Internationalization and Canadian Agriculture: Policy and Governing Paradigms 9781442688360

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INTERNATIONALIZATION AND CANADIAN AGRICULTURE: POLICY AND GOVERNING PARADIGMS

Studies in Comparative Political Economy and Public Policy Editors: michael howlett, david laycock, stephen mcbride, Simon Fraser University. Studies in Comparative Political Economy and Public Policy is designed to showcase innovative approaches to political economy and public policy from a comparative perspective. While originating in Canada, the series will provide attractive offerings to a wide international audience, featuring studies with local, subnational, cross-national, and international empirical bases and theoretical frameworks. Editorial Advisory Board jeffrey ayres, St Michael’s College, Vermont neil bradford, University of Western Ontario janine brodie, University of Alberta william carroll, University of Victoria william coleman, McMaster University rodney haddow, University of Toronto jane jenson, Université de Montréal laura macdonald, Carleton University riane mahon, Carleton University michael mintrom, University of Auckland grace skogstad, University of Toronto leah vosko, York University linda white, University of Toronto kent weaver, Brookings Institute robert young, University of Western Ontario For a list of books published in the series, see page 375.

GRACE SKOGSTAD

Internationalization and Canadian Agriculture Policy and Governing Paradigms

UNIVERSITY OF TORONTO PRESS Toronto Buffalo London

© University of Toronto Press Incorporated 2008 Toronto Buffalo London www.utppublishing.com Printed in Canada ISBN 978-0-8020-9880-1

Printed on acid-free paper

Library and Archives Canada Cataloguing in Publication Skogstad, Grace, 1948– Internationalization and Canadian agriculture : policy and governing paradigms / Grace Skogstad. (Studies in comparative political economy and public policy) Includes bibliographical references and index. ISBN 978-0-8020-9880-1 1. Agriculture and state – Canada. 2. Globalization – Canada. I. Title. II. Series. S451.5.A1S56 2008

338.1c871

C2008-901868-0

University of Toronto Press acknowledges the financial assistance to its publishing program of the Canada Council for the Arts and the Ontario Arts Council. University of Toronto Press acknowledges the financial support for its publishing activities of the Government of Canada through the Book Publishing Industry Development Program (BPIDP).

To David, Matthew, and Richard

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Contents

Acknowledgments Abbreviations

ix

xi

1 Introduction: Internationalization and Canadian Agriculture: Policy and Governing Paradigms 3 2 The State Assistance Paradigm and Canadian Agriculture: Construction and Destabilization 43 3 Farm Income Safety Nets and Risk Management

71

4 The Canadian Wheat Board and Orderly Marketing

107

5 Supply Management: Resisting Internationalization and Adjusting Policy Instruments 141 6 Regulating Food and Animal Product Safety

179

7 Regulating the Risks of Genetically Modified Crops and Foods 209 8 Conclusion: Paradigm Adjustment and Canadian Agriculture and Food 241 Appendices Notes

267

References Index

261

365

321

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Acknowledgments

This book has been a long time in the research and writing, and its publication gives me the pleasant opportunity to thank the institutions and individuals who have made a difference along the way. Research costs time and money. For its provision of both, I thank the Social Sciences and Humanities Research Council of Canada. SSHRC supported me with research grants and provided a much coveted release time stipend. The Department of Social Sciences at the University of Toronto Scarborough granted me a research leave that allowed me to push forward on the manuscript by releasing me from teaching and administration. The University of Toronto’s state-of-the-art Robarts Library, not least in electronic journals, has also enormously facilitated the research. So have the websites of Canadian government departments, including, in particular, those of Agriculture and Agri-Food Canada and the Parliament of Canada. Many of the documents that form a crucial evidentiary base for this book have been accessed from these websites. At the Canadian Wheat Board, Shu Huang and Melanie Lohse generously provided documents that I had been unable to access elsewhere. Kim Longtin at AAFC kindly made available many of the charts and tables that appear in this book. While primary and secondary documents constitute the principal research source for this book, interviews with public and private officials over several years have done much to give meaning to these documents. Among the public servants who have given generously of their time to explain the intricacies of agricultural programs and policies are Frank Claydon, Jan Dyer, Doug Hedley, Tom Richardson, and Steve Verheul at Agriculture and Agri-Food Canada; Ward Weisensel, Victor Jarjour, Patty Rosher, and Earl Geddes at the Canadian Wheat Board;

x

Acknowledgments

Nelson Coyle at the Canadian Dairy Com-mission; Brian Evans and Anne MacKenzie at the Canadian Food Inspection Agency; Ron Burke at Health Canada; Cynthia Currie at the National Farm Products Council; Tim Lambert and Laurent Souligny at the Canadian Egg Marketing Agency; Phil Boyd at the Canadian Turkey Marketing Agency; and Nithi Govindasamy, Len Ewanyk, Joe Rosario, and Ken Moholitny in the Government of Alberta. I thank them, as well as Ralph Goodale and Lyle Vanclief, whose reflections on their service as ministers of AAFC strengthened my understanding of agriculture and food governance in Canada. Several individuals who have served as officials in agri-food organizations across Canada also shared their experiences and expertise. I am grateful to Richard Doyle, Bob Friesen, Brent Furlong, Robin Horel, Tom Kane, John Masswohl, Kempton Matte, Ted Menzies, Rick Phillips, Darren Qualman, Brigid Rivoire, Sally Rutherford, Patty Townsend, and Jack Wilkinson for their insights. All these individuals were generous in finding time in their busy schedules to meet with me and to explain Canadian agriculture policy and governing as they understood it. Some went further and deserve additional mention for reading drafts of the chapters of this book. Jack Gellner and Doug Hedley provided helpful advice on draft versions of chapter 3 on farm income safety nets; Ward Weisensel did the same for chapter 4 on the Canadian Wheat Board; and Nelson Coyle, Rick Phillips, and Tom Kane gave valuable feedback on chapter 5 on supply management. Their counsel has helped to save me from errors in fact or judgment; those that remain in the manuscript are my sole responsibility. A number of undergraduate and graduate students at the University of Toronto have provided research assistance. They include Elizabeth Acorn, Laura Callaghan, Jim Farney, Faiza Fatima, Gina Cosentino, Sarah Hartley, Sabrina Hoque, Celine Mulhern, and Rick Russo. I am especially grateful to Stephen Gillies, who proofread the final version of the manuscript, formatted it to UTP standards, and drew up the index. I pay tribute as well to two former PhD students, Elizabeth Moore and Sarah Hartley. In the course of supervising their doctoral dissertations, I learned much about plant biotechnology policy and its governance. I am grateful, as well, to Rose Olfert, associate director of the Saskatchewan Institute of Public Policy, for her invitation to give a seminar on the manuscript, and to Jill Hobbs, head of the Department of Agricultural Economics at the University of Saskatchewan, for helping to facil-

Acknowledgments xi

itate the seminar in November 2006. The book is better for the feedback I received that day from the political scientists and agricultural economists around the table. Throughout the long gestation of this book, I have had the good fortune to be a faculty member of the University of Toronto. Only a few of my colleagues share my curiosity about agricultural policy, but many of them have inspired me by their fine example as scholars. Others in the Department of Political Science have helped in more tangible ways. I thank May Lee for technical assistance in reproducing the AAFC charts and tables, Rita O’Brien for finding an answer to whatever problem I toss at her, Mary Alice Bailey for her unfailing competence, and Audrey Glasbergen for administering my research grants. At UTP, Virgil Duff shepherded the manuscript through the review process, Catherine Frost copy-edited it, and Anne Laughlin oversaw its publication. Their assistance and the endorsement of UTP’s Manuscript Review Committee and its former chair, Professor Marty Friedland, are much appreciated. Few books – including this one – would see the light of day without the moral support of family and friends. From their Alberta base, my sisters and brother have been an important touchstone to agricultural Canada. My parents were farmers, as is my brother now, and the regular opportunities my extended family give me to discuss farm issues and agricultural policy have long been an important reality check. Friends have been wonderfully encouraging, as well, and I thank Jeremy and Georgie Wilson, in particular, for their confidence in me and my work. David and Matthew have gently nudged me forward with their periodic ‘Hey Mom, how’s your book going?’ They are as happy as I am to know it has ‘gone.’ And finally, I express my thanks to my husband, Richard. In countless ways, big and small, Richard has helped to bring this book to fruition. I dedicate it to him and our sons.

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Abbreviations

AD AIDA AIT APF ASA BSE CAFTA CAIS CAP CBAC CCMA CDC CEMA CFA CFC CFIA CFIP CFO CFSQP CMSMC Codex CWB DFC DPAC EC EEP EU

Anti-dumping Agriculture Income Disaster Assistance Agreement on Internal Trade Agricultural Policy Framework Agriculture Stabilization Act Bovine Spongiform Encephalopathy Canadian Agri-Food Trade Alliance Canadian Agricultural Income Stabilization program Common Agricultural Policy Canadian Biotechnology Advisory Committee Canadian Chicken Marketing Agency Canadian Dairy Commission Canadian Egg Marketing Agency Canadian Federation of Agriculture Chicken Farmers of Canada Canadian Food Inspection Agency Canadian Farm Income Program Chicken Farmers of Ontario Canadian Farm Safety and Quality Program Canadian Milk Supply Management Committee Codex Alimentarius Commission Canadian Wheat Board Dairy Farmers of Canada Dairy Processors Association of Canada European Community Export Enhancement Program European Union

xiv Abbreviations

FIPA FTA GATT GDP GM GMO GRIP HACCP IPPC ITAC ITC LMO MSQ NAFTA NFU NISA NTSP OECD OIE PNT R-Calf RR SAGIT SPS SRM STE TBT TRIMS TRIPS TRQ UPA vCJD WGMP WGSA WTO

Farm Income Protection Act Free Trade Agreement General Agreement on Tariffs and Trade Gross Domestic Product Genetically modified Genetically modified organism Gross Revenue Insurance Plan Hazard Analysis and Critical Control Point International Plant Protection Convention International Trade Advisory Committee International Trade Commission Living modified organism Market Sharing Quota North American Free Trade Agreement National Farmers Union Net Income Stabilization Account National Tripartite Stabilization Program Organization for Economic Co-operation and Development Office international des épizooties Plant with Novel Trait Ranchers-Cattlemen’s Action Legal Fund Stockgrowers of America Roundup Ready Sectoral Advisory Group on International Trade Sanitary and Phytosanitary (Agreement) Specified risk material State trading enterprise Technical Barriers to Trade (Agreement) Trade Related Investment Measures Trade-Related Aspects of Intellectual Property Rights Tariff Rate Quota Union des producteurs agricoles Variant Creutzfeldt-Jakob Disease Western Grain Marketing Panel Western Grain Stabilization Act World Trade Organization

INTERNATIONALIZATION AND CANADIAN AGRICULTURE: POLICY AND GOVERNING PARADIGMS

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1 Introduction: Internationalization and Canadian Agriculture: Policy and Governing Paradigms

Our era is a period of internationalization of domestic politics and policy making. In Canada, as elsewhere, developments, actors, and institutions beyond our borders shape our policy agendas, the content of our public policies, and our modes of governing to an unprecedented degree. The internationalization of Canadian politics is closely linked to phenomena most often described as ‘globalization’: the economic, political, technological, and informational transformations of the late twentieth and early twenty-first centuries.1 The exposure to these developments varies across sectors, but the general pattern is an opening of the Canadian economy and its integration with markets elsewhere, particularly the American market. Economic activities and financial investment have become concentrated in large and often oligopolistic firms and their transactions extend throughout the North American region and sometimes across the globe.2 Liberalizing trade agreements such as the North American Free Trade Agreement (NAFTA) and those of the World Trade Organization (WTO) also are implicated in the internationalization of Canadian politics. They have helped to promote the integration of the Canadian political economy with that of other countries, especially the United States, and authorized the creation of new international institutions of rule making and rule enforcement authority beyond the nation state. Another marker of our era, and one facilitated enormously by the computer-based technological and communication revolution, is the emergence of transnational networks of non-governmental or civil society actors. The occasional success of these networks in scaling national borders and influencing the behaviour of governments is a further element in the internationalization of domestic politics.3

4 Internationalization and Canadian Agriculture

These phenomena – economic activities that transcend national borders, bodies of supranational rule making and norm setting, and transnational networks of political activity – make it impossible to examine Canadian governing and policy making as a response to exclusively domestic factors and developments. Questions nonetheless remain. How consequential are these developments in the international political economy for policy development and governing in Canada? And which developments – regional market integration, mobile capital, new sites of international political authority, networks of social and political actors that transcend large geographic distances – are especially significant for domestic policy making? Canadian scholars are by no means unanimous in their answers to either question, and some would even question the novelty of some of these developments. Canada’s political economy has long been vulnerable to developments beyond our borders. From the country’s inception, some primary commodities such as wheat have relied on consumer markets around the globe. Historically dependent on foreign markets and investment, our economy became integrated into the American economy in the post-Second World War period. Nor is sharing Canada’s political authority with international institutions novel. As one example, Canadian governments endorsed the multilateral trade regime, the General Agreement on Tariffs and Trade (GATT), from its creation in 1947.4 Notwithstanding this historic legacy, most scholars nonetheless conclude that, even while the nation state remains an important site of governing, the context has changed in some important respects. How significant the contextual change is as well as its transformative impacts on domestic policy making are nonetheless matters on which scholars disagree. The editors of a collection surveying post-NAFTA Canadian and American policy developments concluded in 1997 that regional economic integration had constrained state activity in some ‘palpable ways,’ but that ‘there is still room for domestic choice, and [Canadian] policies continue to be shaped by the rhythms of domestic culture and politics.’5 Another multi-sectoral study published five years later drew the same conclusion: Canada still has a ‘capacity for choice,’ despite North American integration.6 A different view puts more emphasis on the constraints of developments associated with globalization. NAFTA, says Stephen McBride, is a new ‘constitution’ for Canada, one that incorporates values of economic liberalism and ‘reduces the scope for the exercise of democracy in Canada.’7

Internationalization and Canadian Agriculture 5

This book enters the debate about the significance for Canadian politics of developments associated with economic globalization and political internationalization. (Both terms are described more fully later in this chapter.) Its focus is Canadian agricultural policy and governance. Agriculture is probably not the first sector that comes to mind for Canada’s largely urban society when the question of internationalization’s impact on policies and governing in Canada is posed. Although consumers around the globe and in Canada appear to be increasingly concerned about the safety, quality, and even the geographical source of their food supply, most Canadians pay little attention to policy making and governing in the Canadian agriculture and food (agri-food) sector. Matters such as the policy room left to manoeuvre when Canadian and American livestock markets become deeply integrated or the policy options in dairy supply management that will pass muster with WTO panels are of keen interest to only a minority of Canadians: the fewer than 3 per cent who are farmers; the 12 per cent whose jobs and incomes are tied to the agri-food supply, processing, and distribution sectors; and, of course, the government officials with responsibility for agricultural, food, and trade policy issues. Some incidents do catch the attention of the national media and the largely urban Canadian public: a farmer thrown in jail for illegally trucking his grain across the Canadian-American border; (other) farmers amassing on the steps of provincial and national legislatures in search of financial aid; the discovery that an Alberta cow has died of ‘mad cow’ disease; the collapse of WTO trade negotiations with blame levelled at farm subsidies and other ‘protectionist’ farm policies. Aside from these high-profile events, the national media and the Canadian public pay only episodic attention to agriculture, leaving policy making in this domain to a relatively small ‘policy community’ with a direct interest and stake in agri-food issues.8 Yet there are compelling reasons to give Canadian agriculture and food close examination. Agriculture represents in many ways a ‘hard’ case for internationalization of domestic politics and governing. The pace and depth of economic globalization (market opening) have been checked by agriculture. Agriculture was largely excluded from the international trade regime established by the GATT in 1947,9 it delayed the conclusion of the Uruguay Round of the GATT, and divisions over agriculture contributed to the suspension of the Doha Round of WTO talks in mid-2006. The sector has often warded off pressures for its political internationalization; efforts to bind domestic governments’ policy

6 Internationalization and Canadian Agriculture

autonomy and constrain their agri-food policy options have invariably fallen short of free traders’ goals. Traditionally, explanations for these outcomes and agriculture’s virtual exclusion from the international trade regime turn overwhelmingly to domestic factors; organizationally developed farm lobbies, the electoral calculus of politicians, the closed policy networks forged between farm organizations and agricultural ministries, and the link between agricultural sectoral goals and broader national and societal values and projects are most often cited.10 Since domestic interests, political institutions, and policy goals overwhelmingly account for the substance of agricultural policies across industrialized countries, analysts argue that any significant change in their (protectionist) substance requires an ‘exogenous’ shock: a polity-wide budgetary crisis and/or the international pressures of a multilateral trade negotiation.11 Although this view of the reformist impact of exogenous pressures is not shared by all,12 there is evidence that developments in the international political economy have played a role in transforming agricultural policies and paradigms. Agricultural policies in Australia and New Zealand shifted towards a more market-liberal model over the 1980s and 1990s, and farm income support programs were retrenched and redesigned along market-liberal premises in several industrialized countries in the 1990s. In both instances, analysts point to developments in the international political economy as a catalyst to reform.13 Timothy Josling and his colleagues argue that the post-war ‘dependent agriculture’ paradigm is being replaced by any of three new paradigms in agriculture: a ‘competitive,’ ‘multifunctionality,’ or ‘globalized production’ model. Paradigm change in each case is linked to economic globalization, international trade agreements, and the heightened importance of the international arena as a site of political action.14 In their view, the competitive paradigm is more prominent in the United States and the multifunctionality paradigm in the EU. Isabelle Garzon concurs on the EU; incremental changes over a two-decade period to its Common Agricultural Policy, she argues, have resulted in a new ‘multifunctional’ paradigm and globalization is a contributing factor.15 Although Wayne Moyer and Josling worried that the ‘neoliberal policy shift’ signalled by the competitive paradigm model might have ‘run out of steam’ by the end of the 1990s, they predicted that developments associated with processes of economic globalization and political internationalization would continue the process of reform.16 Some of the conjecture about paradigm change in agriculture is

Internationalization and Canadian Agriculture 7

clearly normative and prescriptive,17 and many see more continuity than change in agricultural paradigms.18 But the argument that paradigm change is under way in agriculture and that developments in the international political economy have much to do with it is compelling and warrants further examination. Hence the major questions addressed in this book. Is Canadian agriculture witnessing a paradigm shift? If so, what new paradigm is emerging? And has the internationalization of domestic politics and policy making contributed to its emergence? The chapters that follow address these questions. They first describe the development of the post-war paradigm of state assistance and then examine its fate from the mid-1980s to 2006. Focusing on policies with respect to farm income support, the marketing of agricultural commodities, and the regulation of animal and food product safety and genetically modified crops and foods, the chapters reveal adjustment of the post-war state assistance paradigm and a shift towards a competitive paradigm of agriculture. This transition nonetheless reveals considerable resilience in the idea that the state, through its expenditure and regulatory instruments, has an important role to play in the sector. Economic goals of a competitive agri-food sector cannot be served without a state presence. Nor can other social goals be reached, including the provision of safe food, sustaining the population of rural Canada, the maintenance of the family farm, and environmental sustainability. In safeguarding the idea that agriculture is an exceptional sector in some important respects, including its contribution to publicly valued goods, the Canadian agricultural policy paradigm in the early twenty-first century also bears traces of a multifunctionality paradigm of agriculture. The value of economic efficiency and the goal of economic competitiveness that one would associate with a market-liberal paradigm have not nudged out other values and goals that can be assured only by an active role for the Canadian state in our society and economy. The changes in Canadian agri-food policies over the past two decades have been accompanied by changes in norms and patterns of governing in the sector. A greater array of social and economic actors – domestic and international – have entered the agricultural and food policy community, power relationships across state and non-state actors have shifted, and governing practices have changed. There is a strong emphasis on domestic partnerships in the formulation of agri-food policy and on transnational networks to coordinate Canadian agri-food policies with those of other countries. Although much of agri-food pol-

8 Internationalization and Canadian Agriculture

icy development takes place in a discrete policy subsystem, institutions and norms of representative democracy remain central to governing. The governing patterns in agriculture undermine claims noted earlier that internationalization inevitably ‘reduces the scope for the exercise of democracy in Canada.’ The shifts in policies and governing patterns in Canadian agriculture reflect the contemporary political economy of agriculture of which internationalization is a major part. Market integration, international regulatory governance and transnational networks of political activity have directly affected the agri-food policy agenda as well as the instruments and content of public policies in the sector. Neither policy developments nor governing modes can be fully understood by examining only ‘the rhythms of domestic culture and politics.’ However, the impacts of internationalization on policy developments are often difficult to disentangle from other factors. Accordingly, governing in the agri-food sector is best understood by examining how developments in the international political economy have interacted with features of Canada’s domestic political economy of agriculture and food to shape understandings of problems and appropriate solutions to them. The remainder of this chapter is organized as follows. Section 1 discusses the components of policy paradigms and the conditions under which they are likely to be destabilized and replaced with an alternative paradigm. It also sketches the constituent features of the state assistance paradigm of agriculture. Sections 2 and 3 examine the current political economy of agriculture: the economic developments associated with structural changes in the sector and the elements of political internationalization that are hypothesized to destabilize the policy paradigm of agricultural exceptionalism and statist policy instruments. Section 4 probes the ways in which Canada’s macro-and meso-level political institutions affect the resilience and viability of state assistance and alternative (market-liberal) paradigms for agriculture and food. It briefly describes the five issue areas whose policy developments and governance patterns come under scrutiny in following chapters. In its analyses of policies for Canadian agriculture over the past two decades, this book makes a number of contributions. First, it presents the most comprehensive examination to date of Canadian agricultural policy developments and governing patterns. Second, the analyses help us to understand more generally the interactive effects of our domestic political economy, economic globalization, and international regulatory governance on policy development and governing patterns. And third,

Internationalization and Canadian Agriculture 9

the study adds insight to comparative public policy theories of paradigm resilience and adaptation. 1. Policy Paradigms and Paradigm Change All policy development takes place within an interpretive framework.19 It consists of the cognitive and normative beliefs that underwrite substantive policies: consensual beliefs about the problems to be addressed and hence the goals of public policies; the causal theories that underlie strategies for action; and the appropriate means or policy instruments by which policy goals may be realized. This set of normative and cognitive principles – the policy paradigm – shapes both substantive policies as well as norms and practices about who has the right to participate in policy making and who does not.20 The interpretive framework that guided agricultural policies in most industrialized countries – including the United States, western European nations, Japan, and Canada – in the post-Second World War period rested on the belief that agriculture was an exceptional economic sector and ‘without [government] intervention, agricultural producers, consumers and society at large would be adversely affected.’21 The reasons, elaborated in chapter 2, included recognition that farmers face unmanageable natural risks, their fortunes varying with the vagaries of the weather and disease outbreaks. They also included the belief that agricultural markets were subject to inequities in the bargaining power of market participants and sharp fluctuations in commodity prices, and led to less than optimal outcomes that included farm incomes below those of non-farm workers and unstable consumer food costs. State intervention could be justified to yield more efficient outcomes and increase society’s welfare to a greater degree than would a laissez-faire (market-liberal) approach.22 In many industrialized countries, including Canada, state assistance was also coupled with goals of a competitive agriculture; subsidies to help farmers to achieve economies of scale, through larger and more mechanized farms, for example, would increase their efficiency and productivity. These cognitive and normative beliefs shaped agricultural policies. Rather than allowing market forces alone to determine the structure of production, governments across rich industrialized countries, including Canada, deployed their regulatory and expenditure instruments, intervening in agricultural markets, empowering producers with collective marketing power, subsidizing farm incomes, and generally pro-

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tecting their agricultural economies. This conglomerate of policies and the idea of agricultural exceptionalism constituted the state assistance paradigm in agriculture. Usually constructed incrementally over time, the paradigm of state assistance was more inclusive (of commodity sectors) and protectionist in some industrialized countries than in others. Once established, as Peter Hall has observed, policy paradigms rarely change. Governments change programs fairly regularly, adjusting the ‘settings’ of existing policy instruments – altering the level of benefits of an expenditure program, for example – or the policy instrument itself, from a subsidy program to a tax expenditure, for example.23 Paradigmatic change is more fundamental and occurs in a sector like agriculture only when the very premises upon which existing programs and policies alter; policy makers and crucial societal bases of support now view the sector in a different light, and earlier policy goals and their accompanying policy instruments (programs) are seen to be anachronistic. Radical change of this sort is infrequent. One reason why paradigms are ‘sticky’ is because the core beliefs and values that underlie a paradigm are ordinarily internalized and taken for granted by policy makers. Internalizing paradigmatic principles is especially likely when these principles are consistent with the broader societal ideational framework; for example, the state assistance paradigm in agriculture was consistent with the ideas of embedded liberalism and the postSecond World War Keynesian state.24 Other reasons why paradigms persist is because they are usually woven into institutional norms and governing procedures and surrounded by a protective buffer of economic and social actors who benefit from the paradigm and have strong incentives and, usually, resources, to mobilize in its defence. They are able to build institutional buffers around preferential policies and the paradigm itself. In the case of agriculture, patterns of governance (that is, of authoritative decision making)25 gave farm organizations appreciable influence, alongside officials in dedicated ministries for agriculture, over agricultural policy. This pattern of governance prevailed across industrialized countries, including Canada, and reflected in varying degrees the organizational strength of the farm lobby and farmers’ power in the electoral and party systems.26 As suggested above, it also reflected the widespread belief within agricultural ministries across developed countries that their primary mandate was to serve the interests and needs of those who produce food.

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When paradigms are buttressed by their fit with broader societal interpretive frameworks as well as their political and institutional supports, policy paradigm change is likely to occur only when a number of conditions are realized. The first condition under which policy paradigms are likely to be overturned is a crisis of abject ‘policy failure.’ In Hall’s view, policy failure is precipitated by the appearance of anomalies (unanticipated developments) that contradict the assumptions of the paradigm about how the world works or about what constitute desirable policy goals.27 If reforms can be made to the paradigm to correct the anomalies, Hall argues, the paradigm may survive. Otherwise, he suggests, the window opens for a new paradigm: a significant break with the past in terms of the understanding of the problems confronting a sector, the desirable goals for it, and the instruments to realize these goals. Anomalous outcomes and policy failures are descriptors that have been applied to agricultural policies in western industrialized democracies in recent decades. In the 1980s the state assistance paradigm became equated with costly government expenditures and, as chapter 2 documents, with ‘trade wars’ between the United States and the European Union that threatened the integrity of the GATT-centred trade regime itself. Evidence that average farmer incomes now exceed those of non-farm workers also appears at odds with one of the paradigm’s original rationales. The paradigm has also been linked to intensive agricultural practices that are indicted in policy failures, including environmental pollution and, in some countries, food safety crises.28 As elaborated more fully below, some argue that the state assistance paradigm is anomalous with the current structure of the agri-food system, in which large commercial farms have replaced family farms and global agri-food supply systems have taken over from nationally organized supply systems. However, a theory that rests the fate of a paradigm on the appearance of anomalous outcomes or policy failures raises several questions. Which policy failures matter and in whose eyes? Few sectoral paradigms are likely to be fully coherent; their programs and policy instruments often attempt to achieve a variety of goals, some of which are likely to be partly contradictory. What looks like an anomalous outcome or policy failure to one observer is not necessarily perceived in the same light by others. Food safety crises can be interpreted as a failure of ‘modern’ (intensive) agriculture – and undermine a paradigm of state assistance – in one country, but not in another where they are seen

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as isolated incidences of regulatory failure. Evidence that farm incomes no longer lag behind non-farm incomes may not be an anomaly/failure from the perspective of policy makers or citizens if they can point to agriculture’s contribution to valued outcomes – populated rural spaces, protection of biodiversity – that markets don’t reward. It is less the ‘objective’ reality of policy failure than the perception of policy failure that will ultimately matter to policy development. Even so, the question of whose perceptions of policy failure/anomalies matter for paradigm change remains: is it those economic groups who have benefited most from the existing paradigm, the governments whose stamp of authority lends legitimacy to the paradigm, and/or the public whose (usually implicit) support for transfers of their taxpayer dollars is also vital to the sustainment of a paradigm of agricultural exceptionalism and state assistance? These questions highlight the role of other factors in processes of paradigm continuity and change. One such factor is the discourse of policy debates, where this term refers to the content and rhetoric of communication and argumentation that shape perceptions about how events should be interpreted and understood. Hall defines processes of policy paradigm change as a ‘struggle both for advantage within the prevailing terms of discourse and for leverage with which to alter the terms of political discourse.’29 Paradigm change is thus a political process, rather than a technical one, in which paradigms fail because of their self-evident contradictions or their anachronistic fit with altered circumstances. A second condition of paradigm change is therefore a persuasive discourse that defines policy problems and their solutions in new ways – but in ways that nonetheless resonate with available evidence and people’s experiences and values.30 In the case of the EU, for example, Garzon suggests that the discourse of ‘multifunctionality’ provided the policy narrative that facilitated paradigm change. A third condition for paradigm change is the availability of an alternative, viable paradigm. Viability is often equated with an alternative paradigm’s success elsewhere, preferably in an economically and politically powerful state.31 More broadly, Hall defines an alternative viable paradigm as one that passes tests of political, economic, and administrative viability.32 The first condition, political viability, directs attention to the perceptions and beliefs of governing coalitions about the success/failure of the existing paradigm and proposed alternatives. Political viability requires that the alternative paradigm be consistent with the overall goals of ruling political parties and the interests of col-

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lective economic and social actors whose support is important to decision makers. Another dimension of political viability is the consistency of the sectoral paradigm with broader societal ideas about the role of governments in markets and the responsibility of individuals for their own fate. Hall defines economic viability to be the capacity of ideas to resolve a set of economic problems. He suggests that the economic viability of ideational frameworks is a function of their relationship to existing theories, the nature of the economy, and international constraints. In the case of agriculture, the economic viability of paradigms will be related to the sector’s dependence on export markets, the financial health of the sector, and the fiscal resources of governments. Altered economic circumstances – for example, those that suggest greater material gains to be had from an alternative paradigm – could cause those who support an existing paradigm to withdraw their support. Administrative viability, in Hall’s terms, is the congruence of the ideas with the ‘administrative officials’ and is a function not only of this consistency but also of the ‘relative power of relevant agencies’ and ‘structural capacities for implementation.’33 In the case of agriculture and food, the administrative viability of paradigms turns on their fit with the interpretive frameworks, resources, and technical knowledge of those responsible (generally public officials) for turning policy goals into programs and then implementing them. Shifts that reallocate responsibilities within and across governments can thus be a factor that affects the viability of existing and alternate paradigms. The media and intellectuals are hypothesized to play an important role in both discrediting the old paradigm and advancing its replacement. ‘Policy paradigm shifts,’ says Wilson, ‘occur when intellectuals construct alternative paradigms, disseminate them in professional or popular journals, capture media attention, and persuade other intellectuals of their validity.’34 Although intellectuals may be sources of new ideas and new paradigms, and media may be their popularizers, it seems evident that the fate of any paradigm rests on a broader array of political actors. Most important, and in recognition of the significance of criteria of economic and political viability, the support (or lack of support) of the dominant political coalition will be crucial to a paradigm’s fate. Paradigms are in danger when they lose credibility with the coalition that has supported them in the past and/or when that coalition loses political influence.35 Following on the latter observation, a fourth condition that has been

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hypothesized as necessary for paradigm change is a shift in the institutional venue of policy making that brings new actors with new ideas into positions of authoritative decision making.36 Failing a new site of policy making, a transition in political power that ushers into office a new coalition sympathetic to an alternate paradigm can also trigger an existing paradigm’s downfall.37 Either a change in institutions or in political actors – and a consequent change in the pattern of governance – may be critical to destabilizing well-embedded understandings of policy problems and appropriate solutions. Unless policy making is broken out of its existing policy network or governance pattern, policy reforms to account for changing circumstances and new policy problems are likely to be confined to incremental adjustments of existing programs or their replacement with new programs that are still designed to realize the old policy goals. Not all analysts agree that a disruption of normal policy processes and displacement of policy making to new institutional venues is necessary for paradigm change to occur.38 Depending upon the nature of the policy networks (patterns of exchange between state and non-state actors) in place and the opportunity these networks afford for a logic of problem-solving compared with a logic of bargaining, non-incremental changes can be made to policy instruments and policy goals. Over time, and cumulatively, such policy reforms can add up to paradigm change. I return to the significance of the nature of the policy network for policy development and paradigm change later in this chapter. These hypothesized conditions as requisite for policy paradigm change – the perceived failure of the existing paradigm, an alternative paradigm discursively constructed as viable, a new institutional venue of policy making and/or new patterns of governance – resonate with Garzon’s account of paradigm change in the EU’s Common Agricultural Policy (CAP). Perceived policy failures that included the high costs of the CAP and the environmental damage of intensive agriculture, institutional changes that enhanced the influence of the European Parliament, and an opening of agricultural policy networks provided the conditions for paradigm change. In this altered context, accompanied by changes in member state policy goals and coalitions, the European Commission used its role in agenda setting and trade negotiating to promote a series of transformative changes to the CAP. The significance of a change in institutional setting as a prerequisite to paradigm change is highlighted by the contrasting example of the United States. The market liberal reforms to US agricultural policy that

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were economically, politically, and administratively viable in 1996 could not be sustained, argues Eric Patashnik, because the institutional site of US farm policy did not change, and the ‘iron triangle’ of congressional agriculture committees, the United States Department of Agriculture, and the farm lobby remained in place.39 Bearing in mind the American example, a final factor that affects the possibility for paradigm change is the temporal context: ‘the setting within which social, political and economic events occur and acquire meaning’ and that is beyond the immediate control of the actors involved.40 Relatively enduring economic structures, political philosophies, and political institutions are part of the context, but here reference to context focuses on the medium- to shorter-term material and political circumstances. Notwithstanding that actors do, in some important ways, restructure the material context through the consequences of their own actions, the material world has its own effect on political actors’ interpretations of what are appropriate and feasible public policies and policy goals. An important dimension of the context is also the timing and sequence of events.41 When events occur, the order in which they occur, and what else is happening at the same time can have appreciable consequences for the impact of these events on policy developments, including whether there are openings for policy change. A political and economic context at one time may facilitate paradigm change; a different conjuncture of events at another time may rule it out.42 Likewise, the timing of events may serve to reinforce earlier paths of policy development, but it can also interrupt that sequence and put policy developments on an alternative path. To summarize, a change in a sectoral policy paradigm – that is, in the cognitive and normative principles that guide policy development for the sector – is a contingent process in which factors of timing and the conjuncture of events play an important role. Even so, the following conditions appear to be conducive to paradigm transformation: first, the perceived failure of the existing paradigm; second, the availability of an alternative viable paradigm; third, a shift of the policy making venue and/or pattern of governance among actors; and fourth, a material and political context conducive to a reform discourse. Alternatively, paradigms are more likely to prove resilient and to be adjusted rather than replaced when one or more of the following conditions prevails: first, perceptions of policy failure are avoided or successfully rebutted; second, there is no available alternative viable paradigm; third, policy making remains within existing sites and patterns of governance; and

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fourth, the material world and political context favours the paradigmatic status quo. When policy paradigms come under attack, there are three possible outcomes. One is paradigm resilience through incremental modification. A paradigm can prove resilient if it can undergo reforms – to its policy instruments, for example – that do not destabilize core cognitive and paradigmatic ideas.43 The chapters that follow provide examples of such resilience. A second outcome is paradigm replacement as modifications to programs over time entail adjustments not only to policy instruments but also to policy goals.44 Indeed, Garzon argues that it is just such an incremental adjustment over time of the Common Agricultural Policy, in order to build a broader base of support for its core idea that agriculture provides valued outputs that no other economic sector does, that has led to a new paradigm of multifunctionality in place of the ‘dependent’ model. In short, replacement of a paradigm with an alternative one need not be abrupt but rather is a cumulative process. A third outcome is what Walsh calls ‘policy drift’: a situation in which decision makers make ‘only minor and perhaps contradictory changes after failure.’45 Paradigm drift may be a transitional stage towards paradigm overthrow, but whether it is will usually be clear only with the passage of time. The premise that guides conjecture about paradigm change in agriculture, and one that is put to the test in this book, is that developments in the international political economy that are associated with the internationalization of agriculture have increased the likelihood of occurrence of the above conditions associated with paradigm change. As the next two sections will sketch and as subsequent chapters will develop, the contemporary international political economy differs from that which existed in the post-Second World War period when agriculture had an exceptional status in the GATT and governments had a relatively free hand in the international trading regime to protect their agricultural producers and to spend on their behalf. As detailed in Chapter 2, it was in this context that the state assistance paradigm was constructed in several countries, including Canada. In the late twentieth and early twenty-first centuries, the restructuring of agricultural commodity and food production that has been under way for some decades has joined with developments in the international political economy to create a new context for agriculture and food policy development. It is one in which the politics of agriculture and food has become internationalized via economic globalization, regional market integration, and global governance.

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2. Economic Globalization/Regionalization and Agriculture Paradigms Across industrialized countries, the agriculture and food system has been undergoing structural change for many decades. The food supply chain begins upstream from the farm unit with the firms that provide production inputs such as seed, fertilizer, and machinery and extends downstream from the farm to include the processing of raw commodities as well as their manufacturing into food for distribution and sale to consumers through wholesale and retail outlets (grocery stores, food service establishments). At virtually every component in the food supply chain, the trend is towards fewer and larger enterprises. Beginning with food production itself, farm units and numbers of farmers have been steadily eroding. In Canada farm numbers peaked at 750,000 in 1941. There were 500,000 farms in 1961, 300,000 in 1985, and by the early 2000s only around 200,000 farms. This diminution in numbers has been accompanied by an increase in farm size and productivity as farms have mechanized and adopted other novel technologies. In Canada the vast majority of farms – 98 per cent – remain family owned and operated. Food production has nonetheless become concentrated in fewer, large farms. In 1994 farms reporting more than $100,000 in sales represented just over a quarter of all farms and accounted for 75 per cent of total production. In 2005 farms reporting $100,000 or more in sales accounted for a third of all farms and 90 per cent of all production.46 Across the globe, restructuring towards fewer but larger units has also occurred upstream and downstream from the farming sector. Through horizontal integration, economic activity at a single stage of the food supply system has become concentrated in fewer firms. The seed, chemical fertilizer, food-manufacturing, and retail sectors are now highly concentrated, and a handful of firms often dominate. In the food manufacturing sector Kraft General Foods and Nestlé dominate world markets, in the food retail sector Wal-Mart (US) and the French company Carrefour. Through vertical integration, single companies or conglomerates have acquired control over more than one stage of economic activity in the food supply chain. By means of mergers and acquisitions, joint ventures, or contractual agreements, seed companies, for example, have integrated into fertilizer production and manufacturers of animal feed into poultry and hog production. Three large clusters of companies – Cargill/Monsanto, Novartis/ADM/IBP, and ConAgra – are examples of vertically integrated conglomerates of bio-

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technology companies, grain trading and processing companies, and meat production and processing companies, respectively.47 In short, restructuring has resulted in a handful of firms upstream and downstream from the farm enterprise whose scale of operations is transnational or global.48 In the agri-food supply system, transnational corporations now conduct about 40 per cent of world trade in agriculture and food products.49 Linked to the dominance of multinational corporations and vertical integration of agri-food activities is the emergence of global food supply chains that transcend national borders. A food-manufacturing firm is likely to source the multiple ingredients that comprise a single product from all over the world. A Mississauga, Ontario, bakery manufacturer may purchase wheat gluten from China; a Montreal pizza manufacturer may buy milk protein concentrates from the US or, even further afield, New Zealand. It is not only consumers, but also farmers, say Coleman et al., who ‘find themselves more enmeshed in global production networks than they were in the past.’50 The Canadian agri-food sector is also witnessing the consolidation of economic activities in the upstream (fertilizer, machinery, seed) and downstream (food processing, distribution, retail) segments of the food supply system, and usually in transnational firms.51 For example, as few as three companies control three-fifths of nitrogen fertilizer production; retail and distribute the bulk of oil, gasoline, and diesel fuel; and dominate farm machinery sales in Canada.52 The chemical and seed sectors are similarly controlled by a small handful of companies.53 Agriculture and Agri-Food Canada reports that 3,700 food-processing establishments in 1990 had decreased in number to 3,100 in 1999. Further, the ‘largest 5% of food manufacturing establishments accounted for over 50% of sales in 2003 whereas the smallest 80% of establishments accounted for only 15% of sales.’ With respect to the food retail sector, 33,000 retail stores in 1990 had declined to 24,000 in 2004, and ‘the top five food retailers in Canada account[ed] for 60% of sales.’54 American-based companies now own or control significant parts of the Canadian food-processing and grain-handling industries.55 The consolidation of farm units certainly predates the modern era of economic globalization. However, processes of economic globalization are generally indicted in the acceleration of horizontal and vertical integration that is under way and is contributing to the emergence of global food chains. The liberalization of financial and goods markets has not only intensified cross-border exchanges of financial capital and manu-

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factured foods, but also eased foreign direct investment. Since 1970 cross-border trade in agricultural commodities and in processed and manufactured food products has increased, most of the latter being intra-regional.56 The restructuring of the agriculture and food supply systems and the processes of economic globalization that are contributing to it have implications for policy paradigms in agriculture.57 They do so because economic globalization requires states to give heightened attention to competitiveness concerns, that is, the ability to maintain and increase market share in domestic and foreign markets. Susan Strange was among the first to argue the competition state thesis and it has subsequently been elaborated by Philip Cerny.58 In their view, as the liberalization of capital and goods markets contributes to consolidation of investment and financial capital in a small number of transnational corporations, governments find themselves forced to compete with one another to have value added within their territory but not elsewhere. In Strange’s terms, states are forced ‘to bargain with foreign firms to locate their operations within the territory of a state, and with national firms not to leave home, at least not entirely.’59 There are many different definitions of competitiveness, and there is more than one strategy for positioning domestic firms to outsell foreign firms in their own domestic market and external markets. Moreover, ‘competitiveness is not a static concept and is constantly changing in response to changing domestic and international conditions.’60 A number of factors exogenous to the agri-food sector itself affect its competitiveness, including exchange rates and macroeconomic policies such as interest, inflation, and taxation rates.61 However, competitiveness imperatives are likely to imply low-cost production (as well as high productivity, discussed further below). Policies that ensure low or at par input costs for a food processing or manufacturing firm become important when that firm can source its ingredients from farmers in several countries. Where competitiveness is closely linked to low-cost, efficient production, a market-liberal paradigm often emerges. Such a paradigm includes a belief in the market as an efficient mechanism for allocating scarce resources, a limited and non-interventionist role for the state in the market, freedom of trade and capital mobility, removal of welfare benefits that create disincentives to market participation, and in general a smaller public sphere.62 Some argue that market liberalism becomes the ‘hegemonic discourse’ with economic globalization: a discourse that

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alters individuals’ a priori ideas, perceptions of the empirical world, and expectations of the role of the state.63 The heightened attention to competitiveness implied by economic globalization in tandem with restructuring processes in the agriculture and food sector are often seen to undermine both the market power and the political influence of producers. Vertically integrated multinational firms, able to source their ingredients in multiple countries and/or to cross-subsidize losses in one stage of the food chain with good returns elsewhere, gain leverage over those (farmers) involved at only the production stage. As the American senator Tom Harkin phrases it, farmers are ‘on the wrong end of market power.’64 At the same time, farmers lose political power through fragmentation of their interests. The ‘organizability’ of farmers, already a problem as structural changes divide farmers from one another according to the size of their units and their commodity of specialization, becomes more acute.65 Schisms can be expected to appear across producers when the market-opening interest of export-oriented producers makes them less willing to support protectionist strategies at home and to be part of coalitions with their inward-looking counterparts.66 Unless coalitions across segments of the food supply chain – producers and processors, for example – can overcome the fragmentation of the farm lobby, protectionist policy instruments and paradigms like state assistance are likely to be vulnerable.67 Competitiveness strategies, however, do not focus solely on low cost production. They also entail policies that encourage firms to add value through differentiated products and services and to increase productivity by adopting innovative technologies.68 Such strategies have long been part of Canadian agricultural policy. As chapter 2 argues, instruments of state assistance (subsidized credit) were deployed by governments to encourage farmers to mechanize, expand the size of their farm units, and thereby increase their productivity and presumably their competitiveness as well. The belief that technological innovation is closely linked to agricultural competitiveness is thus nothing new, but it does acquire heightened significance in the current era of the competition state. Manzer links economic globalization and technology to beliefs in technological liberalism: the view that material well-being is overwhelmingly dependent upon technological innovation and scientific creativity.69 Where the prevalent view is one of technological liberalism – a belief that novel technologies such as genetically engineered seeds are the route to enhanced productivity and competitive exchanges in a global

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economy – policy paradigms are likely to maintain a role for governments in terms of both expenditures and creating an investmentfriendly regulatory climate. More generally, heightened priority given to goals of competitiveness often requires an activist rather than a night watchman state.70 Market liberalization and integration do not obviate the need for financial support or for regulation in either its narrow sense of rules backed by monitoring and enforcement mechanisms or in its broader sense of state efforts to steer the economy. Indeed, such regulation may be required to realize competitiveness goals. Take the case of food safety regulation. As higher volumes of agricultural commodities, processed foods, and the component ingredients for manufactured foods cross borders, it becomes harder for national authorities to uphold the most fundamental of government roles: to safeguard their citizens. Regulations (as authoritative rules) to ensure the safety of these products become high priorities for buyers and consumers. Governments – and agricultural and food producers – thus have incentives to maintain government regulatory oversight of markets in order to enhance trust in their transactions. It is for this reason that regulatory governance often proceeds in tandem with market liberalization and integration.71 As noted earlier, analysts link the restructuring of agriculture and the competition state thesis to paradigm change. Josling and his colleagues see two different paradigms emerging as a result of these developments. One is a competitive paradigm of agriculture, in which governments restrict their role to assisting competitive farmers to compete in what are assumed to be competitive markets. To facilitate a competitive agriculture and move towards ‘free markets,’ governments provide only shortterm farm income safety nets and design them in a way that encourages farmers who are not competitive over the long term to exit the sector. Consistent with conjectures above about how economic globalization reconfigures producers’ economic interests and creates schisms in domestic coalitions, Josling and his colleagues argue that the competitive agricultural paradigm is most likely to be supported by large-scale farmers, agricultural traders, and processors. The second is ‘a globalised production paradigm.’72 It is equated with global (not national) food supply chains, in which the preferences of those in the downstream sector – processors, retailers, consumers – have the major influence over agri-food policy. A regulatory environment conducive to competitive conditions is a feature of the globalized production paradigm and includes agri-food quality and safety standards

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that are harmonized across jurisdictions and protection of intellectual property rights. From the perspective of this author, the nomenclature of ‘globalised production’ is more properly used to describe structural changes in the agri-food system, rather than the set of cognitive and normative ideas that underpin agri-food policy making and policy instruments. It seems appropriate, therefore, to incorporate a robust regulatory state within the competitive agricultural paradigm when the quest is competitiveness goals. 2.1. Restructuring, Competitiveness Imperatives, and Canadian Agriculture Arguments about the ascendancy of the competition state and heightened attention to goals of competitiveness certainly ring true when one examines Canada’s agri-food sector and its position within Canada’s overall economy. Canada relies on export markets far more than either the United States or the European Union, both of which have a large internal market.73 Forty per cent of Canadian primary agricultural products and almost 25 per cent of processed food products are exported.74 By contrast, in recent years, on average, 25 per cent of US agricultural production has been exported. Canada’s agricultural economy accounts for about 8 per cent of the country’s GDP and export sales contribute positively to its balance of payments.75 Of late, Canada has been the world’s fourth-largest exporter of agricultural commodities and food, behind only the European Union, the United States, and Brazil.76 Although the domestic market remains a crucial outlet for most domestic food producers,77 Chart 1.1 shows the sharp rise in Canadian agri-food exports, and sales have more than doubled since 1990. Chart 1.2 reveals Canada’s high dependence on the North American market;a few of its most important agricultural commodities rely upon consumer markets outside North America, but up to three-fifths of Canadian agricultural commodities and processed food exports go to the US market.78 The trade is two-way, creating a significant measure of interdependence in the Canadian and American agri-food markets.79 Chart 1.3 gives the percentage of market receipts from export sales by commodity; producers of oilseeds and red meats rely upon export markets for more than half their market receipts and, depending upon the year, grain growers for around 40 per cent. The dependence on export markets, alongside trade and financial liberalization, helps to explain why Canadian governments that had long

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Chart 1.1: Agriculture and Agri-Food Export Sales, 1990–2005 Billions $ 30 25

20 Consumer-Oriented 15

10

Intermediate

5 Bulk 0 1990

1993

1996

1999

2002

2005

Source: Statistics Canada and AAFC calculations.

Chart 1.2: Agriculture and Agri-Food Exports to North America and Rest of World, 1990–2005 Billions $ 30 25

Rest of World North America

20 15 10 5 0

1990

1993

1996

Source: Statistics Canada and AAFC calculations.

1999

2002

2005

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Chart 1.3: Portion of Farm Market Receipts from Export Sales, 2002, 2003, and 2004 Per cent of Market Receipts 80 70 60

2002 2003 2004

50 40 30 20 10 0 Grain

Oilseeds

Red Meat

Poultry

Eggs

Dairy

Source: Statistics Canada and AAFC calculations. Notes: Export dependence is calculated in terms of volume to avoid export and farmgate price differentials. Grain and oilseeds export dependence is calculated on a crop year basis and dairy on a dairy year basis.

stressed the need for Canadian agriculture and food to be competitive, took steps to give competitiveness goals higher priority from the mid1980s onward. As part of the review of agricultural policy initiated in the late 1980s, the minister of agriculture struck the Task Force on Competitiveness in the Agri-Food Industry and asked it to assess impediments to improving the domestic and international competitiveness of the Canadian agri-food sector. In 1993 Agriculture Canada was renamed Agriculture and Agri-Food Canada, and a new branch was created within it whose mandate was ‘to strengthen the industry’s competitiveness and help it obtain a larger share of the domestic and international market.’80 For the remainder of the decade and into the 2000s improving the competitiveness of the Canadian agri-food sector was a prominent explicit goal of Agriculture and Agri-Food Canada. A discourse of competitiveness can be expected to have implications for policy instruments in the state assistance paradigm. In the case of the downstream food-processing, retail, and distribution sectors, where most (one in eight) jobs in the sector are found in Canada,81 the capacity of businesses to secure inputs at costs comparable to their foreign (American) counterparts becomes a matter of concern. Differences between domestic and foreign (American) marketing institutions and regulatory standards contribute to competitiveness calculations on both

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sides of the border. Should Canadian regulatory instruments be aligned with those in the US in order to secure access to that vital market? Or to reduce firms’ transaction costs by meeting the standards of the larger market?82 Elsewhere (Japan, New Zealand) the American threat to close off its coveted domestic market had earlier been a catalyst to reforms in protectionist agricultural policies.83 In Canada, answers to these questions have been complicated by the heterogeneity of the agri-food sector across regions and commodity groups. Charts 1.4 and 1.5 provide the commodity composition of export sales in 1990 and 2005, respectively, and chart 1.6 gives regional farm market receipts by commodity share. These charts demonstrate that export dependence and the benefits to be achieved from competitiveness strategies that emphasize market opening are not experienced equally across all regions. Canada’s most economically significant commodities and the ones that are export oriented – grains, oilseeds, and livestock – are grown primarily in western Canada. By contrast, and as a result of the legacy of past policies, farmers in the central Canadian provinces of Ontario and Quebec derive significant earnings from products sold almost entirely to Canadian consumers: dairy, poultry, and eggs. As discussed further below, this regionalization of the Canadian agri-food economy has important implications for the political viability of movement away from border-protection instruments in the state assistance model towards more market-opening policy instruments. The heterogeneity of Canada’s agri-food sector limits the political viability of market-liberal strategies to position the agri-food sector more competitively vis-à-vis economic globalization, or to adjust it to the constraints and opportunities of international regulatory governance (dealt with in the next section). The chapters that follow show the resilience and adjustment of policy instruments in the state assistance paradigm due to their greater political and administrative feasibility than their alternatives. It is the political institutional framework – the political structures, rules and norms about who has the right to participate in decision-making and how their preferences and ideas will be aggregated – that ultimately determines the political and administrative viability of trade and domestic policies in sectors such as agriculture and food.84 Before examining that institutional framework, we turn to a second feature of the altered international political economy associated with the internationalization of domestic agriculture and food policy development and governance: political internationalization.

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Chart 1.4: Commodity Composition of Export Sales, 1990

2.5% 2.6% 3.4%

Total $10.7 Billion $0.2 $0.3 $0.3 $0.4

5.6%

$0.6

Beverages

6.4%

$0.7

Live Animal Excl. Poultry

8.0%

$0.9

Red Meat

9.7%

$1.0

All Other

14.3%

$1.5

Grains & Oilseeds

45.7%

$4.9

Potatoes & Products Dairy & Poultry Products Fruits & Vegetables Animal Feeds Grains & Oilseeds Products

1.9%

Source: Statistics Canada and AAFC calculations.

3. Political Internationalization and Agriculture Paradigms Political internationalization is also a dimension of the contemporary political economy of agriculture. As the term is used here, political internationalization refers to two developments. The first is interna-

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Chart 1.5: Commodity Composition of Export Sales, 2005 Dairy & Poultry Animal Feeds Potatoes & Products Beverages

2.6% 3.9% 4.0%

Total $26.2 Billion $0.6 $0.7 $1.0 $1.0

Live Animal Excl. Poultry

5.6%

$1.5

Fruits & Vegetables

6.5%

$1.7

Grains & Oilseeds Products

13.2%

$3.5

Red Meats

18.0%

$4.7

Grains & Oilseeds

20.3%

$5.3

All Other

23.4%

$6.1

2.4%

Source: Statistics Canada and AAFC calculations.

tional regulatory governance via the heightened importance of newly empowered international institutions that exercise rule-making and rule-adjudication authority. The second is transnational political activity via cross-national linkages and networks of not only state/bureaucratic actors but also actors representing civil society, be they business corporations, farm groups, global social activists, or others. The new venues of authoritative decision making and the new political actors inject into agri-food policy making new cognitive and normative ideas on which to base policy making and, some argue, contribute to paradigm change.85

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Chart 1.6: Regional Farm Market Receipts by Commodity Share, 2005 Per cent 100 90 80 70 60 50 40 30 20 10 0

BC

Prairies

Ont.

Que.

Atlantic

Grains & Oilseeds

Red Meats

Other Farm Commodities

Dairy

Poultry & Eggs

Fruits & Vegetables

Source: Statistics Canada, Farm Cash Receipts, CANSIM, table 002-0001.

3.1. International Regulatory Governance Political internationalization as international regulatory governance represents a transition from the post-war period, in which, as noted earlier, agriculture was virtually exempt from the market-opening philosophy of the GATT. Since the signing of the NAFTA and the implementation of the WTO agreements in 1995 there is a new international political and legal architecture for governing agriculture and food. Its most important components are the rules and principles of the NAFTA and the WTO agreements on Agriculture, Sanitary and Phytosanitary Measures (SPS Agreement), Technical Barriers to Trade (TBT Agreement), and Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement). The international architecture also includes the international bodies empowered by the NAFTA and the WTO to settle trade disputes among member countries as well as the international organizations authorized by the WTO to recommend health and safety standards with respect to food, plants, and animals. International organizations like the OECD, even though their policy recommendations

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are not binding, are also properly regarded as part of the new politicallegal institutional architecture of regulatory governance, as are UN bodies and treaties such as the Cartagena Protocol on Biodiversity. These international treaties, the bodies they authorize to regulate commercial transactions in the international arena, and other institutions wherein state actors attempt to coordinate their economic and trade policies are the political face of the internationalization of Canadian agriculture and food. As Sylvia Ostry observes, the WTO differs from the GATT in the degree to which it reaches into what had hitherto been exclusively domestic matters of public policy.86 Stefan Tangermann concurs, describing the WTO Agreement on Agriculture as an ‘attempt at defining more clearly what governments can and what they should not do in the area of domestic and trade policies for agriculture.’87 Moreover, as an organization, the WTO has the legal authority to sanction member countries who fail to adhere to the terms of its commercial treaties. Does international regulatory governance – via the principles embedded in the WTO and NAFTA agreements – destabilize the interpretive framework embedded in the state assistance paradigm: the view of agriculture as a unique sector that warrants exceptional treatment and the belief in the appropriateness of statist instruments to secure goals for the agri-food sector? Josling argues that it does; in his view, the WTO Agreement on Agriculture ‘enshrined’ the competitive paradigm of agriculture: the belief that agriculture should move towards free markets and that governments should largely remove their expenditure and regulatory supports for the sector.88 The chapters that follow answer the question of the transformative impact of the WTO agreements, including that for agriculture, by examining how these agreements have been interpreted by legal authorities as trade disputes have arisen, as well as how they have shaped policy developments. Examining income safety nets, orderly grain marketing, and supply management provides insight into the impact of the NAFTA, the GATT and the WTO Agreement on Agriculture. The issues of food and animal product safety and the regulation of genetically modified crops allow scrutiny of the TRIPS and SPS agreements as well as the UN Biosafety Protocol. In anticipation of these detailed analyses, a few comments can be made about how these agreements and the international institutions around them are likely to affect domestic policy developments, governing patterns, and the agricultural paradigms. First, neither the NAFTA nor the WTO embed a market-liberal model

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of agriculture, and both agreements treat agriculture as an exceptional sector in some important respects. The NAFTA and the WTO do not fully open member countries’ agri-food markets.89 The WTO Agreement on Agriculture, to quote Tangermann, ‘is not an agreement on free trade, and even less is it an agreement to do away with all agricultural policies.’90 Rather, it is an agreement among countries to respect certain principles with the objective of minimizing the negative effects of their policies on other countries.91 One of these principles is that countries ‘restrict their ability to intervene in [agricultural] markets in exchange for other countries agreeing to do the same.’92 Second, and pursuant to the latter point, the goal of the WTO (and the NAFTA) is not simply to create a liberal trading system but also to institute a rules-based one. As John Barton et al. argue, the GATT/WTO’s ‘purposes were more regulatory than liberal: although the organization attempted to open up markets, as important, or more important, was the creation of rules of conduct that would allow predictability.’93 WTO rules embrace normative and cognitive principles on which domestic regulatory policies should be designed so as to minimize their trade-distorting effects. For example, in order to prevent measures to safeguard animal, plant, and food product safety from being used for protectionist purposes, the WTO SPS Agreement stipulates the constitutive principles of these measures: scientific risk assessments, mutual equivalence, and international harmonization. When these principles enjoy legitimacy across countries, adhering to them when devising regulatory measures can be a basis for competitiveness; when they do not enjoy such legitimacy, the task of devising competitive agri-food regulatory measures becomes more difficult. Third, the international architecture of agriculture and food regulation and the interpretive frameworks extant in these international organizations are a ‘ living tree’ that acquires meaning over time.94 For example, in 1995 the OECD exhorted its member states to adopt reforms that would lead to an agricultural sector ‘increasingly influenced by market signals’; three years later, it enunciated new bases for state assistance for agriculture by recognizing that agriculture could contribute to the provision of ‘public goods’ that markets fail to provide: viable rural communities, food security and quality, biodiversity and natural resource protection, for example.95 The principles incorporated in WTO agreements are also subject to interpretation over time as WTO dispute settlement bodies are asked to rule on their meaning. Fourth, notwithstanding the limited endorsement of market-liberal

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principles in the WTO Agreement on Agriculture, the Uruguay Round Agreement was recognized as but the first step in bringing agriculture more fully into the market economy. Indeed, the 1994 Marrakech Agreement, which concluded the Uruguay Round, scheduled future talks for agriculture at the end of the century. This built-in agenda meant that agri-food policies would continue to be in the spotlight. Those that could not be justified on any of the ‘market failure’ grounds recognized by classical economic theory – inadequate competition, information deficits, and/or external effects not reflected in the pricing mechanism – would be likely targets for criticism from agricultural economists within the agri-food and trade policy community. The foregoing analyses do not suggest that market-liberal ideas could be expected to become the dominant ‘discourse’ (language) and ‘cognitive filter’ through which agri-food policy development could be appraised.96 They simple reiterate that political internationalization injects new political actors with new interpretive frameworks and policy goals into the policy mix. State actors with legal and technical expertise, whether in international institutions (the WTO, the OECD, working committees under the NAFTA) or representing their governments in forums aimed at coordinating economic policies across countries, are especially prominent in this new architecture.97 Their interpretive frameworks and goals can reinforce, or rival, those incorporated in domestic agricultural and food policies 3.2. Transnational Political Activity and Networks The importance of transnational actors and networks is the second facet of political internationalization.98 In the agri-food policy domain, they include epistemic communities, social activist networks, and nongovernmental organizations representing components of the agri-food sector. Epistemic communities are individuals and groups who share normative goals and cognitive principles and whose formal and informal interactions are geared to influencing government policy and international bodies. Transnational communities of economists are a prominent example of an epistemic community in the agriculture and food policy arena.99 Transnational advocacy networks of social activists (or civil society actors, as they are now usually labelled) are organized around the goal of raising the profile of particular issues and influencing the actions of domestic governments and international institutions.100 Domestic organizations representing producers are also active

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in the international arena, constructing vital coalitions to offset their diminishing numbers. If the epistemic community of liberal economists with expertise in agriculture has done much to popularize the competitive or market liberal paradigm (see chapter 2), the impact of networks of social activists is likely to be quite different. They are often opposed to market liberalism and view it as a transfer of power from citizens to corporate actors. And, as the example of genetic engineering shows, they are also often opposed to technological liberalism. In providing new rationales for state intervention in the economy and society, they may be valuable allies for agricultural groups seeking to maintain state assistance or to reconstitute it on new premises. As Garzon argues has happened in the EU, social activists are likely to demand a new paradigm – multifunctionality – that makes state assistance for producers conditional on their contribution to goods like environmental protection, populated rural areas, and safe food.101 To summarize, the economic and political changes in the international political economy create new circumstances with the potential to destabilize the post-war state assistance paradigm. They undermine the efficacy of its policy instruments and require higher priority to be given to policy goals not privileged by the paradigm – goals of competitiveness, in particular. They also redistribute political resources across coalitions that support or oppose the paradigm. There is, in short, the possibility for paradigm failure even as alternative viable paradigms present themselves. Notwithstanding these general tendencies, there is ample empirical evidence that countries’ responses to internationalization are ‘heterogeneous and contingent.’102 Why? At least in the early stages of political and economic internationalization, ‘signals’ from the international political economy are likely to be somewhat ambivalent. In the domestic arena, influential political actors interpret these signals differently, in keeping with the legacy of past policy choices as well as their own interests and values.103 In this political jostling, existing policies and governing patterns – policy paradigms – can prove resilient, as strategic actors adapt them to altered circumstances. Alternatively, they can be vulnerable to reform when domestic and international developments conspire to create openings for fundamental change. How is Canada’s political institutional framework likely to affect paradigm continuity and change? What are its implications for the political and administrative viability of the state assistance and alternate para-

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digms? What opportunities does it provide for a paradigm of state assistance to be locked in, modified and adapted to internationalization, or destabilized by a shift in the locus of authority and new interpretive frameworks? 4. Domestic Governing Patterns and the Viability of Agricultural Paradigms When considering the internationalization of domestic politics and its implications for policy developments, it is useful to keep in mind that policy development and governance normally proceed on two levels. One is the macro level of institutions wherein authoritative actors take decisions that transcend policy sectors and/or constrain options in virtually all policy sectors. The other is the meso level of informal patterns of governing wherein policy developments unfold in policy subsystems that act more or less autonomously of policy communities in other sectors. The fate of policy and governing paradigms in agriculture and food clearly can be affected by institutional frameworks at either the macro or meso level. Even as these general effects of Canada’s institutional framework are outlined below, it is still useful to keep uppermost Atkinson’s caution that ‘the effect of institutions on policy is almost always contingent’ and ‘the same formal structure may give rise to different effects.’104 The Canadian macro political institutional framework for agriculture and food policy development includes three formal pillars: the parliamentary, federal, and judicial systems. How is this institutional framework likely to affect the durability of ideas of agricultural exceptionalism and statist policy goals and instruments? How does it bear on the political and administrative viability of alternate policy ideas and goals? These two questions can be addressed in turn, beginning first with the question of whether Canadian political structures tend to ‘lock in’ earlier policy choices or make them fairly easy to overturn. The first and second pillars, the Canadian parliamentary and federal systems, send mixed signals in terms of the capacity for radical policy development. Whereas the executive-dominated Westminster parliamentary system facilitates abrupt changes of policy, the federal system throws up multiple potential veto points. The Westminster parliamentary system concentrates political authority in the executive (cabinet, premier / prime minister) of the governing party. Within its sphere of legal authority, a majority government has few effective internal checks,

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save those presented by its own caucus, and can readily reverse the policy initiatives of its predecessors. This possibility for radical change – through reforms that sweep across all sectors – has been reinforced by the consolidation of executive authority in the office of the prime minister.105 However, on agri-food sectoral policies, prime ministers have not traditionally directly interfered and the most influential executive actors have been the agriculture minister and bureaucracy. Notwithstanding the centrality of agriculture ministries, agri-food policies increasingly engage other government departments as well: trade, finance, health, and environmental ministries, to name the most obvious. These other ministries are less likely to be committed to a statist model of agriculture, which puts agricultural interests and ideas of agricultural exceptionalism uppermost. As well, the dispersion of authority means that the administrative viability of both statist and other policy options is often contingent upon horizontal coordination of legal authority and expertise across several ministries and agencies. If the executive-dominated parliamentary system makes even longstanding policies vulnerable, the rules and norms of federalism are more likely to protect them. Agriculture is a shared jurisdiction; both federal and provincial/territorial governments have legal authority to spend and provide services for agriculture. This constitutional fixture does present a possibility for unilateral action by one order or the other. Nonetheless, on many matters, especially those with nation-wide scope, the cooperation and collaboration of the two orders of government are needed. Where the political viability of policy goals and instruments – to secure competitiveness goals, for example – requires provincial consent, concessions are often needed to meet the preferences of provincial governments. Mobilization of farm groups at the provincial level and their ability to forge strong alliances with their local government can thus be a potent check on radical federal actions. Federalism puts significant constraints on the political viability of policy options for external and internal trade. Since a 1937 judicial ruling, the government of Canada has lacked the legal authority to enforce provisions in international trade agreements that intrude on provincial jurisdiction. This legal stricture has led the federal government to consult the provinces throughout the negotiation of trade agreements in order to ensure provinces are onside when it comes time to implement commercial treaties.106 In the matter of the internal Canadian market, the provinces regulate marketing and commercial transactions within their borders, and the federal government regulates interprovincial

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trade. This division of jurisdiction is significant for the fate of agricultural marketing schemes that regulate production/sales within and across provinces, presenting an especially high threshold of consensus for their evolution. In this ‘joint decision-making trap,’ changes that would be politically and administratively viable with a single order of jurisdictional authority are unlikely to be feasible without side deals and concessions to bring the most recalcitrant parties onboard.107 The third pillar, the Canadian judiciary, provides state and non-state actors alike with another vehicle through which to pursue their policy goals, including the capacity to attempt radical policy change. In recent years, however, and with the possible exception of decisions rendered under the Canadian Charter of Rights and Freedoms, Canadian courts have not practised judicial activism of the sort that systematically alters the authority of governments vis-à-vis either one another or citizen groups.108 Notwithstanding the structural biases of political-institutional frameworks either to lock in or to render vulnerable policies, it is the strategic behaviour of the actors who exercise authority within these institutions that are ultimately decisive in determining policy developments. Their electoral calculus and political party goals significantly determine the political viability of public policies. Viewed from this angle, there is reason to be pessimistic about the continuing political viability of the state assistance paradigm. Farmers have obviously lost voting power at the national level as their share of the Canadian population has declined – to less than 3 per cent. At the provincial level their electoral power is greater, but even in Saskatchewan, where agriculture is important to the provincial economy, farmers number only 13 per cent of the population. Still, farmers may have marginal political power in Canada’s simple plurality electoral party system, where parties must build alliances across Canada’s different regions and hew close to the centre of the ideological spectrum in order to secure national office. Over the two-decade period of this study (1985–2006), two different parties formed the federal government and each enjoyed a parliamentary majority. The Mulroney Conservatives secured national office in 1984 by forging a coalition in Quebec and prairie Canada and remained in office to 1993 largely by backing off from their market-liberal rhetoric in the 1984 election campaign. This electoral base gave it reason to be sensitive to the preferred trade policy strategies and marketing institutions of agricultural groups based in the prairies and Quebec. After its election in 1993 to its defeat in early 2006 the Liberal Party’s electoral

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calculus made it sensitive to the supply managed industries concentrated in Ontario and Quebec. It was anxious to recoup the ground it had lost in Quebec when rural voters, in particular, threw their support behind the Bloc Québécois.109 Overwhelmingly based in central Canada and with very little representation in prairie Canada, the Liberal Chrétien government could have ignored policy goals and instruments preferred by agri-food interests in that part of Canada. Prairie Canada was represented by the Reform Party which had replaced the party most predisposed towards a state assistance model of agriculture, the New Democratic Party. As the opposition party representing Englishspeaking Canada, the Reform Party championed a fundamental overhaul of the state assistance model of agriculture. The election of the minority Harper Conservative government in January 2006 provides an opportunity to test conjectures that partisan ideology has an impact on policy and governing paradigms in agriculture. Comparative analyses suggest that right-wing parties present a jeopardy to the state assistance paradigm. Market-liberal ideas have been more likely to become the central planks in agri-food strategies in rightwing governments.110 They have been committed to reform across the board and so are much less willing to make an exceptional case of agriculture. Political parties that either rely upon right-wing farm organizations (for votes, financing) or are not dependent upon the farm vote for electoral success have also been more likely to abandon state assistance policies in favour of more market-liberal policies.111 The foregoing picture puts elected executives at the heart of decision making for Canadian agriculture and food. On matters where one order of government alone exercises legal authority, it suggests considerable latitude to alter agri-food programs in keeping with state actors’ preferences. This scope for radical policy change is especially large when economic and political circumstances create openings for reform. Thus, a fiscal situation of large public deficits and debts in the 1980s and well into the late 1990s and public opinion that eventually supported governments acting to redress this fiscal situation gave governments scope to retrench costly expenditure instruments in the state assistance model. If these are the macro-level effects, a different picture can emerge when the focus shifts to the meso level. In agriculture, policy development traditionally took place in discrete policy communities whose members included those with a direct stake in policy outcomes. Indeed, it was within these policy communities that an influential and wellorganized farm lobby constructed the state assistance model alongside

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officials in agricultural ministries. More specifically, the state assistance model has been closely associated with a particular policy network or pattern of interaction and intermediation between state and non-state officials that developed within the agricultural policy community.112 This policy network has been labelled ‘corporatist’ and refers to a pattern of exchange in which farmers are represented by a single, monopoly organization that shares powers of policy formulation and/or implementation with both bureaucratic officials and representatives of an antagonist agri-food interest (processors, for example). Corporatist policy networks are closed to all but these privileged interests and can be distinguished from pluralist policy networks, which are more open. As the term suggests, pluralist networks are composed of multiple state and non-state actors. Their members also include officials from the government ministry responsible for agriculture and representatives of farm groups and other organizations in the agri-food sector. However, rather than a single organization speaking for farmers, there are often many such groups, which are usually in contention with one another. This plurality is replicated on the government side, where officials from more than one order of government, or ministry within a single order, are parties to policy deliberation and formulation. There is a debate about whether corporatist networks facilitate adjustment of policy paradigms. On the one hand, the closed character of corporatist networks and their interdependent relationships can ‘lock in’ public policies and restrict reforms to incremental modifications consistent with the premises of the established paradigm.113 This dynamic suggests that the entry into corporatist networks of new actors, bearing new interests and ideas, is normally necessary to effect the kind of radical or paradigmatic change that a shift from a state assistance model of agriculture to a market-liberal one entails.114 On the other hand, corporatist networks may be the preferred governance pattern for incremental paradigm adaptation. The parties to corporatist networks are likely not only to share interpretive frameworks (regarding the problems that need attending to and the desirable policy instruments to address them),115 but also to trust one another to bargain in good faith. There is speculation that these structural features can enable adjustment of policy instruments consistent with positioning the sector to compete more favourably in the international political economy.116 Whatever the lock-in or adaptive effects of corporatist policy networks, there is speculation that policy networks in agriculture are becoming more pluralist and open, and as they are, radical policy reform becomes more likely.117 Several factors are implicated in the shift

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Table 1.1 Canadian Farm Organizations Canadian Federation of Agriculture BC Agricultural Council Wild Rose Agricultural Producers Agricultural Producers Association of Saskatchewan Keystone Agricultural Producers Ontario Federation of Agriculture Union des producteurs agricoles Agricultural Alliance of New Brunswick Nova Scotia Federation of Agriculture PEI Federation of Agriculture Newfoundland and Labrador Federation of Agriculture Dairy Farmers of Canada Chicken Farmers of Canada Canadian Egg Marketing Agency Canadian Hatching Egg Marketing Agency Canadian Pork Council Canadian Turkey Marketing Agency National Farmers Union Western Barley Growers Association Western Canadian Wheat Growers Association Grain Growers of Canada Canadian Canola Growers Association Canadian Soybean Council Canadian Meat Council Canadian Supply Chain Food Safety Coalition New Brunswick Partners in Agriculture

towards pluralist governing patterns. They include the erosion of boundaries between agriculture and other policy domains such as the environment, consumer health and protection, and trade. The structural transformations within agriculture that were outlined earlier are another factor. Among farmers themselves, there are divisions across commodity growers as well as between large profitable farms that are responsible for the majority of production and the many more, much less profitable operations. National farm organizations often find it hard to bridge these differences and commodity groups have arisen to represent the specialized interests of growers (of wheat, barley, canola, cattle, hogs, and so on). Table 1.1 lists the array of groups that represent farm interests in Canada. The proliferation of commodity groups also

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replicates ideological divisions within the farm community; in Canada, commodity groups are often ideologically right of centre compared with the umbrella farm federation, the Canadian Federation of Agriculture, and the more leftist National Farmers Union. Developments associated with economic globalization and international regulatory governance also contribute to the trend towards more open and pluralist policy networks around agri-food issues. Networks become more pluralist in terms of the composition of state actors. Officials in ministries responsible for agricultural matters increasingly have to coordinate their actions with their counterparts in Trade, Health, and possibly other departments as well. Networks also become more pluralistic in terms of non-state actors. Governments in quest of competitiveness strategies will find it necessary to broaden their consultations to include representatives of the entire agri-food industry. Economic actors in the upstream sector that provide productivityenhancing technologies (developers of genetically modified crops, for example) or investment capital (banks) and those in the downstream processing/manufacturing sectors that add value to commodities and create jobs are certain to gain more prominence in the policy community. The input of a broad array of actors, including those who represent consumer interests, is needed to formulate and adjust domestic policies to the new circumstances of economic globalization and WTO dictates. Canadian governments signalled in the late 1980s the need to develop ‘partnerships’ not only across governments and with farmers, but also with other ‘stakeholders’ in the agri-food sector in order to devise feasible competitiveness and adjustment strategies. And they continued to reiterate the partnership approach over the 1990s and into the 2000s. The pluralization and opening of policy networks has potential consequences for the state assistance paradigm. Using the example of European agriculture, Alan Greer states that open networks ‘challenge the traditional dominance of established agricultural interests.’118 One might expect the same to happen in Canada. Networks of multiple and competing groups weaken the capacity of the farm community to present a coherent and cohesive position, including defence of any exceptional treatment in public policies. The diminished cohesion of producers can give state actors and non-farm interests a freer hand to pursue interests that do not necessarily coincide with those promoted by the state assistance model. Producer coalitions with others in the supply chain – processors and creditors, for example – are likely to be crucial. Notwithstanding these general tendencies, policy developments

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around specific issue areas are nonetheless likely to vary. The political architecture of international governance and processes of regional/global economic integration are of more consequence for some agri-food issues than for others. And different features of the domestic political economy interact with developments in the international political economy in different ways, destabilizing some policy instruments and goals to a greater degree than others. The five issue areas examined here have been chosen to display these possible variations. They also represent topics that have figured large on the political agenda, some preoccupying Canadian governments and the agri-food policy community for extended periods of time. The issues are farm income safety nets, orderly grain marketing, supply management of dairy and poultry/eggs, conventional food and animal product safety regulation, and the regulation of genetically modified crops and foods. A separate chapter is devoted to each issue and undertakes three tasks: first, to uncover the phenomena in the international political economy that have been most consequential for policy developments and governing in the issue area; second, to examine how these developments have interacted with features of Canada’s domestic political economy to shape the substance of Canadian agriculture and food policies; and third, to uncover changes, if any, in patterns of policy making or governance in the sector. As hypothesized earlier, changes in governance patterns are likely to be crucial to paradigm change. Throughout, the concern is two fold: first, to draw conclusions about the fate of the state assistance paradigm and the extent to which it has been displaced or reinforced by other interpretive frameworks, policy goals, policy instruments, and governing patterns; second, to weigh the relative significance of domestic and international factors in accounting for patterns of policy development and governing. Farm income safety nets, the subject of chapter 3, constituted an important pillar in the state assistance model of agriculture and, as noted earlier, were implicated in its purported failure. It is expected that policy developments here will be affected by both economic globalization and political internationalization. The principles and guidelines of international institutions and treaties (such as the WTO Agreement on Agriculture and the OECD) can be expected to shape the design of programs; the dynamics of international markets and the spillover effects of other countries’ domestic politics and policies can be expected to constitute a continuing rationale for state transfers to support farm incomes. It is also anticipated that the domestic fiscal situation of gov-

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ernments, the shared financial responsibility of federal and provincial governments for agriculture, and the pluralist networks of intermediation between state actors and agri-food (principally farm) interests will have important effects on the economic, political, and administrative viability of safety net policy options. Orderly grain marketing, a second historic pillar in the state assistance model, is the subject matter of chapter 4. Political internationalization is not expected to pose the same threat to statist policy instruments in grain marketing as it does with farm income support programs. However, economic globalization, in the form of regional market integration, is anticipated to create pressures for paradigm change. Calculations of the economic, political, and administrative viability of continuing with, reforming, or abandoning the state-trading enterprise – the Canadian Wheat Board – will be affected by the dependence of the grains sector on export markets, exclusive federal jurisdiction over export marketing, and patterns of governance that entail farmers’ direct involvement in authoritative decision making. Supply management of dairy and chickens/eggs is discussed in chapter 5. Supply management is also a vestige of the state assistance paradigm. Political internationalization (via NAFTA and WTO rules) is not expected to create pressure for reform of statist instruments. However, it is anticipated that regional market integration will give rise to competitiveness concerns, shift economic power from producers to the downstream processing sector, and create discernible demands for market liberal reforms to pricing formulae. Institutions of governance, which include a dominant role for provincial governments in corporatist networks, present a high threshold for change and are expected to limit the political and administrative viability of anything other than modest market liberal reforms. Chapters 6 and 7, respectively, deal with regulatory frameworks for conventional foods and animal product safety and for genetically modified (GM) crops and foods. These are ‘new’ issues that potentially test the premise in the Canadian (and American) agricultural paradigm that ‘industrial’ agriculture – mechanized and making use of the latest technologies – is a politically and economically viable competitiveness strategy. The European experience has shown that society-wide perceptions of regulatory failure on these issues has the potential to break open the agri-food policy community and create a window of opportunity for a new policy paradigm. Internationalization, via intensified cross-border trade in agri-food products and global food supply sys-

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tems, and international regulatory governance affect the economic, political, and administrative viability of various policy options. Relatively closed patterns of governance, which privilege the interests of agri-food stakeholders, are also expected to affect policy developments and outcomes. Before beginning inquiry into the five issue areas, the next chapter takes a look back at the construction of the state assistance paradigm of agriculture in Canada over the twentieth century and the factors that destabilized it from the mid-1980s onward.

2 The State Assistance Paradigm and Canadian Agriculture: Construction and Destabilization

Until the late 1970s, incrementally and usually in response to crisis situations, a paradigm of state assistance was constructed in Canadian agriculture. As it was in other industrialized countries, the paradigm was predicated upon a particular understanding of agriculture’s place in the economy and society, its problems, and the public policies that provided solutions to those problems. The foremost belief was that the development of agriculture was contingent upon state intervention in order to realize both sectoral goals of productivity and profitability as well as other goals important to the society, economy, and polity as a whole. Several structural features of agriculture, it was believed, made the price mechanism ineffective in achieving an efficient and productive sector and in assuring adequate and stable incomes for farm producers.1 The situation of perfect competition created by thousands of individual commodity producers, none able individually to alter market conditions, was not replicated elsewhere in the upstream or downstream agriculture and food supply system. This structural imbalance of market power resulted in farm commodity prices declining over time relative to other prices and costs. Add uncontrollable fluctuations in agricultural production and product prices owing to weather changes and outbreaks of disease, and the result was low farmer incomes relative to those of non-farm populations. This socially unacceptable outcome, linked to the exceptional characteristics of the production unit in the agriculture and food supply system, justified state intervention in the sector: subsidies to support and stabilize farm incomes, marketing boards empowered to control supply and fix prices, state trading enterprises and export subsidies for commodity sectors reliant upon external markets, and import quotas and high tariffs to protect commodities not competitive in foreign markets.

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If the major rationale for state intervention in agriculture was to raise and stabilize producer incomes, in several countries the paradigm of state assistance also rested on the belief that agriculture helped to provide other outcomes and goods valued by society. A safe and secure food supply is one such goal; it was prominent in the creation of the Common Agricultural Policy in the European Community.2 State intervention can be justified to assure the poor of a secure food supply (by lowering food costs) or to make society as a whole less dependent upon (less reliable) imported food. Other externalities from agriculture – benefits or costs not compensated for by markets – can also warrant state assistance to producers and agriculture. They include sustenance of rural communities by slowing the rate of out-migration from agriculture, regional economic development through preserving jobs in high unemployment areas, conservation of soil and natural resources, and stability in the overall economy.3 More rarely, a final set of beliefs of agrarian fundamentalism sometimes sustained state assistance. Although farm income parity became the major rationale for American state assistance for agriculture, it had initially been driven by the idea that the farm family unit embodied virtues and values that epitomized the American way of life, such as industry and self-reliance.4 The state assistance paradigm that was erected in industrialized countries to the 1980s varied in scope. In some countries, virtually all commodity sectors were brought under its umbrella; elsewhere, only some commodities were and state regulatory and expenditure support were more limited. This chapter documents the development of the state assistance paradigm in Canadian agriculture to the early 1980s: the goals it was designed to achieve and the public policies put in place to realize those goals. I argue that initial overtures towards state assistance in Canada were geared to increasing agricultural productivity in the pursuit of national and regional economic development goals. Only later did raising and stabilizing producer incomes become important. State assistance for Canadian agriculture was more limited than elsewhere (especially in northern European nations) and generally was a reaction to protectionist measures taken by rich industrialized countries. The reduced scope of Canadian state assistance in agriculture can be related to matters of economic and political viability. The structure of Canada’s agricultural economy – the dpendence of the most important commodities on export markets – caused these commodity sectors to look outward. The ideological and organizational pluralism of the Canadian

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farm lobby undermined its ability to stand four-square behind a single vision for the farm sector. Still, the incremental erection of the paradigm of state assistance points to the effectiveness of a national farm organization in building a close partnership with state officials in the pre-1980s era, the short-term electoral calculus of politicians, and the shared jurisdiction over agriculture that caused competitive federal and provincial governments to ratchet up state support for the sector. The chapter then moves on to examine how the model of state assistance in agriculture came under significant pressure from the early 1980s onward. In the international arena, the GATT-centred international trading regime was put in jeopardy by an agricultural ‘trade war’ between the European Community and the United States. In North America, US use of trade remedy measures to protect its domestic agrifood industry jeopardized Canadian access to an important market. At the same time, governments faced large public debts and fiscal deficits that gave them additional incentives to move away from costly policies of state assistance and agricultural protectionism. Critics of state assistance pointed to the failures of the state assistance model and championed an alternative, market-liberal paradigm. It rests on a different set of cognitive and normative beliefs that include the view that competitive markets are possible in agriculture and should be allowed to function, that producers’ incomes should be derived overwhelmingly from the marketplace, and that agriculture should be treated like other economic sectors. Such a market liberal model called for a significantly different and reduced role for governments in the sector. 1. Incremental Development of State Assistance 1.1. Securing National Goals: Confederation to the Second World War From the late nineteenth century and well into the twentieth century, policies with respect to the agriculture sector were directly linked to broader national goals of economic and political development. No commodity symbolized this link between agriculture and national goals more effectively than wheat. The production and export of wheat was the ‘keystone’ in the National Policy inaugurated in 1879.5 Designed to create Canadian jobs, investment, and economic prosperity, the National Policy included tariff protection for domestic manufacturing interests, initiatives to attract immigrants to western Canada, and the

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construction of a transcontinental railway to move people and central Canadian manufactured goods into the prairie interior and grain and flour out to ocean ports. The development of the prairie wheat economy tied these various policies together, warded off American imperialist ambitions, and promoted Canadian commercial and manufacturing interests.6 When farmers complained that they paid the cost of tariffs in the form of more expensive machinery, they were accommodated, in part, by regulated railway freight rates for the transport of grain and flour. These rates were set ‘in perpetuity’ by the 1897 Crow’s Nest Pass Agreement; in the twentieth century, they helped to keep farmers’ export grain transport costs comparatively low.7 The importance of wheat to the national and prairie economies was fully evident in the early twentieth century. Wheat was Canada’s number one export in 1910 and continued to hold that spot in 1930. Wheat and wheat flour exports accounted for more than a quarter of all Canada’s exports in foreign markets in 1930, almost double the value of the closest rival, newsprint paper.8 Recognition of wheat’s importance led early on to the implementation of other instruments of state assistance. In addition to freight rates, grain handling and storage facilities were regulated in a quest to encourage grain exports. Subsequent instruments of state assistance came grudgingly and required massive mobilization by prairie farmers. From the early twentieth century onward, farmers recognized their competitive inferiority in the price system and mobilized to do something about it. They used the federal and parliamentary systems to their advantage. Farmers’ parties captured political office in Ontario in 1919, in Alberta in 1921, and in Manitoba in 1922. Given that the Government of Canada was much better positioned than were the provinces to meet producers’ needs for better terms of trade (owing to its legal authority over interprovincial and export marketing), more important was the 1921 federal electoral success of the Progressive Party. Campaigning on a platform closely aligned with the Canadian Council of Agriculture, the Progressives became the second-largest political party in the House of Commons. The Progressives used their influence to have the Crow’s Nest freight rates, which the government had suspended in 1918, reinstated in 1922. Their pressure led to the rates being extended to cover more railway lines. The Mackenzie King government defended its freight rate policy as necessary ‘to encourage the further development of the great grain growing provinces of the West, on which development the future of Canada in a large measure depends.’9

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The mobilization of farm interests was also responsible for the creation of the Canadian Wheat Board.10 The Board began life as a temporary agency (1919–21) and was restored under farm pressure in 1935, following the collapse of farmer-owned pools. The voluntary agency that Conservative Prime Minister Bennett created – and that competed with private grain traders to sell farmers’ wheat – finally achieved the monopoly status farmers desired in 1943. Even then, the extension of the Wheat Board’s powers to make it the single-desk seller for prairie wheat was not implemented in response to farmers’ demands but rather in order to ensure sufficient supplies of grain to meet commitments to Britain and other allies. When the Board’s monopoly was renewed and extended in the post-Second World War period, it was to fulfil commitments to wartime allies. The monopoly enjoyed widespread political support from other political parties, the Canadian Federation of Agriculture, the prairie wheat pools, and the three prairie provincial governments.11 A second important plank in the state assistance model was also initiated during the Second World War, when the federal government began to offer direct financial assistance to stabilize prices of eleven farm commodities, including grains and dairy and meat products. Like the granting of a monopoly to the Wheat Board, state intervention was principally designed to secure ‘national interest’ objectives, as these were defined by the government of the day. The stabilization programs supported commodity prices at levels farmers found unduly low. Nonetheless, the programs served national purposes in encouraging production to ensure food supplies for European allies while simultaneously preventing domestic price inflation.12 These early regulatory and expenditure initiatives in support of agriculture were put in place during a period when the farm population comprised a significant proportion of the total Canadian population and when the farm economy was nationally important. In 1930 almost one in three Canadians (32 per cent) lived on the farm; in 1941 more than one in four (27 per cent) still did. With some rare exceptions – notably between 1931 and 1933 – exports of grains and, later, oilseeds, livestock, and meats made important contributions to the country’s positive balance of trade and payments, even when they were overtaken by mineral and forest resources after 1930 as Canada’s most important exports.13 Throughout the 1930s and 1940s, agriculture comprised on average 11 per cent of Canada’s gross domestic product.14 Until the mid-twentieth century, Canadian state assistance for agri-

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culture was neither extensive nor based on the belief that agriculture faced ‘competitive disabilities within the price system.’15 Rather, it constituted a series of expedient measures taken in response to depression and war and represented an endeavour to contribute to broader national economic and political goals. That view changed in the postSecond World War period, aided in no small measure by developments in the international and domestic political economies. 1.2. Expanding the State Assistance Model in the Post-Second World War Period The implementation of the General Agreement on Tariffs and Trade (GATT) in 1947 initiated an era of ‘embedded liberalism’ that formed the context for domestic and trade policy development until the 1980s.16 In the post-war period, signatory countries to the GATT agreed to a progressive reduction in barriers to international trade (tariffs) in most economic sectors. At the same time, the ‘compromise’ of market opening allowed states to insulate certain key aspects of economic life, important to domestic security and stability, from market-liberalizing forces. Agriculture became one of these exceptional sectors explicitly permitted to deviate from the general principles of the GATT.17 The 1947 agreement provided a number of exceptions for agricultural trade. Unlike the situation for non-agricultural (manufactured) goods, the quantity of agricultural imports could be restricted when domestic supplies were controlled (Article XI) and subsidies on primary agricultural exports were permitted (Article XVI). Further exceptions followed when the United States sought and obtained a waiver in 1955 from its GATT obligations for agricultural products. Canada had opposed exceptions for trade in agricultural products in the 1947 GATT and also objected to the US waiver. In the early 1960s the European Community (EC) implemented the Common Agricultural Policy (CAP) to subsidize food production in member states and shield Community farmers from foreign competition. The CAP was given exemption from the GATT’s non-discriminatory and trade-liberalizing provisions,18 a move that Canada also opposed. US efforts to address agriculture – and the CAP – in subsequent rounds of GATT negotiations were unsuccessful.19 Rather than providing checks on the state assistance model, the international context encouraged it. As Timothy Josling has observed, ‘this determination to keep trade rules weak in agriculture’ was supported by ‘a particular view of the functioning of world markets’: of low and

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unstable commodity prices that were ‘not a sound basis for domestic policy.’20 In the three decades after the Second World War, industrialized countries, such as the United States, Australia, Japan, and the members of the European Community, put in place an array of expenditure and regulatory policy instruments directed towards similar policy goals of increasing agricultural productivity and raising farm commodity prices and farm incomes.21 The chosen policy instruments and the degree of state assistance varied across countries and, within them, across commodities. Protectionist measures included border restrictions such as tariffs, import quotas, and levies. Other policy instruments, such as export subsidies, credit for surplus disposal, and state trading bodies, helped to leverage commodities into export markets. Still other measures were intended to raise and stabilize producers’ incomes; they included price supports, production-controlled programs, and international commodity agreements. Canadian governments were also motivated by similar policy goals and used a number of instruments to promote them. The government of Canada invested in agriculture to help it to modernize, lower production costs, and become more efficient and productive. To encourage higher productivity, it funded research to produce higher-yielding crop and livestock varieties and improve cultural practices. This instrument was long-standing, reaching back to the earliest years of Canadian confederation.22 It also employed a second instrument, which could be traced back to the 1940s: subsidized credit to encourage farmers to expand the size of their farm unit, invest in machinery in order to reduce the amount of labour needed, and increase productivity through greater use of chemical fertilizers and herbicides. Between 1951 and 1967 capital investment in Canadian farming more than doubled.23 These capital investments accelerated the structural change in Canadian agriculture that had begun in the 1930s. Chart 2.1 shows the increase in the size of farm enterprises since 1941; Chart 2.2 shows the growth in average herd size since 1971. The structural changes in Canadian agriculture were similar to those in other OECD countries: an exodus of farm labour and a growing share of agricultural production being produced by a relatively small number of highly specialized farm businesses.24 Having peaked in the 1931 census, the number of Canadians living on farms declined decade after decade; by 1981 Canada had 77 per cent fewer farms than in 1951.25 However, the uneven rate at which farmers borrowed and invested resulted in a sharp gap between a small

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Chart 2.1: Number and Size of Farms in Canada, 1941–2001 Average Farm Size in Acres

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2001

0

Source: Statistics Canada, Historical Overview of Canadian Agriculture, Cat. No. 93-358 XPB; Statistics Canada, Census of Agriculture, Cat. No. 95F0301XIE, tables 5.1 and 5.2.

number (less than 10 per cent) of large commercial farms producing two-thirds of agricultural commodities and a much larger number of small farms responsible for only about a third of agricultural output. Thus, while the rationalization and restructuring of Canadian agricultural production resulted in a doubling of agricultural output from the 1960s to the 1980s,26 many farmers failed to realize their anticipated higher incomes. Farm input (land, fertilizer, fuel, machinery) costs also rose significantly, commodity prices were volatile, and crops periodically failed. With an electoral base in prairie Canada, the Diefenbaker Conservative government (1957–63) was sensitive to farmers’ economic difficulties. It extended programs of state assistance that had originated in the pre-Second World War period. It created and funded, without provincial participation, a more extensive price stabilization program and implemented a voluntary crop insurance program that participating farmers cost-shared through premiums. From 1958 onward, these mea-

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Chart 2.2: Average Herd Size, 1971–2001 Number of Cows

Number of Pigs

60

1,000 900

50

800 Dairy Cows

40

700

Beef Cows 600

Pigs 30

500 400

20

300 200

10

100 0

1971

1976

1981

1986

1991

1996

2001

0

Source: Statistics Canada and AAFC calculations.

sures offered most Canadian producers a backstop against fluctuations in their incomes.27 These programs resulted in a threefold increase in government financial transfers to farmers in 1957–8 and 1972–3.28 They did not, however, end the income woes of many farmers. Severe income distress (the result of overproduction and rising costs) in the dairy sector in the early 1960s and a political context of a minority Liberal government anxious to woo central Canadian voters, where the dairy industry is concentrated, resulted in a significant expansion of the state assistance model in the mid-1960s. In 1966 the Canadian Dairy Commission was established as the government of Canada’s vehicle to support industrial milk prices and transfer subsidies to dairy producers. It became a first step in the creation of a national system of supply management, which included producer quotas, administered prices for dairy products, and state subsidies to support dairy product prices. Under the terms of the GATT, this national system of supply management allowed restrictions to be placed on imports of dairy products.29

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Internationalization and Canadian Agriculture

It was regulatory rather than expenditure instruments of state assistance that were significant in the grains and oilseeds sector during the 1950s and 1960s. The Canadian Wheat Board exercised a monopoly over export sales of wheat, barley, and oats. Approximately two-thirds of Canadian wheat is exported, but these quantities – between 15 and 25 per cent of world wheat exports over the period from 1960 to 1985 – were too small to give the Wheat Board much bargaining power.30 Still, the Wheat Board’s system of delivery quotas, coupled with federal government payments to help farmers with their cash flow problems, facilitated the holding of grain stocks when international grain prices were low. Canadian and American governments were largely responsible for these grain stocks and thus for stabilizing international grain markets and prices over the period 1949 to 1969. They did so under the terms of an international agreement with wheat importing and exporting countries (which included Australia, France, and Uruguay).31 At the same time, Canadian grain producers benefited from the considerable effort put into seeking new export markets such as that secured with China. Notwithstanding these instruments of state assistance, by the latter half of the 1960s there was such widespread distress in the Canadian farm community that the Liberal government commissioned a task force in 1967 to assess the industry and recommend policies and programs for its improvement. The Federal Task Force on Agriculture described the following ‘symptomatic’ problems of Canadian agriculture: ‘low incomes, over-production, prevalence of small, non-viable farms, increasing regional disparities, low and unstable prices, cost-price squeeze, slow market growth, diminishing export markets, commodity problem [sic] e.g. wheat and dairy, declining farm share of national income, paternalism and ineffectiveness of government policies and programs and a host of others.’32 It stated that ‘agriculture should be operated much as any other industry’ and, accordingly, that the government should reduce its direct involvement in agriculture, phase out its subsidies and price supports, and require the industry to become more self-sufficient.33 One step towards doing so would be to give incentives to farmers to exit the industry. Had governments adhered to these Task Force recommendations, they would have dealt a strong blow to the state assistance model of agriculture and treatment of agriculture as an exceptional sector. Governments did not view as politically viable the Task Force recommendations that would have sent agricultural policies in such a direction. The farm community, beset with considerable price instability and

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inflationary pressures, reacted strongly and negatively to Task Force recommendations that would have seen governments take measures to reduce farm numbers and state involvement. The Canadian government and its provincial counterparts did pursue other recommendations in the Task Force report. One such recommendation recognized that farmers had meagre bargaining power when it came to prices and advocated enhancing farmer bargaining power through national marketing boards. Such a strategy would also reduce governments’ direct involvement in agriculture (by eliminating direct subsidies and price supports, for example). The Canadian government acted on that recommendation and moved to establish national marketing boards with supply management powers in the poultry and egg sectors to accompany those already existing in the dairy sector.34 Another Task Force recommendation, a program to stabilize prairie grain prices, was also implemented with the passage in 1976 of the Western Grain Stabilization Act (WGSA). Introduced as a measure to stabilize the net returns from exports of grains from the prairie region, it was a voluntary and contributory scheme: for every dollar the farmer contributed to the program, the government of Canada contributed two. The WGSA was intended not to alter the influence of market prices on producer decisions, but rather to leave it to producers to decide what crops were most profitable to grow.35 At the same time, the 1958 Agricultural Stabilization Act was amended to make federal price support mandatory for nine commodities and raise the support level.36 These amendments followed the emergence of initiatives by several provincial governments to stabilize the incomes of their own producers and otherwise build up their own agricultural economies. The resulting uneven treatment of producers across provinces precipitated federal action to harmonize the provincial schemes.37 Within stabilization programs there was a sharp rise in direct government payments to Canadian producers over the 1970s, from 11 per cent to 24 per cent of net farm income.38 Growers of virtually all agricultural commodities were covered as a result of these program initiatives in the 1970s and, significantly, they stabilized farm incomes, not simply commodity prices, by taking into account production costs. By the late 1970s, then, Canada had expanded its state assistance for agriculture. Much of this expansion followed in the wake of other countries’ proliferation of measures to develop and protect their own agricultural sectors from foreign competition. Aside from fiscal transfers to

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Internationalization and Canadian Agriculture

raise and stabilize farm commodity prices/incomes, there were also tariffs, albeit low, on primary and processed agricultural commodities as well as import restrictions on several commodities, including dairy products, poultry, and fruits and vegetables.39 The final plank in the state assistance model was export subsidies. They existed in the dairy sector (where not much product was exported) and in the grains and oilseeds sector, where in excess of 60 per cent of crops were exported. Under the terms of the 1983 Western Grain Transportation Act, the annual subsidy to the railways to assist with their costs of moving prairie grain to export terminals was set initially at $650 million. Notwithstanding their costs to Canadian taxpayers and consumers, analysts argue that Canada’s policies of state assistance for the agriculture sector were ‘relatively modest’ compared with those of most rich industrial nations through to the early 1980s.40 State intervention in agricultural markets and expenditure support for farmers was more extensive in the United States, France, Great Britain, and Japan. Europe’s CAP represented the most comprehensive and institutionalized version of the state assistance paradigm of agriculture, linked as it was to broader political goals (peace among European countries) and social objectives (food security) and incorporated into the Treaty of Rome.41 In Canada, policies of state assistance had evolved through what Veeman and Veeman describe as a process of ‘marginal incrementalism’ or ‘muddling through’: ‘In this approach there is no clearly defined set of objectives, there tends to be an emphasis on making only marginal changes in existing programs rather than scanning a wide range of alternative programs, programs tend to be selected on the basis of their acceptability to pressure groups rather than on their effectiveness in achieving objectives, and frequently programs are chosen which may have conflicting and inconsistent effects.’42 The authors’ description of the ad hoc character in which state assistance for agriculture developed in Canada rings true, even while it underplays the extent to which farm groups, and at least some agriculture ministers, shared the view that agriculture had exceptional problems, which warranted state intervention. 1.3. Canadian State Assistance and Patterns of Governance In most industrialized countries, the paradigm of state assistance was constructed on a political infrastructure of a cohesive and wellorganized farm lobby that enjoyed close relationships with officials in

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agricultural ministries, and was able to leverage its voting power.43 The organizational development of Canadian farm groups was weak relative to that of other industrialized democracies, particularly those in Europe, where a single ‘peak’ farm organization often represented farmers. In conjunction with the diversity of interests across commodity groups and provinces, the federal system frustrated the development of national farm organizations that could speak for the Canadian farm community as a whole. The greater responsibility that the Government of Canada exercised for agriculture, at least until the 1970s, when provincial governments became more active, also left agricultural interests highly dependent upon the partisan calculations of the government party (normally Liberal) in Ottawa. At the national level, no single farm organization has ever attained the status of ‘the voice’ of Canadian farmers. The Canadian Federation of Agriculture (CFA) came closest. Established as the Canadian Chamber of Agriculture in the mid-1930s and renamed in 1940, the CFA is a federation of general provincial farm organizations and interprovincial and national commodity groups. As such, it provides a bridge across different commodity growers, living in different provinces and regions, speaking two different languages, and operating farm units that over time have come to differ quite significantly in terms of their commercial viability. The National Farmers Union (NFU) is sometimes a rival to the CFA; at other times, it is a coalition partner. The National Farmers Union was a loose amalgam of direct-member farm unions in the prairie provinces and Ontario until their formal unification in 1969. As national organizations, the CFA and NFU have always been flanked by organizations representing growers of specific commodities (including rapeseed/canola, barley, milk, cattle, hogs, and wheat). Some, but certainly not all, of these commodity groups are members of the CFA. This multiplicity of farm organizations has chronically dissipated the leadership and coherence of the farm lobby. From the outset, the CFA lacked the statutory mandate and organizational resources necessary for a fully successful umbrella farm organization. No national government has ever enacted legislation that would allow a national farm organization to extract compulsory membership dues from Canadian farmers. The CFA has thus relied almost entirely upon voluntary fees paid by its members, a revenue base that supports only a skeleton administrative and professional staff and requires the CFA to lean heavily upon its member organizations to provide it with policy expertise on a host of issues. In this respect the CFA has always

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Internationalization and Canadian Agriculture

been well served by the presence of strong provincial federations in Ontario and Quebec, in particular, and commodity organizations such as those representing dairy farmers and the prairie wheat pools. Despite its organizational limitations, the CFA did become the most credible voice of Canadian farmers. It built up a close and cordial relationship with officials in the Department of Agriculture, fostered by long periods of tenure of both the CFA’s senior officers and the deputy minister of agriculture. It met annually with the federal cabinet to outline the main problems facing Canadian farmers and propose solutions. It avoided confrontation, believing that non-partisan cooperation was more effective.44 However, its provincial member organizations were not averse to more militant activities. Repeated demonstrations on Parliament Hill in the late 1960s by thousands of Quebec and Ontario farmers and their farm union leaders, including the Ontario Federation of Agriculture and the Quebec Union catholique des cultivateurs, were pivotal to the creation of a national system of dairy supply management. However, the personal relationship between senior officials in the CFA and the Department of Agriculture could not compensate entirely for the organization’s comparatively weak resources of finances, staff, and information. The CFA never enjoyed the influence over agricultural policy exercised by its British counterpart, the British National Farmers’ Union. A comparison of the two organizations led to the conclusion that the ‘flavour’ of the relationship between civil servants and the CFA in Canada was very different from that between civil servants and the British farm organizations: ‘It is much less stratified – there is no concept at all, as in Britain, of the “opposite number.”’ Further, ‘the British organizations, particularly the Farmers’ Union, speak of carrying on “negotiations”’ with government. This word is not used in the literature on the Canadian farm organizations.’45 At the 1969 Canadian Agricultural Congress the CFA itself lamented its lack of influence. The Congress had been convened by the Canadian government to elicit the response of farm groups and agribusiness to the report of the government-commissioned Task Force mentioned earlier. The president of the CFA used the occasion to criticize both the substantive recommendations of the Task Force – they did not recognize that governments have a responsibility for the welfare of farmers – and the Canadian government’s failure to take farmers’ views adequately into account in formulating agricultural policy. President Charles Munro argued the need for ‘improved consultation and im-

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proved consultation procedures’ that ‘represent real breaks with tradition.’ Producers, he said, needed to be informed of the consequences of courses of action that the government was taking ‘before final decisionmaking.’ He attacked existing procedures, by which governments received the views of farmers before ‘retiring into private deliberations of which the farmers will be informed of [sic] the results in due course.’46 Their influence in the national capital not being as great as they would like, farmers used the ‘two kicks at the can’ that federalism provides to make their case for state assistance. By the 1970s, if not earlier, alliances between provincial farm federations that were CFA members and provincial governments were key to enhancing the power of the farm lobby. These alliances were important on the prairies and in central Canada, where provincial governments became more aggressive after 1970 in exercising their substantial expenditure and regulatory powers with respect to agriculture and in demanding more input into federal policies that affected their provincial agricultural sectors.47 The partnership between farm organizations and provincial governments in Quebec, while historically close, grew in significance after 1970, when the economic viability of the province’s agriculture and food sector became intertwined with the nationalist aspirations of Quebec governments. In 1970 the Quebec government passed legislation that allowed a single farm organization to accredit itself as the monopoly voice of Quebec farmers and to extract a compulsory membership fee from every Quebec farmer. The Union des producteurs agricoles (UPA) became that monopoly voice in 1972 and lent its considerable strength and monetary resources to fortifying the CFA.48 Into the late 1970s and notwithstanding its frequent dissatisfaction with both its access and influence, the CFA was nonetheless the only farm organization that came close to having a privileged role in the national agriculture and food policy community. It successfully rebutted suggestions that non-farm interests should be formally invited to advise the government of Canada on agricultural matters. It rejected a recommendation by the federal task force on agriculture in 1970 for a broad all-industry advisory structure to the minister of agriculture that would include the CFA, the NFU, and major commodity sectors, as well as agribusinesses and trade associations.49 The CFA argued: ‘on many subjects the primary interest involved will be that of the farmer, and the agri-business role in a policy-making process in such areas would be inappropriate.’ It adopted a similar position in the late 1970s at a conference organized by the Government of Canada to devise a

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Internationalization and Canadian Agriculture

national food policy. To the Government of Canada and the over 400 invited representatives of all sectors of the food system – producers, processors, distributors, retailers, consumers, and the input sector – the CFA sought to make it ‘unequivocally clear’ that ‘farming is the farmer’s business.’ CFA President Dobson Lea warned: ‘We will not accept decision-making, consultative, advisory or representational systems where non-farm representatives are invited to be the vehicle through which the government is advised on farmer’s business.’50 Although it prevailed temporarily, the CFA could not prevent the organizational fragmentation of the farm lobby. Specialist commodity organizations representing cattle, grains, and oilseeds producers and philosophically committed to a greater role for market forces in Canadian agriculture came into being and gained members in the 1970s. Governments played a role in this phenomenon. In 1969 the federal Liberal government provided public funding to the Canada Grains Council, a new organization representing the grains industry, thereby creating an organizational competitor to the prairie pools that were members of the CFA. The Alberta government subsidized two new organizations, the Palliser Wheat Growers Association and the Western Barley Growers Association. These developments, and the fact that the Canadian Cattlemen’s Association, was also outside its umbrella, seriously undermined the CFA’s capacity to speak for Canadian farmers. Its representational credentials in prairie Canada were particularly weak. Just how weak the CFA was and how disastrous this state of affairs was for its consensus-building capability were fully revealed in the Crow debate of the early 1980s. This debate unfolded when the government of Canada decided to end the eighty-year old statutory obligation on Canadian railways to transport grain to export terminals at fixed and low costs to farmers. The prairie community was torn over whether the Crow’s Nest rates should be rescinded, and, if so, who should bear the cost of higher freight rates. Prairie livestock growers, who stood to gain from lower feed grain costs, were pitted against grain producers, who would lose with the ending of the export subsidy. The result was a deep wedge inside the provincial farm federations that comprised the CFA’s members. Its organizational members at odds, the CFA retreated to the sidelines, leaving its member prairie wheat pools and the National Farmers Union to battle it out against a coalition of oilseeds, cattle, and grain commodity groups. The former were adamant that increases in railway freight rates should not come at farmers’ expense, while the latter were willing to accept higher freight costs to producers. An eleventh-

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hour alliance between two CFA members – the Saskatchewan Wheat Pool and the Quebec UPA – secured an outcome (government payments to the railways but increases in railway rates to transport grain) that was a victory for those who believed the state had expenditure responsibilities for the prairie grain economy.51 The costs to the CFA of the acrimonious Crow debate lingered well into the 1990s. The provincial farm federations in Saskatchewan and Alberta, faced with the impossible task of reconciling the disparate interests of their members, dissolved shortly thereafter. Their death left the CFA without representation from these two provinces throughout the remainder of the 1980s and well into the 1990s. As Coleman has observed, the associational system that the CFA had carefully constructed over several decades had come crashing down ‘like a house of cards’ as a result of the Crow debate.52 In this weakened organizational state, Canada’s farm community was forced by altered circumstances in the international and domestic political economies to debate the merits of a market-liberal path for the sector. 2. Destabilization: A New International and Domestic Context The 1980s ushered in a series of events that destabilized the state assistance model of agriculture in industrialized democracies. Some of these developments – global shifts of economic activity and growth to the newly industrializing countries of east and southeast Asia, onerous public debts and deficits, subscription to ideas of market liberalism – motivated western governments to engage in fiscal retrenchment across all spheres of public policy. Other developments were peculiar to the agriculture sector. International markets, especially in the grains and oilseeds sector, were disrupted as the United States and the European Community (EC) pitted their treasuries against one another in a bid to undercut each other in foreign markets.53 In North America, Canadian exporters, including those in the agriculture sector, faced mounting American protectionism and non-tariff barriers, their access to a vital market impeded by countervailing and anti-dumping duties.54 These developments compounded the income crisis in the farming community that had been created by high interest rates, low commodity prices, and large farm debt. The ‘crisis’ spanned European and North American agriculture and was depicted by agricultural economists as one caused by the state assistance model itself.55 The extensive regulatory and expenditure involvement of governments had caused international trade problems

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Internationalization and Canadian Agriculture

and also had failed to stabilize farm incomes, alleviate poverty among farmers, and deal effectively with adjustment of (surplus) farmers from the sector.56 The growing costs of the CAP could not be ignored; they were threatening the project of European integration itself. On a global scale, a transnational epistemic network of agricultural economists provided the analyses and data to demonstrate the fiscal burden of state assistance for agriculture, its distorting effects on international agricultural markets, and the gains to be had by making agricultural markets more competitive.57 Located in international organizations such as the OECD and the GATT Committee on Trade in Agriculture, as well as looser transnational groupings, such as the International Agricultural Trade Research Consortium and the International Policy Council on Agriculture and Trade, agricultural economists within these networks championed an end to state intervention in agricultural markets and a limit on the capacity of states to protect their agricultural sectors. They elaborated and advocated a market-liberal model of agriculture that rejected the premise of agriculture as a unique sector warranting exceptional treatment.58 They argued that, as in other economic sectors, competitive markets were possible in agriculture and (functioning according to supply and demand) should largely determine producers’ incomes. The market-liberal model does not entirely eschew a role for governments. But it is a much reduced role, confined to ‘horizontal’ policies that provide a level playing field and that promote the overall efficiency and productivity of the sector. Low-slung safety nets and privately funded risk-management tools assist farmers to stabilize their incomes and manage income fluctuations that arise because of natural disasters or market cycles. In terms of trade policy, market-opening measures replace the protectionist instruments found in the state assistance model. Governments reduce tariffs, remove export subsidies, and eliminate other measures (export credits, government financial underwriting of state trading enterprises) that distort world markets.59 Economic analyses, which showed that gains would accrue to all countries if they were to collectively dismantle their protectionist agricultural measures, was persuasive. GATT members agreed to include measures to reduce agricultural trade distortions on the agenda of the Uruguay Round GATT negotiations that began formally in 1986. 2.1. The GATT/WTO Agreement: A New Agri-Food Trading Regime Throughout the Uruguay Round, the market-liberal model of agricul-

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ture was endorsed by the US and the Cairns’ ‘fair traders’ group of fourteen agricultural exporting countries.60 The initial US ‘zero option’ position called for dismantling all trade-restricting and domestic measures within ten years. The EC opposed this extreme view and the pace, depth, and specificity of reforms to the state assistance model of agriculture that it implied. EC negotiators agreed that agricultural policies needed reform, but they proposed a much more modest reduction of tariff and non-tariff barriers to trade in agricultural products. They argued that governments should have the flexibility to choose which policy instruments and commodity programs they would alter, such reforms should be gradual, and countries should have the right to protect farmers from foreign competition and to subsidize their agri-food sectors to secure goals of food security, rural development, and adequate farm income. This rationale for continuing state assistance for agriculture was supported during the Uruguay Round negotiations by other nations, including Japan, South Korea, and some developing countries.61 The clash between the market-liberal and multifunctional visions of agriculture and between the world’s two most important agricultural powers dominated and extended the Uruguay Round. The Round came to a successful end only in 1993, when the EC reformed its Common Agricultural Policy, the US retreated in terms of the magnitude of reforms it was seeking for agriculture, and the US and the EC struck a deal that left their own agricultural policies essentially intact.62 The 1994 Marrakech Agreement that concluded the Uruguay Round and created the World Trade Organization signalled a new era in agriculture, described here as the political internationalization of domestic politics and policies towards agriculture and food. For the first time, international rules and international institutions constrained domestic and trade policies for agriculture. The most important of these rules were laid out in three agreements: the Agreement on Agriculture, the Agreement on Sanitary and Phytosanitary Measures, and the Dispute Settlement Understanding. These agreements ended agriculture’s treatment as an exceptional sector that had been allowed to derogate from several principles in the GATT trade regime. The details of these agreements and their implications for Canadian policy developments are spelled out more fully in the chapters that follow, but a few features can be highlighted here. The Agreement on Agriculture required countries to make specific, binding commitments on market access, domestic expenditure support, and export subsidies

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during the period 1995–2000. On market access, it required countries to convert their non-tariff border measures (import controls and licences) to tariffs and to permit a (small) quota of imports. Imports above this quota were subject to much higher tariff rates.63 Countries had to reduce their aggregate domestic support by 20 per cent from its 1986–8 base.64 With respect to export subsidies, the value and volume of existing subsides were to be reduced and new export subsidies were prohibited.65 The Sanitary and Phytosanitary (SPS) Agreement contained provisions to limit countries using measures to protect the health of the human and animal populations and their plant life as a way to bar imports. It required countries to justify their SPS measures on scientific and risk assessment grounds, that is, to provide scientific evidence to demonstrate that the excluded import was unsafe and that their own domestic products had to meet the same scientific/safety standards as the excluded product. The Dispute Settlement Understanding was arguably the most radical institutional innovation of the new WTO. It established binding procedures to settle trade disputes and prevent countries from avoiding their legal obligations under GATT/WTO.66 As argued in chapter 1, these WTO agreements and the WTO organization itself constitute the foundations of an international trading regime for agriculture and food, that is, a ‘set of rules, decision-making procedures, and/or programs’ that govern interaction among political actors.67 As measured by the terms of the Agreement on Agriculture, this regime fell far short of embracing a market-liberal model of agriculture. It did, however, presage a continuing regulatory role for states if for no other reason than to coordinate more closely their regulatory measures for trade in animal and food products. 2.2. Regional Trade Agreements and Regional Economic Integration The factors that precipitated a North American regional free trade agreement had much less to do with agriculture than to do with the manufacturing and natural resource sectors of the Canadian economy.68 The significance of the US market to Canada as a whole – accounting for about 75 per cent of Canadian exports in the mid-1980s – was not matched in the agri-food sector, where the US market accounted for about a third of Canadian farm exports. However, when exports of Canadian grains and oilseeds, which constitute the largest share of Canadian exports and only 11 per cent of which were shipped to the US

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in the mid-1980s are excluded, the US market was Canada’s most important outlet for agri-food products. It accounted for over 60 per cent of Canadian farm exports.69 Among those commodities most reliant on the US market were live cattle and swine (for 80 per cent of their exports) and beef and pork (for 82 per cent of their exports).70 For these exporting interests, a primary concern was to secure the American market and limit American protectionism. American protectionism from the early 1980s onward has been noted earlier.71 Canadian producers of hogs, cattle, and fruits and vegetables who faced non-tariff barriers to the US market and countervailing and anti-dumping duties welcomed the possibility, held out by the Canadian government, that a trade agreement would pre-empt these trade actions or at least facilitate their expeditious and fair resolution. The interest of export-oriented producers/firms in market opening was not, however, shared by those in the supply-managed dairy and poultry/egg sectors. At the outset of the negotiations, the American government had made clear its desire to erode or eliminate national dairy and poultry marketing boards and remove import controls on eggs, poultry, and dairy products. Both the Free Trade Agreement (FTA) and the North American Free Trade Agreement (NAFTA) negotiations coincided with the multilateral GATT negotiations, and their outcomes were affected as a result. The United States was unwilling to discuss any major dismantling of non-tariff barriers in agriculture in the FTA/NAFTA, since its primary liberalizing target was the European Community. Sensitive issues such as export subsidies (for the US particularly) and supply management (for both countries) were reserved for the Uruguay Round GATT negotiations. The result was a limited agreement on agriculture that, aside from tariff reduction, did not require any immediate changes to each country’s most important agricultural programs. Chapter 7 of the Canada-United States FTA, which came into effect on 1 January 1989, did limit the use of some policy instruments in the state assistance model of agriculture. First, tariffs on agricultural products, which were not large and were comparable on both sides of the border for the most part, were to be phased out within ten years.72 Second, provisions were made to eliminate quantitative import controls and import licences on each other’s agricultural productions, subject to certain conditions. The important exception here was both countries’ retention of import controls for dairy products. And third, Canada and the US agreed to eliminate export subsidies in one another’s markets, including Canadian freight rate subsidies on grain shipments through US ports.73

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Other features of the FTA did not undermine state assistance policy instruments but were intended to facilitate trade across the two countries’ borders. The two countries agreed to harmonize technical standards, health regulations, and meat inspection standards in an effort to ease cross-border trade and minimize trade irritants. A new mechanism was established to settle trade disputes between Canada and the United States,74 and provisions that required national treatment of foreign investors opened the door wider than historically it had been to American investment in the Canadian food processing and input supply sectors. The implementation of the FTA to include Mexico in the NAFTA, which came into effect on 1 January 1994, retained the rights and obligations that Canada and the US had agreed to in the FTA. The extension of the FTA to include Mexico was not nearly as consequential for the Canadian economy or the agri-food sector because of the much smaller volumes of trade involved.75 The NAFTA eliminated tariffs and nontariff barriers on agricultural products, with the exception of those in the dairy, poultry, egg, and sugar sectors.76 It also included chapters on sanitary and phytosanitary measures and technical barriers to trade that were similar to those that later appeared in the GATT/WTO agreement implemented in 1995. Since 1990, trade across the Canadian-American border has surged.77 The US has become not only Canada’s most important export destination for agri-food products, but also its most important source of imports. 2.3. Trade Negotiations, the Domestic Political Economy, and Patterns of Governance The negotiation of international trade agreements tested the capacity of the Canadian government to bridge the disparate interests of importoriented and export-dependent industries. Federalism and the absence of a monopoly national farm organization complicated the task. The federal government’s exclusive legal authority to negotiate international treaties does not extend to authority to implement provisions of international treaties that fall within provincial jurisdiction. Accordingly, while it can negotiate the reduction or removal of tariffs and other border measures such as import controls and licences, provincial cooperation and consent are needed to negotiate provisions relating to measures inside provincial borders.

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Chart 2.3: The Agriculture and Agri-Food Sector’s Contribution to Provincial GDP, 2004 Per Cent of Total Provincial GDP 12

Food Processing Primary Agriculture

10 8 Canadian Average

6 4 2 0

NL

PEI

NS

NB

Que.

Ont.

Man.

Sask.

Alta.

BC

Source: Statistics Canada. Note: Excludes beverages and tobacco processing.

Provinces’ constitutional authority gave them a strong bargaining hand when it came to their involvement in international trade negotiations, as did the economic stakes to their provinces of market-opening agreements. Chart 2.3 provides data on the contribution primary agriculture and food processing make to Canada as a whole and to individual provinces. While primary agriculture and food processing contribute 3 per cent to Canada’s GDP, the figures are higher in Saskatchewan, Manitoba, New Brunswick, and Prince Edward Island.78 Food processing is the largest manufacturing sector in Quebec and the second largest in Ontario, the two most populous Canadian provinces. Notwithstanding provinces’ unity of interest in being consulted on international trade agreement provisions, their interests (and those of their producers) in liberalizing agricultural trade agreements vary considerably. A division can be made between the central Canadian provinces, Ontario and Quebec, whose dairy, poultry, and egg producers benefit disproportionately from supply management, and the prairie provinces, where cattle, grains, and oilseeds producers rely on export markets.79 (Chart 1.6 provides data on regional market receipts.) Whereas prairie provincial governments could be expected to welcome

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market-opening trade agreements that removed tariffs and non-tariff barriers, eliminated export subsidies, and allowed market forces to dictate commercial transactions, governments in central Canada were understandably reluctant to jeopardize their supply management sectors. The Canadian government created an institutional framework that ensured an influential role for provincial governments and agricultural interests in the formulation of its trade-negotiating strategy throughout the FTA, NAFTA, and Uruguay Round GATT negotiations. Provincial input was formally provided through a federal-provincial committee of trade officials; matters specific to agricultural trade negotiations were dealt with in a committee of federal and provincial agricultural officials. The input of industry, agriculture, labour, consumers, and academics was secured through the International Trade Advisory Committee (ITAC). In addition, sectoral advisory groups on international trade (SAGIT) provided representation and information about the implications of trade provisions on a sector by sector basis. The Agriculture, Food, and Beverage SAGIT included representation from the CFA; some CFA members (including the Quebec farm union, UPA); commodity groups not affiliated with the CFA: as well as food processors, distributors, retailers, consumers, and academics. The diverse membership of the SAGIT, however, undermined it as a forum for consensus building and representation and led farm groups to directly lobby federal and provincial officials responsible for the agricultural trade negotiations.80 Organizations representing producers of dairy, egg, and poultry products mounted a strong and ultimately successful campaign to exempt supply management from the bilateral trade agreement. Producers and processors, having worked closely with one another in corporatist supply management networks, maintained a united front that secured the support of several provincial governments. In Quebec, where one-half of farm cash receipts depended upon supply management, the Quebec government, a supporter of free trade, nonetheless lent its support to the campaign waged by the province’s dairy farmers and its farm union to exempt supply management from the free trade agreement.81 This campaign succeeded, in part because the issue of supply management was deferred to the Uruguay Round negotiations also under way. With a few exceptions, the provisions of the FTA (and the NAFTA, into which the Canada-US FTA agreement was rolled) were consistent with the preferences of the agri-food industry.82 The differences in interests of import-oriented and export-dependent

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agricultural groups were much more problematic during the Uruguay Round GATT negotiations. The stated objectives of the Canadian government at the outset and throughout the Round were to lower tariff and non-tariff import barriers to trade, substantially reduce production subsidies, eliminate export subsidies, improve GATT rules covering trade, and minimize the effect of technical regulations and health and phytosanitary measures on trade.83 Canada’s support for the progressive reduction of barriers to trade and for improved rules governing trade reflect its long-standing interest, as a medium-size and exportdependent country that benefits from having rules, rather than power, determine trading relations. However, the goal of market opening was at odds with the position of the supply-managed sectors that sought to retain and extend a GATT provision, Article XI.2.c, which allowed restrictions on imports when domestic production was controlled. The Canadian Federation of Agriculture was unwilling and unable to broker a position that would sacrifice the import-protected commodity sectors for those dependent upon external markets. It called for the Government of Canada to adopt a ‘balanced position’: open markets for western Canada's export commodities and domestic protection for the supply managed sectors. The Conservative national government accepted this strategy as its agricultural trade position; doing so avoided a trade-off between its two bases of political support, prairie Canada and Quebec. As Andrew Cooper points out, it was not simply partisan calculations that made the Conservative government anxious not to do anything that would affront Quebec farmers.84 Agriculture had taken on ‘greater symbolic importance in Quebec’ in the wake of the 1990 defeat of the Meech Lake constitutional accord, a defeat that Quebec nationalist politicians interpreted as a rejection and humiliation of Quebec. Quebec’s farm union, the UPA, and Quebec separatist politicians called for jurisdiction over agriculture to be devolved entirely to the provinces if Ottawa was not going to uphold Quebec farmers’ interests. The Government of Canada’s negotiating position in Geneva became inextricably intertwined with national unity considerations. If the ‘balanced’ negotiating position – maximum liberalization for some agricultural products and minimum change for others – was the most politically viable position as the Mulroney Conservatives saw it, the negotiating position quickly drew fire from both export- and domestic-oriented sectors. Each feared that it would be their interests that would be jettisoned when Canada was forced to abandon what

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many perceived to be an untenable position. Positions hardened and rhetoric flared as both groups moved to solidify their positions. At one pole were grain commodity groups, including the CFA member Prairie Pools, united as the Canadian Agricultural Policy Alliance to argue for multilateral trade reform. They had the support of Conservative provincial governments in Alberta and Saskatchewan, which publicly criticized the government’s trade position. At the other pole were the Ontario and Quebec farm organizations. The UPA and its leader, Jacques Proulx, built a strong alliance with the Quebec government and international farm groups to defend the family farm from globalization and market-liberalism.85 With its members at odds, CFA leaders found themselves on the margins of the internal struggle within Canada’s farm community to shape Canada’s agricultural trade position. The combined weight of the Ontario and Quebec farm federations and the dairy industry ultimately persuaded governments not to abandon import protection for supply-managed products.86 The CFA’s ‘balanced position’ remained the Government of Canada’s position until the dying days of the Uruguay Round when it was no longer tenable. Only when it became clear that Article XI could not be salvaged and an entente between the US and the EC would successfully end the negotiations did Canada agreed to join others in converting all quantitative import restrictions to tariff equivalents. It was the last country to do so.87 The negotiation of the regional and multilateral trade agreements showed the institutional barriers to a coherent agricultural trade policy: one that shifted Canadian agricultural policy away from state assistance and firmly in the direction of market-liberalism. Both the federal division of legal authority over agriculture and the legacy of earlier policy choices were stumbling blocks. The political viability of this strategy was also ruled out by electoral calculations on the part of the governing Conservative party as well as by established norms that dictated the need to consult farm groups and the agricultural industry on matters of direct relevance to them. Their negotiating latitude thereby hemmed in, state officials did not use the opportunity that some say international trade negotiations provide to make concessions that would subsequently have required difficult domestic policy reforms.88 4. Conclusion This chapter has documented the major policies and patterns of gover-

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nance that evolved in Canadian agriculture up to the early 1980s and the conjuncture that initiated a new era of internationalization. It has argued that the composite of Canadian expenditure and regulatory policies for the agricultural sector constituted a paradigm of state assistance. This model was predicated upon the belief that governments had a responsibility to protect farmers against the economic imbalances in agriculture that were rooted in structural features of the sector itself. Canadian economists captured that image in describing agriculture as ‘an atomistically competitive industry’ of thousands of individual commodity producers unable to control the amount of product marketed and handicapped by ‘disparities in bargaining power between the oligopoloid input supply and the processing, distribution, and retailing (PDR) segments of the food system.’89 The consequence of this structural condition – unacceptably low and unstable farm incomes – was a major rationale for state assistance in Canada. Other goals, including regional/provincial economic development, were also factored into the design of stabilization and national marketing programs. In some important respects, the state assistance model rested on a more precarious foundation than it did elsewhere, including the United States and Europe. Beliefs and policy goals that underlie the state assistance model in Europe – food security – were less fully endorsed in Canada. The Canadian federal system handicapped farmers’ organizational development. The parliamentary system also worked to give Canadian farmers less influence in the national capital than the United States separation of powers’ system did. Indeed, there is much evidence to support the view of the 1970 Task Force on Canadian Agriculture, that ‘Canadian restrictive policies have developed more as a result of restraints in international trade than any other single factor.’90 Canadian agricultural policies were affected by developments in the international political economy well in advance of the current internationalizing period. What is significant, then, about the current era is not so much the continuing reverberations of foreign countries’ domestic policy developments on Canadian agri-food politics and policies, but the addition of new features to the context, including those of economic globalization through the regional/global reach of agribusinesses, the rules and norms of the international trade regime, and the more ready transfer of policy and governance ideas and practices across countries. Canadian governments recognized this changing context and by the mid-1980s had called for a more businesslike approach to agriculture. A federal-provincial document, A National Agriculture Strategy, was fol-

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lowed up with another document that stressed the need to reduce the ‘distortion of market signals,’ encourage ‘international competitiveness,’ and improve ‘the ability of the agri-food sector to adjust to changing international conditions.’91 Following consultations with provinces and the agri-food industry, the Government of Canada issued a refined blueprint in 1989 titled Growing Together. It signalled the need for a new ‘vision’ for agriculture and food and called for ‘a more marketoriented’ agri-food industry and ‘a more self-reliant sector ... able to earn a reasonable return from the market place.’92 Consistent with such a model, Growing Together stated that agricultural programs should not mask market signals or present regulatory obstacles. The Canadian government made it clear, however, that it would not impose a new vision on the sector. Rather, that vision would be collectively determined by ‘all partners in the food chain.’ Significantly, those partners extended well beyond agricultural producers to include food processors, food distributors, input suppliers, and consumers. To that end, a number of task forces whose mandates and composition differed were struck to examine a variety of issues.93 One of these addressed farm income safety nets, the subject of the next chapter.

3 Farm Income Safety Nets and Risk Management

Since 1985, the Government of Canada has expended $37 billion in farm income programs, and provincial governments have put in about $13 billion on top of that. Even though we have expended [sic] $50 billion collectively, we are still talking about the same problems we were talking about 10, 15 or 20 years ago.1 The need to protect or support the incomes of farm households is an accepted tenet of agricultural policy in most OECD countries.2

Claims of a paradigm shift in agricultural policies rest overwhelmingly on analyses of reforms to programs whose objective is to raise and stabilize farm incomes. As noted in chapter 2, such income safety net measures were a central plank in the state assistance paradigm and became targets for reform from the early 1980s onward. By the mid1990s reformist pressures had succeeded in Canada, as elsewhere, in scaling back state expenditures in support of farm incomes and requiring individual producers to be more sensitive to market signals. Analysts pointed to these changes as evidence of a new, market liberal paradigm in agriculture.3 By 2001, as the first of the two quotes above indicates, evidence of paradigm change was less clear. In lamenting that Canadian governments were spending billions of dollars on farm income programs, Canada’s agriculture minister was not alone. Two years later, a senior official in the OECD observed that support from consumers and taxpayers as a share of gross farm receipts had declined only marginally since the Uruguay Round of GATT talks were initiated in 1986.4 Stefan

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Tangermann nonetheless took some satisfaction in evidence that, while overall levels of producer support in OECD countries had not declined significantly, measures to support producer incomes were less trade distorting. Moreover, he observed that the WTO Agreement on Agriculture ‘has affected the nature of the policy debate in agriculture’ and ‘The WTO has become a relevant factor in agricultural policy making.’5 This chapter examines Canadian policy developments with respect to farm income safety nets and largely concurs with Tangermann. Canadian farm income support programs have been redesigned to conform to the strictures of the WTO Agreement on Agriculture as well as in keeping with the guidelines of the OECD. Whether these changes amount to a paradigm shift away from state assistance is less clear. As measured by levels of state expenditures for farm incomes, there would seem to be no paradigm shift. As measured by the design of farm income programs, there is more reason to argue paradigm change consistent with the competitive paradigm outlined by Timothy Josling. Canadian safety net programs now provide ‘decoupled’ payments geared to stabilizing the income of the ‘whole farm’ unit, rather than raising commodity prices.6 Moreover, governments have tried to design these programs to require farmers to assume a greater proportion of personal responsibility for their income risks. Viewed from a final perspective, in terms of the ideas of agricultural exceptionalism that guided agricultural policy in the past, there is less reason to conclude a shift to Josling’s competitive paradigm. As suggested by the OECD in the second epigraph, there continues to be a belief that agriculture is a special sector in some important respects, and this belief undergirds state expenditures in support of farm incomes. Traditional rationales in the state assistance paradigm – that farmers face risks beyond their control, owing to factors of climate and disease, and that structural inequities in the market place limit their pricebargaining power – persist. Onto these rationales have been grafted new beliefs about the exceptionalism of agriculture, most notably its role in providing goods valued by society, including a sustainable environment, a populated countryside, and a high-quality, safe food supply. These ideational underpinnings suggest movement towards a multifunctionality paradigm in which state support for farm incomes recognizes that market prices under-reward producers for providing public goods. In seeking explanations for this policy trajectory – a paradigmatic shift towards a market-liberal model of agriculture and its later read-

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justment to yield a modified state assistance paradigm – the chapter turns to how factors in the international and domestic political economies have affected the conditions hypothesized in chapter 1 as requisite for paradigm change. These conditions are, first, the appearance of anomalies and policy failures in the existing paradigm; second, the availability of an alternative, viable paradigm; third, a shift in the policy process that injects new actors with new ideas and persuasive discourses into authoritative decision making; and fourth, the opportunities and constraints to change afforded by short-term circumstances of events and their timing. The chapter argues that the conditions for paradigm change were present during the first stage of policy development from the late 1980s to the mid-1990s. The state assistance paradigm was discredited as being financially unsustainable and at odds with domestic and trade policy goals for the sector. An alternative paradigm – the competitive model that retrenched government expenditures, alleviated the threat of trade actions and was consistent with the rules of the WTO Agreement on Agriculture – was more economically and political viable. Its political viability was promoted by a new policy process that reconfigured the composition and dynamics of policy networks to give farm group representatives a direct role in program design. Timing played a role as well. The changes to limit federal governments’ financial obligations for income safety nets occurred during a period of buoyant commodity prices. A combination of domestic factors (government budgetary crises, policy networks governed by a problem-solving logic), international factors (political internationalization), and sheer contingency thereby enabled the transition away from the state assistance paradigm towards a market-liberal or competitive paradigm. During the second stage of policy development, from the late 1990s onward, a combination of domestic and international factors checked further transitions towards the competitive/liberal-market model. The cognitive premises of a competitive model of agriculture – that world markets are stable and can be relied upon to yield competitive producers a reasonable return – failed to materialize. The limitations of the WTO Agreement on Agriculture in arresting state assistance in rich industrialized countries (the USA, the EU), and creating a level playing field in international markets, became fully apparent. The terms of trade in international markets turned dramatically against Canadian farmers in the late 1990s, bad weather added further to their income woes, and their margins (farm revenues minus operating expenses) went into the

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red. Economic globalization became a reason for, rather than an argument against, state assistance. In this context, where thousands of farmers were likely to remain in business only with a significant transfer from governments, a return to substantial state assistance became economically viable in light of the dramatically improved fiscal situations of most Canadian governments. Programs nonetheless continued to be configured to meet the parameters of WTO and NAFTA trade agreements. The institutional setting and policy processes for designing farm income programs also help to explain the rise in state expenditures in support of farm incomes. When the pluralist policy networks of federal-provincial-territorial officials and farm group leaders within which safety net programs were being designed broke down, the parliamentary and federal systems proved allies for farm organizations. The support of these institutions made it politically unviable for the Canadian government not to assist farmers with their income risks. Nonetheless, just how large the government expenditures should be and the respective portions that farmers and governments should bear in managing these risks remained highly contentious matters. Like the first phase of income safety net development, a combination of international and domestic factors explains policy development. The international factors are economic globalization and weak political internationalization; the domestic factors are a policy process of consensus building and farm group access alongside government budgetary surpluses. A caveat is in order. Provincial governments have scope within overarching intergovernmental framework agreements to provide their farmers with more or less protection from income risks. Quebec governments have traditionally done so; an examination of policy developments in that province would present a stronger conclusion of continuity within the state assistance paradigm.7 In focusing on the intergovernmental framework agreements around farm income safety nets, this chapter provides an account of the contours of policy development across provinces rather than of those specific to any single province. The chapter proceeds chronologically. Section 1 examines program innovation and state retrenchment from 1989 to the mid-1990s. Section 2 deals with policy developments from 1996–2000. Section 3 recounts negotiations under the Agricultural Policy Framework (APF) during 2001 and 2003 to provide more enduring programs to assist farmers to

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manage their income risks. Section 4 examines the implementation of the APF and safety net program development under the minority Liberal and Conservative governments. Section 5 presents conclusions. 1. Constructing a New Generation of Income Safety Nets, 1989–1996 Although they did not use the language of policy failure, Canadian federal and provincial governments outlined several reasons in the second half of the 1980s as to why reforms to existing programs to stabilize commodity prices and farm incomes were necessary. These programs were seen to be incompatible with, first, government goals for the agricultural sector; second, domestic fiscal realities; and third, an international context that implied the need for producers to be more selfreliant and competitive. The goal of equitable treatment of producers across provinces and commodity sectors was the first reason for reform. It was frustrated by the design of existing stabilization programs along commodity and regional lines. The Western Grain Stabilization Act (WGSA) covered participating grain and oilseed producers in the prairie region, whereas producers of other commodities in this region and elsewhere in Canada could join programs available under the Agriculture Stabilization Act (ASA). WGSA and ASA programs differed in their criteria of eligibility, program financing, risk coverage, and levels of support. Moreover, several provinces had their own stabilization programs, and although federal and provincial governments had made their harmonization a high priority in 1987 and made some progress in doing so in the hog and cattle sectors, not all provinces participated in these efforts.8 Fiscal realities were a second catalyst to reform. The mid-1980s plunge in prairie grain farmers incomes9 exhausted the funds of Western Grain Stabilization program, forcing the Government of Canada to bail out its $750 million deficit. The federal public treasury was further tapped when the Mulroney Conservative government made payments totalling $2.1 billion to prairie farmers in 1986 and1987 under the Special Canada Grains program. Another ad hoc program, the Canadian Crop Drought Assistance program, followed in 1988 and, along with the two earlier programs, cost the government $5 billion in farm income safety net spending over the 1986–9 period.10 While farmers welcomed these temporary programs, they impressed upon governments the need for permanent programs that would allow them to plan for the long term. For governments, transfers of the magnitude of the

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ad hoc programs were unsustainable in a context of large public debts. The ratio of public debt to gross domestic product in Canada had risen steadily from the late 1970s. By the mid-1980s over one-third of federal revenue was absorbed by interest payments and several provinces had difficulty financing their bonds.11 The third reason to reform existing programs implicated the international context. In the grain sector, concentrated in prairie Canada and reliant upon export markets for 60 per cent of its sales, the disruptive effects of American and European export subsidies were all too apparent.12 American producers had successfully targeted payments to hog producers under the Agricultural Stabilization Act as unfair subsidies and looked set to claim the same of other ASA payments. Replacing these programs with less market-interfering measures presumably would ease trade flows. In this context, the December 1989 blueprint issued by the Government of Canada, Growing Together, identified three ‘lines of defence’ for managing income risks associated with farming that have subsequently framed discussion. The first line of defence is the responsibility of individual farmers. It is farmers’ task to make sound management decisions to maximize their income. Farmers should normally expect to receive their returns from the marketplace. Insofar as governments contribute to this first line of defence, they do so by providing an appropriate environment, for example, through tax provisions and credit arrangements – to assist farmers to maximize their net revenue and plan their own long-term stability. The second line of defence is the joint responsibility of governments and producers. It consists of stabilization programs to smooth out fluctuations in net revenue arising from production and marketing risks beyond the farmers’ control. Stabilization programs should offer shortterm support to producers as adjustments are made to long-term market trends. Consistent with the principle of decoupling, second-line defence programs should ensure the viability of the individual whole farm unit, not raise prices of individual commodities. Farmers and provincial governments should share their costs with the federal government. The third line of defence consists of assistance to cope with disasters or a situation of prolonged depressed prices. In the late 1980s the Government of Canada was silent on whether producers should bear some of the cost of disaster assistance programs. The degree to which this three-line template deviated from past government stabilization programs and moved closer to a market liberal or

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competitive paradigm of agriculture depended to a great extent on how second- and third-line defence programs were configured. For example, the larger the portion of second-and third-line program costs that was borne by producers, the greater the orientation along market-liberal/ competitive paradigm lines. The greater the required drop in farm income before a payment was triggered, the more the market-liberal orientation. Growing Together’s enunciated goal of redesigning safety nets to move farmers towards ‘greater self-reliance of farmers’ survived the defeat of the Mulroney Conservative government in 1993. Appearing before the Senate and House of Commons Standing Committees on Agriculture and Agri-Food in September 1994, Ralph Goodale, the Liberal agriculture and agri-food minister, defined the government’s ‘Vision’ for the sector in virtually synonymous terms, that is, of a sector that ‘is less dependent on government support.’ Income safety net programs should ‘not distort market signals’ and should let ‘farmers make sound decisions based on the market and not on government programs.’13 Nonetheless, the policy search for less costly and less market-distorting income safety nets was complicated by the injection of non-market liberal goals into the policy mix. As articulated by the government of Canada, stabilization programs as part of the second line of defence not only needed to be more market responsive, but also needed to ensure equitable levels of support across all provinces, take account of special regional needs, and be compatible with sound land use and animal farming practices.14 1.1. Program Innovation within Pluralist Networks In the case of the grains and oilseeds sector, proposals for new safety net programs were well advanced even before the Growing Together document was formally tabled for discussion at a December 1989 workshop.15 The realities of shared federal-provincial responsibility for agriculture and the commitment in Growing Together to a partnership with ‘all the players’ determined the process for formulating new programs. The Canadian government formed two committees of federal and provincial officials and representatives of the agricultural sector and gave them the mandate of recommending permanent, cost-shared programs that would provide predictable and equitable lines of defence against risks to farm incomes. The Federal-Provincial Safety Net Committee consisted of thirty-two

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members: fourteen producer representatives, eight federal officials, and ten representatives of each province. Its task was to review all safety net programs and provide specific proposals for the design of long-term programs. Its 1990 report exposed shortcomings in second- and thirdline defence programs – they did not satisfy equity and cost effectiveness criteria and were inconsistent with the whole farm approach – and recommended a framework and set of principles for their redesign.16 It worked closely with the second committee, the Grains and Oilseeds Safety Net Committee, which consisted of thirty-three individuals: nineteen representing producers, eight provincial officials, and six federal public servants. The Grains and Oilseeds Safety Net Committee met frequently over the winter of 1989–90 and produced a consensus document, which, following intergovernmental negotiations, became the basis for new farm income safety net programs. In OECD jargon, ‘safety net’ refers to three types of programs: those that help farmers smooth variations in their incomes over time through savings, disaster payments to compensate farmers for income or revenue losses, and assistance to low-income farms.17 The Farm Income Protection Act (FIPA) passed by Parliament in early 1991 laid out principles for federal-provincial agreements on income safety net programs that were to prevail into the twenty-first century. First, programs should not ‘unduly’ influence farmers’ production and marketing decisions and should encourage adjustments to marketing opportunities; second, programs should offer equitable and reasonably consistent levels of protection across commodities, taking into account regional diversity; third, programs should be consistent with international obligations; fourth, programs should encourage the long-term social and economic sustainability of farm families; and fifth, programs should encourage long-term environmental sustainability. As statutory obligations, these principles were not fully consistent with market-liberal premises. Even so, officials within Agriculture Canada heralded FIPA as ‘encouraging a more “market-oriented” and “selfreliant” philosophy whose constituent programs were simultaneously “trade- and production-neutral.”’18 FIPA terminated the 1958 Agricultural Stabilization Act and the 1976 Western Grain Stabilization Act (see table 3.1 for a chronology). It provided for four income safety net programs, all of which required producers, provinces, and the Government of Canada to share program costs. The four programs were also national in scope and voluntary for producers. Two programs already existed. One was the National Tri-

Farm Income Safety Nets and Risk Management 79 Table 3.1 Chronology of Income Stabilization Programs 1958 Agricultural Stabilization Act (ASA) 1959 Crop Insurance Act 1966 Canadian Dairy Commission Act 1975 ASA-75 1976 Western Grain Stabilization Act 1985 ASA amended to allow for tripartite stabilization programs 1991 Farm Income Protection Act Gross Revenue Income Program (GRIP) National Income Stabilization Account (NISA) Crop Insurance 1996–9 Three Year Federal-Provincial Agreement: Crop Insurance NISA Provincial Companion Programs 1998, 1999 Agricultural Income Disaster Assistance (AIDA) July 2000–3 Federal/Provincial Framework Agreement on Agricultural Risk Management: Crop Insurance NISA Provincial Companion Programs Special Aid program for Saskatchewan/Manitoba 2000–2 Canadian Farm Income Program (CFIP; disaster assistance) Transitional Industry Support Program 2003–8 Agricultural Policy Framework implemented Canadian Agricultural Income Stabilization Program (CAIS) Transitional Industry Support Program (TISP) BSE Recovery Program 2005 Farm Income Payment Program 2006–7 Canadian Farm Families Options Program 2007 Ad hoc federal program to assist with input costs June 2007: Intergovernmental Agreement in Principle on 4 programs: Margin Based Income Stabilization Production Insurance Producer Savings Account Disaster Relief Framework

partite Stabilization Programs (NTSP); funded by matched provincial, federal, and producer premiums. NTSPs existed for hogs, lambs, and cattle, and they triggered a payment to insured producers when market prices fell below a formula-based target price. Alongside these market price support programs, was the existing crop insurance program which protected farmers against income loss from natural causes. Delivered by the provinces, it covered most crops and triggered pay-

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ments when yield dropped as a result of natural hazards such as drought, flood, hail, frost, and insect damage. The two new programs were the Gross Revenue Insurance Plan (GRIP) and the Net Income Stabilization Account (NISA). GRIP provided protection against both price and yield fluctuations. It guaranteed growers of grains, oilseeds and speciality crops a per acre gross return. Farmers received large payouts from GRIP between 1991 and 1994.19 Cost shared across the two orders of government, GRIP was financially onerous for provinces such as Saskatchewan and Manitoba, which had large grain sectors. Eighteen months after its implementation, Saskatchewan announced it would withdraw from GRIP, and eight other provinces soon gave notice that they would do so as well.20 NISA was a subsidized savings program that was intended to stabilize incomes at the individual farm-unit level. Consistent with the OECD definition of a safety net program, it enabled farmers to deposit a portion of their sales to an account, to which the federal and provincial governments also contributed on a 50:50 basis. Farmers could then withdraw funds from the account when their net income fell below a minimum level or the preceding five-year average. NISA did not stabilize incomes in the short term; participating farmers needed time to build up sufficient funds in their NISA account for it to provide protection from a substantial drop in their income. 1.2. WTO Agreements and Program Parameters The conclusion of Uruguay Round negotiations in December 1993 introduced new principles and requirements for government payments to producers. One principle, intended to orient farm income support programs in a market direction, is ‘decoupling’: that is, de-linking income support from production decisions. The concept of decoupling originated in the OECD, following a commitment by OECD member countries in 1987 to reform their agricultural policies in the direction of an increased market orientation and reduced state assistance.21 Decoupled payments replace the traditional policy instrument in the state assistance model: fiscal transfers in support of commodity prices, production, or factors of production. The attraction of decoupled payments is that they are expected to transfer income from the state to producers without encouraging recipient farmers to increase production. The principle of decoupling was incorporated into the WTO Agreement on Agriculture. Its Annex II specified the decoupling features of

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safety net programs, including disaster assistance programs, that would exempt them from the commitment to reduce the aggregate measure of domestic support (AMS) by 20 per cent from its 1986–8 base. Decoupled programs were labelled ‘green’ and included, for example, payments whose amount was not based on or related to the type or volume of production, factors of production, or a requirement to produce. To be exempt from AMS reduction requirements, government payments also had to fall within stipulated ceilings in terms of the amount of financial protection they offered from income loss.22 Thereafter, countries that failed to adhere to the provisions in the WTO Agreement on Agriculture on the amount and type of government payments to producers could face retaliatory action by trade partners. The concept of decoupling had become the guiding principle for safety net policy development in Canada even before the Agreement on Agriculture came into effect. NISA had been designed with a close eye to the consensus developing during the Uruguay Round GATT negotiations. Its architects said it would meet the ‘green’ category if it were extended beyond the grains and oilseeds sector to apply to all commodities. In terms of the AMS reduction requirements in the WTO Agreement on Agriculture, they posed no constraint to Canadian spending for safety nets. Canada’s ceiling was $5.2 billion; its actual spending was less than $1 billion in 1995. And GRIP had been eliminated in most provinces for reasons of cost before the agreement came into effect. Another WTO Agreement, the Agreement on Subsidies and Countervailing Measures, also delimits farm income safety net program design. Like similar legislation in the US, it requires expenditure programs to be ‘generally available’ to the entire agriculture sector; that is, not specific to a commodity. US trade authorities judged NISA to be ‘nonspecific’ and thus exempt from countervail action. However, the national stabilization programs for hogs, cattle, and cow-calf operators were targeted by American interests as ‘unfair’ domestic subsidies. The threat of the US border’s closing as a result of stabilization programs for these commodities led cattle and hog producers to propose the termination of these programs by 1994.23 Like those who raised horticultural crops, cattle and hog farmers were eligible for safety net coverage under NISA. It then covered all commodities except the supply-managed milk, eggs, and poultry. Efforts followed over the period from 1994 to 1996 to replace the commodity-specific programs with ‘whole farm’ safety net programs

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that met trade agreement obligations and passed trade partners’ scrutiny. Like his Conservative predecessor, the responsible Liberal minister, Ralph Goodale, entrusted the task of policy recommendations to a committee of government and agricultural industry representatives. The National Safety Nets Consultative Committee consisted of nineteen representatives of farm organizations, ten provincial deputy ministers of agriculture, and three senior Agriculture Canada officials. Its deliberations, which began in 1994, eventually resulted in the FederalProvincial Safety Net Policy Framework Agreement of March 1996. Ralph Goodale described the Framework Agreement as providing ‘financial security which is affordable for both producers and governments, [is] compatible with our trade agreements and does not distort market and production decisions.’24 1.3. The Federal-Provincial Safety Net Policy Framework Agreement, 1996–9 This initial intergovernmental framework agreement established the programs and principles that would govern farm income safety nets. First, it included a whole farm program (NISA), crop insurance, and provincial ‘companion’ programs geared to province-specific needs and disasters. Second, all three programs would be cost-shared by participating producers and the two orders of government, the government share being allocated on a 60:40 basis between the Canadian government and the provinces. Third, the Framework Agreement established a formula to allocate federal funding among provinces that was based on income risk and size of the farm sector. Fourth, an envelope of spending for the three-year duration of the agreement was established: $600 million in federal funding and $400 million in provincial funding. Ten separate agreements between Canada and each province were established under this framework. These bilateral agreements (1996–9) gave provinces considerable program flexibility and allowed them to enrich benefits available under NISA and crop insurance. Provincial flexibility represented a victory for provinces such as Alberta and Quebec that had insisted on having the right to decide which farmers were eligible, how they would be supported, and by how much. They wanted the provincial share of federal spending delivered as a block fund so that they could spend as they saw fit. The government of Canada and the Canadian Federation of Agriculture had sought national programs that treated producers equally, no matter their province. They worried that too much variation in programs across provinces would also

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open Canadian programs to trade challenges. In Newfoundland, Nova Scotia, New Brunswick, British Columbia, Saskatchewan, and Manitoba, Ottawa delivered programs. In Ontario, Quebec, Prince Edward Island, and Alberta, provincial governments administered federal funds. The separate bilateral arrangements and provincial flexibility secured provincial agreement for greater cost-sharing but it resulted in different levels of farm income support across provinces. A final chapter of market liberal policy development had occurred earlier in 1995, when finance minister Paul Martin’s budget eliminated subsidies to railways to compensate them for transporting prairie grains to export markets. This action was motivated by the government’s fiscal situation and was part of a government-wide expenditure restraint exercise known as Program Review.25 In the run-up to the February 1995 budget, Moody’s Investor Service had put the Canadian government on notice that it was reviewing Canada’s credit rating. This warning, that investors can go where they earn the greatest return in a world where there are few restrictions on capital flows, added further strength to the government’s resolve to get its fiscal house in order. The elimination of the railway subsidies was also a response to a requirement in the WTO Agreement on Agriculture to reduce export subsidies 36 per cent by expenditures and 21 per cent by volume from their 1986–90 base. In eliminating, rather than simply reducing, the railway subsidies, the Liberal government clearly went beyond its treaty obligations. The payments to the railways, known as the Crow benefit, had replaced the Crow’s Nest freight rates on their elimination in 1984. The Crow benefit kept farmers’ freight costs lower than they otherwise would have been; it was worth $560 million annually by 1995, and prairie grain growers paid between 30 and 50 per cent of the export freight bill. Eliminating these subsidies was not only about cost saving. It was also part of the government’s strategy to diversify prairie agriculture by moving farmers out of grain and into hog and livestock enterprises (that use grain for animal feed) and into value-added processing enterprises.26 The Canadian government compensated farmers for the termination of the Crow benefit, providing them with a one-time payment of $1.6 billion plus $300 million for adjustment assistance. Agricultural economists argued that the true value of the lost subsidy was ‘three to four times that amount.’27 Although freight rates continued to be regulated after 1995, they rose in keeping with inflation, as did farmers’ grain shipping costs. By the mid-1990s considerable progress had been made in putting

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Chart 3.1: Government Expenditures in Support of the Agriculture and Agri-Food Sector, 1995–6 to 2005–6 Fiscal Years Government Expenditures (Billions $) 9 8 7 Provincial

6 5 4 3

Federal

2 1 0

1995–6

1997–8

1999–2000

2001–2

2003–4

2005–6e

Fiscal Years Source: AAFC. Note: 2005–6 figures are estimates.

farm income safety nets on the market-liberal path advocated by the OECD and Canadian governments themselves. Commodity-specific programs such as GRIP and the National Tripartite Stabilization Programs had given way to national ‘whole farm’ income stabilization programs. Federal expenditures for these farm safety net programs had dropped; the 1995 budget signalled a 30 per cent decline to a limit of $600 million for federal safety net spending over the next three years.28 Along with the termination of export grain subsidies, the result was to reduce Canadian government spending in support of producers’ incomes to a ten-year low. As Chart 3.1 shows, government expenditures for the agri-food sector continued to drop to 1998–9. Transfers to Canadian agriculture as a percentage of the total value of production were substantially below those in the European Union and the average for OECD countries.29 Speaking to the House of Commons Standing Committee on Agriculture and Agri-Food in May 1995, agriculture minister Goodale defended the spending reductions as ‘both appropriate and necessary’ in light of Canada’s international trade obligations and fiscal situation: a deficit in excess of $40 billion, an accumulated federal debt in excess of $500 billion, and daily debt service charges of $120 million.30

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Analysts announced the end of the paradigm of state assistance, at least as far as it applied to measures to raise and stabilize farm incomes. ‘The agricultural sector in Canada,’ said a senior official in the federal department of Agriculture and Agri-Food, ‘has undergone a sharp increase in its market orientation combined with substantial decreases in support.’31 The Canadian transition was consistent with that in other industrialized countries.32 It had been facilitated by short-term contextual factors that made fiscal retrenchment politically and economically feasible. Rising commodity prices and strong grains and oilseeds exports mitigated farmers’ criticism. Partisan criticism of government retrenchment was muted by the shift in national politics to right-centre. After 1993 the New Democratic Party, the strongest defender of state assistance for agriculture, was vastly outnumbered in the House of Commons by the pro-market Reform Party of Canada. Whereas the NDP could have been relied upon to mount strong resistance to the Liberal government’s elimination of grain freight rate subsidies and reduction in government expenditures for the sector, the Reform Party applauded these actions. They were consistent with its belief in smaller, less interventionist government. 2. Post-1996: A Prairie Income Crisis and a New Discourse on Internationalization Safety net program development from the late 1990s onward occurred in quite a different domestic and international context. In place of buoyant international markets and optimism that the major agricultural powers would reduce their agricultural subsidies, the environment was one of depressed international grain markets, negative spillover effects of American and European farm policies, and an international trading regime whose deficiencies were increasingly apparent. Grain prices dropped dramatically in 1998 and the hog sector also suffered a relatively short-term downturn. The depressed situation in the prairie grain economy continued into the twenty-first century, as poor weather reduced crop yields and grain prices reached historic lows in real terms.33 Chart 3.2 shows that the total realized net farm income in Canada from 1994 to 2005 was negative. The drop in international grain prices caused the US government to abandon the market-liberal course it had embarked upon in its 1996 Federal Agriculture Improvement and Reform (FAIR) Act.34 FAIR had decoupled program payments and slated them to decline by about one-

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Chart 3.2: Total Realized Net Farm Income, 1994–2005 Realized Net Market Income Billions $ 2 1 0 –1 –2 –3 –4 –5 –6 1994

1996

1998

2000

2002

2004

2002

2004

Program Payments Billions $ 6 5 4 3 2 1 0 1994

1996

1998

2000

Realized Net Farm Income Billions $ 4 Five-Year Moving Average 3 2 1 0 1994

1996

1998

Source: Statistics Canada and AAFC.

2000

2002

2004

Farm Income Safety Nets and Risk Management 87

third over the seven years of the bill. It retained price supports for grains (but at low levels) as well as export subsidies, but the expectation was that they would not be used. With the dramatic change to low commodity prices, the US government implemented ‘emergency payments’ that added $5.9 billion in 1998 and $8.7 billion in 1999 to legislated spending under FAIR.35 It continued to transfer large emergency payments to its farmers in 2000 and 2001. In this context of sustained low commodity prices in the late 1990s and early 2000s the package of safety net programs endorsed in the 1996 Framework Agreement proved wanting. What accounts producers had built up in NISA were deemed inadequate to deal with the severe and prolonged decline in farm incomes.36 The magnitude and duration of the crisis in the prairie agricultural economy were so grave that Canadian governments could not ignore the need for government assistance. The introduction of US emergency payments in 1998, noted a senior official in Agriculture and Agri-Food Canada, ‘also played a large part.’37 Between 1998 and 2000 federal and provincial governments implemented two disaster assistance programs that joined the existing NISA, crop insurance, and provincial companion programs. The Agricultural Income Disaster Assistance (AIDA) program announced in November 1998 funnelled $1.7 billion in federal and provincial aid to compensate farmers for income losses during 1998 and 1999. The administration of AIDA was widely criticized, particularly during its initial year, and was blamed for delays in getting money into farmers’ pockets until long after it was needed. AIDA’s limitations led to a new disaster aid program in the form of the Canadian Farm Income Program (CFIP). It operated over three years (2000–2) and was also designed to improve farmers’ margins. CFIP pumped $340 million federal dollars into the farm economy in 2000–1, $360 million in 2001–2 and $260 million in 2002–3. Chart 3.1 shows the increase in government expenditures from 1999–2000 onward. The political discourse and mobilization that resulted in these additional transfer programs and shaped the path of income safety net development more generally differed in some important respects from that which had accompanied earlier safety net programs in the 1990s. Rather than being a rationale for a market-oriented agriculture, internationalization became a justification for expenditure programs of state assistance. Bad weather had clearly played a part in the crisis in the grain economy, but virtually all farm groups, and initially govern-

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Chart 3.3: Producer Support Estimate, 1986–2004 Per cent of Adjusted Value of Production 45

Canada EU(15) U.S.

40 35 30 25 20 15 10 5 0

1986–8 1991–3 1997

1998

1999

2000

2001

2002

2003

2004e

Source: OECD and AAFC estimates. Note: 2004 figures are estimates.

ments, also put the blame for the income crisis on the agricultural subsidies of the United States and the European Union.38 These subsidies had distorted world markets and put Canadian farmers in an impossible position without government subsidies at home. Canadian farm groups, prairie ministers of agriculture, opposition parties, and even the rural caucus of the Liberal Party all argued that the government of Canada had an obligation to put Canadian farmers on ‘a level playing field’ with their international competitors. Speaking to the Standing Senate Committee on Agriculture and Forestry on 29 March 2001, CFA president Bob Friesen presented the figures on the ‘discrimination’ against Canadian farmers relative to the treatment of European and American farmers. For every dollar per capita Canada was spending on farm support, the US was spending over two dollars. Whereas farm support in the US had increased by 283 per cent over the previous five years, the level of Canadian support was what it had been in 1996–7 and just over half of the amount of 1991–2 spending. Farther afield, the OECD average transfer to farmers as a percentage of GDP was almost twice the Canadian level.39 And, as chart 3.3 shows, the

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producer subsidy estimate in Canada was half that in the European Union and significantly below that in the US. The CFA president argued that it was actions of the Government of Canada that had made Canadian farmers so vulnerable to fluctuations in world market. It had encouraged farmers to increase their production even while dropping its support for agriculture to very low levels. As he had argued a year earlier, Bob Friesen insisted that it was governments’ job ‘to insulate them [farmers] from that vulnerability.’40 The link between internationalization and state assistance to ensure equitable treatment of Canadian farmers was also made by the leader of the Ontario Corn Producers. Speaking to the House of Commons Standing Committee in May 2001 as part of its hearings on ‘the future role of the federal government in Canada’s agricultural sector dealing with grain and oilseeds,’ the president of the Ontario Corn Producers Association criticized the ‘unilateral disarmament approach’ of the government of Canada and urged it to establish ‘a level playing field with U.S. growers.’ Dennis Jack observed that the anticipated marked reductions in world agricultural subsidies had failed to materialize, and farm subsidy levels now exceeded pre-WTO agreement levels in most other major developed countries. He concluded: ‘With an increasingly continental and global agriculture and food marketplace and the elimination of almost all border restrictions under NAFTA, Canadian grain farmers must compete directly with U.S. growers, both at home and internationally. We can only do so if supported at similar levels as U.S. farmers by our government.’41 Economic globalization as concentration of upstream and downstream food supply activities in multinational corporations was also part of the analyses of the farm income problem. Farmers pointed to data presented in chart 3.4 that show the rise in farm input costs were not being compensated by increases in commodity prices, despite farmers’ increasing their productivity. For many farm leaders, the concentration of the food-processing/manufacturing and retail sectors was allowing these sectors to benefit at producers’ expense; the farmers’ share of the food dollar was decreasing. The 2002 report of the Prime Minister’s Caucus Task Force on Future Opportunities in Farming (discussed further below) identified ‘corporate concentration in the industry’ alongside ‘distorted global markets’ and low commodity prices as the three ‘challenges currently facing agriculture and the agri-food industry.’ Provincial governments in Manitoba and Saskatchewan, whose

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Chart 3.4: Canadian Net Farm Income Growth Decomposition, 1984–2003

Real Net Farm Income Decline

Due to Input Price Changes

Due to Output Price Changes

Due to Productivity Growth –600

–500

–400 –300

–200

–100

0

100

200

300

Millions 1997 $ Source: AAFC calculations.

provincial economies suffered the most, owing to the geographic concentration of the economic downturn in prairie Canada, shifted the responsibility for alleviating the income crisis to Ottawa. They had resisted the 60:40 cost-sharing formula in the 1996–9 framework agreement as posing too large a burden on provinces, especially those with large agricultural sectors. Now, they argued, the western Canadian provinces had already been disproportionately hurt by the federal drop in spending for agricultural income support, and their treasuries were simply too small for them to assume their 40 per cent share of the cost of disaster aid. In their view, the national government was responsible for international trade, and trade agreements were not working. The evidence was the steady rise in US direct subsidy payments to American farmers (at $22.5 billion in the 1999 calendar year – the largest amount yet) and in EU export subsidies. The western Canadian grain sector – and the prairie economy, by extension – had sacrificed a great deal for the WTO (the loss of freight subsidies) and, unlike the supply managed sectors, which were located disproportionately in Ontario and Quebec and had given up little or nothing, was not realizing any benefits.42 The federal government resisted attempts to make other countries’

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high subsidies a basis for state assistance in support of farm incomes. It asserted that the Canadian treasury could not match subsidies of the magnitude south of the border. It also refused to accept provincial arguments that the federal government bore particular responsibility for the income crisis (and should therefore solely finance disaster income support relief). Even so, and as noted above, Ottawa and the provinces did co-finance disaster assistance programs over the period 1998–2000; the effect was to support – raise – farm incomes. More permanent government support for income safety nets was provided for by the Federal/Provincial Framework Agreement on Agricultural Risk Management, signed by the governments of Canada and the provinces in Fredericton on 5 July 2000. The term ‘risk management’ represented another evolution in international principles. In 2000 the OECD Directorate for Food, Agriculture and Fisheries issued a document entitled ‘Approaches to Income Risk Management in OECD Countries’ which formed the basis for discussion at a workshop of OECD agriculture ministers in Paris in May 2000. The document identified the types of risks (uncertainties) farmers face to their incomes as well as the market-based strategies and government mechanisms available to farm households to manage income losses. The workshop concluded that farmers have the primary responsibility for risk management. Any government intervention should come only in response to an identified market failure and should be consistent with increasing the market orientation of agriculture and not distort production and trade.43 The Framework Agreement on Agricultural Risk Management committed the provinces and the Government of Canada to $5.5 billion in spending over the three years of the agreement. Its objectives were defined as not only ‘encouraging risk management by producers’ but also ‘stabilizing income.’ Like the earlier three year (1996–9) agreement that it replaced, a 60:40 federal-provincial cost sharing ratio applied. Ottawa’s share was approximately $1.1 billion per year.44 For the first time, disaster assistance became a part of the farm income safety net package. Consistent with the ‘green’ parameters of the Agreement on Agriculture, the CFIP covered up to 70 per cent of a farmer’s three-year margin.45 By the early 2000s the provinces and Ottawa were transferring unprecedented amounts of money to producers to support their incomes. From a low point of $2 billion in 1998–9, federal expenditures had risen to $3.3 billion in 2001–2 and were expected to continue to rise. Provin-

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cial expenditures had also increased and reached $2.7 billion in 2001– 2.46 In 2000–1, government transfers accounted for approximately twothirds of total farm income.47 Transfers of this magnitude indicate the continuity in Canadian agricultural policy of government financial obligations to assist producers to manage their income risks and stabilize their incomes. These transfers owed their existence in no small part to the depth of the income crisis in the farm community. The crisis brought greater cohesion to farm organizations than had existed for some time. Organizations such as the Grain Growers of Canada48 and the Canadian Federation of Agriculture proved adept at rallying all-partisan support for their call for financial assistance. In Parliament, the Reform Party, the NDP, the Conservatives, and the Bloc Québécois criticized federal farm aid efforts as too paltry. They used the opportunity presented by parliamentary procedures to launch emergency debates on agriculture and to demonstrate that ‘political support for additional farm aid is deep and non-partisan.’49 The House of Commons Standing Committee on Agriculture and Agri-Food proved an important ally. It issued a report on the farm income crisis in 1998, another in early 2000, and yet another in 2001. Its February 2000 report, entitled ‘Making the Farm Income Safety Net Stronger and More Responsive to Farmers’ Needs,’ expressed the genuine fear that the present farm income crisis might indeed signal the start of a serious social crisis in rural Canada. It stated that there was an urgent need to develop a national agricultural policy that would address both farm production and rural development issues, and recommended both more financial aid and a permanent farm income disaster assistance program. In a dramatic about-turn from the position of its progenitor (the Reform Party of Canada), the Canadian Alliance issued a dissenting report that was even more critical of existing programs and urged more federal assistance. The June 2001 report of the Standing Committee on Agriculture and Agri-Food continued the committee’s criticisms of existing government programs, even while it concluded that high input costs, foreign subsidies, and natural disasters were to blame for the crisis of low net incomes of grain and oilseed growers. The Liberal caucus was also an important target and champion of farmers’ concerns.50 Several Liberal backbenchers repeatedly criticized the lack of action by the agriculture minister and the prime minister himself. Provoked into action, Prime Minister Chrétien appointed several of his caucus to a task force on ‘Future Opportunities in Farming.’

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Its interim and final reports went well beyond farm safety nets to deal with the broad array of challenges facing the sector. On the matter of income support, the interim report to the prime minister on 17 April 2002, said that not enough was being done to recognize and deal with the farm ‘crisis.’ It detailed the loss of jobs in the agriculture sector and the relatively low net farm income compared with that of other OECD countries, and it recommended that the Government of Canada maintain federal safety net spending minimally at its current level ($1.1 billion annually) and provide bridge financing until a long-term plan was in place.51 Its report and the farm lobby’s successful politicization of the issue of farm incomes had the desired effect of persuading Prime Minister Chrétien to increase funding for income safety nets. This mobilization in the broader political arena was pivotal in increasing government expenditures to help farmers to manage their income risks. However, it did not displace the established policy process and network of federal and provincial/territorial government officials and twelve producer representatives in which the Framework Agreement on Agricultural Risk Management was hammered out. The work of this committee, co-chaired by a federal government official and the president of the CFA, was difficult. Cleavages that had manifested themselves in the negotiation of the 1996–9 income safety net Framework Agreement remained. They included intergovernmental conflict over the 60:40 ratio of federal-provincial funding, the formula for distributing federal dollars across provinces, and the scope for provinces to design programs to local needs. At issue was how much decentralization and provincial variation in program design was not only desirable, but also allowed under international trade rules. The committee’s agreement on the 2000 Framework Agreement on Agricultural Risk Management was hailed by the federal agriculture minister as an excellent example of cooperation among provinces and the federal government.52 It provided for tripartite (federal-provincialproducer) funding for the permanent safety net programs: crop insurance, NISA, and federally approved province-specific programs. It also provided for government funding for a cash advance program and for disaster assistance under the Canada Farm Income Protection program.53 Even though the tripartite funding approach – and the disaster assistance program – were believed to be trade neutral in their effects, by treating farmers similarly regardless of what commodities they produced or where they produced them, provinces praised the agreement for the flexibility it gave them to design programs to serve the needs of

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their own producers.54 That flexibility would continue to mean that producers in some provinces would enjoy better safety net protection than those in other provinces. Each federal and provincial signatory also had a veto over amendments.55 These provisions reflected the strong bargaining power of provincial governments who have the legal authority to introduce any safety net program they wish (contingent upon their fiscal capacity). The federal government can meet its goals of 40 per cent provincial cost sharing and a ‘national’ approach to income safety nets only if it meets provinces’ demands for flexibility. 3. Negotiating the Agricultural Policy Framework, 2001–3 Notwithstanding the 2000 intergovernmental Framework Agreement on Agricultural Risk Management, in the late 1990s and early 2000s the need to augment established programs with ad hoc ones was widely viewed as pressing in the agricultural policy community. The 2001 Speech from the Throne of the Liberal government signalled a new commitment to help Canada’s agriculture sector to ‘move beyond crisis management,’ and in June of that year, federal and provincial/territorial ministers of agriculture agreed in principle on an action plan for a new agricultural policy framework. That framework had to be fleshed out in the form of concrete programs, and, as it was over the next 18 months, it was shaped by developments in the international political economy, the lessons drawn from earlier income safety net developments, and the domestic political situation. In the international arena, there was an important shift in discourse around farm income support measures. In March 1998 OECD agricultural ministers issued a set of policy principles that reaffirmed their support, first made in 1987, for ‘the long-term objective of substantial progressive reduction in support and protection’ in order to promote a market orientation in the sector. They did so amid growing evidence that the reforms undertaken by countries to their agricultural policies had not appreciably reduced market price support, and world agricultural markets continued to be significantly distorted by government measures.56 These distortions were noted in a report prepared by the OECD Secretariat, entitled‘Agricultural Policy: The Need for Further Reform,’ which also observed that there would likely continue to be a need for measures to stabilize farm household incomes, provided they were decoupled from production, such as direct payments.57 The news release of the twenty-nine OECD ministers noted ‘the multifunctional

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character of agriculture’ by virtue of its role in providing public goods where there is an absence of effective markets: beyond providing food and fibre, ‘agricultural activity can also shape the landscape, provide environmental benefits such as land conservation, the sustainable management of renewable natural resources and the preservation of biodiversity, and contribute to the socio-economic viability of many rural areas.’58 They endorsed targeted spending for the provision of such public goods. The OECD document reflected the principles that were guiding reforms to the Common Agricultural Policy and transforming its paradigm of state assistance into one of multifunctionality. EU governments were continuing to support and stabilize European farmers’ incomes with high expenditures, but state obligations were justified not only on grounds of providing farmers with a fair standard of living, but also on their complying with measures to protect the environment and help to keep rural areas economically viable.59 Even while providing new rationales for state assistance for agriculture, the OECD analysis cast doubt on traditional state assistance rationales and strategies with regard to supporting farm incomes.60 Average farm household income in a number of OECD countries, it observed, was higher than comparable non-farm households, farm income often being increased by non-farm sources of revenue. (OECD data showed relative parity of farm and non-farm household income in Canada, while a 2000 study by Agriculture and Agri-Food Canada showed the income gap for rural families persisted in some provinces.)61 The bulk of government financial support went to larger farms, many of which already had higher incomes. Further, long-term support was not effective in dealing with the farm income problem; it ended up being ‘capitalized’ into the value of fixed assets such as land, whose inflated values then posed a barrier to new entrants. Accordingly, the better policy option was targeted payments, directed to those in need and capped in terms of their benefits. Those adversely affected by restructuring in the sector should be given adjustment assistance so they could be retrained and/or exit the sector. The OECD principles and analyses found their way into the Safety Net Review, a report commissioned by federal and provincial governments and delivered in January 2002 by the Federal/Provincial Safety Net Working Group of officials.62 The review had been undertaken in order to identify options for improving program performance. It documented the huge diversity within the sector and the fact that in

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any given year individual farmers or commodity sectors fared ‘poorly,’ while the economic performance of others was ‘robust.’ It also noted the uneven distribution of program benefits across farms; both the largest grain and oilseed farms, as well as those whose economic performance was weakest received a ‘disproportionate’ share of payments. Convinced that price variability would continue, the Review observed that ‘sharing risks with primary producers through our safety net programs has therefore become a major component of Canadian agricultural policy.’ This view that safety net programs were important to the financial stability of Canadian farms was consistent with the perspective of Canadian farmers, who survey research had shown also believed that they were ‘primarily responsible for risk management.’63 The Safety Net Review Committee outlined a number of strategies available to farmers to manage their own income risks, including long-standing tools like diversification and cost management, as well as forward pricing contracts and contract production.64 The Safety Net Review Committee drew several conclusions, which were later elaborated upon by the agriculture minister in a presentation to the House of Commons Standing Committee on Agriculture in early 2002. First, existing programs did not offer sufficient protection against all important risks, such as negative margins, and were inadequate during periods of sustained low income. Farmers with chronically deteriorating incomes find their incomes stabilized at decreasing levels. Second, there was overlap and duplication among programs, so that ‘over-stabilization’ occurred. Third, most programs required little contribution from farmers and fostered dependence on governments. They had done little to encourage farmers to adapt by innovating, diversifying, and adding value to their production and in many instances had ‘possibly discouraged them.’ Fourth, governments paid the vast majority of the costs. Fifth, farmers were encouraged to ‘cherry-pick,’ because there were no clear rules for participation or how programs should be used together. For example, producers received payment under the Canadian Farm Income Program regardless of whether they participated in crop insurance or made use of their NISA account. Finally, the existing safety net system was ‘being pulled in two completely different directions: one, to act as a business tool to help farmers manage risk; and two, to act as a passive income subsidy.’ In Vanclief’s view, the second direction was not the intention of Canadian safety net programs; they were not designed to meet the needs of farmers whose major problem was chronically low levels of income.

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The OECD’s articulation of additional purposes served by agriculture can also be seen as a blueprint for the Agricultural Policy Framework (APF) agreed to by governments in Whitehorse in June 2001. Business risk management (rather than income safety nets) was one of five APF pillars of an agri-food policy package. The others were food safety and quality, the environment, science and innovation, and renewal. Although some of these pillars – such as renewal – initially were not well explicated, their linkage in one policy framework was consistent with OECD thinking that state assistance for agriculture could be justified by including its role in providing public goods not supplied by private markets. As agriculture minister Vanclief explained, the pressures facing the agriculture and food sector were a combination of risks beyond its control. Beyond the traditional risks from weather, disease, and global market fluctuations, there were new challenges from intensified international competition in commodity markets. Farmers also had obligations to respond to demands from consumers for more information about the safety and quality of their food, and with regard to environmental impacts of agriculture. If consumers wanted assurance of safe food, if taxpayers expected farmers to produce in a way that was environmentally sustainable, then they had to recognize that there was a price to pay for these benefits.65 The APF thus justified state assistance on grounds specific to the income risks of farm households as well as on broader social and public goods considerations. Building on the Safety Net Review and OECD analyses, the principles of risk management programs in the APF were articulated. Most were familiar: safety net programs had to conform to Canada’s international trade obligations and minimize the risk of countervail trade actions; be developed in conjunction with ‘stakeholders,’ including farmers and their respective organizations; provide income stabilization and disaster assistance for the whole farm; be predictable and allow producers to plan for the long term; treat producers equitably across provinces; and not influence producers’ marketing and production decisions. New to the mix was the OECD principle of targeting programs to those with greatest losses. As well, producers would be required to assume a greater share of the cost of mitigating income fluctuations – through larger premiums and helping to cover the costs of disaster assistance.66 Securing agreement on such a new portfolio of risk management programs was difficult and prolonged. Developments in the international arena maintained a sense of vulnerability in the farm community and left them feeling ill prepared to bear a larger share of the burden of

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managing their income risks. The Doha round of WTO negotiations that had begun in November 2001 provided little guarantee of a more optimistic future. On the one hand, the negotiations held out the possibility that the large domestic and export subsidies to European and American farmers would be forced down and that ‘market forces’ would work to the benefit of Canadian grains and oilseeds growers. On the other hand, the US had made clear its intention to use the WTO negotiations to weaken substantially the policy instruments – the Canadian Wheat Board and supply management – that gave Canadian farmers leverage in the market system. Both of these instruments were under siege. In 2002 Canadian dairy farmers lost a case at the WTO that ruled out expanding their industry through subsidized dairy exports (see chapter 5). In the spring of 2003 US domestic interests persuaded American trade authorities to levy import duties on Canadian durum and red spring wheat (see chapter 4). These events portended a future for agriculture of more, not less, exposure to market forces and political developments beyond their border. The income situation of many Canadian farmers compounded their sense of insecurity and their reluctance to assume more personal responsibility for their incomes. The 2002 US farm bill increased price supports for grain and added new subsidies for products that competed directly with Canadian crops. It committed $190 billion in US funds for the next ten-year period, a figure that was nonetheless within the US’s limits under the WTO Agreement on Agriculture. Low international commodity prices, compounded by poor weather, deepened the income distress in the prairie grain sector. Economic woes spread to the cattle industry, also concentrated in prairie Canada, after the discovery in late May 2003 of a BSE-infected cow in Alberta (see chapter 6). The US closed its border to Canadian live cattle and beef, and overnight the outlet for approximately 80 per cent of Canadian sales of live cattle and beef was lost. The federal government made additional transfers over and above statutory commitments to deal with the farm income crisis over the period 2002–5, including aid to the cattle and beef sectors for losses resulting from the discovery of BSE and lost export markets.67 The dire income situation kept the spotlight firmly on the inadequate level of farm incomes, rather than simply their instability. Charts 3.2 and 3.4 provide the data to demonstrate the negative farm income and the failure of real net farm income to keep up with input and output price changes. Canadian farm incomes have declined in real terms since 1950, whether measured as net cash income or net realized income after accounting for depreciation of assets. Realized net farm in-

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come dropped from over $3 billion annually in 1989 to a minus figure in 2003. Net market income (realized net income minus government payments) approached a negative $5 billion in 2003. The trajectory of incomes derived from the marketplace had been sharply downward since the 1970s: on a per farm basis, average net market income fell from $21,000 in the 1970s to $6,400 in the 1980s, $4,500 in the 1990s, and minus $7,000, on average, in the early 2000s.68 As it had done earlier, this economic situation raised questions about the link between safety nets and a competitive agricultural sector. The Safety Net Review report concluded that international subsidies were partly to blame for the depressed income situation, but that there were also ‘long term competitive pressures’ that were driving commodity prices down, including competition from low-cost/lowsubsidy production in countries such as Brazil and Argentina. It also viewed the trend towards lower commodity prices over the past two decades to be ‘part of long-run effects of technical change that dates back for centuries.’ Canadian governments, it advised, should not match EU or US subsidies, since money would be simply capitalized into land values or isolate farmers from the market realities.69 The federal minister and his officials endorsed this view, but a number of farm organizations and the Saskatchewan minister of agriculture argued the federal government should provide a ‘trade subsidy offset’(either as emergency payments or as a fifth pillar of the Agricultural Policy Framework), since it was the government of Canada that had cut absolute support levels dramatically in comparison with Canada’s international competitors.70 The pluralist network that had designed farm income safety net programs in the past now proved dysfunctional. Farm group representatives’ vigorously opposed the desire of federal agricultural officials to shift more safety net program costs to individual farmers, even while providing what farmers believed would be an inferior level of protection against income risks. Deteriorating relations were also linked to the failure of the minister and his deputy minister to champion publicly the cause of the farm community for greater fiscal support.71 Finally, farm leaders also believed that norms of a ‘partnership’ approach to designing safety net programs had been breached.72 Although an elaborate machinery of consultation subsequently helped to mitigate this criticism,73 the pervasive distrust lingered and undermined the capacity of the advisory committee on safety nets to contribute to effective program development. Intergovernmental negotiations throughout 2002 and 2003 became

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the primary mechanism for developing the risk management pillar of the APF, and the alliances that provincial farm groups forged with their provincial agricultural officials became their most important vehicle of influence. Each province had its own safety net advisory committee on which representatives of provincial farm organizations sat, and these provincial policy networks presented a formidable opposition to the government of Canada’s reform proposals. Their impact was to delay implementation of the APF business risk management program until the federal agriculture minister made a number of concessions that met producers’ and provinces’ concerns.74 4. The Agricultural Policy Framework, 2003–8 The risk management program of APF came into effect in April 2003 and marked an important departure from preceding farm income safety net programs. First, it committed federal spending in the amount of $1.1 billion annually for not three, but five, years. Second, it combined income stabilization and disaster protection in one program called the Canadian Agricultural Income Stabilization (CAIS) program. Like previous safety net programs, CAIS was designed to stabilize the income of the whole farm (that is, it was not commodity specific) and to be non-market and non-trade distorting (by virtue of being a national program that treats similar risks similarly across Canada). Indeed, CAIS was more of a national program than previous safety nets insofar as it also applied to supply managed commodities. Third, whereas governments alone had previously funded ‘the third line of defence’ in the form of disaster assistance programs, now producers participating in CAIS shared those costs. The configuration of disaster payments was now more consistent with OECD guidelines that disaster payments not cover full losses and require farmer contributions. And fourth, a new production insurance program extended the crop insurance program to non-crop commodities and provided protection against income losses due to drops in yield. In its 2003 configuration, some argued that CAIS shifted farm income safety nets more towards a market-liberal or competitive model, consistent with the decoupling principles of the Agreement on Agriculture.75 It required farmers to take more responsibility for managing risks to their income, and gave them more flexibility to select their level of safety net coverage.76 The expectation was that producers would change their operations (the mix of commodities they produce, for example) to keep their income high over time.77

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101

In its 2005 review of Canada, the OECD credited Canada with ‘substantial progress in policy reform’ from its 1986–8 benchmark, and towards less distorting forms of support. It observed that in 1986–8, prices received by Canadian farmers were 40 per cent above those received in the world; in 2002–4, they were only 14 per cent higher. At the same time, the OECD noted that the upward trend in the level of support in the last decade, principally as a result of ad hoc funding for income declines owing to drought and BSE, ‘works against the goal of a more market-oriented agricultural sector.’78 Agreement on CAIS and a new production insurance program did not terminate discussions around income safety net development. Farmers were frustrated that their incomes would be stabilized at ever lower levels if their margins (allowable revenues minus allowable expenses) continued to fall. Provinces remained concerned about the costs of these programs. A change of prime minister, as well as minister and deputy minister at Agriculture and Agri-Food Canada, helped to resolve this matter and other outstanding issues. Bob Speller (January– June 2004) and Andy Mitchell (July 2004–January 2006) assumed the traditional role of advocate for farmers at the cabinet table and, with the support of Prime Minister Martin, demonstrated some flexibility on the issue of the 60:40 provincial funding share of safety nets. In June 2004 changes were made to CAIS that included coverage of negative margins and raised the payment cap for individual farms. Several committees were struck to provide ongoing scrutiny and periodic review of the APF and risk management programs. In addition to the long-standing federal safety nets advisory committee, a national CAIS program committee was created to advise on its administration and to implement an appeals process.79 Over the next two years, CAIS continued to be the subject of deliberations and adjustments. The problem of persistently low farm incomes remained. As a marginbased program, CAIS was not designed to deal with it. A committee chaired by the parliamentary secretary to Wayne Easter, the federal minister of agriculture, was struck in 2004 to address the issue. Following extensive consultations with Canadian farmers, Empowering Canadian Farmers in the Marketplace (the Easter Report, 2005) described the Canadian farm income problem to be ‘long term,’ ‘systemic,’ and part of a ‘global’ farm income crisis. At the root of the problem was an imbalance of national and international market power linked to the structural power over producers of a handful of transnational corporations in the up-stream (controlling input costs of chemical fertilizers, machinery, seeds) and downstream (the processing, wholesale, and retail) agri-food

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sector. This imbalance was the reason why realized net farm incomes were falling even while profits of those elsewhere in the agri-food sector were rising. The solution? While government transfers to support farm incomes were clearly needed, far more radical change to curb the market power of global corporations and to re-balance that of producers was crucial. Easter’s Liberal government eschewed his radical reforms. But it did raise its income safety net funding over that committed in the CAIS to assist low-income grain and cattle farmers. In March 2005 the Government of Canada announced a $1 billion Farm Income Payment Program. 4.1. Business Risk Management and the Conservative Government Discussions on safety net reform and modifications to CAIS continued after the election of the Conservative government of Stephen Harper in January 2006. The Conservative Party had campaigned on the promise of replacing CAIS, and by late 2006 it had committed itself to formulating with the provinces and producer groups a ‘new generation’ of farm income safety net programs. As it did so, it introduced the $550 million Canadian Farm Families Options Program in August 2006 to help lowincome farmers to raise their incomes, develop a business plan, and upgrade their skills. Its 2007 budget announced additional funds to support farm incomes and help to defray rising input (fuel, fertilizer) costs. Discussions on business risk management programs proceeded as part of the broader exercise of renewing the 2003 Agricultural Policy Framework that was due to expire in 2008. This exercise entailed not only intergovernmental discussions and consultations with stakeholders in the agri-food sector, but also public consultation sessions. As discussions proceeded, provinces and some farm organizations (the Canadian Federation of Agriculture and the UPA) pressed for the return of provincial ‘companion programs’ cost-shared with the federal government. Less wealthy provinces, such as Saskatchewan, continued to challenge as inequitable the 60:40 federal-provincial cost-sharing formula. CAIS had triggered payments since its implementation in 2003 and its rising costs (above what had been projected) troubled provinces with larger numbers of farmers.80 At the same time, there were complaints about the program, ranging from its administrative complexity and delay in getting payments into farmers’ hands,81 to its inadequacy in supporting farm incomes over a period of declining commodity prices and rising input costs.82

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Agriculture and Agri-Food Canada issued a discussion paper on business risk management, ‘Next Generation,’ in the spring of 2007. The discussion paper identified instruments available to farmers to manage their business risks and proposed design principles for a new suite of business risk management programs.83 Government programs, according to the discussion paper, were only one tool available to farmers to manage their risks; others were commodity diversification, forward contracts with buyers, and price pooling through provincial marketing boards. The design principles elaborated were familiar: for example, programs should treat producers equitably across commodities and regions and be production neutral and should not bias the mix of commodities raised and conform to international trading obligations by not being commodity specific. The discussion paper stated: ‘Risk programming should focus on mitigating the negative impacts of uncontrollable and unforseen events without masking market signals over the longerterm. Allowing trends in prices of inputs and outputs to signal to farmers what to produce will encourage efficiency and ultimately long-term profitability earned from the market place. Programming options, such as long-term commodity support, mask these signals, and potentially farmers could become dependent on programming as a permanent source of income.’84 By June 2007 governments and farm group representatives had agreed to replace CAIS with four new programs. These programs elicited a strong sense of déjà vu. A NISA-like producer savings account would be financed on a 50:50 basis by governments and farmers and create a pool of savings that farmers could draw on in the event of small income declines. A margin-based income stabilization program supported producers’ incomes when their income drop was larger. An extended production insurance program provided protection against income losses when yields declined, owing to weather, pests, and disease. A separate disaster relief program completed the suite of programs. Its manner of cost sharing was yet to be determined. 5. Analysis and Conclusion Public policies to help farmers to manage the risks to their incomes – from weather, disease and pests, and price variability – were a component of the state assistance paradigm of agriculture and continue today to be a feature of Canadian agricultural policy.85 The configuration of programs has changed in recent years; programs no longer support

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commodity prices, but rather are designed to raise and stabilize farm incomes. What has not changed is government support for farm incomes. In recent years, government programs have transferred $5 billion annually to producers; programs to help farmers manage their income risks accounted for 70 per cent of total federal and provincial program expenditures in 2005–6.86 The level of state expenditures for farm income safety nets indicates that a full-blown market-liberal model of agriculture has been rejected in Canada. Producers have not been left to assume sole responsibility for minimizing the risks of fluctuating incomes or for the levels of their incomes. Rather, that responsibility is shared by governments and individual producers. Joint public-private responsibility does not mean a commitment to shield farmers fully from market dynamics. Indeed, the official discourse around safety nets, as noted above, is that farmers should normally expect to extract their incomes from the marketplace. The 1989 Growing Together document articulated a vision of a more ‘market responsive’ and ‘market reliant’ agriculture sector; the 2007 Growing Forward document states that ‘sustainable profitability must come from the market.’87 How, then, to account for the seeming dissonance between what has often sounded like a market-liberal vision of agriculture and billion dollar transfer payments to support Canadian farm incomes? A combination of factors in the domestic and international political economy help to explain it. First, the market-liberal paradigm has not been economically or politically feasible in recent years. It has not been in the economic or political interest of governments to abandon state transfers to raise and stabilize farm incomes when swathes of farmers and provincial economies have been economically threatened and government accounts are robustly in the black. Moreover, it is the largest farmers, those with revenues in excess of $250,000, who have been the recipients of these transfer payments as much, if not more, than farmers with revenues in the $100,000 to $250,000 range.88 Canada’s parliamentary and federal systems and the capacity of farm organizations to mobilize politicians across and within these macro-level institutions have enhanced the political viability of state assistance for farm incomes. Provincial cost sharing has helped producers to leverage the government of Canada for assistance, and coalitions of farm organizations were adept in the early 2000s at raising the profile of the farm income crisis, capturing the attention of national media, and garnering the support of parliamentarians across all parties.

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Second, the rhetoric of market liberalism does not obviate beliefs about the exceptionalism of agriculture, including in the current globalizing economy. Even if all enterprises face risks, the idea persists that in producing food farmers face unique and uncontrollable risks that derive from weather, disease, and pests. It is recognized, as well, that restructuring of the food supply chain – by virtue of consolidation in its upstream and downstream components – has squeezed many farmers; they are unable to pass on their production costs, even as their input costs rise. As in the case in Europe, new rationales justify state transfers in support of farm incomes; they include helping to compensate farmers for their provision of valued goods such as food and biodiversity protection. The significance of these justifications is considerably less than it is in Europe, where farm income subsidies have been directly tied to provision of such public goods. Third, economic globalization has also constituted a rationale for farm income programs: to compensate farmers from the material injury of foreign subsidies and loss of vital export markets when disease (for example, BSE) strikes. The belief that Canadian farmers should be put on ‘a level playing field’ with their American and European counterparts has not always resonated with governments. However, there does appear to be recognition that farmers – and all those enterprises downstream from them – live in a highly competitive global economy fraught with uncertainty and risk. Fourth, political internationalization has played a role in farm income safety net development. Canadian programs have been configured both to be consistent with the guidelines of international organizations such as the OECD and the rules of multilateral treaties (the WTO Agreement on Agriculture) as well as to ward off American countervail actions. But none of these instances of internationalization of domestic policy development prohibits state transfers in support of farm incomes; they have simply required that such transfers meet conditions such as decoupling and whole farm support. The level of support has been determined in the domestic political arena. Turning from policy paradigms to governance paradigms, we find ample evidence that policy networks have become more pluralist in composition. Since the early 1990s representatives of producer organizations have been only one of the private interests that have advised and helped governments to shape safety net programs. Producer organization representatives have been the largest party to these negotiations, but they have shared the table with representatives of input

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suppliers, food processors, the retail sector, the financial sector, and academics. As income safety net policy networks have become more pluralist, their effectiveness as consensus-building forums for policy reform has varied over time. They proved an effective site of reform of traditional statist policy instruments in the early to mid-1990s. By the late 1990s the pluralist policy network that had given birth to GRIP, NISA, and the 1996 Safety Net Policy Framework Agreement was no longer functional. The diversity of farmer interests and organizations handicapped their representatives on the safety nets advisory committee, and they found it difficult to agree on anything other than the need for more government spending. When the key executive officials in a national government intent on more radical change lost the trust of the major farm organizations at the turn of the century, this mode of governance failed as a forum of effective policy development. By 2005, following a change of personnel in Agriculture and Agri-Food Canada, the policy network (safety net committee) appeared to be efficacious again in producing non-radical reforms.89 These pluralist forums and the Government of Canada’s commitment to a ‘partnership’ with the agri-food sector, including the major farm groups, appear to have been an effective check to radical policy reforms that would signal a paradigmatic change in the role of governments in raising and stabilizing farm incomes. In the late twentieth and early twenty-first centuries, in a context of poor commodity prices, bad weather, disease, and a decline in real aggregate net cash income, Canadian farmers were generally of one voice when it came to the need for state assistance for farm incomes. Far more controversial has been the appropriateness of another pillar in the state assistance model: the Canadian Wheat Board’s monopoly in export grain marketing. The next chapter turns to this topic and the heated debate that still surrounds it.

4 The Canadian Wheat Board and Orderly Marketing

The decisions about changing the Canadian grain marketing system are to be made in Canada by Canadians for our own good, Canadian reasons. They should not be driven by external factors and forces. That having been said, there are a number of changes ... that may help to take some of the steam out of some of the more misguided arguments ... that come from abroad to attack the Canadian Wheat Board.1

The changes he was proposing to the Canadian Wheat Board Act in 1997, said the minister responsible for the marketing agency in the Chrétien Liberal government, were not ‘driven by external factors and forces’ or an attack ‘from abroad.’ Ralph Goodale’s insistence that the statutory reforms were guided by ‘Canadian reasons’ was certainly not wrong. But it fails to capture the reality of contemporary politics and more precisely, the internationalization of policy debates and policy developments. The debate over the appropriate institutions and instruments of Canadian grain marketing is a domestic debate. But it is one that has been profoundly affected by economic globalization, regional market integration, and international regulatory governance via the rules of WTO Agreements. Since the early 1990s the Canadian Wheat Board’s (CWB) monopoly over exports of prairie-grown wheat, durum, and barley crops has been very divisive. It has pitted prairie grain growers against one another and provincial governments (of Alberta) against the government of Canada. After the election of the Harper Conservative government in 2006, it also put the Government of Canada in a bitter battle with

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prairie grain producers who support the Board’s monopoly and with the Wheat Board’s directors. The cleavages are ideational and represent a choice between instruments and institutions of market regulation in the state assistance paradigm and deregulation in the market-liberal model. Although ideological divisions over the merits of the Wheat Board’s monopoly surfaced before the signing of regional and multilateral trade agreements, this chapter argues that the contemporary context of internationalization propelled them to the top of the political agenda. As noted in the introductory chapter to this book, processes of economic globalization and regional market integration raise the priority of competitiveness concerns. The debate in prairie Canada over the appropriate institutions for export grain marketing is a clash of ideas that are both normative and pragmatic. What is also the best marketing system for an export-dependent grain economy? Is the current marketing system the most competitive system even if its divergence from that of our closest trading partner (in the United States private grain companies dominate grain marketing) has made it the endless target of American trade actions? In an era of fierce competition for export grain markets, does the Wheat Board’s monopoly allow it to extract premiums in export markets and return them to farmers, as some experts suggest? And, if state trading enterprises like the Wheat Board do give Canadian farmers a competitive edge, will they survive future WTO trade negotiations? These questions get to the heart of the economic and political viability of statist institutions in an era of trade liberalization and international regulatory governance. Politicians and governments of different political stripes have arrived at different calculations of the economic and political feasibility of the Wheat Board’s mandate and governing structure. The federal Liberal government and Ralph Goodale opted to reform the Wheat Board but retain its export monopoly; in early 2007 the federal Harper Conservative government and Chuck Strahl were seeking more radical – deregulation – reforms. In tracing policy debates and developments regarding the Wheat Board’s marketing mandate and governing structure, this chapter investigates the conditions hypothesized in chapter 1 to affect the fate of a policy paradigm: perceptions of policy failure, the availability of an alternative paradigm deemed politically viable, the discourse and strategies of influential political actors; (shifts in) the policy process and institutional locus of authoritative decision making; and the short-term

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material and political context. As the discussion above indicates, policy debates around the Wheat Board have been rife with allegations of policy failure and competing policy paradigms. This chapter also demonstrates the role that is crucial to the outcomes of these debates of the three other factors: the strategic actions, discourse and political calculations of political actors, especially those with legal authority for the Wheat Board; the institutional locus of authority in a federal executive that has exclusive jurisdiction over export grain marketing; and the short-term economic and political context. During phase one of the debate (1993–8) under the Chrétien Liberal government, the outcome of paradigm modification was also affected by the institutional factor of Canadian judicial deference to parliamentary supremacy. In phase two of the debate (2006–), the outcome to July 2007 of substantial steps towards paradigm change was also crucially affected by the strategic actions, ideological preferences, and political calculations of the responsible minister. The (albeit contending) analyses of academic experts on the Wheat Board’s utility and legitimacy have also appeared to affect policy outcomes. Similarly, the short-term economic context has also mattered by affecting farmers’ perceptions of the economic viability of alternative marketing systems (a modified regulated marketing system versus deregulation). The chapter is organized into six sections. Section 1 provides a brief historical overview of the Canadian Wheat Board: its regulatory pillars and contribution to goals in the state assistance paradigm of increasing farmers’ bargaining power (and potentially, incomes) in international grain markets. Section 2 discusses the context in the late 1980s and early 1990s of economic and political internationalization, within which the debate over prairie grain marketing unfolded. Particular attention is paid to the developments in the North American region that destabilized the Wheat Board and moved its reform to the top of the political agenda. Section 3 provides an account of phase one of the domestic debate around the Wheat Board, the governance mechanisms and strategies used to resolve it, and its eventual outcome. Section 4 returns to the international dimension of the Wheat Board debate, where the efforts of the American wheat industry and government to effect a paradigm change in Canadian grain marketing policies through the pressure of NAFTA and WTO trade actions have been checked. Their attempt to achieve the same outcome via the Doha multilateral trade negotiations was put on hold when these talks were suspended in mid2006. Section 5 discusses phase two of the debate since the Harper Con-

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servative government gained national office in January 2006. Section 6 presents conclusions. 1. The Canadian Wheat Board: Its Origins and Orderly Marketing Pillars Well before Canadian grain farmers turned to governments for state financial assistance to help to buffer farm incomes from developments in the international political economy, they had called on the Canadian government to use its regulatory powers to augment grain growers’ collective marketing and countervailing power in the grain trade. The instrument of choice was orderly marketing and, more precisely, a marketing board with ‘single-desk status,’ that is, with exclusive powers to purchase and sell prairie-grown wheat, barley, and oats in domestic and export markets. Prairie farmers’ desire for a monopsonist marketing board was directly related to their structural dependence on export markets that are dominated by large (and now multinational) private grain companies. Grain farmers’ degree of dependence on global markets has varied over the years; during the late twentieth century export markets accounted for 60–70 per cent (depending on the year) of Canadian grain sales.2 Wheat exporters are not dependent upon a single market; the Wheat Board sells to several countries – as many as seventy – across the globe. Canadian wheat exports comprise 20–25 per cent of world wheat trade, 50–60 per cent of world durum trade, and 20–25 per cent of world barley trade.3 Canada is currently the second-largest exporter of (all varieties of) wheat, behind the United States, but it is the world’s leading exporter of hard red spring wheat (used for bread) and durum wheat (used to make pasta). The Canadian dollars earned from export wheat sales usually surpass those from any other agricultural commodity and are particularly important to Saskatchewan, where the most wheat is produced, but also to Alberta (the second-largest wheat producer) and Manitoba. The volume and value of barley exports pale in comparison with those for wheat, and barley producers are much less dependent upon export markets (most barley is fed to animals). In contrast to wheat, the US can be an important destination for barley exports. Saskatchewan and Alberta produce roughly equal amounts of barley, and Manitoba comes third.4 Historically, the world wheat market is competitive, albeit unevenly so because it is dominated by a few grain companies.5 Today these

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wheat marketing organizations include Cargill with revenues of $75 billion US in 2006, Archer Daniels Midland with revenues of $36 billion US in 2006, Bunge with revenues of $26 billion US in 2006, and Louis Dreyfus with 2006 revenues of $20 billion US; the Australian Wheat Board with 2004 revenues of $10 million Canadian; and the Canadian Wheat Board with annual revenue sales of around $4–$5 billion Canadian.6 The creation of a monopoly marketing agency to purchase prairiegrown grains and sell them in export markets occurred in a series of steps over three decades. From the early twentieth century onward, the grain farmers who lobbied for a compulsory grain-marketing board reasoned that, acting together, they would be in better bargaining position to market their grain to the handful of private grain buyers than they would acting individually. Canadian governments were not persuaded of the need to correct the inequity of often arbitrary pricing by grain buyers until their own interests as political parties and governments meshed with those of prairie grain farmers. In 1935 the Conservative Bennett government created the Canadian Wheat Board as a voluntary marketing agency in order to help to dispose of a surplus of wheat in a period of depressed prices. In 1943 the Liberal government granted the Wheat Board a two-year monopoly to sell prairie wheat. The monopoly marketing powers were seen as necessary to honour Canada’s grain supply commitments to wartime allies, arrest domestic inflation of grain prices, and secure the Liberal Party’s re-election in western Canada. The Liberal government continued the Wheat Board’s monopoly in the post-war period and extended it to include barley and oats for a similar combination of ‘national interest’ and partisan reasons.7 The three pillars of orderly marketing that were incorporated in the Canadian Wheat Board are single-desk (monopoly) selling, price pooling, and government financial guarantees of the Wheat Board’s operations. Under the first pillar of single-desk selling, the Wheat Board has the exclusive right to purchase and sell wheat and barley grown in the prairie region (Manitoba, Saskatchewan, Alberta, and the northeastern corner of British Columbia) for export and domestic human consumption.8 Individual farmers acquire permits/quotas to deliver grain to an elevator or railway car within a specified period of time and as arranged with the Wheat Board. The permit is designed to give every farmer equal opportunity to deliver grain within a crop year. The second pillar, price pooling, guarantees the farmer that over the crop/marketing year he receives the same return as other farmers for grain of the same quality or grade (that is, in the same ‘pool’), regardless of whether

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he sells it when market prices are higher or lower. The farmer receives an initial payment, set by the Wheat Board and subject to approval by the Government of Canada, upon delivery of his grain and a final payment at the end of the crop year based on the net sales of grain in that pool. Both the single-seller and price-pooling principles emphasize the collective interests of farmers and their equitable treatment. The third pillar of orderly marketing is government financial underwriting of the marketing agency’s operations, that is, its borrowing to finance initial payments to producers as well as credit sales to foreign buyers. Gradually over the post-Second World War period, the Wheat Board built up its credentials as an instrument that allowed Canadian farmers to compete more effectively in the international grain market. During the 1960s, often as a result of credit guarantees by the Canadian government, the Wheat Board procured a series of long-term bilateral contracts with major grain-importing countries, including China and the Soviet Union. In the late 1970s and early 1980s, when the western Canadian grain-handling system proved inadequate to transport the increasing volumes of prairie grain production, the Wheat Board entered into the grain-handling system for the first time and purchased its own rail cars to move grain. In the early 1980s Canadian wheat and barley exports reached their highest ever levels.9 Its record as a successful grain-marketing agency garnered the Wheat Board the support of the vast number of prairie farmers and all political parties. In the words of three analysts, the Wheat Board’s ‘central and commanding role in regulatory matters in the grain industry, its historical performance, and its wide acceptance by producers make its disappearance from the scene unthinkable and unsupportable.’10 The widespread belief, therefore, was that the Wheat Board was an important tool of competitiveness for Canadian grain farmers in the international markets upon which they depended but whose prices they could not set. Little wonder then, and given the supportive international context (detailed below), the 1989 Growing Together document exempted the Wheat Board from the general call for a more self-reliant and market-oriented agriculture. Greater self-reliance, according to the document, did not mean ‘that the individual must operate alone, without the benefits gained through collective activities. Canadian farmers have fought for a century to gain the legitimacy and efficiency of cooperative action through producer organizations, cooperatives, the pooling of products and prices and marketing boards.’11

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2. The International Context: Regional Economic Integration and Trade Agreements The international trade regime constructed in the post-Second World War context sustained and legitimized the Canadian Wheat Board’s single-desk powers. Its prevailing norms of embedded liberalism upheld state trading enterprises (STEs), such as the Canadian Wheat Board, as consistent with a rules-based trading regime whose intent was to liberalize trade. GATT Article XVII recognized the right of countries to establish state trading enterprises and to give them exclusive or special privileges that included the purchase or sale of traded commodities. STEs also were required to act in accordance with commercial considerations (not make sales based on political considerations) as well as conform to other GATT principles.12 STEs were not a source of controversy during the Uruguay Round negotiations, and GATT provisions with respect to them were retained in the WTO agreements implemented in 1995. The latter did, however, include a clearer definition of STEs and committed member countries to new notification requirements for them.13 The disjuncture in international grain markets in the mid-1980s did not immediately affect the Wheat Board. It survived the tighter competition in international markets following the initiation of the US export subsidy program in the mid-1980s, finding new markets for Canadian grain. Neither the FTA (effective January 1989) nor the NAFTA (effective January 1994) directly destabilized the status of the Wheat Board; both agreements contained provisions analogous to those in the GATT with respect to state trading entities.14 However, developments pursuant to the FTA soon had an impact on grain markets with subsequent implications for the Wheat Board. The FTA established a formula for the removal of US tariffs on Canadian grains and Canadian import licences on US grains; both policy instruments had limited bilateral grain trade. The opening of the US market coincided with US domestic policy developments that made the United States a more attractive market for Canadian grain exporters. The effect of the Export Enhancement Program (EEP), initiated in 1984 in a bid to recapture American dominance in international grain markets lost to the European Community (see chapter 2), was to raise internal US grain prices relative to international prices. The US market became more attractive for Canadian grain exports and between 1990–1 and 1994–5,

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when EEP expenditures were significant, Canadian exports to the US rose.15 The implementation of the GATT/WTO agreements in 1995 contributed to further regionalization of Canadian wheat sales. Although the WTO Agreement on Agriculture did not require an end to export subsidies – only their reduction by volume and value – the Canadian government entirely eliminated grain freight subsidies in the 1995 budget. This policy shift meant that it was often more profitable to ship grain from prairie Canada into the US than to transport it to ports for shipment to overseas markets. Canadian wheat and barley exports to the US continued to grow, quadrupling over the period from 1986–7 to 2001–2.16 US imports of wheat are historically small, averaging about 3 per cent of total US supplies each year.17 Not surprisingly, then, the increased Canadian wheat and durum exports into the US in the early 1990s met with resistance. American grain growers and private grain companies targeted then – and now – what they describe as the ‘unfair’ Canadian grain-marketing policies of the Canadian Wheat Board. The Wheat Board’s price-setting mechanism, they have argued, lacks transparency and this feature allows the Wheat Board to selectively and/or secretly lower its export prices to be competitive with American prices. Moreover, they allege that the Canadian government’s guarantee of Wheat Board borrowing (to finance its operations), the Wheat Board’s export credits, and its credit guarantees to buyers constitute government subsidies that lower the cost of export sales to third countries.18 The net effect is to give Canadian grain exporters an unfair competitive advantage in the US and third-country markets.19 American farmers, located primarily in the border state of North Dakota and with the encouragement of some state senators,20 have launched what has turned out to be a virtually continuous stream of American investigations into the operations of the Wheat Board since 1989. These allegations of unfair trade and illegal trading practices on the part of the Canadian Wheat Board, as discussed further in section 4 of this chapter, have been found to lack substance by the administrative bodies authorized to investigate them. None of the decisions rendered by the trade remedy bodies has directly undermined the legal authority and powers of the Wheat Board. Still, the continuous American investigations and trade actions pursuant to the practices of the Wheat Board have been politically consequential. They have provided ammunition

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for domestic critics of orderly marketing, whose preference is to strip the Wheat Board of its export monopoly powers. 3. The Domestic Reform Debate: Phase One Structural changes in the grain sector appeared to lie behind the opposition to orderly grain marketing that arose in prairie Canada from the 1970s onward. Grain-farming operations were now considerably larger than at the Wheat Board’s inception, and younger farmers, in particular, were more entrepreneurial. Whereas their grandfathers and fathers had welcomed the benefits of collective risk sharing through orderly marketing, some grain growers were now ready – and arguably better positioned – to assume the individual risks that a more liberal grainmarketing system implied. Technological developments helped to bolster their entrepreneurial confidence; sitting at their computers, farmers could obtain current information on grain prices. For some, this information alone gave them confidence that they did not need a collective marketing agency like a Wheat Board to extract premium prices from the marketplace. With the financial support and encouragement of the Alberta government in the 1970s, some of these farmers had organized themselves into new commodity groups, such as the Palliser Wheat Growers Association (later renamed the Western Canadian Wheat Growers Association) and the Western Barley Growers Association. Both organizations were committed to individual freedom, including reducing federal government involvement in grain marketing. By the late 1980s their ideological preference for deregulation found a welcome environment. An ideational shift had put the Mulroney Conservative government in office in Ottawa and lent momentum to free trade agreements. The Conservative minister responsible for the Canadian Wheat Board, Charlie Mayer, was receptive to deregulation arguments. Mayer removed the Wheat Board’s monopoly on export sales of oats in 1989. Because only a small quantity of oats was exported, criticism of the minister’s action was limited. His decision in 1993 to remove the Wheat Board’s monopoly on export sales of barley to the US, on the advice of a commissioned report that argued the Wheat Board was costing Canadian grain farmers lost opportunities in the higherpriced American market,21 was much more controversial. Although the private grain companies and wheat and barley commodity groups that had urged the move were happy, the minister’s action, taken by order-

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in-council (by the cabinet), was immediately challenged by the three prairie wheat pools. They sought and obtained a legal ruling to have the action overturned. A federal court judge ruled the minister’s action unconstitutional, stating that altering the Wheat Board’s legal authority required changing the Canadian Wheat Board Act and thus needed Parliament’s approval. When the Liberal Party returned to national office in 1993, it inherited an issue over which the prairie grain community was deeply divided. Grain farmers were at odds with one another, as were their provincial governments. Conservative governments in Alberta had long chafed under the Wheat Board’s powers and believed that a less regulated grain-marketing system would yield important economic benefits to the province. That view was not shared by governments in the other two prairie provinces. The high salience of the issue and the governance mechanisms through which the Liberal minister in charge sought to deal with it were significantly shaped by Canada’s formal and informal institutional context; the governance mechanisms in turn shaped the debate’s outcome, as did the resources and strategies of the competing pro- and anti-Wheat Board coalitions and the ideas and interests of the minister himself. 3.1. The Significance of Domestic Institutions and Context The impact of the domestic institutional context – the federal, parliamentary, and judicial systems as well as the mechanisms of intermediation between grain growers and the federal government – on the Canadian Wheat Board debate can be analytically distinguished in terms of, first, how this framework contributed to the high political salience of the issue and, second, how it affected its resolution. As suggested above, the federal system helped to elevate the voice of the dissident farmers beyond what their sheer numbers would have warranted. Although the government of Canada enjoys exclusive legal authority over interprovincial and export marketing,22 the Alberta government was prepared to assist the anti-Wheat Board farmers to challenge federal authority. Their assured institutional ally was an opposition party in the House of Commons; their potential ally was the judiciary. After 1993 the Reform Party of Canada represented most of prairie Canada and used the House of Commons as a platform from which to champion the cause of Wheat Board critics. Léon Benoit, the Alberta

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MP who served as the Reform Party critic for agriculture, used his maiden speech in the House of Commons to promote changes to the Wheat Board, including eliminating its monopoly. The Reform Party’s voice from the right of the political spectrum easily overpowered in sheer volume that from the left. The ranks of the NDP, which historically had been the most ardent advocate of orderly marketing, were severely reduced after 1993. The judiciary was the other potential institutional check on exclusive federal latitude to determine the fate of the Wheat Board, and both the dissident farmers and the Conservative government in Alberta were prepared to use it. However, the twenty-one farmers, Alberta Barley Commission, and Western Barley Growers Association, who argued before a federal court judge that the Wheat Board contravened the Canadian Charter of Rights and Freedoms, did not prevail. Nor was the judiciary prepared to uphold the separate challenge to the constitutionality of the Wheat Board brought by the Alberta Klein government.23 Ultimately, neither Parliament nor the judiciary was an effective constraint on the federal government’s legal authority over export grain marketing. The fate of the Wheat Board over the 1990s to the end of 2005 thus rested with the federal Liberal government and the minister responsible for the Canadian Wheat Board, Ralph Goodale. Member of Parliament for the Saskatchewan riding of Regina-Wascana, Goodale clearly understood the high stakes the issue presented for his home province. He was also undoubtedly aware that the Wheat Board was popular with most Saskatchewan farmers. Goodale proceeded cautiously, deciding that only an inclusive process of consultation that gave the entire prairie grain community a chance to become involved would give legitimacy to any eventual resolution of the controversy. The decision to consult widely had a historical precedent; the Trudeau Liberal government had terminated the Crow’s Nest freight rates and replaced them with government subsidies to railways (see chapter 2) only after extensive consultation with the grain policy community in the early 1980s.24 3.2. Competing Coalitions of Actors Two competing coalitions emerged in the prairie grain policy community around three issues related to the functioning of the Wheat Board. The first issue was retaining the pillar of single-desk seller status for the Wheat Board; the second was changes to the pillar of price pooling; and

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the third concerned reforms to the governance structures of the Wheat Board. The second and third changes implicated the third pillar of government financial underwriting of the Wheat Board’s operations. As observed above, the critics of the Wheat Board had put the first issue of the Wheat Board’s monopoly to purchase and sell wheat and barley in export markets on the political agenda. The second and third issues owed their genesis in no small part to officials within the Wheat Board. Its marketing function put Wheat Board officials in regular contact with grain farmers, and these officials became fully aware of the Board’s diminishing reputation among younger farmers who were willing to assume more individual responsibility and risk for their own grain marketing.25 Convinced their marketing agency needed to adapt if it were to survive, mid-level Wheat Board officials had persuaded their leadership to appoint the Canadian Wheat Board Review Panel in 1990 to examine the role of the Board in prairie grain marketing. Following its report, the Wheat Board was galvanized around two changes in particular. One called for the Board to become more democratic and more accountable to prairie farmers. Replacing government-appointed commissioners with farmer-elected commissioners was a way to give farmers ‘an effective voice and a sense of ownership’ in the Board and more direct say in its operations.26 The other proposed change was to give farmers more pricing options by adding the option of cash pricing. This option would allow the Wheat Board to offer farmers a cash payment in place of the pooled price and, it was hoped, induce grain shipments when Wheat Board inventories were inadequate to meet customers’ demand. The first issue of the Wheat Board’s single-desk seller status divided the prairie farm community into two coalitions. One coalition challenged the Wheat Board’s monopoly authority and argued that farmers should be free to market their grain as they chose. Its preoccupation was barley exports. It championed a ‘dual market’ that would require the Wheat Board to compete with private grain companies for the purchase of domestic barley and its sale in export markets. The most militant members of this coalition were a group who called themselves Canadian Farmers for Justice. Formed in 1994, the group claimed to have 1,500 paid members in February 1998. The major tactic of Canadian Farmers for Justice was to draw media attention to their dissatisfaction with the Wheat Board by circumventing its authority. In late 1995 and early 1996 they drove their barley-filled trucks across the Canadian-US border to grain elevators in northern US states. At point

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of sale, they gained higher returns than they would net from the Wheat Board’s initial payments based on average world prices. Selling without the requisite Wheat Board export permit, these farmers were found to be acting illegally, fined, and very occasionally jailed when they refused to pay the fine.27 Nonetheless, their border-running episodes continued and garnered considerable publicity. Other, more law-abiding members of this coalition were the Western Canadian Wheat Growers Association, the Western Barley Growers Association, and private grain companies such as the United Grain Growers. The Alberta government assisted the cause of this challenging coalition. It conducted a provincial plebiscite in the fall of 1995, in which two-thirds of those casting ballots indicated their support for a dual barley market. As noted earlier, the Reform Party of Canada was also a vigorous member of this coalition. A second coalition defended the Wheat Board’s single-desk status and was united in its opposition to a dual export barley market. It consisted of the Wheat Board; the two national farm organizations, the National Farmers Union (NFU) and the Canadian Federation of Agriculture (CFA); the largest grain-marketing cooperative in Canada, the Saskatchewan Wheat Pool; the NDP government of Saskatchewan; and, later, a fledgling group called the Family Farm Foundation. The latter had reason to believe that the minister responsible for the Wheat Board was also a supporter. Upon inheriting the Wheat Board dispute from his Conservative predecessor, Goodale had stated that opening the Wheat Board to competition from private grain companies or individual farmers would ‘destroy the board in short order’ and be ‘counterproductive to the interests of Western Canada.’28 Even so, minister Goodale deferred embracing the proposals advanced by the Wheat Board for its reform, pending their wider public discussion. The second issue entailed options to price pooling. This issue divided not only the anti-Board and pro-Board coalitions but also the pro-Board coalition itself. Wheat Board critics wanted complete freedom to choose between receiving a full cash payment at the point of sale (from the purchasing private grain trader) and the Wheat Board’s pooled price. The Wheat Board proposal fell far short of this stark choice and proposed some ‘flexibility’ in price-pooling arrangements. For example, farmers would be able to sell some grain on a cash basis and/or at a price other than the initial payment.29 Used sparingly, cash pricing could give the Board more flexibility in a rapidly changing marketplace and help to meet the needs of its diverse farmer clientele.30 The most ardent de-

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fenders of orderly marketing opposed any cash trading because it appeared to jeopardize one of the institution’s core ideational principles: price pooling. The National Farmers Union, the New Democratic Party, and the Saskatchewan Wheat Pool worried that if the option of cash pricing were used routinely by the Board, farmers would have an incentive to hold their grain on the farm until supplies were short. The Wheat Board would then be forced to offer a cash payment higher than the pooled price, and price pooling would soon disappear as an attractive option. The Wheat Board would also be expected to assume the financial risks entailed by cash pricing options. The NFU, NDP, and Saskatchewan Wheat Pool resisted cash pricing, even as it was passed into law in 1998. The third set of issues, changes to the governance of the Wheat Board to reduce the government’s role in its operations, was much less controversial. Farmers generally concurred on the desirability of democratizing the governing structures of the Wheat Board by replacing the five government-appointed commissioners with a board of directors of whom a majority would be elected by farmers. Not surprisingly, some of the then government-appointed commissioners opposed this change. 3.3. A New Policy Process: Governance Mechanisms of Conflict Management The consultation strategy that minister Goodale pursued to manage the domestic conflict over the Wheat Board’s central pillars took place in its early and crucial stages outside parliamentary institutions of representative democracy. It was consistent with a model of ‘participatory democracy’ in which the farm community was asked to directly air its views. Goodale initially sought the advice of an external panel. He asked the nine individuals he appointed to the Western Grain Marketing Panel (WGMP) to review grain and marketing issues, and framed the debate over the future of the Canadian Wheat Board by posing the questions farmers would be asked to address in hearings held by the WGMP over the winter of 1995–6. The questions centred on the continuing utility of the Wheat Board in the changing global economy. Do changes in the global marketplace require Canada to make any changes in its grain-marketing system? Are changes needed to stimulate and support investment in grain processing? Can the Canadian Wheat Board, as a monopoly export seller, extract a better return for farmers from world markets than could a system of multiple sellers? Would changes to the marketing system

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threaten Canada’s valued reputation among grain buyers for high quality, consistency, and integrity? The questions also addressed the governance of the Wheat Board: should the Board be made more directly accountable to farmers? Among this panoply of questions, the matter of the Wheat Board’s monopoly became the focus of the WGMP hearings. A second stage of broader public consultation opened up after the WGMP delivered its report in July 1996. Included in the WGMP’s thirty-three recommendations was the proposal to end the Wheat Board’s monopoly over export sales of feed barley. Wheat Board critics urged Goodale to implement the report’s recommendations immediately. By contrast, the Wheat Board condemned its recommendation to end the Board’s monopoly on feed barley exports. Goodale responded by asking farmers and the grain industry to give him feedback on the WGMP report. His delay provided the opportunity for the defending coalition of Wheat Board supporters to gain momentum. Aside from the Wheat Board itself, they had been largely silent.31 Up to this point, and as reflected in the recommendations of the WGMP to remove the Board’s export monopoly over barley, the momentum appeared to lie with the anti-Board coalition.32 Now, mobilized by the NFU and a fledgling umbrella group called Concerned Farmers Saving the Wheat Board, farmers turned out in the hundreds and thousands in prairie cities and towns to urge the minister not to implement any WGMP recommendations that would undermine the Board’s marketing authority. They replied to minister Goodale’s invitation for feedback, bombarding his office with letters of support for the Board’s export monopoly. This overwhelming farmer feedback in support of the Board’s monopoly was effective. When minister Goodale introduced legislation in December 1996 to amend the Canadian Wheat Board Act, it included changes to allow for more ‘flexible’ pricing arrangements and more democratic and accountable governance. There were no proposed changes to the Wheat Board’s monopoly. The question of the Board’s monopoly was to be decided by producers themselves in a third ‘direct democracy’ phase. Simultaneously with the announcement of amendments to the Wheat Board Act, Goodale announced a plebiscite would be held on whether the Wheat Board should retain its existing marketing monopoly over barley sales. This ‘democratic process,’ said Goodale, was ‘essential in the circumstances to clear the air.’33 Further, ‘assuming a solid level of turnout and considering it is a clear-cut question,’ he stated he would find the plebiscite results ‘very compelling.’34

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The February 1997 ballot put only two options before grain growers. One was the single-desk option, which would retain the Board’s existing monopoly powers over barley. The other was the open-market option, which would remove feed barley exports and malting barley sales from the control of the Wheat Board and place them on the open market. The dual-market option was not on the ballot, and its exclusion elicited sharp criticism from the Wheat Board’s critics. Some chose to remain on the sidelines of the publicity campaign that preceded the late February ballot.35 The referendum result was conclusive. Over threefifths of those who returned the ballot voted to continue the Board’s authority with respect to barley sales. The plebiscite result was followed shortly thereafter by the Federal Court ruling on the constitutional challenge to the Wheat Board. Justice Muldoon dismissed the complaint brought by the coalition of Wheat Board critics and reaffirmed the Wheat Board’s monopoly as valid in law. He concluded that it was up to Canada’s parliament ‘to fix what is quintessentially a political problem, by freeing or regulating the market, virtually as it and the government see fit.’36 This ruling gave Goodale the green light to proceed with the statutory changes to the Canadian Wheat Board Act that he had introduced in the previous fall. Mechanisms of participatory democracy joined with those of representative democracy as the passage of the legislation introduced into Parliament in December 1996 provided further occasion for deliberation over the mandate, governance, and functioning of the Wheat Board. Both the House of Commons and the Senate standing committees on agriculture held hearings in Ottawa and western Canada. The dissolution of the 35th Parliament for the June 1997 election necessitated the reintroduction of the legislation in the 36th Parliament in a slightly amended form. The amendments to the Canadian Wheat Board Act received parliamentary approval in June 1998, passing with the support of the Liberal, Conservative, and Bloc Québécois parties. The NDP opposed the amendments because they went too far; the Reform Party of Canada opposed them because they did not go far enough. 3.4. The Outcome: Changes to the Canadian Wheat Board Act The amendments to the Canadian Wheat Board Act fell into three broad categories. The first set of reforms related to the governance and accountability of the Wheat Board. Prior to the changes, five commissioners appointed by the government of Canada had acted as a board of

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directors. This structure was replaced by a fifteen-member board of directors, of whom ten were elected by farmers and the remaining five were government appointees. Goodale had originally proposed a set of interim directors to be appointed by the Government of Canada, pending elections of farmer directors in 1998. He was forced to withdraw this proposal when it met with wide-scale opposition. These governance changes, said Goodale, made the Wheat Board more transparent and accountable to farmers and put ‘a tremendous amount of strength and influence’ in their hands.37 The Canadian Wheat Board lost its status as a Crown corporation, but the Canadian government continued to guarantee the Board’s initial payments, its credit sales, and its annual operational borrowings. The second set of changes were intended to make the Wheat Board’s operations more ‘flexible’ and responsive to producer needs. They included options to grain delivery procedures as well as to price pooling. The Wheat Board would be allowed, for example, to make cash purchases of wheat and barley and to adjust payments during the crop year ‘on an expedited basis.’38 To deal with the financial risks presented by these new payment options, the Board would be allowed to establish a contingency fund. The third category of changes related to the Canadian Wheat Board’s single-desk seller status. The Wheat Board’s existing monopoly (over sales of barley and wheat for export and domestic human consumption) was not altered. But any significant or fundamental changes in the future to its mandate would be conditional upon an affirmative vote among farmers. As Goodale saw it, if farmers wanted to end the Wheat Board’s monopoly, it would now be in their power to do so. The legislation stipulated that a change to the Wheat Board’s mandate would require the following: first, a clear recommendation to that effect by the directors of the Canadian Wheat Board; second, if a quality control issue were involved, the unequivocal concurrence of the Canadian Grain Commission that a change could be made safely without damaging Canada’s reputation for quality and consistency; and third, if the proposed change were significant or fundamental, an affirmative vote of farmers. For the Liberal government, putting the fate of the Wheat Board in farmers’ hands was the most politically viable outcome. It shifted future responsibility for a highly contentious issue from the government to the farming community itself. From the 1997 statutory changes to 2006 grain farmers consistently elected a majority of Wheat Board

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directors committed to single-desk selling and opposed to a dual-market system. These changes to the Wheat Board’s functioning were guided, said minister Goodale, by the preferences of the majority of western grain producers.39 Those preferences had been communicated to him in a consultative process that he described as ‘probably the most exhaustive in the history of the western grains industry. Countless meetings, hearings, seminars, surveys, focus groups, questionnaires, votes, pamphlets, petitions, faxes, e-mails, Internet messages, personal and public letters and good old fashioned phone calls. More people had the opportunity to participate in this very public and transparent process than ever before and literally thousands did so.’40 The message he had heard, said Goodale, was that the status quo was not satisfactory. Even if there was a clear preference for retaining the Wheat Board’s barley export monopoly, there was also widespread support for some changes, including putting farmers in control of the marketing agency. The pricing options were also an attempt to accommodate the ‘not insignificant minority of thirty to thirty-five percent of prairie farmers whose criticisms were more strident’ but who ‘couldn’t simply be brushed aside or treated in a cavalier fashion.’41 These reforms to the Wheat Board, said a veteran journalist, caused the marketing agency to undergo ‘its greatest period of reform in more than half a century.’42 Certainly, the changes were more than merely incremental. Indeed, those most committed to orderly marketing viewed deviations from the Board’s price-pooling principle as a radical change that would ultimately undermine the Board. NDP agriculture critic, Dick Proctor, predicted that the changes would ‘kill the board, sooner rather than later.’ In his view, the government had ‘unleashed forces that will undermine the Board.’ Among those he cited were cash buying outside the pools, reduced government guarantees, and ‘a forum for critics of the Board to continue to work against it.’43 These apprehensions notwithstanding, the reforms to the Wheat Board were not as radical as critics had sought and gave them reason to continue to wage a campaign for terminating the Wheat Board’s singledesk export status.44 They fell short of a market-liberal outcome that would have terminated the Wheat Board’s export monopoly over barley sales. That regulated export marketing and a statist institution had survived under bombardment owed much to the skill of Wheat Board defenders in making the case for the continuing utility of a monopoly marketing board. It also owed a great deal to the ideas and interests of

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a strategic cabinet minister and the Liberal government who judged a reformed but still monopolist Wheat Board as the most economically and politically viable marketing system for prairie Canada.45 3.5. The Wheat Board: An Instrument of Competitiveness in a Global Economy? The schism between the coalition that challenged the Wheat Board and that which defended it was a clash of ideologies that predated the current context of internationalization. The state assistance paradigm of agriculture was one that the federal New Democratic Party and the National Farmers Union supported. For them, its goals were best advanced by maintaining the status quo in the Wheat Board’s single-desk seller and price-pooling principles. The market-liberal paradigm was one held by those who saw the Board’s monopoly as a restriction of individual rights.46 The belief of these critics that farmers should be free to choose how to market their grain provoked their constitutional challenge of the Wheat Board as an infringement on freedoms and rights guaranteed Canadians under the Charter of Rights and Freedoms.47 Wheat Board defenders rebutted the discourse of individual freedom by pointing to proposed reforms to pricing policies (the option cash payment at point of sale and/or the final pooled price) as giving individual farmers more, rather than less, choice. If a clash of ideas over the preferred marketing system was always a basis of cleavage, it is also clear that for much of the farm community, including the responsible minister, the important question was a practical one. What marketing system was most functional in the competitive international grain-trading system? What marketing system would maximize farmers’ returns? For these individuals, its outcome hinged on the answers to the questions posed by Western Grain Marketing Panel. Were the marketing powers incorporated in the Wheat Board – single-desk seller status, pooling powers, government financial underwriting – consistent with developments in the global economy? If they were not, what changes were needed to make the grain-marketing system a more competitive one? Did they require the Board’s loss of its export monopoly? Or did they require less radical changes such as those the Wheat Board itself had proposed or those recommended by the Western Grain Marketing Panel? For individual grain farmers, the overriding question appeared to be whether the Wheat Board was the best tool to help to manage the inher-

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ent income risks from marketing a commodity in an international market subject to price fluctuations. Even an ardent defender of the Wheat Board on communitarian grounds was not ready to put principle ahead of pragmatic considerations. Nettie Wiebe, the president of the National Farmers Union, defended the Wheat Board’s single-desk seller status as ‘very much a question of all those people in that community ... getting as fair a deal as possible, as equal and fair a deal as possible.’48 Still, before the WGMP, Wiebe stated that for her the overriding question was the economic benefits of the Wheat Board. ‘Does it save us money, does it make us money, is it a better way financially of making money for us?’49 The coalition defending the Wheat Board addressed these questions head on. To persuade the minister and prairie farmers of its continuing salience in a competitive global economy, the Wheat Board amassed empirical analyses, produced by authoritative, expert sources. These analyses sought to demonstrate the economic benefits of single-desk selling and to discredit the claim of Wheat Board critics that a dual market would be economically feasible and profitable. An early report commissioned from university-based agricultural economists told the Western Grain Marketing Panel that the Wheat Board yielded farmers higher returns than a situation of multiple buyers.50 Further, Professor Kraft and his colleagues concluded that these premiums – a minimum of $265 per year in additional revenue – would disappear under a dual market. In a separate presentation to the Western Grain Marketing Panel, two other agricultural economists argued that the Board’s price pooling system would not be sustained over the long run in a dual market in which the Wheat Board had to compete with private grain traders.51 These analyses, like the hearings of the WGMP, were extensively reported in the farm press.52 So were the findings of a Wheat Boardcommissioned report issued in the weeks preceding the February 1997 barley plebiscite.53 Authored by four agricultural economists, it concluded the Board had been able to capture a premium on barley sales because of its single-desk powers.54 Professor Schmitz and his colleagues showed that clear economic benefits flowed to farmers as a result: an estimated $72 million per year in additional revenue during the period from 1985–6 to 1994–5. Further, these premiums would disappear if Canadian wheat was exported by multiple agents rather than a single-desk seller.55 However, the pro-Board economic analyses did not go unchallenged. Also given coverage in the prairie media were the counter-analyses pro-

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duced for the Alberta government.56 They were sceptical that the Wheat Board generated increased returns from price discrimination and argued that any such price premiums were outweighed by the excessive administrative, handling, and other costs accrued by the Wheat Board relative to private grain traders. Minister Goodale stated that he found ‘compelling’ the conclusion of the report by Professor Kraft and his colleagues that the Wheat Board would not long survive if it had to compete with private grain traders in an open market. It led to his decision not to include the dual-market option on the plebiscite ballot.57 The Federal Court judge who affirmed the constitutionality of the Wheat Board also cited the same expert testimony the Wheat Board had drawn on to make its case in the political arena. Justice Muldoon held that the government had proven on a balance of probabilities that the Wheat Board would not be viable in a dual market and that the dual market was merely a transition to the open market.58 He cited ‘two uncontroverted facts’ to support his judgment. The first was that ‘no [voluntary] cooperative in the U.S. has successfully operated a wheat pool of any major size for any substantial period of time during the last 20 or 30 years.’ The other relevant fact was ‘Canada’s own experience with the dual market between 1935 and 1943, and ... particularly in 1938 and 1943.’59 In 1938 a record world wheat harvest caused prices to collapse. With the option of selling grain to either the Wheat Board or private grain traders, farmers sold almost all their wheat to the Wheat Board, where they were guaranteed a minimum initial payment. The Board had set the initial payment too high and it sustained a $61.5 million loss. In other years, when market prices were high, farmers diverted their grain to private grain companies. For Justice Muldoon, history provided valuable lessons that could not be ignored. It is more difficult to discern the impact of these empirical analyses on prairie farmers’ behaviour. There are some polling data that indicate that the arguments of academic experts that single-desk selling afforded real economic benefits changed some farmers’ minds.60 The relevance of the academic analyses was probably sharpened by their conjuncture with the economic situation confronting prairie grain farmers at the height of the contestation. The February 1995 budget of the Liberal government terminated export grain subsidies, causing the average grain farmers’ freight costs to double.61 Government fiscal transfers to prairie farmers over the period 1995–7 were reduced to their lowest levels in over fifteen years, even as farm input costs were rising.62 Although the

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buoyant grain prices from 1993 to 1996 likely resonated with the claim of the Wheat Board critics – that regulated marketing meant lost economic opportunities – the historic rapid fluctuation of grain prices also meant that these high prices were unlikely to last. In this environment of considerable economic uncertainty, the economically attractive option for many farmers was the risk-averse strategy: sticking with the marketing structure they knew rather than switching to an unfamiliar alternative. The context of regional economic interdependence required the farm community to deal with the question of whether it was desirable for Canada’s policy instruments for grain marketing to diverge from those of its major trading partners. Even if the Wheat Board’s status as a single-desk seller was vital to its utility as a tool of competitiveness, was it still the best policy instrument, given American opposition to it? Was the divergence of Canadian and American marketing policy instruments worth the risk to persistent tensions in Canada’s most important trading relationship? Wheat Board critics argued that it clearly was not; the never-ending American complaints and investigations into the Board’s marketing practices jeopardized access to a market whose importance had grown. Wheat Board supporters countered that crossborder tensions would increase without the Wheat Board’s single-seller status. Exports of Canadian grain to the US would not be coordinated in an orderly fashion, US prices would become depressed, and American trade complaints and retaliation would follow. Goodale was persuaded by the latter arguments. He stated that, if the Wheat Board was such a thorn in the Americans’ side, that constituted evidence it was doing its job.63 For Goodale, the advantages of the Wheat Board’s single-desk seller status were evident in its high international reputation and its success in securing markets worth between $4 and $5 billion in annual sales in over seventy countries. That said, the minister justified the statutory changes to the governance and operations of the Wheat Board on the grounds that they would ‘take some of the steam out of some of the more misguided statements we hear from time to time that come from abroad to attack the Canadian Wheat Board.’ Changes to the price-pooling system that put the onus on the Wheat Board to assume financial risk for new cashpricing options would give the United States ‘less of a reason to be critical of the Canadian system because ... it won’t be all that different from what they do themselves within their own country.’64 Minister Goodale’s optimism soon proved to be unfounded.

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4. The International Debate and International Regulatory Governance As noted above, the domestic debate over the effectiveness and legitimacy of the Wheat Board has been joined to American bombardment of the Wheat Board in the form of continuous trade complaints, actions, and investigations. (The latter are listed in appendix 4.1 and appendix 4.2.) These challenges, fourteen in total between 1989 and 2005, have been financially costly to Canadian grain growers; export sales to the US have been either lost or are much smaller than they would have been without the import duties, and legal fees to appeal punitive rulings are substantial.65 Until 2006 these costs had been a good investment for supporters of the Wheat Board; it had withstood all American challenges to its legality under international trade rules. This section examines the substance and outcomes of American complaints and trade actions. It demonstrates that while American pressures are formidable, the current regional (NAFTA) and multilateral (WTO) trading regime provides a supportive environment for state trading enterprises. For the US grain industry, a statist instrument like the Wheat Board is an anomaly in a world of liberalizing markets. Their criticisms have focused on the Board’s trading practices. Canadian government financial underwriting of the Board’s operations, they argue, results in Canadian wheat exports being dumped or subsidized into the American market with economic harm to American growers. Additionally, the Wheat Board’s ability to practise price discrimination unfairly increases returns to Canadian wheat producers at the expense of US exporters. Under US law (which is consistent with GATT/WTO and NAFTA rules), countervailing duties (CVDs) can be imposed on an imported good when the US Department of Commerce determines it is subsidized and the US International Trade Commission determines the subsidy is causing or threatening to cause material injury to a US industry. The process is similar with respect to anti-dumping (AD) duties. Such duties can be imposed on an imported good when the same two bodies (the Department of Commerce and the International Trade Commission, respectively) determine that the import has been sold at less than its ‘fair value’ (in effect, the cost of acquisition plus transport) and is causing or threatening to cause material injury to a domestic US industry. With a few exceptions, formal trade complaints on these grounds

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have failed. In the early 1990s American producers argued unsuccessfully that the Board was dumping Canadian wheat in the US. Later complaints that its practices amounted to unfair subsidies were also found to lack substance.66 In a rare exception to relying on international trade rules to regulate trade between the two countries, Canada negotiated a settlement to a trade dispute in 1993–4 after a sharp increase in Canadian exports of wheat and durum to the US. The Canadian government agreed to limit its wheat exports to the US for the 1994–5 crop year in order to avoid the US unilaterally imposing an import quota. Any such quotas could subsequently have been converted to a (high) tariff rate quota and made permanent under the terms of the Uruguay Round WTO Agreement.67 Canadian negotiators, with the support of farm groups, agreed that it was better to suffer a short-term market loss to stave off the possibility of a longer-term market barrier. The American assault on the Canadian Wheat Board moved into a new phase in 2002 and can be related to the greater competitiveness pressures facing the American wheat industry as American domestic demand for wheat / wheat products has dampened and competition in export wheat markets has increased.68 A broad coalition has aligned against the Wheat Board’s ‘anti-competitive’ practices. Besides the North Dakota Wheat Commission (which represents that state’s wheat growers), the coalition includes the U.S. Wheat Associates (an export market development organization), the National Association of Wheat Growers (the national umbrella organization of state wheat grower groups), and the Wheat Export Trade Education Committee, whose selfdescribed role is to ‘educate’ the industry and Congress on policies affecting US wheat export and trade policies. Under pressure from this coalition, the US Trade Representative launched what turned out to be a sixteen-month investigation into the Wheat Board’s practices. The investigation provided an opportunity for American wheat growers and exporters to argue that the increases in Canadian wheat exports to the US over the five-year period between 1996–7 and 2000–1, as well as the decline in American exports to third countries and the rise in Canadian wheat exports to these same third countries, could be attributed to unfair trading practices on the part of the Canadian Wheat Board. In February 2002 Zoellick declared that his office would ‘aggressively’ pursue a four-pronged approach ‘to level the playing field for American farmers.’ The four prongs in the USTR’s strategy consisted of first, working with the US wheat industry to examine the possibility of filing counter-

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vailing and anti-dumping cases against Canadian wheat and durum; second, examining a possible WTO case against the Wheat Board; third, working with the US wheat industry to identify specific impediments to U.S. wheat entering Canada; and fourth, ‘vigorously pursuing comprehensive and meaningful reform of monopoly state trading enterprises in the [Doha Round] WTO negotiations.’69 The countervailing and anti-dumping cases brought by the North Dakota Wheat Commission and the U.S. Durum Growers Association commenced in September 2002. The countervail case alleged that Canadian hard red spring wheat and durum exports to the US were unfairly subsidized, in part because of the Canadian government’s financial underwriting of the Wheat Board’s operations. The dumping case alleged that Canadian wheat and durum were being sold in the US at prices below market value. The US Department of Commerce ruled that the two commodities were being subsidized and dumped, and in early 2003 it imposed preliminary anti-dumping and countervail duties on both Canadian hard red spring wheat and durum. These preliminary duties remained in effect, pending a determination by the US International Trade Commission (ITC) on whether the subsidized products were causing material injury to US industry. The ITC found no injury in the case of durum and the duties were lifted. A positive finding of injury caused the duties on Canadian red spring wheat imports to remain in effect. Canada appealed this finding, using the opportunity provided under NAFTA rules for a binational panel to review the finding of the US trade remedy bodies. This route was eventually successful, and the countervail duties, which had earlier been reduced, were finally lifted in February 2006. For almost three years, however, while the countervail duties were in effect, Canadian wheat exporters were locked out of a small, but lucrative, market.70 The second and third prongs of the US challenge to the Wheat Board entailed a legal challenge at the WTO. First, the US alleged that the export-marketing practices of the Wheat Board were in violation of various GATT rules, including those in Article XVII regarding state trading enterprises. Second, the US targeted certain Canadian practices with regard to treatment of American wheat imports and argued that they violated provisions in GATT as well as the WTO Trade Related Investment Measures (TRIMS) Agreement. The two complaints were heard and decided as one.71 The Wheat Board case put the spotlight on a vestige of the state assistance model of agriculture that had viewed and treated agriculture as

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an exceptional sector in the international trading regime. State trading enterprises are ubiquitous in agriculture; some 70 per cent of the 150 state trading enterprise notifications to the WTO are involved in agriculture or related sectors.72 Aside from the European Union, all the main exporters and importers of agricultural products use state trading enterprises. In the wheat sector, however, the Canadian Wheat Board is one of two state trading enterprises with a significant share of world wheat exports; the other is the Australian Wheat Board. Their combined share of world wheat markets is roughly equivalent to that of the US private grain traders. Prior to the Wheat Board case, all previous GATT/WTO disputes involving state trading enterprises had been based on GATT articles and rules (national treatment, for example) other than Article XVII, which deals explicitly with state trading enterprises. In appraising the consistency of the Canadian Wheat Board with Article XVII provisions, the WTO did so with little good empirical knowledge ‘about how and to what extent state trading enterprises distort trade.’73 The US argued that the ‘very structure of the Canadian Wheat Board export regime’ violated GATT rules with respect to state trading enterprises. This export regime structure consisted of the Wheat Board’s exclusive monopoly powers to purchase and sell Canadian wheat for export and domestic human consumption, the power of the Wheat Board to set the initial price paid to Canadian producers, and the Canadian government’s financial guarantees of the Wheat Board’s initial payments, borrowing, and credit sales to foreign buyers. These special powers and privileges were alleged to violate the ‘national treatment’ requirement in GATT Article III, which state trading enterprises must adhere to, as well as provisions in Article XVII that require state trading enterprises not to discriminate among GATT members in their purchases or sales, and to make sales/purchases ‘solely in accordance with commercial considerations.’74 The effect of the special powers and privileges of the Wheat Board, the US argued, was to deny the enterprises of other GATT members (the private grain companies, in the case of the US) an adequate opportunity to compete for CWB’s purchases and sales. Canada denied these charges. It argued that the Wheat Board did behave in a commercial and non-discriminatory manner, there was nothing in its mandate that either gave it an incentive or prevented it from doing so, and the US had not produced any evidence to indicate otherwise.75 The WTO panel agreed and concluded that there was no

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evidence that GATT obligations with respect to state trading enterprises had been breached by the Wheat Board. The second part of the Wheat Board case concerned the allegation that some Canadian regulations violated GATT/WTO non-discrimination laws by according American grain imports less favourable treatment than ‘like’ domestic grain.76 None of these measures directly implicated the Wheat Board. The WTO panel agreed with the US that regulations requiring imported grain to be segregated from domestic grain in the grain-handling system and capped railways’ revenues for transporting domestic grains but not imported grain were inconsistent with GATT/ WTO laws. Canada was required to alter the offending regulations. The panel did not agree that a further measure, with regard to the allocation of government railway cars to transport grain, favoured domestically produced grain over imported grain. It was therefore not inconsistent with GATT/WTO laws. The outcome of the Wheat Board case confirmed that a monopoly marketing grain agency like the Wheat Board is consistent with the existing international trading regime. The US wheat industry and its government interpreted the WTO ruling as evidence that the rules of the international trading regime needed changing so as to prohibit the ‘anti-competitive’ practices of monopolistic marketing agencies. Such is the fourth prong in their attack: the WTO Doha Round (2001–) negotiations. The US views these multilateral trade negotiations as providing ‘an unprecedented opportunity to pursue permanent reform of the CWB through the development of new disciplines and rules on state trading enterprises.’77 It seeks reforms that would require the operations of STE to be more transparent, end their monopoly seller status, and eliminate government financial underwriting of these agencies. By mid-2004 the US appeared poised for success in this endeavour. It had obtained sufficient support to insert a provision in the August 2004 ‘framework agreement’ that called for elimination of ‘trade distorting practices with respect to exporting STEs, including eliminating export subsidies provided to or by them, government financing and the underwriting of losses. The issue of the future use of monopoly powers would be subject to future negotiation.’78 Were this WTO framework agreement to hold, existing financial guarantees provided by the government of Canada to the Wheat Board, which were upheld by the WTO in its 2004 ruling, would end. The Canadian Wheat Board strongly resisted the framework agreement and mounted an international campaign to press its case that it

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is not a trade-distorting marketing agency. It put the spotlight on the grain-marketing policies of other countries, including those of the US and the European Union, which it argues are more trade distorting. It further argues that existing provisions with respect to STEs should be applied to private entities of equal or greater market power, that export credit and food aid programs (a favourite instrument of the US) should be disciplined, and that export subsidies should be eliminated.79 By mid-2006 the cross-national divisions over agriculture, including those over restrictions on the practices of state trading enterprises, were sufficiently large and entrenched to cause a suspension of the Doha Round negotiations. The international debate was thus put on hold, even if the domestic debate was not. 5. Phase Two: The Harper Government and Paradigm Change The federal election on 23 January 2006 brought to office a minority Conservative government. Its caucus included all twenty-eight members of parliament from Alberta, twelve of Saskatchewan’s fourteen MPs, and eight of Manitoba’s fourteen MPs. The constituency of Prince George–Peace River in British Columbia, whose grain farmers also fall within the scope of the Wheat Board, also returned a Conservative Party member to parliament. The prime minister, Stephen Harper, and many of the government’s MPs from prairie Canada had been members of the Reform Party of Canada and long on record as opposing the Board’s monopoly and commitment to ‘dual marketing.’ Having put these promises at the centre of its campaign in rural Canada, the Conservative government was soon under pressure from its own caucus and from its supporters in organizations such as the Western Barley Growers Association, the Western Canadian Wheat Growers Association, and the Grain Growers of Canada to give prairie grain farmers ‘marketing choice.’ The change of power – and ideological predisposition – in Ottawa put the Wheat Board in a defensive mode. Minister Strahl soon served notice to the Wheat Board that the government intended to make the Wheat Board a ‘voluntary agency’ and refused to approve the Board’s annual corporate plan because it referred to the single desk of the Board and the Board’s proposal to leverage the single desk for the benefit of all producers.79 Initially, the board of directors of the Wheat Board sought to modify the extent of Conservative government opposition by proposing reforms that stopped short of being paradigmatic. These

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proposed changes included an end to government financing of its operations but not to its status as a single-desk seller.80 Elimination of government financial underwriting would shift the Wheat Board into alignment with the other grain state trading enterprise, the Australian Wheat Board. These proposals failed to forestall the Conservative government and the responsible minister, Chuck Strahl. In a minority government position and recognizing that any legislation to strip the Canadian Wheat Board of its monopoly would go down to defeat by a united front of prosingle-desk opposition parties, the Conservative government sought a non-legislative route to paradigmatic change. It attempted to marginalize the board of directors of the Wheat Board in the policy debate and limit the impact of pro-Wheat Board supporters. The government struck a task force to advise it on how to implement ‘marketing choice.’ Its 30 October 2006 report recommended restructuring the Wheat Board as a private entity owned by producers, and stripping the Board of its singledesk powers and government financial support. Strahl re-composed the membership of the Wheat Board’s board of directors to the degree that he was able, appointing two new directors who shared the Conservative government’s marketing philosophy. In December 2006 he fired the Wheat Board’s chief executive officer after Adrian Measner had refused to obey a ‘gag order’ that prohibited the Wheat Board from advocating on behalf of its single-desk seller status. The Conservative government and the board of directors of the Wheat Board agreed on an interim replacement for Measner but clashed over who (the Board or the minister) had the authority to set the interim CEO’s salary. The stand-off between the minister and the Wheat Board directors led the Board to file two applications with the Federal Court of Canada. They argued that the government had acted in violation of the Wheat Board Act by not consulting the board of directors on the CEO’s salary and by prohibiting its advocacy actions. The latter, it argued, prohibited Board directors from carrying out their statutory duties and obligations. Criticism of the Conservative government and Strahl’s tactics as antidemocratic came not simply from the Wheat Board’s board of directors but also from NDP provincial premiers and agriculture ministers in Saskatchewan and Manitoba. The Manitoba government announced that it would hold its own plebiscite. The results of that plebiscite, which gave voters the two options of an open market or the single-desk seller for barley and wheat, affirmed Manitoba farmers’ preference for orderly marketing of both grains. Even the Task Force Report, ‘Market-

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ing Choice – The Way Forward,’ had recommended that the government take a legislative route to changing the Wheat Board’s mandate. The government’s appreciation of the inefficacy of the legislative route was confirmed when a private members’ motion in the House of Commons by a Saskatchewan Conservative MP to allow wheat and barley producers to sell their barley and wheat off the Board was defeated in late October. Liberal, NDP, and Bloc Québécois MPs had united to vote against it. In late October 2006 Strahl announced that a plebsicite would be held among barley producers in March 2007 on how barley should be marketed. At the same time, he oversaw changes that disqualified 16,000 individuals from voting in the plebiscite on the grounds that they had not delivered grain to the Wheat Board in the past two years. Not surprisingly, this move was perceived as tampering with the voters list and criticized by the prairie NDP agriculture ministers, the National Farmers Union, Manitoba’s general farm organization, and the parliamentary opposition parties. Other aspects of the plebiscite – the lack of a voters list, the numbering of ballots, some farmers receiving multiple ballots while others received none, the lack of farmer scrutineers – also were criticized as undermining the democratic integrity of the process. Professional pollsters criticized the wording of the ballot and the Standing Committee requested the Office of the Auditor General to investigate the conduct of the plebiscite.82 Pro-Board supporters also took issue with the Conservative government’s interpretation of the ballot’s results. Whereas the Liberal government had earlier eschewed the ‘dualmarketing’ option as unfeasible, the Conservatives included it on the ballot. Barley farmers were given a choice among three options: 1. The Canadian Wheat Board should retain the single desk for the marketing of barley into domestic human consumption and export markets. 2. I would like the option to market my barley to the Canadian Wheat Board or any other domestic or foreign buyer; and 3. The Canadian Wheat Board should not have a role in the marketing of barley. Of the more than 29,000 farmers who voted, 37.8 per cent supported option 1, to retain the single desk; 48.4 per cent supported option 2, to market to the Board or another buyer; and 13.8 per cent opted for

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option 3, of no role for the Board in marketing barley. The Conservative government tallied options 2 and 3 and concluded that over three-fifths of prairie farmers wanted ‘the freedom to market barley in whatever way they want.’83 Following a thirty-day comment period, the Conservative government promulgated regulations in June by Order-in-Council to create ‘Barley Freedom Day’ on 1 August 2007, when it would remove the marketing of feed and malting barley from the Wheat Board’s authority. Its decision to act so quickly met with criticism. The Wheat Board argued that the government’s action put it in jeopardy of being unable to meet the terms of contracts it has already signed for grain delivery and urged a deferral for a year. Some private grain traders also urged a longer transition period. Unable to deter the government from its course of action, a coalition calling itself Friends of the Canadian Wheat Board and funded in part by the Manitoba and Saskatchewan governments, filed an application with the Federal Court of Canada and asked it to rule on whether the Canadian government has the right to eliminate the Board’s barley monopoly by regulation, rather than statutory changes. The Canadian Wheat Board filed its own, separate case to have the barley regulations ruled as inconsistent with the Canadian Wheat Board Act, as amended in 1998. In early July a Federal Court judge agreed to a request from the Canadian Wheat Board and the government of Canada to expedite the application regarding the legality of the regulatory changes to remove barley from the Wheat Board’s mandate. On 31 July Madame Justice Hansen ruled that the Conservative government had acted illegally. She ruled that by virtue of the amendments to the Canadian Wheat Board Act made in 1998, only parliament has the authority to pass legislation to exclude barley from the Wheat Board’s single-desk marketing authority.84 The judge’s ruling forestalled the attempt by the Conservative government to effect paradigm change via executive order and a plebiscite of farmers, albeit a highly contentious plebiscite of farmers. Its minority government status helps to explain why the government attempted paradigmatic changes in grain-marketing policy via quite a different governing process from that which marked phase one of orderly marketing reform under the Chrétien Liberal government. In contrast to the inclusive and broadly participatory policy process designed by Ralph Goodale – which gave parliament a role and opponents of the Wheat Board a hearing, even if it did not produce the results the latter sought – Strahl opted for a less

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open and less deliberative policy process. Executive, top-down decision making was joined with direct democracy, the latter via a referendum worded to maximize the likelihood of returning a preferred result. 6. Conclusion This chapter has detailed the clash of paradigms over prairie grain marketing as the statist principles and institutions of regulated marketing via a monopoly export agency have been challenged by market liberal principles of deregulation and ‘a dual-marketing system.’ It has argued that internationalization helped to propel the issue of the Wheat Board’s monopoly to the top of the political agenda and that internationalization has also had an important effect in shaping the ideas of prairie grain farmers and politicians on retaining the Wheat Board’s mandate. The ideological division over regulated versus deregulated grain marketing did precede the current period of internationalization of domestic politics. However, the altered trade patterns in the North American region pursuant to the signing of the FTA/NAFTA (alongside US domestic policies such as the Export Enhancement Program), ensuing bilateral trade frictions and heightened competition in global wheat markets have put the spotlight on the effectiveness and legitimacy of the Canadian Wheat Board as a marketing institution. It is unlikely that such scrutiny would have occurred – and it certainly would not have had the same destabilizing effect – absent regional market integration. At the same time, to 2006 the protection afforded by international agreements like the WTO to institutional legacies of the state assistance paradigm, such as state trading enterprises, was a crucial resource for those who support the Wheat Board’s monopoly. They were able to argue that the Wheat Board is an economically and politically viable grain-marketing institution. If regional market integration has destabilized the Wheat Board and international regulatory governance has provided a counter, stabilizing environment, what about the effects on policy developments of the domestic institutional framework? Because it is the federal government alone that has legal authority with respect to the interprovincial and export marketing of prairie barley and wheat (including durum), the ideas and strategies of responsible federal ministers have been key to outcomes. Without the commitment to single-desk selling of the Liberal minister responsible for the Canadian Wheat Board, Ralph Goodale, it is hard to imagine that the Wheat Board would have retained its export

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monopoly. The election of a federal government opposed to the monopoly status of the Wheat Board and the subsequent actions of the Harper Conservative government are a potent reminder of how the differing partisan bases and ideational preferences of governing parties shape key executive actors’ determinations of politically viable strategies – and, by extension, policy development. Informal institutional norms about legitimate policy development processes also shaped the outcome under the Liberal government. In the absence of any farm organization able to bridge the cleavages in the farm community, but against a historic legacy of extensive farm community input into high-stakes policy developments, Goodale structured a process of participatory democracy that allowed a full and extensive debate on the Wheat Board’s reform and future. It did not fully bridge the divisions – an impossible task when ideological positions are held as firmly as those around regulated versus deregulated grain marketing – but the process of direct participation and extensive deliberation was vital to the legitimacy of the eventual reforms to the Board’s mandate and governance structures. This chapter has also argued that the outcome of the debate during the Liberal era was also significantly affected by the Wheat Board itself: its capacity to muster crucial resources of political and epistemic support to defend itself, even while demonstrating a willingness to adapt to the changed expectations of its clientele. Both the political process of consultation and the Wheat Board’s strategy made modification of statist policy instruments in prairie grain marketing – not the overthrow of the paradigm itself – a politically and administratively viable outcome. After the election of the Conservative government, the same domestic institutional structures that had enabled an institutional pillar in the state assistance paradigm to be resilient now threatened it. Prepared to exercise their executive authority to the limit, the minority Conservative government bypassed Parliament as opposition parties mounted a vigorous critique of the Conservative government’s stance and tactics vis-à-vis the Board. Once again, Canada’s judicial system was being called upon to settle the dispute. In summarizing the lessons for theories of paradigm change, the case of Canadian grain marketing institutions and policy affirms the significant role played by perceptions of policy failure, the availability of alternative politically viable paradigms, and the discursive and political strategies of authoritative actors. In Canada’s executive-dominated political system, shifts in the venue of authoritative decision making do

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not appear to be necessary to effect paradigm change. Although the story remains unfinished at the time of writing, a majority government that is ideologically committed to market-liberal values of freedom and ‘marketing choice’ looms large as a vehicle of transformative – or paradigmatic – policy change. The next chapter turns to another policy domain where regulatory policy instruments in the state assistance paradigm have also come under challenge with the regional integration of agri-food markets. The domain is dairy, poultry, and egg supply management.

5 Supply Management: Resisting Internationalization and Adjusting Policy Instruments

Supply management is an integral part of our long-term agricultural policy. Now we must look to the 1990s and beyond in a changing marketplace and create together the second generation of supply management.1

The state assistance model in the first ‘generation’ of Canadian dairy, poultry, and egg supply management appeared to have escaped virtually unscathed from the thrust towards internationalization with the implementation of international trade agreements. As chapter 2 documented, Canadian farm organizations mobilized successfully during the negotiation of the FTA/NAFTA and WTO agreements to keep statist instruments virtually intact. High levels of border protection for dairy and poultry/egg products continued, leaving the Canadian market to domestic producers and processors. Trade agreements did not touch directly on the other two instruments of supply management: a pricing formula based on costs of production and production quotas to regulate the supply of eggs, milk, and poultry in accordance with consumer demand. Why then did Agriculture Canada’s 1989 blueprint for agricultural policy, Growing Together, urge the need for a ‘second generation’ of supply management? Has that ‘second generation’ emerged and, if so, does it represent a shift towards a paradigm more consistent with a market-liberal or competitive agriculture paradigm? This chapter addresses these questions. It argues that changes in supply management policies have been driven by the (adjudicated) rules of trade agreements, and regional and global market integration. But the ‘changing market-place,’ which the Growing Together document cited as a catalyst

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to change, is also one of changing consumer preferences, including for lower-fat foods, and of technological developments (which have also had a role in changing consumer preferences) that create pressures on traditional supply management instruments. This chapter finds evidence of a ‘second generation’ of supply management in which there has been adjustment, rather than abandonment, of the state assistance paradigm. A market-liberal model that would have ended production controls, eliminated border restrictions on imports and abandoned price-setting formulae has not been implemented in dairy, poultry, and egg supply management. But the state assistance paradigm has not proved inviolate. Changes in pricing instruments have occurred, and prices of a few supply-managed products now reflect competitive market conditions more than they did two decades ago. Moreover, domestic producers’ ability to match domestic supply to domestic demand is under challenge. In accounting for the outcome of adjustment to the state assistance paradigm in supply management, rather than its abandonment, the chapter argues that the conditions for paradigm change were not present to mid-2007. Recall that these conditions include policy anomalies/failure in the current paradigm, the existence of an alternate viable paradigm, and a shift in the policy process or governing coalition that empowers those sympathetic to the ideas in an alternate paradigm. Certainly, there are allegations that the statist (protectionist) character of supply management is anomalous with the economic interests of Canadian agriculture and the Canadian economy writ large. Protecting the domestically oriented supply-managed sectors with high barriers to the Canadian market is frequently denounced by liberal economists, as well as export-oriented commodity groups representing grains, oilseeds, and red meat sectors. They see supply management as a misfit with and a constraint to the Canadian government’s ‘vision’ of increasing profits in the agri-food sector through export growth. Still, if anomalous from this perspective, policies in the Canadian dairy sector are not necessarily anomalies in comparison with those of other countries, including Canada’s most important trade partner, the United States. Across OECD countries, with the important exception of Australia and New Zealand, government income support and protection for milk producers is higher and more widespread than for virtually every other commodity.2 The world export market for dairy products is small and constitutes only about 7 per cent of world production. Although their policy instruments differ, Canadian and American dairy policies have

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similar effects for producers. American dairy producers have also enjoyed high over-tariff rate quotas.3 State assistance in the form of border protection has been considerably greater in the Canadian than the American, egg sector but levels of state support across the CanadianAmerican border for the poultry sectors have been quite similar.4 The supply-managed sectors have rebutted charges of inefficiencies and policy failure and argued that, with reforms, supply management is a policy success. They cite as one indicator of success the fact that supply management imposes no drain on taxpayers. In the early 2000s, when governments were transferring large sums from taxpayers to producers in non-supply managed sectors in order to help them to cope with an income crisis, supply management was able to extract fair returns from the market-place and did not encumber the government treasury. Although supply management does not entail direct costs to Canadian governments, ending it and undermining the value of farmers’ investments in their quotas (licence) to produce – estimated by some to amount to between $20 and $25 billion5 – would create demands for large compensatory payments from governments. Whether supply management is economically viable (in the sense of resolving a set of economic problems given Canada’s trade-dependent economy and international constraints of trade agreements) nonetheless is a matter of rigorous debate, and its outcome depends crucially on a perceived congruence of economic interests of producers and those further downstream: processors, further processors, and consumers. The political viability of supply management compared with an alternative, market-liberal paradigm has been clearer. Supply management has enjoyed the protective barrier of joint-decision federalism amid a perennial threat of Quebec separation. Federal parties and parliamentarians of all stripes have been cognizant of the political power of supply management in central Canada: in part the result of swing rural votes in large provinces such as Ontario and Quebec, but also in large part a function of the organizational strength and coherence of the supply management lobby. The capacity of (dairy) corporatist policy networks to effect policy reforms that maintain the producer-processor alliance and mitigate demands for more radical change has been crucial to state actors’ continuing support. Within this institutional and political context, a shift of governing coalition – from a Liberal government to a minority Conservative government–had not provided the context for fundamental modifications to supply management through to mid-2007. This chapter develops the argument of the resilience of a reformed

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paradigm of state assistance in dairy and poultry supply management in five parts. Section 1 situates supply management in the domestic political economy. It describes its origins and instruments and the domestic context that created pressures for its reform in advance of international trade agreements. Section 2 examines the developments in the international political economy, most particularly the terms of trade agreements and the rulings of trade dispute panels, that created pressures for change to supply management policies from the mid1980s onward. Sections 3 and 4 describe changes in policy instruments with respect to pricing and quota allocation that have been designed to maintain the Canadian market for Canadian producers and processors and also serve the economic interests and needs of downstream components of the food supply system. Section 5 examines the challenge presented by the Doha Round WTO negotiations. Section 6 concludes the chapter and recapitulates the explanation for paradigm resilience, including the continuing salience of the principle of agricultural exceptionalism. 1. The Origins and Political Economy of Supply Management, 1970–90 The political economy of the dairy and poultry sectors in the early to mid-1970s gave public and private actors alike incentives to embrace initiatives that led to national supply management and a state assistance paradigm. Producers facing economic hardship in these sectors sought to improve their bargaining power vis-à-vis processors and to raise their incomes. Consolidation and vertical integration of processing activities, even while many (smaller) processors witnessed serious financial problems, created concerns that the Canadian market would be lost to import competition.6 For national governments, supply management had the bonus of shifting the burden of costly support payments from the public Treasury to the consumer and was consistent with international trade law. Until 1995 border protection in the form of quantitative restrictions on imports was permitted by GATT Article XI(2)(c)(i) (hereafter referred to simply as Article XI).7 In this context, supply management provided a mechanism by which producers would receive a reasonable return for their labour and investment, processors would benefit from a stable supply of products, the domestic market would be preserved for the domestic industry, and consumers would be assured of stable prices.8

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National supply management evolved in the dairy sector and required the close cooperation of the federal and provincial governments. The provinces control marketing within their borders, while the federal government has legal authority to regulate interprovincial and export marketing. In dairy, the division of legal authority turns into a division of responsibility for fluid and industrial milk. The provinces regulate prices and supplies of the 40 per cent of milk that is consumed as fluid milk (table milk and cream) within their provincial boundaries. Milk excess to fluid consumption needs, the remaining 60 per cent, is called industrial milk and is used to produce dairy products such as butter, cheese, yogurt, and skim milk powder. These products are sold interprovincially and in export markets, giving the government of Canada regulatory responsibility. By the late 1960s provincial governments had empowered provincial milk marketing boards with authority to regulate the supply and prices of fluid milk. Individual producers were allocated fluid milk quotas that, in aggregate, were intended to match provincial fluid milk supplies to that demanded by processors. Fluid milk producers diverted milk in excess of their provincial quota to the industrial milk market, a market upon which some dairy farmers relied disproportionately. As noted in chapter 2, in the 1930s the Government of Canada began to support the prices of industrial milk products. When the Canadian Dairy Commission (CDC) was created in 1967 to administer federal policies for industrial milk, it assumed responsibility for the offer-topurchase program that supported dairy product prices at governmentestablished levels. The CDC also took over the direct subsidies to industrial milk producers that the government of Canada had begun in the 1960s to help to close the gap between the (higher) prices of fluid and industrial milk. In order to limit the total amount of these payments and in an attempt to equate total milk supplies with demand in the domestic and export markets, the CDC established subsidy eligibility quotas that provided each industrial milk producer with a share of total federal subsidies.9 It also imposed and collected levies from industrial milk producers to finance export disposal of surpluses. The CDC lacked the ability, however, to regulate excess supplies of fluid milk diverted to the industrial milk market and hence to balance supply and demand for industrial milk. Nor could it collect levies from fluid milk producers who sold their surplus milk in the industrial milk market. In January 1971, following an agreement between the CDC and the milk-marketing agencies of Ontario and Quebec, a comprehensive milk

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marketing plan was implemented. It was developed in a context of a surplus of milk in domestic and international markets that resulted in low milk prices and the pending loss of Canada’s most important export market, the British market, after the UK’s forthcoming entry into the European Community in 1973.10 Dairy producers in Ontario and Quebec and, by April 1974, those in the remaining provinces11 agreed to market sharing quotas on both industrial milk and milk shipped by fluid producers for the manufacture of dairy products. Their agreeing to share the domestic market enabled industrial milk supplies to be much more closely aligned with consumer demand and guaranteed each industrial milk producer a share of the market. The three pillars of dairy supply management were thus in place by the mid-1970s. The first entailed production controls on both fluid and industrial milk to equate domestic supply with consumer demand. The Canadian Milk Supply Management Committee (CMSMC), composed of representatives of each provincial milk marketing board and provincial government and chaired by a representative of the Canadian Dairy Commission, determines the annual national industrial milk quota, using estimates provided by CDC staff. It then allocates the Market Sharing Quota (MSQ) among provinces consistent with the National Milk Marketing Plan. At the provincial level, provincial milk marketing boards regulate milk supply by issuing quotas to individual producers. The second pillar of supply management is administered pricing. The CDC establishes support prices for manufactured dairy products (today for butter and skim milk powder) at a level calculated to cover milk producers’ costs of production.12 Provincial milk marketing boards use the support prices as a reference to determine prices paid by dairy processors for milk. Processor prices vary, depending upon the end use of the milk. The third pillar of supply management is restrictions on imports of dairy products. At the origins of national supply management, import restrictions consisted of quantitative import controls on all dairy products, except casein, designated for industrial purposes. As elaborated below, these import controls have since been replaced by tariff rate quotas and tariffs. A similar context led to the establishment of supply management in the poultry and egg sectors. Chronic overproduction in the 1960s and early 1970s resulted in sustained low prices and cyclical price fluctuations that occasioned bitter conflicts between producers and processors within and across provinces. An additional concern was that the verti-

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cally integrated American companies that set prices would assume control of a large part of Canadian egg and poultry production.13 Tensions reached a crisis point in the early 1970s when some provinces acted illegally to close their borders to incoming products.14 These ‘chicken and egg wars’ gave added impetus to federal legislation in 1972 in the form of the Farm Products Marketing Agencies Act, which enabled the creation of national marketing agencies to regulate production of agricultural commodities and of a national body to oversee them.15 The Canadian Egg Marketing Agency was created in 1972, the Canadian Turkey Marketing Agency in 1973, the Canadian Chicken Marketing Agency in 1978, and the Canadian Broiler Hatching Egg Marketing Agency in 1986.16 Supply management substituted sharing of the Canadian market for the destructive market competition that had cost the public treasury in subsidies to support egg and poultry prices. Under the four national marketing agencies, national production controls were implemented, provinces and individual producers were assigned a share of the Canadian market, and producers received prices for their poultry products that netted them their costs of production and a reasonable return on investment and labour. These returns enabled poultry and egg farmers, like those in the dairy sector, to expand and become more profitable. A sketch of the political economy of the supply-managed industries demonstrates structural change, relative robustness, and concentration in politically influential provinces. Over decades of consolidation of farm units, dairy farms have been reduced to about 16,000 and poultry and egg farms to approximately 5,000. In 2005 dairy farm market receipts amounted to more than $5 billion; sales of dairy-processing plants were worth more than twice as much at $11.5 billion.17 Cash receipts of poultry and egg farmers were over $2 billion, while the poultry/egg-processing sector generated economic activity worth about two and a half times at $5 billion.18 Although supply-managed sectors are found in every province, as tables 5.1–5.4 and chart 1.6 show, they are concentrated in Ontario and Quebec. Together, these two central Canadian provinces account for 80 per cent of dairy farms and 60 per cent of chicken and egg farms. Two-thirds of the dairy and poultry processing plants are also concentrated in central Canada.19 The incomes of dairy and poultry/egg producers are substantially higher on average than those in other commodity sectors. For example, in 2003 net operating income of poultry and egg farms was $80,000 and that of dairy

148 Internationalization and Canadian Agriculture Table 5.1 Provincial Percentage Shares of Egg Production (Percentage Share of Canadian Population) 1973 Ontario Quebec British Columbia Alberta Manitoba Nova Scotia Saskatchewan New Brunswick Prince Edward Island Newfoundland Northwest Territories

38.2 16.6 12.0 8.7 11.4 4.1 4.8 1.8 2.4

2004 (36) (27.5) (10.7) (7.7) (4.5) (3.6) (4.0) (2.9) (0.5) (2.4) (0.3)

37.5 (38.7) 17.9 (23.7) 12.2 (13.1) 8.6 (10.0) 10.8 (3.7) 3.7 (3.0) 4.5 (3.1) 2.1 (2.4) 0.6 (0.4) 1.6 (1.6) 0.5 (0.3)

Source: CEMA Proclamation, 1973; CEMA, 2003 available at: http://www.canadaegg.ca/ data/1/rec_docs/330_CEMA-2004-Managing-e.pdf. Table 5.2 Provincial Percentage Shares of National Industrial Milk Production, 1979–80, 2003–4

Newfoundland and Labrador Prince Edward Island Nova Scotia New Brunswick Quebec Ontario Manitoba Saskatchewan Alberta British Columbia

1979–80

2003–04

1.9 1.2 1.3 47.9 31.3 3.9 2.6 6.7 3.1

0.1 1.8 1.1 1.3 45.8 31.5 3.6 2.5 6.6 5.7

Source: McCormick (1980); Canadian Dairy Commission, 2005. Available at http:// www.cdc-ccl.gc.ca/cdc/main_e.asp?catid=282&page=351.

farms was $74,000. These figures can be compared with $26,000 net operating income for ‘all farm types,’ $26,000 for oilseeds and grains farming, and $7,000 for beef cattle ranching and farming (hard hit by the BSE crisis).20 Incomes are also more stable in the dairy and poultry/ egg sectors, thanks to pricing, production control, and import control instruments of supply management. Jobs in the processing sector are

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Table 5.3 Provincial Percentage Shares of Turkey Production

Ontario Quebec British Columbia Alberta Manitoba Saskatchewan Nova Scotia New Brunswick

1974

2004

43.7 24.4 9.6 8.5 8.0 3.7 1.4 0.7

40.5 22.9 11.8 9.0 7.1 3.8 2.9 2.0

Source: Canadian Turkey Marketing Agency. Available at http://www.canadianturkey.ca/ ctma/en/docs/2004%20TurkeyFacts.pdf.

Table 5.4 Provincial Percentage Shares of Chicken Production

Ontario Quebec British Columbia Alberta Manitoba Nova Scotia Saskatchewan New Brunswick PEI and& Newfoundland

1980

2003

34.1 33.8 10.5 7.9 3.8 3.6 2.4 2.6 1.0

32.7 27 16.1 8.8 4.2 3.4 3.3 2.7 0.4 (PEI) 1.4 (Newfoundland)

Source: Canada Gazette, Amendment. Part II, Vol. 113, No. 24, Canadian Chicken Marketing Quota Regulations for 1980 data; Chicken Farmers of Canada, for data for the period 24 August – 18 October 2003. Available at http://www.chicken.ca/app/ DocRespository/1/Data_Handbook/2004_Data_Booklet.pdf.

arguably more secure as well, since dairy – and poultry/egg-processing firms enjoy protection from foreign competition. Like their counterparts in non-supply-managed sectors, dairy, egg, and poultry producers operate in a context where mergers and acquisitions have led to considerable consolidation, not only in the upstream input-supply firms, but also in the downstream segments of the industry. There are fewer and larger firms to purchase supply-managed

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commodities, process and manufacture them into food, and sell them to consumers. In the poultry-processing sector, five companies account for 55–60 per cent of processing, and ten companies account for 80 per cent.21 In the dairy sector, three companies process 70 per cent of milk: Saputo, Agropur, and Parmalat.22 Agropur is the lone major dairy cooperative. Dairy cooperatives have lost significant market share, dropping to 50 per cent from close to 70 per cent in the 1990s, and multinational corporations whose ‘shareholders’ are not domestic dominate. In the Canadian retail sector, five large retailers account for about 60 per cent of national grocery sales.23 Economists suggest that the potential for abuse of market power rises when four firms or fewer control more than 40 per cent of the market share, and, indeed, some argue that the bargaining power of processors and retailers, relative to that of producers, has increased.24 Still, the above figures on net incomes of supply-managed farmers relative to their counterparts suggest that supply management has provided Canadian dairy and poultry producers with collective marketing power, as it was intended to do. There have been critics of supply management from its inception. In the 1980s they included consumer advocates whose concerns centred on the possibility for supply management to drive up consumer costs of dairy, poultry, and egg products. Liberal agricultural economists have also decried supply management as creating ‘cartels’ that disproportionately benefit a small group of producers to the neglect of consumers and society as a whole.25 The comparative point of reference has typically been Canadian-US prices; on average, poultry, egg, and dairy prices have historically been higher in Canada than in the United States.26 Rebuffing these critics has required political support at the highest levels. Eugene Whelan, the federal Liberal agriculture minister under whose watch poultry and egg supply-management agencies were created, consistently warded off consumer and liberal economists’ critiques by arguing that supply management was ‘an efficient way of protecting domestic producers’ by guaranteeing them ‘a fair price for their product’ even while stabilizing prices for processors and consumers.27 Supply management has also had to weather chronic intergovernmental tensions. Provincial governments have sought to realize their own provincial economic development goals through the operations of national poultry/egg-marketing agencies. From the outset, this goal resulted in multiple and conflicting criteria in the national marketing

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plans with respect to allocating new quotas across provinces. Some criteria favoured provinces supplying their own market; others gave an advantage to provinces that enjoyed a comparative advantage in production.28 So armed, provincial marketing boards have jostled to maintain or expand their share of the internal market and have threatened to leave the national marketing arrangement when they did not get what they wanted. This bargaining ploy was deployed most frequently by provinces with growing populations (British Columbia, Alberta, Ontario), who chafed against the practice of allocating extra quotas principally on the basis of historic market share. Tensions were historically particularly acute in the chicken sector and less pervasive in the dairy sector.29 From the mid-1980s onward, however, pressures for reform of supply management policy instruments appeared.30 Changing consumer preferences created demand for more processed foods and brought into play a new set of industry actors – further processors – whose interests were not so easily reconciled with producers. In 1984 the Progressive Conservative Party, a party with a long-standing opposition to extending national supply management beyond dairy, replaced the Liberal Party in Ottawa.31 Soon after, a joint federal-provincial communiqué of agriculture ministers made it clear that supply management reforms were part of their vision of a more market-oriented and self-reliant agriculture sector. An internal Agriculture Canada review and studies commissioned by the department concluded that the dairy, poultry, and egg national marketing boards required reforms, including the need to give processors and other trade interests more priority.32 The reports of task forces subsequently established in the late 1980s by the federal and provincial governments to engender these reforms, such as the governments’ own Growing Together document, flagged the central pillars of supply management as obstacles to greater ‘market responsiveness.’ In order to achieve more efficiencies in the system, reforms were needed to reallocate quotas to provinces with growth in market demand and lower-cost production. Production controls themselves were seen as a problem; they raised the costs of Canadian production by inflating quota values and posed real barriers to new entrants to the sectors. In the poultry/egg sectors, fixed global production quotas were also viewed as responding too slowly to changes in consumer demand.33 And administered cost-of-production pricing needed reform, owing to the terms of regional and multilateral trade agreements. Tariffs were being removed on manufactured foods even

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while Canadian chicken prices were 20–50 per cent higher in Canada than in the United States; cheddar cheese prices were 50 per cent higher and mozzarella cheese prices were 20 per cent higher.34 Canadian food manufacturers would be able to compete against imported foods only if they could purchase their supply-managed inputs at competitive (American) prices. In the lexicon of policy paradigm theory, all these analyses pointed to policy failures in need of correction via substantial modifications to existing policy instruments – and maybe even the overthrow of the paradigm itself. The next section examines how the altered international political economy of regional and multilateral trade agreements destabilized the pillars of supply management. In the interests of isolating the discrete effects of internationalization, this section dispenses with a chronological account of policy developments to describe rulings on trade disputes over the duration of this study. 2. The Altered International Political Economy of Trade Agreements Prior to the negotiation of free trade with the United States, there was very little Canada-US trade in dairy and other supply-managed products, and both countries preferred to leave the issue of import controls to the Uruguay Round negotiations then under way. This situation assisted the dairy sector to mount a successful lobby to maintain the border protection under NAFTA that was allowed by GATT Article X1. However, Canada did agree to increase American imports of chicken, turkey, eggs, and egg products to an annual ceiling of 7.5 per cent of the previous year’s domestic production. This percentage was equal to imports at the time the FTA was negotiated. Notwithstanding the exclusion of dairy from the terms of the FTA, its implementation in 1989 brought an immediate threat to Canadian supply management. In anticipation of lower tariffs on processed foods under the bilateral trade agreement, Canada had imposed import quotas for ice cream and yogurt in the mid-1980s. Once the FTA was in effect, the US challenged these import quotas and persuaded a GATT panel that the quotas were illegal. Import barriers on ice cream and yogurt were not supported by Article X1 because they were not ‘like products’ to raw milk. GATT rules prohibit discrimination against ‘like products.’ The 1989 ruling put in question import restrictions on all processed dairy products and, by extension, supply management.

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GATT panel decisions were not binding on GATT parties, and Canada decided not to implement the GATT ruling while it negotiated hard throughout the Uruguay Round to strengthen Article X1. The GATT ruling raised the stakes of the Uruguay Round negotiations (1986-93). The supply-management instrument of border controls was a major focus of reform on the part of US negotiators during the Round. It proposed replacing import quotas with bound tariffs. Canadian farmers, through the Canadian Federation of Agriculture and the Quebec Union des producteurs agricoles (UPA), strongly opposed this proposal and persuaded the Government of Canada to defend and extend border protection for supply management. As noted in chapter 2, Canadian negotiators were ultimately unsuccessful in retaining Article X1 and extending its protection to processed food (dairy) products. The implementation of the WTO Agreement on Agriculture in 1995 destabilized the policy instruments integral to Canadian supply management.35 These consequences are spelled out here before being discussed in greater detail in subsequent sections on policy developments. First, the end to GATT Article XI eliminated the requirement to control domestic supply in order to restrict imports. Freed from the force of international law and no longer compelled to share the Canadian internal market, producers/provinces now had unprecedented liberty to maximize their own economic self-interest. Provinces with a large and/ or expanding consumer market could now pursue their own interests in procuring a larger share of national quota by threatening to opt out of supply management if those demands or others were not met. As documented below, this dynamic has been especially evident in the poultry and egg sectors. Second, the WTO Agreement jeopardized administered cost-of-production pricing. Countries were required to accept minimum quantities of imports and to convert quantitative import controls to tariffs. The minimum-access imports (and the FTA-stipulated amounts for poultry/egg products) came in at lower tariffs than did imports within the Tariff Rate Quotas (TRQs) on which countries set much higher tariffs. Albeit relatively low, the increase in volumes of imports soon led domestic processors to argue they could be competitive only if they, too could purchase egg/poultry/milk supplies at the lower prices paid by their foreign competition. At the same time, the high levels of border protection also encouraged dairy processors/manufacturers to search for dairy product substitutes that did not face high import tariffs.

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Third, the Agreement on Agriculture required a reduction in subsidized exports. Unlike the United States and the European Community, Canada’s supply management system, by controlling supplies to meet domestic demand, kept to a minimum the quantity of surplus product that had to be disposed of on export markets. To maintain production consistent with quota allocation, producers were penalized for overquota production through a system of levies. These producer levies helped to fund losses from providing milk at reduced prices for use in certain dairy products and products containing dairy ingredients that were sold in both domestic and export markets. The WTO Agreement defined the producer levies as export subsidies and limited their amount. This constraint required tighter control on production (to keep within export subsidy constraints) and led the dairy industry in search of instruments to allow it to grow through exports. NAFTA has also had implications for supply management. It terminated export subsidies on goods between Canada and the United States and phased out tariffs on food products containing less than 50 per cent dairy ingredients. Both provisions created a situation in which Canadian food processors and manufacturers gained leverage to press for some dairy products to be supplied at lower prices than the cost-of-production domestic prices. 2.1. Maintaining Border Protection under NAFTA Supply management survived an early test when the United States challenged the legitimacy of high border controls under the terms of the WTO Agreement on Agriculture. Consistent with the terms of the agreement, in April 1995 Canada implemented TRQs on imports of supply-managed products, that is, high tariffs on all imports but the quota amount that entered at lower tariffs. As table 5.5 shows, these tariffs were in the order of 300 per cent and thus effectively precluded imports of foreign fluid milk, butter, cheddar cheese, yogurt, ice cream, and skim milk powder. The US immediately charged that the tariffs were inconsistent with NAFTA provisions that prevented new tariffs or tariff rate equivalents among treaty partners. Canada defended the tariffs as consistent with FTA and NAFTA provisions that retained GATT rights and obligations for all agricultural trade not specifically dealt with in the agreement. Canada argued that the tariffs were legal because Article X1 and the tariffication that replaced it had not been singled out in the FTA/NAFTA.

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Table 5.5 Tariff Bindings for Selected Dairy Products in the 1995 WTO Agreement on Agriculture Product

Base tariff (per cent)

Final bound rate 2000 (per cent)

Milk Cheddar Cheese Butter Yogurt Ice Cream Skim Milk Powder

283.8 289 351.4 279.5 326 237.2

241.3 245.6 298.7 237.5 277.1 201.6

Source: World Trade Organization (1999a; para. 2.9).

The NAFTA panel struck to hear the case concluded in December 1996 that Canada had acted within its rights. This decision was crucial to preserving the internal Canadian market from lower-cost American competition. It reversed the decline in Canadian tariffs on US dairy products and continued protection for Canadian dairy processors from US processors whose raw milk prices were decidedly lower than those in Canada. Canadian dairy processors had joined with dairy producers and the Canadian government to defend the Canadian tariffs, because losing them would mean losing the domestic market without additional access to the US market.36 The NAFTA panel ruling nonetheless had indirect effects that, in the words of the president of the organization representing dairy processors, the National Dairy Council, were ‘huge.’ The American challenge was seen as ‘a precursor of much more open markets and the possible demise of dairy supply management.’ Subsequently, dairy processors began to ‘rationalize operations, modernize [their] plant base and squeeze costs out of their operations.’37 The result has been the consolidation in the dairy-processing sector noted earlier. Structural changes of this nature have altered market power within supply-managed industries and affected the distribution of influence over supply management policies. Fewer dairy and poultry processing plants (and, in the case of eggs, grading facilities) translate into producers perceiving an enhanced need to accommodate processors’ economic interests. As the manager of Chicken Farmers of Canada, Mike Dungate (1998), testified to the House of Commons Standing Committee on Agriculture and Agri-Food in 1998: ‘In most provinces in this country, there is one processor in that province. If that processor is not

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competitive, if he doesn’t get competitive inputs from farmers and that processor goes out of business, those farmers are out of business too.’38 The structural changes have also exacerbated interprovincial tensions, as provinces compete to maintain or expand jobs and profits from their poultry and egg sectors. 2.2. Limiting Dairy Export Opportunities under the WTO Agreement Limits on export subsidies under the WTO Agreement on Agriculture have curtailed the opportunity for Canada’s dairy sector to expand its export markets within the existing instruments of supply management. As detailed more fully below, the Canadian dairy industry implemented programs in the mid-1990s that were designed to generate additional revenues in the sector through increased exports. Spurred by these programs, the value of dairy product exports as a percentage of total production products grew from 2.4 per cent in 1994 to 4.8 per cent in 1997.39 This growth in exports was short lived, however, when some of the export programs were challenged by the United States and New Zealand. New Zealand exports the vast proportion of its dairy products and could anticipate economic losses from Canada’s export programs. The US concern was that, if allowed to stand, the Canadian programs would be emulated by other countries such as those in the European Union. Their complaint to the WTO was successful. It ruled that the programs in question were export subsidies and violated WTO restrictions on export subsidies.40 Appendix 5.1 provides a full account of the WTO’s reasoning in ruling the Canadian programs illegal, as well as Canadian efforts to reconfigure the programs so as to meet WTO export subsidy guidelines. WTO adjudication panels over the duration of the dispute (1998–2002) were not persuaded by the Canadian argument that the WTO Agreement did not restrict countries from producing or exporting products that enjoyed tariff protection and for which, therefore, domestic and international prices differed. Nor were they persuaded that Canadian governments were not involved to the degree the complainants argued and that it was producers, individually and collectively through their marketing boards, who made all the key decisions around volumes and prices of exported dairy products. The WTO concluded that Canadian export sales under the specially designed programs were possible only because of ‘government action’ that controlled ‘virtually every aspect of domestic milk supply and management.’41

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None of these WTO rulings invalidated the domestic milk supply management system. The regulation of domestic production under the quota system was not in question, nor was the right of producer marketing boards and the CDC to establish/negotiate domestic dairy product prices. Indeed, the WTO Appellate Body emphasized that it was not suggesting that Canada’s domestic supply management system was inconsistent with Canada’s obligations under the Agreement on Agriculture; its consistency was ‘not at issue.’42 Nonetheless, the WTO ruling has had discernible effects on policy developments. The WTO ruling required an end to the Special Class category under which dairy farmers had produced milk for export outside the quota system. Production controls–and supply management–faced an early test when dairy farmers, based principally in Ontario, who had been producing milk for export outside the supply management system, continued to do so. They were supported by some dairy processors and exporters, but not by Canadian dairy producer organizations and milk marketing boards, which feared that exports by non-quota producers would be seen by the US and New Zealand as non-compliance with the WTO ruling.43 The government of Canada deferred to the provinces and dairy industry groups on whether to allow non-quota producers to continue to operate. In Ontario, the matter was finally resolved when a government order to end all non-quota sales and to require all producers to have a quota was upheld in July 2005 by the Ontario Superior Court. The court reaffirmed the authority of the provincial marketing board over production and marketing of milk in the province, including that destined for export markets. This challenge to the supply management pillar of production controls was warded off. However, the WTO ruling required an immediate 5 per cent reduction in total milk production (the amount equal to lost exports). Options for surplus disposal were significantly limited; as noted earlier, exports to the US market were virtually eliminated under NAFTA’s prohibition on the use of export subsidies in bilateral trade.44 Milk supplies have to be more closely regulated to ensure milk production does not exceed demand. The impacts of international trade agreements, in restricting the use of certain supply management policy instruments and opening the domestic market to greater import competition, however modestly, were anticipated but not fully known in the late 1980s and early 1990s when the governments of Canada and the provinces first began to prod

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supply-managed industries to undertake reforms in the direction of greater market responsiveness. 3. Market-Responsive Adjustments in the Dairy Sector In the dairy sector, reforms throughout the 1990s and into the 2000s were arrived at through ‘negotiation’ and ‘consensus.’45 At the same time, the institutional framework facilitated adjustment of policy instruments while braking radical reforms. A mutual interest of Canadian producers and processors in retaining the domestic market for themselves has been key to this outcome, as has a problem-solving logic within dairy corporatist networks. Governance structures for dairy policy conform fairly closely to a corporatist network, the institutional arrangement between state and non-state actors that theorists conjecture is most conducive to longrange planning in the public interest.46 Corporatist policy networks exist where state officials formulate or implement policy in conjunction with representatives of normally adversarial industry groups (in this case, producers and processors) and where state actors have sufficient legal authority and expertise to check self-interested behaviour on the part of the private economic interests that share decision-making powers. The major decision-making bodies in this corporatist network are the Canadian Dairy Commission and the Canadian Milk Supply Management Committee. The CMSMC decides the annual national production quota and its allocation among provinces. Its members are representatives of provincial marketing boards and provincial governments. The CDC, which plays an important role in price setting, is chaired by a public representative who is normally a career public official, and its members are representatives of the national dairy producers and dairy processors organizations. The Dairy Farmers of Canada (DFC) represents producers of milk in every province; its members are the provincial milk-marketing boards, dairy associations, and dairy cooperatives. The DFC has substantial resources of bureaucratic expertise and membership support to bargain effectively with state actors and to engage in longer-term planning to advance producers’ interests. The same could be said for the National Dairy Council, the umbrella organization for dairy processors. It was part of the corporatist network throughout the period when changes to pricing and allocation policies were debated and implemented. In 2001 the NDC was dissolved, but by 2003 a new

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body, the Dairy Processors Association of Canada (DPAC), had emerged to represent producers.47 Although one of the largest dairy manufacturing firms, Nestlé, is not a member of DPAC, its members represent over 90 per cent of the milk processed in Canada. When the federal and provincial governments first became intent on reforming supply management in the late 1980s, they sought to improve what they described as the ‘often strained relationship between producers and processors’ by redistributing decision-making powers away from producers to give greater representation and voice to nonproducer interests: processors, further processors, consumers, distributors.48 As noted above, dairy processors were represented on the CDC but others further downstream were not. The task force struck in mid1989 to review national dairy policy was broadened beyond representatives of dairy producers and dairy processors to include further processors and consumers. The federal and provincial officials who served also included representatives of the ministries of finance and international trade, state officials not normally involved in dairy supply management. The broadly composed Task Force on National Dairy Policy issued a report in 1991 that reiterated the need for ‘increased market responsiveness and greater self-reliance’ and recommended sweeping changes to dairy policies. At the same time, however, its report confirmed the support of governments and the industry as a whole for dairy supply management and stressed that change had to be evolutionary, not revolutionary. Within the dairy policy network, leaders from Dairy Farmers of Canada and the National Dairy Council sought the assistance of the chairman of the Canadian Dairy Commission in devising a strategy to accommodate the anticipated future environment of liberalizing international trade agreements and changes in consumer preferences.49 This small group, known as the Consultation Committee on the Future of the Dairy Industry, engaged in a wide-scale consultation of dairy producers in an effort to persuade them of the need to reduce regulatory barriers to a more efficient processing sector.50 Its work was followed up by the Federal-Provincial Task Force on Orderly Marketing struck by agriculture minister Ralph Goodale in January 1994; its mandate was to recommend how the WTO Agreement on Agriculture could be implemented to ensure the viability of supply-managed sectors and simultaneously move ‘towards enhanced competitiveness.’51 On the Task Force’s recommendation, this task was given to a newly created strategic planning committee in each supply-managed sector. The

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Dairy Industry Strategic Planning Committee, chaired by the CDC and composed of leaders in the dairy industry, became the vehicle for implementing several recommendations that had been made by the earlier task forces and committees.52 The reforms to dairy policy initiated by this process and that have continued over the 1990s and through to 2006 demonstrate modifications to supply-management instruments, but not their elimination. 3.1. Special Milk Classes and Market and Price Pooling As noted earlier, the implementation of the NAFTA and the WTO agreements required the elimination of producer levies that had helped fund exports of dairy products and products containing dairy ingredients. As the parliamentary secretary to the minister of Agriculture and Agri-Food explained to the House of Commons Standing Committee on Agriculture on 30 May 1995, the current system of producer levies to finance dairy exports to the United States would be prohibited as of 1 August 1995 and so would exports to that country. The levies had required producers to share the costs of offering milk to processors at reduced prices when that milk was used to produce manufactured products such as cheese, chocolate, and butter cookies for sale in the US and abroad. Further processors, who used cheese to produce pizzas and macaroni and cheese dinners, for example, also had benefited from such levies.53 Without a new mechanism to replace what would soon be an illegal levy and to enable Canadian plants to continue to obtain milk and milk components at competitive (American) prices, Canadian processors would be unable to compete with American and other foreign processors. Without the American market, some manufacturers would go out of business because the Canadian market was too small for them to be profitable. US markets for foods containing dairy products, said Vanclief, were very important for all provinces, but especially for Ontario and Quebec. The loss of foreign markets would mean not only lost jobs in Canadian processing, but also a drop in demand for milk. Although only 1.7 per cent of total milk supply was exported to the United States, the total milk supply quota in Canada could be reduced by as much as 4 per cent.54 The solution arrived at had been hammered out by the dairy industry itself in the Consultation and Strategic Planning committees noted above.55 It was, said Lyle Vanclief, ‘believed to be the best way of maintaining Canadian competitiveness, equity and orderly marketing,

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Table 5.6 Milk Classes Class 1 Class 2 Class 3 Class 4 Class 5

Fluid milk and cream Industrial milk for products: Ice cream, Yoghurt and sour cream Industrial milk for products: Cheese Industrial milk for products: Butter, condensed and evaporated milk, milk powders and other Products Special class 5(a) Milk for cheese for use in further processing 5(b) Milk for non-cheese products for use in further processing 5(c) Milk for use in confectionary products 5(d) Planned exports for traditional markets 5(e) Surplus removal through exports

5(a), 5(b), 5(c) at prices competitive with those available in NAFTA member countries

while responding to the changes agreed to under the GATT and WTO agreements.’56 The Special Milk Class Pricing and Pooling System, implemented on 1 August 1995, continued the long-standing practice of differential pricing of milk according to its end use (fluid versus industrial). Five classes and prices of milk, based on the end use of the milk, were created. (See table 5.6.) Milk classes 1 to 4 are for milk/dairy ingredients destined for the domestic market and their prices continued to be set by provincial marketing boards, using cost-of-production guidelines. Their prices were higher than milk in Special Class 5, which included dairy products (cheese for further processed products, milk for use in confectionary products, for example) used to produce foodstuffs for export or for sale in the domestic market, where they face lower-cost import competition. Special Class prices, like the producer levy they replaced, were set so as to be competitive with American prices. By virtue of Special Classes, then, dairy products were provided to processors / further processors at a price that was competitive with foreign-(American-) produced products sold in Canada. Currently, sales under the Special Classes now amount to about 11 per cent of industrial milk.57 Along with the introduction of Special Milk classes, provinces agreed to expand pooled revenues and markets for milk. The consultative committees had recommended price pooling or sharing of revenues not only for special classes but from sales of milk in all classes. Pooling revenues provided for an equitable sharing across producers of the costs of differential pricing. The consultative committees had also recom-

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mended the coordination of milk supplies on a national basis via national market sharing or pooling. Such a system would replace the historic provincial allocation of milk supplies to processors. National milk pooling was urged by processors: to remain competitive they needed to acquire ‘the right amount of milk at the right place, at the right time and for the right price.’58 Under the Comprehensive Agreement on Special Class Pooling, signed in 1996 but made retroactive to 1 August 1995, producers in all Canadian provinces agreed to pool the (lower) receipts from the Special Class milk sales. Under the 1996 All Milk Pooling Agreement for Eastern Canada, the six provincial milk marketing boards of Ontario, Quebec, New Brunswick, Nova Scotia, PEI, and Manitoba agreed to create a regional pool in which markets and revenues from sales of all in-quota milk (fluid, industrial, and special class) would be shared.59 Milk marketing boards in Alberta, Saskatchewan, and British Columbia refused to join the eastern Canada pooling arrangement, perceiving it not to be in the economic interests of their provincial dairy industries.60 The four western provinces did agree under the 1997 Western Milk Pooling Agreement to share the western Canadian market and to pool revenues from all classes of milk sold within it. There are thus two regional market and price pools – in eastern and western Canada – as well as a national pool for Special Class milk sales. The decision of milk producers in western Canada to pool their revenues and share the costs and benefits of market expansion/contraction occurred in a context of increased market power of dairy processors and retail stores. In provinces such as British Columbia, the consolidation of dairy plants led to a situation in which a single plant could exercise considerable market power, including sourcing its milk supplies outside the province (from Alberta). It was far better for producers to determine the rules of the game than to leave it to monopsonistic processors to do so.61 There have been further modifications to pooling arrangements. In the wake of the 2002 WTO ruling, changes to the Special Class category to eliminate the two prohibited subclasses were necessary, and were incorporated in the Comprehensive Agreement on Pooling of Milk Revenues in 2003. The pooling initiatives have gone a considerable distance to update the dairy marketing system to the ‘market responsive’ system demanded by processors from the 1980s onward. They have not, however, created a fully harmonized dairy policy across provinces. Fluid milk prices continue to diverge across provinces within the eastern

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Canada and western Canada pools, although there is greater harmonization of prices for non-fluid milk classes. Provincial milk marketing boards continue to allocate supply within the province. As table 5.2 shows, there has been some adjustment of quotas across provinces, British Columbia having bargained successfully for a larger share of national milk production, but sales of quotas across provincial borders continue to meet hurdles. And despite provincial agreement under the interprovincial Agreement on Internal Trade (AIT) to harmonize fluid milk and distribution standards by September 2007, barriers such as Quebec’s margarine-colouring requirements remain.62 3.2. Pricing Instrument Changes: An End to the Dairy Subsidy A second and important change in dairy pricing policy occurred when the federal government’s 1995 budget announced that the subsidy paid directly by the CDC to industrial milk and cream producers would be terminated. Like the 30 per cent cut in federal government expenditure support announced for safety nets at the same time (see chapter 3), the dairy subsidy’s termination was dictated not by trade agreements, but rather by the determination of the government of Canada to get its fiscal house in order. Efforts by the Dairy Farmers of Canada to keep the dairy subsidy in place were unsuccessful. But the federal agriculture minister did agree to phase out the subsidy and replace it with a gradual increase in the industrial milk target price established by the CDC. The DFC argued that the direct payments were a consumer subsidy and rolling them into the target price would have a minimal impact on consumer demand for dairy products. Their continued lobbying paid off. After the subsidy was completely eliminated in 2002, the CDC agreed to raise the industrial milk target price to a level by February 2006 that covered the average cost of production of 50 per cent of dairy producers. This policy has been consistently opposed by dairy processors, who argue that it raises the cost of dairy products like cheese to a level that makes it unprofitable for further processors and cheese importers. Indeed, they have sought ways to curb their costs by importing products not subject to high tariffs. 3.3. Import Controls and Dairy Product Substitutes Controls on imports of dairy products under the WTO Agreement on Agriculture via tariffs and tariff rate quotas (TRQs) were intended to retain the domestic market for domestic producers of dairy products.

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Imports under the Import for Re-Export Program were allowed, but manufacturers who imported specified quantities of dairy ingredients (whole milk powder, cream, fluid milk) at low tariff rates had to reexport the resulting manufactured product within six months. The effectiveness of border controls has been undermined over time by imports of dairy product ingredients that are substitutes for dairy products such as milk and cream but are not subject to their high TRQs. These substitute products include butteroil and sugar blends that are used as a replacement for milk and cream in the manufacture of ice cream. The blends contain less than 50 per cent of dairy product and, as such, are subject to either low or no tariffs. In recent years, milk protein concentrates have also been replacing milk in the production of processed cheese and further processed foods. Technological developments have allowed milk protein concentrates to be produced from whey, a product that would otherwise be disposed of for non-human uses and considered not suitable for cheese making. Some of these milk protein concentrates are produced from domestic whey, whereas others – isolates – are imported.63 They enter Canada without tariffs and at lower (than domestic) international prices. Processors use imported isolates to make mozzarella, which is then used to make pizzas. These novel products are believed to produce a superior product for consumers that can also be sold ‘at a competitive price.’64 Canadian dairy products have risen in price (as the lost federal subsidy has been rolled into milk prices) and consumer sales have dropped. The lower-cost milk product ingredients are seen as a way to maintain consumer sales by offering a high-quality product at the lowest possible price.65 In recent years dairy producers estimate that displacement of milk with butteroil/sugar blends and milk protein concentrates has cost them in the order of $20–50 million annually.66 The Dairy Farmers of Canada has sought to have these products subject to high tariffs and to prevent their being labelled as dairy products. Their efforts to persuade the Canadian International Trade Tribunal and the Federal Court of Canada to re-categorize milk protein concentrates as dairy protein substances subject to high tariffs failed. After the election of the Harper Conservative government, dairy producers appeared to be making better headway to mid-2007. At the urging of the Dairy Farmers of Canada, but with the opposition of the Dairy Processors Association of Canada, the Conservative government was investigating the possibility for taking action under GATT/WTO Article XXVIII, a safeguard provision that allows for the tariff category of products to be reclassified and

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subject to higher TRQs. Dairy processors and government officials warned that use of Article XXVIII carried the risk of a backlash that could not only put supply management but other Canadian agri-food sectors in jeopardy. For example, it could give the US reason to take similar action against Canada (with respect to hogs, wheat, and cattle) and it would probably cause countries such as New Zealand to launch another WTO dispute against Canadian supply management.67 At the same time, the agriculture minister also asked the Canadian Food Inspection Agency to establish rules and compositional standards for cheese in Canada that would circumscribe the use of cheaper, imported substances.68 The palpable tensions between dairy producers and those further downstream in the industry, amid declines in domestic consumer demand for milk products, a consequent reduction in production quotas, a growing structural surplus of skim milk powder, and the uncertainty of the WTO negotiations (dealt with below) occasioned calls for a review of dairy industry policy. The agriculture minister invited dairy producers to join a working group with processors and other industry players to define key principles on a strategy for the sector. As he did so, dairy producers argued that they had unduly borne the costs of earlier reforms. In their view, processors had emerged as the major beneficiaries; they enjoyed a guaranteed supply of high-quality product at competitive prices and were protected from competition in the domestic market. For their part, processors agreed that the stability of supply management was an advantage and the system should be saved. However, in the opinion of the CEO of the dairy processors’ organization, the pricing and allocation systems of supply management were ‘archaic and counterproductive in today’s marketplace’ and had contributed to ‘the very difficult and profound issues’ facing the industry.69 4. Poultry and Egg Supply Management Relative to those of dairy, policy instruments in chicken supply management have undergone more market-oriented changes, at least as measured by price-setting and quota allocation policies. However, efforts to induce changes in pricing and quota allocation policies in poultry and eggs have also been more conflict riddled. Compared with those in the dairy sector, the governance structures in poultry and egg supply management have inherent institutional limitations that virtually preclude a consensual path to policy reform.

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When governments and industry stakeholders revved up their exhortations for reform in the late 1980s and early 1990s, there seemed little likelihood that policy changes could be effected within existing governance structures. Those with an interest in reform – most pointedly, some in the processing sector plus regulators in the government of Canada – were in a weak position to advance this goal. Governance structures give provincial governments and producer-controlled provincial marketing boards preponderant authority over poultry and egg supply management. Their consent was needed to amend the national supply-management marketing plan, and they dominated the boards of directors of the national agencies that recommend the total national quota, its allocation across provinces, and other orders and regulations needed to implement the supply management plans.70 Compared with the situation in the dairy sector, there is also less effective national government oversight. The composition and authority of the federal supervisory body, the National Farm Products Council,71 have traditionally handicapped it as an effective check on the capacity of producers and provincial governments to pursue their selfinterests. Producer influence on the council is assured; by statute, a majority of council members must be producer representatives. The National Council is not a regulatory body in the sense of being able to issue orders and regulations to poultry/egg-marketing agencies. It cannot substitute its own orders and regulations for those recommended by the agency. A national marketing agency does need the council’s prior approval for its orders and regulations (with respect to the national quota, its allocation, and levies), but lacking that approval the agency has no authority to force producers to abide by its decisions and must simply rely on the voluntary cooperation of provincial marketing boards. Although the council’s unwillingness to grant approval for agency-recommended orders is expected to bring the agency to heel, the agency is conscious that this big stick could undermine the whole supply-management system. Given the institutional limitations of existing governing bodies in poultry and egg supply management to represent all stakeholders in the sector and to kick-start reform, federal and provincial governments, sought the advice of external bodies. They included the Federal-Provincial Task Force on Orderly Marketing, the Poultry Task Force, and ad hoc committees for each of the supply-managed poultry sectors.72 The membership of the Task Forces and committees extended well beyond those embedded in existing bodies entrusted with implementing sup-

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ply-management plans. Besides making several recommendations for policy reforms to make supply management more market responsive, their reports also recommended changes to the governance structures of national poultry and egg supply management.73 In response, the Government of Canada provided new representation for processors and other processors on the boards of directors of the national chicken-, egg-, and turkey-marketing agencies.74 This representation comes via the Canadian Poultry and Egg Processors Council, which represents virtually all chicken, egg, and hatching-egg processors and further processors. In the egg sector, an advisory committee provided additional representation of non-producer interests.75 Although producer representatives still outvoted non-producer representatives on national marketing agencies, the altered composition of the agencies gave a chance for producers and processors to improve their understanding of the challenges facing each other and allowed collectively strategic thinking for the long term. As the chair of the National Farm Products Council saw it, processors were subsequently better positioned ‘to inject an element of reality on [sic] what is happening in the market place.’76 After the intense period of review in the early 1990s, government officials and ministers continued to exhort changes of the supply-management agencies. As the WTO agreement took effect in 1995, the federal agriculture minister, Ralph Goodale, warned that the greatest challenge to supply management came not from the WTO but rather from ‘whether there is the voluntary domestic political will to work with each other, to make the system function.’77 This theme was echoed by the outgoing chair of the National Council in 1996; he urged producer boards to ‘shake off the complacency engendered by high tariff walls and accept the fact that it can no longer be “business as usual” if there is to be a successful future generation of producers.’78 In the case of poultry supply management, it was left to the Ontario chicken-marketing board to demonstrate that the context of market opening did indeed mean change for Canadian poultry supply management. 4.1. Chicken Supply Management Under the terms of the FTA, Canada agreed to open its chicken market to the US, the world’s largest chicken producer in the world and, after Brazil, the second-largest exporter. The FTA allowed into Canada poultry imports equal to 7.5 per cent of the previous year’s production. This

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development, combined with substantial growth in consumer demand for chicken, has helped to fuel changes in chicken supply management. These reforms include a new method for establishing national production targets, allocating these targets among provinces, and changes to pricing of chicken. How national (and provincial) production targets are established has changed, even while who establishes them has not. The Canadian Chicken Marketing Agency (CCMA) continues to be responsible for establishing the total national target for chicken production and allocates each province its share/quota. Before 1995 the agency decided the volume of chicken production in Canada based on production estimates provided by provincial marketing boards and taking account of processors’ anticipated needs. It determined provincial shares on the basis of historical market share. Today, the national production target is ‘bottom-up,’ driven by processors’ anticipated needs over the quota allocation period, as these are relayed to provincial marketing boards. Provincial marketing boards pass on processors’ estimates (which are often adjusted by the producer-controlled marketing board) to Chicken Farmers of Canada (as the CCMA has been renamed). The CFC aggregates the provincial amounts to determine the national production target and allots each provincial marketing board its share. Within their assigned provincial quota, provincial marketing boards have some latitude to expand their annual production by a fixed amount without incurring penalties. Provincial marketing boards set prices at the provincial level, using Ontario prices as a benchmark. Historically, prices were set using a cost of production (COP) guideline, but since 1995, there has been increased negotiation of prices with processors. In May 2003 the Ontario chickenmarketing board moved away from negotiated prices to a formulabased price for live chickens that is negotiated once a year – a shift that some analysts suggest is likely to yield a higher ‘utility’ for processors than producers.79 At the same time, however, provincial chickenmarketing boards have been largely successful in negotiating pricing arrangements that guarantee their producers a margin over their costs. Additional programmatic changes have been designed to assist the further processing sectors to be competitive in the domestic market and to access foreign markets. Special import permits enable processors to import (lower-cost) chicken and chicken products for further processing, providing the finished product is re-exported within a six-month period or sold in the domestic market where a similar imported prod-

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uct has entered Canada tariff free. As well, some provincial chickenmarketing boards (subject to limits set by the national marketing agency) sell chicken at discount prices to processors to assist them in meeting export commitments. In contrast to dairy, trade across the Canadian border in chicken and chicken products has grown significantly. Canada now exports nearly as much chicken by weight as it imports. While increased imports can be attributed to larger volumes of minimal access requirements for chicken compared with dairy under trade agreement provisions (7.5 per cent versus about 3 per cent), the rise in exports–a fortyfold increase between 1992 and 1998 – can be related, at least in part, to policy initiatives designed to assist poultry processors to be more price competitive.80 These ‘market-responsive’ initiatives in the form of altered policy instruments are responses to the more competitive environment of market opening. They represent efforts to overcome, at least to some extent, what government advisers in the late 1980s and early 1990s described as the efficiency-stifling features of supply management: fixed global production quotas that responded too slowly to changing market demand, quota allocation policies that had ossified provincial quota shares, and cost-of-production pricing formulae that were insensitive to the needs of processors and further processors.81 Free trade agreements have provided both a rationale and an opening for changes to help correct these perceived deficiencies. The elimination of the GATT imperative to control domestic production in order to control imports gave the Ontario chicken marketing-board, Chicken Farmers of Ontario (CFO), the leverage to press for changes in quota allocation and pricing policies that its government and producers perceived to be in their self-interest. Ontario’s bargaining power to effect change was significant; it has the largest share of Canadian chicken production: more than a third of total production (see table 5.4), the largest processing and further processing capacity, a large consumer market, and comparatively low production costs. From the early 1990s on, as the consumer demand for chicken and chicken products rose, the Ontario chicken-marketing board came under pressure from processors and producers in the province. Processors were importing chicken to meet their needs, and Ontario producers were anxious to respond to that need and displace the imported (American) chicken.82 Their provincial marketing board raised the ante by threatening to leave the national supply management plan unless

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Ontario received a greater share of the national quota. That strategy proved successful and Ontario’s share of national production grew.83 The CFO also sought to capitalize on growth in the consumer market for chicken and chicken products by acquiring more flexibility to adjust provincial production to processors’ needs. It advocated a ‘bottom-up’ approach, whereby processors and producer-controlled chicken marketing boards would negotiate production limits for each province, and the national quota would equal the total of what individual provincial producer marketing boards negotiated with processors in their province (provincial market requirements). The provincial system would be driven more by processors’ needs and presumably, therefore, would be more market responsive. When Chicken Farmers of Ontario implemented its bottom-up approach in 1994, it met with resistance in Quebec. Quebec chicken producers saw the changes as being dictated by chicken processors and worried that they signalled the beginning of the end for supply management. When the Quebec marketing board failed to deter Ontario from its course of action, the Quebec chicken-marketing board embarked on a pricing war with Ontario. It lowered Quebec chicken prices.84 By early 1995 the bottom-up determination of production limits and the system of negotiated prices had led to an oversupply of chicken, depressed prices, and declining producer incomes. Federal and provincial ministers of agriculture had been forced to intervene in December 1994, warning the CCMA to restore discipline to chicken supply management. The resolution of provincial disputes over their shares of national production and chicken pricing policies was protracted and extended over a three-year period. The first effort, a new National Allocation and Pricing Agreement in 1995, proved too contentious to be durable. Under this agreement, production limits were negotiated on a province-by-province basis between processors and the provincial chicken marketing board, but provincial production was subject to caps under a national production ceiling.85 This method of determining production was opposed by producers in higher-cost provinces such as Quebec, Nova Scotia, and Newfoundland. They feared that allowing each province to determinate its quota needs (within caps) would lead to chicken surpluses that would then be dumped in their province. The representative of the Quebec chicken-marketing board resigned from the CCMA, arguing that the agency’s role was undermined by the changed quota allocation system. The four western Canadian provinces com-

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plained that their provincial quota was too small.86 Since its only processing facility was functioning at less than full capacity, Saskatchewan feared it would close. The National Allocation Agreement, signed in March 1998, retained the bottom-up system for determining provincial and national quotas. It also retained the caps on production to secure discipline on overproduction. However, production caps were henceforth to be assigned on a regional/provincial basis. Within each of three regions (central Canada, western Canada, and the Maritimes), production could be increased by up to 5 per cent. Further, any one province could increase its production by 8 per cent with the unanimous agreement of provinces within the region. The national chicken-marketing agency continues to determine whether provinces’ total proposed volumes of production meet Canadian requirements in the aggregate. As a result of these changes, all ten provincial chicken marketing boards had rejoined the national marketing plan in 2001, placated by shifts in provincial production shares greater than those in other supply managed sectors. (See table 5.4.) 4.2. Egg Supply Management Shifts in consumer/market demand alongside competitiveness pressures in the North American food processing sector have induced reforms in egg supply management over the 1990s and 2000s. As is the case for chickens, these reforms have been preceded and accompanied by intergovernmental tensions as each provincial marketing board pursues pricing and quota allocation policies that will maximize its province’s economic development and competitiveness goals. Demand for eggs has increased since the mid-1990s, but it is largely for industrial/breaker eggs. These liquid, dried, or frozen eggs are purchased by ‘breakers’ for sale to restaurants and food processors and currently comprise about 20 per cent of the total market.87 They are distinguished from the table or shell eggs that consumers purchase in retail stores and that still comprise the largest share of domestic demand. In the late 1970s the Canadian Egg Marketing Agency (CEMA) effectively established a two-price system whereby industrial eggs were sold at a lower, negotiated price that was financed by producer and consumer levies. Over time, and in response to pressure from the breaker industry, the price at which industrial eggs are sold has been brought into line with the price of eggs available to American breakers.88 The growth in demand for industrial eggs is accompanied by inter-

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provincial tensions. Increasing national production to accommodate processors’ demand for eggs raises the risks of surplus product and adds to the cost to egg producers of removing it from the table market. Under the traditional levy system, all eggs were assessed a uniform levy and the costs of surplus removal were shared across producers in every province. Both Ontario and Quebec, which produce a lower percentage of eggs for industrial use, opposed this levy system. They brought the issue to a head in 1992 by partially withdrawing from the federal-provincial agreement in order to operate their own surplus removal programs. Forced to modify its industrial products levy system, the CEMA introduced a revised levy system under which all producers are assessed a minimum base levy, and those in provinces with a surplus to their table needs pay higher levies. This system differs from that in dairy, where, as noted earlier, the losses for Special Class milk have been shared equally across provinces/producers. CEMA found it difficult – and eventually impossible on its own – to resolve tensions over how growth in demand for ‘above-base’ quota which is a result of the growth in demand for industrial eggs, should be distributed. Should it go to those experiencing the demand or should above-base quota be distributed to all provinces, since they help to finance it through producer levies? CEMA’s Industrial Products Program, created in 1995, failed to satisfy egg producers in Ontario and Manitoba, where the industrial egg-processing sector was clamouring for more eggs and anxious to take advantage of that growth opportunity. As these provinces negotiated increases in their share of the national quota in 1998, Quebec refused to contribute financially to the cost of CEMA’s surplus removal / industrial products program.89 Alberta followed suit, and by the end of 1999 other provinces also announced that they would not remit industrial product levies to CEMA. The Ontario egg-marketing board threatened to issue unilaterally new production quotas. This defiance of CEMA orders and provincial marketing board brinksmanship ‘embroiled’ CEMA in what it described as ‘what may well be the greatest threat to our supply management system in eggs since its inception in 1972.'90 The agency was forced to bring in an external conflict-management consultant to help to resolve the crisis.91 Subsequent changes have introduced greater flexibility into egg supply management and responded to the demands and interests of the largest provinces (Ontario and Quebec). Provincial egg-marketing boards have been given quota to develop their own industrial product

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programs and steps have been taken to reconcile these programs with the CEMA-run industrial products program.92 A new quota allocation formula, agreed to in 2004, increased quotas for Ontario and Quebec. However, it was soon appealed to the supervisory National Council by Manitoba, Saskatchewan, and BC.93 Finally, new voting rules for CEMA decision making were introduced in 1999. Once formalized in an intergovernmental agreement, they gave Ontario and Quebec collectively a veto over board of directors’ orders.94 As is evident, policy reforms have been difficult and driven by the large provinces in the supply managed system with large producer/ processing sectors. The CEMA continues to set the price at which it is prepared to buy eggs surplus to the table market for resale into the breaker market, and buy back price serves as a benchmark for provincial marketing board pricing. Provincial marketing boards do, however, keep a close eye on Ontario prices as they set those in their own province. The oversight National Council has had fewer levers to pull throughout this troubled path of reform. In the chicken sector, it left it largely to producers and primary processors to find a way to accommodate market needs95 and characterized the eventual solution arrived at as ‘a model’ of the CCMA ‘refocussing and restructuring itself for a future of globalization and reduced tariffs.’96 Developments in the egg sector have occasioned more criticism from the national oversight body, and more than once CEMA has begun a new year of operations without National Council approval for its orders. The council has been reluctant to approve quota allocation orders that are the subject of provincial complaints and result in higher consumer egg prices. 5. WTO Doha Round of Trade Negotiations The WTO Doha Round talks that commenced in 2001 have presented a significant challenge to supply management. Improving market access, by lowering over quota tariffs and increasing imports by expanding TRQs, emerged alongside reducing export subsidies and trade-distorting domestic support measures as an early goal of the trade negotiations. Liberal agricultural economists – as academics, consultants to governments, and officials within the OECD – view instruments of supply management as trade-distorting policies that entail social costs, including keeping inefficient producers in business and redistributing wealth from consumers to producers.97

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In advance of the negotiations and throughout, Canadian governments have assumed the position of groups representing supplymanaged producers, the Canadian Federation of Agriculture, and the National Farmers Union: that countries have the right to protect ‘sensitive’ sectors. Although the WTO’s July 2004 Framework Agreement incorporated the principle of protection of sensitive products, it is highly unlikely that the principle could be extended to provide the degree of import protection sought by supply managed producers. Since July 2003 organizations representing supply-managed groups have formed a broader coalition – GO5 – to mobilize political support for their goal of prohibiting changes to Canada’s TRQs. The GO5 Coalition for a Fair Farming Model Supply Management found an ally in the Quebec National Assembly. In the run-up to a WTO ministerial meeting in Hong Kong in mid-December 2005 the Quebec National Assembly passed a unanimous motion on 16 November 2005 that called on the Canadian government ‘to give its negotiators a mandate that will ensure, at the end of the current round of negotiations, that Canada obtains results that ensure that the supply managed sectors are subject to no reductions in over quota tariffs and no increase in tariff quotas.’ On 22 November 2005 Bloc Québécois member André Bellavance introduced a motion to the same effect in the House of Commons. It read: ‘That, in the opinion of the House, the government should give its negotiators a mandate during the negotiations at the World Trade Organization so that, at the end of the current round of negotiations, Canada obtains results that ensure that the supply managed sectors are subject to no reduction in over-quota tariffs and no increase in tariff quotas, so that these sectors can continue to provide producers with a fair and equitable income.’98 Some members of parliament, especially those on the Liberal government side of the House, worried that the motion tied the hands of trade negotiators and would be counterproductive. Others, especially in the Conservative Party, argued that it needed to be balanced against the interests of export-oriented agricultural sectors. Despite such misgivings, the motion carried: 288 Yeas, no Nays. This ‘no concessions’ strategy in defence of supply management has been roundly criticized by many academics, as well as by a former Canadian agricultural trade negotiator during the Uruguay GATT Round.99 The merits of such an inflexible negotiating position have since been revisited, and there continues to be a debate about what amount of concessions on market access would imperil supply man-

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agement.100 Until mid-2007 the governing Conservative Party continued to affirm its steadfast support for supply management.101 6. Analysis and Conclusion A ‘second generation’ of supply management has been born. In its most fundamental respects, it bears striking similarities to the first generation: imports continue to be restricted, domestic production controlled, and product prices regulated. Notwithstanding these continuities, Canadian supply management has undergone changes: pricing policy instruments, and to some degree, quota allocation policies, have been modified. The federal dairy subsidy has been eliminated, there have been changes in the prices of supply-managed commodities to those downstream (processors and/further processors), and regional milk pools have been created in the quest for greater efficiency and competitiveness. In poultry and egg supply management, there have been similar policy changes in order to position the sectors more competitively. These changes, the chapter has argued, reflect the increased market power of those downstream from producers. The modification of the state assistance model, rather than its replacement with a market liberal paradigm, raises an important question. Why has supply management proven resilient in warding off more radical changes? One important reason up to mid-2007 was the relatively weak degree of political internationalization of the supply managed sectors. The reforms to policy instruments exogenously imposed by the NAFTA and WTO trade regimes have required modifications to supply-management policies but they have not required its elimination. A second set of reasons why the state assistance paradigm in supply management has proven resilient concerns its economic viability, which has required that it be perceived as benefiting not only producers but also others downstream. Both producers and processors share an interest in preserving the domestic market for themselves. Supply management also serves their mutual interest in preventing volatility in supplies and prices. Processors, as evidenced by the public support for the pillars of supply management by the Canadian Poultry and Egg Processors Council and the Dairy Processors Association of Canada, support the system, providing it enables them to access the product they need at a price that allows them to be profitable. Producers have recognized the conditionality of processor support and have agreed to

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pricing changes. The unity of producer-processor interest in the core features of supply management has not obviated tension on other issues, but it has been critical to maintaining government support for supply management and warding off pressures for more radical changes, for example, from further processors. Absent these reforms to enhance the competitiveness of downstream consumers of supplymanaged products, Canadian and provincial governments would likely have insisted on more radical reforms to national dairy, poultry and egg marketing plans. Also implicated in the economic viability of supply management are the economic costs of its termination. Dairy, poultry, and egg quotas have acquired substantial value, and partial or full removal of import barriers would reduce the value of these quotas and undoubtedly necessitate government compensatory payments. In the dairy sector, the cost to producers of trade liberalization is estimated to be $1 billion or greater.102 Third, enhancing the economic viability of supply management has maintained its political viability. The unwillingness of national governments to jettison supply management during international trade negotiations also appears to reflect their calculation that there are more political costs than benefits to doing so. Both Progressive Conservative (1984–93) and Liberal (1993 – January 2006) governments in Ottawa supported supply management when it came under attack during international trade negotiations and trade disputes. Only opposition parties that ideologically supported market liberalism, such as the Reform Party of Canada and the Canadian Alliance, championed more radical reforms to supply management. And having failed to extend its support into Ontario, the Reform Party eventually abandoned its opposition to supply management. The Harper Conservative Party also publicly endorses supply management. Strategic partisan calculations help to explain national and provincial political parties’ support for supply management. As observed at the outset of the chapter, the dairy and poultry/egg sectors are geographically concentrated in Ontario and Quebec. Farm and rural voters in these provinces often switch their vote between the two major parties. Particularly in Quebec, federalist and separatist parties have calculated that it is profitable to try to woo the farm/rural vote during both provincial and federal elections. More important than their voting power, however, is the organizational power and prowess of the farm lobby on behalf of supply man-

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agement. Dairy producers have been especially organizationally well developed. On matters of international trade policy, poultry and egg producers have been able to piggyback on the Dairy Farmers of Canada and present a solid front. Cohesive and astute lobbyists with the backing of Canada’s largest farm organizations, these commodity producers have constituted a formidable alliance before governments in resisting trade liberalization in the sector even while making adjustments needed to retain the domestic market for domestic processors and food manufacturers. Supply-management producer groups have also been astute in mounting arguments for the exceptionalism of agriculture. Historically, these arguments included evidence that agricultural markets were imperfect, farmers were in an inferior bargaining position with their suppliers and buyers, and farm incomes were low relative to non-farm incomes. The last of these beliefs no longer has credence; incomes earned by farmers in the supply-managed sectors are more stable and higher than those of other commodity producers. But given downstream concentration in the processing, manufacturing, and retail food sectors, arguments about imperfect markets still echo and provide a rationale for maintaining collective bargaining power for producers.103 Interventions by MPs during parliamentary debates reveal that economic arguments continue to constitute an important rationale for support for supply management; they include most prominently the jobs thereby created even while it imposes no drain on the public treasury. Producers of supply-managed commodities also argue that supply management provides goods valued by society by virtue of its family farm structure of production. These goods include ‘more environmentally sound’ farming practices, stable employment, and the survival of rural communities.104 Arguments for the social values promoted by supply management have always constituted a reason why politicians across the political spectrum – liberal, social democratic, and nationalist – have supported supply management.105 It is harder to tell whether the Canadian public endorses agricultural exceptionalism, but there is little evidence it is unhappy with supply management. The case of supply management provides support for arguments about how policy-making venues and governance structures affect paradigm resilience/change. In dairy supply management, corporatist networks proved capable of brokering the changes needed to adjust policy instruments to the altered context and thereby to preserve the paradigm.105 The same cannot be said of the quasi-corporatist struc-

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tures in the chicken and egg sectors, where national decision-making bodies were unable to broker changes to policy instruments. The veto points exercised by provincial marketing boards in the national marketing agencies blocked radical changes through negotiation. The reforms that were seen as necessary to enable supply management to survive were made only when large provinces with large production and processing shares engaged in brinkmanship and unilateralism. In short, macro- and meso-level institutions have played an important role in policy developments with respect to supply management. Since supply management is embedded within the institutions of federalism and corporatist policy networks, there is a high ‘political viability’ threshold that radical paradigmatic change has to overcome. Neither parliamentary governing nor opposition parties, nor the courts has seen fit to interfere with the status quo.107 The fate of supply management in the future likely rests, therefore, less on developments in the domestic political economy than on events beyond the country’s border. A successful conclusion of the Doha negotiations will most likely require far greater changes to supply management and will certainly test the capacity of corporatist networks to engender change that stops short of being paradigmatic. This chapter concludes the inquiry into the fate of public policies that epitomized the state assistance paradigm in agriculture. This and previous chapters have demonstrated resilience but also adjustment to the paradigm. The next two chapters shift focus. They examine issues whose policies and governance were not central to the state assistance paradigm but that have acquired heightened salience in the current era of regional market integration, economic globalization, and international rule making.

6 Regulating Food and Animal Product Safety

A high level of food safety also helps us to maintain our reputation as an important supplier of high quality, safe food to world markets. Increasingly, other countries could attempt to use consumers’ concerns for food safety to develop trade barriers which, whether based on scientific fact or public perception, will have effects which are very real.1

Inherent to the state assistance paradigm was a bargain between the consumer and the producer. Producers would receive public support for their enterprises in exchange for consumers’ being assured a secure and high-quality food supply.2 In most countries, including Canada, the bargain was implicit, but in Europe it was made explicit. A history of wartime food shortages created real concerns about food security in terms of its supply and costs. The Common Agricultural Policy (CAP), embedded in the 1957 Treaty of Rome that established the European Community, identified its objectives to include assuring consumers of adequate food supplies at reasonable prices. In Canada, an abundant food supply allowed consumers to take for granted a secure food supply. On the rare occasion when food security surfaced as a political issue, it was in terms of access to affordable food.3 Today, Canadian consumers enjoy some of the cheapest food in the world; they spend about 12 per cent of their income on food. There seems little prospect that food security concerns – as affordable food – will translate into a taxpayer revolt and undermine the implicit producer-consumer bargain that sustains public transfers to agricultural producers.4

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However, the quality and safety of food products do command attention in the late twentieth and early twenty-first centuries, and analysts link these elevated concerns to paradigm change in agriculture. Isabelle Garzon implicates food safety crises (of which the BSE or ‘mad cow’ crisis has the highest profile) in the EU’s transition to a multifunctional paradigm of agriculture.5 She and others point out that these crises undermined public support for agriculture, particularly for the modern version of industrialized, large-scale agriculture. They also engendered a series of institutional and policy changes in countries such as the United Kingdom and Germany that diminished the role of agriculture ministries in food safety regulation, shifted food safety responsibility to new agencies, and gave higher priority to food safety goals relative to market liberalization goals.6 As the epigraph of this chapter suggests, food safety issues are also linked to the competitiveness of the agri-food sector; its profitability depends upon persuading consumers domestic and foreign, that its food products are safe. Developments associated with economic globalization – intensified cross-border trade, the integration of supply chains across several jurisdictions – have heightened competitiveness imperatives and goals, even while complicating the task of ensuring safe food products. In the current era of global trade, fruits, vegetables, meat, and fish appear in our markets and on our grocery shelves from all over the world. So do processed foods, whose source of component ingredients may be impossible to trace.7 Incidents of contaminated food entering the local food supply chain can quickly generate demands to close borders to the suspect imports. Although domestic producers may benefit in the short term by supporting consumer demands for border protection, over the long term this protectionist strategy is not an economically viable one for an export-dependent country like Canada.8 What is called for is a strategy of regulation for competition. The first prong in a regulation for competition strategy is rigorous food safety measures and standards backed up with enforcement and compliance procedures. And because rigorous food safety measures enhance the competitiveness of a country’s agri-food sector only when these measures ease entry to other countries’ markets, the second prong of regulation for competition is the cross-national harmonization of domestic food safety measures and standards. Rather than a ‘race to the bottom,’ where the competitiveness of firms is a matter of keeping their costs low, regulation for competition in food product safety is more properly viewed as a ‘race together’ and ‘to the top,’ that is, towards stringent

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regulations harmonized with those of other countries and/or major trading partners.9 If economic globalization – increases in cross-border trade in food products and global food supply chains – gives countries incentives to adopt strategies of regulation for competition, the political internationalization of agriculture has facilitated such a strategy. An international food and animal product safety regime is under construction via the terms of international treaties and the authority of international institutions. WTO (and NAFTA) treaties include normative goals of protecting public health as well as promoting trade liberalization and crossjurisdictional harmonization of food and animal product safety measures. The cognitive principles that are widely endorsed across industrialized countries to realize these goals include, first, scientific knowledge and risk assessments as a basis for sanitary and phytosanitary (SPS) measures such as food safety measures;10 and second, the co-responsibility of the private sector (the agri-food industry) and public officials to secure food and animal product safety goals. These cognitive principles are broadly shared – but not unanimously implemented – across developed countries.11 In its examination of Canadian policy developments pursuant to food and animal product safety regulation, this chapter argues that Canada has adopted a regulation for competition strategy in the area of food safety. This argument is made by examining regulatory changes that the Canadian government has made to reconcile the twin objectives of assuring consumers of the safety of their food supply and furthering trade liberalization in agri-food products. Regulatory changes consist of restructured roles and responsibilities across state actors as well as across public and private actors in the agri-food sector. The creation of the Canadian Food Inspection Agency (CFIA) is an example of the former; the introduction of Hazard Analysis and Critical Control Point (HACCP) systems, an example of how private actors – packing plants, food processors, food manufacturers, and farmers – have been delegated greater responsibility for implementing food safety standards and assuring the safety of food products. Evidence of regulation for competition can also be found in efforts to base animal and food product standards on the latest scientific knowledge and international standards, as illustrated by regulatory changes in light of the discovery of BSE in Canada in May 2003. What does a strategy of regulation for competition denote by way of agricultural paradigms in agriculture? To the degree that Canadian ani-

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mal and food product standards have traditionally been science based and governments retain the primary role in setting food safety regulations and standards, there is considerable continuity in Canada’s regulatory approach. To the degree that private actors (the industry) now assume greater responsibility for ensuring the safety of food products, there is change. Such change should not be equated to a market-liberal turn in food safety regulation, however, given the crucial role that Canadian governments continue to play in setting and ensuring compliance with animal and food product safety regulations. In seeking an explanation for Canadian policy developments with respect to animal and food product safety, the chapter highlights factors in the domestic and international political economies. Canada is a trade-dependent country, both an exporter and importer of food products. The economic well-being of its exporters is undermined when sanitary and phytosanitary measures are used as trade barriers; the safety of its own citizens is put at risk by imports of unsafe food and animal products. Trade dependence has given Canadian governments reason to base domestic SPS measures on international principles and guidelines and to promote an international food and animal product safety regime. In the cattle/beef sector, these incentives have increased as Canada’s agri-food sector has become more integrated with the American agri-food sector and its products more reliant on foreign consumers. The substance of Canadian SPS measures, as well as ideas about the best practices in food safety systems, have been significantly shaped by standards and guidelines of international institutions such as the World Organization for Animal Health, as well as by those of important trading partners (for example, the US). In its quest for a strategy of regulation for competition, Canada’s federal system has sometimes been a barrier, and it has been necessary for structures and norms of partnerships to be built across the two orders of government as well as with private industry actors. The chapter is organized in four sections. Section 1 discusses the developments in the international arena that have led to the political internationalization of domestic food (and animal product) safety measures. It describes the international institutions and principles that constitute international regulatory governance of food and animal product safety. Section 2 turns to the principles and institutions of Canada’s food and animal product safety regime and the steps taken in the late twentieth century to strengthen its administrative viability. It discusses the creation of the Canadian Food Inspection Agency (CFIA) within the

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government of Canada, as well as the difficulty of coordinating food safety risk management policies across provinces Section 2 also describes the introduction of HACCP systems under which private actors have been delegated more responsibility for food safety goals. Section 3 provides an example of how regional and global market integration is a catalyst for regulation of competition. It examines regulatory developments in the wake of the discovery of BSE in Canada and later in the United States and the efforts taken by Canadian governments and the cattle industry towards regulatory policy coordination and harmonization in Canada, the NAFTA, and the international arena. This account also reveals the role of not only domestic policy networks, but also transnational policy networks of state and non-state actors, in addressing the BSE-induced trade crisis and achieving greater policy harmonization. It also affirms the regulatory pattern in Canada of the co-responsibility of public and private actors for animal product safety regulation. Section 4 provides a summary. 1. An International Agri-Food Product Safety Regime The principles and institutions of an international regime for food and animal product safety have evolved out of the dual objectives of protecting public health even while promoting cross-border trade.12 Citizens everywhere look to their governments to ensure the safety of the foods they consume, making the goal of promoting public health through a safe food supply a long-standing objective of food safety regulation. Although food safety measures of governments historically have differed, sometimes substantially,13 industrialized democracies have relied upon scientific information to help to determine when foods are safe and when they are not. Scientists can identify the hazards that arise during the production, processing, and distribution of food, owing to the addition of a food additive, the residue of a veterinary drug, or the use of a new production process like food irradiation. Based on such scientific risk assessments, regulators then decide how to manage these risks in order to protect human/animal health and safety (through sanitary measures) or plant life and health (through phytosanitary measures).14 Their risk management decisions include whether to license a product for sale and, once it is licensed, the surveillance and inspection activities needed to ensure the private actors responsible for food, animal, and plant production are in compliance with health and safety standards.

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The safety of the food supply system becomes a more politically salient issue in the context of economic globalization and increased volumes of agricultural and food products crossing borders.15 Consumers often demand higher standards of imported food than of that produced locally (unless, of course, the domestic food safety system has failed to build confidence in the safety of the local food supply.) Food safety measures become more salient for food producers as well. Agricultural producers seek assurance that imported plants and animals do not carry diseases that could infect their own stock or crops. Exporters of foods, animals, and plant products have another reason to pay attention to sanitary and phytosanitary measures. Their worry is that their local health and safety standards for animal and plant products will not be recognized as equivalent to the importing country’s standards and will constitute a reason to prohibit trade. Since governments cannot abdicate their responsibilities to protect consumers from unsafe food (and their animal/plant populations from disease risks), how can this obligation be reconciled with goals of a liberal trading regime in agriculture and food products? The solution has been to encourage countries to base their domestic food and animal product safety measures on international SPS guidelines and standards. Scientists’ recommendations about acceptable risks of animal-, plant-, and food-borne hazards constitute the cognitive bases for international guidelines and standards. When countries collectively adhere to international standards, the expectation is that their SPS measures will converge and thereby pose less of a barrier to trade in agriculture and food products. The cognitive principle of scientific risk analyses as the appropriate methodology on which to base domestic food safety measures is therefore expected to advance normative goals of agri-food product safety and trade, and in a cost-effective way for the food industry. Vesting science with regulatory authority in order to facilitate international cooperation on SPS measures works only if countries agree on what constitutes scientific knowledge and accept that science, not consumer preferences, should determine whether products are safe or unsafe. 1.1. The WTO SPS Regulatory Regime The international SPS regulatory regime predates the modern era of economic globalization. As early as 1924 food-exporting and importing countries created an international organization to recommend sanitary

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standards for international trade in live animals and animal products. The Office international des épizooties – now also called the World Organization for Animal Health, but here referred to by its acronym OIE – was an early effort to allow exporters to capture the economic benefits that accrued from sanitary guarantees, even while assuring importers of live animals and animal products protection from food-borne diseases (such as foot and mouth disease) and contaminants. The OIE recommends appropriate measures to safeguard animal health and zoonoses affecting both animal and human health, including how to manage the risks of disease outbreaks. Since 1962 the Codex Alimentarius Commission (Codex) has had a similar mandate to create international standards for food. As an agency of the UN World Health Organization and the Food and Agriculture Organization, the Codex was backed by the US government and the US food industry, both of which wanted American standards to become the worldwide standards for food safety. Its creation followed the increase in international trade in foodstuffs – meat, butter, cheese, and cereals – in the post-Second World War period. Both OIE and Codex standards are proposed by scientific experts using the latest scientific information and are adopted by consensus by member countries during their annual meeting. These standards are voluntary and, historically, few countries have adopted them in their entirety. However, over time, OIE and Codex standards became those on which domestic measures converge.16 Early efforts of the GATT international trading regime to reconcile food safety and trade goals proved wanting. GATT Article XX:b recognized the right of countries to take measures ‘necessary to protect human, animal or plant life or health,’ providing these measures did not discriminate among countries or constituted disguised barriers to trade. Article XX’s effectiveness was limited by political dispute over what constituted ‘necessary’ measures as well as by the fact that the decisions of GATT trade dispute panels were not binding on WTO member countries. The beef hormone dispute between North America and the European Community over trade in meat derived from animals treated with non-therapeutic growth hormones revealed the limited capacity of the GATT to balance food safety and trade goals to the satisfaction of the North American exporting countries. Under considerable domestic pressure from anxious consumers, in 1989 the European Community prohibited the production and import of meat from animals treated

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with any of a number of growth-promoting hormones. The banned hormones are widely used in Canada and the US. The EC import ban thus cost Canadian and American beef exporters lost sales in the EC market, and efforts by Canada and the US to challenge the ban after it was implemented in 1989 proved futile. GATT panels set up to adjudicate the case ruled that existing GATT agreements did not apply to processing and production methods, including the use of hormones.17 The beef hormones case was a major catalyst in the joining of Canada and the United States with other countries to negotiate a more authoritative international agri-food product safety regime.18 Their solution was a new, legally binding SPS agreement that applied to food production and processing methods, including the use of hormones, and limited countries’ autonomy to use these measures for ‘protectionist’ purposes. The WTO Agreement on the Application of Sanitary and Phytosanitary Measures (hereafter SPS Agreement) clarified and strengthened GATT articles by enabling but also limiting the right of countries to take measures to protect human, animal, and plant health or life from food- or feed-borne risks and from pests or disease-related risks.19 The SPS Agreement allows countries to choose their own level of risk protection for animal, plant, and human health but requires that this level of protection – their sanitary and phytosanitary measures – be based on scientific principles and a risk assessment that is supported by scientific evidence. Although countries can take temporary measures to protect animal, plant, or human health that are not based on scientific risk assessments, they have an obligation to seek out additional scientific information to support the temporary measures. Countries are also required to design their SPS measures in a way that impacts trade in the least restrictive fashion and does not discriminate between foreign and domestic goods. The principle of non-discrimination requires that countries be consistent in their SPS measures; they cannot demand a higher level of protection from risk of an imported product than they do of a domestic product. Countries must recognize other parties’ SPS measures as equivalent, providing it has been demonstrated that they meet the importer’s appropriate level of protection. And they are urged to base their domestic food safety standards on international standards where the latter exist. The incentive is strong; countries that adopt international standards as their own agri-food product safety standards are deemed to be in compliance with the terms of the SPS Agreement. The

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international standard-setting bodies identified in the agreement are the Codex for food safety, the OIE for animal health, and the International Plant Protection Convention (IPPC) for plant health issues. Subsequent to the implementation of the SPS Agreement, the US and Canada brought a WTO case against the EU, arguing its ban on imports of hormone-fed beef was illegal in that it contravened the requirement for SPS measures to be based on a scientific risk assessment.20 Although the WTO ruled in favour of Canada and the US in the Beef Hormones case, the EU faced strong domestic pressure not to allow imports of hormone-fed beef and opted not to do so. Consistent with WTO provisions, however, it was obligated to pay compensation to Canada and the US for their lost sales.21 The WTO ruling in Beef Hormones and the EU response is significant for subsequent efforts to establish an authoritative international food safety regime. The January 1998 ruling of the Appellate Body stepped back from conferring a status on Codex measures that would have advanced an international SPS regulatory regime. Article 3(1) of the SPS Agreement states that WTO members ‘shall’ base their sanitary and phytosanitary measures on international standards, guidelines, and recommendations ‘where they exist.’ However, the Appellate Body ruled that such international standards were not binding, but rather were ‘a goal, yet to be realized in the future.’22 This interpretation provided more scope for regulatory divergence than was desired by Canada and the United States. Providing countries can provide a risk assessment to justify their SPS measures, they need not conform to international (Codex, OIE, or IPPC) standards, guidelines, or recommendations.23 The SPS Agreement has other limitations as a basis for promoting harmonized animal and food product safety measures across countries. As several scholars have pointed out, the agreement rests on the premise that it is producers, not consumers who seek protection from imports. It thus has limited legitimacy when, as in the Beef Hormones case, consumers demand protection from imports that they view as harmful.24 As EU governments have responded to their risk-averse populations (the history of food safety regulatory failure that has contributed to their cautionary behaviour was noted at the beginning of this chapter) a potential conflict has emerged between the requirement in the SPS Agreement that SPS measures, such as those for food and animal product safety, be based on scientific evidence and the EU endorsement of

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the precautionary principle as a ‘cornerstone’ of European food safety regulation.25 The precautionary principle allows and encourages governments to take protective measures in the event of a potential health risk without waiting for scientific evidence to confirm the risk. Although the SPS Agreement allows provisional cautionary measures in the event of an emergency, it would appear to rule out long-term risk management measures that are linked to a product’s novelty.26 The degree of compatibility between the precautionary approach and the SPS agreement provisions awaits further adjudication. Meanwhile, there remains a gap between the risk-averse and science-sceptical populations in European countries and the populations in Canada and the United States who, as a whole, have more faith in science and are more risk tolerant.27 This cleavage in the authority granted science and in levels of risk tolerance impedes consensus building across countries on international standards. The WTO mandated an institutional infrastructure to promote an international agri-food product safety regime. It includes technical cross-national committees of officials whose task is to work towards harmonized SPS measures. The WTO Committee on Sanitary and Phytosanitary Measures (SPS Committee) is entrusted with monitoring the process of international harmonization of SPS measures and the adoption of international guidelines, standards, and recommendations. Committee recommendations – for example, with regard to maximum residual levels of veterinary drugs in animals – are forwarded to Codex member states for confirmation by consensus decision making. Building consensus within the Codex has often been difficult (as chapter 7, on standards for genetically modified products, will testify) and time consuming. The fact that Codex standards now have a legal authority that they had not before 1995 only renders consensus building around SPS measures more difficult.28 1.2. NAFTA and SPS Regulation Chapter 7 of the 1994 NAFTA was also motivated by a desire to reduce the potential for SPS measures to constitute barriers to trade.29 It was negotiated at the same time as the WTO SPS Agreement and shares most of its features. They include the promotion of cross-national harmonization of SPS measures on the basis of science and international standards, guidelines, and recommendations. They also include mutual recognition of NAFTA members’ SPS measures, providing they meet the

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importing country’s ‘appropriate’ level of protection. In search of mutual recognition, NAFTA Article 756 exhorts the three member states to ‘pursue equivalence of their respective SPS standards.’ At the same time, however, NAFTA Chapter 7 is consistent with the SPS Agreement in allowing countries to establish their own measures ‘necessary for the protection of human, animal or plant health in its territory, including a measure more stringent than an international standard, guideline or recommendation.’ Like the WTO, the NAFTA created institutions of shared crossnational authority for SPS measures. These institutions consist of an SPS Committee that meets annually to promote the equivalence of member states’ food safety measures and to forge mutual recognition agreements around inspection systems, for example, when their SPS measures differ. Their work is supported by several technical committees and working groups.30 The NAFTA enjoys no binding dispute mechanism similar to that of the WTO and to date has not adjudicated any SPS disputes. It does, however, have an elaborate committee structure to negotiate an end to trade disputes over SPS measures as well as formal panels to resolve disputes.31 The significance of these transnational networks in the context of the BSE crisis is addressed below in section 3. 1.3. Delegated Private Responsibility for Food and Animal Product Safety Accompanying the formal SPS provisions of international trade agreements and their accompanying standard-setting bodies are ‘best practices’ that industrialized democracies have adopted. They delegate considerable responsibility for animal and food product safety to private actors in the food supply chain. The introduction of HACCP systems in the production or processing unit represents a shift from traditional inspection that focuses on the end product to monitoring the production/processing process. The process approach entails identifying points at which food hazards (microbial pathogens) can arise and implementing remedial efforts at these potential contamination points. First developed in the US to ensure the safety of food for Apollo space mission astronauts (for the 1969 moon landing), HACCP systems have become the internationally accepted standard for preventing food safety risks.32 The ‘farm-to-fork’ principle extends HACCP principles throughout the entire food production and processing chain. It urges – and in the

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European Union mandates – farms and firms to implement measures both to safeguard product safety and to uniquely identify food products. Traceability and product-identity provisions are part of this approach; they promote food safety goals by facilitating timely and effective responses to potential disease or contamination outbreaks. Do HACCP systems represent a market-liberal model of food safety regulation: one that shifts responsibility from state regulators to the private sector as the food industry itself is delegated both risk assessment and risk management? The answer to this question varies across countries, depending upon the degree of state regulatory oversight. The role of government may be reduced primarily to auditing industry records to verify compliance with HACCP processes, or government inspectors may continue to provide on-site inspection at slaughter and processing plants. Although HACCP and farm-to-fork systems do shift more of the cost and responsibility for food safety regulation onto private actors in the food industry, governments usually assist with these costs, at least at the start-up.33 Where governments retain crucial roles not only in setting but also enforcing standards, the regulatory system is better described as one of joint public-private regulation than of private regulation. To summarize, considerable consensus has developed across industrialized countries on the principles of food and animal product regulation.34 They include normative goals of rigorous safety measures based on scientific evidence and risk assessments; joint responsibility of private and public actors for risk management; the desirability of crossnational harmonization of food safety measures; and the sovereignty of countries to adopt SPS measures to achieve their disired level of protection, providing their measures are no more trade restrictive than necessary to achieve it. These principles are not adhered to in full. As the outcome of the Beef Hormones case illustrates, there is a vigorous debate about the role of consumer preferences and the precautionary principle in food safety regulation, especially for non-conventional food products. And even where there is consensus on the constitutive principles of SPS measures, there is not necessarily harmonization of domestic food and animal product safety standards across nations. 2. Internationalization as a Catalyst to Canadian Regulatory Reform Canada’s status as a food-exporting and importing country has given its governments a keen interest in helping to construct and uphold an

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international agri-food product safety regime. Canada was an early party to the OIE and the Codex and its food and animal product safety measures were constituted so as to be consistent with the standards and guidelines of these bodies.35 The prospect and eventual signing of regional and multilateral agreements (FTA, NAFTA, WTO) that liberalized agri-food markets and strengthened scientific principles of agri-food safety regulation provoked the Canadian government to take steps to reform its domestic food product safety regime. Regulatory and institutional changes were driven by the desire to close existing regulatory gaps that could undermine not only food safety objectives, but also the efficiency of the food industry, the industry’s domestic and international competitiveness, and trade goals.36 Securing these objectives required overcoming internal constitutional/institutional obstacles. The Canadian constitution divides responsibility for agri-food product safety regulation across the two orders of government in Canada.37 The problem arises not with risk assessment, but with risk management. Risk assessment is primarily the responsibility of the Government of Canada, specifically Health Canada. Its officials set food safety standards, identify the risks associated with food products,38 and administer regulations aimed at minimizing the production or sale of unsafe products to which provincial measures have to conform.39 However, Canada’s political system disperses authority over risk management. At least two, and sometimes three, orders of government are responsible for enforcing food safety standards, recommendations, and guidelines by licensing and auditing food industry establishments and investigating complaints about unsafe food products and seizing and recalling such products. Whereas the Government of Canada is responsible for enforcing SPS measures with regard to domestic products sold interprovincially and internationally, as well as for imported foods, sub-national governments enforce SPS measures standards within the provinces. Provinces and municipalities regulate the activities of provincial abattoirs, and food-processing, food service, and food retail industries, and they decide whether and how to inspect them to ensure compliance with regulatory standards and guidelines. The problems posed by the federal division of responsibility for food safety are apparent with meat inspection. Meat- and dairy-processing plants whose products are traded interprovincially and internationally are subject to federal inspection and the standard of mandatory inspec-

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tion. By contrast, the inspection standards for processing plants whose products are sold exclusively within the province varies from province to province and even within a single province.40 In some provinces, plants that slaughter and pack meat for the local retail market are either not inspected or inspected only infrequently.41 Although the Office of the Auditor-General concluded in 1994 that plants that were not inspected or less rigorously inspected represented only a small percentage of overall production, there has long been concern that these plants could be a source of serious food-borne illnesses and could jeopardize domestic consumer confidence and export markets. The 1989 and 1994 regional trade agreements (FTA, NAFTA) gave industry and governments strong incentives to seek greater internal harmonization of food safety and inspection standards. Canadian agrifood industries were anxious to reduce regulatory costs that impeded their competitiveness in the looming integrated US-Canadian market. One set of Canadian food safety standards, rationalized to those of its trading partners, would eliminate the ‘unworkable administrative mess’ created by disparate provincial standards.42 Internal harmonization of regulatory standards would also reduce the possibility that Canadian food exporters would be denied access to external markets on the grounds that Canadian food safety standards and inspection systems were not equivalent to those of the importing country. In the early 1990s shipments of ultra high-temperature milk from Quebec to Puerto Rico were prohibited entry to the US on the grounds that the Canadian dairy standards, which differed across provinces, were not equivalent to the American national standard.43 2.1. An Integrated Canadian Food Safety and Inspection System Steps towards a more internally coherent food safety regime were first taken in the early 1980s under the Mulroney Conservative government and achieved a modicum of success in the late 1990s under the Liberal Chrétien government.44 One successful initiative consolidated responsibility for food safety inspection within the government of Canada. The creation of the Canadian Food Inspection Agency (CFIA) in 1997 brought under one roof responsibility for inspection of federally registered establishments and for enforcement of standards pertaining to food safety and animal and plant health. Previously, these tasks had been dispersed across ministries responsible for agriculture, health, and fisheries and oceans.45

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Domestic factors beyond concerns about greater coherence around food inspection activities within the government also contributed to the creation of the CFIA. Primary was the goal of cost saving in a context of a serious federal deficit; a single inspection agency promised personnel cuts and administrative savings. It also represented an opening for privatization of food inspection costs by requiring the food industry to pay for such services. Under rigorous pressure from industry groups who argued that cost recovery would jeopardize their competitiveness, the government of Canada backed off, opting for ‘cost reduction and cost avoidance, rather than cost recovery.’46 The market-liberal option was not taken up. Efforts to overcome the federal dispersion of authority and to coordinate food safety standards and inspection systems across federal and provincial/territorial governments had mixed success.47 By 1997 federal and provincial governments had agreed to a Canada-wide set of health and safety standards for the dairy industry. Nonetheless the National Dairy Regulation and Code was voluntary and was implemented at the discretion of individual provinces. It proved more difficult to harmonize meat and poultry inspection standards across governments. Governments in provinces like Alberta, whose meat packing and processing plants trade interprovincially and internationally, must meet federal inspection standards. Not surprisingly, they supported a national meat code predicated on federal meat-processing standards. Provinces with smaller and medium-sized plants that serve only local consumers opposed harmonizing provincial standards with the more exacting federal standards; doing so would entail significant capital investment. These economic considerations were a major and ultimately fatal obstacle to intergovernmental agreement on a Canadawide meat inspection system harmonized with federal standards.48 The disparate provincial regulations and the gap across federally and provincially regulated slaughter/packing plants surfaced again during the BSE crisis, which resulted in regulations to mitigate its risk in Canadian cattle herds. 2.2 Greater Industry Responsibility for Food Safety In 1994 the same federal-provincial-territorial committee of officials that called for better harmonization of food inspection across tiers of government also endorsed the principle that industry had the primary responsibility for [food] safety and quality.49 Although governments

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would continue to be responsible for setting standards of food safety, producers and processors would be delegated the primary responsibility to achieve these outcomes and to assume the bulk of their costs.50 Consistent with this shared responsibility and international standards, HACCP systems have been introduced for fish, seafood, meat, and poultry processing plants. In federally inspected meat packing plants, HACCP systems were implemented in order to ensure equivalence of Canadian food safety standards and inspection systems with those in the US. The US decision to require HACCP programs by January 1998 also required imported (Canadian) meat to conform to this rule.51 Canadian governments have provided financial assistance and scientific and technical advice to the industry in the introduction of these systems. As is the case in other countries, HACCP systems are a way to shift a portion of government food safety regulation costs to the private sector.52 The CFIA provides inspection services on a cost-recovery basis, and firms are inspected more frequently if they are found not to be complying with food safety standards. The field-to-fork principle also has been embraced. The food safety chapter of the 2001 Agricultural Policy Framework includes a commitment to implementing HACCP systems from field to fork.53 This objective includes on-farm food safety systems, subsidized by government funding, under the Canadian Farm Safety and Quality Program (CFSQP). Other initiatives, most particularly livestock identity and traceability systems, have also become a prominent feature of food safety regulation in Canada, especially in the wake of the BSE crisis. All of these initiatives make food safety regulation a joint responsibility of governments and the private sector. Despite the lack of total success of efforts to close gaps in the Canadian food safety regulatory system, entering the twenty-first century Canadian governments took credit for having established a rigorous food safety system that assured domestic and international consumers of the safety of Canadian food products. Food safety regulatory failures, such as the BSE crisis in the United Kingdom, the dioxin contamination of poultry feed in Belgium, and incidents even in the United States on a seemingly daily basis, had been avoided in Canada.54 Canadian governments explicitly linked the competitiveness of the Canadian agri-food sector via export growth to rigorous domestic food and animal product safety standards. The discovery of BSE in a Canadian cow in 2003 jeopardized this equation. It reminded Canadian governments and the agri-food indus-

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try that their economic profitability was closely linked not only to rigorous SPS regulatory measures, but also to the cross-national harmonization of SPS measures, especially those with Canada’s most important trading partner. 3. North American Market Integration, the BSE Crisis, and Further Regulatory Reform As Canada’s livestock sector had hoped, the signing of a free trade agreement with the United States created a continental market in cattle and beef. Over the 1990s and into the 2000s Canada’s cattle industry expanded, particularly in Alberta, where it is concentrated. By 2002 cattle were the largest single commodity source of Canadian farm cash receipts, accounting for 21 per cent of total farm cash receipts and sales worth about $7.6 billion. The contribution of the beef sector to the rest of the economy (through the processing, retail, food service, and transportation sectors) amounted to $30 billion in 2002.55 As charts 1.4 and 1.5 show, the value of red meat (cattle, hogs) exports increased almost fivefold from 1990 to 2005. Canada become the fourth-largest exporter of beef behind Australia, the USA, and Brazil.56 There were few barriers to trade in cattle and beef across the Canadian-American border before the FTA, and the remaining ones – import quotas on Canadian beef and tariffs on live cattle – were eliminated by the agreement. With the aid of the low Canadian dollar, exports of live cattle and beef increased eightfold between 1988 and 2003. Buoyant prices tracked one another on either side of the border. Sales reached $1.8 billion in cattle and calves and $2.2 billion in beef products in 2002. The trade in cattle and beef was two way, but the increased US shipments of beef and cattle to Canada post-1989 paled in comparison with those going in the other direction. The Canadian livestock sector became dependent upon the US market to absorb 70-80 per cent of Canadian beef exports and almost 100 per cent of live cattle exports.57 The Canadian and American feed systems were also integrated; approximately 50 per cent of meat and bonemeal in Canadian feed was imported from the United States.58 The integration of the Canadian and US live cattle and beef markets over the 1990s and into the 2000s outpaced progress on commitments under NAFTA to harmonize sanitary standards for livestock (and other products) and meat inspection.59 Differences in Canadian and American animal sanitary requirements periodically disrupted markets.60 By

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the time of the BSE outbreak, little progress had been made in harmonizing NAFTA BSE measures other than agreement among the three member countries on mandatory reporting and surveillance of BSE. The NAFTA partners also agreed in 1997 not to import ruminants or ruminant/meat products or by-products from regions where BSE was known to exist. This commitment confirmed existing Canadian policy; the Canadian government instituted an import ban on live cattle, animal products, and by-products from the UK in 1989 and later extended it to all countries with BSE infection. This import ban was consistent with the highly risk-averse behaviour of most countries when it comes to trading with countries in which BSE is present. BSE was first confirmed in 1986 in the United Kingdom, where 95 per cent of all BSE cases have been reported.61 Scientists trace the disease to feeding cattle rendered meat and bonemeal (bovine protein) from infected animals. Eating BSE-contaminated meat has been linked to new variant Creutzfeldt-Jakob Disease (vCJD), a degenerative and fatal neurological disease in humans that was first diagnosed in the United Kingdom in 1996. There is no test to determine BSE in live animals; the disease in animals and vCJD in humans is always fatal. Approximately 150 people around the world have died from vCJD. Despite its consistency with other countries’ practice, the Canadian (and NAFTA) ban on imports from BSE-infected countries was not compatible with the non-binding OIE guidelines. These guidelines recommend that countries conduct a risk assessment of all potential factors for disease occurrence to determine the risk status of an exporting country/region and elaborate the factors to be taken into account in doing so. The OIE recommends different export conditions for live cattle, meat, and meat products, depending on the exporting country’s disease risk and – significantly – recommends trade, even from regions considered high risk, providing certain conditions (a risk assessment) are met. The OIE guidelines, however, did not specify procedures for reopening borders and lifting trade restrictions on an embargoed country once it had complied with OIE risk-assessment recommendations.62 3.1. Regulatory Change towards Minimal BSE Risk On May 2003 the disclosure of a BSE-diseased cow in an Alberta herd marked the first Canadian case of BSE in a domestically raised animal.63 From the outset, officials in the Canadian Food Inspection Agency insisted that the BSE-infected animal (as well as subsequent

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infected animals confirmed in December 2004 and January 2005) did not constitute a threat to human health because the infected animal had not entered the food chain. Canadian consumers accepted this message and the Canadian food safety regulatory system passed a crucial test of consumer credibility. Whereas consumers in the EU had turned away from beef consumption when BSE cases were disclosed, Canadians increased their consumption of beef after May 2003. It was more difficult to persuade Canada’s trading partners that importing Canadian beef and live cattle did not pose a risk to their animal and human populations. Consistent with OIE guidelines, Canadian governments acted to reassure them and reopen the thirty markets that had closed virtually overnight to Canadian live cattle and beef products. In concert with provincial authorities, the CFIA conducted a risk assessment that confirmed that the BSE case was an isolated one and that the diseased animal had been born before the ruminant-toruminant feed ban went into effect.64 It invited the OIE to review Canada’s procedures for mitigating and managing the risk of BSE. Besides the restrictions on imports from BSE-infected countries, these measures included a surveillance program, begun in 1992, that tested a sample of higher-risk cattle for BSE and a prohibition on rendered meat and bonemeal in feed for cattle and other cud-chewing animals (ruminants), in effect since August 1997. As observed above, this ruminant-to-ruminant feed ban was consistent with scientific understanding that contaminated feed was the source of the disease.65 The OIE review committee concluded that Canada met OIE guidelines. But it made a number of recommendations for further risk management, including the removal of specified risk materials (SRMs – the tissues that harbour the BSE agent) from all slaughtered animals destined for human consumption; prohibition of SRMs in all animal feed (not simply that fed to cattle/ruminants); strengthening of animal tracking and tracing systems; improved disease testing and surveillance; and additional efforts to improve disease awareness among producers, veterinarians, and the public.66 Despite seeing room for improvement, the international review team concluded that it was ‘unreasonable’ for other countries to prohibit Canadian beef imports on the basis of a single BSE case.67 This conclusion was consistent with the OIE guideline that trade should be commensurate with the degree of BSE risk in a country. However, the opinion of OIE experts was not persuasive with Canada’s trading partners. Consistent with US regulations, which pro-

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hibited imports into the country from BSE-infected countries, the US border had closed to Canadian beef and cattle in May 2003. Its reopening was contingent upon a change in American regulations to accept live cattle and beef products from ‘minimal-risk’ countries, a category into which Canada argued it now fell; the US agreed. Approval of the American regulation was delayed, however, and the American and most other foreign markets remained closed to Canadian live cattle for the next twenty-six months. Bilateral negotiations re-established beef export markets sooner; they were back to 90 per cent of pre-BSE levels by the fall of 2004.68 The Canadian government undertook reforms to strengthen its BSE risk management standards with a close eye to meeting OIE criteria for ‘minimal-risk’ status.69 The US also agreed that Canada now fell into this OIE category, and in November 2003 the US Animal and Plant Health Inspection Service proposed to change the US Code of Federal Regulations to align it more closely with OIE guidelines and to accept products from countries that met the minimal-risk category. The US and OIE criteria for determining a minimal-BSE-risk country were fairly consistent. They relied on examining the overall effectiveness of mechanisms in place to prevent widespread exposure to and/or establishment of the disease. These control measures included restrictions on imports to minimize the exposure to BSE; surveillance equal to or greater than OIE guidelines; an effective ban on ruminant-to-ruminant feed; and appropriate epidemiological investigations, risk assessment, and risk mitigation measures. Later, the removal of SRMs from all slaughtered animals and their prohibited use in human food was added.70 As noted earlier, SRMs are tissues, such as the brain and spinal cord, that contain the agent in a BSE-infected animal that may transmit the disease. Removing such materials from the human food chain, scientists agree, is the appropriate measure to protect humans from BSE/ vCJD. Canada met the first three risk management measures required of ‘minimal-risk’ countries: import restrictions, a ban on feeding ruminant protein to ruminants/cattle, and surveillance equal to or exceeding OIE guidelines. It took steps to meet the other criteria. It enhanced its surveillance of cattle for BSE to meet OIE guidelines; doing so meant increasing its testing of slaughtered animals older than thirty months that showed neurological signs of disease.71 In July 2003 it introduced a regulation requiring SRMs to be removed from all animals slaughtered for human consumption. It also announced its intent to introduce an

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enhanced feed ban by July 2004 that would prohibit the use of SRMs in all animal food. The existing ban on ruminant-to-ruminant feed would be extended to ruminant-to-non-ruminant animal (pig, poultry, pet) feed. The last measure was not required by the US to achieve its definition of minimal-risk status. But the OIE review panel had recommended not allowing SRMs in any animal food in order to mitigate possible cross-contamination of animal feeds on the farm. These regulatory reforms, plus strengthened animal tracking and tracing systems, would bring Canada’s BSE risk-management measures into accord with the recommendations of the OIE and its minimal risk category. 3.2. Harmonizing North American BSE Standards The changes over the 2003-5 period to Canada’s BSE measures were made with the goal of reopening the Canadian-American border by rendering them equivalent to US and Mexican BSE measures. A continental Canadian livestock and beef market had created a shared crossborder interest in equivalent standards on the part of governments and affected industry groups. Equivalent standards, as defined by the SPS Agreement and the NAFTA, are standards that offer the same level of protection. The large losses – estimated to be in the order of $4 billion72 – due to the prolonged closure of the Canadian-American border clearly gave Canadian cattlemen an interest in equivalent (or harmonized) BSE measures. The American companies that dominate the Canadian feedlot, meat-packing, and processing segments of the industry through vertical integration also shared an interest in market opening and regulatory harmonization. Although American-owned packing plants expanded their Canadian operations once the border was closed to shipments of live cattle into the US, their American operations sustained losses.73 Further, as the border remained closed to live cattle and as it became clear that Canadian cattle over thirty months would still not be allowed into the US, Canadian federal and provincial governments announced initiatives to enhance the domestic slaughter capacity and reduce the backlog of older cattle. Although the American-owned slaughter/packing plants in Canada stood to gain from such financial incentives,74 they nonetheless faced the prospect of more local competition for cattle supplies. Meat-packing plants with operations on both sides of the border thus were anxious to have BSE measures (such as SRM removal requirements) harmonized across NAFTA borders.

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But on what standards should BSE risk mitigation measures be harmonized? Should they be ‘science’ or ‘market’ based? Should BSE standards, as American and Canadian (and Mexican) officials argued, be based on the latest scientific risk assessments and in line with developments in the OIE to readjust BSE guidelines in keeping with new understandings of how to manage its risks?75 Alternatively, should BSE risk-mitigation measures conform to what was necessary to access markets by assuring consumers that Canadian (and, later, American) meat was safe? For some industry groups, higher than science-based/ OIE standards were the necessary price of regulation for competition. Others disagreed, wanting to keep their regulatory costs as low as possible. The discovery of BSE in the US complicated the issue of BSE standards. Export markets for US beef closed. The largest lost market was Japan, responsible for one-third of US exports, or $1.4 billion annual sales. Mexico and Korea were smaller markets, each absorbing slightly less than a quarter of US exports.76 Japan insisted that any future imports from BSE-infected countries – Canada and the US – meet its own high standard of 100 per cent testing of slaughtered animals. Japan had adopted this BSE standard to address domestic consumer concerns following local BSE cases. Convergence on the Japanese standard of blanket testing for BSE of all slaughtered animals was a price that some Canadian cattlemen were willing to pay to recapture the Japanese (and US) market. Individual farmers called for every animal to be tested, and the organization representing Canadian cattlemen, the Canadian Cattlemen’s Association, urged the Canadian government to consider testing all animals if it would increase marketing opportunities and competitiveness in third markets.77 The premier of Alberta weighed in to lend his support for this option.78 However, both Canadian and American regulatory officials strongly resisted mandatory testing, arguing that the Japanese standard was not scientifically warranted and was inconsistent with OIE guidelines regarding testing. Officials insisted that testing, unlike the removal of SRMs from slaughtered cattle, in itself was not a health protection measure. Rather, the objective of testing was to evaluate the quality of the BSE-monitoring programs (to keep cattle most at risk out of the food chain). As noted above, equivalence of Canadian-American BSE standards was important to industry groups on both sides of the border. The US

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Meat Export Federation and the American Meat Institute insisted that Canadian regulatory standards not supersede American standards; if they did, American meat might be perceived to be unsafe.79 Canadian meat packing and processing industries wanted Canadian regulatory standards to be set no higher than those in the US.80 Discrepancies in Canadian and American regulations, such as a proposed Canadian requirement to prohibit SRMs from being used in any animal feed and fertilizer, would drive up costs for Canadian-based slaughter plants. They had to refit their plants to remove the SRMs and faced new disposal costs. These costs would be passed on to Canadian cattle producers and give incentives to ship live cattle to American plants not facing the same total feed ban regulation. Such worries about becoming noncompetitive with their American counterparts made the enhanced feed ban contentious when a similar, proposed US government regulation did not move forward to implementation. The American regulation (Rule 2) still had not been finalized when Canada’s own regulation to remove all SRMs from the entire feed, pet food, and fertilizer chains came into effect in July 2007. For its part, the CFIA argued that the ban on SRMs in all animal feed (extending the ruminant-to-ruminant feed ban to include ruminant-tonon-ruminant feed) would ‘more quickly reduce the incidence of BSE in North America by preventing future disease spread.’ It ‘would be supportive of Canada’s strategy to reposition itself as a much more important global exporter of premium meat and meat products, livestock and genetic material.’81 Moreover, the ban was consistent with a proposed international standard before the OIE and required practice in other countries with BSE (the European Union, Japan). When the OIE standard was approved in May 2005 (see below), implementation of the enhanced feed ban was recognized as critical to Canada’s avoiding its ‘unknown or uncontrolled risk’ categorization. Canadian regulatory reform was undoubtedly eased by the financial support of Canadian governments for the cattle and beef packing/ processing sectors throughout the crisis, and their willingness to subsidize the industry’s adoption of regulatory reforms undoubtedly expedited regulatory reform. Financial assistance helped to compensate for income lost with the border closures,82 and subsidies were provided to increase slaughter capacity in Canada and other BSE risk-mitigation measures.83 In advance of the implementation of the SRM regulations (effective 12 July 2007), federal funding was provided to assist abattoirs and processing plants with SRM removal and disposal costs.84

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3.3. National Brokerage Networks The consensus building that was needed to bring Canadian BSE riskmitigation measures into consistency with OIE minimal-risk standards and guidelines was brokered across the two orders of government and industry groups. The federal-provincial division of jurisdiction that had earlier frustrated provincial-territorial-federal harmonization of meat inspection standards proved not to be an obstacle. The 1997 consolidation of food inspection activities had left the CFIA as the single federal agency responsible for risk management at the federal level; BSE is a federally reportable disease and falls under the jurisdiction of the CFIA.85 CFIA officials worked closely with their provincial counterparts and the industry to devise and execute a risk management strategy and to secure the needed regulatory reforms. The formal vehicle for consensus building was the Beef Value Chain Roundtable (hereafter Roundtable), a body that pre-dated the 2003 BSE case and had been created to devise market development strategies. During the BSE crisis, it was expanded from thirty to more than fifty members, who represented all sectors of the beef chain: beef producers (Canadian Cattlemen’s Association, Canadian Beef Export Federation); dairy cattle producers (Dairy Farmers of Canada); beef packers (Canadian Meat Council); the commercial rendering industry (Canadian Renderers’ Association); the feed industry (Animal Nutrition Association of Canada); and the food service industries (Canadian Restaurant and Food Services Association of Canada). Provincial and federal government representatives also sat on the Roundtable. Along with bilateral meetings between government officials and the industry, the Roundtable became the forum through which the CFIA vetted its reforms to enhance BSE risk mitigation measures.86 By no means were members of the Roundtable united on all risk mitigation measures; for example, it took ‘a fairly lengthy process of negotiation’ to secure agreement on removing SRMs from all animal feed.87 Extensive negotiations across the two orders of government and with the industry also surrounded the implementation of the ban of SRMs in all feed. The CFIA is responsible for inspection to ensure compliance with feed ban regulations in federally inspected plants; the provinces, are responsible for provincially regulated plants that sell intra-provincially as well as for SRM waste disposal. The implementation of the ban entailed significant disposal costs for the abattoirs, renders, and packing plants involved, especially for smaller, provincially inspected facil-

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ities, which could not realize the economies of scale possible for plants handling large volumes of cattle. In provinces with large numbers of smaller plants, such as Saskatchewan, the provincial government pressed for federal cost sharing even beyond the 60:40 federal-provincial formula. However, provinces were in accord with the enhanced feed ban regulation as a necessary measure to retain the confidence of international markets.88 The shared intergovernmental interest in maintaining foreign consumer confidence in Canadian animals and animal feed products facilitated intergovernmental agreements, whose effect was substantial progress towards equivalent BSE risk management measures across Canadian provinces.89 Even so, concerns continued that differences in meat inspection systems for provincially and nationally regulated facilities could undermine consumer confidence in the food safety system.90 3.4. Transnational State and Non-State Actor Networks Transnational policy networks of NAFTA government officials – chief veterinarians and those responsible for food safety – were crucial to brokering harmonized measures and reopening borders. Although the real work of regulatory harmonization was done in these technical NAFTA-wide working groups, the transnational networks of representatives of the cattle, meat-packing, meat-processing, and export trade in the NAFTA region were also important to expediting consensus for regulatory harmonization. Cattle producer organizations in the NAFTA partners have personal and organizational ties; indeed, in January 1994 they affiliated to form the NAFTA Beef Working Group.91 These linkages and an aggressive informational campaign in the US by representatives of Canadian cattlemen and beef exporters were crucial to building the ‘trust’ that facilitated reopening the Canadian-American border.92 By the spring of 2005 officials from the three NAFTA partners announced that their BSE measures had been rendered equivalent or ‘essentially the same’ on several matters.93 The Canadian-American border reopened in the summer of 2005 to shipments of Canadian live cattle under thirty months. Some beef products from Canada (including boneless beef from animals under thirty months) had been granted American access in September 2003; now a longer list was approved for re-entry into the American market.94 There were still American prohibitions on imports of Canadian cattle older than thirty months, which

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continued in effect to mid-2007. A proposed American rule change to admit older animals born after 1999 (the date by which the US believed Canada’s 1997 feed ban became effective) was still pending. It had been stalled when additional cases of BSE had been discovered in Canada; the tenth case was identified in May 2007 in a sixty-six-month-old cow. 3.5. New International Standards The harmonization of NAFTA BSE risk mitigation measures was intended to be consistent with developments under way in the OIE, where Canada and the United States actively promoted efforts to bring international guidelines with respect to sanitary measures for trade in animals more in line with advances in scientific understanding, to increase the incentives for countries to foster surveillance of the disease, and to reduce the potential for countries to close their borders to countries experiencing an outbreak of BSE or other disease.95 In May 2005 representatives of the 167 OIE members agreed to new guidelines that considered the relative risk of BSE in a country in terms of the steps it would take to find, report, and control the disease, rather than in terms of the number of cases reported. Three OIE disease risk categories were defined: negligible risk, controlled risk, and unknown or uncontrolled risk.96 The earlier ‘BSE free’ and ‘provisionally free’ categories have been eliminated. As recommended by the OIE in May 2007, Canada and the US fall into the ‘controlled BSE risk’ category; countries in this category have experienced incidents of BSE, but imports from them should resume when exported animals are subject to a permanent identification program and have been born after the effective implementation of a feed ban. The list of low-risk products not requiring BSE-specific trade regulations was also expanded to include, for example, boneless beef from cattle younger than thirty months. The OIE guidelines are voluntary, although countries that adopt them are automatically in compliance with WTO rules regarding trade in animals and animal products. If the guidelines are followed, they will reduce the potential for export markets to dry up for countries with an incident of BSE. To conclude, one outcome of the Canadian – and then American – BSE crises has been greater regulatory harmonization in the NAFTA. Another is that BSE risk mitigation measures are more consistent with the existing state of scientific knowledge about how to prevent and mitigate spread of the disease. NAFTA BSE measures now conform more fully with WTO rules that require SPS measures to be based on scien-

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tific risk assessments and OIE guidelines. This outcome was facilitated by continental integration of the livestock and meat sectors and the shared economic interest within the NAFTA bloc on BSE standards based on scientific knowledge and risk assessments. Canada’s political institutional framework of federalism ultimately posed no insurmountable obstacles to cross-national regulatory harmonization on sciencebased and rigorous standards.97 By contrast, the American institutional framework undoubtedly delayed regulatory reform in the United States – and by extension, the opening of the Canadian border until some twenty-six months after the first BSE case was disclosed in Canada and almost two years after US administrators began procedures to allow imports from a minimal-risk BSE country. The delay can be explained in large part by the American institutional framework and, more particularly, the opportunities it provides for organized interest groups to intervene in the regulatory process and appeal to American courts when they believe regulators are not acting in accordance with administrative laws. The Ranchers-Cattlemen’s Action Legal Fund United Stockgrowers of America, or R-Calf as it is known, successfully exploited these institutional opportunities. On two occasions, in April 2004 and again in March 2005, R-Calf persuaded US judges to grant injunctions to stop actions by the US secretary of agriculture that would have removed American border restrictions on Canadian products. In April 2004 it successfully argued that the USDA had not provided the requisite evidence that Canada was a minimal-risk country. The court injunction R-Calf obtained required American administrators to provide the necessary risk assessment and subject it to comment/review. Having done so, US administrators announced that the final rule to lift the import ban would take effect in early March 2005; R-Calf then persuaded a US judge that the USDA had not followed proper procedures in arriving at its decision.98 The May 2005 injunction ceased to take effect in July 2005 when another court ruled that the specified Canadian beef products and live cattle (under thirty months) allowed entry under the revised US rule posed no safety risk to US citizens and no economic harm to US producers. 4. Conclusion Maintaining consumer confidence in the safety of food products is vital to the profitability of the agri-food sector. The European example suggests that the stakes may be even higher than lost markets and profits when food safety regulatory systems fail and lose consumer confi-

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dence. Isabelle Garzon, for example, cites policy failure in food safety regulation as one contributing factor to paradigm change in EU agriculture. Regulatory failures such as the BSE crisis, she argues, helped the EU paradigm of state assistance to lose legitimacy, the privileged status of agri-food interests and ministries in policy formulation to be dislodged, and state assistance to producers to be made conditional on provision of public goods such as a safe food supply system.99 Canada’s own BSE experience has been quite different, at least as far as domestic consumers are concerned. The discovery of BSE-infected animals has not evoked a backlash against regulatory institutions responsible for food and animal product safety or against producers. On the contrary, consumers’ purchasing behaviour suggests their continuing confidence in the regulatory system. With modifications to policy instruments, this same regulatory system also earned back the confidence of foreign consumers. More broadly, developments with respect to the regulation of animal and food product safety suggest that, in a context of regional and global market integration, the most economically and politically viable policy paradigms are not paradigms predicated on unregulated markets. Rather, the regulation of markets is needed to provide citizens and consumers with assurance that their health and safety are not jeopardized by cross-national and cross-regional trade in agri-food products. Especially for trading nations like Canada, the most economically and politically viable strategy is the one described here as ‘regulation for competition,’ that is, high safety standards that are coordinated across countries on the basis of common normative and cognitive principles. In the case of animal and food product safety, the shared normative principles are health and safety protection and trade liberalization. The shared cognitive principles are scientific knowledge as authoritative, regulatory equivalence (of outcomes), and harmonization (on international standards and guidelines). A strategy of regulation for competition means a preference for international regulatory governance via international standard setting bodies, such as the OIE or the Codex. It also means a predisposition towards regulatory policy harmonization across jurisdictions. The integration of the American-Canadian economies (as it is for livestock and beef) has facilitated progress towards regulatory harmonization inside Canada in the form of equivalent provincial measures to manage BSE risks in Canada (through the implementation of the enhanced feed ban). Integration of the Canadian and American beef and cattle systems

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and Canada’s dependence on the US market have helped to bring about greater harmonization of SPS measures in the NAFTA bloc. Such harmonization has been eased by consensus on the constitutive principles of SPS measures, that is, that they should be science based. Even so, up to mid-2007 the harmonization of BSE risk management measures had not been complete. The failure of the US to move in lockstep with Canada in prohibiting SRMs in all animal feed had created real concerns that Canadian producers and abattoirs had been rendered less competitive with their American counterparts. The Canadian industry and Canadian governments were calculating that these costs would be offset by gains elsewhere through new foreign customers, whose confidence in the safety of Canadian cattle and beef had been renewed by Canada’s rigorous measures. If regulation remains an important instrument in a context of economic and political internationalization, relationships between state and non-state actors have nonetheless changed when it comes to measures to protect the public from food safety risks. Canadian state actors retain substantial responsibility in agricultural and food product safety in terms of setting and monitoring domestic safety standards and participating in transnational networks to establish international regulatory guidelines and standards. At the same time, those who produce, manufacture, and distribute food products have assumed more responsibility for controlling the risks of food-borne hazards and animal diseases. They are also subject to more rules. Identification and traceability systems have been implemented in the livestock sector, for example, as the ‘farm-to-fork’ philosophy has taken hold. As internationalization of agriculture and food markets has proceeded, it has moved in tandem with a model of regulatory governance in which authority and responsibility for food/animal product safety are shared by public and private officials. As noted above, shared public-private responsibility stops short of a market-liberal model that would leave private industry actors far more responsible for food safety regulation. Canada’s domestic institutional framework has necessitated intergovernmental collaboration to overcome the division of jurisdiction over different aspects of food and animal product safety regulation. The consolidation of federal responsibility for risk management activities in the Canadian Food Inspection Agency increased the administrative capacity of the federal government for risk management when the BSE crisis unfolded. Across the two orders of government, intergovernmental networks proved effective in dealing with the crisis. In non-cri-

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sis situations, federal and provincial governments are also cooperating with one another and with industry groups on several initiatives pursuant to the Food Safety and Quality chapter in the Agricultural Policy Framework (2001). The one major gap in a coordinated regulatory framework – and a continuing subject of intergovernmental negotiation – is full harmonization of provincial and federal food inspection standards. The next chapter turns to measures to regulate the risks of genetically modified crops and foods, where efforts to secure cross-national consensus on the appropriate bases for regulation have been far more elusive.

7 Regulating the Risks of Genetically Modified Crops and Foods

We must recognize that modern technology, safely used, is the keystone of modern agriculture.1

In the late twentieth and early twenty-first centuries, the ‘modern technology’ most closely linked to ‘modern agriculture’ in North America has been genetic engineering of plants. Adopting genetic engineering, as the above quote from the Canadian government’s 1989 Growing Together blueprint suggests, was seen as the route to greater profitability and competitiveness. Canadian governments (especially federal) historically invested public funds in productivity-enhancing tools (like new crop varieties) in the belief they would help farmers to become more efficient, productive and profitable.2 Genetic engineering or plant biotechnology was simply the latest such tool. Canadian governments and most Canadian farmers have seen plant biotechnology as a benign technology with real potential to yield economic benefits, as have their counterparts in the United States, the world leader in genetically modified crop acreage. Proponents of the technology see its potential to increase food supply and contribute to environmental sustainability through, for example, reduced application of chemical fertilizers. However, not everyone has shared this outlook. In the late twentieth and early twenty-first centuries, the technology became a potent negative symbol of economic globalization and international regulatory governance. It is also implicated in a debate about the merits of the industrial model of agriculture that developed in the post-Second World War and that in North America is closely tied to the state assistance paradigm. As noted in chapter 2, that model is one of

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large farms that rely on inputs of machinery, chemical fertilizers, animal antibiotics, pesticides – and now genetically modified (GM) seeds – to provide consumers with abundant and cheap food and fibre. These benefits, argue the domestic and transnational networks of consumers, environmentalists, and social activists who have rallied against plant biotechnology, are offset by real and apprehended costs of industrial agriculture’s effects on the environment and human health. Compared with elsewhere, particularly in Europe, the Canadian debate spawned by plant biotechnology has been relatively muted. However, this chapter demonstrates that Canadian policy developments have been affected by global developments and debates regarding the merits of plant biotechnology and its appropriate regulation. It argues that Canadian plant biotechnology policies have been shaped over two different time periods by developments in the international political economy of plant biotechnology. During the first phase, from the early 1980s to 1997,3 the constitutive principles of Canada’s plant biotechnology framework were closely aligned with international guidelines for the regulation of GM products. These principles include the belief that there are no fundamental differences between GM and non-GM products and that scientific risk assessments should be the basis for regulating the risks of GM crops and foods to the environment and human health. During the second period, from 1997 onward, when international consensus on the principles for regulating GM products has evaporated and disparate regulatory frameworks have developed in North America and Europe, Canadian biotechnology regulatory policies remain essentially intact. However, the global debates and policy developments elsewhere have put new issues on the Canadian political agenda and raised the political salience of others such as the labelling of GM foods, the licensing of GM wheat, the scientific integrity of Canada’s regulatory system, and plant biotechnology firms’ patent rights. As concerns have been raised regarding the legitimacy and effectiveness of Canadian plant biotechnology policies, governments have acted to shore up the scientific credentials of regulatory policies and have created consultative mechanisms to examine the broader issues raised by genetic engineering. They have also attempted to strengthen international regulatory governance of GM products consistent with the principles in Canada’s regulatory framework. In accounting for the substance of Canadian plant biotechnology policies, this chapter directs major attention to domestic political economy

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factors: the export dependence of the grains and oilseeds sectors, the integration of the Canadian and American processed-food markets, governing patterns that give agricultural interests a privileged role in agri-food policy development, and a long-standing belief in the postwar state assistance paradigm that links technological innovation with agricultural productivity and profitability. The reliance on export markets has given Canadian crop producers and their governments a strong incentive to support an authoritative international regime with respect to plant biotechnology and to create a Canadian regulatory framework predicated upon its principles. Still, as the example of GM wheat shows, the integration of the Canadian and American agri-food markets (especially for processed foods), alongside the dependence of the oilseeds and grains sectors on offshore markets, has created ambiguity and cleavages within the agri-food sector over appropriate regulatory policies. Throughout the two phases of biotechnology policy developments, the Canadian institutional framework has been sensitive to the preferences of biotechnology plant developers and users, and less hospitable to critics of the technology and the Canadian regulatory approach. The chapter proceeds in four sections. Section 1 discusses the pre1997 phase of policy development, when the international and domestic arenas supported development of plant biotechnology. It describes the close alignment of Canada’s plant biotechnology regulatory framework with international guidelines for the regulation of GM products and the economic circumstances and political context that create incentives for domestic measures to be consistent with American policies and international guidelines. Section 2 examines the post-1997 phase, when international consensus on the principles for regulating GM products has evaporated, environmentalists and consumers have mobilized against GM products, GM policies have diverged across industrialized countries, a schism has opened up between the North American permissive and the EU restrictive GM regulatory frameworks, and trade in GM products has been disrupted across the Atlantic and around the globe. It discusses efforts towards international regulatory governance, the modest success of international institutions in building consensus on GM product regulation, the tension between the UN Cartegena Biosafety Protocol and the WTO-centred trade regime regarding the principles and conditions for trade in genetically engineered products, and the WTO dispute over the EU’s moratorium on GM product approvals.

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Section 3 discusses the feedback effects of international controversy on Canadian plant biotechnology policy development, examining discrete issues of GM food labelling, plant biotechnology firms’ patent rights, the licensing of GM wheat, and the integrity of Canada’s regulatory system for licensing GM products. It outlines the initiatives taken to mitigate criticism of Canada’s GM regulatory framework and notes that they stop short of abandoning its science-based regulatory approach or faith in genetic engineering as a tool of competitiveness. Section 4 concludes. It provides a summary of the argument and examines the political and economic viability of a domestic approach based on international principles/treaties and harmonized with that in the United States. 1. Phase One: Creating a Favourable Regulatory and Investment Climate Plant biotechnology involves altering the genetic material (DNA) of an organism in a way that does not occur naturally by mating or natural recombination.4 Genetically engineered plants are produced when a (pest- or herbicide-resistant) gene is transferred from one plant to another. The expected benefits for farmers of genetically modified plants are increased crop yields, owing to the GM plant’s protection from pests and diseases.5 However, there are potential human health and environmental risks from genetic engineering. Potential risks to human health include the allergenicity or toxicity of the GM product and the possibility of antibiotic resistance. Potential environmental risks include the possibility for a GM crop to be weedy or invasive of natural habitats, become a pest or otherwise harmful to plant health, have negative impacts on other species or wild relatives, and adversely affect biodiversity.6 In the view of the handful of private biotechnology companies who dominate globally, and of the governments who want to attract them, the appropriate regulatory and investment environment is one that meets three conditions. First, it protects the biotechnology company’s intellectual property rights; second, it does not discriminate against the technology; and third, it assures consumers that any potential human health and environmental safety risks from the technology are minimized. These three conditions for plant biotechnology’s success guided the first phase of genetic engineering policy development in Canada. The first condition was met when legislation was passed in 1990 to pro-

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tect the intellectual property of biotechnology (and other plant breeders) by giving them the exclusive right to commercial exploitation of new plant varieties for up to eighteen years.7 Since 1995 and the implementation of the WTO Trade-Related Aspects of Intellectual Property Rights (TRIPS) Agreement, protection of intellectual property rights has been part of the international trade regime. In the 1980s and 1990s Canadian regulators, alongside European and American officials, took a leading role in international organizations like the OECD to create the second and third components of a regulatory framework that did not discriminate against the technology and assured consumers of the safety of genetically modified organisms (GMOs). In 1986 the OECD issued guidelines on how to manage the safety risks of GMOs from the stage of laboratory research to confined, small-scale field trials of GM crops to their unconfined release for commercial planting. In the 1990s the OECD attempted to do the same for GM foods, producing consensus documents that were designed to achieve cross-national regulatory harmonization.8 Canada harmonized its own regulatory approach, as did the United States, with the OECD guidelines. A central principle in the North American and OECD regulatory frameworks is that GM crops and foods are not inherently different from and less safe than their counterparts produced through traditional processes. Further, GM products should be evaluated on their own merits and characteristics, rather than in terms of the process by which they have been developed. Only when a GM plant or food is not substantially equivalent to its conventional counterpart (in terms of molecular structures) should it undergo more rigorous risk assessment. Canada’s 1993 Regulatory Framework for Biotechnology regulates GM plants the same way it regulates all plants with novel traits (PNTs): that is, plants whose characteristics are neither familiar nor substantially equivalent to those of existing cultivated species.9 Biotechnology firms develop GM plants under mandated standards for confinement in laboratories/greenhouses and later field trials; isolation is believed to be necessary to restrict the interaction of the GM plants with the larger environment and to prevent accidental release of plant material. The developer submits data collected during these field trials to the Canadian Food Inspection Agency (CFIA)10 as well as to Health Canada if the GM plant is destined for human consumption. Government officials analyse the data to see if the new trait(s) in the plant have altered the plant’s characteristics and its environmental/ health impacts. In assessing this evidence, government regulators com-

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pare the PNT with conventional plant or food species with a history of safe use or to previously assessed and approved plants with novel traits. If regulators judge acceptable the PNT’s risks to the environment (and animal/human health if the crop will be consumed by livestock or humans), it is eligible for licensing for wide-scale cultivation. Once Health Canada is assured that any potential allergenic or toxic effects or possible increased resistance to antibiotics in the consuming population are addressed, the novel (GM) food can be marketed.11 The development of GM seeds has become concentrated in relatively few companies: in 1995 six companies were responsible for most plant biotechnology research and development.12 This handful of companies also controls the chemical pesticides/herbicides that farmers purchase with their GM seeds. Although farmers clearly have the freedom not to purchase GM seeds, critics of the technology worry that the consolidation and vertical integration in the GM seed-fertilizer supply chain gives biotechnology companies disproportionate market power over those producers who do opt for GM seeds. Economic considerations like the latter do not enter the Canadian decision about whether to license the products of genetic engineering. As in the United States, GM plants and foods are approved in Canada solely on a risk assessment of their safety. Other social, economic, and ethical issues raised by the novel technology are not addressed within the regulatory framework.13 Canadian regulators have argued that these social, economic, and ethical considerations are immaterial to GM product regulation. The primary concern in developing the Canadian regulatory framework has been to reap the benefits of the technology, in part, by minimizing any discrepancies in Canada’s regulatory framework that would create barriers to trade with its most important trading partner.14 Canada’s biotechnology sector has insisted that it not be put at a competitive disadvantage with its foreign (principally American) counterparts. A framework of licensing GM crops and foods solely on the basis of their scientifically determined risks was one such competitive framework; one that paid heed to the broader social issues raised by plant biotechnology was not. Existing patterns of governance allowed this narrow regulatory framework. First, there was no wide public or parliamentary debate prior to the introduction of genetically engineered plants and food for planting and commercial sale in Canada because no new legislation specific to genetically engineered plants and foods was introduced. Rather, the regulatory framework relied on existing statutory authority, with

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regulatory changes made to existing statutes to clarify their application to biotechnology products.15 Second, in the absence of new legislation, policy development took place within a narrow and closed policy network of biotechnology developers, representatives of the major farm organizations, government officials, and scientific experts, all of whom preferred a science-based approach consistent with international (OECD) guidelines. The government did hold a ‘multistakeholder’ workshop in 1993 that included not only industry representatives but also representatives of consumer, environmental, and health groups. Another workshop in 1994 was devoted to the issue of GM food labelling. Critics say neither workshop considered issues beyond the safety of GM foods and both ignored their social, economic and ethical dimensions.16 One significant consequence of regulating novel food (GM) products on the basis of existing statutes and revised regulations was to keep environmental safety regulatory authority in the hands of agriculture officials. Agriculture Canada successfully warded off a challenge for the transfer of this authority to Environment Canada following the adoption of the Canadian Environmental Protection Act in 1988.17 Because provinces also deferred jurisdiction to Ottawa, the agri-food sector and plant biotechnology firms had, for the most part, a friendly locus of power on which to concentrate their lobbying efforts. However, it was not a single locus of power, because Health Canada also has authority. Other public policies, including protection of intellectual property rights, promoted plant biotechnology as a competitiveness strategy. Federal funding for public and private research on GM crop plants was also provided from the early 1980s onward. In addition, some provinces have invested significant public expenditures in plant biotechnology research and development.18 This facilitative Canadian regulatory and investment environment had the intended effect of making the products of genetic engineering available to the country’s farmers in a timely fashion.19 The sentiment voiced by the Canadian agriculture minister in 1998 that GM crops were the ‘ticket’ to doubling Canada’s agri-food exports by the year 2005 did not seem unreasonable.20 Canadian farmers sowed herbicidetolerant and insect-resistant GM crops when they were licensed for cultivation from 1995 onward. Their planting of GM crops climbed from 100,000 hectares in 1996 to 5.8 million hectares in 2005,21 behind GMsowed acreage only in the United States (50 million hectares), Argen-

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tina (17.1 million hectares), and Brazil (9.4 million hectares). 22 Canola is Canada’s most important genetically engineered crop.23 Canadian canola growers, who export half their crop, produce about two-thirds of it using GM varieties. The two other significant Canadian GM crops are soybeans and corn. About 40 per cent of total Canadian soybean and corn acreage is in GM varieties, although the figure varies from year to year.24 However, Canadian and American enthusiasm for plant biotechnology has not been matched elsewhere around the globe. The production of GM crops is concentrated in five large countries, and China is now ahead of Canada as the fourth of the five largest GM crop growers. Rich food-importing countries have not embraced GM crops or foods. Of these, the most important sceptics are found in the member countries of the European Union. 2. Phase Two: Contestation and Cross-National Regulatory Divergence From 1997 onward, the international context of genetic engineering shifted dramatically. As one observer notes: ‘Just when the science and industry of biotechnology began to take off, the technology became a lightning rod for local, national, and transnational conflicts over trade, agriculture and the environment.’25 As the first GM crops were harvested in 1996 and entered commercial channels, the public indifference that had existed in their early stages of development began to be replaced by suspicion and resistance. The negative reaction to GM crops and foods that began and has been especially sustained in several European countries has also manifested itself in Asia and elsewhere around the globe. Analysts single out different factors to account for the backlash against plant biotechnology and science-based regulatory frameworks. In Europe, these factors include a lack of trust in regulators as a result of the British BSE debacle and other regulatory failures; the equation of GM crops/foods with the refuted ‘industrialized model of agriculture’ (which was also implicated in the BSE fiasco); the failure of consumers to perceive any direct benefits from the first generation of plant biotechnology, which had concentrated on improving plant varieties for producers; and evidence of ‘contamination’ from GM crops; and resistance to ‘America’s imperial power.’26

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The success of the advocacy network of environmental and other civil society organizations against biotechnology can also be linked to opposition to economic globalization, as symbolized by transnational biotechnology companies. Insofar as the rules and norms of international treaties – to protect intellectual property rights, for example – are seen to reflect biotechnology companies’ interests and political influence, the reaction against plant biotechnology is also a reaction against global governance (described here as international regulatory governance via the rule-enforcement powers of the WTO).27 The differing reactions of North Americans and Europeans to genetic engineering reflects two different interpretive frameworks across the Atlantic with respect to not only the benefits/risks of genetic engineering but also the capacity of science to determine its risks and to provide an authoritative basis of regulation. Sheila Jasanoff describes this difference as one of different ‘civic epistemologies’; Grant Isaac believes it is ‘scientific’ versus ‘social rationality.’28 Whereas science is viewed as value free in North America and a powerful source of authority for regulation, it enjoys no similar status in Europe, and regulators must therefore rely on mechanisms of citizen input – democracy – to justify risk regulation processes and outcomes.29 Whereas the North American framework regulates only the scientifically determined risks of GMOs, there are social demands in Europe that other considerations relating to the overall benefits of the technology to society should be taken into account. The adverse reaction to plant biotechnology and the capacity of mobilized opponents to question science’s capacity and authority to regulate its risks/benefits for the good of society have had consequences for policy development across the globe. Governments have moved to regulate more stringently the novel technology. Their initiatives have been uncoordinated, however, and the conditions under which GM products are licensed for sale have subsequently diverged in their content and outcomes across countries. Efforts in international forums like the OECD to bring greater cross-national harmonization of GMO regulatory measures through international guidelines and standards have had limited results. Growing concern about the environmental effects of GMOs has played a role in the signing and ratification of a multilateral environmental agreement to regulate their transboundary movement. The result is a fragmented and incoherent international regulatory environment for GMO regulation.

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2.1. Transatlantic Regulatory Divergence Although EC-member officials also participated in the OECD discussions to formulate guidelines on regulating GMO risks, the domestic political and institutional context in the European Community differed significantly from that in Canada (and the United States). Pervasive public unease over plant biotechnology, an environmental movement leery of the technology and sufficiently organized to wield considerable political influence, and a political-institutional framework sensitive to public opinion and environmental concerns resulted in legislation specific to GMOs in 1990.30 From its inception, the European Community/Union (EC/EU) approach to regulating novel foods and feeds (GM products) differed from that in North America.31 The major departure is that the EU treats genetically engineered crops and foods as different from traditional counterparts for regulatory purposes.32 The 1990 legislation, Directive 90/220, required that GMOs be regulated on a case-by-case basis to evaluate their potential risks to the environment and human health before they can be placed on the market or released into the environment.33 Because every GM product is subject to the same risk assessment, not just those that are not ‘substantially equivalent,’ analysts describe the distinction as one between regulating the process of genetic engineering (in the EU) and regulating GM products (in North America). The EU process-based approach had consequential feedback effects over time. It was burdensome and time consuming for biotechnology developers, and the opportunity for political officials (if they were sufficiently in accord) to waylay regulators’ decisions, led to few GMO approvals. By 2002 the European Union, the world’s largest foodimporting bloc, was home to less than 1 per cent of GM crop acreage.34 The regulatory framework also conveyed the view that genetically engineered crops and food pose distinctive risks. This view was held by a significant proportion of the European public at the time the legislation was debated and implemented – indeed, it accounted in part for its precautionary character – and it persisted over time.35 A combination of developments, of which the major ones have been outlined above, conspired after 1996 to erode the legitimacy of the EU regulatory framework and to give EU governments incentives to reform it. A well-publicized environmental boycott of American GM soybeans and corn when they arrived in a European ports in mid-1996 struck a chord with consumers and they turned against GM foods.36 In

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response, several food manufacturers, such as Kellogg’s, Nestlé, and Kraft, said they would eliminate GM ingredients from their European products. As well, some UK retailers banned GM foods from their shelves.37 Confronted with environmental and consumer opposition to GM products, some member states refused in 1998 to approve new applications for release of GM crops and prevented those already approved in the EU from being cultivated in their country. The EU’s Council of Ministers formally halted all new approvals of GM products in June 1999, pending reform of existing legislation to deal with outstanding concerns. The EU’s de facto moratorium on approval of new GM products blocked the entry into the then fifteen EU member countries of all Canadian GM crops that had not already received regulatory approval there. GM canola was most affected by the EU ban on licensing new GM applications; Canadian exports of canola to the EU dropped to $1.5 million from an average $185 million.38 American GM products – corn and soybeans – were likewise barred from entry into the EU.39 When bilateral diplomacy and transnational networks failed to resolve these differences and build consensus on appropriate regulatory measures,40 Canada, the United States, and Argentina brought a formal case against the EU to the World Trade Organization in early 2003. They claimed that the EU ban was in violation of several WTO agreements and in September 2006 the WTO agreed. It ruled the EU moratorium illegal and ordered the EU to bring its measures in line with the SPS Agreement.41 The EU Commission had already begun to approve new GM product applications, but continued to face resistance from some member countries, who were reluctant to have GM products licensed for sale in their territory. In the interim, by April 2004 the EU had implemented changes to its GM regulatory framework to build public confidence and to make the framework more consistent with ‘new scientific understandings.’ 42 Besides the requirement of mandatory case-by-case risk assessment of each new GM product to determine its safety, the EU now requires GM products to be traced from ‘farm to fork’: that is, through record keeping, testing, and monitoring at all stages of agricultural production, food processing, and distribution. Regulations also include more comprehensive labelling provisions for foods containing or derived from GM products. GM feeds also were included in these labelling and traceability provisions for the first time.43 Countries such as Canada and the United States that want to export GM crops and products containing

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GM ingredients to the EU have to comply with its traceability and labelling provisions. That requirement will mean domestic regulatory changes in exporting countries to mandate segregation of GM and nonGM crops, implementation of detection systems, and labelling of products that contain GM content above the EU threshold level.44 The divergence of regulatory provisions with respect to the licensing and labelling of GM products across the world’s two largest agri-food powers is paralleled elsewhere.45 Many developing countries have not adopted regulations specific to GM food, but developed countries such as Australia and Japan have regulatory frameworks that fall somewhere between the Canadian/American and European Union approaches.46 As suggested above, this regulatory divergence attests to a transatlantic – and, arguably, global – controversy regarding the relative costs and benefits of genetic engineering and the regulatory framework that is most suited to balancing its costs/benefits.47 This controversy has plagued and handicapped efforts to establish an authoritative international regulatory regime for plant biotechnology. 2.2. Gaps and Inconsistencies in the International Agreements for Regulating Biotechnology There are gaps and inconsistencies in the international institutional architecture for regulating genetically modified products and their trade. The gaps are caused by the inability of international bodies to establish a consensus on how to regulate the technology; the inconsistencies are a result of the ratification of a multilateral agreement specific to GMOs that is at odds with WTO agreements. Chapter 6 outlined the WTO treaties and standard-setting bodies relevant for regulating GMOs. As noted, the SPS Agreement requires that countries base their SPS measures on scientific risk assessments and international guidelines where they exist, and it mandates the Codex Alimentarius Commission (Codex) to establish international standards and guidelines. To date, the Codex has had only partial success in fulfilling this mandate. The Codex Ad Hoc Intergovernmental Task Force on Foods Derived from Biotechnology has secured a consensus on guidelines for safety assessments and risk analysis of genetically modified foods.48 However, the Codex Committee on Food Labelling (hereafter Labelling Committee), chaired by a Canadian official, has been unsuccessful in establishing guidelines and standards for the labelling of GM food.49

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Since 1994, when it first began to consider the issue of GM food labelling, the Labelling Committee has secured agreement on only the need to label GM foods that are substantially different from their non-GM counterparts and that raise health concerns (such as an allergic reaction). It has not been able to bridge the difference between countries that oppose the labelling of GM foods to indicate their method of production and those that support extensive labelling of GM food to provide consumer information unrelated to health and safety effects. In the first camp are Canada and the United States; in the second camp are approximately thirty countries, including the member countries of the EU.50 Undoubtedly, this stalemate in the Codex has been prolonged by the fact that since 1995 Codex standards have acquired a new legal authority as reference points for national standards, even while the organization strives to adhere to a unanimity (consensus) decision-making rule. Countries that adopt Codex standards as their domestic standards are automatically in compliance with international law; those that do not adopt them face potential trade action if they cannot justify their domestic standards by reference to a scientific risk assessment. There is thus a natural inclination for a country to block the establishment of a new standard at the Codex when it thinks the standard runs contrary to its economic interests and consumer preferences.51 At the same time as Codex has failed to resolve the labelling issue, the state of international law with regard to trade in genetically modified products has became more complicated and incoherent as a result of the implementation of the United Nations’ Protocol on Biosafety. Signed in Cartegena in December 2000 by the Conference of Parties to the 1992 United Nations Convention on Biological Diversity and in effect since September 2003, the goal of the Biosafety Protocol is to protect biodiversity by managing the environmental risks of transboundary movements of living modified organisms (LMOs). The Biosafety Protocol distinguishes between LMOs destined for the food chain (as food or feed, or for processing) and LMOs that will be released into the environment (seeds that will subsequently be sowed). Firms exporting GM seeds are required to notify the importing country of any first-time cross-border shipment and to obtain its approval. The importing country may refuse the LMOs if it determines they pose unacceptable risks. This ‘advanced informed agreement’ clause does not apply to the 90 per cent of traded LMOs that will be used as food or feed or processed.52 However, exporters of these commodities must label them as ‘may contain LMOs.’53 A subsequent insertion to the

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treaty in February 2004 allows countries to require a description of the ‘transformation event code’ of the LMO being imported. Such a description is intended to make it easier for the importing country to assess liability should LMOs be imported illegally and cause damage to human health, organic production, or the environment. Canada has signed but not yet ratified the Protocol. Its delay can be attributed to pressure brought by the Canadian farm community and export traders who fear the Protocol will raise their costs of exporting food products by requiring them to implement identity preservation systems. Several provisions in the Biosafety Protocol are potentially in conflict with the WTO SPS Agreement.54 The Biosafety Protocol allows countries to consider ‘socio-economic factors’ (for example, the impact on local farmers) in determining whether to accept LMO imports, whereas the WTO SPS Agreement does not. The other major difference is that the Protocol allows countries to use the ‘precautionary principle’ to block imports of a genetically modified product if they fear it could be harmful to biological diversity. As defined in the preceding chapter, the precautionary principle advocates that when potential harms are not yet ‘precisely understood or subject to formal [scientific] analysis,’55 policy makers have an obligation to act in a way that avoids harm to the environment or human health. The principle provides a rationale for regulatory action when there is evidence of a risk to human (or animal or plan) health, but the scientific data to demonstrate that risk are insufficient or incomplete. The SPS Agreement also allows countries to act in accordance with the precautionary principle, but only on a temporary, not a permanent basis. The WTO Biotech Products dispute potentially pitted the Biosafety Protocol and the WTO SPS Agreement against one another. Canada, the United States, and Argentina argued that the EU moratorium, (as well as the failure to approve specific GM products and member states’ ‘safeguard’ prohibitions on specific biotech products that had been approved at the EU-wide level), contravened the SPS Agreement.56 The EU argued that the SPS Agreement did not apply and that the disputed measures and alleged moratorium were environmental measures and therefore should be judged against the provisions of the Biosafety Protocol, including its precautionary principle. The WTO Panel confirmed that the regulation of GM products for trade purposes falls within the scope of the WTO SPS Agreement and that the EU had acted illegally in not respecting its obligations under the

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agreement to (a) act without undue delay to deal with applications to approve GM products (and thus end the moratorium) and (b) support the GM product-specific bans and safeguard measures with a scientific risk assessment. The WTO Panel noted that it had no obligation to take the Biosafety Protocol into account when making its ruling because two of the WTO complainants (the United States and Argentina) were not parties to the Protocol. International law states that countries cannot be bound by the provisions of treaties to which they are not parties. Even so, the Panel noted that it had the option to consider the relevance of the Biosafety Protocol and concluded it was not relevant in this case. In sum, there is no coherent and legitimate international regulatory regime for GM products. The WTO Panel in Biotech Products did not address several outstanding questions that lie at the root of GMO controversies. It examined only the EU’s application of its regulatory procedures and did not examine whether GMOs are safe or whether they are ‘like’ or ‘substantially equivalent’ to their conventional counterparts.57 And the ruling is unlikely to silence the transnational advocacy network that seeks a more judicious balancing of environmental and trade concerns in international regulatory governance. 3. Contested Canadian Governance of Plant Biotechnology The international controversy that surrounds GM crops and foods has rippled through to shape policy debates in Canada. Several issues overlooked during the first phase of Canadian policy development have been put on the domestic agenda. They include (a) the asymmetrical power of multinational biotechnology developers versus farmers and even governments; (b) the scientific integrity of Canada’s regulatory oversight for assessing the potential human health and environmental risks of GM products; (c) consumer choice regarding GM foods and their labelling; and (d) the exclusion of economic (cost-benefit) and social and ethical considerations from decisions to license GM crops. As these issues have gained more attention, new actors in the form of environmentalists, anti-globalization advocates, and parliamentarians have entered the plant biotechnology policy community. And some nonstate actors, principally export-dependent farmers, have had reason to second-guess the science-based Canadian regulatory framework in the wake of the international backlash of foreign consumers to GM crops/ foods. Faced with growing controversy, the Government of Canada issued

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the Canadian Biotechnology Strategy in 1998. It did not alter in any fundamental way Canada’s regulatory approach to plant biotechnology, but it did create the Canadian Biotechnology Advisory Committee (CBAC) to advise the government of Canada on social, ethical, regulatory, economic, health, environmental, and scientific considerations of biotechnology policy. Until the CBAC was disbanded in May 2007,58 its members, experts external to government and drawn from diverse backgrounds, had the additional mandate of enhancing public awareness of the technology and facilitating ‘an open, transparent national conversation on key issues’ related to its development and application.59 The CBAC attempted to provide Canadians with an opportunity to discuss the social and ethical concerns raised by plant biotechnology that are not currently taken into account in the decision to license GM products. It issued a consultation document that served as the focus of discussion in a series of workshops and internet discussions during 2001 on GM food. The success of this consultative exercise was impaired by a boycott initiated by the vast majority of environmental and public interest non-governmental organizations, who argued that the remit of the CBAC was too narrow and lacked independence from government.60 In 2003 the CBAC issued a ‘dialogue tool on genetically modified foods and feeds,’ whose premise was that different biotechnology products are more or less acceptable, depending upon knowledge about their risks and societal views.61 At the same time, the advisory committee reiterated that GM crops and food should continue to be approved solely on the basis of scientific assessments. There is little evidence that the dialogue tool was useful in engaging the Canadian public in a discussion about the broader issues raised by biotechnology. However, the CBAC did serve as a forum in which those inside the biotechnology policy community could discuss issues around GM products.62 Critics have turned to the judicial and parliamentary systems to champion neglected issues of direct relevance to biotechnology regulation. As they have done so, the Government of Canada has often found itself on the defensive and more than once has ceded to non-governmental actors the political task of consensus building around controversial matters. 3.1. Private Patent Rights versus Farmers’ Rights: Monsanto Canada Inc. v. Schmeiser The issue of the rights of farmers versus those of plant biotechnology companies is one that is raised around the globe. Companies like Mon-

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santo, which develop GM seeds/crops also produce the herbicide that kills plants/weeds without killing the herbicide-resistant GM crop. Farmers who purchase the GM seed are required to sign a Technology Use Agreement binding them to use the seed to plant a single crop, to sell the crop to a commercial purchaser authorized by Monsanto, and not to retain any seed for replanting or inventory. These contractual requirements around GM seeds have elicited a strong reaction from anti-globalization activists, environmental groups, and critics of largescale farming. Internationally, these resisters of plant biotechnology include most prominently the French farmer, José Bové, and the environmental group Greenpeace. In Canada, they include environmental groups; the anti-globalization group Council of Canadians and Percy Schmeiser, a Saskatchewan farmer. Schmeiser’s litigious struggle with Monsanto Canada was ultimately unsuccessful, but it did focus attention on the issue of biotechnology companies’ obligations with respect to the environmental effects of their technology. Schmeiser became involved in litigation with Monsanto Canada in 1998. The biotechnology company alleged that the farmer had planted a genetically modified canola, patented by Monsanto, without having first purchased the seed from Monsanto, signed the Technology Use Agreement, or paid the required acreage fee. Schmeiser defended his actions, arguing that the planted seeds were his, retained from the previous year, when the Roundup Ready canola had accidently got into his field and survived in a roadside patch sprayed with the herbicide Roundup. In court, Monsanto Canada produced evidence that 95–98 per cent of the 1,000-acre canola crop that Schmeiser harvested in 1998 was made up of the Roundup Ready plants. This amount, experts testified, ruled out the possibility that the seed had been carried by the wind or survived over the winter to germinate. The outcome of the case turned on the extent of Monsanto’s patent rights. Monsanto sought protection for the genes and the modified cells in its Roundup Ready canola. In March 2001 the Federal Court of Canada ruled that Schmeiser had infringed Canada’s Patent Act when he knew or ought to have known that he was using a patented invention without permission.63 Schmeiser’s submission to the Federal Court of Appeal was unsuccessful. Its September 2002 ruling upheld that of the lower court: Schmeiser knew there was Roundup Ready canola in his field, did not get rid of it, and illegally used Monsanto’s patent when he planted the GM seed the next year. The Federal Court of Appeal also upheld the lower court’s award of $172,832 in costs and damages to be paid by Schmeiser to Monsanto.

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The outcome of Schmeiser’s appeal to the Supreme Court of Canada also turned exclusively on Monsanto’s patent rights. In a split decision (5:4), the court upheld, in Monsanto Canada Inc. v. Schmeiser on 21 May 2004, that Schmeiser had violated Monsanto’s patent on canola containing the Roundup Ready gene by actively cultivating Roundup Ready canola without a licence.64 The Supreme Court dismissed the Federal Court of Appeal’s award of costs and damages to be paid to Monsanto. The majority of the Supreme Court justices claimed to stand by its earlier ruling in 2002 in Commissioner of Patents v. President and Fellows of Harvard College that higher life forms cannot be patented. In Harvard College, the higher life form was an animal (mouse); in Schmeiser, it was a plant. They ruled that even though a plant is a higher life form, a gene in a plant can be patented, thereby giving the patent-holder rights over the plant's use.65 The Supreme Court ruling was hailed by Monsanto Canada as sending ‘a very significant message’ that Canada welcomes and protects agricultural innovation.66 Those who had intervened on behalf of strong intellectual property rights – the Canadian Canola Growers Association; Ag-West Biotech, representing Canada’s 400 biotechnology companies; Biotech Canada; and the Canadian Seed Trade Association – also applauded the decision. By contrast, critics of genetic engineering called on the Government of Canada to pass legislation to clarify farmers’ rights (to save seeds, for example) and a biotechnology company’s obligations (regarding environmental contamination) as well as to prevent genes from being patented and becoming private intellectual property. These critics included other interveners in the case: the National Farmers Union, the Council of Canadians, and the Sierra Club of Canada.67 The Canadian courts refused to consider a number of other issues that Schmeiser and his supporters raised. One is the property rights of farmers, including the right to keep companies from entering their fields to take tests without the owner’s permission. (Monsanto had not obtained permission for all its field tests.) A second is the onus on the farmer to prove that his/her crop was contaminated. A third is whether a farmer is guilty of infringing the patent merely by growing the crop, regardless of whether he takes advantage of its special traits. A fourth is the right of a farmer to grow a patented seed if it ends up on his land unintentionally. And a final issue is the responsibility of the biotechnology developer for genetically modified seed contamination as these plants accidentally spread to other fields. These outstanding issues

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have led one Canadian lawyer to describe the Schmeiser ruling as ‘the first stage in what is likely to be a long legal battle’ because ‘with legal rights come obligations.’68 A second case represents an effort to clarify the obligations of biotechnology companies with regard to ensuring the environmental safety of their intellectual property. In 2003 the Saskatchewan Organic Directorate brought legal action against Monsanto Canada, claiming Roundup Ready canola plants have contaminated their fields, destroyed markets for organic canola, and precipitated losses estimated at $14 million. They argue that because the Supreme Court has ruled that Monsanto owns the Roundup Ready gene, it is also liable for any patented material that escapes from fields in which it was supposed to be contained.69 A Saskatchewan lower court denied certification of a class action suit, as, on appeal, did the Saskatchewan Court of Appeal on 2 May 2007.70 3.2. (Lack of) Scientific Integrity and Potential Conflicts of Interest The adequacy of Canadian regulatory procedures for assessing the risks of a novel technology like genetic engineering has been repeatedly questioned by organized environmentalists, academics, and public interest groups. Their concerns were vindicated in a 2001 report of an Expert Panel of the Royal Society of Canada commissioned by the Government of Canada. It sought the Royal Society’s advice on the Canadian regulatory system and the scientific capacity required to ensure the safety of new products developed through plant biotechnology. The report of the Royal Society Expert Panel, entitled Elements of Precaution: Recommendations for the Regulation of Food Biotechnology in Canada, found significant and numerous deficiencies in existing riskregulatory procedures. It criticized the failure of Health Canada and the CFIA to reveal the data on which their regulatory decisions are based, the absence of an independent review of data, and the inadequate consultation of the expert scientific community in the design and execution of testing regimes for GM organisms. The report faulted provisions in existing regulations that protected developers’ confidentiality and compromised the public transparency of scientific data and the scientific rationales on which regulatory decisions are based. Concluding that GM plants were being approved without sufficient research to appraise their environmental impact, the Expert Panel warned that the regulatory system did not warrant Canadians’ confidence.71

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An important part of the Expert Panel’s critique was based on Canadian regulators’ use of the concept of substantial equivalence, which, as noted earlier, was incorporated in 1993 in OECD guidelines for regulating novel foods: ‘If a new food or food component is found to be substantially equivalent to an existing food or food component, it can be treated in the same manner with respect to safety.’ The Expert Panel observed that government regulators were using the concept of substantial equivalence to exempt novel food from a full risk assessment. They were assuming that the changes introduced into the organism (other than those directly attributable to the new gene) were harmless rather than scientifically demonstrating that they posed no more risk to health or the environment than the conventional counterpart. The Expert Panel concluded that the practice of not subjecting novel foods to risk assessments ‘was scientifically unjustifiable and inconsistent with precautionary regulation of the technology.’72 Several of the Panel’s recommendations were consistent with a more precautionary approach to regulating the products of genetic engineering. The Royal Society also pointed to two potential conflicts of interest in the Canadian GM regulatory system. The first is the dual mandate that regulatory agencies have to promote the development of agricultural biotechnology as well as to regulate it. Zeal in promoting the technology and interest in capturing its economic benefits could lead to downplaying its risks and costs. This criticism is fuelled by the ample evidence that the Government of Canada has very close ties to the biotechnology industry and invests millions of dollars in it.73 The conflict of interest charge was denied by the Government of Canada on the grounds that two discrete organizational entities within the CFIA are responsible for safety evaluations and promotional activities. The second potential conflict of interest is within the scientific community, where ‘entrepreneurial interests in resulting technologies and the increasing domination of the research agenda by private corporate interest’ make it difficult for scientists to be disinterested.74 Both conflicts of interest, in its view, ‘compromise the integrity of regulatory science and decision making.’75 The solution proposed by the Expert Panel to eliminate the second conflict of interest was an independent panel of experts to review the data and rationales upon which risk assessments and regulatory decisions are based. The Government of Canada rejected this recommendation, no doubt because of its commitment to ensuring the confidentiality of developers’ data. The Expert Panel’s report garnered media attention and provided

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fodder for critics of Canada’s GM regulatory framework. A subsequent report, issued two years later, by the Canadian Biotechnology Advisory Committee also drew attention to the weaknesses in Canada’s regulatory framework by reiterating many of the criticisms of the Expert Panel. This report called for greater scientific rigour and transparency in Canadian regulatory policies.76 It urged more involvement of outside experts in risk assessments of GM products, clearer information on how GM products are regulated, and public disclosure of the data on which safety assessments are made. It echoed the recommendation in the Royal Society report for study and surveillance of the long-term effects of GM foods and products as well as use of a precautionary approach that would presume that new technologies are not safe ‘unless there is a reliable scientific basis for considering them safe.’77 These external reports undermined the credibility of the scientific credentials of Canada’s GMO regulations and put the Government of Canada on the defensive. It announced it would make changes to enhance the integrity of its regulatory science. It issued an ‘Action Plan’ in November 2001 and committed itself to providing an annual progress report on its implementation.78 The ‘Action Plan’ proposed reforms to provide greater transparency of the regulatory process and decision documents, greater input from the expert scientific community in the development of regulations and guidelines, and initiatives to inform the public of regulatory developments.79 The 2000 federal budget provided funds for CFIA and Health Canada to build ‘biotechnology capacity’ by hiring more staff scientists, conducting research into the long-term environmental (and economic) effects of genetically engineered crops, and developing and improving scientific assessment tools.80 And in July 2003 the government issued a set of guiding principles for applying precautions to science-based decision making in federal regulatory activity, including protecting health and safety and the environment.81 In a 2006 analysis, Peter Andrée concludes that although the Government of Canada made some efforts to implement the recommendations of the Royal Society Expert panel, it ‘continues to fall short of meeting the RSC Panel’s expectations in key areas, including food safety, environmental assessment, peer review, transparency, and monitoring and surveillance.’82 Even while Andrée laments what he sees as an unwillingness on the part of the government to accept the degree of precautionary scrutiny of GMOS called for by the Panel, there is some evidence that the government of Canada is taking a more precaution-

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ary approach to regulation of the newest products of genetic engineering: plants engineered to produce non-food products such as pharmaceutical and industrial products as well as GM fish and GM animals. The first of these, plant molecular farming, poses real hazards to food crops in the absence of efficacious segregation and containment systems to prevent contamination of food crops. The Canadian government has moved sufficiently slowly to establish a regulatory framework for these products to prompt criticism from biotechnology companies and the threat that they will ‘go elsewhere.’83 3.3. Consumer Choice and GM Food Labelling Consistent with international guidelines and the practice elsewhere, Canada requires GM foods that raise health issues, such as compositional or nutritional changes, to be labelled. At issue is whether consumers have a right to know when they are consuming GM foods that do not raise health issues. This concern gained political salience in Canada from the late 1990s onward, undoubtedly fuelled by EU legislation as early as 1997 to require foods containing genetic engineered products to be labelled as such. Organizations such as Greenpeace, the Sierra Club, and the Council of Canadians argue that the principle of the consumer’s right to choose must be upheld and it can only be upheld, if the consumer also has the labelling information to know which foods are GM and which are not.84 The Canadian government has resisted such calls for labelling as impractical, expensive, unnecessary, and misleading. Validated detection methods for testing the presence of GM material are not widely available or proven either in Canada or internationally. Further, mandatory labelling will add costs throughout the food chain, even while suggesting safety concerns when none have been shown to exist. When food retailers and distributors themselves came under pressure to carry products with labels referring to their GM content (or GMfree status), the Canadian Council of Grocery Distributors called on the Government of Canada to join hands with it and establish a committee to propose specific guidelines for voluntary labelling of GM foods that would be ‘meaningful, credible and enforceable.’ The task was given to the Canadian General Standards Board and, more specifically, to the Committee on Voluntary Labelling of Foods Obtained or Not Obtained through Genetic Modification. Established in September 1999, the committee comprised more than fifty individuals, drawn from the federal

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government, consumer and farm organizations, food processors and retailers, and biotechnology seed developers. The Government of Canada’s strategy of delegating the task of securing a consensus on voluntary labelling standards to a committee dominated by non-state (industry) actors did not expedite resolution of the issue. Organizations sceptical of GMOs (Greenpeace, organic growers, the Council of Canadians, and the National Farmers Union) refused to sit on the committee because its mandate excluded mandatory labelling and it was housed in a private body. Deeply divided over several matters, the labelling committee was incapable of reaching agreement for several years. An exasperated Lyle Vanclief, as the responsible minister, extended the committee’s funding in early 2003 with a public warning ‘to get cracking.’85 When the committee finally reached agreement in early 2004 on a voluntary standard that would apply to only a circumscribed range of GM products, it did so without the support of the Consumers Association of Canada. The CAC had earlier withdrawn its representatives from the labelling committee, reversing its previous support for voluntary labelling. After protracted debate, the labelling committee opted for voluntary labelling. The lack of international standards, guidelines, or recommendations on labelling GM food and feed products, in its view, made voluntary labelling the economically viable option. The Canadian government, farm and commodity organizations (with the exception of the NFU), and food manufacturers and retailers saw voluntary labelling as the route to appease labelling advocates while safeguarding American markets. The United States government and its biotechnology and food manufacturing sectors have opposed mandatory labelling (although they took initiatives towards voluntary labelling), and Canadian agri-food officials and exporters worried that mandatory labelling in Canada could place both trade and investment (with the United States) at risk.86 Trade officials also warned that mandatory labelling could be challenged under NAFTA as a restrictive trade barrier. Mandatory labelling of GM foods in Canada also would require US food imports containing genetically modified material (estimated to include 60–70 per cent of multi-ingredient food products) to be labelled. Were Canada to erect such a trade barrier to US food manufacturers, government officials testified in early February 2002 to the House of Commons Standing Committee on Health that Canada would face a retaliatory trade action. In addition, food manufacturers, farmers, and food exporters argued

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that mandatory labelling would drive up their costs of doing business and put them at a significant disadvantage vis-à-vis foreign competitors.87 The Food and Consumer Products Manufacturers of Canada said that its member food manufacturers and retailers would stop using genetically modified corn, soya, and canola in their manufactured food products if labelling of these products were mandatory. Their research had persuaded them that consumers see labels as a health and safety warning and fully a quarter of Canadians would look for non-GM alternatives. Canadian food manufacturers buy 45 per cent of Canadian agricultural commodities and account for 80 per cent of the food in Canadian grocery stores.88 The economic costs for the agrifood sector – particularly for producers – would be considerable were Canadian food manufacturers to source their products outside Canada. The principle of consumer choice stands in opposition to these economic calculations and concerns about the impact on the Canada-US trading relationship. Public opinion polls consistently show that a strong majority of the Canadian public supports compulsory labelling of GM foods.89 Two opposition parties, the NDP and the Bloc Québécois, took up the cause of consumers’ right to know and to choose, publicizing and politicizing the issue of mandatory GM food labelling. Individual members of these parties introduced private members’ bills, raised the issue during Question Period, and occasioned an all-day debate on the matter.90 The most significant threat to the Liberal government’s preference for voluntary labelling was presented by one of its own backbenchers, Charles Caccia. Caccia’s private member’s bill (Bill C-287) required mandatory labelling of GM foods. In the run-up to the vote on the bill on 16 October 2001, Alan Rock, the health minister, announced his support for mandatory labelling; in his view, Canada needed to catch up to Europe, Japan, Australia, and New Zealand, where mandatory labelling rules were in effect or coming into effect. Rock was roundly opposed by his ministerial colleagues responsible for agriculture, international trade, and industry. Farm organizations and biotechnology organizations urged MPs to vote against the bill. In an open letter they argued that mandatory labelling would result in an increase of 10 per cent in food prices, would harm growers and the food industry, and would impair agri-food trade with the US, purchaser of over 60 per cent of Canadian agri-food exports.91 Caccia’s bill was defeated and the House of Commons Standing Committee on Health was asked by the minister of health to address

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the labelling issue. It did so briefly before moving on to other issues. The House of Commons Standing Committee on Agriculture and AgriFood, worried that agricultural interests would be overlooked in the Health Committee, held its own public hearings between January and April 2002. Its report, Capturing the Advantage: Agricultural Biotechnology in the New Millennium, summarized the testimony it heard from twenty agri-food industry groups and the Consumers Association of Canada. All, except the National Farmers Union, favoured voluntary rather than mandatory labelling. The standing committee recommended a narrow definition of genetically modified organisms be used for labelling purposes: that is, only genetically engineered foods, not other novel foods produced by other methods, would be labelled.92 Both the Bloc Québécois and the NDP, who support mandatory labelling, issued dissenting opinions. In an interesting recognition that Canada’s export markets extend beyond the United States, the NDP members of the committee argued that Canada’s trading interests would be harmed by not heeding the demands for mandatory labelling made by foreign consumers in the EU, Japan, Australia, New Zealand, and South Korea. The divisions that hampered the work of the industry-dominated Voluntary Labelling Committee were those endemic to labelling discussions everywhere: the level of GM content that would trigger voluntary labelling, whether labels should be negative (‘does not contain’ ) or positive (‘does contain’ GM ingredients), and whether voluntary labelling should apply to further processed products that don’t contain detectable GM ingredients. The committee’s ultimate recommendation that food products could contain up to 5 per cent genetically engineered material and still be labelled non-genetically engineered set a relatively high threshold for accidental contamination. Industry spokesmen had argued that the level of cultivation of GM crops is now so extensive in Canada that it was difficult – if not impossible – to guarantee GM-free foods at the low threshold of 0.9 per cent mandated in the EU. Moreover, Canada’s grain-handling system cannot segregate grain without some co-mingling occurring; 100 per cent purity of any grain or oilseed is impossible.93 The 5 per cent threshold is consistent with an agreement signed in February 2004 among Mexico, Canada, and the US to allow corn shipments containing up to 5 per cent genetically modified organisms to be labelled ‘may contain’ GMOs. Any labelling required would be seen only by distributors and there would be no requirement to inform consumers of any GMO content. The Government of Canada announced in April 2004 that it would

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accept the report of the Voluntary Labelling Committee. Along with provincial and territorial governments, it is also assisting the voluntary labelling exercise by providing funding and technical support to help industry to develop traceability and identity preservation systems from farm to retail. Although the Quebec government has contemplated mandatory GM labelling rules, following the recommendation of a legislative committee, it had not done so by mid-2007. Across Canada, food manufacturers have not taken up the voluntary labelling option. In the above cases, pressures from civil society groups (and a single farmer) to incorporate a broader range of social concerns into Canada’s GMO regulatory framework essentially failed to persuade government regulators to abandon their science-based framework. The only criticisms that appeared to be influential were those from experts who cast doubt on the integrity of the science-based framework itself. The regulatory process, to quote Isaac, ‘is narrow and judicious ... limited to traditional actors and experts.’ As he elaborates, ‘Citizens and consumer and environmental organizations, along with provincial governments, while allowed relatively free access to applications and specific decision documents through the CFIA website, have limited say in this science-based system.’94 3.4. Economic Competitiveness and Genetically Modified Wheat Unlike the Schmeiser case, GM food labelling, and the scientific integrity of Canada’s GM regulatory process, the issue of licensing of genetically engineered wheat has caused a major schism across farm organizations and commodity groups that support plant biotechnology. The discord extends beyond the desirability of licensing for commercial sale a herbicide-tolerant wheat, Roundup Ready (RR) wheat, developed by Monsanto Canada. The conflict is over the adequacy of Canada’s regulatory framework for licensing plants with novel traits and whether this framework needs to be adjusted to include a cost-benefit criterion that would factor in market acceptance of novel food products. As noted earlier, wheat is western Canada’s most important crop by acreage and volume and is the second-largest source of market revenue for western Canadian farmers. Since a large proportion of the western Canadian wheat crop is sold outside the country, domestic policies with regard to genetically engineered wheat are highly vulnerable to the concerns of foreign consumers. As Monsanto Canada conducted tests on a genetically engineered hard red spring wheat from 1997 onwards,

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Canadian grain growers and Canada’s export grain marketing agency, the Canadian Wheat Board, were particularly mindful of the consumer apprehension in Europe and Asia of genetically engineered foodstuffs. At the same time, Canadian farmers had their own reasons to be sceptical. Their experience with GM canola demonstrated that it was difficult, if not impossible, to prevent GM crops from contaminating nonGM crops. Farmers found unwelcome volunteer herbicide-resistant GM canola appearing in their fields and had difficulty controlling it with conventional herbicides. The market impacts and potential costs to Canadian wheat growers of introducing GM wheat varieties was recognized as early as 1998, when the largest purchasers of Canadian wheat (Japan, Korea, the European Union) sought guarantees from the Canadian Wheat Board that Canadian wheat shipments were free of genetically engineered varieties. Such guarantees would not be possible were GM varieties to be registered, because Canada lacks an effective segregation system. The costs of developing such a system to keep GM and non-GM wheat separate, the loss of export markets in countries that wanted absolute guarantees of non-GM wheat contamination, and resulting lower wheat prices all meant that Canadian farmers would not benefit economically from GM wheat.95 Armed with the support of several farm groups, the Canadian Wheat Board took the lead in organizing a coherent response to Monsanto’s continuing efforts to register its GM variety – RR wheat – for commercial planting. Having elicited farmers’ views on herbicide-tolerant wheat and discovered that they had little demand for it (farmers had other tools to manage weeds), the Canadian Wheat Board developed a threefold strategy to prevent the licensing of the GM wheat variety until a system was in place to segregate GM and non-GM crops. First, it attempted to persuade Monsanto to discontinue its testing and withdraw the GM wheat variety. This strategy initially failed. In December 2002 Monsanto filed an application with the Canadian Food Inspection Agency, the appropriate regulatory body, to approve the RR wheat. The Wheat Board then attempted to influence the regulatory approval process by producing evidence that the GM variety was likely to create environmental risks. A commissioned study of the environmental aspects of RR wheat by three University of Manitoba plant scientists predicted that the spread of RR wheat from wheat crop to wheat crop would be similar to that seen in Roundup Ready canola, with consequent increased weed management problems and detrimental environ-

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mental consequences.96 Should this evidence not be persuasive to the CFIA, however, the GM variety would be approved, provided it complied with regulatory human, animal, and environmental safety requirements. Recognizing this fact, the Wheat Board embarked on a third strategy: to build an inclusive coalition of farm groups to lobby the government for changes to Canada’s variety registration system. The Canada Seeds Act requires that all new plant varieties, including genetically engineered crops, be tested and registered before they can be sold in Canada and enter the country’s commercial grain-handling system. From 1990 to 2002 variety registration criteria included a market impact criterion whereby a new wheat variety could be rejected if it posed ‘production or marketing risks’ for its own or other wheat classes. Subsequent to the elimination of the marketing risk criterion, new varieties could be rejected only if they failed the remaining criteria of agronomics, quality, and disease resistance. The task of making recommendations to the CFIA on whether a new variety should be registered fell to a committee composed of plant breeders, domestic wheat buyers, and public servants. Were the committee to recommend and the CFIA to agree to register RR wheat, a problem would immediately arise. Canada’s grain-handling system was not equipped to segregate non-GM and GM varieties, the very condition that buyers of Canadian wheat insisted upon. Although Monsanto stated that it would not offer the RR wheat for sale to Canadian farmers until concerns such as market acceptance and an effective segregation system were dealt with, the Wheat Board and most Canadian grain farmers were not reassured. They feared that crucial markets would be lost were RR wheat to be planted in Canada. In December 2001, at the instigation of the Wheat Board, the Canadian Grain Industry Working Group on Genetically Modified Wheat was struck to outline the set of conditions that would need to be met before a genetically engineered wheat variety could be released in Canada. Its members included farmers, processors, grain handlers, researchers, government regulators, and Monsanto representatives. Of the major grain commodity groups, only the Grain Growers of Canada did not participate. The Working Group explicitly excluded from its mandate the issue of whether Roundup Ready wheat should be introduced or not. It identified four conditions that needed to be met prior to introducing a GM wheat variety. The first condition was market acceptance: the existence of identified markets for the entire production of GM or commingled wheat for multiple years and the ability to meet

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requirements in non-GM wheat markets. The second condition was an effective segregation system. The third condition was a clear understanding of the agronomic effects of GM crops on farm management practices and profitability. These three conditions needed to be met individually as well as collectively in a comprehensive cost-benefit analysis – the fourth condition.97 These efforts to prevent the registration and commercial release of new plant varieties that were unacceptable to buyers of Canadian grain and oilseeds did not meet with universal support in the agri-food policy community. The Canadian government and some components of the grain industry opposed them. They believed they would undermine Canada’s science-based regulatory system and put Canada at odds with international rules that prohibit the restriction of food and feed imports on any grounds other than their scientific demonstrated risks to human, animal, and plant safety. The agriculture and agri-food minister argued that regulatory decisions should continue to be based on science but also expressed his preference for a voluntary approach by which the industry itself would deal with questions like segregation and market acceptance. The Grain Growers of Canada, whose members include the Western Canadian Wheat Growers Association, the Western Barley Growers Association, the Canola Council of Canada, and the Ontario Corn Producers Association, also opposed the shift away from an exclusively science-based system and organized an industry task force to develop such voluntary guidelines.98 Government officials worked closely with the industry group, expressing hope in early 2003 that it could develop ‘a set of best business practices’ that would ensure that the concerns of consumers and buyers of novel products were met before new varieties were brought to market.99 An AAFC official stressed, however, that any market acceptance process that was devised would not stop the registration of GM products that passed scientific scrutiny.100 In an unusual coalition, farm groups opposed to GM wheat but otherwise supportive of plant biotechnology, joined long-standing opponents of the technology: health, environmental, and anti-globalization organizations such as the Council of Canadians, the Canadian Health Coalition, and Greenpeace Canada. Coalition members also included the National Farmers Union and the Saskatchewan Organic Directorate. They undertook a publicity-raising tour of western Canadian cities in early 2003. As they were in the case of GM food labelling, parliamentary committees responsible for agriculture and agri-food issues were a

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target: a reported 210 industry associations, municipal governments, and citizens’ groups concerned about the introduction of GM wheat in Canada appeared before the House of Commons Standing Committee on Agriculture and Agri-Food when it held hearings on the matter.101 Undoubtedly swayed by the arguments of farm organizations and the Canadian Wheat Board that licensing Roundup Ready wheat would cost them over 80 per cent of their most important export markets in Japan, the European Union, Korea, and even the United States,103 the Standing Committee delivered a report to the minister of agriculture and agri-food that recommended a cost-benefit analysis be added to scientific safety analyses before the registration of new varieties. In response to these lobbying efforts, in late 2003 the federal agriculture minister announced that he and his officials would work with industry to create ‘a new step’ in the variety registration process that took account of consumer attitudes and potential market impact before bringing new varieties to market.103 More crucially, on 10 May 2004 Monsanto Canada announced that it was deferring all its efforts to introduce RR wheat in Canada. The company noted that planting of spring wheat had declined since 1997.104 The opposition of US wheat farmers, millers, and bakers to the licensing of the genetically modified wheat (for the same economic reasons) also explained Monsanto’s decision to withdraw its registration application in Canada and the United States. At the insistence of associations representing American wheat growers, Monsanto had agreed not to introduce RR wheat unless it did so simultaneously in Canada and the United States.105 As in the case of GM food labelling, the debate over GM wheat shows how the preferences of the Canadian agri-food industry are shaped by its external market dependence. In the GM food debate, dependence on the US market limited policy options to relatively lax voluntary labelling measures. In the case of Roundup Ready wheat, dependence on international markets beyond those in the United States explained opposition to the new GM crop. It was fortuitous for Canadian wheat growers that their American counterparts also faced the same constraint of a grain-handling system not yet equipped to segregate GMand non-GM varieties. 4. Analysis and Conclusion Canadian policy developments with respect to plant biotechnology have passed through two phases. During the first phase of regulatory

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development, Canadian biotechnology policies bore the imprint of internationalization. They were constituted on principles that enjoyed international consensus and were subsequently incorporated in WTO treaties for regulating trade in conventional food products. These principles include reliance on the authority of scientific experts to discern the risks of GMOs to human health and the environment and licensing safety thresholds as well as protection of intellectual property rights, including those of biotechnology developers. A Canadian regulatory framework that incorporated these principles was deemed by Canadian policy makers and the agri-food policy community to be consistent with the interests of an export-dependent agrifood sector seeking to enhance its competitiveness in agricultural markets. The similarity of the Canadian biotechnology regulatory framework to the American was an important consideration, given that the two countries compete for markets. Policies that facilitated the development and commercialization of GM products were also consistent with a historic legacy of governments looking to productivity-enhancing technologies as a means to increase farmers’ incomes. With the farm community largely onside and most of the Canadian public indifferent to genetic engineering, calculations like the foregoing guided Canadian policy makers during the first stage of plant biotechnology policy development. During the second phase of plant biotechnology development, internationalization has also shaped Canadian policy making with regard to GM products. From the late 1990s onward, the new important dimension of internationalization is the transnational mobilization of consumer, environmental, and social activists against the technology. They have successfully coupled genetic engineering to multinational corporations’ structural power in the global food supply chain and their political power in enshrining protective intellectual property rights in supranational rule-making bodies like the WTO. Anti-biotechnology (and anti-globalization) activists have succeeded in raising concerns around the globe about the environmental effects of GM crops, the obligations of GM developers with respect to farmers, the right of consumers to be informed when they are eating GM products, and the merits of a regulatory system that does not take into account a ‘market impact’ criterion. But for their efforts – and the jeopardy to Canadian markets posed by anti-GMO sentiment – it is highly unlikely that Canadian sceptics of plant biotechnology and the country’s regulatory framework would have succeeded in raising the domestic profile of these issues and requiring Canadian policy makers to respond to them.

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The anti-GMO backlash has also had some effect on the substance of Canadian plant biotechnology policies. It played a large role in the successful mobilization against GM wheat licensing and in influencing Monsanto to put its application on hold. Canadian regulations will also require alteration to meet identification and labelling requirements on GM product imports into the EU. However, the constitutive principle that scientific factors alone (not social or ethical concerns) should determine whether GM products are licensed remains a cornerstone of Canadian GM regulatory policies. This principle is the one that Canadian policy makers and the Canadian agri-food sector largely concur is in the best interests of an exportdependent agricultural economy. Science-based regulation for SPS measures is legally enshrined in international treaties such as the WTO and the NAFTA. Even if this principle is highly contested, like plant biotechnology itself, Canadian policy makers have calculated that upholding it remains the best strategy for building a consensus in international organizations around how to regulate the technology in a way that facilitates cross-border trade in GM products. Until 2007 Canadian policy developments have been consistent with the preferences of biotechnology developers and user stakeholders (farmers). The possibility that government officials would have to give priority to the interests of one of these parties (biotechnology developers or farmer users) over the other was avoided when Monsanto Canada withdrew its application to license Roundup Ready wheat. Initiatives by the Canadian government to provide a forum for discussion of the broader issues raised by plant biotechnology, via the CBAC, had no discernible impact on the substance of Canadian plant biotechnology policy. Nor did the interventions of Canada’s Parliament or the rulings of its courts. Although both provided a hearing for consumer, farmer, environmental, and anti-globalization opponents of the technology and how it is currently regulated in Canada, the recommendations of parliamentary committees and the rulings of courts did not undermine the existing regulatory framework.

8 Conclusion: Paradigm Adjustment and Canadian Agriculture and Food

This book began with two observations. First, agriculture has historically been a ‘hard case’ for internationalization, since agricultural groups and governments have resisted efforts to bring agriculture under the liberalizing premises of the GATT/WTO. Second, and notwithstanding this first observation, analysts suggest that such internationalization of domestic agricultural politics and policy making as has occurred – via international trade agreements and market liberalization, in particular – is destabilizing paradigms in the agriculture sector and engendering fundamental reforms. This concluding chapter reviews the evidence that Canadian agriculture provides in relation to both observations and posits the future for Canadian agriculture. In terms of the first observation, Canadian agricultural groups and Canadian governments have been ambivalent about opening markets – their enthusiasm depending upon the commodity in question – but they have been conscientious adherents to international rules once they have been agreed upon. They have also worked actively to expand the scope of international regulatory governance in animal and food product safety and plant biotechnology. Canadian agriculture thus generally supports internationalization as a rules-based regional and multilateral trading regime with authoritative dispute settlement powers. In terms of the second observation, the claim that internationalization has destabilized existing paradigms is exaggerated in the Canadian case. Developments in the international political economy have required reforms to existing policies, but they have not yet displaced the state assistance paradigm. Section 1 begins by revisiting the theorizing around paradigm change in agriculture and the evidence for Canadian agricultural para-

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digm resilience through adaptation. It provides an overview of articulated goals and visions for Canadian agriculture at discrete points in time and summarizes the findings of earlier chapters. Section 2 examines the role of internationalization in the evolution of the Canadian agricultural paradigm to include elements of the competitive and multifunctionality paradigms. It delineates the distinct ways in which internationalization has affected the policy process and policy developments, but also observes that it is often the interplay of factors in the international and domestic political economies that best account for paradigm developments in Canadian agriculture. Section 3 draws out the lessons for theories of paradigm change and contemplates the possibility of future transformation of Canadian agriculture into the market-liberal or multifunctionality paradigms. 1. Paradigm Resilience through Adjustment Earlier chapters have sought evidence of continuity and/or change in the Canadian agricultural paradigm against a backdrop of literature that posits an end to the post-war paradigm of state assistance, within which agriculture was viewed as an exceptional sector in the society and economy, and governments actively deployed their regulatory and expenditure instruments on behalf of the sector and agricultural producers. Prominent candidates touted to replace the state assistance paradigm are the competitive and multifunctionality paradigms. Whereas the multifunctionality paradigm shares the state assistance belief in agricultural exceptionalism, the competitive or market-liberal paradigm does not. Whereas the multifunctionality paradigm retains an active expenditure and regulatory role for governments in the sector, the competitive paradigm calls for a far more limited state role, particularly with respect to use of expenditure instruments to support and stabilize farm incomes. Although the multifunctionality paradigm shares many of the elements of the state assistance paradigm, including, as noted, its belief in agricultural exceptionalism, it gives a higher priority to the values and goals of consumers and the broader public compared with those of food producers, which were central in the state assistance paradigm. In their focus on specific issues, preceding chapters have examined the discourse of policy debates about policy goals, problems, and solutions. They have paid particular attention to the policy instruments and institutions that have been adopted to achieve policy goals. The nature

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and degree of change in these instruments and institutions have been important indicators of shifting relationships among producers, governments, and the marketplace. Accordingly, they provide evidence of paradigmatic evolution. It is useful, in this concluding chapter, to examine how officials invested with responsibility for agricultural policy development have defined visions, problems, and goals for the sector as a whole, rather than for discrete policy issues. Table 8.1 provides such a snapshot, excerpting visions and goals articulated by the agriculture department four times since the late 1980s. It shows a diversity of policy goals. They include stalwarts of the state assistance model, such as financial security for producers and the ability of producers to obtain ‘sustainable’ returns from the marketplace. They also include a goal linked to the competitive paradigm: improving the domestic and international competitiveness of the Canadian agri-food sector. Table 8.1 also shows that governments have consistently embraced the goals of food safety and quality, environmental sustainability, and promoting regional interests and rural communities that are linked to the multifunctionality paradigm. Vision statements can be read as striking a balance between the market-liberal (competitive) and state assistance paradigms. They express the objective of a more market-oriented and less governmentdependent agriculture even while they recognize a role for government in the sector. Thus, the 1994 document, Future Directions for Canadian Agriculture and Agri-Food, states, ‘security will ultimately come from growth and diversity in the market-place, rather than from government programs,’ but also ‘there is a role for government in helping to manage production and market risks to stabilize farm income without distorting production and marketing decisions.’ Likewise, the 2007 Growing Forward document observes that ‘sustainable profitability must come from the market’ but also elaborates that governments have a role to play in helping to mitigate and manage farm income risks. From the perspective of defined problems and articulated policy goals, there is continuity of the state assistance paradigm but also elements associated with a market liberal model of agriculture. Table 8.2 provides another snapshot of paradigm continuity/change. It summarizes the findings of earlier chapters with respect to the substance and instruments of public policies for the sector. There is continuity in the preservation of a government role in supporting/stabilizing farm incomes as well as in retention of orderly marketing. As they did in

244 Internationalization and Canadian Agriculture Table 8.1 Problem Definitions, Policy Goals, and Visions for Canadian Agriculture 1989 Growing Together Problem: existing programs and supply chain practices slow adjustment to a more competitive market place and changing consumer demands Vision: ‘a more market-oriented’ agri-food industry; ‘a more self-reliant sector that is able to earn a reasonable return from the market place’; ‘recognizing and responding to regional diversity’; ‘environmentally sustainable’ Policy Goals: develop and liberalize markets; diversify agriculture; recognize regional diversity; increase environmental sustainability; protect food safety and quality 1994 Future Directions for Canadian Agriculture and Agri-Food Problem: high public debt unable to sustain large expenditure role; Canada not capturing share of world market growth Vision: ‘A growing competitive, market-oriented agriculture and agri-food industry that is profitable and responds to the changing food and non-food needs of domestic and international customers; is less dependent on government support; and contributes to the well-being of all Canadians and the quality of life in rural communities while achieving farm financial security, environmental sustainability and a safe, high quality food supply.’ Policy goals: sustainable growth; rural opportunities; long-term financial security; resource and environmental sustainability; safe, high quality food supply 2003 Agricultural Policy Framework Problem: declining competitiveness of Canadian bulk commodities; lower real farm income and lack of farmer profitability; Policy goals: business risk management (to encourage producers to be proactive to reduce business risks); food safety and quality; the environment; renewal (of farmers’ skills); science and innovation 2006–7 Growing Forward Problem: lack of global competitiveness as commodity exporter; future international trade agreements will require reductions in government support; consumer demand for healthy food Vision: ‘a profitable and innovative agriculture, agri-food and agri-based products industry that contributes to and benefits from the development of vibrant rural communities’ Policy Goals: compete successfully in domestic and international markets .... achieving sustained growth and profitability; contribute to society’s priorities of food safety, environmental sustainability, and health and wellness; manage and mitigate income risks

the mid-1980s, provincial and federal governments transfer substantial sums annually to support and raise farm incomes; there are barriers to trade at the Canadian border for dairy, poultry, and egg products; and the Canadian Wheat Board remains the sole marketing agency for prairie-grown wheat and barley for export and human consumption.

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Table 8.2 Continuity and Change in Policy Instruments

Farm Income Support/Stabilization

1985

1995

2005

Commodity Price Stabilization

Whole Farm Income Stabilization

Whole Farm Income Stabilization and Support Decoupled Payments

Decoupled Payments Export Grain Marketing

Supply Management

Food and Animal Product Safety

Genetic Engineering Regulation

Export Subsidy Single Desk Marketing Pooled Pricing

Single Desk Marketing Pooled Pricing

Government Commissioners

Government Commissioners

Dairy Subsidy Production Controls Production Controls Administered Administered and Pricing Negotiated Pricing High Border High Border Protection via TRQs Protection via Import Controls Fragmented Inspection System

Canadian Food Inspection Agency (1997) Intellectual Property Rights Protection Science-Based Regulation

Single Desk Marketing Pooled Pricing and Producer Payment Options Elected (15/10) Board of Directors

Production Controls Administered and Negotiated Pricing High Border Protection via TRQs; Increased Imports

HACCP and Farm to Fork systems Intellectual Property Rights Protection Science-Based Regulation Voluntary Labelling

Table 8.2 also reveals changes to policy instruments and adjustment of existing policy programs. Government subsidies for the export of grain and industrial milk products have been abandoned. An export dairy subsidy was introduced and then eliminated. Commodity price stabilization programs have given way to programs that stabilize the income of the farm unit as a whole. Other policy instruments have been

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modified, including pricing schemes in supply management, and new pricing options have arisen for grain sold through the Wheat Board. The mandates and functioning of regulatory institutions have also been modified. Food inspection activities and plant biotechnology regulatory activities have been consolidated in the Canadian Food Inspection Agency, and new process-based food safety systems in the food industry are transforming food safety into a matter of shared public and private (producer, processor, and food manufacturer) responsibility. Changes to the governance structure of the Canadian Wheat Board have put a majority of farmer-elected directors, rather than government appointees, in charge of its operations. This overview of policy developments suggests the resilience but also the adjustment of the Canadian version of the state assistance paradigm. Policy instruments and marketing institutions in this post-war paradigm persist: border protection, surplus buying, and supply controls for the poultry, egg, and dairy sectors; and a state trading enterprise for prairie-grown barley and wheat. At the same time, there are elements of other paradigms identified by analysts. The competitive agricultural paradigm, which Tim Josling describes as the one incorporated in the WTO Agreement on Agriculture, is evident in decoupled risk-management / safety-net programs and the elimination of export subsidies. There are also initiatives to realize public goods goals in the multifunctionality paradigm.1 Finally, instruments identified by Josling as prominent in the globalized paradigm are evident. They include regulatory initiatives to strengthen and harmonize SPS measures across countries as well as protection of intellectual property rights. In short, the Canadian agricultural policy paradigm – at least as viewed through its policy instruments and articulated goals – is a composite paradigm. Features of the competitive and multifunctionality models have been layered onto the state assistance paradigm. 2. Internationalization and Paradigm Adjustment What role has the internationalization of agriculture played in the evolution of the state assistance paradigm in Canadian agriculture so that its policy goals and instruments are now a composite of elements found in the state assistance, competitive, and multifunctionality models? To answer this question, this section first reviews the evidence of earlier chapters regarding five discernible ways in which internationalization has shaped Canadian agricultural policy developments. This exercise

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permits evaluation of three hypotheses introduced in chapter 1 about how internationalization leads to paradigmatic change. It provides support for the first hypothesis that economic globalization requires more attention to economic competitiveness goals2 and creates incentives for cross-jurisdictional harmonization of policies. The Canadian case, however, provides meagre evidence for a second hypothesis that WTO agreements are creating convergence on a competitive agricultural paradigm.3 The Canadian case also provides some evidence for a third hypothesis, that transnational political activity and contestation around agri-food issues is challenging the paradigmatic status quo by replacing the ‘politics of production’ with the ‘politics of consumption.’4 Five effects of economic globalization, international regulatory governance, and transnational political activity on the policy process and policy development can be identified. They are, first, raising the salience of some issues and the priority of some policy goals; second, increasing the possibility for perceptions of policy failure; third, creating incentives to reconfigure patterns of governance; fourth, shaping the choice of policy instruments; and fifth, helping to determine the content of public policies. First, and most obviously, the political salience of some issues and policy goals has risen in the current era of internationalization. As table 8.1 has made clear, competitiveness has become more important in Canadian agricultural policy discourse and development as markets have opened and supply chains become regional or global. But it is not only goals of competitiveness that have assumed higher priority in the current internationalization context. Farm safety nets were a perennial issue in the post-war period, but, as chapter 3 documented, they rose higher on the political agenda as these programs were implicated in the 1980s transatlantic ‘trade wars.’ In the late 1990s and early 2000s Canadian governments’ endeavours to curb their spending obligations for farm income support were waylaid by the negative effects of other countries’ subsidies on Canadian agriculture. Orderly marketing of prairie grain, as documented, in chapter 4 became more politically charged as trade agreements in the NAFTA bloc took effect and criticism from an adversarial coalition in prairie Canada was joined by vigorous opposition to the Wheat Board by the US grain lobby and politicians. Chapters 6 and 7 showd how food and animal product safety measures, and regulatory frameworks with respect to genetically engineered products, have moved up the political agenda as cross-bor-

248 Internationalization and Canadian Agriculture

der trade has increased and segments of the food supply chain have become more vertically integrated. Second, and relatedly, developments associated with economic globalization, international regulatory governance, and networks of transnational political activity have heightened the possibility for policy failure – real and constructed. This development is clearly important for theories of paradigm change, given that policy failure is a hypothesized initial condition for such change. Chapter 5 noted how trade agreements that have increased imports (including of substitute products) and disallowed export subsidies are putting to the test the capacity of supply management policies to restrict domestic supply to market demand. Chapter 2 recounted the efforts and success of a transnational community of liberal economists in making a compelling case for the failure of the state assistance paradigm, and chapter 3 described a similar role played by the OECD with regard to non-targeted, nondecoupled income safety nets. If policy failure is understood not only as the (perceived) failure to realize stipulated goals, but also as the failure to ward off allegations of illegitimacy, then market developments pursuant to trade agreements are also implicated in policy controversies surrounding the Wheat Board. NAFTA’s easing of trade across the Canadian-American border has helped to keep this issue on the political hotplate. Another facet of internationalization – the mobilization of activists in the global arena – has weakened the effectiveness, and possibly, the legitimacy as well, of Canadian policies that exclude market considerations from entering decisions to license genetically modified crops and that do not require the labelling of GM foodstuffs. Third, the enhanced authority of international regulatory governance has made the international arena and international organizations an important site for legitimizing existing and alternative policy and governing paradigms. This development does not necessarily undermine the political influence of agricultural interests, which, like other organized segments of civil society, now devote considerable resources to political mobilization in the international arena, especially before and during negotiations around trade agreements. The legitimacy-conferring role of international institutions can be either a stabilizing or a destabilizing force for policy developments. As chapter 6 observed, the perceived imperative of securing the imprimateur of the World Organization for Animal Health (OIE: Office international des épizooties) had a clear and discernible impact in the reconfiguration of Canadian BSE risk management policies and standards. In the case of farm income

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safety nets / business risk management programs, the OECD’s 1998 recognition of the multifunctional character of agriculture provided an important source of international legitimacy for state expenditures to support farm incomes when they help to advance valued goods that the market fails to provide. Fourth, the choice of policy instruments has been affected by the contemporary political economy of regional and globally integrated agrifood markets and supply chains, trade liberalization, and international regulatory governance. Most changes to Canadian agricultural policy instruments have been made to meet requirements of international trade agreements. Farm income safety nets have been configured to be consistent with WTO rules, and Canadian officials have adhered to OECD guidelines regarding decoupled farm income support. Policy instruments have been altered in supply management, consistent with the provisions of the WTO Agreement on Agriculture and its dispute adjudication bodies. Import controls were replaced with tariff rate quotas and a new dairy export subsidy program was ruled illegal by the WTO. The elimination of tariffs on manufactured foods by 1999 under NAFTA put pressure on administered pricing formulae and required changes to price some dairy and poultry products (used in further processed products) more competitively with their imported substitutes. However, it is important not to exaggerate the scope of externally induced changes in Canadian agricultural policies. They certainly fall far short of providing solid evidence for Josling’s claim that the WTO Agreement on Agriculture embeds a competitive paradigm of agriculture. Market integration has also driven change in policy instruments and regulatory institutions. Examples of changes made under pressure of competitiveness goals and concerns about market access are found, first, in food and animal product safety, where federal food inspection activities were consolidated in a single agency in the form of the Canadian Food Inspection Agency; and, second, in the implementation of ‘farm-to-fork’ systems (through more rigorous identification, recordkeeping, and traceability requirements) and process-based HACCP systems. The HACCP and farm-to-fork initiatives conform closely to principles enunciated by international institutions. The impact of market integration as a catalyst to policy change is most visible in the BSE crisis, where the disruption of trade across the Canadian-American border (and elsewhere) led to changes in BSE risk mitigation measures and created strong incentives for their harmonization in the NAFTA bloc. Both international regulatory governance and market integration

250 Internationalization and Canadian Agriculture

have affected Canadian policies to regulate genetic engineering. Canada has followed international guidelines and treaty provisions in its domestic regulatory framework for plant biotechnology in order to help export-dependent Canadian grains and oilseeds producers gain access to and be competitive in foreign markets. External market dependence has also been a major consideration in the selection of policy options. Compulsory labelling of GM products was rejected in favour of voluntary labelling out of fear it would invite American trade retaliation and/or render Canadian food manufacturers uncompetitive with their American counterparts. Dependence on international wheat buyers helps to explain why GM wheat was not licensed in Canada. These examples of changes to regulatory policy instruments have earlier been described as congruent with a logic of ‘regulation for competition.’ This logic is not that of a market-liberal paradigm in which private actors largely determine the terms of exchange in the market-place, unfettered by state regulations. Rather, the logic of regulation for competition is one in which rigorous safety standards are seen to be the pathway to domestic and foreign market access and competitiveness. Moreover, state actors normally take an important role in setting, enforcing, and attempting to harmonize such standards across jurisdictions. However, regulation for competition does not mean that internationalization directly shapes the substance or content of agriculture and food policies, the fifth possible effect of internationalization on policy development. As noted, the contemporary political economy of agriculture has intensified pressures and increased incentives for crossjurisdictional harmonization of regulatory policy instruments and standards either to avoid/end trade disputes or not to put an economic sector at a competitive disadvantage with its foreign counterpart. WTO agreements, such as the SPS Agreement, identify the principles on which such harmonization should occur. The substance of policies to license genetically engineered crops and foods, as well as BSE risk-mitigation measures, come closest to examples of internationalizationinduced harmonization. However, even here Canadian and American policies are not fully harmonized. Canada’s biotechnology framework relies on a novel food trigger, whereas the American regulatory framework does not. And despite best efforts to move lock-step with the US in banning specified risk materials from the entire animal feed chain, full harmonization of policies was not achieved by mid-2007. Market integration, even when asymmetrical and one partner (Canada) is highly dependent on the market of the other (the US), is unlikely to

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induce policy harmonization in the absence of international regulatory governance. Examples are the divergent Canadian and American marketing systems in the dairy, poultry, egg, and prairie grains sectors. In sum, developments associated with the internationalization of agriculture have played a role in the adjustment of Canadian agricultural policies and have helped to inject policy goals equated with the competitive paradigm into Canadian agricultural policy. Policy instruments have been modified to encourage greater responsiveness to market signals, but the scope of such changes stops short of implanting in Canadian agriculture the policy goals and instruments at the fore of a market-liberal model of agriculture. Canadian governments have not retreated from supporting farm incomes, eliminated marketing institutions that help producers to bargain collectively in the marketplace, or turned over their regulatory responsibilities – for food safety, for example – to private authorities. Indeed, when it comes to food safety, competitiveness is likely to mean an enhanced, rather than a diminished, regulatory state. The analytic effort to demarcate the impact of factors associated with internationalization on Canadian agricultural policy developments can obscure the importance of factors in the domestic political economy. Indeed, it has often been the conjuncture of domestic factors with developments in the international political economy that has shaped policy developments. In the case of farm income safety nets, for example, the combination of a government budgetary crisis, a governmentwide program review, buoyant commodity prices, and implementation of the WTO Agreement on Agriculture opened a window for significant retrenchment of federal cost sharing of farm income risks. An altered domestic-international nexus later in the decade (widespread economic distress in the farm community, plunging international commodity prices, government fiscal surpluses) made a reversal of the earlier policy direction fiscally possible and politically necessary. Orderly grain marketing in prairie Canada provides another example of how policy developments reflect the intersection of domestic and international factors. As noted above, the debate over the Wheat Board’s mandate escalated when NAFTA was implemented. Under challenge by the United States, the Wheat Board’s single-desk seller status for wheat and barley could not have been retained without the WTO’s verification of its consistency with international trade law. By the same token, the disparate policies of Liberal and Conservative governments on the Wheat Board’s export barley monopoly also indicate

252 Internationalization and Canadian Agriculture

that the fate of this marketing institution rests on the support of domestic political coalitions. Changes to introduce cash-pricing options as well as in the Board’s governance structures (a farmer-controlled board of directors) have been made to maintain support among the prairie farmers. At the same time, the new political economy of agriculture – the removal of barriers to trade across the Canadian-American border, the emergence of lower cost global grain competitors, the inadequacy of GATT agreements to arrest government subsidies for agriculture – undoubtedly affects farmers’ beliefs about desirable producer-government-market roles in grain marketing. The significance of the domestic political economy on policy developments and paradigmatic evolution is considered further in the next section, which offers an account of Canadian paradigmatic resilience and adaptation. 3. Explaining Paradigm Resilience and Adaptation in Canadian Agriculture Chapter 1 theorized the conditions under which paradigm change is likely to occur and chapters 3–5 pointed out the absence up to 2007 of one or more of these requisite conditions in policy developments with respect to farm income safety nets, export marketing of prairie grains, and supply management. Here, I revisit the postulated conditions for paradigm transformation and speculate on the developments in the international and political economies that could heighten the possibility for further evolution towards either the competitive or the multifunctionality models in Canadian agriculture. The appearance and perception of policy anomalies and policy failures is the first hypothesized requisite for undermining an existing paradigm and creating an opening for an alternative paradigm. The discussion above has noted that internationalization does appear to increase the possibility of arguments of policy failure, even while presenting alternative paradigms to the state assistance model. However, Canada’s agricultural paradigm may be less vulnerable to allegations of anomalies and failures than the more fully developed state assistance paradigm that existed in Europe. The policy failures indicted by Garzon in the CAP’s paradigmatic transition have not been either as evident or as politically salient in Canada: excessive budgetary costs of farm subsidies, the environmental damage of a productivist agriculture, the jeopardy to the international trading regime of protectionist agricultural instruments, and food safety crises.5

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The environmental consequences of large-scale farming have become an issue in suburban and rural Canada, one with which the provincial governments responsible for land zone planning and environmental protection must deal. However, geography is on Canada’s side in a way it is not in densely populated Europe, and the environmental pollution caused by agricultural production tends to take place beyond the eyes and noses of Canada’s largely urban population, concentrated as it is in a handful of large cities. With respect to the last of the issues that have destabilized traditional agricultural paradigms, the BSE episode in Canada was broadly understood as an economic crisis, not as a food safety crisis. As such, the interests of consumers were not seen to be at odds with those of producers, and agricultural policy makers were not discredited as biased and incompetent regulators. Allegations of policy anomalies and failures are levelled at Canadian agricultural policies, especially at supply management policies. As chapter 5 noted, liberal economists and export-trade-dependent interests view dairy and poultry supply management as protectionist anomalies that undermine the interests of Canada’s export-dependent agriculture and food sector. To date, these arguments have been rebutted by pointing to ‘successes’ of supply management – in raising and stabilizing farm incomes and preserving the family farm and rural communities – as well as by evidence that all countries have ‘sensitive sectors’ and that world markets are riddled with agricultural protectionism. Indeed, the stickiness of state assistance in the Canadian agriculture sector and its limited embrace of market-liberal precepts can be attributed to the absence of the second requisite for paradigm change: that is, an economically, politically, and administratively viable alternative paradigm. To date, at least, the market-liberal paradigm has not been perceived as an economically and politically viable paradigm for agriculture. Neither of the world’s two major agricultural powers – the United States and the European Union – have adopted it and made it a successful model to emulate. On the contrary, their continued protection and subsidization of agriculture constitute a rationale for Canadian state expenditure support and border protection. In recent years, when producers of Canada’s most important commodities have experienced appreciable income distress, the market-liberal paradigm has not been economically or politically viable when government accounts have been robustly in the black. Moreover, it is the largest-scale farmers who have been recipients of government transfers in support of their

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incomes.6 The question of the political viability of alternative paradigms is addressed further below. The resilience of the state assistance paradigm and its adjustment rather than overthrow can also be attributed to another factor that is significant in the fate of policy paradigms: the institutional framework and patterns of governance of Canadian agricultural policy making. Theorists predict that paradigm change is possible only with a shift of the institutional locus of decision making that erodes the political influence of agricultural ministries and farm organizations and brings new actors with new ideas into positions of authority. There have been changes in governance patterns (policy networks) to make them more inclusive of stakeholders (to use the government of Canada’s term). These changes are not unimportant, as discussed further, below. However, a major stabilizing force for Canadian agriculture policy has been the macro-political institutions within which these pluralist policy networks are nested. Both the parliamentary and the federal systems have often presented obstacles to radical reforms outside the state assistance paradigm. The House of Commons and Senate committees with responsibility for agricultural legislation and policy matters are important allies of the farm community, as have been the rural party caucuses. Although parliamentary committees do not, of course, have the final say on agricultural policies, members of Parliament and senators in both the government and the opposition parties have been strong advocates of the state assistance paradigm and champions of positions advocated by the major farm organizations.7 A June 2006 report by the Standing Senate Committee on Agriculture and Forestry, Agriculture and Agri-Food Policy in Canada: Putting Farmers First!, articulated a view of agricultural exceptionalism: ‘agriculture does more for us than just supply food – it creates jobs in towns and cities, it provides habitat to wildlife, environmental benefits such as storing carbon in the soil, and it is a source of innovative products such as biofuel. It is truly the backbone of rural Canada.’8 The Senate Committee elaborated: ‘Because it [agriculture] is one of the foundations of our country, Canadians have a responsibility toward the farming community to help it through difficult times until it can achieve sustainability.’9 The parliamentary and federal systems tend to work together to enhance the political influence of agricultural interests. The fact that provinces share jurisdiction for agriculture gives provincial farm organizations (which are, in turn, members of the Canadian Federation of

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Agriculture) an important ally. The example of farm-income safety-net policy development demonstrates how the federal and parliamentary systems worked together to assist a well-organized farm lobby to leverage government subsidies to raise and stabilize farm incomes. Federalism as joint decision making, by creating multiple veto points to change, usually provides a defence against radical policy change. The example of supply management is instructive: modifications to dairy pricing policies require federal and provincial agreement, and changes to egg and poultry pricing policies require interprovincial consensus. On policy matters in which both orders of government are involved, as either financiers or regulators, the barriers to non-incremental policy change can be appreciable. If the macro-level political institutional framework has mitigated radical policy reforms and provided a buffer for ideas of agricultural exceptionalism, the possibility still remains for paradigm evolution through changes in the patterns of governance within which most agricultural policy formulation occurs. Officials from agriculture ministries continue to be central actors, and national ‘peak’ farm organizations such as the Canadian Federation of Agriculture, which historically enjoyed a privileged role alongside agricultural ministry officials in policy making, retain considerable influence in the formulation of public policies. Even so, governance networks have opened to a larger number of state actors, including from ministries responsible for trade, food safety, and finance. In terms of non-state actors, the CFA now normally shares its role with representatives of commodity growers and other components of the food supply system. (Evidence of just how pluralist the policy process has become can be found in appendix 8.3, which lists the organizational membership of invitees to a government workshop on the most recent permutation of the agricultural policy framework.) The policy networks that administer supply management plans still remain relatively closed, although they, too, have become more open to downstream players (processors, further processors, consumers). The opening and pluralization of policy networks is a conscious choice of the government of Canada. It has undoubtedly been prompted by the internationalization of domestic politics and the heightened priority placed on competitiveness goals. In addition to the policy issues given close scrutiny in earlier chapters, trade policy issues constitute another example of how government officials responsible for these matters are eliciting information, expertise, and support from all

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components of the agri-food sector when formulating strategies on trade disputes and international trade negotiations.10 Trade negotiators need the expertise of agri-food industry groups to promote the sector’s interests, and having these groups ‘alongside’ in trade negotiations can also keep them ‘onside’ when concessions have to be made. Canada’s chief trade negotiator for agriculture has described the level of sophistication of agricultural groups on trade issues as having ‘increased exponentially’ over the years and as being on a par with that of governments.11 The extensive consultation and input into agriculture and food policy of agri-food interests, including farm organizations, is also linked to an ethos in the government of Canada that equates such a governance pattern with effective and legitimate policy making.12 Government exhortation since the late 1980s for a stronger ‘partnership’ across all components of the agri-food sector also shapes practices within the policy process. To the considerable degree that officials within the federal and provincial capitals strive for a degree of consensus on their policy proposals, the largest and best-organized farm groups – which also represent most Canadian farmers – have considerable influence over Canadian agricultural policy.13 When farm groups are able to broker compromises with other components of the agri-food chain and adjust policies to the altered context of internationalization, government officials are usually content to accept these incremental reforms. Accordingly, the durability of supply management can be in no small measure linked to the capacity of the corporatist networks (particularly in dairy) to broker the changes necessary to sustain the support of processors for supply management. What about the future? The resilience that the Canadian state assistance paradigm has demonstrated to date does not necessarily indicate that it will survive in the future. Paradigms persist when their interpretive frameworks enjoy support from critical constituencies: the farm community itself, influential politicians, and the public at large. Will the core idea in the state assistance paradigm – that agriculture is an exceptional sector by virtue of its unique problems, the non-competitive nature of agricultural markets, and its place in the rural, if not national, society – persist? If it does, the Canadian agricultural paradigm will likely evolve further along the multifunctionality path. If the belief in agriculture’s exceptionalism evaporates, Canadian agricultural policy will take on more features of the market-liberal paradigm. Section 1 of this chapter presented some information that captures

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the ideas of the public and parliamentarians on agriculture’s exceptionalism. The degree of cohesiveness within the farm community itself is crucial to sustaining support for agricultural exceptionalism and state assistance. The future here may not be rosy. Within the farm community, (outside Quebec) there are evident divisions among farmers and farm organizations on the desirability of regulated versus unregulated markets and government transfers in support of farm incomes. Although the Canadian Federation of Agriculture has generally succeeded in aggregating provincial farm federations and specialist commodity group interests and bridging the divide between inwardlooking farmers (those whose market is domestic) and those who are outward looking (depend upon export sales), it is challenged by more market-liberal commodity groups in the cattle and oilseeds/grains sectors. On trade policy matters, the Canadian Agri-Food Trade Alliance (CAFTA), a coalition of commodity groups, processors, and export trade associations, advocates trade liberalization. CAFTA claims to account for almost 80 per cent of Canada’s agriculture and food exports; 500,000 jobs in production, processing, and marketing; and more than half of Canadian farm cash receipts. During the Doha Round WTO negotiations, CAFTA has squared off with the CFA and the coalition of supply managed commodity groups defending orderly marketing arrangements and border protection for sensitive sectors. The beliefs of the state officials who ultimately determine agricultural policies will be crucial to the fate of the Canadian agricultural paradigm. Elsewhere (the US in the mid-1990s, Europe over the 1990s and 2000s), it has been entrepreneurial leadership from elected and appointed state officials that has driven agricultural policy reforms. It is increasingly the case, especially at the federal level, that ministers responsible for agriculture and officials within Agriculture and AgriFood Canada are generations removed from the farm and have little practical knowledge or direct experience of farming. Although they may build up knowledge of agricultural policy during a career spent in the agricultural ministry, the government of Canada’s policy of rotating senior officials at fairly regular intervals across government ministries and agencies tends to work against their acquiring such in-depth knowledge. This situation contrasts with that during the period when the state assistance paradigm was established and when officials in agriculture departments lived out their careers in the ministry and acquired considerable expertise on agri-food matters. The implications for agricultural policy development of the altered profile of officials

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within the federal agricultural department are unclear. On the one hand, their lack of expertise and first-hand knowledge of agriculture may increase state officials’ dependence on sectoral groups to prescribe solutions to problems. On the other hand, state elected and appointed officials may opt to follow the advice of academics or other experts championing alternative paradigms. The likelihood of the Canadian state assistance model evolving more fully into a multifunctional paradigm will be increased if agriculture maintains the confidence of consumers. Public opinion data show that Canadian taxpayers are sympathetic to the farmer and support governments subsidizing farm incomes.14 With such a reservoir of support, as long as Canadian food producers can assure the Canadian public of their ability to provide consumers with a safe and nutritious food supply and attain a reputation for good environmental stewardship, they are likely to be able to count on taxpayers’ tacitly supporting government transfers to the sector and maintaining marketing institutions that give producers collective marketing power. The possibility for more concerted movement along the market-liberal pathway cannot be discounted. As observed, there are organized groups in the agri-food policy community with a preference for a market-liberal paradigm. This paradigm is also favoured by the international epistemic community of specialists in agricultural and trade issues. A paradigmatic transformation may yet be given a major boost with a successful conclusion to the Doha Round of multilateral trade talks. International trade negotiations provide an opportunity for governments to commit to policy reforms that would otherwise be difficult, if not impossible, to effect.15 Concessions could be made to statist institutions and policy instruments – such as supply management and the Wheat Board – in return for agreement by the Americans and Europeans to reduce their trade-distorting subsidies.16 Indeed, even in the absence of a successful multilateral trade negotiation, further steps towards endorsing market-liberal policy instruments and the accompanying paradigm could be forthcoming. The pressures of American trade harassment are not likely to abate (with or without a successful conclusion to the Doha Round), and a Canadian government that puts a high priority on harmonious relations with Canada’s most important trading partner could move to eliminate statist policy instruments and collective marketing institutions that offend American interests. This path to paradigm change is most likely under a majority national Conservative government that is ideologically com-

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mitted to ‘free markets’ and puts a high priority on amicable CanadianAmerican relations. Undertaking the kind of radical policy changes that would sound the death knell of the state assistance paradigm would be politically perilous without the support of the major farm organizations. However, it could be finessed by a window of opportunity probided by buoyant commodity prices. That is, factors of timing and the conjuncture of events would be crucial, as they were in the mid1990s when agricultural reforms appeared to be launching the sector on a market-liberal path. In conclusion, the case of Canadian agriculture suggests that neither those who see Canadian politics as overwhelmingly shaped by ‘the rhythms of domestic politics’ nor those who argue a limited scope for domestic policy autonomy are correct. Until 2007 Canadian agriculture revealed domestic ‘capacity for choice.’ Depending upon the specific policy matter, the parameters of such choices had been both narrowed and widened by the internationalization of politics and policy making in the agriculture and food sector. Internationalization in the form of regional market integration appeared to be narrowing the scope for domestic choice of policy, including marketing institutions, when these differed from important trading partners, while internationalization in the form of international regulatory governance appeared to be maintaining it. The international arena has become a crucial site for political mobilization and contestation around agriculture and food issues, and consumers, environmentalists, and other social activists are demanding a voice in food and trade policy matters. The international trade regime for agriculture and food must heed such voices if it is to be legitimate and effective. From the vantage point of late 2007 such a regime appears to be one that continues to give countries scope to balance their particular agricultural and food policy goals.

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Appendices

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APPENDIX 4.1 Formal US Trade Complaints Involving the Canadian Wheat Board Investigation

Conducted By

Begun-Completed

Outcome

Durum

US International Trade Commission (ITC) (s.332, Tariff Act 1930) Bi-National FTA Panel (FTA chapter 18) ITC (s.22 Agricultural Adjustment Act 1930)

December 1989– June 1990

No evidence of CWB dumping

February 1993

No evidence of dumping ITC issued split recommendation; negotiated outcome No subsidy found

Durum Wheat Products

Live Cattle – CVD subsidized by CWB Canadian wheat and durum

January–July 1994

US Department of December 1998 – Commerce October 1999 US Trade November 2001 Representative (s.301, Trade Act 1934)

ITC (s.332, Tariff Act 1930) Durum and hard red US Department of spring (HRS) wheat Commerce – CVD and AD US ITC

February 2002 September 2002 March, May 2003

October 2003

Wheat exports and imported grain

No justification to bar Canadian wheat imports

NAFTA Panel

February 2006

WTO Dispute Settlement Panel (GATT Article XVII)

December 2002 – April 2004

CVD and AD duties imposed on durum and HRS wheat Durum duties revoked; HRS wheat duties reduced HRS wheat duties eliminated Upheld CWB as legal STE; found Canada discriminated against imports in grain handling system

Source: Canadian Wheat Board (2004). Notes 1 STE = state trading enterprise; CVD = countervailing duties; AD = anti-dumping duties. 2 s.332, Tariff Act 1930, allows for fact-finding investigations on any matter involving trade, tariffs, and conditions of competition between the US and foreign industries. 3 s.32, Agricultural Adjustment Act 1930, allowed controls on imports when the latter rendered, or tended to render, ineffective or materially interfered with price supports, payments, and production adjustment programs of the US Department of Agriculture.

262 Appendices 4 s.301, Trade Act 1934, allowed the US to impose trade sanctions against a foreign country whose acts, policies, and practices violate or deny US rights or benefits under trade agreements or `are unjustifiable, unreasonable or discriminatory and burden or restrict US commerce.’

APPENDIX 4.2 Investigations into the Canadian Wheat Board Investigation

Conducted By

Completed

Outcome

Review of CWB

US GAO (1992)

June 1992

Canada-US Grain Market Ability of state trading enterprises to distort trade US Agricultural Trade and Canadian wheat issues

Joint Commission on October 1995 Grains US GAO (1996) June 1996

No evidence of unfair trade practices Recommendations

US GAO (1998)

November 1998

No evidence CWB violating existing trade agreements No solid conclusions

Source: Canadian Wheat Board (2004). GAO: US General Accounting Office.

APPENDIX 5.1 The WTO Dairy Dispute Panel Rulings At issue in the WTO dairy dispute between Canada, on the one hand, and the United States and New Zealand, on the other, were categories 5d and 5e in the Special Milk Class. Under their provisions, Canadian processors of dairy products for export could purchase milk at prices below milk used to manufacture the same products for domestic consumption. Class 5d applied to ‘traditional planned exports’ that were produced from milk produced within quota. Class 5e applied to dairy products for ‘surplus removal’ that were made from milk produced both within- and over-quota. The WTO Panel that was struck in 1998 to adjudicate that dispute over Canada’s dairy export program concluded that sales of milk under Classes 5d and 5e prices did constitute illegal export subsidies under the WTO. They met the condition of an export subsidy under Article 9.1(a) and 9.1(c) of the Agreement on Agriculture. Article 9.1(a) defined export subsidies to be ‘direct subsidies, including payments in kind’

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provided by ‘governments or their agencies’ to ‘a firm’ or ‘an industry’ and which are ‘contingent on export performance.’ Article 9.1c defined export subsidies to be ‘payments on the export of an agricultural product that are financed by virtue of government action.’ The WTO Panel accepted the complainants’ argument that both the CDC and provincial marketing boards were directly implicated in the administration of the Special Classes and that both acted under delegated governmental authority. They observed that the Special Milk Classes were the result of an intergovernmental agreement among the provinces and the CDC, and that decisions with respect to the implementation of the national milk marketing plan and the special classes were taken by representatives of provincial governments and the CDC on the CMSMC. Further, the classification scheme could not have been implemented without the CDC; indeed, the Canadian Dairy Commission Act had been amended in 1995 to grant the Crown corporation specific additional powers in order to implement it. Volumes of exports under classes 5d and 5e exceeded Canada’s allowable export limits for butter, cheese, and other milk products for the marketing years 1995–6 and 1996–7. As a result, Canada had not met its obligations under the WTO Agreement on Agriculture (World Trade Organization 1999a). The Panel also ruled on a second complaint brought by the US that Canada was administering its tariff-rate quota in a manner that denied US access to the Canadian market. The Panel agreed with the US that Canada had acted inconsistently with its GATT obligations by restricting the access to the tariff-rate quota for fluid milk to that purchased for personal use and valued at less than C$20 per entry. Canada appealed the Panel’s ruling on the grounds that the Panel had erred in its interpretation of the Agreement on Agriculture in concluding that Special Milk Class prices were export subsidies. The Appellate Body concurred that the Panel had made some errors of interpretation, but still upheld the Panel Body’s finding that special milk classes 5d and 5e constituted export subsidies and exceeded Canada’s quantity commitment limits under the WTO. It also upheld the Panel’s finding that Canada had acted inconsistently with its GATT obligations in restricting access to the tariff-rate quota for fluid milk to entries valued at less than C$20 (World Trade Organization 1999b). However, a minor regulatory change enabled border controls to continue much as before. This decision thus had a minimal impact on domestic fluid milk market sales and was considered to be a ‘win’ for Canada. The WTO Panel that was asked by the US to rule on the legality of

264 Appendices

Canada’s response, to create a new category of Commercial Export Milk (CEM), also concluded that it constituted an export subsidy. Further, sales under the CEM milk class put Canada in excess of its obligations under the Agreement on Agriculture (WTO 2001a). On appeal by Canada, the Appellate tribunal ruled that it lacked the necessary information to determine whether Canada’s reformed measures constituted an export subsidy. It said that the appropriate standard for determining whether the CEM class and Special Milk Class 5d prices constituted ‘payments’ that were ‘financed by virtue of government action’ (that is, export subsidies) was not whether they conferred an advantage relative to domestic prices (the standard the Panel had set) but whether they conferred an advantage relative to the producer’s costs of production. The Appellate Body said it could not make this determination because it lacked information on the cost of production of milk. It asked the Panel to make this determination (World Trade Organization 2001a). The Panel decision of July 2002 did not differ from its original ruling. It concluded that Canada’s dairy exports were being exported below their cost of production (World Trade Organization 2002a). Canada’s subsequent appeal was based on the claim that the Panel had erred on a number of matters, including how it calculated the cost of production of milk for use in export products. The Appellate Body was not persuaded. It accepted data submitted by New Zealand and the United States that showed the cost of milk production in Canada was considerably higher than the average prices for CEM. Producers then were making a ‘payment’ to processors because they were not recouping all the costs associated with producing and selling CEM. It was ‘government action’ that controlled ‘virtually every aspect of domestic milk supply and management’ (World Trade Organization 2002b, para. 144). It was governmental action – the CDC – that ensured that domestic sales covered a significant part, if not all, of the fixed costs of production and that therefore made these payments (selling milk to exporters/processors at marginal cost) possible. It was governmental action that protected the administered price by controlling the supply of domestic milk (through quotas) and that protected the domestic market from import competition through tariffs. The Appellate Body noted that it was the same producers – it calculated they were about 40 per cent of total Canadian dairy producers – who supplied milk to the domestic market who were selling it (below cost) to processors for export dairy products. It thus upheld the earlier finding that the CEM price constituted an export subsidy.

Appendices

265

APPENDIX 8.1 Participants at May 2007 Meeting on the Next Generation of Agriculture and Agri-Food Policy 1. Producer Organizations Canadian Federation of Agriculture National Farmers Union Union des producteurs agricoles Chicken Farmers of Canada Canadian Turkey Marketing Agency Dairy Farmers of Canada Canadian Egg Marketing Agency Canadian Broiler Hatching Egg Marketing Agency Coopérative Fédérée du Québec Canadian Horticultural Council Canadian Cattlemen’s Association Canadian Pork Council (provincial hog producer associations/marketing boards) Canadian Soybean Council (soybean growers) Grain Growers of Canada (provincial grain and oilseed producer associations) Canadian Young Farmers Forum (1997 – sponsored by AAFC) Canadian 4H Council 2. Primary Processing Canadian Meat Council (federally inspected meat packing/processing industry) Canadian Beef Export Federation (packers, processors, and exporters) *Canadian Grains Council (umbrella organization for 34 organizations representing grain producers, companies, processors, and end users) *Canola Council of Canada (canola crushers, producers, processors, and marketers) Canadian Seed Growers Association (pedigreed seed growers) Canadian Seed Trade Association (140 seed companies) Canadian Special Crops Association (merchandisers of pulse and special crops, incl. bean, chickpea, lentil, pea, canary seed, buckwheat, sunflower seed, and mustard seed) CropLife Canada (plant science and plant biotechnology industry) Pulse Canada *Canadian Agri-Food Trade Alliance

*Represents producers as well.

266 Appendices 3. Further Processing, Manufacturing, and Retail Canadian Restaurant and Foodservices Association Food and Consumer Products of Canada (food manufacturers and distributors) Food Processors Alliance of Canada (food processors) Canadian Produce Marketing Association (fresh fruit industry) Canadian Federation of Independent Grocers (retailers) 4. Input Supply Sector Canadian Fertilizer Institute (manufacturers and distributors of chemical fertilizers) Animal Nutrition Association of Canada (represents livestock and poultry feed manufacturers) Credit Union Central of Canada Canadian Bankers Association 5. Epistemic/Scientific Agricultural Institute of Canada (professional agrologists) George Morris Centre Institute of Agri-Food Policy Innovation (University of Guelph) 6. Environmental and Health Soil Conservation Council of Canada Ducks Unlimited Canadian Institutes of Health Research

Notes

1. Introduction: Internationalization and Canadian Agriculture: Policy and Governing Paradigms 1 The literature detailing these processes is voluminous. Good overview accounts can be found in Held, Democracy; Waters, Globalization; Mittelman, Globalization; Held et al. Global Transformations; Scholte, Globalization; and McGrew, ‘Logics of Globalization.’ The distinction between economic globalization and internationalization of domestic politics is made in Doern, Pal, and Tomblin, ‘Internationalization of Canadian Public Policy’; Coleman and Perl, ‘Internationalized Policy Environments’; and Bernstein and Cashore, ‘Globalization.’ 2 For data, see Rugman, ‘Globalization.’ 3 There are other developments in the international political economy beyond the three investigated here (economic globalization, international regulatory governance, and transnational networks), which scholars implicate in transitions in governing patterns and policy developments. They including the global diffusion of culture and values as well as the transnational migration of people. The resistance to genetically modified crops, the subject of chapter 7, may be viewed as an example of the first, but the transnational migration of farm labour precedes the current era. 4 Stone, Canada. 5 Simeon, Hoberg, and Banting, ‘Globalization,’ 405. 6 Hoberg, Capacity for Choice. 7 McBride, ‘Quiet Constitutionalism in Canada,’ 257. See also Clarkson, Uncle Sam and Us. 8 The term ‘policy community’ is defined by Coleman and Skogstad,‘Policy Communities,’ 25, and refers to all those who follow policy developments

268 Notes to pages 5–7

9

10

11

12

13

14 15 16 17 18

in a given sector and who seek to influence their outcomes over time. The policy community can be subdivided into the ‘sub-government,’ which consists of those who are decision makers and the ‘attentive public’ who keep a watching brief and whose influence is less consistent. Trade in agricultural commodities was exempt from GATT rules, but trade in processed food was not. Good accounts of agriculture under the GATT are Josling, Tangermann, and Warley, Agriculture in the GATT, and Hathaway, Agriculture and the GATT, chap. 5. The other economic sector that came to be treated differently under the GATT was textiles and clothing. Representative examples of this argument are Hansen, Gaining Access; Browne, Cultivating Congress, and Wilson, G.K., ‘Farmers, Interests,’ for the US; Keeler, ‘Corporatism and Official Union Hegemony,’ for France; Keeler, ‘Agricultural Power,’ for the European Union; and Mulgan, Politics of Agriculture, for Japan. On the necessity of these pressures for reform of the European Community’s Common Agricultural Policy, see Moyer and Josling, Agricultural Policy Reform; Patterson, ‘Agricultural Policy Reform’; Coleman and Tangermann, ‘1992 CAP Reform.’ Paarlberg, ‘Agricultural Policy,’ argues that the Uruguay Round GATT negotiations ‘contributed little’ to reforms of EU agricultural policies and ‘almost nothing’ to American policy reforms in the 1990s. Orden, Paarlberg, and Roe, in Policy Reform in American Agriculture, argue that domestic factors (a Republican congress and rising commodity prices) explain the liberalizing measures in the US in 1996. On New Zealand, see Cloke, ‘State Deregulation’; on Australia, see Coleman and Skogstad, ‘Neo-Liberalism’; Coleman, Skogstad, and Atkinson, ‘Paradigm Shifts’; and Halpin, ‘Agricultural Interest Groups.’ On market liberal reforms in agriculture in industrialized countries, see Coleman, Atkinson, and Montpetit, ‘Against the Odds’; Coleman, Skogstad, and Atkinson, ‘Paradigm Shifts,’ Coleman, ‘Protected development.’ On agricultural policy reform in the United States, France, and Japan see Sheingate, Agricultural Welfare State. Mulgan, in Politics of Agriculture, argues that external pressure from the United States and the GATT is the ‘primary agent of transformation in Japan’s agricultural trade policies.’ Josling, ‘Competing Paradigms’; Moyer and Josling, Agricultural Policy Reform; Coleman, Grant, and Josling, Agriculture. Garzon, Common Agricultural Policy. Moyer and Josling, Agricultural Policy Reform, 244, 246–57. Tweeten and Zulauf, ‘Public Policy,’ is an example. On the EU’s Common Agricultural Policy, and in contrast to Garzon, Com-

Notes to pages 9–10

19

20

21 22

23 24 25

26

269

mon Agricultural Policy, see Daugbjerg, ‘Reforming the CAP.’ Moyer and Josling, in Agricultural Policy Reform, 8, state that ‘the farm policy community’ has been able to limit the scope of reform and ‘to minimize the harm to the farm community.’ This definition of policy paradigm draws heavily on Hall, ‘Policy Paradigms,’ and also on Sabatier and Jenkins-Smith, Policy Change and Learning, who use the term ‘belief system’ and Jobert and Muller, L’état en action, who use the concept of a ‘reference system.’ Capano, ‘Administrative Traditions,’ and Hay, ‘Normalizing Role of Rationalist Assumptions,’ are also helpful. Including the governance patterns as a component of the paradigm is a departure from conventional usage, which focuses only on policies, but it is consistent with theoretical conjecture, elaborated later, that suggests paradigm change requires a disruption of existing governance patterns. Ingersent and Rayer, Agricultural Policy, 5. Allen and Elliott, ‘Current Debate and Economic Rationale,’ 14; Ingersent and Rayner, Agricultural Policy, 5–8; Moyer and Josling, Agricultural Policy Reform, 32–3. Ingersent and Rayner state, ‘the uncertainty generated by excessive price instability is apt to result in inefficient resource allocation by producers (unless they are risk neutral). Moreover, to the extent that unstable prices cause unstable producer incomes, producers may suffer a welfare loss. Consumer welfare may also be adversely affected by excessive instability of prices’ (Agricultural Policy, 7). Hall, ‘Policy Paradigms.’ Ruggie, ‘International Regimes.’ The term ‘governance’ has become fashionable in recent years as a way to signal that it is not governments alone that make authoritative decisions. See Rhodes, Understanding Governance; Stoker, ‘Governance as theory’; Pierre, ‘Introduction’; Peters, ‘Governance’; Van Kersbergen and van Waarden, ‘“Governance” as a Bridge.’ As used in this book, ‘governance’ refers simply to patterns of decision making that include both state and non-state actors, and it makes no assumptions about whether they are horizontal or vertical, conflictual or cooperative. In several European countries, farm organizations’ strength stemmed from the fact that a single organization had emerged to represent farmers’ interests. Where farm organizations were not monopolistic but plural in number, as in the United States, they were still able to construct networks with bureaucratic and legislative officials, exploiting the party and governing institutions to ensure a privileged role in policy making. See Hansen, Gaining Access; Browne, Cultivating Congress; Wilson, ‘Farmers, Interests.’

270 Notes to pages 11–16 27 Hall, ‘Policy Paradigms.’ 28 Agro-environmental issues do not receive scrutiny in this book. Provincial and local governments are overwhelmingly responsible for the environment, and this study is focusing on matters within the authority of the Government of Canada. 29 Hall, ‘Policy Paradigms,’ 288. 30 On the role of discourse in policy change, see Hall, ‘Conclusion’; Cox, ‘Social Construction’; Schmidt, ‘Politics of Economic Adjustment’; Schmidt, ‘Does Discourse Matter?’; Bleich, ‘Integrating Ideas’; and Schmidt and Radaelli, ‘Policy Change and Discourse.’ 31 See Hansen and King, ‘Eugenic Ideas’; and McNamara, Currency of Ideas. 32 Hall, ‘Conclusion.’ 33 Ibid., 371–73. 34 C.A. Wilson, ‘Policy Regimes,’ 263. 35 Several analysts make this point, including Hall, ‘Policy Paradigms’; Howlett, ‘Policy Paradigms’; and Sabatier and Jenkins-Smith, Policy Change and Learning. 36 Hall, ‘Policy Paradigms’; Howlett, ‘Policy Paradigms’; Howlett and Ramesh, ‘Policy Effects of Internationalization’; Walsh, ‘Policy Failure and Policy Change.’ 37 Coleman and Perl, ‘Internationalized Policy Environments’; Hay, ‘Crisis of Keynesianism’; Howlett and Ramesh, ‘Policy Effects of Internationalization.’ 38 Coleman, Skogstad, and Atkinson, ‘Paradigm Shifts’; Cashore and Howlett, ‘Punctuating Which Equilibrium?’ 39 Patashnik, ‘After the Public Interest Prevails.’ 40 Hay, Political Analysis, 94, 96. Hall, ‘Policy Paradigms,’ 370, notes the importance of context when he observes: ‘The influence of a new set of economic ideas is likely to depend, at least in part, on political and economic circumstances.’ 41 Hall, ‘Policy Paradigms,’ 370. 42 Thelen, ‘Historical Institutionalism in Comparative Politics’; Hay, Political Analysis; and Pierson, ‘Fragmented Welfare States,’ draw attention to how timing, sequencing, and context affect policy developments. Orden, Paarlberg, and Roe, Policy Reform in American Agriculture, cite buoyant commodity market prices as providing an opening for market-liberal reforms in American farm programs in the mid-1990s. 43 Skogstad, ‘Ideas, Paradigms and Institutions.’ 44 Coleman, Skogstad, and Atkinson, ‘Paradigm Shifts.’ 45 Walsh, ‘Policy Failure and Policy Change,’ 491; see also Hall, ‘Conclusion,’ 371–3.

Notes to pages 17–20

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46 For 1994 data, see Agriculture and Agri-Food Canada, ‘Future Directions,’ 15. For 2005 data see Agriculture and Agri-Food Canada, Overview, Chart B4.30. 47 International Federation of Agricultural Producers, ‘Sixth Draft Report, 1. 48 Goodman, ‘World-Scale Processes’; Coleman, Grant, and Josling, Agriculture, chap. 2; International Federation of Agricultural Producers, ‘Sixth Draft Report.’ 49 Bonanno, et al., From Columbus to ConAgra; McMichael, ‘World Food System Restructuring’; McMichael, Global Restructuring; Coleman, Grant, and Josling, Agriculture; Hennis, Globalization and European Integration, 18–19. 50 Coleman, Grant, and Josling, Agriculture, 26. 51 Agriculture and Agri-Food Canada, Overview, Charts B2.3, B3.7, and B3.8; Easter, Empowering Canadian Farmers, 11. 52 See International Federation of Agricultural Producers, ‘Sixth Draft Report,’ for information on nitrogen fertilizer concentration; Easter, Empowering Canadian Farmers, 11, for information on fuel and machinery concentration. 53 Easter, Empowering Canadian Farmers, 11. 54 Agriculture and Agri-Food Canada, Next Generation. 55 Hertel, ‘Global Perspective on Regional Integration’; Paddock, Destorel, and Short, Potential for Further Integration, 6; Qualman and Wiebe, Structural Adjustment of Canadian Agriculture. 56 Food and Agricultural Organization, Trends. 57 Coleman, Grant, and Josling, Agriculture; Hennis, Globalization and European Integration; Garzon, Reforming the Common Agricultural Policy. 58 Strange, ‘Rethinking Structural Change’; Cerny, ‘Paradoxes of the Competition State.’ 59 Strange, ‘Rethinking Structural Change’; see also Hennis, Globalization and European Integration, 18–19. 60 Brinkman, ‘Competitive Position of Canadian Agriculture,’ 266. 61 Ibid. 62 Cox, ‘Perspective on Globalization’; Gill, ‘Knowledge, Politics’; Boyer, ‘State and Market’; Hay, Political Analysis, 202–4; and McGrew, ‘Logics of Globalization,’ focus on the ideational discourse of globalization/internationalization. 63 Cerny, ‘Globalization.’ 64 Harkin, Economic Concentration, 8. 65 Halpin, ‘Agricultural Interest Groups,’ 228. 66 Strange, ‘Rethinking Structural Change’; Cerny, ‘Paradoxes of the Competition State’; Kahler and Lake, ‘Globalization and Governance.’

272 Notes to pages 20–9 67 The general argument is made by Milner and Keohane, ‘Internationalization and Domestic Politics.’ See Coleman, ‘Weathering the Storm’; Coleman, Grant, and Josling, Agriculture, chap. 4; and Halpin, ‘Agricultural Interest Groups,’ for the application to agriculture. 68 Productivity is usually defined as a function of physical capital (land, equipment), human capital (the education and skills of food producers), and access to technological knowledge, including that embodied in inputs such as new varieties of seeds. 69 Manzer, Public Schools and Political Ideas, 267–8. 70 Cerny, ‘Paradoxes of the Competition State’; Cerny, ‘Political Globalization,’ 376; Victor, ‘WTO Efforts to Manage Differences.’ 71 Levi-Faur and Jordana, ‘Rise of Regulatory Capitalism,’ 6; Levi-Faur, ‘Global Diffusion,’ 19. 72 Josling, ‘Competing Paradigms,’ 255; see also Coleman, Grant, and Josling, Agriculture, chap. 4. 73 Barton, et al., Evolution of the Trade Regime, table 1.4, 12. 74 Agriculture and Agri-Food Canada, Next Generation, 3. 75 Agriculture and Agri-Food Canada, Agenda, Jobs and Growth. 76 Agriculture and Agri-Food Canada, Overview, chart A2.2. 77 Agriculture and Agri-Food Canada, Next Generation, states that approximately three-quarters of the food consumed in Canada is of domestic origin. 78 Agriculture and Agri-Food Canada, NAFTA Benefits. 79 Economic integration is a matter of degree. Fully integrated markets would have no barriers that distort trade or investment across the national borders. The Canadian and American markets, including the agricultural market, are interdependent but still have a number of trade/investment barriers. 80 See Dakers and Forge, Agriculture, 3–4. 81 Agriculture and Agri-Food Canada, Overview, chart A.1.1 and chart A.1.2, 5–6. 82 Helpful sources on policy convergence are Drezner, ‘Globalization, Harmonization,’ and Holzinger and Knill, ‘Causes and Conditions.’ 83 See Mulgan, Politics of Agriculture, and Cloke, ‘State Deregulation.’ 84 Milner and Keohane, ‘Internationalization and Domestic Politics’; Hiscox, ‘Domestic’; Weiss, ‘Introduction.’ 85 Coleman, Grant, and Josling, Agriculture; Hennis, Globalization and European Integration; Garzon, Common Agricultural Policy. 86 Ostry, Post-Cold War Trading System, xvii–xviii. 87 Tangermann, ‘Agreement on Agriculture,’ 149.

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88 Josling, ‘Competing Paradigms,’ 256. 89 Barton et al., Evolution of the Trade Regime, 105, point to the following as evidence that agriculture continues to be treated differently in the WTO Agreement on Agriculture: agricultural tariffs were ‘still on average about five times as high as on manufactured goods’ and export subsidies were ‘in effect legitimized by their incorporation in country schedules.’ 90 Ibid., 144. 91 Wolfe, Farm Wars, 108. 92 Moyer and Josling, Agricultural Policy Reform, 34. 93 Barton et al., Evolution of the Trade Regime, 214. An important principle is non-discrimination: GATT/WTO members cannot discriminate between domestic and ‘like’ imports (national treatment) or treat one GATT/WTO member differently from another (most favoured nation treatment). 94 The phrase ‘living tree’ was used by British Lord Sankey to describe the Canadian Constitution Act 1867 in Edwards v. A.-G. Can [1930] A.C. 114, 136. 95 OECD, Agricultural Policy Reform, 1995; OECD, Agricultural Policy. For a history of multifunctionality’s origins in the European Community, see Garzon, Common Agricultural Policy, chap. 9. 96 Hay and Rosamond, ‘Globalization, European Integration and the Discursive Construction of Economic Imperatives,’ 151. 97 Levi-Faur, ‘Global Diffusion of Regulatory Capitalism.’ 98 Coleman, Grant, and Josling, Agriculture, chaps 6 and 7, use the term ‘transnational policy space’ to describe the heightened importance of the actors, institutions, and political activity in the international arena. 99 In the NAFTA region, there have been annual meetings of universitybased agricultural economists and officials in federal and provincial agriculture ministries to address matters related to agriculture and food in this trading bloc. In Canada, the Estey Centre for Law and Economics in International Trade, based in Saskatoon, Saskatchewan, produces a steady stream of high-quality monographs that analyse and prescribe solutions to international trade matters. Agricultural economists have also been active in advocating a more liberal international trade agenda for agriculture through the Institute for International Economics based in Washington, DC. 100 Coleman and Perl, ‘Internationalized Policy Environments’; Bernstein and Cashore, ‘Globalization’; Cerny, ‘From “Iron Triangles” to “Golden Pentangles”?’; Coleman, Grant, and Josling, Agriculture, chap. 6. 101 Garzon, Common Agricultural Policy. 102 Kahler and Lake, ‘Globalization and Governance,’ 412.

274 Notes to pages 32–9 103 104 105 106 107 108

109 110 111

112

113

114 115 116

117

118

Hay, Political Analysis, 116–17. Atkinson, Governing Canada, 22. Savoie, Governing from the Centre. Skogstad, ‘International Trade Policy.’ Scharpf, ‘Joint Decision Trap.’ See Kelly, ‘Reconciling Rights and Freedoms.’ Peter Russell’s observation that the Supreme Court of Canada has not consistently favoured either the federal or the provincial orders of government is the standard one ‘Supreme Court’). On Quebec, see Skogstad, ‘Canadian Federalism.’ Cloke, ‘State Deregulation’; Orden, Paarlberg, and Roe, Policy Reform in American Agriculture; Coleman, ‘Agricultural Policy Reform.’ Orden, Paarlberg, and Roe, Policy Reform in American Agriculture; Cloke, ‘State Deregulation’; Sheingate, Agricultural Welfare State. By contrast, Coleman, ‘Agricultural Policy Reform,’ finds market liberal policy change more likely under centre-left governments than under conservative governments, especially in commodity sectors that are open to international competition. On policy networks and the distinction between pluralist and corporatist networks, see Coleman and Skogstad, ‘Policy Communities and Policy Networks,’ chap. 1; Coleman, Skogstad, and Atkinson, ‘Paradigm Shifts and Policy Networks’; Daugbjerg, ‘Policy Networks’; Daugbjerg, Policy Networks under Pressure; Daugbjerg, ‘Reforming the CAP’; Daugbjerg and Marsh, ‘Explaining Policy Outcomes’; and Halpin, ‘Agricultural Interest Groups.’ Corporatist policy networks have moderated market liberal reforms in France and the European Union. See Coleman, Atkinson, and Montpetit, ‘Against the Odds’; Daugbjerg, ‘Policy Networks.’ Coleman and Perl, ‘Internationalized Policy Environments’; Howlett and Ramesh, ‘Policy Effects of Internationalization.’ Daugbjerg, ‘Policy Networks under Pressure’; Marsh and Smith, ‘Understanding Policy Networks.’ Coleman, Skogstad, and Atkinson, ‘Paradigm Shifts and Policy Networks’; Weiss, Myth of the Powerless State, suggests a relationship of ‘governed interdependence’ such as exists in corporatist networks is requisite if countries are to adapt to the challenges of internationalization. Individual chapters in Halpin, ‘Agricultural Interest Groups,’ as well as Greer, Agricultural Policy in Europe, and Garzon, Common Agricultural Policy, document this development. Greer, Agricultural Policy in Europe, 202.

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2. The State Assistance Paradigm and Canadian Agriculture: Construction and Destabilization 1 Forbes, Hughes, and Warley, Economic Intervention and Regulation, 8; Allen and Elliott, ‘Current Debate and Economic Rationale,’ 14; Tracy, Food and Agriculture, 3; Tweeten and Zulauf, ‘Public Policy for Agriculture’; and Schmitz, Furtan, and Baylis, Agricultural Policy, 13 are all helpful in laying out the rationale for agricultural exceptionalism and state assistance. 2 The CAP was created in the shadow of food shortages in Europe during the two world wars; hence, the commitments in Article 39 of the Treaty of Rome to ensure a fair standard of living for the agricultural community and to ensure available food supplies to consumers at reasonable prices. Fennell, Common Agricultural Policy, 76, states that ‘support for farmers has always been a proxy’ for ‘a mixture of economic, social, political and even cultural factors.’ 3 These rationales are articulated in the multifunctionality concept of agriculture, articulated by the European Community/Union (see Garzon, Common Agricultural Policy) and more recently by the OECD. They are discussed further in chapter 3. 4 On agricultural fundamentalism and the beliefs underwriting US agricultural policy, see Hathaway, Government and Agriculture, 2; Talbot and Hadwiger, Policy Process in American Agriculture; Thompson, ‘Philosophical Rationale’; Goldstein, ‘Impact of Ideas’; and Tweeten and Zulauf, ‘Public Policy for Agriculture’. 5 Easterbrook and Aitken, Canadian Economic History, 476. 6 MacKintosh, ‘Economic Factors in Canadian History’; Easterbrook and Aitken, Canadian Economic History; Fowke, National Policy. 7 The Crow’s Nest rates were established following an agreement between the Canadian government and the Canadian Pacific Railway in 1897. In return for a federal subsidy of over $3 million and significant provincial land grants to build a rail line from Lethbridge, Alberta through the Crow’s Nest Pass to Nelson, BC, the CPR agreed to reduce freight rates, effective 1899, on ‘settlers’ effects’ and grain and flour. 8 Hart, A Trading Nation, 96. 9 Darling, Politics of Freight Rates, 60. 10 The history of the Canadian Wheat Board can be found in Fowke, National Policy; C.F. Wilson, Century of Canadian Grain; D.E. Smith, Regional Decline; and Morriss, Chosen Instrument. 11 Thompson, Farmers, Governments. 12 Drummond, Anderson, and Kerr, Agricultural Policy in Canada.

276 Notes to pages 47–51 13 14 15 16 17

18

19

20 21

22 23 24 25 26 27

28 29

Hart, A Trading Nation. Urquhart and Buckley, Historical Statistics of Canada. Fowke, National Policy, 296. Ruggie, ‘International Regimes.’ Good discussions of the treatment of agriculture in the GATT can be found in Stone, Canada, chaps 13 and 14; Winham, International Trade; Josling, ‘The GATT’; and Josling, Tangermann, and Warley, Agriculture in the GATT. On its creation, the European Community did make some concessions to reduce duties and bind tariffs (that is, not to increase the tariffs without compensation) on certain products (including soya beans and oil and oilseeds), which were formalized in the Dillon Round (1960–2). The Kennedy Round (1964–7), despite involving a major discussion of agriculture, made no progress on agriculture. The Tokyo Round (1973–9) cut tariffs by about a third, but tariff reductions in agriculture were limited mainly to tropical products. The Tokyo Round did result in a subsidies code that obliged countries to avoid export subsidies that resulted in an ‘inequitable’ share in world markets or that undercut prices. Josling, ‘Competing Paradigms,’ 254. On the Common Agricultural Policy, see Tracy, Government and Agriculture; Tracy, Food and Agriculture; Grant, Common Agricultural Policy; and Fennell, Common Agricultural Policy. On the United States, see G.K. Wilson, Special Interests and Policymaking; Goldstein, Ideas, Interests; Browne, Cultivating Congress; and Sheingate, Agricultural Welfare State. See Mulgan, Politics of Agriculture, on agriculture in Japan. For a comparative overview of France, Germany, and the US, see Coleman, ‘Protected Development.’ Moore, ‘New Direction.’ Federal Task Force on Agriculture, Canadian Agriculture, 334. Bowlby and Trant, Agricultural Employment, 8. Statistics Canada, Census of Canadian Agriculture. Auer, Canadian Prairie Farming, 1960-2000, 1. The 1958 stabilization program provided a payment to farmers when the prices of eligible commodities fell below 80 per cent of their previous tenyear average; the 1957 crop insurance plan provided participating producers with a payment in years of low yields. Berthelet, ‘Agriculture Canada Policy,’ 10. On the history of the Canadian Dairy Commission and dairy supply management in the 1960s, see McCormick, ‘Canadian Dairy Policy’; Stonehouse,‘Government Policies’; Skogstad, Politics of Agricultural PolicyMaking, 45; and Veeman, ‘Marketing Boards.’

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30 Data from Carter, McCalla, and Schmitz, Canada and International Grain Markets, 20. 31 See Cohn, International Politics of Agricultural Trade, chap. 4 for a discussion of the International Wheat Agreement. 32 Federal Task Force on Agriculture, Canadian Agriculture, 7. 33 Ibid., 10, 431. 34 A detailed history of the national marketing agencies in poultry and eggs is provided in Chapter 5. 35 Canada. Department of Agriculture, Orientation of Canadian Agriculture, 31. 36 The support level was raised to 90 per cent of the previous five-year average for slaughter cattle, hogs, sheep, industrial milk and cream, oats and barley grown outside the Canadian Wheat Board area, corn, and soybeans. The Canadian Dairy Commission received the biggest portion of these funds to distribute to dairy producers. See Skogstad, Politics of Agricultural Policy-Making, 71–81. 37 A summary of these developments can be found in ibid., chap. 4. 38 Huff, ‘Changing Role of Public Policy,’ 1404. 39 Import restrictions included import permits, import controls, tariffs, and seasonal duties on commodities such as dairy products, poultry, eggs, wheat, oats, barley, corn and other grain feeds, and fruits and vegetables. 40 Veeman and Veeman, ‘Changing Organization, Structure,’ 763. 41 Tracy, Government and Agriculture; Tracy, Food and Agriculture; Grant, Common Agricultural Policy; and Fennell, Common Agricultural Policy. 42 Veeman and Veeman, ‘Directions of Canadian Agricultural Policy,’ 82. 43 The term ‘iron triangle’ was coined by McConnell, Private Power and American Democracy, to describe the close relationship in the US between the American Farm Bureau, the Department of Agriculture, and the congressional committees responsible for agriculture. See various chapters in Halpin, ‘Agricultural Interest Groups.’ 44 Dawson, ‘Interest Group.’ 45 Dawson, ‘Relations between Farm Organizations,’ 457. 46 Canada, Proceedings, 626. 47 Skogstad, Politics of Agricultural Policy-Making. 48 The UPA president serves as one of the two vice-presidents of the CFA. The Coopérative fédérée du Québec, which represents the Quebec farm cooperative movement, is also a member of the CFA. 49 Federal Task Force on Agriculture, Canadian Agriculture, 300. 50 Canadian Federation of Agriculture, ‘Statement of Dobson Lea,’ 55. 51 For a discussion of the Crow debate, see Skogstad, Politics of Agricultural Policy-Making, chap. 6; and B.K. Wilson, Farming the System, 214–32. The

278 Notes to pages 59–61

52 53 54

55 56 57

58

59

60

61

62

compromise in the Western Grain Transportation Act was government payments to the railways ($658 million in 1983–4) and fixed freight rates. The subsidy and fixed rates were set to enable the railways to recover their costs. Western grain producers paid higher freight rates, but they were well below (about 30 per cent initially) the full costs. Coleman, Business and Politics, 101. Libby, Protecting Markets; Wolfe, Farm Wars. The US initiated countervail cases against Canadian live swine and pork in 1984 and against red raspberries in 1985. They initiated anti-dumping cases against potatoes in 1983 and red raspberries in 1985. Duties were levied on Canadian live swine and red raspberries. Josling, Tangermann, and Warley, Agriculture in the GATT, chap. 6. See also Michelmann, Stabler, and Storey, Political Economy. Veeman and Veeman, ‘Directions of Canadian Agricultural Policy’; Veeman and Veeman, ‘Changing Organization, Structure.’ The Australian Bureau of Agricultural and Resource Economics was also an important source of analyses supporting market liberal reforms. The International Policy Council on Agriculture and Trade was formed in 1987 ‘to develop and examine policy alternatives’ to global agricultural problems and consisted of twenty-six professional agricultural economists, farm leaders, government officials, and businessmen from sixteen countries in the developed and developing world. See Coleman, ‘Globality and Transnational Policymaking,’ 101–2 for discussion of this epistemic community of agricultural economists. As noted in chapter 1, Moyer and Josling, Agricultural Policy Reform, use the term ‘competitive’ to label what is here described as the market-liberal model. Coleman, Skogstad, and Atkinson, ‘Paradigm Shifts and Policy Networks,’; Coleman, ‘Protected Development’; Moyer and Josling, Agricultural Policy Reform, 34; OECD, Agricultural Policy Reform (1995), 47. Cairns Group members were Argentina, Australia, Brazil, Canada, Chile, Columbia, Fiji, Hungary, Indonesia, Malaysia, New Zealand, Philippines, Thailand, and Uruguay. As chapter 3 shows, the concept of multifunctionality has since been defined by the OECD. See Commission of the European Communities, Communication: Agenda 2000, for a formal commitment to multifunctional agriculture as the ‘European model of agriculture.’ Avery, World Agriculture and the GATT; Croome, Reshaping the World Trading System; Ingersent, Rayner, and Hine, Agriculture in the Uruguay Round; Keeler, ‘Agricultural Power’; Josling, Tangermann, and Warley, Agriculture in the GATT, chap. 7; and Paarlberg, ‘Agricultural Policy.’

Notes to pages 62–4

279

63 See Josling, Tangermann, and Warley, Agriculture in the GATT, chap. 8. As a developed country, Canada was required to reduce tariffs on imports by 36 per cent and to agree to minimum access commitments for imports that began at 3 per cent and rose to 5 per cent of domestic production over the six-year period. These minimum access imports entered at lower tariff rates. 64 Producer payments not tied to production decisions or market prices were exempt from this discipline, as were producer payments not related to market prices but designed to limit production. 65 Schott, Uruguay Round, 47–54; Tangermann, ‘Agreement on Agriculture.’ 66 Ostry, Post-Cold War Trading System, 193–200. 67 Young, Governance in World Affairs, 5. 68 Free trade with the United States was recommended by the Royal (Macdonald) Commission on the Economic Union and Development Prospects for Canada in its 1985 report. The commission saw free trade as a way to restructure the Canadian economy to make it more competitive. See Doern and Tomlin, Faith and Fear; Leyton-Brown, ‘Political Economy’; Inwood, Continentalizing Canada. 69 Agriculture Canada, Canada-U.S. Free Trade Agreement, 7, 10. 70 Ibid., 12. 71 Cohn, International Politics of Agricultural Trade, chap. 7; Meilke and Van Duren, ‘Economic Issues’; Veeman, ‘Implications of NAFTA and GATT.’ 72 An exception allowed for conditional temporary duties to be levied on fresh fruits and vegetables. 73 Agriculture Canada, Canada-U.S. Free Trade Agreement. 74 In place of each country’s having a final right of judicial review of trade disputes, the FTA provided for a jointly selected panel to review final antidumping and countervail duty orders to determine if the national investigating authority upheld its domestic law. The decision of the binational panel is binding on the two parties. 75 In 1988 Canadian agri-food exports to the US were worth $3.4 billion and those to Mexico netted $160 million. Canadian imports from the US were worth $4 billion and those from Mexico were valued at $120 million. See Rattray, ‘Canadian Perspective,’ 65. Prior to NAFTA, over 85 per cent of Canadian agricultural imports entered Mexico duty free. See Josling and Barichello, Agriculture in the NAFTA. 76 Canada, North American Free Trade Agreement, 5–6. 77 Trade flows have also been affected by the low Canadian dollar relative to the American dollar as well as by domestic public policies of the two countries. Furtan and van Melle, ‘Canada’s Agricultural Trade,’ demonstrate that Canadian agricultural trade had ‘a lesser home consumption bias’ in

280 Notes to pages 65–8

78

79

80 81 82

83 84 85

86 87 88

1998 than in 1984, with the exception of the supply managed sector. They attribute this effect to NAFTA. If beverage and tobacco processing are included, the sector accounts for 13 per cent of total employment in Canada. See Agriculture and Agri-Food Canada, Overview, 16. At the time of the negotiation of the Canada-US Free Trade Agreement, 78.5 per cent of oilseeds (canola, soybeans) and grains (wheat, barley, corn, rye) were grown in western Canada. Alberta and Ontario were the major livestock-producing provinces. Eighty per cent of the milk used to produce dairy products was produced in central Canada. However, dairy production was important in several other provinces, including British Columbia, Alberta, and Prince Edward Island. Together, Ontario and Quebec accounted for about 46 per cent of egg production, 66 per cent of turkey production, and 65 per cent of chicken production. As in the case of dairy, producers in other provinces also benefited from supply management of these products. See Agriculture Canada, Canada-U.S. Free Trade Agreement, 18, 33, 46. Skogstad, ‘The State, Organized Interests.’ Ibid. Put in jeopardy were the horticultural and wine sectors, where the costs of adjusting to lower-cost American imports were great. The FTA outlawed provincial wine distribution, listing, and mark-up policies that had discriminated in favour of Canadian wine producers. A GATT panel had earlier ruled these policies illegal. Gifford, ‘Evidence’; Warley, Agriculture in the Uruguay Round. Cooper, In Between Countries, 202. Proulx denounced what he perceived to be an inadequate CFA campaign to defend supply management and Canadian farmers and threatened to withdraw the UPA from the CFA. Although he later retracted this threat, which other senior officials in the UPA never endorsed, Proulx distanced himself from both the CFA and its provincial farm organization members. Cooper, In Between Countries, chap. 7, is the best account. Ibid.; Acorn, Negotiating Agricultural Trade Reform. Winham, ‘NAFTA,’ 485. The ‘two-level game’ thesis, which posits that countries can leverage international negotiations to force through domestic changes that would not be possible without external pressures, has been used to explain domestic agricultural policy reform in the United States and the European Union. See Putnam, ‘Diplomacy and Domestic Politics,’ for the general argument and Coleman and Tangermann, ‘1992 CAP Reform,’ on the EU and CAP reform. Patterson, ‘Agricultural Policy

Notes to pages 69–75

89 90 91 92 93

281

Reform,’ and Paarlberg, ‘Agricultural Policy,’ depart from the two-level game thesis to argue that domestic factors were more important in explaining CAP and American farm policy reforms. See Cooper and Higgott, ‘Australian and Canadian Approaches,’ on its applicability to Australia but not to Canada. Forbes, Hughes, and Warley, Economic Intervention and Regulation, 8–9. Federal Task Force on Agriculture, Canadian Agriculture, 43. Agriculture Canada, Strategic Directions to 1990, 16. Agriculture Canada, Growing Together, 2. Other task forces examined supply management, farm credit and financial management, agriculture transportation, food safety and quality, marketing and trade development, and sustainable agricultural development.

3. Farm Income Safety Nets and Risk Management 1 Vanclief, ‘Evidence’ (2001). 2 OECD, Agricultural Policies in OECD Countries (2002), 7. 3 See Coleman, Skogstad, and Atkinson, ‘Paradigm Shifts and Policy Networks’; Coleman, ‘Protected Development’; Skogstad, ‘Ideas, Paradigms and Institutions’; and Moyer and Josling, Agricultural Policy Reform. 4 Tangermann, Agricultural Policies in OECD Countries. 5 Ibid., 25. 6 Josling, ‘Competing Paradigms in the OECD.’ 7 Quebec’s farm income stabilization program guarantees producers a price that is equal to their cost of production plus 90 per cent of the average wage of a skilled urban worker. Producers pay one-third of the costs of the program. 8 Agriculture Canada, Strategic Directions to 1990; Agriculture Canada, Growing Together; Agriculture Canada, Growing Together – Safety Nets. 9 The drop in farm incomes was caused by reduced yield from drought and world grain prices at their lowest point in over fifty years in 1987. See Auer, Canadian Prairie Farming, 26. The low international grain prices were the result of changes in US policies that ended American underwriting of world prices. Economic distress dictated the need for some fiscal transfer; political factors, in the form of strong prairie representation in the Mulroney Conservative government and a Conservative premier in Saskatchewan, are given credit for the size of these payments. When the Special Canada Grains Payments were added to them under other federal and provincial programs, they amounted to $4 billion, roughly $31,000 per farmer, in 1987 (Ibid., 8).

282 Notes to pages 75–81 10 Huff, ‘Changing Role of Public Policy,’ 1403. 11 Data provided by Banting, ‘Canada,’ figure 3.2. 12 Canada is much more dependent on export markets (as a percentage of production) than are all other major grain exporters. In 1983–4 and 1985–6, Australia came close to Canada in exporting 75 per cent of its wheat and wheat flour products, compared with Canada’s figure of 79 per cent. By contrast, Argentina’s exports were 68 per cent of its production, those of the US, 50 per cent, and those of the EC, 21 per cent. See Carter, McCalla, and Schmitz, Canada and International Grain Markets, 1–2, 39. 13 Agriculture and Agri-Food Canada, ‘Future Directions,’ 6, 4. 14 Agriculture Canada, Growing Together, 49–55. 15 Ibid.; Agriculture Canada, Growing Together – Safety Nets. 16 Agriculture Canada, Growing Together: Report to Ministers. 17 OECD, Approaches to Income Risk Management, 28. 18 Culver, Niekamp, and Zafiriou, ‘Canadian Agricultural Safety Net Programs,’ 509–10. 19 Schmitz, Furtan, and Baylis, Agricultural Policy, 329. 20 GRIP ended in most provinces in 1995–6, although Ontario continued to offer a similar program until 2001. Only one of the national tripartite stabilization programs established in 1987 and 1988 remained, and it ended in 1996. 21 OECD, Agricultural Policy Reform. There have been considerable subsequent analyses and refinement of the concept of decoupling within the OECD (OECD, Decoupling). It now classifies programs in terms of their degree of decoupling, and market price supports that raise domestic prices above world prices are the most coupled instruments in giving a direct incentive to increase output; acreage payments are moderately decoupled; and payments based on historical entitlements and unrelated to planting, on farm income, or targeted to ‘social’ objectives like environmental sustainability, are the most decoupled. See also Dewbre and Short, ‘Alternative Policy Instruments,’ and Ash, Agricultural Policies. 22 Item 7 of Annex II stated that payments could be made only when the income loss was 30 per cent of a three-year average or the average of three of five years, and it compensated producers up to 70 per cent of the income shortfall. If farmers also received crop insurance and/or disaster aid payments, their combined total with income safety net programs had to amount to less than 100 per cent of the producer’s total loss. 23 Duckworth and MacArthur, ‘U.S. Beef Market,’ 4; B.K. Wilson, ‘Ag Ministers Agree,’ 1; Duckworth, ‘Pork tripartite ends,’ 13; and Veeman, ‘Implications of NAFTA and GATT.’

Notes to pages 82–90

283

24 Agriculture and Agri-Food Canada, Minister’s Message, 3. 25 On agriculture and the program review exercise, see Skogstad, ‘Case Study.’ 26 Doan, Paddock, and Dyer, ‘Grain Transportation Policy,’ 3. 27 Schmitz, Furtan, and Baylis, Agricultural Policy. Those who fed grain on the prairies to cattle, hogs, and poultry benefited from lower feed grain costs with the elimination of the Crow benefit. 28 Agriculture and Agri-Food Canada, Agenda, Jobs and Growth. 29 OECD, Agricultural Policies in OECD Countries, 31. 30 Goodale, ‘Evidence.’ (1995). 31 Huff, ‘Changing Role of Public Policy,’ 1408. 32 Coleman, Skogstad, and Atkinson, ‘Paradigm Shifts and Policy Networks’; Coleman, ‘Protected Development’; Moyer and Josling, Agricultural Policy Reform, chap. 3. 33 The headlines of national newspapers in late 1998 told the unfolding story. ‘Rural Way of Life at Stake, Farmers Say’ (Canadian Press, A13); ‘Prairie Grain Farmers Face Devastation’ (Mitchell, A1); ‘Farming Crisis to Worsen’ (Mitchell, A5). 34 Sheingate, Agricultural Welfare State. 35 Reuters, ‘Congress Opens Cash Spigot,’ 57; Wilson, ‘Farmers, Interests,’ 172. 36 Richardson, ‘Canadian Agricultural Safety Nets,’ 5. 37 Ibid. 38 One organization that did not blame other countries’ agricultural subsidies for grain and oilseed producers’ depressed incomes was the National Farmers Union. It argued that there was no oversupply of grain in world markets. The current world grain supplies were far below average and below 1970s levels. The NFU also argued that there was no correlation between subsidy levels and production; while production had increased in the highly subsidized EU, it had also increased in Australia and Argentina, where there were no subsidies. See the NFU presentation to House of Commons Standing Committee on Agriculture and Agri-Food, 23 March 2000. 39 Friesen, ‘Evidence,’ 2001. 40 Ibid. (2000), 005 (recorded time). 41 Ibid. Jack, ‘Evidence,’ 0950 (recorded time). 42 Serby, ‘Evidence.’ This argument, and a personal appeal for federal funding by the Saskatchewan and Manitoba premiers to the prime minister in October 1999, was initially rebuffed by Prime Minister Jean Chrétien. However, Chrétien’s government eventually provided Saskatchewan and Manitoba

284 Notes to pages 91–3

43

44

45

46

47 48

49 50

51

52 53

with additional money for farm income support programs in the February 2000 budget. See also the OECD document by Antón, ‘Agricultural Policies and Risk Management,’ 30, which concludes that the role for government in risk management ‘is to provide a sound business environment with competitive markets and clear requirements’ and ‘to facilitate the development of market mechanisms when markets fail and to provide instruments in general for high levels of risk.’ A year after the agreement was signed, the federal government announced an additional aid package of $500 million to help to ease the continuing income distress. This reference margin excluded the high and low years and averaged the other three years. Contrary to the wishes of farm organizations like the CFA, provincial opposition (because of their share of costs) had forced Ottawa to drop its coverage of negative margins – yearly income losses. (B.K. Wilson, ‘New Aid Deal,’ 1). Alberta and Ontario were spending more than their required 40 per cent share of farm safety net spending, and by 2001 Quebec was spending an estimated $1.60 for each federal dollar spent on safety net programs in the province (B.K. Wilson, ‘Quebec Farm Policy Envied,’ 115). Agriculture and Agri-Food Canada, A Strong Partnership. The members of the Grain Growers of Canada formed in 2000 were wheat and barley growers in western Canada and BC, Ontario Corn Producers, Ontario Soybean Growers, and the Atlantic Grains Council. B.K. Wilson, ‘Editorial,’ 6. Sympathetic Members of Parliament organized a family farm tribute reception on Parliament Hill in late February 2001. A persistent advocate for farmers was the Liberal Member of Parliament from PEI, Wayne Easter. A former president of the National Farmers Union, Easter was an unrelenting critic of Agriculture Minister Vanclief’s failure to extract dollars for farmers and of officials in the agriculture ministry, whom he accused of not making the necessary case for agricultural support. See Wilson, ‘Vanclief Not Pushing Hard Enough,’ 4. Prime Minister’s Caucus Task Force on Future Opportunities in Farming, Interim Report; Prime Minister’s Caucus Task Force on Future Opportunities in Farming, Securing Agriculture’s Future. Vanclief, ‘Evidence’ (2000), 1240 (recorded time). To ease conflict over the formula for allocating federal funds, the federal government provided extra funds to Manitoba and Saskatchewan, a move that only precipitated further division. B.K. Wilson reports that the leaders of the Ontario and Quebec general farm unions also denounced the special

Notes to pages 94–9

54

55

56

57 58 59 60

61 62 63 64 65 66 67

68 69 70 71

285

treatment. The Alberta farm organization stated that ‘an aid package that stops at the Alberta-Saskatchewan border “is as inequitable as you can get”’ ‘Aid Plan Lambasted as Divisive,’ 11. The Ontario agriculture minister said it would allow a ‘made-in-Ontario’ safety net package. Quebec's agriculture minister also praised the agreement, saying his province would have ‘more flexibility than ever’ to design its own safety net package with increased funding. See B.K. Wilson, ‘Farm Leader Warns,’ 4. The Ontario agriculture minister said the veto over amendments was necessary to avoid Ottawa’s making unilateral decisions regarding coverage (Western Producer, ‘We Need National Rules,’ 12). OECD, Market Effects; OECD, Agricultural Policies in OECD Countries, 1997; Dewbre and Short, ‘Alternative Policy Instruments,’ provide a good analysis of the effects of different income support measures on income transfer efficiency, trade distortion, and competitiveness. OECD, Agricultural Policies in OECD Countries, 2002, 5, reports that in 1986–8, total transfers to the agricultural sector were US$298 billion; by 2001 they had climbed to US$311 billion. OECD, ‘Agricultural Policy.’ OECD, News Release, 3. Garzon, Common Agricultural Policy, chaps. 9 and 12. See OECD, Agricultural Policies in OECD Countries (2002); OECD, Farm Household Income; Huff, ‘Changing Role of Public Policy,’ 1408; and Ash, ‘Agricultural Policies.’ OECD, ‘Farm Household Income,’ 7; Agriculture and Agri-Food Canada, Income Inequality in Canada. Agriculture and Agri-Food Canada, Safety Net Review. Survey research was conducted by Angus Reid in late 1999 and is reported in Agriculture and Agri-Food Canada, Risk Management, xi. Agriculture and Agri-Food Canada, Safety Net Review, 30, 7, and 6, respectively. Vanclief, ‘Evidence’ (2002). Komarynsky, ‘Evidence.’ LeRoy, Klein, and Klvacek, ‘Losses in the Beef Sector,’ 13–16, describe the various federal and provincial programs for BSE assistance and tally their amount over the period May 2003–May 2005 at $2 billion. Easter, Empowering Canadian Farmers, 9. Agriculture and Agri-Food Canada, Safety Net Review. Wilson, ‘Sask Proposes New Safety Net Plan,’ 5. Minister Vanclief had taken the ‘tough love’ approach of reminding farmers

286 Notes to pages 99–100

72

73

74

75

76

that he and his wife had quit farming when they couldn’t make a living at it. Not many farmers were convinced that their bleak situation was their fault. The deputy minister was also singled out for opprobrium; he often appeared to be impatient with and lacking in respect for farm union leaders. The resentment with what many in the farm community perceived as an intransigent and uncaring minister and deputy minister led farm leaders to take the unprecedented step of writing a letter to the prime minister to request Lyle Vanclief’s resignation. (B.K. Wilson, ‘Frustrated Farmers Losing Patience’). When the minister remained in his post and farm leaders still had to work with him and his officials, consensus was all the more difficult. The deputy minister of Agriculture refused to meet with the federal safety nets advisory committee. It ceased to be co-chaired by an AAFC official and was chaired solely by the president of the CFA. Although AAFC officials continued to be part of the committee, the atmosphere external to the committee handicapped its capacity to serve as a forum in which to build a consensus around risk management programs. Ottawa subsequently employed a consulting firm to hear the views of the farming community. Farm groups criticized the poor organization of these consultations, which, in the words of the CFA president, got the consultative process off to ‘a rocky start.’ See B.K. Wilson, ‘Ag Canada Consultations Slammed,’ 4. Western Producer, ‘Critics Fear,’ 10, reported that 800 people gave views at 42 commodity specific sessions held in March and April 2002 and that there had been about 200 one-on-one sessions with ‘various industry players.’ The APF could not come into effect until ministers representing six provinces with half of eligible net sales signed it. Saskatchewan, PEI, Ontario, and Quebec agriculture ministers withheld their signatures pending changes to satisfy their producers. Ontario was the last province to sign a bilateral implementation agreement with Ottawa and did so only after the defeat of the provincial Conservative government and its agriculture minister, Helen Johns. The signature of the new Liberal minister in Ontario allowed the implementation of the APF in December 2003. The imperative to follow WTO rules in order to reduce the likelihood of trade retaliation ruled out adjusting the reference margin to take account of trade injury, as many in the farm community argued was necessary. Under the 2003 CAIS, farmers could choose to protect drops in their income up to 70 per cent. The greater their desired protection against risks to their income, the larger their premiums. Smaller declines in income were shared equally by government and producers; for larger declines, the government

Notes to pages 100–6

77

78 79

80 81

82

83 84 85 86 87 88 89

287

assumed greater responsibility for income compensation. Compensation for the first 15 per cent drop of income below the reference margin was funded equally by the producer and government. The reference margin is the historical average of eligible revenues minus eligible expenses (fertilizer, fuel, feed). Compensation for the second 15 per cent drop of income below the reference margin was funded 70 per cent by government, and the last 70 per cent drop in income was funded 80 per cent by government. Danny Foster, an official with the AAFC, in ‘Evidence’ stated that the 2003 design of CAIS worked better for farmers with larger sales and larger margins, but it also worked well for smaller and medium-sized farmers if they were well managed. OECD, Agricultural Policies in OECD Countries (2003), 42–3. Its membership consisted of thirty-seven federal and provincial officials and representatives of the agri-food industry, of which producer representatives are the largest number. A second committee of federal-provincial officials looked at more technical issues of how CAIS functioned. And a third committee of thirty-one federal and provincial officials and producer representatives was struck to provide an annual review of APF. For the latter report see Agriculture and Agri-Food Canada, Assessing Progress. Ibid., 26–7, reports that spending was 41 per cent and 22 per cent higher than originally budgeted for in 2003–4 and 2004–5. An audit of CAIS by the Office of the Auditor-General in May 2007 vindicated the first two complaints and concluded that possibly thousands of farmers had received smaller payments than they deserved. See Auditor General of Canada, Report of the Auditor General of Canada: Chapter 4. Agriculture and Agri-Food Canada, Next Generation.’ B.K. Wilson, ‘Memos Reveal CAIS Unease,’ 1, reports that Agriculture and Agri-Food Canada officials voiced their concern about the capacity of CAIS to maintain a viable agricultural sector in a briefing memo to Minister Strahl. He quotes the memo as stating: ‘the CAIS program is currently stabilizing a margin which is insufficient to maintain a profitable industry.’ Agriculture and Agri-Food Canada, ‘Next Generation.’ Ibid., 8. Lerohl, ‘Farm Policy Tiger?’ table 2, identifies the risk management and price/income support features of historic and current programs. Agriculture and Agri-Food Canada, ‘Next Generation,’ 6. Agriculture and Agri-Food Canada, Growing Forward, 2. Frigon, Farm Income. Under the Harper Conservative government, the safety net advisory com-

288 Notes to pages 107–13 mittee was supplemented with consultations with invited stakeholders. See Agriculture and Agri-Food Canada, Next Generation (2007), appendix B. 4. The Canadian Wheat Board and Orderly Marketing 1 Goodale, ‘Evidence,’ 1997. 2 The importance of export markets varies, depending upon the grain and over time. Much less barley than wheat is exported. In the early 1990s about 30 per cent of barley was exported; by 2001–2, the figure was halved. The comparable figures for wheat are roughly 75 per cent and 65 per cent. 3 Furtan, Kraft, and Tyrchniewicz, ‘Can the Canadian Wheat Board?’ 418. 4 For data on production and sales see Agriculture and Agri-Food Canada’s Bi-weekly Bulletin: Barley. Available at http://www.agr.gc.ca/mad-dam/ index_e.php?s1=pubs&s2=bl&page=intro. This URL also allows access to Bi-weekly Bulletin: Profile of the Canadian Wheat Industry. See also Canadian Wheat Board, ‘2004-2005 Statistical Tables.’ 5 There is debate about how competitive world agricultural markets (including wheat) are, but the weight of evidence suggests that they are not competitive. McCorriston and MacLaren,‘State Trading,’ 129, summarize the evidence regarding world wheat markets and conclude, ‘the overall impression is that the assumption of perfect competition is questionable and potentially inappropriate.’ 6 Data for Cargill, Archer Daniels Midland, Bunge, and Louis Dreyfus can be obtained from the websites of the firms. Those for the Australian and Canadian wheat boards can be found in Canadian Wheat Board,‘CWB Competitors.’ 7 Fowke, National Policy; C.F. Wilson, Century of Canadian Grain; Smith, Regional Decline of a National Party; Morriss, Chosen Instrument. 8 The Wheat Board had a monopoly to market barley for domestic feed use between 1949 and 1974 and to market oats in export markets from 1949 to 1988. 9 Morriss, Chosen Instrument II. 10 Forbes, Hughes, and Warley, Economic Intervention and Regulation, 85. 11 Agriculture Canada, Growing Together, 35. 12 STEs must also respect the GATT principle of non-discriminatory treatment, which requires that any advantage granted to one GATT member must be accorded to other GATT members. 13 Croome, Reshaping the World Trading System, 97, 217; McCorrriston and MacLaren, ‘State Trading, the WTO and GATT.’ 14 NAFTA Article 1502 on Monopolies and State Trading Enterprises requires

Notes to pages 114–19

15 16 17 18

19 20

21 22

23

24 25 26 27

289

monopolies and state trading enterprises to act in accordance with commercial considerations and in a non-discriminatory manner and not to engage in anti-competitive practices. Gray and Annand, ‘Grain Trade.’ Canadian Wheat Board, ‘Trade Issues and the CWB.’ USDA, ‘USDA Agricultural Baseline Projections.’ These allegations are outlined in US President Reagan’s ‘Statement of Administrative Action,’ which accompanied the FTA when it was forwarded to the US Congress for approval. See also United States GAO, Canada and Australia, 4. GATT/WTO provisions with respect to STEs do not require full transparency if disclosing confidential information would ‘be contrary to the public interest or would prejudice the legitimate commercial interests of particular enterprises’ (GATT (1947) Article XVII, 4(d)). The GATT/WTO Agreement on Agriculture also allowed export credits and credit guarantees. Furtan and Baylis, ‘State Trading in Wheat,’ summarize the arguments. The most egregious example of an American senator inciting his constituents to wage ‘war’ on Canadian wheat imports and the Canadian Wheat Board was North Dakota Senator Kent Conrad. He proposed that American missiles should be pointed northward to force Canada ‘to surrender’ in the 1993–4 wheat trade dispute. See Fagan, ‘Bully-boy Tactics,’ A1. Carter, Economic Analysis, ‘Economics.’ Two court cases clarified that the federal government had legal authority, by virtue of its trade and commerce powers in Section 91(2) of The Constitution Act (1867), to vest the Canadian Wheat Board with its monopoly to purchase and sell wheat, oats, and barley in interprovincial and export markets; and, further, to exercise pooling powers. These cases were Murphy v. CPR and the Attorney General of Canada (1958) and R. v. Klassen (1959). In October 1997 the Federal Court of Canada dismissed an application by the Government of Alberta for a judicial review of the Canadian Wheat Board’s grain delivery system. The presiding judge ruled that the Alberta government did not have standing to request the review, since it is not directly affected by the Board. No grain producers or permit holders joined the Alberta government in the application. See Alberta v. Canada (Wheat Board). Skogstad, Politics of Agricultural Policy-Making, chap. 6. Information obtained in interviews with Canadian Wheat Board officials, Winnipeg, May 2004. Hehn, ‘Evidence.’ A February 1998 report stated that there were 219 cases before the courts,

290 Notes to pages 119–24

28 29

30 31

32 33 34 35 36 37 38

39 40 41 42 43 44

involving about 100 farmers (some farmers were involved in more than one case). Most of those charged for selling grain across a border without a Wheat Board permit were Saskatchewan farmers. Three farmers chose to go to jail rather than pay the assessed fine. See Tjaden,‘Courts Deal with 219 Cases,’ 31. Quoted in B.K. Wilson, ‘Reform Party Outlines Its Ideas,’ 12. The Wheat Board viewed cash pricing as a way to induce grain shipments when Wheat Board inventories were inadequate to meet consumers’ demands. Note that farmers are eligible for cash advances on their grain shipments, and that payments include initial, adjusted, interim, and final payments. Information obtained in interviews with Canadian Wheat Board officials, Winnipeg, May 2004. Briere, ‘The ‘Silent Majority’ Speaks,’ 28. Later in the debate, Goodale chastised the Saskatchewan Wheat Pool for not being a more vocal supporter of the Canadian Wheat Board (Ewins, ‘Let Elected CWB Decide’). The NDP Saskatchewan government ran a full-page ad in the Western Producer explaining why dual marketing would destroy the Board and included a form for farmers to fill in and return to the provincial agriculture minister. Briere, ‘The ‘Silent Majority’ Speaks.’ Goodale, ‘Evidence’ (December 1996), 1720 (recorded time). Quoted in B.K. Wilson, ‘Implications of Vote Unclear,’ 42. White, ‘Board Critics.’ Federal Court of Canada Trial Division, Archibald et al., 79. Goodale, ‘Evidence (1998). Introduced in 2000–1, one cash-pricing option allows a farmer to lock in a fixed price and receive full payment at the time of delivery. Another early payment option provides up to 100 per cent of the expected pool return at the time the grain is delivered but also allows for further payments if the initial and/or final payments rise above the early payment rate. Neither payment option is guaranteed by the federal government. Goodale, ‘Evidence.’ (December 1996), 1540 (recorded time). Ibid., (1998), 1010 (recorded time). Goodale, interview with the author. B.K. Wilson, ‘Age of Reform at CWB,’ 1. As quoted in the Western Producer, ‘Wheat Board Defender Sees Demise,’ 4. Even after the changes to the Wheat Board Act that empowered farmers to determine whether the Board would retain its monopoly in the future, the Alberta government continued to spend considerable sums of money on an advertising campaign for a dual market (Ewins, ‘Alberta’s CWB Position,’

Notes to pages 125–7

45 46 47

48 49 50 51 52 53 54 55

56 57 58 59 60

291

4). Part of the Wheat Board’s counter-campaign that ran in the farm press consisted of a photo of two bulls. The caption under the one whose genitalia were intact read ‘This is the CWB.’ The caption under the castrated bull read ‘This is the CWB in an open market for wheat and barley.’ Skogstad, ‘Dynamics of Institutional Transformation.’ Ewins, ‘Facts and Figures Show,’ 5. The plaintiffs argued the powers of the Canadian Wheat Board were inconsistent with sections 2(d), 6(2) and 15(1) of the Canadian Charter of Rights and Freedoms. Section 2(d) guarantees freedom of association; Section 6(2) guarantees the right ‘to move and take up residence in any province’ and ‘to pursue the gaining of a livelihood in any province’; and Section 15(1) guarantees equality before and under the law. The Federal Court judgment observed that the complainants were ‘philosophically antipathetic’ to statesponsored grain marketing (Federal Court of Canada. Trial Division, Archibald et al., 17). Quoted in Canada. Department of Justice, Defendants’ Post-Trial Memorandum, 54. Quoted in Ewins, ‘Facts and Figures Show,’ 5. Kraft, Furtan, and Tyrchniewicz, Performance Evaluation. Fulton and Vercammen, Dual Marketing. Briere, ‘Single-Desk Sales More Valuable,’ 4; Western Producer, ‘Pooling, Cash Market Can’t Co-exist.’ Ewins, ‘Barley Study Smiles on CWB,’ 3. Schmitz et al., CWB and Barley Marketing. The debate among agricultural economists over whether the Wheat Board captures premiums has continued in scholarly journals. For a sampling, see Carter, Loyns, and Berwald, ‘Domestic Costs,’ and Carter and Smith, ‘Potential Impacts of State Trading Enterprises,’ for the critical view. See Furtan, Kraft, and Tyrchniewicz, ‘Can the Canadian Wheat Board?’ for the case for Wheat Board premiums. Carter and Loyns, Economics of Single-Desk Selling. Goodale, interview with the author. Federal Court of Canada. Trial Division, Archibald et al., 69–70. Ibid., 69, 70, 72. A poll of Saskatchewan farmers released in January 1996 showed that more than half of the farmers surveyed said participation in the Board should be voluntary. A year later, after economists’ studies had been released showing the net gains that accrued to prairie farmers as a result of the Wheat Board, a majority of Saskatchewan farmers supported the single-desk option in the plebiscite. See Western Producer, ‘Poll Shows CWB Support.’

292 Notes to pages 127–33 61 Schmitz, Furtan, and Baylis, Agricultural Policy, 173. 62 Brinkman, ‘Report Card for Prairie Agriculture.’ 63 Goodale, ‘Evidence’ (21 October 1997), 0850 (recorded time); Goodale, interview with the author. 64 Goodale, ‘Evidence’ (21 October 1997), 0850 (recorded time). 65 Canadian Wheat Board, ‘Trade Issues: Canada-U.S. wheat relations,’ puts the costs at $17 million. 66 Alston, Gray, and Sumner, ‘Wheat War of 1994.’ 67 Ibid.; Skogstad, ‘Warring over Wheat.’ 68 Vocke, Allen, and Ali, ‘Wheat Backgrounder.’ 69 USTR, USTR Affirmative Finding, 1. 70 The US market had absorbed about 10 per cent of the red spring wheat crop, but net returns from this market are high for Canadian grain growers because the transportation costs of accessing it are comparatively low (relative to more distant overseas markets), and American wheat millers pay a premium for Canadian wheat. See Canadian Wheat Board, ‘Trade Issues: The NAFTA Wheat Decision.’ 71 WTO, Canada – Measures. 72 McCorriston and MacLaren, ‘State Trading, the WTO and GATT,’ 114. 73 Ibid., 133. 74 WTO, Canada – Measures, para. 6.110–6.114, summarized the US position on why the Wheat Board export regime ‘necessarily’ and ‘inescapably’ resulted in the CWB’s breaking GATT/WTO rules regarding state trading enterprises. The government’s financial guarantees for the Wheat Board gave it ‘less exposure to market risk’ than a commercial actor. The exclusive right to purchase western Canadian wheat, and at an initial payment below the estimated final market value, gave the Wheat Board greater ‘pricing flexibility’ than ‘commercial’ grain traders had. These provisions gave the Wheat Board incentives and allowance to make ‘non-commercial’ sales. The US also argued that the government of Canada had supervisory obligations to ensure that the Wheat Board acted in a commercial and non-discriminatory manner and that its failure to do so necessarily resulted in the Wheat Board’s not acting in a commercial and non-discriminatory manner. 75 Canada also pointed to ‘exclusive and special privileges’ that other GATT/ WTO members gave their own enterprises. The United States, it pointed out, offers credit guarantees to its multinational grain traders such as Cargill and ADM. (Ibid., para. 4.406). 76 GATT Article III:4 requires countries to treat imported products of member countries no less favourably than ‘like products of national origin in respect of all laws, regulations and requirements affecting their internal sale, offer-

Notes to pages 133–44

77 78 79 80 81

82

83

293

ing for sale, purchase, transportation, distribution or use.’ Article 2 of the TRIMS agreement contains this GATT requirement. USTR, USTR Affirmative Finding, 5. See Canadian Wheat Board, ‘Trade Issues: CWB.’ See Canadian Wheat Board, Notice of Application. Canadian Wheat Board, ‘Canada Begins Effort.’ On the pollsters’ view that the wording was ‘skewed,’ see Ewins, ‘Barley Vote Plagued by Controversy,’ 3; on the request to the auditor general, see B.K. Wilson, ‘Auditor General Considers,’ 12. Strahl, ‘Strahl Confirms Barley Freedom Day,’ 5. Ewins, ‘Barley Vote Plagued by Controversy,’ reports that Brian Otto, a member of the Market Choice Alliance, suggested that Strahl aggregate the votes of options 2 and 3. The website of the Market Choice coalition includes linkages to the Western Canadian Wheat Growers Association, the Alberta Barley Commission and the Western Barley Growers Association. Other applications filed by the Canadian Wheat Board directors on the prohibition of advocacy and the issue of compensation for the Board’s CEO continue at the time of writing.

5. Supply Management: Resisting Internationalization and Adjusting Policy Instruments 1 Agriculture Canada, Growing Together, 57. 2 The important exceptions are New Zealand and Australia, among the world’s biggest dairy exporters, which liberalized their dairy markets in stages over the 1980s and 1990s. See OECD, Agricultural Policies, 2004. 3 Romain and Sumner, ‘Dairy Economic and Policy Issues.’ 4 Ash, Agricultural Policies, figures 1.a and 1.c. 5 The figure of $25 billion was suggested by one of the anonymous reviewers of this manuscript. I was unable to find published data on aggregate quota values for all supply-managed sectors. 6 Coffin, Saint-Louis, and Rosaasen, ‘Supply Management Canadian Style,’ 206. 7 The GATT article required effective discipline of national production, a condition met when 80–85 per cent of production or marketing was restricted. 8 Section 8 of the Canadian Dairy Commission Act defines the mandate of the Canadian Dairy Commission, the Crown corporation that is authorized by the federal government to implement supply management, ‘to provide efficient producers of milk and cream with the opportunity of obtaining a

294 Notes to pages 145–50

9 10 11

12 13

14

15 16 17

18

19 20 21

fair return for their labour and investment and to provide consumers of dairy products with a continuous and adequate supply of dairy products of high quality.’ It states no goals with respect to processors. Stonehouse adds to this list: ‘to ensure that Canadian domestic requirements for processed dairy products are met as much as possible from Canadian sources of milk, and at the same time, avoid accumulations of large stocks of surplus processed products’ (‘Government Policies,’ 1). Ibid.; McCormick, ‘Canadian Dairy Policy.’ Scullion, Canadian Dairy Commission, provides an excellent history of Canadian dairy policy from the 1960s to 2005. Newfoundland did not become a party to national dairy supply management and the National Milk Marketing Plan until August 2001. Its producers sell their milk almost exclusively in the local, fluid milk market. Until 1991 the federal cabinet had final responsibility for administered pricing, even though it normally acted on the advice of the CDC. Contini and Yorgason, Egg Industry in Ontario; Skogstad, Politics of Agricultural Policy-Making; Veeman, ‘Marketing Boards’; Coffin, Saint-Louis, and Rosaasen, ‘Supply Management Canadian Style.’ The federal- provincial agreement to establish a national egg marketing scheme stated its goals to be ‘a fair return to the producer’ and ‘a dependable supply of high quality products to the consumer.’ Safarian, Canadian Federalism and Economic Integration, 48–57. The Supreme Court of Canada ruled provincial efforts to block out-of-province egg and poultry imports illegal in Attorney General for Manitoba v Manitoba Egg and Poultry Association. Skogstad, ‘Farm Products Marketing Agencies Act.’ Skogstad, Politics of Agricultural Policy-Making; Coffin, Saint-Louis, and Rosaasen, ‘Supply Management Canadian Style.’ Scullion, Canadian Dairy Commission, xvii. Dairy plant processing data can be found on the website of the Canadian Dairy Commission: www.cdcclc.gc.ca. Data on the poultry and egg industry can be found at National Farm Products Council, Poultry and Egg Industry, 2006. See also Canadian Poultry and Egg Processors Council at http://www.cpecpc.ca/about_cpepc/who.asp. See notes 17 and 18. Agriculture and Agri-Food Canada, Farm Income, 13. The Canadian Poultry and Egg Processors Council states that the five largest firms process 55 per cent of chicken slaughtered in Canada. See http:// www.agr.gc.ca/poultry/prindc4_e.htm. The five firms are la Coopérative Fédérée de Québec, Lilydale Poultry Co-operative, Maple Leaf Poultry,

Notes to pages150–6

22 23 24

25

26 27 28 29

30 31

32 33 34 35

36 37 38 39 40

295

Exceldor, and Maple Lodge Farms. See also Harrison and Rude, ‘Measuring Industry Concentration,’ and Agriculture and Agri-Food Canada, Snapshot of the Canadian Chicken Industry. See Doyon, ‘Evolution of Agricultural Cooperatives in Quebec’; and Canadian Dairy Commission at http://www.dairyinfo.gc.ca. Agriculture and Agri-Food Canada, Overview, 45. Gervais and Devados, ‘Estimating Bargaining Strengths,’ claim processor power for the 1997–2003 period. Fulton and Yang, ‘Testing the Competitiveness,’ suggest that high (compared to American) chicken retail prices may be due to market power at either or both the processing and retail sectors. For an early sample, see Arcus, Broilers and Eggs; Barichello, Canadian Dairy Industry Regulation; and Forbes, Hughes, and Warley, Economic Intervention and Regulation. Quebec-based agricultural economists have been the few, rare economists to offer a less critical view of supply management. See Coffin, Romain, and Douglas, ‘Performance’; and B.K. Wilson, Farming the System, 174–9, for a summary of critics and criticisms. Romain and Sumner, ‘Dairy Economic and Policy Issues.’ Whelan with Archbold, Whelan, 149. Skogstad, Politics of Agricultural Policy-Making, 94–5. Alberta was not in the national dairy plan between 1978 and 1983 and had only a contractual relationship with the CDC between 1983 and 1989. BC left the national dairy plan for 15 months in 1983–4. See Skogstad, Politics of Agricultural Policy-Making, chap. 5; B.K. Wilson, Farming the System, 179–80. Skogstad, ‘Policy Under Siege.’ See Skogstad, ‘Farm Products Marketing Agencies Act,’ for a discussion of the Progressive Conservative Party’s extended efforts to block passage of the legislation that enables poultry/egg supply management boards. Agriculture Canada, Strategic Directions to 1990. Agriculture Canada, Growing Together. Task Force on Competitiveness in the Agri-Food Industry, Report to Ministers of Agriculture. See Larue,‘Implications of GATT and NAFTA,’ for an analysis of the terms and effects on supply management of the WTO Agreement on Agriculture and the NAFTA. Matte, ‘Discussion.’ Ibid., 285. Dungate, ‘Evidence,’ 1040 (recorded time). Canada, First Submission, 44. World Trade Organization, Panel Report, Recourse to Article 21.5; World Trade Organization, Panel Report. Second Recourse to Article 21.5; World

296 Notes to pages 156–62

41 42 43 44 45 46 47

48 49

50 51 52 53

54 55 56 57 58

Trade Organization, Report of the Appellate Body, Second Recourse to Article 21.5. World Trade Organization, Report of the Appellate Body, Second Recourse to Article 21.5 para. 144. Ibid., para 153. Anderson, ‘Georgian Bay Company Loses Bid,’ A14. Verheul, ‘Evidence.’ R. Phillips, ‘Discussion.’ Coleman, Skogstad, and Atkinson, ‘Paradigm Shifts and Policy Networks’; Weiss, Myth of the Powerless State. Competing with one another on an international plane, multinational dairy processors are less likely than producers to perceive the benefits of organizational and market solidarity. Its disparate economic interests led Parmalat to withdraw from the National Dairy Council. The organization dissolved itself in 2001, when other multinational dairy companies followed Parmalat and the NDC ceased to represent 50 per cent of the processing sector. Agriculture Canada, Growing Together, 56. The cooperation of dairy producers and processors was facilitated by the large presence of dairy cooperatives in the dairy processing sector – they accounted for about 50 per cent of all milk processing – and the active involvement of leaders of Dairy Farmers of Canada in these cooperatives. Consultation Committee on the Future of the Dairy Industry, Working Document. Canadian Dairy Commission, 1994/1995 Annual Report, 3–4; Federal-Provincial Task Force on Orderly Marketing, Action Plan, 8. Scullion, Canadian Dairy Commission, 115–18 provides a review of the work of these various bodies. Producer levies financed a rebate program implemented in 1992 under which further processors recovered 60 per cent of the difference between Canadian and American dairy ingredient costs. Vanclief, ‘Evidence’ (30 May 1995). Scullion, Canadian Dairy Commission, chap. 4, provides a detailed account. Vanclief ‘Evidence’ (30 May 1995), 0910 (recorded time). Scullion, Canadian Dairy Commission, 201. Louis Balcaen, vice-chair of the CDC and the co-chair of the Consultation Committee on the Future of the Dairy Industry, as quoted in ibid., 124. Ibid., chap. 4 also provides good details on the complexity of creating regional and national pools by harmonizing different provincial milk classes and end-use prices.

Notes to pages 162–5

297

59 Manitoba withdrew in 2003 from the eastern pool but remained a member of the western pooling agreement. 60 In Alberta and BC producers sold more higher-priced fluid milk than they did lower-cost industrial milk, and the demand for milk was growing. Pooling all revenues (fluid and industrial milk across the remaining four classes) was seen as an economic subsidy to producers in eastern Canada. Pooling markets was also seen as antithetical to the goal of increasing western Canada’s share of national production. 61 See Scullion, Canadian Dairy Commission, 136–8. 62 Under the interprovincial Agreement on Internal Trade (AIT), provinces agreed to harmonize fluid milk and distribution standards by September 2007. Quebec also agreed to remove its margarine-colouring restrictions. Pressed by the food manufacturer, Unilever, the Alberta government appealed this restriction to an AIT panel. The panel ruled that Quebec should remove the restriction. When Quebec refused to do so, Unilever (which produces margarine from oilseeds) appealed to the Quebec Court of Appeal. The Quebec court upheld the Quebec regulation. Unilever then appealed to the Supreme Court of Canada, which ruled that the regulations were within Quebec’s legislative authority. For the AIT panel ruling, see http://www.iir.gov.ab.ca/trade_policy/documents/AIT_AB-MN-SK_ Qu_PanelRpt-23June05.pdf. The Supreme Court ruling in UL Canada Inc. Appellant. v. Attorney General of Quebec and Fédération des producteurs de lait du Québec can be found at http://scc.lexum.umontreal.ca/en/2005/2005/ scc/0/2005scc/ 0.pdf. 63 Kempton Matte, senior vice-president of Saputo, testified to the House of Commons Standing Committee on Agriculture and Agri-Food on 11 May 2006 that high Canadian milk prices make the technology unviable in Canada. See Matte, ‘Evidence,’ 0920 (recorded time). 64 Ibid. 65 This explanation is provided by Yves Leroux, vice-president of regulatory and government affairs for Parmalat. See Leroux, ‘Evidence.’ Canada. 66 See Frechette,‘Imports of Butteroil/Sugar Blends,’ for a discussion of the issue and the sharp rise in butteroil/ sugar blend imports. 67 Dairy processors’ concerns were aired before the Standing Committee on Agriculture and Agri-Food on 11 May 2006; those of government officials, on 1 June 2006. 68 See Strahl, ‘Evidence.’ 69 The comments are those of Don Jarvis, president and CEO of the Dairy Processors Association of Canada to the Standing Committee on Agriculture and Agri-Food on 11 May 2006. See Jarvis, ‘Evidence.’

298 Notes to pages 166–9 70 It was not until the 1990s that processors and other components of the industry acquired representation on the national poultry and egg marketing agencies. 71 In 1972, when the Farm Products Marketing Agencies Act was passed, the supervisory council was called the National Farm Products Marketing Council. The act was amended in 1993 and renamed the Farm Products Agencies Act, and the Council was renamed the National Farm Products Council. 72 For example, the two Ad Hoc Review Committees on Chicken and Turkey included representatives of the national marketing agency as well as the processing, further processing, wholesale/distributor/food service sectors, plus provincial governments. 73 Agriculture Canada, Summary of the Final Report; Federal-Provincial Task Force on Orderly Marketing, Action Plan. 74 These changes were institutionalized in formal amendments in 1996 to the federal-provincial agreements for poultry and egg supply management. The board of directors of CEMA was expanded beyond representatives of the provincial marketing boards to include four non-producers: three selected by the Canadian Poultry and Egg Producers Council (CPEPC) to represent egg graders, processors, and hatcheries; the fourth by the Consumers Association of Canada. Three non-producers were added to the provincial marketing board representatives on CTMA’s board of directors: two appointed by CPEPC; the third by the Further Poultry Processors Association of Canada (FPPAC). The four non-producers added to provincial marketing board representatives on the national chicken marketing agency included two named by the CPEPC, a third named by the FPPAC, and a fourth named by the Canadian Restaurant and Food Services Association. See National Farm Products Council, 1995–1996 Annual Review, 8. 75 The Sectoral Advisory Group on Eggs (SAGE) was composed of both CEMA officials and representatives of egg graders, processors, hatcheries, the food service industry, grocery distributors, and provincial governments. 76 As conveyed to the author in an interview in November 2004. 77 As quoted in B.K. Wilson, ‘National Cooperation Necessary,’ 4. 78 The words are those of Cliff McIsaac, chair of the National Products Marketing Council, and recorded in its 1996 annual report, National Farm Products Council, 1995- 1996 Annual Review, 7. 79 Gervais and Devadoss, ‘Estimating Bargaining Strengths.’ 80 Huff, Meilke, and Amedei, ‘Canada-United States Chicken Trade,’ 423–4. 81 Agriculture Canada, Growing Together.

Notes to pages 169–75

299

82 Between 1995 and 1999 chicken imports increased to an average 46,500 tonnes annually from an average of 38,000 tonnes over the 1990–4 period. See Huff, Meilke, and Amedei, ‘Canada-United States Chicken Trade,’ 430. 83 Bourgeois, ‘Les ménaces,’ 2. 84 Bourgeois, ‘Entente de principe.’ 85 National Farm Products Council, 1995–1996 Annual Review, 19. 86 The elimination of the subsidies on the export of grain in the 1995 budget drove down the price of feed grains in western Canada. 87 Canadian Egg Marketing Agency, Annual Report (1999), 12. 88 Gartner, ‘Provincial versus Centralized Pricing.’ 89 B.K. Wilson, ‘Egg Agency Courts Quebec.’ 90 Canadian Egg Marketing Agency, Annual Report (1999), 4. 91 B.K. Wilson, ‘CEMA Cracked, but System Holds.’ 92 The Canadian Egg Marketing Agency’s Annual Report (2001) states that eggs sold under provincial Eggs for Processing programs cannot be sold until CEMA has marketed its eggs under the Industrial Products Program. Nor can they be sold at a lower price. CEMA establishes the EFP quota. 93 Both Saskatchewan and Manitoba argued that comparative advantage, a criterion in the federal-provincial agreement that established CEMA, should be a basis for assigning over- base quota. Their appeal to the National Farm Products Council was unsuccessful, and in January 2005 Saskatchewan appealed CEMA’s 2004 quota order to the Federal Court of Canada. At the time of writing, its decision is still pending. 94 A majority of provinces in each of the three regions of central, western, and eastern Canada is needed to approve CEMA orders. 95 National Farm Products Council, Annual Review, 1994–1995, 25. 96 National Farm Products Council, 1995-1996 Annual Review, 19. 97 There are some economic analyses that argue that Canadian dairy farmers have become more competitive. Barichello, ‘Canadian Dairy Industry,’ summarizes these studies and concludes that Canadian dairy farms increased their competitiveness in large part because of the depreciated Canadian dollar. 98 Bellavance, ‘Evidence,’ 1010 (recorded time). 99 The former trade negotiator is Mike Gifford, ‘Canada’s Dairy Industry.’ 100 There is debate about the effects of tariff reduction on the Canadian dairy industry. Romain and Sumner, ‘Dairy Economic and Policy Issues,’ summarize and critique these studies and conclude that opening the CanadaUS border might have little effect on south-north trade. 101 The Conservative government’s intransigence in not allowing its trade negotiator to even discuss TRQs probably owed much to farm groups’

300 Notes to pages 176–9

102 103 104 105

106 104

scepticism about its commitment to supply management. In January 2007 Conservative trade minister, David Emerson, told a journalist that defending supply management was ‘costly.’ See B.K. Wilson, ‘Supply Management Days Numbered.’ Shortly thereafter, the agriculture minister, Chuck Strahl, stated that Canada would not ‘walk away from a WTO deal.’ See B.K. Wilson, ‘Minister Denies Supply Managed Sector.’ Under pressure from opposition parties and pro-supply management farm groups, both ministers were required to reiterate their government’s commitment to the November 2005 parliamentary motion. These figures are reported by Romain, ‘Future of the Dairy Industry.’ Phillips, ‘Discussion’; Fulton and Yang, ‘Testing the Competitiveness.’ Coyle, ‘Tariffication in the Dairy Industry,’ 595. More so than their counterparts in English-speaking provinces, Quebecbased academics and policy institutes have examined the social values promoted by social management. A study by Groupe Ageco, Comparative Analysis of the Performance of Poultry Sector Regulatory Systems in Canada, United States, France and Australia, comparing poultry regulatory systems in Canada, the United States, France, and Australia, concluded that Canada’s poultry regulatory system had a superior ‘social performance.’ It had led not only to a better geographic distribution of poultry production across Canada, but also to a better sharing of revenues and powers between producers and processors. And these outcomes had been achieved with no detriment to economic results. Coleman, Skogstad, and Atkinson, ‘Paradigm Shifts and Policy Networks.’ The courts’ role in supply management has been important only in the sense of maintaining the status quo by ruling illegal any efforts to produce supply-managed products outside the supply-management systems. In Canadian Egg Marketing Agency v. Richardson, the Supreme Court of Canada affirmed the legality of CEMA against a 1997 challenge by a group of corporate egg producers in the Northwest Territories, who argued that the Agency’s monopoly powers contravened the Charter of Rights and Freedoms. In 1997 the BC Supreme Court granted an injunction to stop a small group of BC milk producers who were circumventing the BC Milk Marketing Board.

6. Regulating Food and Animal Product Safety 1 Agriculture Canada, Growing Together, 62, 64. 2 This chapter is concerned solely with food safety, not food quality. Food quality relates to attributes of food like taste, texture, colour, odour, and

Notes to pages 179–81

3

4

5 6

7

8 9 10

11

301

other qualities not related to public health. Governments have always had a role in assurance of food safety but not necessarily of food quality, where the benefits are seen to be more private than public. In 1978, following a period of rising food prices, the Government of Canada unveiled ‘A National Food Strategy’ and hosted a national conference on the Strategy. The conference discussed a host of issues, most of direct interest to food producers and the food processing, distribution, and retail sectors. Consumer issues around food focused on nutrition and education but also the safety of ‘new foods.’ See Canadian Federation of Agriculture, Report. Martz, Farmers Share – Compare the Share, graph 4, shows that in 1998 Canadians spent 12.4 per cent of their income on food versus 10.9 per cent for American and 11.5 per cent for United Kingdom consumers. As the previous chapter has noted, critics of supply management, including some consumer spokesmen, do lament the cost to consumers of ‘high’ dairy and poultry/egg prices. Garzon, Common Agricultural Policy. Several chapters in Ansell and Vogel’s (2006) collection, Contested Governance, elaborate these themes. See Ansell, ‘Asymmetries of Governance’; Ansell and Vogel, ‘Contested Governance’; Borraz, Besançon, and Clergeau, ‘Is It Just about Trust?; and Steiner, ‘Governance Reform.’ Ansell and Vogel, ‘Contested Governance,’ table 1.1, provide a list of the food-safety/ disease-outbreak incidents. Looking at the global food chain from a European perspective, van Waarden, ‘Treatise on Taste,’ 51, describes it as follows: ‘Manure from Chili [sic] gets transformed into U.S. corn, then into Belgian cows and milk, then into Dutch cheese, and a leftover, whey powder, turns into French calves and bonemeal, and then into British beef, ad infinitum.’ Vogel, Trading Up, calls these coalitions ‘Baptist and Bootlegger’ coalitions. See D. Lazar, ‘Regulatory independence and International Governance,’ for a helpful discussion. World Trade Organization, Agreement, defines sanitary and phytosanitary measures as including measures to protect human, animal, and plant life and health from risks associated with entry and spread of pests, diseases, disease-causing and disease- spreading organisms and risks associated with additives, contaminants, toxins, or disease-causing organisms in food, beverages, and feedstuffs; measures to protect human life and health from diseases carried by animals, plants, or products thereof; and measures to prevent or limit damage from the entry, establishment or spread of pests. Roberts and Unnevehr, ‘Resolving Trade Disputes,’ are helpful in laying

302 Notes to pages 183–7

12

13 14

15 16 17 18

19 20

21

out these principles, but they also caution that despite broad agreements on them, countries still differ substantially in their actual substantive measures. There are still relatively few international standards, and those that exist are not accepted by the majority of countries. For overviews, see Josling, Roberts, and Orden, Food Regulation and Trade, chaps 3 and 8; Roberts and Unnevehr, ‘Resolving Trade Disputes’; and Garcia and Carruth, ‘Multilateral Governance of Food Safety.’ van Waarden, ‘Treatise on Taste.’ Any suggestion that risk assessment is a technical operation and risk management is a political exercise of value judgment is wrong. Values enter into risk assessment as well, especially when scientific knowledge is uncertain and there is low consensus on the nature of risks. See Busch et al., Amicus Curiae Brief, 12–15, for a good overview of the extensive literature devoted to how values permeate science and hence scientific risk assessments. A third element of risk analysis, not given attention here, is risk communication, the process of informing consumers of risk-assessment findings and risk-management decisions. On the ‘globalization’ of the food industry and food safety regulation, see Carruth, ‘Globalization and Food Safety.’ Braithwaite and Drahos, Global Business Regulation. Vogel, Trading Up. Besides Canada and the US, Australia, New Zealand, and Japan were interested in minimizing the negative effects of SPS measures on trade (Stanton, ‘Implications of the WTO Agreement’). The US was prohibiting import of European wines containing a fungicide that EU authorities had said was safe. The EU attempted, but failed, to have other criteria besides scientific evidence justify trade-impacting SPS measures. See Skogstad, ‘International Institutions,’ for an account of the negotiation of the SPS Agreement. Skogstad, ‘Internationalization, Democracy.’ The Codex Commission had approved the use of the growth-promoting hormones by a narrow majority in 1995, over the opposition of the EU member states. Subsequent to the WTO ruling, the EU undertook scientific risk assessments of the hormones in question. On the basis of these studies, its Scientific Committee on Veterinary Measures Relating to Public Health concluded that no safe threshold could be established for any of the six hormones. In early 2005 the European Commission requested the WTO to establish a panel to investigate its claim that the American and Canadian sanctions should be lifted. The WTO held a meeting open to the public in September 2005 to hear the parties to the dispute. At the time of writing, the

Notes to pages 187–90

22 23

24

25 26 27

28 29 30 31 32

33

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WTO has not issued a decision on whether the sanctions should be lifted. Discussions of the dispute can be found in several places, including Kerr and Hobbs, ‘North American / European Union Dispute’; Skogstad, ‘Internationalization, Democracy’; Skogstad, ‘International Institutions.’ World Trade Organization, EC – Measures, para. 165 (Appellate Body’s emphasis). The onus is on the defendant, not the complainant, to provide the burden of proof that the appropriate risk assessment has been done. Besides the hormones dispute, the failure to provide an appropriate risk assessment constituted grounds for the WTO ruling against Australian import barriers on Canadian salmon and Japanese import restrictions on new horticultural varieties and apples (from the US). The cases are available on the WTO site: http://www.wto.org/english/tratop_e/cases.htm. See also Josling, Roberts and Orden, Food regulation and Trade, 63–73. Kerr and Hobbs, ‘North American / European Union Dispute, and Isaac, Agricultural Biotechnology and Transatlantic Trade, are among those who argue that the WTO-centred trade regime would be undermined if the SPS Agreement is interpreted in a way that forces governments to deny consumer demands for protection. Noiville, ‘Compatibility or Clash?’ 307. Ibid., 312. See Gaskell et al., ‘Troubled Waters,’ on consumer attitudes and Vogel, ‘Hare and the Tortoise Revisited,’on the greater use of the precautionary approach in the EU compared with the US. Veggeland and Borgen, ‘Negotiating International Food Standards.’ The text of the NAFTA can be found at http:// www.dfait-maeci.gc.ca/ nafta-alena/agree-en.asp. Henson and Bredahl, ‘Policy Options for Open Borders’; Haddow, ‘Health, Plant and Animal Protection.’ Burfisher, Norman, and Schwartz, ‘NAFTA Trade Dispute Resolution.’ See Lazar, ‘Regulatory Independence and International Governance’; and Roberts and Unnevehr, ‘Resolving Trade Disputes,’ 474. The Codex developed guidelines for the application of HACCP in 1993. Prior to that, the US had adopted a voluntary HACCP program in 1989 and later, in 1996, made HACCP programs in meat and poultry slaughter and processing plants mandatory. A 1993 EU directive requires firms to adopt HACCP systems; see Bernauer and Caduff, ‘Food Safety,’ Borraz, Besançon, and Clergeau, ‘Is It Just About Trust?’ and Steiner, ‘Governance Reform,’ for their implementation in Europe, France, and Germany, respectively. Carruth, ‘Regulated Competition and Food Safety,’ 439–42, discusses the

304 Notes to pages 190–4

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35

36 37

38 39

40 41 42 43

44 45 46 47 48 49 50 51 52 53

role of the FAO, WHO, and Codex in providing guidance on traceability systems. Two other WTO agreements, the Agreement on Technical Barriers to Trade (the TBT Agreement) and the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement), are also properly regarded as part of the international food product regulatory regime. Both agreements are discussed in chapter 7. Canadian officials have played an important role in helping to set international standards, guidelines, and recommendations, so that the latter often mirrored those already in place in Canada. Auditor General of Canada, Federal Management; Canada. Joint Steering Committee of CFIS, Bueprint. Federal jurisdiction arises from its ‘trade and commerce’ power [s. 91(2)] and criminal law [s. 91(27)] powers, while provincial activity flows from provinces' responsibility for ‘property and civil rights’ [s. 92 (13)] and ‘matters of a local or private nature’ [s. 92 (16)]. Municipal governments have varying degrees of involvement, depending on the province. They may establish by-laws or be limited to enforcing provincially set standards. Canada. Health Canada, Identifying, Assessing, and Managing. Provinces have more leeway when it comes to non-binding federal guidelines and policy recommendations. They can impose food safety standards that surpass those set by the government of Canada. Canadian Food Inspection Agency, CFIS Newsletter. Spriggs and Isaac, Food Safety and International Competitiveness, 59. Doering, ‘Renewing the Federation,’ 5. SICE, Final Report. The US claimed that the Canadian regime was not equivalent to the US system, since it lacked the federal oversight and verification elements in the US system. The dispute was resolved when the plant in Quebec that was shipping UHT milk to the US was deemed to be in compliance with the US standards. Spriggs and Isaac, Food Safety and International Competitiveness, 60–3. Skogstad, ‘Case Study.’ Prince, ‘Canadian Food Inspection Agency,’ 217. Moore and Skogstad, ‘Food for Thought.’ This conclusion is based on interviews with provincial and federal officials. Canada. Joint Steering Committee of CFIS, Blueprint. Agriculture Canada, Regulatory Review, 14–16. Spriggs and Isaac, Food Safety and International Competitiveness, chap. 3. Prince, ‘Canadian Food Inspection Agency.’ The ‘Food Safety and Quality’ component of the Agricultural Policy Frame-

Notes to pages 194–8

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55 56

57

58 59 60

61 62 63 64

65 66 67 68 69

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work and programs pursuant to it can be found at: http://www.agr.gc.ca/ cb/apf/index_e.php?section=fd_al&page=fd_al. In 1993, in the Jack-in-the-Box episode, hundreds of American schoolchildren became sick after eating tainted hamburgers. See Schlosser, Fast Food Nation, 207–8. Canadian Food Inspection Agency, Regulatory Impact Analysis Statement. The expansion of the cattle industry was appreciably aided by first the reduction and then the elimination of grain freight subsidies in 1995. Feed grain (barley) prices dropped in prairie Canada, reducing the cost of raising cattle and hogs. The statistics cited in this paragraph are taken from Standing Committee on Agriculture and Agri-Food (House of Commons), Canadian Livestock and Beef Pricing, and LeRoy, Klein, and Klvacek, ‘Losses in the Beef Sector,’ 1. Canadian Food Inspection Agency, Canada’s Assessment, 11. Kerr, ‘Sanitary Barriers.’ See Hayes and Kerr, ‘Progress toward a Single Market,’ 172–8, for a discussion of American use of SPS measures as non-tariff barriers. One Canadian SPS measure, the requirement for American feeder cattle imported into Canada to be tested for bluetongue and anaplasmosis (diseases found in the US but not in Canada) was removed in 2004 as part of the broader effort to harmonize NAFTA SPS measures. See Canadian Food Inspection Agency, Regulatory Impact Analysis Statement. Josling, Roberts, and Orden, Food Regulation and Trade, 92. Loppacher and Kerr, ‘BSE Crisis in Canada,’ 19. In 1993 an animal imported from Britain had been diagnosed with the disease. It was surmised that the contaminated feed had resulted from an infected animal imported into Canada in the late 1980s before BSE was detected in the exporting country. On its death, the infected animal had been rendered and used to produce animal feed that had subsequently been fed to the BSE-diseased animal discovered in early 2003. Canadian Food Inspection Agency, Overview of Canada’s BSE Safeguards. Canadian Food Inspection Agency, Report on Actions Taken. White, ‘Ignoring BSE Rules Exacerbates Crisis,’ 11. Lavoie, ‘Evidence.’ In 2003 the OIE identified five BSE categories: BSE free, provisionally free, minimal risk, moderate risk, and high risk. Before the discovery of BSE, Canada qualified as ‘provisionally free.’ Provisionally free status applied to countries that had a BSE surveillance program, controls on ruminant-toruminant feed in place for eight years, no case of BSE for eight years, and an import control program.

306 Notes to pages 198–201 70 United States. Animal and Plant Health Inspection Service, Bovine Spongiform Encephalopathy. 71 These animals fit one of the four D categories: dead, diseased, downer (unable to walk), or dying. BSE-infected animals show symptoms that include nervous or aggressive behaviour, lack of coordination or difficulty in rising from a lying position, weight loss, and abnormal posture. 72 LeRoy, Klein, and Klvacek, ‘Losses in the Beef Sector,’ 26. The $4 billion figure is made up overwhelmingly of losses from reduced live cattle exports but also includes smaller losses from increased domestic processing costs and beef by-products. 73 Two American companies, Cargill Foods and Lakeside Packers, along with XL Beef (owned by a domestic firm) controlled 90 per cent of Alberta’s beef packing industry. Auditor General of Alberta, Report. 74 American-owned plants sell their products interprovincially and internationally and so must meet federal inspection standards. Federal financial incentives to expand slaughter capacity and to upgrade plants to meet new regulatory standards (including the removal of SRMs) were most likely to go to those plants (including the larger, American owned ones) that were already federally registered and inspected. 75 USDA, ‘Explanatory Note.’ 76 The costs of lost export markets for the US were far less than for Canada; about 10 per cent of US beef/cattle are exported compared with 60 per cent of Canadian beef and cattle. 77 Wildeman, ‘Evidence.’ 78 Alberta Premier Ralph Klein was rebuked by his agriculture minister and a provincial veterinarian, who deemed testing every slaughtered animal to be impractical and costly, given Alberta’s cattle herd of 2 million. Nor, said the provincial agriculture minister, was there evidence that mandatory testing would open the Canadian-American border. Japan could test all its animals because it slaughtered far fewer animals. See Pratt and MacArthur, ‘Premier, Minister Differ on Testing,’ 5. 79 Phil Seng, the chief executive officer of the US Meat Export Federation stated: ‘If Canada builds higher firewalls than we currently have in the United States in terms of how you define SRMS, strengthen your feedban or your animal ID program, our trading partners will become suspicious of U.S. beef.’ Quoted in Duckworth, ‘Japanese Politics Skew Beef Recovery,’ 4. 80 See statements attributed to the Canadian Meat Council in Duckworth, ‘BSE Rules Must Not Overreact,’ 5; and B.K. Wilson, ‘U.S. Packers Warn Against Ban,’ 82. 81 Canadian Food Inspection Agency, Regulatory Impact Analysis Statement, 10, 21.

Notes to pages 201–3

307

82 The 2003 Federal-Provincial Governments’ BSE Recovery Program to pay producers the difference between the weekly US average fed cattle price and the provincial average proved highly controversial when evidence mounted that meat packers had benefited significantly as the program lowered cattle prices and cattlemen unloaded their cattle. A report by Alberta’s Auditor General determined that Alberta cattlemen had also benefited financially from the program (Auditor General of Alberta, Report. The Standing Committee on Agriculture and Agri-Food (House of Commons), Canadian Livestock and Beef Pricing, also investigated and reported on the effects of the program. 83 Lavoie, ‘Evidence,’ provides the details. The government of Canada paid 100 per cent of the costs of upgrading meat packing plants to increase slaughter capacity. It also announced $92.1 million would be spent over the five-year period 2004–2009 to improve the cattle identification program and BSE-testing programs. LeRoy, Klein, and Klvacek, ‘Losses in the Beef Sector,’ 16, estimate that more than $2 billion was transferred by federal and provincial governments in BSE assistance. 84 The government of Canada allocated $80 million to the provinces to assist industry with the costs of implementing the enhanced feed ban regulations and for research on disposal methods. See Evans, ‘Evidence.’ 85 Agriculture and Agri-Food Canada did play an active role in lobbying foreign governments, including the American government, and in sharing the responsibility with the provinces for addressing the income crisis in the sector. But it did not assume leadership on BSE risk management measures, and the task of coordinating regulatory reforms with the US and international partners fell to the CFIA. 86 Canadian Food Inspection Agency, Regulatory Impact Analysis Statement. 87 Fadden, ‘Evidence.’ 88 See testimony of senior officials from agriculture departments in Alberta, Saskatchewan, and Manitoba to the House of Commons Standing Committee on Agriculture and Agri-Food on 28 February 2007. Smaller facilities were given an additional six months to implement the regulations. 89 See Evans, ‘Evidence.’ 90 The Canadian Meat Council, which represents federally inspected meat packing/processing plants has voiced this concern for some time. 91 The Canadian Cattlemen’s Association and American National Cattlemen’s Beef Association have regular joint meetings. 92 The Canadian Cattlemen’s Association was also extremely active throughout the BSE crisis in speaking to those American interests whose jobs depended on Canadian beef and cattle supplies: meat packers, food processors, the restaurant sector. It mounted an aggressive grass roots campaign

308 Notes to pages 203–4

93

94

95

96

after the April 2005 injunction to speak to state-level organizations and politicians. The Alberta Beef Producers forged alliances with the American Meat Institute. Information obtained in an interview with John Masswhol, director of international relations for the Canadian Cattlemen’s Association in Ottawa, 1 September 2005. See also Alberta Beef Producers, Focus on BSE. The American Minister-Counsellor, Foreign Agricultural Service, USDA, told the Canadian House of Commons Standing Committee on Agriculture and Food on 18 October 2006 that the relationship between the Canadian Cattlemen’s Association and the National Cattlemen’s Beef Association in the US had ‘really helped’ to open the border. The Harmonization of a BSE Strategy can be found at http://www .aphis.usda.gov/lpa/issues/bse/04-01-05na_bse_harmonization.pdf. Measures not yet fully harmonized included cattle identification programs to enable tracking of BSE-infected animals back to their birth herd. The Canadian Cattle Identification Program required all Canadian cattle to wear an ear tag after 2001, while the US identification program is voluntary. Scientific knowledge has established the incubation period of BSE to be four to seven years. Aside from one case in Japan of an animal aged twentyone months, scientists concur that the disease is unlikely to be present in an animal younger than thirty months. The OIE Ethics Chapter obliges countries to notify if they have a disease. However, given the high economic penalty for disclosing a disease, countries had every incentive not to look for the disease, and those who did not look and did not find the disease stood to gain (at least until an importing country discovered a diseased animal). Chapter 2.3.13 of the OIE Terrestrial Animal Health Code defines ‘negligible risk’ as appling to commodities from countries or zones that pose a negligible risk of transmitting the BSE agent as demonstrated by a risk assessment, the appropriate level of BSE surveillance, and either no BSE cases or only imported cases or cases no more recent than seven years old. Negligible-risk countries also have an existing education and reporting program and a feed ban in place for at least eight years if an indigenous case or other risk factors exist. The ‘controlled risk’ category describes commodities from a country or zone that pose a negligible risk of transmitting BSE, owing to specific risk-mitigation measures but that, having indigenous BSE cases, also must have in place an education and reporting program, an effective feed ban, and an ability to identify, track, and destroy progeny and herd mates of BSE-infected animals. ‘Unknown or uncontrolled risk’ applies to the cattle population of a country or zone that cannot be demonstrated to meet the requirements of either negligible or controlled risk. See the OIE website at www.oie.int.

Notes to pages 205–12

309

97 However, a strengthened BSE risk-mitigation and management framework has not overcome all jurisdictional obstacles to an integrated food safety and food inspection system. The long-standing gap remains between the rigorous standards that federally inspected plants, which account for 90 per cent of animals slaughtered in Canada, must meet and those required of some provincially or municipally registered plants, whose produce is sold locally and is rarely inspected. 98 Under the US Administrative Procedures Act, judges have an obligation to ensure that US administrators follow proper procedures in issuing their orders as well as to set aside those actions, findings and conclusions that they find to be ‘arbitrary, capricious, and abuse of discretion, or otherwise not in accordance with law.’ In granting the injunction, Judge Cebull agreed with the plaintiff that the United States Department of Agriculture (USDA) had failed to conduct a proper risk assessment of Canadian cattle/beef. The judge ruled that there were ‘numerous procedural and substantive shortcomings of the USDA’s decision to allow importation of Canadian cattle and beef’ and that ‘serious irreparable harm ... will occur when Canadian cattle and meat enter the U.S. and co-mingle with the U.S. meat supply.’ Further, the USDA had acted in an ‘arbitrary and capricious’ manner in failing ‘to give careful consideration to the benefits and costs of mandatory testing, or at least in its failure to explain to the public why these benefits do not justify mandatory testing.’ The case can be found at http://www.mtd.uscourts.gov /mtd/Documents.nsf/0/ 4f2e6d9350e68ca087256fbd005ddfea/$FILE /Opinion.pdf. 99 Garzon, Common Agricultural Policy. 7. Regulating the Risks of Genetically Modified Crops and Foods 1 Agriculture Canada, Growing Together, 31. 2 Drummond, Anderson, and Kerr, Review of Agricultural Policy, 79–86; Federal Task Force on Agriculture, Canadian Agriculture, 395; Moore, ‘New Direction.’ 3 The choice of 1997 as a boundary between the two periods of GM development is based on 1997 being ‘a watershed’ in terms of marking ‘the beginning of years of controversy’ in the European Union and globally. See Grabner et al., ‘Biopolitical Diversity,’ 15. 4 World Trade Organization, European Communities. First Written Submission by the European Communities, para. 17. The terms ‘genetic modification,’ ‘genetic engineering,’ and ‘plant biotechnology’ are used interchangeably here, although there are some differences in how scientists use the terms. Genetic modification refers to any method of altering the genetic material

310 Notes to pages 212–14

5

6

7

8 9 10 11

12

13

of a plant, animal, or bacterium, including by conventional breeding, as well as genetic engineering. Plant biotechnology is the most inclusive term, encompassing genetic engineering and other methods that mutate the genetic sequence without adding DNA from another organism. Genetically engineered plants are often called transgenic plants. Canada uses the term ‘plants with novel traits’ to refer to both genetically engineered plants and those produced through mutagenesis. See Canadian Food Inspection Agency, Biotechnology. These benefits are identified by the United States in World Trade Organization, European Communities. First Submission of the United States, para. 17. Other benefits cited are more nutritious food and environmental benefits. Ibid., paras. 20–26. These risks are identified by the European Communities in World Trade Organization, European Communities. First Written Submission by the European Communities, paras 36–63. Moore, ‘Science, Internationalization and Policy Networks,’ 75–6, provides an account of the plant breeders’ rights legislation. She notes that it was intended to stimulate private sector investment in agricultural research and was supported by Canadian seed growers but opposed by some farm organizations and the federal NDP. They feared it represented a loss of farmer control and privatization of a resource (such as research into new seed varieties) that hitherto had been regarded as a collective one. Cantley, ‘Regulation of Modern Biotechnology.’ The concept of ‘familiarity’ preceded the term ‘substantial equivalence,’ which was introduced by the OECD in 1993. When the CFIA was created in 1997, it assumed responsibility for environmental risk assessment of novel plants. It should be stressed that Canada does regulate GM foods more rigorously than the United States, where food manufacturers have not been required to notify federal regulators before marketing food containing GM products. See Canada. Health Canada, Guidelines for the Safety Assessment. See also Isaac, Agricultural Biotechnology and Transatlantic Trade, 194–200. Pray, Oehmke, and Naseem, ‘Innovation and Dynamic Efficiency,’ 59, identified Monsanto, Bayer, Syngenta, Dow Chemicals, DuPont, and BASF as the six companies. About forty firms do field trials of GM crops. See also Newell, ‘Globalization.’ Good overviews of the ethical, social, and economic issues raised by critics of the technology are provided by Isaac, Agricultural Biotechnology and Transatlantic Trade, 41–6; Bernauer, Genes, Trade and Regulation, chap. 2; and

Notes to pages 214–16

14 15

16 17

18 19

20 21 22 23

24

311

Ansell, Maxwell, and Sicurelli, ‘Protesting Food.’ Isaac, Agricultural Biotechnology and Transatlantic Trade, 198, notes that risk management decisions in Canada can take account of ‘other legitimate factors, such as socio-economic factors.’ The case of GM wheat, discussed later in the chapter, shows the reluctance of regulators to do so. In 1999 Canada and the United States signed an agreement to harmonize their plant biotechnology frameworks. The relevant statutes for environmental release are the Seeds Act; for regulating imported plants the Plant Protection Act; for regulating use of PNTs in livestock feeds the Feeds Act; and for variety registration the Seeds Act. Abergel and Barrett, ‘Putting the Cart before the Horse,’ 148–50. Moore, ‘Science, Internationalization and Policy Networks,’ 127–8, notes that the Department of Justice (in 1993) and the cabinet (in 1995) confirmed that existing statutes administered by AAFC provide the department with sufficient authority to regulate plant biotechnology products. Regulatory amendments in 1997 clarified and reinforced the authority of the CFIA (which reports to the AAFC minister) to conduct environmental safety assessments. Moore, ‘Science, Internationalization and Policy Networks,’ 75–6. Isaac, Phillipson, and Kerr, International Regulation of Trade, 10, observe that Canadian governments saw two benefits from plant biotechnology. First, private companies make the major investments, so governments spend less on research and development. Second, plant biotechnology ‘promises scientific solutions to many production risks,’ so governments can reduce their spending on farm income support programs. As chapter 3 (on farm income safety nets) has shown, government transfers to support farm incomes remain high, although one could conceivably argue they would be even higher without GM crops. Rance, ‘Biotech Trade Deals Crucial.’ James, Highlights. Ibid. Canola Council of Canada, ‘Impact of Transgenic Canola.’ However, while GM canola is important to Canada, it constitutes only 5 per cent of all global biotech crops. GM soybeans are the major biotechnology crop in the world and the United States, comprising 60 per cent of the world’s GM crops in 2005. Percentages vary somewhat depending upon the year and source. Figures here are provided by the Council for Biotechnology Information at http:// 64.233.167.104/custom?q=cache:OPm15TfnkPEJ:www.whybiotech. com/

312 Notes to pages 216–18

25 26

27 28

29

30

31 32

33

index/asp%?is=2809. See ‘Benefits of Biotech Crops Have Fueled Rapid Growth in Canada.’ The Canola Council of Canada , ‘Industry and Government Continue to Work,’ reported higher sowing of GM corn (58 per cent) and GM soybeans (48 per cent) in 2003. Schurman, ‘Introduction,’ 4. There is a burgeoning literature on the anti-biotechnology movement in Europe, but the following are especially helpful: Gaskell and Bauer, Biotechnology, 1996-2000; Jasanoff, Designs on Nature; Ansell, Maxwell, and Sicurelli, ‘Protesting Food.’ Jasanoff, Designs on Nature, 8, states ‘Resistance to biotechnology became almost a surrogate for resisting America’s imperial power.’ Buttel, ‘Global Politics of GEOS.’ Jasanoff, Designs on Nature, contrasts the United States, Britain, and Germany; Isaac, Agricultural Biotechnology and Transatlantic Trade, chap. 8. See also Skogstad, ‘Regulating Food Safety Risks,’who argues that private/ market and expert authority are legitimate bases for regulating GMOs in North America while popular (participatory democracy) authority is more legitimizing in the European Union. The Amicus Curiae Brief, presented by Busch et al., 5 and 37, in the WTO Biotech Products case, argues that risk assessment is ‘neither a single methodology, nor a science.’ Accordingly, where scientific knowledge is characterized by low certainty and low consensus (the case of genetic engineering, in their view), there can be no single (international) model of risk assessment. For the origins of EU GMO legislation, see Cantley, ‘Regulation of Modern Biotechnology’; Gottweis, ‘Regulating Genetic Engineering’; and Patterson, ‘Biotechnology Policy.’ Analysts observed that the scientific criteria for assessment of environmental and food safety have not differed much across the Atlantic. The regulatory differences in the EU and US GMO frameworks have been the subject of considerable analyses. See Gaskell et al., ‘Troubled Waters’; Vogel, ‘Ships Passing in the Night’; Isaac, Agricultural Biotechnology and Transatlantic Trade, part III; Bernauer, Genes, Trade and Regulation, chap. 3; Prakash and Kollman, ‘Biopolitics in the EU’; World Trade Organization, European Communities. First Written Submission by the European Communities, para. 132–84; and Pew Initiative on Food and Biotechnology, US vs. EU. The 1990 EU legislation differently regulated GM/novel foods that no longer contained GMOs and that were recognized as ‘substantially equivalent’ to existing foods in nutritional value, composition, and intended use.

Notes to pages 218–20

34 35

36

37 38 39

40

41 42

43

44

313

They required only notification of public authorities, as in Canada. With the adoption of Directive 2001/18 in 2001, all GM foods are subject to the same risk assessment and risk management procedures. USITC, ‘Trade in Biotechnology Food Products.’ Gaskell and Bauer, Biotechnology, 1996-2000, 108–9; Eurobarometer, Europeans, Science and Technology; Lusk et al., ‘Comparative Advantage in Demand.’ This reaction comes despite the lack of evidence that GM foods are unsafe. See World Trade Organization, European Communities. First Submission of the United States, paras. 27–8. On retail sector behaviour, see Bernauer, Genes, Trade and Regulation, 86–9. Canada. Department of Foreign Affairs and International Trade, ‘GMOs.’ US corn exports dropped from 1.74 million metric tons in 1997 to 0.09 million metric tons in 2003. Soybean exports to the EU were smaller to start with but dropped by about half over the same period. See USDA. Economic Research Service, Biotechnology, and USDA. Foreign Agricultural Service, Online U.S. Trade Internet System. These lost sales were less likely a reason for the legal action against the EU than was the desire of the US (and Canada) that the EU’s GM approach not become the world standard. On transnational networks that attempted to bridge EU-US differences, see Pollack and Shaffer, ‘Challenge of Reconciling Regulatory Differences’; Murphy and Yanacopulos, ‘Understanding Governance and Networks;’ and Murphy and Levidow, Governing the Transatlantic Conflict. World Trade Organization, European Communities. Reports of the Panel. World Trade Organization, European Communities. First Written Submission by the European Communities, paras 155–6, also notes that there were discrepancies across member states in application of the 1990 directive because ‘it did not include harmonised criteria on risk assessment’ and that there was now a recognized need ‘to put in place mechanisms to ensure monitoring of the long-term effects of GMOs, including on biodiversity, on the face of scientific uncertainty.’ The new EU regulatory framework includes Directive 2001/18/EC ‘on the Deliberate Release into the Environment of Genetically Modified Organisms,’ and Regulations 1829/2003/EC and 1830/2003/EC on the authorization, traceability, and labelling of genetically modified organisms, genetically modified food, and genetically modified feed. The regulations are available by following the links at http://europa.eu. Some analysts argue that the American GMO regulatory system is already changing in line with the EU system, although there are as yet no formal

314 Notes to pages 220–2

45 46

47 48

49

50 51 52

53

54

55 56

changes in the regulatory framework. See Prakash and Kollman, ‘Biopolitics in the EU and the U.S.’; A. Young, ‘Political Transfer and ‘Trading Up’?’ Gruere, Analysis; World Trade Organization, European Communities. First Written Submission by the European Communities, paras 71–86. In the summer of 2002 Zambia refused to accept US food aid in the form of GM crops, worried that doing so would imperil its own exports of agricultural products to the EU. Zambia feared the imported food crops would contaminate its own non-GM crops and that it would no longer be able to meet the EU’s threshold levels (0.9 per cent) for non-GM products. Zambia illustrates the conundrum of developing countries. Selling their foods in the EU market requires they adopt EU standards, including costly labelling standards, even while they are often dependent on the United States for food aid that may contain GM products. Skogstad, ‘Contested Political Authority.’ The Codex Guideline for the Conduct of Food Safety Assessment of Foods Derived from Recombinant-DNA Plants and its Principles for the Risk Analysis of Foods Derived from Modern Biotechnology were adopted by member countries of the Codex in 2003. Codex Alimentarius Commission, Report of the Thirty-Second Session; MacKenzie, ‘Process of developing labeling standards’; MacKenzie, ‘International Efforts to Label Food.’ Gruere, Analysis, 16–17. Veggeland and Borgen, ‘Negotiating International Food Standards.’ Discussions of the Biosafety Protocol can be found in Isaac, Phillipson, and Kerr, International Regulation of Trade, 36–40, 53–9; Gruere, Analysis, 19; and World Trade Organization, European Communities. First Written Submission by the European Communities, paras 87–112. The Cartagena Protocol on Biosafety to the Convention on Biological Diversity: Text and Annexes can be found at http://www.biodiv.org. A number of issues relating to labelling are not yet resolved, including the percentage of genetically modified material that LMO shipments may contain to be still considered GM-free. Phillips and Kerr, ‘Alternative paradigms’; Isaac, Phillipson and Kerr, International Regulation of Trade, 96–105; Winham, ‘International Regime Conflict.’ Jasanoff, ‘Living Legacy,’ 229. The WTO Agreement on Technical Barriers to Trade (TBT Agreement ) is also viewed by experts to apply to trade in GM products where labelling issues are a concern. See Isaac, Phillipson, and Kerr, International Regulation of Trade. Canada invoked the TBT Agreement (as well as the WTO Agree-

Notes to pages 223–6

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58

59 60

61

62 63

64 65

315

ment on Agriculture and the GATT) in its WTO challenge to the EU’s moratorium on GM products. However, the WTO Panel, finding that the offensive measures breached obligations under the SPS Agreement, stated that there was no need to rule on whether they also breached the TBT Agreement. See World Trade Organization, European Communities. First Written Submission of Canada; World Trade Organization, European Communities. Reports of the Panel. The EU’s traceability and labelling regulations may yet be challenged as a violation of the TBT Agreement. For an opinion on this matter, see Makuch, ‘TBT or not TBT.’ Canada, the United States, and Argentina all argued that biotechnology products are ‘like’ their conventional counterparts. Under GATT Article III:4, countries have to treat ‘like products’ the same. The EU argued that GM products could not be treated as ‘like’ or ‘equivalent’ to non-GM counterparts, and since 2004 it no longer recognizes the ‘substantially equivalent’ concept for GM foods. The Conservative government announced that the mandate of CBAC had ended in May 2007 and it was being replaced by a new Science, Technology and Innovation Council. Information about the CBAC and its activities can be found at http://cbaccccb.ca. Critics pointed to the fact the CBAC office was located in a government department, Industry Canada, and was a paid member of Biotech Canada, an advocacy group for biotechnology companies. See Baxter, ‘Government Paying to Lobby Itself.’ The ‘dialogue tool,’ which was originally described as an ‘acceptability spectrum,’ can be found at http://cbac-cccb.ca/epic/site/cbac-cccb.nsf/ en/h_ah00350e.html. For example, the CBAC hosted a conference on risk communication in December 2005. The Patent Act protects patents, while the Plant Breeder’s Rights Act grants the developer of new plant varieties an eighteen-year monopoly of the variety. Supreme Court of Canada, Monsanto Canada Inc. v. Schmeiser. The four dissenting judges, led by Madam Justice Louise Arbour, disagreed. On their reasoning, seeds were higher life forms and Harvard College led to the conclusion that seeds cannot be patented. As they stated, Schmeiser ‘was entitled to conclude that since plants cannot be patented, they fell outside the scope of patent protection. Accordingly, the cultivation of plants containing the patented gene and cell does not constitute an infringement. The plants containing the patented gene can have no stand-

316 Notes to pages 226–9

66 67

68 69 70 71 72 73

74 75 76

77 78

79

80 81

by value. To conclude otherwise would, in effect, confer patent protection on the plant’ (Supreme Court of Canada, Monsanto Canada). Pratt, ‘Schmeiser Decision May Help,’ 1. Other interveners were the Action Group on Erosion, Technology and Concentration; the Research Foundation of Science, Technology, and Assessment; and the International Centre for Technology Assessment. Philipson, ‘Agricultural Law,’ 5. Hofffman v. Monsanto Canada Inc. The Saskatchewan Court of Appeal ruled in Hoffman v. Monsanto Canada Inc. Royal Society of Canada, Elements of Precaution, 132, 214, 215. Ibid., ix. Abley, ‘Biotech Lobby got Millions,’ reports that Biotech Canada received up to $1.1 million annually under Industry Canada’s Technology Outreach Program, some of which went to improving public awareness of biotechnology. Industry Canada is also a member of Biotech Canada, which was formed in February 1998 when the Canadian Institute of Biotechnology merged with the Industrial Biotechnology Association of Canada. Royal Society of Canada, Elements of Precaution, ix. Ibid., 212. The Canadian Biotechnology Advisory Committee (2002) argued that knowledge of the long-term effects of plant biotechnology crops on the environment is limited. It stated that pre-market assessment of environmental risks of GM crops was based on small-scale confined trials that were unsuitable in detecting effects on larger spatial scales and over time. Ibid., x. The government response is posted on Health Canada’s website at: www.hc-sc.gc.ca/ahc-asc/media/nr-cp/2001/2001_13_e.html. When this site was accessed in February 2007, the most recent entry was dated 2001. In late 2003 the CFIA and Health Canada announced a pilot project to post website information about safety assessments of GM crops, livestock feeds, and foods. The pilot project informs the Canadian public of new GM submissions that are being reviewed by the government as well as the scientific studies on the product’s safety. The project is voluntary; developers are not required to make this information available to the public, but member companies of Crop Life Canada, the trade association that represents developers of biotechnology-derived products, are cooperating. The intent is to allow the public to make comments through the website. Canada. Department of Finance, Budget 2000. The Framework for the Application of Precaution in Science-Based Decision Making about Risk. Available at http://www.pco-bcp.gc.ca.

Notes to pages 229–33

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82 Andrée, ‘Analysis of efforts,’ 377. 83 B.K. Wilson, ‘Biotech Industry,’ 63. 84 In 2000 a Consumer Right to Know Campaign was launched by the Canadian Biotechnology Action Network. 85 B.K. Wilson, ‘GM Labelling Committee Seeks Extension,’ 104. 86 See Agriculture and Agri-Food Canada, Government Response. 87 The costs of mandatory labelling were calculated by Geoff Golder, KPMG Consulting, to amount to a 9–10 per cent increase in the retail food price or cost. For canola- or corn-producing farmers, the amount would be equivalent to 35–41 per cent of their price. See Golder’s testimony to the House of Commons Standing Committee on Agriculture and Agri-Food on 26 February 2002. 88 See testimony of Laurie Curry, Food and Consumer Products Manufacturers of Canada, to the House of Commons Standing Committee on Health, 11 April 2002, as well as to the House of Commons Standing Committee on Agriculture, 31 January 2002. 89 A 2001 poll by Pollara and Earnscliff Research and Communications reported that 94 per cent of Canadians polled believed that the government should order companies to label GM products. See Cross, ‘What’s in a Label?’ 10; and Staples, ‘Public Wants GM Food Labeled,’ A1, who reports that a federal government-commissioned poll found 84 per cent of Canadians saw the need to introduce a labelling system for GM foods. 90 Bloc Québécois MP, Hélène Alarie, introduced a motion in the House of Commons in October 2000 to require labelling of GM foods. It was supported by the NDP and a handful of MPs from other parties. The all-day House of Commons debate on mandatory labelling was also led by the Bloc Québécois. The Bloc endorsement of mandatory labelling appears to rest on survey research that shows that nine out of ten Quebeckers want the federal government to impose mandatory labelling of GMOs. 91 The CFA, Canola Council of Canada, and Grain Growers of Canada signed the open letter, as did biotechnology companies and the Canadian Council of Grocery Distributors. See Canada News Wire, ‘Coalition Calls for Defeat.’ 92 One of these methods is mutagenesis in which the novel food is not the result of genes’ being transferred from one organism to another but rather is the result of chemical and irradiation processes of alteration. This narrow definition was advanced by the Canadian Wheat Board because it was compatible with the Codex definition that countries had already adopted or were adopting, and it would therefore not put Canada at a disadvantage with competitors. See testimony of the Canadian Wheat Board to the House

318 Notes to pages 233–8

93

94 95 96 97

98 99 100 101 102

103

104 105

of Commons Standing Committee on Agriculture and Agri-Food, 31 January 2002. Demeke, Perry, and Scowcroft, ‘Adventitious Presence of GMOs,’ document the adventitious presence of GMOs in non-GM grains and conclude that this accidental contamination is unavoidable. The executive director of the Western Grain Elevator Association testified to the House of Commons Standing Committee on Agriculture and Agri-Food on 26 February 2002 that requiring the segregation and testing necessary to guarantee a low level of contamination would bring the grain bulk-handling system to a standstill. Isaac, Agricultural Biotechnology and Transatlantic Trade, 200. Ewins, ‘GM Wheat’s Profitability Rejected,’ 11. Van Acker, Brûlé-Babel, and Friesen, Environmental Safety Assessment.’ See also Brûlé-Babel, Van Acker, and Friesen, ‘Issues Related to Release.’ Canadian Grain Industry Working Group on Genetically Modified Wheat, Conditions. These conditions, plus the requirements of ‘achievable tolerance levels’ and ‘availability of a rapid, accurate and inexpensive detection system’ are Canadian Wheat Board policy and are posted on its website at http://www.cwb.ca/public/en/hot/biotechnology. Canola Ink, ‘Industry and government continue to work toward GM acceptance process.’ The comments are those of Peter Pauker, acting chief, Agriculture and Agri-Food Canada, Cross-Sectoral Policy Development, as quoted in ibid. Ibid. See testimony of NDP MP Judy Wasylycia-Leis at the House of Commons Standing Committee on Agriculture and Agri-Food, 3 April 2003. A coalition of Japanese consumer and food groups presented a petition to the federal minister of agriculture in early 2004, saying they would not buy Canadian wheat if Canada introduced GM wheat varieties. B.K. Wilson, ‘Vanclief Floats Nonscientific GM Test,’ A1. Following extensive consultations on a review of the Canadian Seed Variety Registration System, this ‘next step’ is still pending in 2007. A review of the consultations can be found at http://www.inspection.gc.ca/english/plaveg/ variet/revetu/revetu99 e.shtml. A summary document states that European negative reaction to GMOs should not ‘necessarily impact the variety registration process’ and that were ‘harm to markets’ to be incorporated as a registration criterion, ‘variety registration would then, no longer be, science-based.’ Monsanto Canada, News Release. Organizations representing American wheat growers and wheat exporters

Notes to pages 246–56

319

have subsequently had second thoughts and in 2006–7 attempted to persuade American farmers as well as wheat-marketing agencies in Canada and Australia to support GM wheat varieties. Their argument is that wheat is losing its competitive position alongside other grains that are adopting genetically modified varieties. 8. Conclusion: Paradigm Adjustment and Canadian Agriculture and Food 1 While initiatives are underway to realize policy goals in the multifunctionality paradigm, expenditures allocated for them pale in comparison with those for farm income safety nets. The latter absorbed 90 per cent of government funding under the 2003–8 Agricultural Policy Framework. See Agriculture and Agri-Food Canada, Assessing Progress. 2 Strange, ‘Rethinking Structural Change’; Cerny, ‘Paradoxes of the Competition State’; Harkin, Economic Concentration and Structural Change. 3 Josling, ‘Competing Paradigms’; Coleman, Grant and Josling, Agriculture. 4 Coleman, Grant and Josling, Agriculture; Garzon, Common Agricultural Policy. 5 The role of these ‘externalities’ as a factor in CAP reform is made, among others, by Greer, Agricultural Policy in Europe; and Garzon, Common Agricultural Policy. On the United States, see Moyer and Josling, Agricultural Policy Reform; and Ingersent and Rayner, Agricultural Policy. 6 See Frigon, Farm Income. 7 The important exceptions were the Reform Party of Canada and its successor, the Canadian Alliance. Both championed a market-liberal model of agriculture but also supported farm income support payments when farm market returns dived. 8 Standing Senate Committee on Agriculture and Forestry, Agriculture and Agri-Food Policy, 3. 9 Ibid., 10. 10 One forum is the Canadian Agri-Food Marketing Council. It was created in 1997 in response to a request from private industry groups for a mandate to advise AAFC and International Trade Policy ministers on domestic and international marketing of Canadian food, including measures to improve the sector’s competitiveness. Its thirty members include representatives of producers but most are food processors and traders. 11 Information obtained by the author in an interview with Steve Verhuel, Ottawa, December 2004. 12 As noted in chapter 4’s discussion on export grain marketing, there were signs of a deviation from this ethos under the Harper Conservative government in 2006–7. The Conservative government did adhere to established

320 Notes to pages 256–8

13

14 15

16

practice of consulting the farm community closely on other policy matters, including in its agricultural policy framework for 2008–13. The question of influence should be distinguished from the matter of whether farm group leaders always are content with their impact on specific policy initiatives. They clearly are not. There were well-publicized complaints from members of the farm community that they were marginalized in the discussions that led to the Agricultural Policy Framework implemented in 2003. S. Thompson, ‘Summary of Consumer Attitudes.’ Patterson, ‘Agricultural Policy Reform’; Coleman and Tangermann, ‘1992 CAP Reform’; Moyer and Josling, Agricultural Policy Reform; Garzon, Common Agricultural Policy. Gray and Furtan, ‘Current WTO Proposals,’ have argued that the concessions that Canada would likely have had to make on market access and state trading enterprises during the Doha Round would sound the death knell of the Canadian Wheat Board and seriously undermine dairy and poultry supply management.

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Index

agrarian fundamentalism, 44 Agreement on Internal Trade (AIT), 163, 297n agricultural exceptionalism, 8, 10, 12, 33–4, 72, 144, 177, 242, 254–5, 257, 275n; definition, 9. See also state assistance paradigm Agricultural Income Disaster Assistance (AIDA), 79t, 87 Agricultural Policy Framework (APF), 74, 79t, 94, 97, 99–100, 102, 194, 208, 244t, 255, 304n, 319n, 320n, 75, 101, 286n, 287n agricultural protectionism, 45, 253. See also state assistance paradigm Agricultural Stabilization Act (ASA), 53, 75–6, 78, 79t Agropur, 150 Alberta, 5, 46, 58–9, 68, 79t, 82–3, 98, 107, 110–11, 115–17, 119, 127, 134, 148t, 149t, 151, 162, 172, 193, 195–6, 200, 275n, 280n, 284n–285n, 289n– 290n, 293n, 295n, 297n, 306n–308n Alberta Barley Commission, 117, 293n All Milk Pooling Agreement for Eastern Canada, 162 American Meat Institute, 201, 308n

American protectionism, 59, 63 Animal Nutrition Association of Canada, 202, 266a Archer Daniels Midland, 111, 288n Argentina, 99, 219, 222–3, 278n, 282n– 283n, 315n Australia, 6, 49, 52, 111, 132, 135, 142, 195, 220, 232–3, 268n, 278n, 281n– 282n, 288n–289n, 293n, 300n, 302n– 303n, 319n Australian Wheat Board, 111, 132, 135 barley. See Canadian Wheat Board Barley Freedom Day, 137, 293n Beef Hormones, 185–7, 190 Beef Value Chain Roundtable, 202 Bill C-287, 232 BiotechCanada, 226, 315n, 316n Bloc Québécois, 36, 92, 122, 136, 174, 232–3, 317n bovine spongiform encephalopathy (BSE), 105, 180–1, 194–200; in United States, 183, 195, 199–200; in Canada, 79t, 98, 101, 148, 181, 183, 193–200, 248–50, 253, 285n, 305n– 309n

366 Index Brazil, 22, 99, 167, 195, 216, 278n British Columbia, 38t, 83, 111, 28c, 65c, 134, 148t, 149t, 151, 162–3, 173, 275n, 280n, 284n, 295n, 297n, 300n Cairns’ fair traders’ group, 61, 278n Canada-US Free Trade Agreement (FTA), 63–4, 66, 68, 113, 115, 138, 141, 152–4, 168, 191–2, 195, 261a, 279n–280n, 289n Canadian Agricultural Congress, 56 Canadian Agricultural Income Stabilization program (CAIS), 79t, 100– 3, 286n–287n Canadian Agricultural Policy Alliance, 68 Canadian Alliance, 92, 176, 319n Canadian Beef Export Federation, 202, 265n Canadian Biotechnology Advisory Committee (CBAC), 224, 229, 240, 315, 316n Canadian Biotechnology Strategy, 224 Canadian Broiler Hatching Egg Marketing Agency, 147, 265n Canadian Canola Growers Association, 38t, 226 Canadian Cattlemen’s Association, 58, 200, 265a, 307n, 308n Canadian Chamber of Agriculture, 55 Canadian Chicken Marketing Agency (CCMA), 147, 168, 170–1, 173, 298n Canadian Council of Agriculture, 46 Canadian Council of Grocery Distributors, 230, 317n Canadian Crop Drought Assistance program, 75

Canadian Dairy Commission (CDC), 51, 79t, 145–6, 157–9, 163, 263a, 264a, 276n–277n, 293n–296n Canadian Egg Marketing Agency (CEMA), 147, 148t, 171–3, 265a, 298n–300n Industrial Products Program, 172– 3, 299n Canadian Farm Families Options Program, 79t, 102 Canadian Farm Income Program (CFIP), 79t, 87, 91, 96 Canadian Farm Safety and Quality Program (CFSQP), 194 Canadian Farmers for Justice, 118 Canadian Federation of Agriculture (CFA), 38t, 38, 47, 55–9, 66–8, 82, 88–9, 92–3, 102, 119, 153, 174, 255, 257, 265a, 277n, 280n, 284n, 286n, 301n, 317n Canadian Food Inspection Agency (CFIA), 165, 181–2, 192–4, 196–7, 201–2, 207, 213, 227–9, 234–6, 246, 249, 253t, 307n, 310n–311n, 316n Canadian General Standards Board, 230 Canadian Grain Industry Working Group on Genetically Modified Wheat, 236, 318n Canadian Meat Council, 38t, 202, 265a, 306n–307n Canadian Milk Supply Management Committee (CMSMC), 146, 158, 263n Canadian Poultry and Egg Processors Council, 167, 175, 294n, 298n Canadian Renderers’ Association, 202 Canadian Restaurant and Food Ser-

Index vices Association of Canada, 202, 298n Canadian Seed Trade Association, 226, 265a Canadian Turkey Marketing Agency, 147, 149t, 265a Canadian Wheat Board (CWB), 41, 47, 52, 98, 106–7, 111, 113–16, 235, 238, 244, 246, 261a, 262a, 275n, 277n, 288n–292n, 317n–318n, 320n; dispute with United States, 129– 34; reform, 107, 109, 116–23, 128, 130, 132–3, 135–8. See also price pooling: reform Canadian Wheat Board Act, 107, 116, 121–2, 137 Canola Council of Canada, 237, 265a, 311n–312n, 317n Capturing the Advantage: Agricultural Biotechnology in the New Millennium, 233 Cargill, 17, 111, 288n, 292n, 306n Charter of Rights and Freedoms, 35, 117, 125, 291n, 300n Chicken Farmers of Canada(CFA), 149t, 155, 168, 265a Chicken Farmers of Ontario (CFO), 169–70 Codex Ad Hoc Intergovernmental Task Force on Foods Derived from Biotechnology, 220 Codex Alimentarius Commission (Codex), 185, 187–8, 191, 206, 220– 1, 302n–304n, 314n–315n, 317n Codex Committee on Food Labelling (Labelling Committee), 220–1 Commissioner of Patents v. President and Fellows of Harvard College, 226 Committee on Voluntary Labelling of Foods Obtained or Not

367

Obtained through Genetic Modification, 230–1, 233–4, 238 commodity prices, 50, 53–4, 59, 72–3, 75, 80, 85, 87, 89, 98–9, 102, 104, 106, 251, 259, 268n Common Agricultural Policy (European Community), 14, 16, 44, 48, 54, 60, 61, 95, 179, 268n–269n, 274n–276n, 280n–281n, 311n, 319n Comprehensive Agreement on Pooling of Milk Revenues, 162 Comprehensive Agreement on Special Class Pooling, 162 Concerned Farmers Saving the Wheat Board, 121 Conservative Party of Canada, 35–6, 47, 50, 67–8, 102, 134, 151, 174–6, 295n Conservative Party of Saskatchewan, 68 Consultation Committee on the Future of the Dairy Industry, 159, 296n Consumers Association of Canada (CAC), 231, 233, 298n Council of Canadians, 225–6, 230–31, 237 countervailing duties (CVDs), 129, 261a Crow benefit, 83, 283n Crow’s Nest freight rates, 46, 83, 117 Crow’s Nest Pass Agreement, 46 Dairy Farmers of Canada (DFC), 158–9, 163–4, 177, 202, 265a, 296n Dairy Industry Strategic Planning Committee, 160 dairy product substitutes. See tariff rate quotas: dairy sector

368 Index

Easter, Wayne, 101, 271, 284n European Union/Community (EU; EC), 6, 11–12, 22, 32, 44–5, 48–9, 59–61, 63, 73, 84, 88c, 89, 90, 95, 99, 113, 132, 134, 138, 146, 156, 179, 185–7, 190, 197, 201, 206, 211, 216, 218–22, 230, 233, 235, 238, 240, 253, 268n, 273n–276n, 280n, 282n–283n, 302n–303n, 309n, 312n–315n; Council of Ministers, 219; Treaty of Rome, 54, 179, 275n Export Enhancement Program (EEP), 113–14, 138 export subsidies, 43, 49, 54, 60–3, 66– 7, 76, 83, 87, 90, 98, 114, 133–4, 154, 156–7, 173, 246, 248, 262a–264a, 273n, 276n

Farm Income Protection Act (FIPA), 78, 79t farm organizations, 6, 10, 36, 38t, 38, 55–7, 68, 74, 82, 92, 99–100, 102, 104, 106, 119, 141, 177, 215, 231–2, 234, 238, 254–7, 259, 269n, 284n, 310n Farm Products Marketing Agencies Act, 147, 295n, 298n Federal Court of Canada, 135, 137, 164, 225, 289n, 291n, 299n Federal/Provincial Framework Agreement on Agricultural Risk Management, 79t, 91, 93–4 Federal-Provincial Safety Net Committee, 77–8, 106 Federal-Provincial Safety Net Policy Framework Agreement, 82. See also farm income programs Federal-Provincial Task Force on Orderly Marketing, 159, 166 Food and Consumer Products Manufacturers of Canada, 232, 317n food product safety regime: Canada, 182, 192; international standards, 181–3, 186–8; private sector responsibilities, 189–90 France, 52, 54, 268n, 274n, 276n, 300n, 303n freight rates (subsidies). See Crow benefit Friends of the Canadian Wheat Board, 137 Friesen, Bob, 88–9

farm income programs, chapter 3. See also Canadian Farm Income Program Farm Income Payment Program, 79t, 102

General Agreement on Tariffs and Trade (GATT): Marrakech Agreement, 31, 61; Uruguay Round, 5, 31, 60–1, 63, 66–8, 71, 80–1, 113, 130, 152–3, 268n

dairy production controls. See supply management: dairy sector Dairy Processors Association of Canada (DPAC), 159, 164, 179, 297n dairy sector, 53, 142, 145, 147, 150–2, 156, 165; reform, 158, 165–6, 176, 246; special milk classes, 160–1, 263a; subsidies, 54 decoupling, 76, 81, 100, 105, 282n; definition, 80; payments, 81, 94, 245t, 246, 249, 282n. See also income safety nets disaster assistance programs, 76, 81, 87, 91, 100. See also income safety nets Dungate, Mike, 155

Index genetic engineering/modification. See GM foods genetically modified organisms (GMOs), 213, 217–18, 220, 223, 231, 233, 239, 312n–313n, 317n–318n; Roundup Ready canola, 225–7, 235; Roundup Ready wheat, 236–8; Technology Use Agreement, 225. See also living modified organisms Germany, 180, 276n, 303n, 312n globalization (economic), 3–8, 10, 16–21, 25, 39–41, 68–9, 74, 89, 105, 107–8, 173, 178, 180–1, 184, 209, 217, 240, 247–9, 267n, 271n–273n, 302n, 310n GM foods: Canadian regulations, 212–16, 227–30; EU opposition, 218–20; international regulations, 218–23; labelling, 220–1, 230–4; patent rights, 224–7 GM wheat, 210–12, 235–8, 240, 250, 311n, 318n–319n. See also GM foods: patent rights GO5 Coalition for a Fair Farming Model Supply Management, 174 Goodale, Ralph, 77, 82, 84, 108, 117, 119–24, 127–8, 137–9, 159, 167, 290n Governance paradigm, 33, 36, 105, 248 Grain Growers of Canada, 38t, 134, 236–7, 265a, 284n, 317n Grains and Oilseeds Safety Net Committee, 78 Greenpeace, 225, 230–1, 237 Growing Together, 70, 76–7, 104, 112, 141, 151, 209, 244t Harper, Stephen, 36, 102, 107–9, 134, 139, 164, 176, 287n, 320n

369

Hazard Analysis and Critical Control Point (HACCP), 181, 183, 189– 90, 194, 245t, 249, 303n Health Canada, 191, 213–15, 221, 227, 310, 316n House of Commons Standing Committee on Agriculture and AgriFood, 84, 92, 155, 233, 238, 283n, 297n, 307n, 317n–318n House of Commons Standing Committee on Health, 231–2, 317n Import for Re-Export Program, 164 import quotas, 43, 49, 152–3, 195. See also state assistance paradigm; supply management income safety nets, 21, 29, 40, 70, chapter 3, 249, 251–2, 311n, 319n; definition, 72; government transfers, 85–94; programs, 75–80, 79t intergovernmental framework agreements, 74, 82, 94. See also income safety nets international grain prices, 52, 85, 281n. See also prairie agriculture International Plant Protection Convention (IPPC), 187 International Trade Advisory Committee (ITAC), 66 internationalization (political), 5, 6, 8, 26, 28, 31, 40–1, 61, 73–4, 105, 109, 175, 181–2, 207 Japan, 9, 25, 49, 54, 61, 200–1, 220, 232–3, 235, 238, 268n, 276n, 302n– 303n, 306n, 308n, 318n Klein, Ralph, 117, 306n Kraft General Foods, 17, 219

370 Index Lea, Dobson, 58 Liberal Party of Canada, 88, 116, 151 living modified organisms (LMOs), 221 Louis Dreyfus, 111 Manitoba, 38t, 46, 65, 79t, 80, 83, 89, 110–11, 135, 137, 148t–149t, 162, 172–3, 235, 283n, 284n, 294n, 297n, 307n marketing boards, 43, 53, 63, 103, 112, 263a, 265a; dairy sector, 145–6, 151, 156–8, 161–3, 298n; egg sector, 151, 166, 172–3, 178, 298n; poultry sector, 151, 166, 168–71, 178 market-liberal (competitive) paradigm, 6–8, 19, 21, 29, 32, 45, 71–3, 77, 104, 125, 143, 175, 242–3, 249– 50, 253, 256, 258 Martin, Paul, 101 Mayer, Charlie, 115 Measner, Adrian, 135 Mexico, 64, 200, 233, 279n Mitchell, Andy, 101 Monsanto, 17, 36, 225–7, 234–6, 238, 240, 310n, 316n Monsanto Canada Inc. v. Schmeiser, 224, 226 Mulroney, Brian, 35, 67, 75, 77, 115, 192, 281n multifunctionality paradigm, 6, 7, 72, 242–3, 246, 319n. See also European Union/Community; OECD Munro, Charles, 56 National Allocation Agreement, 171 National Dairy Council, 155, 158–9, 296n National Farm Products Council, 166–7, 294n, 298n–299n

National Farmers Union (NFU): Canada, 38t, 39, 55, 57–8, 119–21, 125–6, 136, 174, 226, 231, 233, 237, 265a, 283n–284n; United Kingdom, 56 National Milk Marketing Plan, 146, 263a, 294n National Policy, 45, 92, 275n Nestlé, 17, 159, 219 New Brunswick, 38t, 65, 83, 148t– 149t, 162 New Democratic Party (NDP), 36, 85, 92, 117, 119–20, 122, 124–5, 135– 6, 232–3, 290n, 310n, 318n New Zealand, 6, 18, 25, 142, 156–7, 165, 232–3, 262a, 264a, 268n, 278n, 293n, 302n North American Free Trade Agreement (NAFTA): Beef Working Group, 203; National Agriculture Strategy, 69; and sanitary and phytosanitary measures, 188–9; and supply management, 154–6 North Dakota Wheat Commission, 130–1 Nova Scotia, 83, 148t–149t, 162, 170 Organization for Economic Co-operation and Development (OECD): ‘Agricultural Policy: The Need for Further Reform,’ 94; Directorate for Food, Agriculture and Fisheries, 91 Ontario, 18, 25, 36, 38t, 46, 55–6, 65, 68, 83, 90, 143, 145–7, 148t–149t, 151, 157, 160, 162, 167–70, 172–3, 176, 280n, 282n, 284n–286n Ontario Corn Producers Association, 89, 237

Index Ontario Federation of Agriculture, 38t, 56 orderly marketing, chapter 4, 160, 243, 247, 257; definition, 110; pillars, 111–12. See also Canadian Wheat Board Palliser Wheat Growers Association, 58, 115. See also Western Canadian Wheat Growers Association Parmalat, 150, 296n–297n plant biotechnology. See genetically modified organisms plants with novel traits (PNTs), 213– 14, 234, 310n. See also genetically modified organisms policy networks: corporatist, 37, 143, 158, 178, 274n; pluralist, 37, 39, 74, 254 policy paradigm, 7–16, 19, 21, 32, 37, 41, 105, 108–9, 152, 206, 246, 254, 269n, 270n; definition, 9. See also market-liberal (competitive) paradigm; multifunctionality paradigm; state assistance paradigm prairie agriculture: crisis, 85–6. See also disaster assistance programs Prairie Pools, 58, 68 precautionary principle, 188, 190, 222. See also food product safety regime price pooling: dairy sector, 160–3; definition, 111–12; prairie grain, 111–28; reform, 119–20. See also orderly marketing Prime Minister’s Caucus Task Force on Future Opportunities in Farming, 89 Prince Edward Island, 65, 83, 148t– 149t, 162, 280n, 284n, 286n

371

Proctor, Dick, 124 Progressive Party, 46 Proulx, Jacques, 68, 280n Quebec, 25, 35–6, 56-57, 59, 65c, 65–8, 74, 82, 83, 90, 143, 145–7, 148t–149t, 160, 162, 170, 172–4, 176, 192, 234, 257, 274n, 277n, 280n, 284n, 286n, 295n, 297n, 299n, 304n (Quebec) Union catholique des cultivateurs, 56 (Quebec) Union des producteurs agricoles (UPA), 38t, 57, 153, 265a railway subsidies, 83, 90, 114, 305n; elimination of, 83. See also Crow benefit Ranchers-Cattlemen’s Action Legal Fund United Stockgrowers of America (R-Calf), 205 Reform Party of Canada, 85, 92, 116, 119, 122, 134, 176, 319n Regulatory Framework for Biotechnology, 213 Report of an Expert Panel of the Royal Society of Canada, 227 risk management: income (business), 60, chapter 3, 244t, 246, 284n–287n; product safety, 183, 188, 190é1, 197–9, 202–3, 207, 248–9, 302n, 307n, 311n, 313n sanitary and phytosanitary measures, 182, 184, 186–7, 301n; NAFTA, 28, 64; WTO, 28, 61, 186, 188. See also food product safety regime: international standards Saputo, 150, 297n Saskatchewan, 35, 59, 65t, 65, 68, 79t, 80, 83, 89, 99, 102, 110–11, 117, 119–

372 Index 20, 134–7, 148t–149t, 162, 171, 173, 203, 225, 227, 237, 273n, 281n, 283n–286n, 290n–291n, 299n, 307n, 316n Saskatchewan Organic Directorate, 237 Saskatchewan Wheat Pool, 59, 119– 20 Schmeiser, Percy, 224–7, 234, 315n sectoral advisory groups on international trade (SAGITs), 66 Seeds Act, 236, 311n Sierra Club of Canada, 226 South Korea, 61, 200, 233, 235, 238 Special Canada Grains program, 75 Special Milk Class Pricing and Pooling System, 161 specified risk materials (SRM), 197– 202, 207, 250, 306n Speller, Andy, 101 stabilization programs, 47, 53, 75–7, 79t, 79, 81, 84, 245, 282; ‘whole farm,’ 72, 84, 100, 245t. See also income safety nets state assistance paradigm, 7, 8, 10–11, 16, 24–5, 29, 32, 35–6, 39, 40–2, 71– 4, 103, 108–9, 125, 138–40, 142, 144, 175, 178-–9, 190, 211, 241–3, 246, 248, 252, 254, 256–7, 259; Canada, chapter 2. See also dairy sector: reform state trading enterprises (STEs), 43, 60, 108, 113, 129, 131–4, 138, 262a, 288n, 289n, 291n, 292n, 320n. See also Canadian Wheat Board Strahl, Chuck, 108, 134–7, 287n, 293n, 300n supply management, chapter 5; criticism, 150–1; dairy sector, 144–6, 158–65; egg sector, 146–9, 171–3;

poultry sector, 146–9, 167–71; reform, 151–2; second generation, 141–2, 175; and trade agreements, 152–8. See also state assistance paradigm Supreme Court of Canada, 226, 274, 274n, 294n, 297n, 300n, 316n tariff rate quotas (TRQ), 143, 146, 153, 165, 173–4, 245t, 249, 299n; dairy sector, 163–5. See also supply management: and trade agreements Task Force on Canadian Agriculture, 69 Task Force on National Dairy Policy, 159 trade barriers, 179, 182, 231 trade negotiations, 5, 6, 64–6, 68, 108–9, 133, 173, 176, 256, 258 trade regime (international), 4-6, 11, 61, 69, 113, 175, 211, 213, 259, 273n, 303n trade wars, 11, 129–34, 247; Canadian wheat export monopoly, 108, 115, 121, 124–5 transnational networks, 3, 4, 7, 8, 31, 60, 189, 203, 207, 210, 217, 219, 223, 267n, 313n. See also GM foods UN Cartegena Biosafety Protocol, 211 UN Convention on Biological Diversity, 221, 314n United Kingdom (UK), 47, 54, 56, 146, 180, 194, 196, 219, 301n, 305n, 312n United States Department of Agriculture (USDA), 15, 261a, 277n, 205, 308n–309n, 313n

Index US Department of Commerce, 129, 131, 261a US Durum Growers Association, 131 US Federal Agriculture Improvement and Reform Act (FAIR), 85, 87 US International Trade Commission, 129, 131, 261a US Meat Export Federation, 201, 306n US National Association of Wheat Growers, 130 US Wheat Associates, 130 US Wheat Export Trade Education Committee, 130 Vanclief, Lyle, 96, 97, 160, 231, 284n– 286n, 318n Western Barley Growers Association (WBGA), 38t, 58, 115, 117, 119, 134, 237, 293n Western Canadian Wheat Growers Association, 38t, 115, 119, 134, 237, 293n Western Grain Marketing Panel (WGMP), 120, 121, 125–6 Western Grain Stabilization Act (WGSA), 53, 75, 78, 79t Western Grain Transportation Act, 54, 278n Western Milk Pooling Agreement, 162

373

Wheat. See Canadian Wheat Board Whelan, Eugene, 150 Wiebe, Nettie, 126 World Organization for Animal Health (OIE), 182, 185, 187, 191, 196–202, 204–6, 248, 305n, 208n World Trade Organization (WTO): Agreement on Agriculture, 29–31, 40, 61–3, 72–3, 80–1, 83, 91, 98, 100, 105, 114, 153–7, 155t, 159, 163, 246, 249, 251, 262a–264a, 273n, 289n, 295n; Agreement on Sanitary and Phytosanitary Measures (SPS Agreement), 61–2, 78, 186–9, 199, 219–20, 222, 250, 302n, 303n, 315n; Agreement on Subsidies and Countervailing Measures, 81; Biotech Products, 222–3, 312n; Doha Round, 5, 98, 131, 133–4, 144, 173, 257, 258, 320n; and supply management, 156–8, 173–5; Trade Related Investment Measures (TRIMS) Agreement, 131, 293n; Trade-Related Aspects of Intellectual Property Rights (TRIPS) Agreement, 28–9, 213, 304n Uruguay Round. See GATT: Uruguay Round Zoellick, Robert B, 130

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Studies in Comparative Political Economy and Public Policy 1 The Search for Political Space: Globalization, Social Movements, and the Urban Political Experience / Warren Magnusson 2 Oil, the State, and Federalism: The Rise and Demise of Petro-Canada as a Statist Impulse / John Erik Fossum 3 Defying Conventional Wisdom: Free Trade and the Rise of Popular Sector Politics in Canada / Jeffrey M. Ayres 4 Community, State, and Market on the North Atlantic Rim: Challenges to Modernity in the Fisheries / Richard Apostle, Gene Barrett, Peter Holm, Svein Jentoft, Leigh Mazany, Bonnie McCay, Knut H. Mikalsen 5 More with Less: Work Reorganization in the Canadian Mining Industry / Bob Russell 6 Visions for Privacy: Policy Approaches for the Digital Age / Edited by Colin J. Bennett and Rebecca Grant 7 New Democracies: Economic and Social Reform in Brazil, Chile, and Mexico / Michel Duquette 8 Poverty, Social Assistance, and the Employability of Mothers: Restructuring Welfare States / Maureen Baker and David Tippin 9 The Left’s Dirty Job: The Politics of Industrial Restructuring in France and Spain / W. Rand Smith 10 Risky Business: Canada’s Changing Science-Based Policy and Regulatory Regime / Edited by G. Bruce Doern and Ted Reed 11 Temporary Work: The Gendered Rise of a Precarious Employment Relationship / Leah Vosko 12 Who Cares? Women’s Work, Childcare, and Welfare State Redesign / Jane Jenson and Mariette Sineau with Franca Bimbi, Anne-Marie Daune-Richard, Vincent Della Sala, Rianne Mahon, Bérengère Marques-Pereira, Olivier Paye, and George Ross 13 Canadian Forest Policy: Adapting to Change / Edited by Michael Howlett 14 Knowledge and Economic Conduct: The Social Foundations of the Modern Economy / Nico Stehr 15 Contingent Work, Disrupted Lives: Labour and Community in the New Rural Economy / Anthony Winson and Belinda Leach 16 The Economic Implications of Social Cohesion / Edited by Lars Osberg 17 Gendered States: Women, Unemployment Insurance, and the Political Economy of the Welfare State in Canada, 1945–1997 / Ann Porter 18 Educational Regimes and Anglo-American Democracy / Ronald Manzer 19 Money in Their Own Name: The Feminist Voice in Poverty Debate in Canada, 1970–1995 / Wendy McKeen

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