> March 2009

Threatened Harvest

Protecting Canada’s world-class grain system

By Scott Sinclair and Jim Grieshaber-Otto About the authors Acknowledgements Scott Sinclair is a senior research fellow with the The authors are greatly indebted to those who Canadian Centre for Policy Alternatives, where he agreed to be interviewed in person for this paper in directs the centre’s Trade and Investment Research and Vancouver, and to the many others Project. He has advised several Canadian provincial who provided valuable information in other ways. and territorial governments on trade policy These individuals include: current and former matters, including five years as a senior policy senior public officials and staff involved in the grain advisor to the Government of . sector, grain producers, producer group and other He is the author of numerous books, articles and non-governmental organization representatives, papers on a wide range of trade policy issues, academics, public interest advocates, and other grain including Putting Health First: Canadian Health industry professionals. Generously contributing Care Reform, Trade Treaties and Foreign Policy (with their time and expertise, these people provided Matthew Sanger), a background study prepared for invaluable insights into Canada’s grain regulatory the Romanow Commission on the Future of Health and marketing system. Care in Canada, Atlantica: Myths and Reality (with This study was done by the Canadian Centre for John Jacobs) and Facing the Facts: A Guide to the Policy Alternatives. We wish to thank the dedicated GATS Debate (with Jim Grieshaber-Otto). He lives in staff at the CCPA, especially Bruce Campbell, Trish rural Prince Edward Island. Hennessey, Kerri-Anne Finn, and Tim Scarth, for Jim Grieshaber-Otto is a research associate with his professional work on layout. The paper was the Canadian Centre for Policy Alternatives. He translated into French by Traductions Tessier. We are obtained his B.Sc. at the University of British especially indebted to Gary Schneider who edited the Columbia and the University of Toronto, and his entire manuscript and re-crafted the summary. His Ph.D., in Agricultural Botany, at the University of skilful editing contributed immensely to the paper. Reading, England. He has served as a policy analyst We are grateful to the Public Service Alliance of for Members of Parliament and with a provincial Canada (PSAC) for their financial support of this legislature, and as a senior trade policy advisor paper and the CCPA’s ongoing project on public with the Government of British Columbia. Recent interest regulation. This is an independent study; the publications include: Perilous Lessons: The Impact views expressed are those of the authors and do not of the WTO Services Agreement (GATS) on Canada’s necessarily reflect those of the PSAC. This paper is Public Education System (with Matthew Sanger), the first in a planned series of studies on regulation The GATS: Impacts of the international ‘services’ in Canada. treaty on health-based alcohol regulation (with Noel Schacter) and Trade Treaties, and Health The authors wish to thank Bob Roehle and several Care Reform in Canada (with Scott Sinclair and anonymous reviewers for their helpful input and Ricardo Grinspun). He lives with his family on a comments on previous drafts. Any remaining errors diversified 35-hectare family farm near Agassiz, east are the responsibility of the authors. of Vancouver, B.C. and can be reached at jimgo@ Finally, we wish to express our appreciation to uniserve.com. Diane Exley and Rosalind Waters both of whom, in countless ways, make our work possible.

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5 Summary Undermining the Canadian Grain Commission Attacking the Canadian Board Protecting the successful Canadian grain system 10 introduction A Canadian success story Overcoming inherent challenges 13 Section 1 Undermining Canada’s grain system regulator The key roles of the Canadian Grain Commission (CGC) Undermining the Grain Commission 19 Section 2 The move to eliminate inward inspection The flow of grain Impacts of eliminating inward inspection Who benefits from eliminating mandatory inward inspection? 29 Section 3 Eliminating Canada’s visual system for differentiating wheat classes (KVD) Eliminating KVD KVD-related changes to wheat registration system and wheat import rules Beyond KVD: Other proposed changes 36 Section 4 Conservative government efforts to dismantle the Introduction Task force on implementing marketing choice The ”gag order”: Muzzling the CWB A deeply flawed plebiscite Attempted unilateral removal of from the Wheat Board Trade treaty pressure on the CWB 47 Conclusion 50 annex 1 Undermining the CGC’s independence 52 annex 2 Loss of the Prairie Pools 54 annex 3 Intensified corporate integration, concentration and control in western Canadian agriculture 56 annex 4 Beyond KVD Beyond KVD — deregulating seed imports into Removing the requirement for seed to be registered Removing the requirement for seed to be pedigreed Deregulating Canada’s seed registration system Other related government initiatives 61 Notes

Summary

The outstanding international reputation of redress some of the power imbalances between Prairie grain is a source of pride across Canada. prairie farmers and the large grain companies. International buyers know that when they buy This is achieved in part through the operation Canadian grain, the quality will be high and the of the Canadian Wheat Board, which markets product consistent. A great deal of credit must western grain and returns the benefits each year go to the thousands of farmers who grow grain directly to Canadian grain producers. that is highly acclaimed around the world. The Piece by piece, the minority Conservative other part of this success story is the uniquely government under is disman- Canadian grain regulatory and marketing system. tling Canada’s highly successful grain system. Unfortunately, this critical component is under Both the Canadian Grain Commission and the attack by Canada’s own government. Canadian Wheat Board are feeling the wrath of Canada’s grain handling and inspection sys- a federal government that seems more interested tem was designed to address the formidable chal- in creating opportunities for transnational cor- lenges faced by Prairie farmers. Higher transpor- porations than in protecting Canadian farm and tation costs put grain growers at a disadvantage consumer interests. compared to their overseas competitors located closer to coastal ports. Through decades of well- Undermining the Canadian considered public-interest regulation, Canada has Grain Commission managed to overcome geographical and trans- portation cost disadvantages by developing a The Canadian Grain Commission CGC( ) plays a high-quality, consistent product. This excellence central role in maintaining and enhancing Can- has enabled the Canadian industry to build and ada’s worldwide reputation for grain quality and maintain strong customer loyalty and to com- consistency. As Canada’s grain system regulator, mand a higher price than its global competitors. it administers the unique grading and inspection Shaped by a generation of grassroots activism, system that allows Canadian grain to command the Canadian grain system is also designed to higher prices internationally. The Commission

Threatened Harvest 5 also makes sure that the rules of western Canada’s • The federal Minister of Agriculture and grain handling system are applied evenhandedly Agri-Food appointed a highly partisan and that individual grain producers receive fair Chief Commissioner with whom he has treatment in their transactions with powerful close personal ties, undercutting the international grain companies. This provides a independence of the Commission. more stable and predictable marketplace for all • Government plans to downgrade the grain sector participants. Commission’s longstanding mandate to This is no easy task, considering that theCGC protect the interests of producers. is starved for the funds necessary to fulfill its im- • Government plans to allow disputes about portant regulatory mandate. The Commission is the grade assigned to parcels of grain to be prohibited from obtaining greater revenues by decided by private contractors, rather than raising user fees and direct funding for the CGC the established Grain Appeal Tribunals, made up of grain experts with no financial > The Harper minority interests in the outcome. • Government plans to remove the Conservative government is requirement for grain buyers to post dismantling Canada’s world class security bonds that protect producers if dealers cannot pay, or refuse to pay, wheat system for delivered grain. This would expose producers to the risk of severe financial losses. continues to be inadequate and unpredictable. In addition, the Commission is under attack from Eliminating official inspection and the Harper government in three critical areas: weighing of domestic wheat shipments the pursuit of fundamental changes to the CGC The Canadian Grain Commission has long pro- structure, the elimination of official inspection vided mandatory inspection and weighing of and weighing of domestic wheat shipments, and grain delivered to transfer and terminal eleva- the destruction of Canada’s system of visual iden- tors within Canada. Such inward inspections tification of wheat classes. are vital to protect the quality and safety of the grain supply and to ensure that the grades and Government has made fundamental weights of grain are accurate and fair. Primarily changes to the CGC and plans more at the behest of the large grain companies, the The federal government has made damaging Harper government plans to end the Commis- changes to the Canadian Grain Commission and sion’s direct involvement in this vital aspect of has plans for more. Through Bill C-13, introduced western Canada’s grain quality assurance system. on February 23, 2009, the Conservative govern- The privatization of these services would have ment intends to fundamentally alter the CGC serious consequences, including the following: and western Canada’s established grain system. • Inward weighing and inspection services • Assistant Commissioners, senior officials that would still be required would be less within the CGC appointed largely to trustworthy and more expensive. protect producers’ rights, have already • The grain system would lose an important been eliminated. early-detection system for contaminated

6 canadian centre for policy alternatives grain. Eliminating inward inspection The KVD system had the unintended side- by public officials would increase the effect of restricting breeders’ flexibility in devel- likelihood of contaminated grain being oping high-yielding wheat varieties to be used co-mingled with larger quantities of clean as animal feed and in the production of etha- grain. nol. The CGC had announced changes to ad- • Shipments of grain to Canadian and U. S. dress the concern without unduly threatening markets would lose an important level of Canada’s exports of the highest-value and protection against contamination. Grain . Ignoring warnings from industry shipped to these markets could bypass observers, government officials and legislators, official inspection altogether. the Harper government rejected the Commission initiative to modify the KVD system. Instead, it • Outward inspection of Canadian grain adopted the approach favoured by U.S. wheat exports would be made more difficult and growers and the U.S. government by terminat- expensive. Inward inspection provides ing Canada’s KVD system outright. quality assurance information that makes The elimination of KVD harms the grain outward inspection immediately prior to handling and regulatory system in several ways. export more efficient and cost-effective. • The job of the Canadian Wheat Board • Canada’s established reputation for (CWB) would become more difficult, guaranteed high quality wheat is since it relies upon accurate information threatened by an increased likelihood of about the quality and inventories within mix-ups between wheat classes. various parts of the grain handling system. • New risks and financial burdens have been Replacing public sector inspectors with placed on producers, who now face the private contractors — many of whom would financial liability of cross-contamination be reliant upon private grain companies for and find the power dynamics of the grain business — would undermine the perceived system tilted against them. reliability of the vital information derived • Visual distinguishability has been from inward inspection. eliminated as a criterion in Canada’s system for registering wheat varieties and, Eliminating Canada’s system of visual under international trade treaty rules, as identification of wheat classes a requirement for wheat imported into The Kernel Visual Distinguishability (KVD) sys- western Canada. New wheat varieties can tem provided substantial benefits by facilitating be registered even if they look like existing exports of high-quality wheat for human con- varieties of a different class. sumption. It allowed varieties in one end-use • The elimination of KVD is part of a class of wheat to be distinguished from varieties much broader government effort to relax in other classes easily and cheaply based on vis- Canada’s regulatory system for , ual characteristics. This allowed various classes which will likely increase the frequency of wheat to be segregated and sold separately, with which western Canada’s wheat based on their distinct quality and processing handling system is contaminated with characteristics. International buyers could be unsuitable wheat in the future. uniquely confident that their purchases of high- quality Canadian wheat were not contaminated by low-quality look-alikes.

Threatened Harvest 7 Attacking the Canadian Wheat Board amendments did not come to a vote in Parliament before the October 2008 Even though a solid majority of western grain election but are expected to be re- producers support the current Canadian Wheat introduced in 2009. Board, the Harper government is implacably op- posed to the internationally-renowned market- • failing to defend the CWB at the World ing agency. A Canadian icon, the CWB is the Trade Organization negotiations — By exclusive marketing agency for western farm- striving to eliminate the CWB’s ers growing wheat, wheat and barley for authority, the Harper government is human consumption. It seeks to obtain the best implementing one of the most important prices and transportation rates, and returns all demands of its main international grain the revenues it obtains (minus marketing costs) trade adversaries. If the agriculture back to Canadian producers. Despite bringing proposals currently on the table in the clear benefits to farmers, theCWB is under fierce WTO negotiations are adopted, the CWB attack from the Conservative government. as it currently exists would be eliminated These attacks by government on a body repre- within five years. senting the interests of western Canadian grain growers have struck at all levels, including: Protecting the successful Canadian grain system • using unlawful intimidation and interference — A “gag order” prevented Opposed by a solid majority of grain produc- the Board from communicating with ers, overruled by the Canadian courts and con- producers during a critical period in strained by their parliamentary minority sta- determining its future. The highly regarded tus, the Conservative government has for the CWB president was fired after he resolutely most part been blocked in its effort to destroy defended the Board’s Parliament- the Canadian Wheat Board and dismantle the granted authority against inappropriate regulatory framework of western Canada’s grain government interference. system. However, this does not mean that our • attempting to abolish the CWB world-class grain system is secure. monopoly through illegitimate The destruction of Canada’s unique grain means — Constrained by their minority system can only be avoided if opposition par- status, the Conservatives sought to end ties in Parliament act together. Harmful regu- the CWB monopoly over barley sales by latory changes that have already been made can conducting a deeply flawed plebiscite, be reversed and future reckless proposals can be manipulating the results in its favour and defeated. The Canadian grain system should be attempting to remove barley from the protected through the following actions: Board’s “single desk” marketing authority • Reinstitute Kernel Visual by order-in-council. Distinguishability for the major export • changing the CWB rules — Thwarted wheat classes as soon as possible, before by federal and appeal court rulings, the grain handling system becomes the government tabled amendments to polluted with visually confusing low- allow cabinet — without Parliamentary quality varieties. approval — unilaterally to eliminate • Reinstate the positions of Assistant “single desk” selling by the CWB. These Commissioners within the CGC by

8 canadian centre for policy alternatives promptly appointing top calibre • The chronic underfunding of the individuals to these positions. Commission must be addressed, preferably • Reinstate the prohibition and protections through predictable Parliamentary against the importation into western appropriations that cover shortfalls and Canada of unregistered wheat varieties and variability in revenue from fees. non-pedigreed wheat seed. • Grain Appeal Tribunals and the Producer • Vigorously support the Canadian Wheat Payment Security Program should be Board at home and defend it at the retained to protect the ethos of trust WTO, making it clear that the current underlying the grading system and to agricultural negotiating text — which protect producers from inappropriate would eliminate the Board’s single-desk financial losses. selling authority by 2013 — is a deal- The recent spate of food safety concerns, to- breaker. gether with the turmoil inflicted by the global In addition, the government’s proposed amend- financial crisis, graphically demonstrate the im- ments to the Canada Grain Act (Bill C-13) should portance of intelligent public interest regulation, be withdrawn or defeated in support of the fol- strong and effective regulatory institutions, and lowing actions that protect Canadian grain farm- appropriate constraints on the enormous power ers and our international reputation: wielded by huge global corporations. Canada’s grain regulatory system has for decades support- • Universal inward weighing and inspection ed producers, protected consumers, guaranteed by the CGC should be retained and quality and provided stability through the peaks strengthened. Early detection and and troughs of the commodity cycle. Discard- prevention of safety threats, insect ing it, as proposed by the current government, infestations and other problems in the would be folly. Instead, Canada should safeguard grain supply are essential to safeguarding and enhance a unique policy and regulatory suc- quality and consumer health. cess — its world-class wheat system.

Threatened Harvest 9 introduction

A Canadian success story

Canada is renowned for the consistent, high-qual- their end use. This allows the different classes ity cereal grains it supplies to countries around of wheat to be kept separate, so customers can the world. Bakeries everywhere seek out Cana- be confident that they are receiving the specific dian hard milling wheat to improve the qual- type of grain they require. ity and consistency of their loaves. Italian pasta Second, Canada has developed an independ- makers favour Canadian durum, while Chinese ently-enforced grading system which ensures that noodle makers and Indian makers ap- buyers get exactly what they pay for. This grad- preciate consistent supplies of other classes of ing system, backed by the Canadian government, Canadian wheat.1 sets a series of tolerance levels for a number of Without question, Canadian wheat com- important quality and functional characteristics mands international respect. Yet Canada’s rep- that are designed to meet customers’ needs. In utation for excellence did not emerge from thin addition to guaranteeing the functional charac- air. It was earned through decades of intelligent teristics of grain shipments, the grading system policy-making aimed at creating, maintaining facilitates strict procedures which ensure grain and improving an effective quality control sys- cleanliness and safety. All shipments are govern- tem for western Canadian wheat. There are three ment-inspected: first, when the grain arrives at key elements to this system:2 major terminals and again before it is sent over- First, Canada is unique in the world in main- seas. Parcels of grain are sampled and tested for taining tight control over the registration of wheat insect infestations, and rigorous standards for varieties and ensuring their consistent functional contamination by other cereal grains, or , performance. Only varieties that have been care- , weeds and other, more harmful foreign fully evaluated to meet strict performance cri- materials are also enforced. Export shipments are teria are licensed for use. Varieties in one qual- accompanied by an official assurance of quality ity class must also be visually distinguishable from the Canadian government — the highly re- from varieties from other classes, and varieties garded “Certificate Final”. This guarantee means are restricted to eight distinct classes based on customers receive the specific class, grade and

10 canadian centre for policy alternatives quality of grain that they have purchased and has about federal legislation that allowed the grain led to Canadian wheat becoming recognized as system’s benefits to be shared more fairly. the cleanest in the world. Today, the Canadian Wheat Board (CWB) is Third, Canada’s grain transportation and an icon of Canada’s unique agricul- handling system allows wheat classes to be seg- tural policy. Established in 1935, it is one of the regated according to functional class and grade, world’s largest grain trading companies. Annual and for wheat from within a class that is grown revenues average between $4–6 billion, with sales in different geographic areas to be blended. This of 22–24 million tonnes of wheat and barley each ensures uniformity and consistency from ship- year, within Canada and to over 70 other coun- ment to shipment and from year to year. tries.3 The Board is financially self-supporting4 This quality control system is sustained by the and is based on the cooperative model of sharing various institutions and infrastructure specifi- (or “pooling”) both the risks and advantages of cally designed for the purpose and by the thou- sands of diverse participants throughout the grain commodity chain who coordinate their > The grain system is an efforts for mutual benefit. embodiment of Canadian values

Overcoming inherent challenges

As a nation, Canada has always faced challenges grain selling equitably among its 85,0005 producer to its very survival: a harsh climate, its sparse members. It is controlled by a 15-member board population, the vastness of its land mass and its of directors, 10 of whom are elected by farmers, close proximity to a much more powerful neigh- with five appointed by the federal government. bour. Canada’s grain system shares these same As the exclusive marketing agency for western challenges. How western Canadians and their Canadian farmers growing wheat and barley for governments rose to these challenges — by cre- human consumption, it seeks to obtain the best ating a system expressly designed to serve the prices and transportation rates for producers, public good and the national interest — is an em- and passes all of the revenues it obtains (minus bodiment of Canadian values. marketing costs) back to Canadian producers. Historically, plant breeders working at fed- The Board is a great asset to Canadian produc- eral government research establishments devel- ers, grain customers and the general public alike, oped wheat varieties that were primarily grown providing guaranteed delivery and reliable sup- by Canada’s new immigrants. These varieties plies of high-quality product. allowed grain growers to thrive. Communities Much of credit for Canada’s reputation for were established and the nation’s prairie agri- grain quality and consistency is due to the activi- cultural sector expanded dramatically. Canada’s ties of the CWB’s sister organization, the Canadian railroads provided the means to transport the Grain Commission (CGC) — the federal regulatory inputs necessary for rural development in the body that oversees the Canadian grain industry thinly populated land and to ship wheat from and administers the grain grading system. The country elevators to distant markets. In response CGC is a federal government agency that oper- to the overwhelming power of the railway and ates independently of the CWB and other grain private grain companies, individual grain farm- industry players. As an independent third party, ers joined together to form producer-owned co- it has built up an almost universal trust among operatives. Working together, they helped bring grain industry participants. The Commission

Threatened Harvest 11 establishes the grading guidelines used by pri- Vancouver, Prince Rupert, and Churchill). It is mary elevators (those that receive grain directly the Commission which issues the Certificate Fi- from producers). This enables grain delivered to nal, the internationally respected guarantee cer- primary elevators to be graded quickly, cheaply tifying that foreign grain buyers are receiving the and fairly, before it is mixed with grain of similar type and quality of grain that they have paid for. grades for cost-effective bulk shipment to mar- The CWB, the CGC and the legislation and ket. The Commission also provides independ- regulations that underpin their activities — in- ent dispute resolution services when there are cluding the Canada Grain Act and the Seeds Act disagreements about assigned grades; provides have been pivotal in making Canada a leader in standard samples for use as visual guides in grain the world’s . These organizations are grading and marketing; and provides independ- known world-wide for their proven ability to ent information on the milling and baking qual- overcome the difficulties inherent in produc- ing, transporting and marketing grain in a vast country and in fairly accommodating the many > Canada’s grain system is participants’ diverse interests. Canada’s world- renowned quality grain sector is a prime example now at a precipice of a public policy and regulatory success story. Having proved its worth over decades, Cana- da’s grain system is now at a precipice. It faces an ity, and moisture and protein content of Cana- array of new developments that together could dian grain. The Commission also licenses grain tip it over the edge and make it unable to pro- dealers, and primary elevators, process elevators tect either our grain producers or our reputation (which process grain for human consumption), for growing a world-class agricultural product. and terminal elevators (located at Thunder Bay,

12 canadian centre for policy alternatives section 1

Undermining Canada’s grain system regulator

The key roles of the Canadian tion. It sets and applies the parameters for grain 8 Grain Commission (CGC) quality standards and regulates the grain grad- ing and inspection process.9 It licenses all grain Canada’s grain system is strictly regulated in the companies and grain dealers.10 Significantly, by public interest by the Canadian Grain Commis- requiring elevator companies and grain dealers sion. This federal agency performs two essential to be bonded or insured, the Commission pro- roles. Its first function is to be an independent tects producers from financial harm arising from referee, ensuring that the grain system’s rules are fraudulent practices or business failures of these applied fairly. This assures individual grain pro- industry players.11 TheCGC also regulates grain ducers fairer treatment from the hugely powerful handling procedures,12 undertakes, sponsors and corporations with whom they trade and provides promotes research,13 and acts as an arbitrator a more predictable marketplace for all grain sec- in grain-related disputes.14 15 It is authorized to tor participants. The Commission’s second role hold public hearings, conduct inspections and is to maintain Canada’s worldwide reputation for investigations as required, and, through special grain quality and consistency. These dual roles tribunals, rule on grain-related appeals.16 The are encapsulated in the Canada Grain Act, which Commission’s duties are backed up with pow- stipulates that the Commission shall: ers to suspend or revoke licenses, and to order violators to pay compensation, fines or even be “in the interests of the grain producers, imprisoned.17 Work is coordinated by three Com- establish and maintain standards of quality missioners appointed by the federal cabinet and for Canadian grain and regulate grain up to six Assistant Commissioners,18 whose jobs handling in Canada to ensure a dependable include advocating for producers’ interests and commodity for domestic and export otherwise addressing their concerns. markets.” 6 The broad scope of the Commission’s duties, The Commission employs over 700 staff7 and powers and activities reflects the longstanding oversees the system of grain grading and inspec- recognition within Canada that grain grading

Threatened Harvest 13 and grain handling issues are vitally important Undermining the Grain Commission not only to producers and all participants in the Starving the Commission of funds grain sector but to the nation generally. In the It is widely acknowledged that successive fed- late 1890s, before such regulation was instituted, eral governments have under-funded the CGC many western grain farmers complained bitter- for many years. Even the Harper-government ly that they were cheated on weights and grades commissioned review of the CGC and Canada when they delivered their grain to country eleva- Grain Act — the so-called Compas report23 — em- tors and when the grain reached the large ter- phasized the need for greater funding. Despite minal elevators.19 There was little competition its deregulatory bent, the Compas report high- between elevators, and the railroads refused to lights the “enormous economic importance” of permit direct loading of rail cars. According to the grain economy, rightly asserting that “the two prominent economic historians, people of Canada and…the federal government have a special reason to protect and sustain the > Most observers agree that the regulatory system and infrastructure.”24 The re- port notes that there is widespread agreement, Canadian Grain Commission is even among critics, that the federal government underfunded is failing to fund the CGC adequately. The re- port states:

“Stakeholders who agree on little else among themselves seem agreed that the “[t]his left the farmer with no alternative CGC is underfunded, even those who are but to accept the elevator’s terms for price, deeply critical of it.”25 weight, grade and dockage.”20 According to the Compas Report, the CGC is Producers of the day also complained that so under-funded that “resource constraints have Winnipeg grain companies were illegally fix- prevented [it] from maintaining adequate core ing prices. Their claims were given credence by infrastructure” which, in turn, has prevented the a royal commission, whose examination gave Commission from providing stakeholders with rise, in 1900, to the Grain Act.21 In “optional cost-recovery services.”26 1912, this was followed by the passage of the The Commission has two primary sources Canada Grain Act — a statute sometimes called of revenue. It charges user fees for the various the Magna Carta of the grain grower22 — which services it provides27 and it receives funding established the CGC. through direct appropriations from Parliament. Under the regulatory framework of the Can- Both sources are unpredictable and inadequate. ada Grain Act, the CGC has been helping to sta- Funding derived from user fees is inherently bilize the nation’s grain sector, securing predict- unpredictable. Most CGC fees are based on the ability for its diverse participants, and providing volume of grain shipped from terminals, and the foundation for Canada’s worldwide reputa- these volumes naturally depend on such vari- tion for quality grain. able external factors as weather, harvest condi- Regrettably, in recent years the federal gov- tions, and crop yields. As a result, user fee rev- ernment has undermined the role and independ- enues have fluctuated from year to year by as ent authority of the CGC. much as 33%.28

14 canadian centre for policy alternatives Table 1 Canadian Grain Commission revenues from user fees and parliamentary appropriations, 2001–2008 (million $Cdn) Parliamentary Total Annual Share of revenues Year Service fees appropriations revenue change (%) from Parliament (%) 2011 41.3** 2010 41.3** 2009 41.3** 26.5*,*** 67.8*,** -19.3 39.1*,** 2008 40.1 42.3 84.1 +7.2 50.3 2007 40.9 35.7 78.4 +18.6 45.5 2006 36.7 27.3 66.1 +14.5 41.3 2005 33.6 21.8 57.7 -19.3 37.8 2004 34.0 37.5 71.5 +20.6 52.4 2003 26.3 33.0 59.3 -6.9 55.6 2002 38.8 24.9 63.7 +1.0 39.1 2001 43.1 20.0 63.1 -7.2 31.7

* Estimate ** Planned (see text endnote) *** Supplemented through utilization of $14.2 in accumulated surplus Sources Canadian Grain Commission Revolving Fund, Financial Statements, various years, Canadian Grain Commission and Treasury Board Secretariat; CGC staff.

Parliamentary funding has also been highly changes were published in the Canada Gazette.30 variable. Since 2001, parliamentary appropria- CGC fees were frozen in 1991, and to this day tions to the CGC have ranged from a low of $20 remain frozen at those levels. While benefiting million to a high of $42 million (See Figure 1). grain producers by shielding them from CGC The erratic appearance of these federal payments fee increases that grain companies would pass arises from the fact that their aim is to supple- on to them, this freeze imposes a ceiling on the ment user fee revenues. However, the key point revenues the CGC can raise by itself — a policy remains: parliamentary funding has not result- the Harper Conservative government intends to ed in steady, predictable funding for the Grain extend at least through 2011.31 Commission. The year-to-year variation in total Successive governments have thus placed CGC revenues (user fees plus parliamentary ap- the CGC in a double financial bind. They have propriations) presents its own challenge, making hobbled the CGC by providing inadequate and planning — including staffing decisions — quite unpredictable direct funding while prohibiting difficult. the Commission from obtaining greater reve- But Parliament has made CGC’s funding situ- nues on its own accord through increased user ation even more difficult. fees. In short, Parliament is starving the CGC of Not only has Parliament failed to provide the the revenues it needs to fulfill the vital mandate CGC with stable, predictable funding, it has long that Parliament itself assigned to it. prevented the organization from augmenting its There is little doubt that the resulting fi- own revenues through higher user fees. While the nancial pressures undermine the ability of the fact may surprise many Canadians, Parliament CGC to do its job. Any underfunded organiza- has prohibited the CGC from increasing the fees tion with little prospect of increasing revenues it charges for its services for over a decade-and- must look to reduce costs, even if this under- a-half.29 Previously, the structure and levels of mines the services it provides — in this case, these fees were reviewed annually and proposed regulating Canada’s grain system in the public

Threatened Harvest 15 interest. The imposition by the federal govern- Bill C-13: Pursuing fundamental changes ment of unsustainable financial constraints on to the Canadian Grain Commission the CGC unquestionably contributed to the ill- Bill C-13,35 proposed legislation to amend the advised proposal to eliminate the CGC service Canada Grain Act, demonstrates how the fed- of mandatory inward inspection and weighing. eral Conservative government intends to funda- Independent inward inspection and weighing mentally alter the CGC and the grain system. The by the CGC is vital for the proper functioning controversial proposals, which Agriculture and of Canada’s grain quality assurance system (see Agri-Food Minister first introduced in below). However, since it costs the CGC more to December 2007 as Bill C-39, did not pass before provide it than it derives in fees,32 it is vulner- the October 14, 2008 federal election was called able to budget cuts. and the 39th Parliament ended. Re-appointed as The CGC has identified the task of develop- Agriculture and Agri-Food Minister after the federal election, Mr. Ritz re-introduced the same amendments, as Bill C-13, on February 23, 2009. > The government intends to The bill proposes a number of changes that fundamentally alter the CGC would adversely affect producers’ interests. The five key changes would shift theCGC focus away and the grain system from protecting producer interests while elimi- nating Assistant Commissioners, the Grain Ap- peal Tribunals, the Producer Payment Security ing a sustainable funding mechanism as a de- Program and mandatory inward inspection. partmental priority, stating that: 1. Shifting CGC’s primary focus away from pro- “[a] sustainable funding mechanism is tecting producer interests imperative for the CGC to carry out its As noted above, one of the CGC’s longstanding, legislated responsibilities and maintain its primary purposes has been to serve as a coun- capacity to create value for producers, the terweight for producers in the grain system, grain industry, and the Canadian public as balancing the enormous influence wielded by an integral part of a successful Canadian large grain companies. This is reflected in the [grain quality assurance system].”33 current Act, which stipulates that the CGC’s activities be “in the interests of the grain pro- Regrettably, the current Conservative gov- ducers.” The amendments proposed in Bill C-13 ernment is not actively pursuing a mechanism would downgrade this producer focus, requir- for more stable, predictable and adequate par- ing the Commission to “protect the interests of liamentary funding for the CGC. Instead, it is fo- grain producers” only with respect to three ac- cused on developing “alternative funding mech- tivities: “grain deliveries to elevators and grain anisms”34 — a phrase which in practice means dealers, the allocation of producer railway cars contracting out government services to private and the binding determination of grade and service providers. If allowed to continue, this ap- dockage of grain by the Commission.”36 While proach will erode the capacity of the CGC — an some observers view this wording change as a organization of national importance and inter- mere formality, many others are concerned that national stature — to perform its responsibili- it downgrades the Commission’s longstanding ties as the independent regulator of Canada’s producer protection focus. grain system.

16 canadian centre for policy alternatives 2. Eliminating Assistant Commissioners intimate knowledge that came with their mem- For many years, Assistant Commissioners of the bership on the CGC,44 it is difficult to see how CGC played a central role in protecting produc- the unique producer advocacy role that trusted ers’ rights and ensuring that they received fair Assistant Commissioners often played could be treatment within the grain handling system. Re- replicated by an outside agency. grettably, the current federal government has, The loss of Assistant Commissioners elimi- for practical purposes, dispensed with Assist- nates a longstanding safeguard that has helped ant Commissioners. ensure fairer treatment of producers within the Up to six Assistant Commissioners were ap- western Canadian grain handling system. pointed by the federal cabinet for renewable five- 3. Eliminating Grain Appeal Tribunals year terms. They responded to producer inquiries Under the current Act, producers dissatisfied with and complaints about late or non-payment for the grade assigned to their grain by an inspec- delivered grain, disputes over grade or dockage, producer cars, deductions for shrinkage, and el- evator charges.37 It was common for Assistant > The Conservatives want to Commissioners to handle over 1,500 complaints “contract out” grain inspection about these matters in a single year.38 Assistant Commissioners also represented the concerns appeals of producers in their respective regions to the Commission39, publicized Commission activities in their areas and dealt with inquiries from pro- tor may appeal the decision either to Canada’s ducers and other members of the grain industry. chief grain inspector or to a Grain Appeal Tri- As recently at 2007, the CGC, under Minister bunal.45 These tribunals consist of independent Ritz, recognized Assistant Commissioners for grain experts with no financial interest in the their efforts in achieving results to “[m]ediate outcome,46 make final rulings on the appeals. and/or arbitrate producer complaints concerning This process gives producers and other partici- transactions with grain companies to facilitate pants in the grain sector confidence that rulings negotiated settlements acceptable to both par- about grain grading — which have enormous fi- ties”40 These efforts were in support of protecting nancial consequences — are fair. producers’ rights — which the CGC considered a The proposed legislation would eliminate “[k]ey program” and a “strategic outcome” war- Grain Appeal Tribunals entirely.47 It would au- ranting special mention in its annual perform- thorize the chief grain inspector, acting alone, ance report.41 Despite this acknowledgement of to make final rulings on these appeals. More dis- their importance, the current federal government turbing, the bill would also authorize the chief effectively eliminated the position of assistant grain inspector to delegate all of his or her grain commissioners by failing to renew the terms of appeal functions to another individual, and the individuals when they expired.42 decision of that individual would be final and not The government has not moved to establish subject to review “by any court.”48 If approved, any other body as a partial replacement for As- Bill C-13 would allow the vital job of issuing rul- sistant Commissioners, with for example, an in- ings on grain appeals to be “contracted out” to dependent arbitrator, ombudsperson, or “Office private individuals. Privatizing the grain appeal of Grain Farmer Advocacy”, as recommended by process in this way would result in a system that the House of Common Standing Committee on was, and was widely perceived to be, less objec- Agriculture and Agri-Food.43 Indeed, with the

Threatened Harvest 17 tive and more subject to inappropriate manipu- 5. Eliminating mandatory inward inspection — lation and corruption49 a vital CGC role Eliminating these panels of independent grain Through Bill C-13, the Harper government also experts and allowing the possibility for substi- proposes to eliminate the mandatory inspection tuting unaccountable and unappealable review- and weighing of grain delivered to transfer and ers are clearly moves that would shift the CGC’s terminal elevators.53 This proposal has attracted role away from protecting producers. considerable controversy, since the CGC’s inward inspection service is a valuable, cost-effective 4. Eliminating the Producer Payment program that benefits producers, the CWB and Security Program the Canadian public generally. This misguided Bill C-13 would eliminate the requirement for proposal is examined in greater detail in section grain buyers to post security bonds.50 Under the 2 of this paper (see below). current system, all grain dealers and terminal el-

Undercutting the independence > The appointment of partisan of the Canadian Grain Commission The stature and world-renowned effectiveness Elwin Hermanson as Chief of the CGC rests largely on the knowledge, in- Commissioner sullies the CGC’s tegrity and impartiality its staff and the inde- pendence of its leadership. Unfortunately, the reputation minority Conservative government tarnished the solid reputation of the federal agency by ap- pointing a partisan individual, who has close evator operators are required to post bonds as a ties to the Minister, to lead it. On December 21, condition of their license. This bonding require- 2007, Agriculture and Agri-Food Minister Ritz ment protects producers against serious financial announced the appointment of Elwin Herman- impacts that arise if a grain buyer refuses to pay son to a five-year term as Chief Commissioner for delivered grain or when grain companies go of the CGC. Regrettably, given his close politi- bankrupt and cannot pay. Perversely, the CGC’s cal ties with Ritz, Hermanson cannot reasonably 2008–2009 Report on Plans and Priorities claims be considered either impartial or independent that the elimination of this valuable program (See Annex I) and the appointment sullies the will “benefit producers [sic] by reducing barriers CGC’s reputation. As Chief Commissioner, Mr. for new entrants into the grain handling system Hermanson has already demonstrated his in- and removing system costs.”51 What the CGC re- ability to protect the independence of the CGC: port overlooks is that eliminating the Producer on February 7, 2008, he published an opinion Payment Security Program52 would remove an article strongly promoting Bill C-39 (recently important protection for producers — protec- re-introduced as Bill C-13), the controversial bill tion that cannot be achieved easily through any that Mr. Ritz introduced but which Parliament other means — and would almost certainly result has not passed. in some producers facing catastrophic financial losses through no fault of their own.

18 canadian centre for policy alternatives section 2

The move to eliminate inward inspection

One of the central responsibilities of the CGC is The flow of grain to inspect, weigh and grade grain as it enters and a) Primary elevators leaves major terminals. It has performed this key The first stop for most prairie wheat after it leaves role for almost a century. Inward inspection and the farm is usually a nearby country, or primary, weighing occurs when grain arrives at the termi- elevator. A small fraction of Canadian grain by- nal. It provides accurate, impartial information passes primary elevators and is shipped directly regarding grades and weights that buyers, sellers by individual farmers in “producer cars” to ter- and shippers can rely on to ensure each is treat- minal elevators at ports. ed fairly. Mandatory inward inspection also pro- When grain arrives at the country elevator it tects the consumer by ensuring that every ship- is weighed and graded by the elevator operator. ment is checked by highly trained professionals If the farmer and operator disagree on the grade, for any quality concerns or safety problems. Bill either has the option to take samples which will C-13, the government’s proposed amendments be sent to the CGC for a binding determination. to the Canada Grain Act, would eliminate uni- This option is known as “subject to inspectors’ versal inward inspection by public officials, to grade and dockage.” The proposed amendments be replaced by an optional system where buy- to the Grain Act would preserve this option and ers or sellers would contract for these services, extend it to grain delivered to “grain dealers and as needed, in the private market. This section of process elevators.” the paper traces the flow of grain through the While many producers have an excellent handling system, explains the role of inward relationship with their local elevator operators, inspection in the existing system, assesses the buyers have an inherent interest in grading for impacts of eliminating inward inspection as a their own benefit. For example, dockage is for- government service and examines the interests eign material in grain that can be removed by behind the pressure to get rid of it. cleaning. If the amount of dockage estimated when the grain is purchased is higher than the

Threatened Harvest 19 actual dockage, then the buyer will have more essary check and balance to prevent fraud and to grain to sell after cleaning. Even a small percent- weed out dishonest buyers or dealers. age bias can add up over large volumes. The dif- Before being eliminated by the current fed- ference between estimated and actual dockage eral government, Assistant Grain Commissions is a significant source of potential profit for -el played an important role in uncovering fraudu- evator operators. lent practices in the industry. They acted as both The option of a bindingCGC determination advocates for producers who felt they had been and the knowledge that grain will ultimately dealt with unfairly or dishonestly, and provid- be inspected by an impartial third party act as ed an independent office where whistle-blowers checks against the buyers’ tendency to grade to could safely come forward to reveal bad practices. the detriment of the producer.54 Another major source of profit for grain buy- b) Terminal and transfer elevators

(i) Weighing The CGC’s inspection system swings into high > Independent CGC oversight is gear when the grain cars arrive at terminal and needed to prevent fraud transfer elevators. It is here that mandatory “in- ward inspection” occurs. The inward inspection process begins with the CGC weighers. Despite their title, the role ers is blending. Grains of somewhat lower grades and function of these employees is far broader or protein levels can be mixed with higher-qual- than simply weighing the grain. The first step is ity grains prior to sale. As long as each order is to observe the arriving rail car, checking that it is blended to meet or exceed the buyers’ specifi- intact and that no leaks have developed en route. cations, all is well. In effect, grain purchased at The next step is to “sound” the car, to check that a lower price can be sold, quite legitimately, at each compartment is full, noting any compart- a higher price. ments that are empty or short. When a private grain company blends its own A vital task is to ensure that the car is identi- grain, it pockets the extra profits. The producer fied correctly. Without a proper match between is paid based on the grade and price transacted the car identity and the parcel of grain, inventory, at the primary elevator, even though their grain payment and inspection systems break down. The might be blended up and sold at a higher price. electronic tag system used by elevators (a chip One of the benefits of the CWB is that it returns on the car is read by a sensor) does not always the proceeds derived from blending to produc- work properly. TheCGC weigher independently ers, who otherwise would not share in the ex- verifies the identity of the grain. tra returns. TheCWB estimates that it returns a The weigher also creates a shunt order and benefit of between $7 and $10 million annually unload schedule, which documents the identity to prairie farmers through terminal blending of and order of the cars as they arrive and are avail- wheat, barley and durum.55 able for unloading, the status of the car and any Fraudulent practices can occur at any eleva- issues identified. This documentation is provided tor, including primary ones. There are many dif- by the weigher to the elevator operators. ferent ways that samples or equipment can be It is the CGC weighers’ job to ensure that the tampered with to short-change the seller. CGC identity of each parcel of grain is preserved and oversight — which can lead to fines, license sus- the lot kept intact until it is officially weighed, pensions or criminal prosecution — acts as a nec-

20 canadian centre for policy alternatives graded and inspected, as well as to prevent or At a typical Vancouver elevator, CGC weigh- note any discrepancies as the parcel works its ers routinely process the unloading of 50–100 way through the elevator’s conveyance system.56 rail cars during a shift. Documentation on these The weigher must also ensure that the elevators’ cars, their parcels, weights, any anomalies and equipment is running properly — for example, other relevant information is provided by the that there are no spills as the parcel is conveyed weigher to the elevator at the end of each day. to the scales. Each elevator’s conveyance and Such information is important, not just in the handling systems are unique and an experienced event of disagreements, but also in the routine weigher must be familiar with all those for which operation of the elevators. It is unclear how this they are responsible. data would be gathered, and by whom, if public The physical weighing itself is performed by inward inspection were eliminated. the elevator operator using the elevator’s equip- ment. TheCGC monitoring equipment works off the elevators’ scales, ensuring that the weighing is done accurately and recorded correctly. There > Independent CGC inward is no unnecessary duplication of effort. inspection records allow grain The CGC records are made available to all parties to the transaction: the elevator operator, disputes to be adjudicated fairly the railway and the shippers. In the case of any disagreement, the CGC official records are the final authority regarding the identity and weight (ii) Inward inspection and grading of every parcel of grain unloaded at terminal and Canadian law currently requires that all grain transfer elevators. In fact, without independent be inspected by government officials when it -ar CGC documentation regarding the identity of rives at a terminal or transfer elevator (See Table the car and information about how it was un- 2, Canadian Terminal And Transfer Elevators). loaded, it would be almost impossible to fairly As previously discussed, the current government adjudicate any dispute between the elevator and intends to eliminate the existing requirement for the seller. The seller and the railways would be inward inspection, while maintaining mandatory at the mercy of the elevator operators’ records, outward inspection of overseas grain shipments. resulting in a clear conflict of interest. After first obtaining a representative sample Bill C-13 provides for the CGC to continue to for testing, CGC inspectors determine the class adjudicate disputes between sellers and buyers. or type of grain. Kernel Visual Distinguishabil- Unfortunately, without the records provided by ity, or KVD (which is discussed further in section impartial third-party inward weighing and in- 3 of this paper), is a crucial component of this spection, such a role will be difficult — perhaps process. Visual distinguishability allows expe- even impossible — to perform. rienced inspectors to tell at a glance the type of CGC officials provide a deeper level of scru- grain they are dealing with and to recognize at tiny for “producer cars”, which are rail cars load- once if the grain has been mixed with a variety ed and shipped directly by farmers themselves of a different class. rather than through a grain company . Such Inspectors next determine the cleanliness of producers rely entirely on CGC records to de- the sample and the percentage of dockage. termine payment or to resolve any dispute with Inspectors remove the dockage from the sam- the elevator operator. ple. They check both the dockage material and the

Threatened Harvest 21 Table 2 Canadian Terminal and Transfer Elevators (as of December 2007) Licensed Terminal Elevators Tonnes Ontario THUNDER BAY Limited 176,020 James Limited 210,030 Mission Terminal Inc. 121,240 Parrish & Heimbecker, Limited 40,800 7 362,650 Viterra S 167,000 Viterra A 231,030 Western Grain By-Products Storage Ltd. 30,000 Total 1,338,770

Manitoba CHURCHILL 3 Hudson Bay Port Company 140,020 Total 140,020

British Columbia PRINCE RUPERT Prince Rupert Grain Ltd. 209,510 VANCOUVER Alliance Grain Terminal Ltd. 102,070 Cargill Limited 237,240 Cascadia Terminal 282,830 James Richardson International Limited 108,000 Kinder Morgan Canada Terminals ULC 25,000 Pacific Elevators Limited 199,150 Total 1,163,800

Canadian Total 2,642,590

sample for insects. A portion of the sample is sent Inspectors next analyze the sample for safe- to the CGC entomology lab for more thorough ty factors. In all, inspectors test for about fifty inspection. The lab does its work quickly, usually grading factors.57 They detect kernels that are within 24 hours, and if infestation is discovered broken, shrunken or heated, as well as grain the binned grain can then be treated before it is that is discoloured, mouldy, rotted or damaged mixed with other grain. Discovery at this early by insects. They also check grain for contami- stage also allows the source of the infestation nation by other seeds and foreign material such to be identified. The CGC can then alert eleva- as glass, dirt and stones. Donning gloves and tors and growers from that producer or region masks, inspectors screen out any chemically to take the steps needed to control the infesta- treated grain or grain containing rodent excreta, tion. If this layer of inspection is eliminated as insect infestations, fertilizer pellets and certain proposed, the ability to detect, isolate and con- toxin-producing bacteria and fungi. Known food trol insect infestations in the Canadian grain safety threats include fusarium blight, mercury, supply will be seriously compromised. glass and ergot (see below). As with insect infes-

22 canadian centre for policy alternatives Table 2 (continued) Canadian Terminal and Transfer Elevators (as of December 2007) Licensed Transfer Elevators Tonnes Nova Scotia HALIFAX Halifax Port Authority 144,290 Total 144,290

Quebec BAIE COMEAU Cargill Limited 441,780 MONTREAL Montreal Port Authority 262,000 PORT CARTIER Louis Dreyfus Canada Ltd. 292,950 QUEBEC Bunge of Canada Ltd. 224,030 SOREL James Richardson International (Quebec) Limited 146,460 TROIS-RIVIERES 3 Les Élévateurs des Trois-Rivières Ltée 109,000 Total 1,476,220

Ontario GODERICH Goderich Elevators Limited 2 140,020 HAMILTON James Richardson International Limited 29,300 OWEN SOUND The Great Lakes Elevator Company Limited 106,420 PRESCOTT The Corporation of the Township of Edwardsburgh/Cardinal 154,020 SARNIA Cargill Limited 151,000 WINDSOR Windsor Grain Terminal Ltd. 110,410 Total 691,170

Canadian Total 2,311,680

Source Canadian Grain Commission

tations, if the grain were not inspected on arriv- holders to reflect expected quality standards and al at ports, as proposed in Bill C-13, it would be current growing conditions. At this point, the far more difficult, perhaps impossible, to trace inspector is able to assign a grade to the sam- these problems back to specific parcels of grain, ple and the parcel. Inspectors may also recom- farms or regions. mend further cleaning or drying to allow for Inspectors also assess the sample for mois- grade improvement. ture content, which indicates whether the parcel Either the sellers or the buyers can appeal is within acceptable tolerances for safe storage this grade determination. In such instances, the or requires drying, and for protein level. Finally, sample is re-inspected, at minimal cost, by CGC the inspector evaluates a number of visual (sub- inspectors, who will either confirm the original jective) and objective grading factors. All these grade or change it. results are then compared to the grade determi- nant table in the appropriate section of the Of- ficial Grain Grading Guide OGGG( ). The OGGG is vetted and adjusted each year by a committee of experts and industry stake-

Threatened Harvest 23 Impacts of eliminating inward inspection rates. As has been acknowledged in parliamen- tary testimony and reports, proponents of con- a) Cost tracting out these services have not provided The existing public system — including any cost-benefit analyses or factual evidence to KVD — has justly been described as “the ulti- support their claims of lower costs or increased mate low-cost grading and inspection system.” efficiency.58 As previously discussed, the CGC fees for in- Public inward inspection services provide ward weighing and inspection have been fro- valuable support to agricultural producers. This zen since 1991. falls squarely within the current mandate of the There is little doubt that the CGC currently CGC to uphold producer interests. Moreover, provides inward inspection services at less than unlike so many Canadian agricultural subsi- cost. This is a significant source of the annual dies, publicly funded inward inspections have survived challenge under WTO rules. Eliminating inward inspection would be a > Without CGC participation, classic case of “penny wise and pound foolish.” inward inspection fees would The immediate cost savings would be minor. By contrast, the risks and associated costs involved increase, costing producers more to producers, the CWB and ultimately the pub- lic purse are potentially significant.

b) Food safety and bio-security shortfall in CGC revenues versus expenses. Ide- Inward inspection provides an extra layer of as- ally, if fees remain frozen to assist farmers, then surance to domestic and international buyers Parliament should make the necessary appro- that Canadian grain is free from harmful con- priations to enable the CGC to provide the full taminants or other safety hazards. Under the range of services to producers. proposed changes to the Grain Act, grain ar- CGC senior management, however, appears riving at terminal or transfer elevators which is to regard inward inspections as a cost drain and destined for domestic use or consumption would have acquiesced in the federal governments’ ef- no longer be inspected by the CGC. At a moment forts to fundamentally change the inspection when public concerns about food safety are near system. Management has also declared that an all-time high, passage of Bill C-13 would cre- once mandatory inspections have been ended, ate a new gap in the Canadian food inspection CGC inspectors will no longer be made available and safety system. to perform optional inspections, even on a fee- The example of ergot, a dangerous fungal for-service basis. disease which occurs in western Canada, dem- If the proposed changes were to become law, onstrates the importance of maintaining rig- the fees charged for inward inspections would orous government oversight, including inward likely increase. Wages of front-line CGC inspectors inspections, in our grain system. Ergot infects are generally lower than, for example, the union- rye, wheat and other cereal grasses, forming ized longshoreman employed by hard fruiting bodies that resemble dark kernels companies, who are not in any case trained to of grain.59 It contains powerful chemical alka- perform thorough inspections. Private contrac- loids, from which LSD is made. When ingested tors would need to charge significantly more for even in small quantities in baked bread, ergot comparable inspections than the current CGC can cause violent muscle spasms, hallucinations

24 canadian centre for policy alternatives and crawling sensations on the skin. Ergot poi- consumption. The tainted rice was sold soning in rye is thought to have led to the Sa- to 380 companies, including suppliers lem, Massachusetts witch trials of 169260 and, of food to hospitals, nursing homes, as recently as 1951, caused widespread bizarre schools and other public facilities.66 The behaviour in a small town in France.61 In 2008, revelation prompted a sweeping recall of ergot was unusually prevalent along the Mani- products that may have been made with toba- border after a damp growing the contaminated rice and shook public season, with between 10–25% of grain samples confidence in Japan’s food safety system. from the region containing ergot damage.62 Yet These examples highlight the importance of Canada’s grain inspection system was able to preventing both inadvertent and deliberate con- ensure that dangerous levels of ergot were kept tamination of the food system before they occur. out of the food supply. Several recent outbreaks of food-borne ill- nesses, all occurring in the summer and fall of 2008, underline the dangers to the public of cut- > CGC inward inspection helps ting back on government oversight and inspec- keep dangerous ergot out of the tions in the food system. 2008 grain supply • In August, Canadians were shocked by the widespread distribution of over 200 brands of meat products contaminated by the disease-causing Listeria bacterium, which This is best achieved by maintaining high-quality resulted in over 20 deaths and a class- inspections performed by trained public inspec- action lawsuit involving 5,000 Canadians.63 tors who are independent of the companies they • In China, over 300,000 children were left oversee. The federal government’s proposal to ill and at least six died, after consuming eliminate inward grain inspection would leave milk tainted with melamine — a chemical grain companies free to arrange their own in- used to make plastic. Melamine was added spections of their own grain in their own facili- to milk to increase profits by artificially ties — an obvious conflict of interest that would boosting protein levels.64 The scandal increase the risk of food-borne illnesses both in extended to more than 20 companies, with Canada and abroad. products including fresh milk, yoghurt Another scarcely discussed feature of the pro- and ice cream. The problem extended posed changes is that all grain exported to the worldwide — causing the Canadian U.S. would no longer be inspected. Currently, Food Inspection Agency to put in place grain shipped to the U.S. by lake freighter and new measures to protect animal and by rail from terminal elevators must be inspect- 67 public health by testing imported dairy ed by the CGC. This change would downgrade ingredients and soybean meal for the the level of protection and could expose Ameri- contaminant.65 can consumers of Canadian grains to increased safety and quality risks. • In Japan, a large rice miller was found to Furthermore, given the current U.S. preoccu- have boosted profits by selling 400 tons pation with counterterrorism and bio-security, of inedible, contaminated rice — intended it would open a perceived bio-security weakness for use as fertilizer, animal feed and in the U.S. food import system. It is conceivable glue — as more expensive rice for human

Threatened Harvest 25 that the U.S. homeland security apparatus would that our rigourous inspection and grading sys- move to remedy this. tem has been faithfully followed. Given the long-standing tensions in the Can- It would be foolhardy to suppose that elimi- ada-U.S. grain trade, the temptation to close this nating the inward inspection process will have potential bio-security breach to the detriment no impact on the integrity of the outward in- of Canadian grain producers is ever-present. It spection process or the quality and reputation is disconcerting that, with Canadian concerns of Canadian grain sent to international export about the thickening of the border on the rise, markets. Eliminating the set of checks and bal- the federal government might hand U.S. legisla- ances followed in inward inspection, especially tors and industry lobbyists this new opportunity when combined with the immediate elimination to harass Canadian grain exports. of KVD, introduces new risks and potentially very significant costs into the system. Inward inspections provide outward in- spectors with detailed knowledge and confi- > Ending CGC inward inspection dence about the quality and characteristics of would raise bio-security the grain that is about to be loaded for export. For example, during the loading of a ship, the concerns, giving the U.S. a outward inspector may observe that the grade new reason to harass Canadian quality or protein levels of grain being loaded are dipping below required specifications. The grain exports inward inspection report, however, provides reliable information about higher quality grain yet to be loaded. With this knowledge, the out- c) Undermining outward inspection ward inspector can be confident that the final Under the proposed regime, grain must still be cargo will meets required standards. Without weighed and graded by CGC officials before it the trustworthy information about grain in can be exported overseas. These “outward in- the pipeline provided by inward inspection, spections” follow similar procedures to those the outward inspector may be obliged to halt described above for inward weighing and grad- loading, or, in extreme cases, require that the ing. At the end of the outward inspection proc- ship be unloaded. These actions would involve ess the CGC inspector assigns the appropriate considerable delay and expense. grade and issues a “Certificate Final.” Furthermore, if any amount of contaminat- Worldwide confidence in theCGC system is ed or insect-infested grain gets into the cargo extremely high. Once a Certificate Final is is- hold, it is nearly impossible to remove it. The sued, foreign buyers can be assured — without entire cargo may have to be unloaded and pos- even examining the grain themselves prior to sibly discarded. Early detection through inward delivery — that the Canadian grain they have inspection saves time, effort and expense. Once purchased will consistently meet designated sub-standard or contaminated grain from even a quality standards. The certificate helps Canadian single car is mistakenly mixed with high-quality sellers to command a price premium for mill- grain, it can degrade an entire cargo, reducing ing wheat and other grains in the international its value or in extreme cases rendering it unfit marketplace. This premium price will only be for sale. Inward inspection provides information available as long as buyers have full confidence and quality assurance that outward inspectors rely on to do their job effectively and efficient-

26 canadian centre for policy alternatives ly. It also provides a higher level of comfort and recent years as the larger firms compete among assurance to international buyers, thereby pre- themselves. But they are still used and are, in serving the reputation of Canadian grain and fact, an efficient way to fill specialized orders. allowing it to command a higher price. Finally, the CWB relies on information pro- vided by public inward weighing and inspection d) “Optional” inward inspection to compile its data on the supply and quality of Another serious flaw in the proposed changes, the wheat it markets. Unlike private grain com- is that even though inward inspections would panies, the CWB does not own any terminal no longer be legally required, they will still, in or transfer elevators. One of the board’s great many cases, be necessary. In fact, it would be strengths is a comprehensive knowledge of the more accurate to say that Bill C-13 would priva- grain supply — how much grain it has to sell and tize inward inspections, rather than eliminate of what end-use class and quality — and its ability them. For most stakeholders in the grain indus- try — whether dealing in producer cars, pooled shipments or CWB grains — inward inspections will still be essential. These services will then > Inward inspection allows early have to be contracted from private firms. detection of problems, saving Producer cars must be weighed, inspected and graded by an independent third-party when time, effort and expense they arrive at terminal or transfer elevators. CGC management has made clear that if the proposed changes were implemented, the CGC would no longer provide inward inspections, even on fee- to match this to overseas customers’ demands. for-service basis. This means that prairie pro- If public inward inspection is eliminated, then ducers would have to arrange for these services the CWB will need to procure these essential to be provided through a private contractor. The services elsewhere. cost to independent producers of privately con- TheCWB undoubtedly has the resources and tracting these services would almost certainly the bargaining heft to procure replacement in- be higher than current CGC rates. spection and weighing services. But if its costs Unlike private contractors, CGC officials are increase, this would cut into the revenues re- explicitly mandated to protect producer interests turned to prairie producers. Furthermore, the and routinely provide an extra level of scrutiny elimination of the CGC services, and their re- to producer cars. This is, in part, because the placement, will cause the CWB to face disrup- rate of infestations and safety factors is higher tion and uncertainty. Indeed, that may be one in producer cars, which are being inspected for of the scheme’s unstated purposes. the first time. But this extra scrutiny also occurs The move to end public inward inspection because these producers are totally dependent on is part of the current federal government’s the professionalism, accuracy and impartiality broader attack on the wheat board. Both the of pubic officials to ensure that they are treated CGC and the CWB are mandated to advance and fairly by buyers in distant ports. protect producers’ interests. Their respective Pooled shipments, where two or more com- operations and duties are complementary and panies combine to fill an order, will also need mutually reinforcing. This relationship, built to be inspected by an independent third party. and refined over many decades, has functioned Pooled shipments have fallen out of favour in well. The enemies of the board want to kick out

Threatened Harvest 27 a vital prop in the current regulatory system, Moreover, even these companies’ opera- thereby deliberately isolating and weakening tions could experience reduced efficiency as a the CWB. This, as we will see, is best under- result of the proposed changes. As discussed stood as part of a plan to shift control of grain above, CGC officials provide cost-efficient serv- from Canadian producers to the multinational ices relied on by the companies’ own elevator grain companies. operators. As the recent listeriosis outbreak demonstrates, even if weakening the inspec- Who benefits from eliminating tion system results in short-term cost savings, mandatory inward inspection? it can contribute to preventable food safety problems. These have clearly been shown to There is little doubt that pressure from the large be financially catastrophic for affected com- grain companies is behind the changes pro- panies. Finally, if eliminating official inward inspection jeopardizes the reputation and price premium for Canadian wheat, it might well ad- > Ending public inward inspection versely affect the profitability of these global would undermine the CWB and companies’ Canadian operations. Multinational companies, however, are not boost grain companies’ power just looking at the short-term picture. Elimi- nating public inward inspection enhances their bargaining power in and control over the grain posed in Bill C-13. These companies are verti- handling system. At the same time, it weakens cally and horizontally integrated. Frequently, the position of their arch-rival the CWB and the the grain arriving at their terminal elevators is country’s grain producers. The desire of multi- grain they already own. These companies have national companies to weaken the CGC is part long and loudly objected to the requirement to of a broader attack on the CWB and of a long- have their grain, weighed, inspected and grad- er-term strategic effort to eliminate Canada’s ed by public inspectors when it arrives at their unique “brand” of grain and shift control of the own elevators.68 industry from producers and public institutions While it may be true that the exchange of grain to themselves. At the end of this process, Can- between two components of the same company ada’s grain sector will be more fully integrated does not require the same independent oversight with the U.S. system, with both our regulations to ensure that the seller is treated fairly, qual- and quality of Canadian grain harmonized to ity and safety concerns remain. Inspection and the inferior U.S. levels. While this would serve grading at arms-length, by impartial public of- the interests of grain multinationals, Canadian ficials, remains the best way to detect and cor- consumers and producers would suffer. rect safety and quality problems.

28 canadian centre for policy alternatives section 3

Eliminating Canada’s visual system for differentiating wheat classes (KVD)

Canada has long used a simple, inexpensive and wheat for breadmaking, it is a red spring wheat highly effective system to differentiate between suitable for that use. classes of prairie wheat based upon the appear- KVD has been a vital aspect of western Cana- ance of their kernels. Under this system, known da’s unique quality control system. Visual distin- as Kernel Visual Distinguishability (KVD), the guishability allows the different wheat classes to colour, shape and size of kernels of one class of be kept separate more easily as they travel from wheat are different from the kernels of other producer to processor, a confidence-building fea- classes. This allows for easy segregation of the ture that benefits all participants in the supply eight wheat classes, each of which has distinct chain. Producers can determine visually that any quality and processing characteristics and is sold wheat seed they purchase is the class they intend for a different purpose. For example, kernels of to grow. Elevator operators can easily verify the the class Canada Western Red Spring wheat, re- various classes of the wheat delivered to their el- nowned for breadmaking, look different from evator and place them in their appropriate seg- kernels of Canada Western Amber Durum, used regated bin, ready for shipment in different rail- to make pasta, and from Canada Western Soft cars. Grain inspectors can check that shipments White Spring wheat, used to make pastry.69 Under of one class of wheat are not contaminated by this system, all of the varieties of wheat within a another and confirm that railcars and shiploads class share common visual and functional char- of grain meet buyers’ requirements. Ultimately, acteristics that are distinct and varieties that do under Canada’s KVD-based grain inspection sys- not conform to this system are not registered for tem, international grain buyers can be confident, use. As a result, knowledgeable individuals can without performing any test of their own, that ascertain the class of a particular wheat sample western Canadian wheat — whether purchased anywhere along the supply chain merely by ex- to make bread, flatbread, pasta, chapatis, cakes, amining a handful. Buyers of western Canadi- , cookies, or crackers — will perform an grain can thus be uniquely confident of their exactly as expected year after year. purchases; if it looks like a top-quality red spring

Threatened Harvest 29 Eliminating KVD ties for feed and ethanol without unduly threat- ening Canada’s export market for the highest- It is widely accepted even among KVD crit- value bread and pasta wheats. The Commission ics that the benefits of the system — allowing announced that KVD would be retained for the efficient segregation of different functional Canada Western Red Spring and Canada West- classes of wheat and preventing cross-contami- ern Amber Durum, which constitute over 85% of nation — have been instrumental in helping Ca- the wheat acreage grown in Canada. It also an- nadian wheat to compete successfully against nounced that it would end Kernel Visual Distin- stiff international competition in export markets. guishability for minor classes of wheat by 2008. However, the KVD system has the unintended Under this proposal, , Canadian side-effect of restricting the varieties of wheat, Prairie Spring, White Spring and Extra Strong whether developed in Canada, the U.S. or else- wheat classes would fall outside of KVD rules. where, that can be grown in western Canada. If It also announced the creation of a new class of wheat (“General Purpose”), for feed and ethanol > The KVD system allows easy wheats, to which KVD criteria also would not segregation of the different apply. Varieties within these five wheat classes could look alike but could not resemble varieties classes of wheat in the major classes. While the government and several Canadian wheat pro- ducer groups complained that the KVD changes did not go far enough70, many observers saw the the kernels of a new, higher-yielding or disease- change for minor wheat classes as a compromise resistant variety visually resemble wheat from that successfully accommodated both opponents an existing KVD class but do not share that class’ and defenders of the KVD system. quality and processing characteristics, that va- Disconcertingly, the federal government riety cannot be registered for commercial use didn’t stop there. In April 2007, the Conserva- in western Canada. While certain analysts have tive government released a document indicating attempted to determine the economic impact it would eliminate the KVD system entirely — that of this KVD side-effect, it is not an easy task. It is for all wheat classes — by 2010. Assistant Chief is even more difficult to compare the second- Commissioner Terry Harasym acknowledged at ary negative impact with the primary benefit of the time that the scheme “will be a fundamental KVD — preventing contamination of the export change to how we handle wheat in this country.”71 stream. The prevailing view appears to be that The announcement surprised even opponents KVD has proven to be an enormous benefit by of the existing system and some expressed con- facilitating Canadian exports of high-quality cern that such a rapid change could pose undue wheat for human consumption. KVD restrictions risk to the industry. KVD proponents warned that mainly affect the development and production of eliminating the system would threaten Canada’s higher-yielding, low-protein wheat — including reputation for high quality standards72 since a re- many U.S. varieties — used as animal feed or to placement identification system does not exist. In produce ethanol for use as a gasoline additive. February 2008, industry observers were shocked In June 2006, after a number of years spent again. Instead of delaying the change until a re- examining and consulting on the issue, the CGC placement identification system was in place, as announced KVD changes that were designed to recommended by the House of Commons agri- better accommodate high-yielding wheat varie- culture committee73, Agriculture and Agri-food

30 canadian centre for policy alternatives Table 3 The visual characteristics of western Canadian wheat classes under the KVD (Kernel Visual Distinguishability) system

Under the KVD system, there are eight milling classes of western Canadian wheat. These are:

• Canada Western Red Spring (CWRS) • Canada Western Red Winter (CWRW) • Canada Western Extra Strong (CWES) • Canada Prairie Spring Red (CPSR) • Canada Prairie Spring White (CPSW) • Canada Western Amber Durum (CWAD) • Canada Western Soft White Spring (CWSWS) • Canada Western Hard White Spring (CWHWS)

All wheat varieties within a particular class look the same and share particular quality and processing characteristics. Each wheat class can be distinguished visually from the other classes because the kernels of each class have a distinctive appearance, as shown in the photograph below:

The physical characteristics of each class are described as follows: Colour Size Shape Germ Brush Cheeks Red Spring Translucent red Small to midsize Oval to ovate Round, midsize Varies to large Red Winter Orange to Small to midsize Elliptical Small, oval Small Round opaque red to round Extra Strong Dark to Ovate, s-shaped Large, wide, Large, Round medium red Large base typically round collared ventrally CPS Red Opaque red Midsize to large Ovate to elliptical, Midsize Small to midsize to orange incurved base to small, oval CPS White White Midsize to large Ovate to elliptical, Midsize, oval Small to midsize incurved base Amber Durum Amber Large to midsize Elliptical Large, wide oval Varies Angular to rectangular

Soft White Spring White Small to midsize Ovate to oval Small, oval Varies

Hard White Spring White Small to midsize Oval to ovate Round, midsize Varies to large

Adapted from the CGC website (http://www.grainscanada.gc.ca/Quality/Wheat/classes-e.htm)

In addition, the Canada Western General Purpose wheat class was created to meet the needs of the feed and industrial sectors. There are no quality requirements for this class, and the varieties within it may look similar to varieties within other classes of wheat.

Threatened Harvest 31 Minister Ritz moved the deadline ahead, ending tamination — and tracing back to determine its KVD two years earlier than expected. Just weeks source — is made far more difficult. This problem earlier, senior government bureaucrats had warned would be compounded by the proposed elimina- the minister that Canada’s reputation for quality tion of inward grain inspection because delays wheat would be threatened in the absence of a in tracking sources of contamination always in- KVD replacement system, that the risks of com- crease the cost of rectifying mistakes. A timely plete KVD elimination were much greater than replacement for KVD seems unlikely, since the for ending it just for minor wheat classes, and extensively-researched, long-anticipated com- that the system was poorly prepared for such a mercial ‘black box’ replacement remains elusive.77 rapid change.74 The House of Commons agricul- Even if one were to be developed, it would likely ture committee echoed these concerns. It urged be less efficient, transparent and dependable, as the minister to reconsider the change and argued well as more technical and expensive to use. The uniquely valuable characteristic of western Ca- nadian wheat classes — the trait of “what you see > The Conservatives ended KVD is what you get” — has been eliminated. even though warned that no In the WTO wheat dispute brought by the United States, Canada successfully defended replacement identification several of the most important aspects of its system yet exists grain handling and distribution system. In do- ing so, Canadian officials explained to a skepti- cal international audience the importance of the KVD-based system for maintaining quality as- that KVD cancellation should be delayed until surance. Their arguments in defense ofKVD are the industry had a credible alternative identifi- still highly relevant and merit quoting at length: cation process in place. Despite these and many • “Because foreign grain is not subject to other warnings, the Harper government instead the same quality assurance system as adopted a position that had long been advocated Canadian grain, if US wheat, for example, by the United States government75 and some KVD were mixed with Canadian wheat, the opponents76 in Canada — it eliminated the KVD CGC would no longer be able to visually system for all wheat classes on August 1, 2008. grade Canadian wheat. Unlike Canadian- The elimination of KVD harms the grain origin wheat, US-origin wheat is not handling and regulatory system in several ways. subject to the same requirement for visual Most importantly, it has increased the likelihood distinguishability between varieties with of mix-ups between wheat classes in western different end-use characteristics. Thus, Canada. While the immediate risk of cross-con- the Canadian visual grading system tamination is low (since look-alike varieties have cannot function properly and maintain not been permitted and have not yet entered the segregation in the system according to system in large volumes), this risk could soon in- particular qualities desired by end-users crease rapidly and exponentially. As previously if US-origin wheat is commingled with unregistered varieties are allowed to proliferate, Canadian-origin wheat. more frequent contamination of high-quality, high-priced wheats by low-quality varieties that • In addition, most US wheat is grown closely resemble them seems inevitable. With- from varieties not registered in Canada. out visual distinguishability, detecting con- If mixing occurred with no restrictions,

32 canadian centre for policy alternatives the specific end-use characteristics human consumption; if foreign wheat were could no longer be ensured. In Canada, not distinguished from Canadian wheat, if a variety does not perform well (that is, the monopoly authority of the CWB could meet the acceptable criteria and end-use not be enforced.” 78 characteristics for its class) it will not be In precipitously eliminating KVD, the Harper registered. For example, at the end of two Conservatives have simply brushed aside these years of testing in Canada, the Alsen wheat serious objections articulated so clearly by Ca- variety was refused registration because nadian government officials. of poor quality performance. This variety The elimination of theKVD system also places is grown extensively in the United States. significant new burdens on producers. Much of Segregation requirements for foreign grain the legal responsibility for the potential damage that is not subject to the Canadian quality assurance system is necessary to maintain the integrity of the Canadian grading system. > Without KVD, “what you see is • In addition, the measures are necessary to what you get” no longer applies secure compliance with Canada’s unfair competition and consumer protection to Canadian wheat because, in order to determine the origin of the grain in the grain handling system, it is necessary to keep grain of different caused by mix-ups has been shifted to producers. origins separate from one another and to Under the simple KVD system, many mistakes identify them properly if they are mixed along the wheat supply chain could be detected so as not to misrepresent them. This is fairly easily, and liability for them resided ulti- particularly important where the grain is mately with the system’s government regulator, exported as the importing country often the CGC. Without KVD, and without a suitable requires a certification that the grain is replacement, the Commission reverted to a fall- Canadian origin grain. If Canada were not back position to prevent cross-contamination. able to determine the origin of the grain in Producers are now required to sign legally-binding its grain handling system, it would not be declarations specifying what class of wheat they able to provide this assurance to countries are delivering.79 Under this system, the liability purchasing its grain and to comply with is shifted away from the public- and producer- section 32 of the CGA. No other measure funded regulator — essentially all participants in is reasonably available that would ensure the supply chain — to rest almost entirely with strict compliance with the prohibition producers.80 Producers must now shoulder lia- against misrepresentation of origin. bility for the costs of rectifying contamination • Finally, the measures are necessary to caused by wheat they specify incorrectly, even secure compliance with the provisions if their declarations are made in good faith. For establishing the CWB as a single desk example, if a trucker mistakenly loads wheat exporting S[tate] T[rading] E[nterprise], from the wrong bin and delivers it to an eleva- as contained in the CWB Act, because the tor on behalf of a producer, the producer bears relevant CWB privileges apply to the sale of the legal responsibility if the delivery doesn’t Canadian wheat for export or for domestic match the declared class. Similar liability prob-

Threatened Harvest 33 lems could arise for a producer who plants seed It will also tilt the power dynamics in favour of saved from the previous year believing it to be large integrated corporations that supply certi- one class, only to discover the honest mistake fied seed at the expense of producers, many of after harvesting and delivering the crop into the whom will feel increasingly pressured to buy it.86 distribution system. The costs of such mistakes could be huge—and for individual producers, KVD-related changes to wheat seed catastrophic — if the resulting contamination registration system and wheat import rules requires large amounts of wheat to be down- graded, diverted or unloaded. The ending of KVD for wheat classes immedi- John Morriss, editorial director of the Mani- ately eliminated the basis for visual distinguish- toba Co-operator, provided producers with this ability in the formal system for registering wheat blunt warning about the significance of signing varieties in Canada. According to the Canadian Food Inspection Agency (CFIA), the first change “necessitated” a corresponding change in varie- > Ending KVD shifted the legal ty registration.87 As a result, wheat varieties can liability for expensive mix-ups now be registered even if their seed is visually indistinguishable from varieties in other qual- entirely to producers ity classes. This is a profound change to the Ca- nadian wheat regulatory system. TheKVD change was also reflected in chang- post-KVD declarations: es to Canada’s rules for seed imports. Specifi- cally, the visual distinguishability criterion was “[Y]ou are authorizing them to sue your eliminated for imports of wheat seed into west- socks off for tens or even hundreds of ern Canada.88 It is noteworthy that this change, thousands of dollars should a bin be which was introduced without prior consulta- contaminated. You bought some seed tion89, was not a consequential amendment — that from a neighbour and found it was some is, domestic law did not require it.90 Instead, the unlicensed U.S. variety? Too bad, you’re on change was aimed primarily to ensure conform- the hook.” 81 ity with previously-adopted international trade Post-KVD, producers will have to spend more treaty rules. As the regulatory impact analysis to reduce their financial liability. Some will opt statement accompanying the changes states: to incur the additional expense of having their “The CFIA is proposing these regulatory saved or common seed tested at a private lab amendments to align requirements for before planting, as the CGC advises,82 in order imported wheat seed with those for to obtain concrete evidence in support of their domestic wheat seed in order to ensure declarations. More importantly, many produc- Canada is consistent with its international ers will seek to further reduce their vulnerability trade obligations.” 91 by avoiding saved and common seed altogether. These producers will enhance the verifiability of In other words, eliminating KVD domestical- their declarations by routinely purchasing expen- ly had the direct secondary effect, under inter- sive certified seed,83 an option the Commission national trade treaty rules, of eliminating KVD recommends84 and the Canadian Seed Trade restrictions at the border as well. Association strongly advocates and welcomes.85 CFIA regulations would no longer serve their This will entail a new cost for many producers. longstanding function as KVD-based quality “gate-

34 canadian centre for policy alternatives keepers.”92 As a result, Canada’s wheat quality This identification system has worked to ensure assurance system would face one of the gravest that international buyers have confidence in our threats that it had been designed to prevent — in- Canadian products. These buyers look to pur- fluxes of visually-confusing wheat varieties im- chase Canadian grains in part because there are ported from the United States and elsewhere.93,94 no surprises — if a pasta maker in Italy orders Canada Western Amber Durum, that’s exactly Beyond KVD: Other proposed changes what s/he will get. Unfortunately, the destruction of the KVD system is linked to other sweeping The elimination of KVD poses a serious threat changes proposed for Canada’s regulatory sys- to the quality and reputation of Canadian grain. tem for wheat and other agricultural seeds. These changes are considered in Annex IV.

Threatened Harvest 35 section 4

Conservative government efforts to dismantle the Canadian Wheat Board

Introduction Annex III). These farmer-owned co-operatives were for many years among the most respect- For over 50 years, the Canadian Wheat Board ed and influential shapers of agriculture policy has been responsible for marketing Canadian and rural development across the prairies. They grain at home and abroad. The board’s primary gave producers economic clout. The transforma- mandate is to market grain grown in western tion over time of these Canada’s farmer-owned Canada in the best interests of prairie producers. and controlled prairie into an in- The CWB is one of Canada’s largest export vestor-driven, publicly-traded company has al- companies, with annual sales of between $4 and tered the dynamics of western Canadian agri- $6 billion and buyers in over 70 countries. It has cultural politics. built a strong Canadian brand and international The loss of the pools exacerbated the trend customer loyalty, enabling it to increase returns toward corporate concentration and vertical through price premiums. These extra revenues integration in Canada’s western agricultural are returned each year to prairie producers, sector. In the absence of the co-operatives, the helping to increase and stabilize their income grain sector is now dominated by large, diver- through the characteristic peaks and troughs sified, investor-driven corporations with a glo- of global grain markets. bal focus. Producers now do business almost TheCWB operates in volatile global commod- exclusively with companies over which they no ity markets dominated by a handful of transna- longer have direct control. TheCWB is the sole tional grain companies. Four companies — Cargill exception — the only farmer-controlled market- Inc., Louis Dreyfus Corporation, Archer Daniels ing organization left on the prairies. Midland and Bunge Limited — effectively con- TheCWB is, by law, the “single desk” through trol nearly three-quarters of the global market which prairie wheat and barley is sold. Federal for grain (see Annex II).95 legislation grants the CWB the exclusive author- The recent demise of the three prairie pools ity to sell wheat and barley produced within the has also profoundly altered the industry (see designated area (the three prairie provinces and

36 canadian centre for policy alternatives the Peace River district of B.C.) that is intended More recently, producers have also consistently for export from Canada or for human consump- selected a strong majority of pro-CWB candi- tion within Canada.96 dates to fill the ten farmer-elected seats on the The Board administers a government-guar- board of directors, including in the 2008 CWB anteed initial price (representing a portion of the elections (see below). final expected return) which is paid to farmers Until recently, the CWB and orderly marketing when they deliver their grain. It keeps separate also enjoyed remarkable multi-party support in accounts, or pools, for each grade of grain it mar- Parliament. Long advocated by western Progres- kets during each crop year. Throughout the crop sives and the CCF, the board was created under year, the producer receives interim payments a Conservative government and consolidated as the price is adjusted upwards to reflect sales. under a Liberal regime following World War II. When the board receives full payment, all rev- When Parliament voted to make the board per- enues — less operating expenses — are distribut- ed to producers based on their deliveries to each pool.97 Each producer gets the same price for > The Harper Conservatives are grain of the same quality delivered at the same deeply hostile to the CWB location. Each producer also receives the same price regardless of when they deliver their grain, ensuring that they are not disadvantaged by the timing of their sales into the pool.98 manent in 1967, support was universal across all The Board also plays a key role in organiz- party lines (Liberal, Progressive Conservative, ing the transportation and delivery of grain. It NDP and Creditiste).99 contracts for and allocates rail cars to produc- However, the Reform-Alliance party and now ers. It issues grain delivery calls to meet its sales Stephen Harper’s Conservatives have broken with commitments. Although the board itself owns this tradition and are deeply hostile to the board. no grain elevators or handling facilities, it is the Shortly after being elected in January 2006, the central player in planning and implementing the minority Conservative government set about to challenging logistics of transporting and deliv- dismantle Canada’s orderly marketing of grain ering prairie grain to markets each crop year. and replace it with a laissez-faire approach. The board’s monopoly, or “single-desk”, over the sale of prairie wheat and barley is the main Task force on implementing pillar of its success. It has also been a source marketing choice of controversy. A small, but vocal, minority of farmers has agitated against the Wheat Board, The new government moved swiftly to advance decrying its monopoly and demanding “market- its agenda of “marketing choice.”100 Soon after ing choice” — in other words, the right to sell taking office, then Agriculture Minister Chuck their grain to whomever they want. Strahl convened a planning meeting with groups The Board, however, continues to command critical of the Wheat Board. Representatives of the support of a solid majority of producers. This the Wheat Board were not invited.101 In the fall support was reflected, for example, in the results of 2006, Minister Strahl appointed “A Task Force of a 1997 plebiscite on barley. Presented with a on Implementing Marketing Choice for Wheat clear ballot choice between the single desk and and Barley”. The CWB was invited to designate the open market, 67% of farmers supported the a representative, but declined to participate in a continued marketing of barley through the CWB. process stacked with board opponents.

Threatened Harvest 37 This process was never intended to be a dis- Such unworkable proposals would, as intend- passionate examination of the challenges fac- ed, alter the board beyond recognition and lead ing the Canadian grain industry and the future to its quick demise. of the board. As the title of the task force sug- gests, the purpose of the exercise was to explore The ”gag order”: Muzzling the CWB means to implement “marketing choice.” In other words, the task force was clearly created to rub- The CWB’s rebuttal of the Task Force’s recom- ber-stamp and advance the government’s previ- mendations and continued defence of its stat- ously decided policy direction. utory mandate clearly aggravated the federal The task force recommendations largely re- minister. In October 2006, the federal cabinet flected its politicized mandate. Its recommen- struck back, employing a rarely used section of dations would end single-desk selling for wheat the CWB Act. By order-in-council, cabinet is- and barley and reduce the CWB to a small trad- sued a directive prohibiting the CWB from ex- pending funds, directly or indirectly, on advo- cating the retention of its monopoly powers.103 > The court struck down the Prior to 2006, the ministerial authority to issue government’s “gag order” on the directives had been used sparingly and never over the objections of the Board’s directors and CWB as an abuse of authority senior management.104 The “gag order” — as it became known — pre- vented the board from opposing government’s ing company in a global market dominated by policy of marketing choice and essentially banned huge transnational corporations. The task force it from communicating with farmers on these is- did, however, acknowledge — contrary to the sues. The minister even specified that certain -ma government’s messaging — that the single-desk terial, including the board’s response to the task and the open market could not co-exist and that force report, be removed from the CWB web site. “dual marketing” was not a viable option. It also The CWB went to court to challenge this recommended that the government proceed draconian attempt to muzzle it. In June 2008, a through legislation to end the single desk and federal court ruled in the Wheat Board’s favour. restructure the CWB as a new corporate entity. Although the cabinet directive was construed in In its response to the task force report, the terms of financial accountability, the judge saw CWB tersely summed up the task force’s recom- through the illusion: “It is entirely clear, there- mendations: fore, that the directive is motivated principally to silencing the Wheat Board in respect of any “In essence the task force has proposed promotion of a ‘single desk’ policy that it might that the CWB lose its single desk, which do.”105 The court ruled that the directive over- is the engine of its value proposition to stepped government’s legislative authority and farmers, and attempt to enter, with absurdly violated the Canadian Charter of Rights and little in the way of assets, a concentrated, Freedoms. The court struck down the gag order consolidated, mature grain handling directive, ruling it of no force and effect. and marketing industry with notoriously Evidence presented before the court reveals a high barriers to entry, dominated by disturbing pattern of intimidation and interfer- transnationals.”102 ence in the internal affairs of the wheat board. Affidavits indicate that Minister Strahl rejected

38 canadian centre for policy alternatives Harvesting Opportunity, an initiative outlining amounted to forcing the board to defy its own the CWB vision for maximizing value to farmers. statutory mandate and raison d’être. It also, as He also refused to approve the board’s annual the court emphasized, betrayed government’s corporate plan, demanding that the deletion of serious misunderstanding — or disregard — for any reference to maintaining single desk sell- certain fundamental democratic norms and the ing. Just before the elections the ministry struck rule of law. Unfortunately, these bullying tactics 16,000 producers (approximately 35%) from the were successful. The gag order remained in ef- voters’ list for farmer-elected positions on the fect for over 18 months until the courts struck it CWB board of directors. Minister Strahl also down and along with the firing of the president, forced the CWB to remove its response to the created uncertainty and fear among CWB staff Task Force from its web site and halt publica- and senior management. This impaired their tion of a just-completed study of the continen- ability to communicate with farmers during a tal barley market.106 critical period in determining the board’s future. TheCWB is not a government-controlled en- tity or an agent of the Crown. It is a shared-gov- ernance entity. Ministerial roles and responsibili- > The Harper government ties in regard to the CWB are clearly defined in manipulated the results of a statute. As the courts have now confirmed, the minister and federal cabinet have abused their deeply flawedCWB authority, overstepping these legal bounds. The plebescite on barley friction created by this ministerial interference culminated in the December 2006 firing of CWB president Adrian Measner, a 32-year veteran of A deeply flawed plebiscite the organization widely known and respected for his integrity. While the Conservative government remains In June 2008, a federal court ruled that the committed to abolishing the Wheat Board’s sin- minister’s directive had been issued for an im- gle desk, its minority status has, so far, prevented proper purpose and violated the Canadian Charter it from passing the legislation that is required to of Rights and Freedoms. In his judgment strik- do so. Under the 1998 amendments to the CWB ing down the gag order, Justice Roger Hughes Act, only Parliament can remove a product from strongly censured the government’s conduct, the board’s authority and single-desk selling. The observing that: Act also obliges the federal government to first consult with the CWB board of directors and to It is a fundamental tenet of a free and conduct a plebiscite in which a majority of farm- democratic society that the citizens of a ers vote to exclude the product.108 country agree to be governed and obey the On October 31, 2006, Minister Strahl agreed, laws if proper and fairly imposed, and that under pressure from the farm community, to hold the government conduct itself in accordance a non-binding plebiscite on barley. The minister with those laws and the principles of natural did not consult with the CWB on the plebiscite, justice and the jurisprudence. It is a bargain as required.109 Moreover, the question put to that must be kept by both sides.107 farmers was neither clear nor straightforward. Pressure on the board, its directors and sen- Cabinet documents entered as evidence in the ior management to submit to the Conserva- gag order court case revealed that there was a tive government’s desire for “marketing choice” deliberate decision by the government to skew

Threatened Harvest 39 the ballot question.110 The government was con- “1) The Canadian Wheat Board should cerned that it would lose any vote with a clear- retain the single desk for the marketing of cut question that simply asked farmers to choose barley into domestic human consumption between single-desk selling through the CWB or and export markets. an open market. 2) I would like the option to market my Previous plebiscites, where the ballots gave barley to the Canadian Wheat Board or any producers clear options, had resulted in strong other domestic or foreign buyer. and support for maintaining the Wheat Board’s sin- gle desk. A 1997 plebiscite on barley, for exam- 3) The Canadian Wheat Board should not ple, asked eligible farmers to decide between two have a role in the marketing of barley.” options: 1) the open-market option which would The ballot did not conform to standard sur- remove barley from the CWB and 2) the single- vey practice, since the exclusive use of the per- sonal voice and pronoun “I” in the second option > The court struck down could skew the results by artificially increasing the likelihood of respondents selecting it. More- the Harper cabinet’s unlawful over, as many observers pointed out, the ballot attempt to remove barley from also suggested that there were three options when there were really only two: the open market or single-desk CWB marketing the continued Wheat Board monopoly. The bal- lot clearly implied, against all evidence, that the CWB could continue to be effective in the market without its key strategic asset, single-desk sell- seller option which would maintain the CWB as ing. As Bob Friesen, then president of the Ca- a single-seller for all barely, except feed barley. nadian Federation of Agriculture, expressed it: As noted previously, farmers voted 67 per cent “This ballot asks farmers to vote for something in favour of the single-seller option. A provincial that may not be possible. The CWB cannot ex- plebiscite organized by the Manitoba govern- ist in its present form in an open market, and ment in December 2006 offered a clear choice no one has yet presented a viable plan for how between the single desk and an open market for the CWB can transition and remain strong.”112 barley and wheat. Manitoba producers voted 61.8 It should also be recalled that the gag order per cent in favour of retaining the single desk for eventually struck down by the courts was still barley and 69.5 per cent for retaining the single in effect during the plebiscite period. As CWB desk for wheat.111 president Adrian Measner testified “The Direc- The federal government deliberately avoided tion has had a chilling effect on the CWB and a straightforward ballot question. Instead, it con- has created uncertainty and confusion during jured up a misleading scenario, suggesting that a period when producers are faced with criti- an open market for barley was compatible with cal decisions relating to the future of the single a viable role for the Wheat Board. Ignoring the desk.”113 During the middle of the plebiscite pe- advice of major farm groups, it proceeded with riod, the minister also sent a letter indicating a complicated and unclear ballot that asked his intention to fire the president of the Wheat producers to indicate their preference for one Board. The strong desire of the government for of three options: a vote in favour of ending the single desk could not have been more clear, and the vote was held

40 canadian centre for policy alternatives in an atmosphere of intimidation of the Board the CWB Act stipulates that barley can only be and its supporters. removed through legislative amendment. The results of the plebiscite were: 37.8 per cent Under 1998 amendments to the CWB Act, voted for option 1 in favour of retaining the sin- only Parliament can exclude a product from the gle desk, 48.4 per cent for the ambiguous, per- single-desk authority of the CWB. Furthermore, sonalized option 2, and 13.8 per cent for option the act stipulates that the minister must not in- 3 which would end the role of the CWB. When, troduce a bill in Parliament that would exclude even after manipulating the questions, the gov- any product from the authority of the wheat ernment failed to get a clear majority, it brash- board, unless they have first consulted with the ly added together the results for options 2 and board and secured a vote in favour of the exclu- 3 and declared that 62 per cent of farmers had sion by producers of that grain.116 voted to remove barley from the CWB. Armed Shortly afterwards, a group known as Friends with this illegitimate ‘mandate’, the government announced in March 2007 that it would “begin work on the necessary amendments to remove > “We’ll continue to fight… barley from the CWB’s single desk authority.”114 Mark my words…anyone who

Attempted unilateral removal stands in their way is going to get of barley from the Wheat Board walked over.”

In May 2006, MP Gerry Ritz, with the support of Prime Minister Stephen Harper, June 20, 2008 the agriculture minister, had introduced a private member’s bill (Bill C-300) intended to “carve out an exception to the requirement in the [CWB] of the CWB — “a coalition of farmers and other act that western Canadian producers sell their Canadians in support of a democratic, farmer- grain to the CWB, by permitting producers to controlled CWB”117 — went to court to challenge sell their grain directly to ‘processing’ firms that the ruling. They were soon joined in the court were owned primarily by Canadian farmers.”115 challenge by the CWB itself. The provincial gov- This bill would have represented an incre- ernments of Manitoba and Saskatchewan also mental step in eroding the single desk. In Oc- intervened on behalf of the applicants, while the tober 2006, however, it was defeated prior to government of intervened on the side of second reading by the combined majority of the the federal government. Liberals, NDP and Bloc Quebecois in the House On July 31, 2007, one day before the regu- of Commons. lations were scheduled to take effect, a federal Concluding that the parliamentary route court found in favour of the applicants, strik- to eliminating the single desk was blocked, the ing down the regulations removing barley from government then embarked on a legally dubious the single desk as ultra vires (beyond Cabinet’s effort to dismantle it by through regulation. In power) and of “no force and effect.”118 The min- June 2007, the federal Cabinet acted unilaterally ister expressed disappointment at the court’s to remove barley from the single desk marketing decision and announced that the government authority of the CWB by amending the regula- would appeal. tions through order-in-council. It proceeded in On February 26, 2008, in a tersely worded this manner even though the plain meaning of judgment, the federal court of appeal upheld the decision of the lower court, dismissing the fed-

Threatened Harvest 41 eral government’s legal arguments out of hand. established an open-ended arbitration process As the appeal court emphasized, cabinet does through which well-funded grain companies not have the authority to repeal the regulations could pursue expensive legal proceedings against that include barley in the single desk.119 the CWB. As the CWB Chief Operating Officer Only an act of Parliament can exclude a prod- Ward Weisensel observed, the legislation “would uct from the authority of the CWB, and only if essentially take money from farmers and hand it the pre-conditions of consulting the board and over to the grain companies.”122 Lacking support securing a producer vote in favour of its removal in the House of Commons, the minority Con- are fulfilled. servatives did not call the Bill for second reading The court ruling did not alter the government’s debate before the parliamentary session ended. apparent determination to dismantle the CWB In June 2008, the Harper government also through any possible means. A defiant Prime introduced amendments to revamp the vot- ers list for CWB director elections. Bill C-57123 would have disenfranchised small grain produc- > Just prior to the CWB elections, ers by requiring farmers to have grown at least Minister Ritz unilaterally 120 tonnes of the major grains in one of the two previous crop years to be eligible to vote. Again, ordered changes to the voter the Conservatives were unable to garner enough eligibility rules support to pass the controversial Bill before Par- liament ended. Just weeks before the 2008 CWB elections, Agriculture and Agri-Foods Minister Ritz at- Minister Harper declared that the government tempted to change the rules in order to alter voter would not change course. eligibility. On July 23, he sent a letter to the CWB ordering a change in voting procedures to make “We’ll continue to fight in Parliament. it easier for certain types of producers to obtain We’ll continue to fight in the legislature. ballots by placing them on the voting list, while But the bottom line is this: mark my words, requiring others to apply specially for ballots. Western Canadian farmers want this When the contents of Ritz’ letter became freedom and they are going to get it. And public in September, the Friends of the Canadi- anybody who stands in their way is going to an Wheat Board filed suit in federal court, alleg- get walked over.”120 ing that the government had violated the CWB Act. The Friends and other observers charged Attempted changes that the government order was deliberately de- to the CWB Act and voters’ list signed to add single desk opponents and remove In March 2008, shortly after the federal courts single desk supporters to favour the election of had confirmed that theCWB Act prohibits cabi- ‘open market’ candidates in the upcoming elec- net from unilaterally removing barley from the tions.124 The case was not heard before theCWB Board’s authority, the Conservatives introduced director elections were held and remains before amendments specifically to allow it. The Gov- the federal court.125 ernment’s Bill C-46121 would have given cabinet the unilateral power — without consulting bar- ley growers or Parliament — to remove barley from the CWB mandate. The Bill would also have

42 canadian centre for policy alternatives Eliminating the spending cap “Harper was vocal about his dislike of the for CWB director elections CWB single-desk and the organization ran In early September, the Conservatives continued ads against the CWB during the CWB board their attack on the CWB, removing the $10,000 of directors’ election — a contravention spending limit on third-party campaigning dur- [of] the third party election-spending ing Board elections. This allowed governments, ban [which] the group claimed…was grain companies and others to spend an un- ‘unconstitutional and unenforceable.’”132 limited amount on CWB campaigns, so long as The termination of the CWB spending cap they listed donors and amounts over $100 and also reflected the challenge by Harper’sNCC to provided an accounting of their advertising ex- third-party spending limits in Canadian feder- penses.126 The regulatory change did not affect al elections. In that case, the NCC argued that the spending cap for farmer-candidates, which spending caps violated the Charter’s freedom of remained at $15,000. No farm group had requested the change,127 and several complained that it would skew CWB > Allowing unlimited third party elections by tilting campaigns towards anti-single spending in the CWB election desk candidates who were more likely to attract large corporations as third-party promoters.128 was “like an open invitation for CWB Chair Larry Hill explained the purpose of outsiders to interfere” the existing cap as follows:

“The existence of a limit guards against the possibility of a third party having a expression provision. The Supreme Court reject- disproportionate voice in an election. ed that view, ruling in 2004 that spending limits Removal of the limit would introduce helped protect democracy and the public good.133 potential for a well-financed third party to The Friends of theCWB challenged the elimi- play a significant role in a particular vote nation of third-party election spending limits in and possibly influence a result. This could federal court on September 10th, arguing that the undermine the integrity of the election move violated the CWB Act and, since it created process and perception of fairness.”129 uneven spending rules for candidates and third parties, the Charter of Rights and Freedoms.134 Keystone Agricultural Producers president The 2008 CWB director elections went ahead Ian Wishart, was quoted as stating that the pro- with the challenge to the elimination of the third- posal “reads like an open invitation for outsiders party spending cap unresolved. to interfere in a farmer election process.”130 Na- tional Farmers Union president Stewart Wells CWB supporters win 2008 charged that the Harper government changed the director elections rules expressly “to make it easy for corporations The future of the Board remained precarious to influence the election outcome.”131 leading up to the November election of direc- Other observers of the move recalled that tors. Single-desk supporters held a slim 8–6 ma- it echoed the position of the National Citizens’ jority on the 15-member board,135 and four of the Coalition (NCC) when Stephen Harper was its five directorships up for election were held by president. As the Manitoba Co-operator pointed single-desk supporters. A loss by supporters in out, at that time, just two of the five contested seats would have

Threatened Harvest 43 resulted in an evenly split board, with the un- crisis, may have won the CWB a much-needed, committed CEO casting deciding votes. A loss if temporary, reprieve. of three seats would have enabled single desk Yet supporters of a single-desk marketing opponents to control the board. system need to remain intensely vigilant. Gerry Even during the final week of the hotly con- Ritz, who spearheaded the Conservative’s recent tested election campaign, the Harper government attacks and was re-appointed as the minister re- continued to intervene in order to influence the sponsible for the CWB, announced his intention outcome. Conservative MPs sent producers cam- to re-introduce amendments to the CWB Act to paign-style letters — on government stationery allow cabinet to unilaterally remove barley from and mailed at taxpayers’ expense — urging them single desk marketing.139 In a major speech af- to support candidates who opposed single desk ter the federal election, Stephen Harper signal- marketing and directing them how to fill out the ed his determination to end CWB single desk marketing140 — a commitment also contained in the Throne Speech.141 Given the extraordinary > Despite the Conservatives’ lengths the Harper Conservatives have gone to interference, supporters of CWB in pursuit of their ideological war against sin- gle-desk marketing, there seems little reason to single-desk marketing won 4 of believe they will end their efforts to dismantle the 5 contested seats the Canadian Wheat Board.

Trade treaty pressure on the CWB

ballots.136 Despite the last-minute and clearly The Canadian Wheat Board and Canada’s grain inappropriate intrusion, single-desk marketing regulatory system have been targets of more than supporters won four of the five contested seats, a dozen challenges under the WTO, NAFTA, and retaining the single-desk majority.137 U.S. trade remedy laws. While certain aspects CWB supporters were enormously relieved of Canada’s grain system have been eroded as and encouraged by the result. Many felt that the a result of these trade treaty pressures,142 the strong demonstration of support would make it core operations of the CWB have, up until now, more difficult for government to dismantle the survived relatively unscathed. In other words, Board, especially since the Conservatives were Canada’s current grain system has been repeat- re-elected to a minority government and theo- edly tested and found consistent with existing retically had to focus on protecting Canada from international trade treaty rules. a deepening global economic crisis. Indeed, in The establishment of the World Trade Organi- response to reporters’ questions in December zation in 1994 did not in itself bring about major and early January 2009, Minister Ritz indicated changes in the CWB.143 The newWTO rules did, that the government is “holding back” on legisla- however, submit the Board and its operations to tion to end the CWB single desk on barley. “It’s intense international scrutiny through the formal off the table for the short term”, he said, adding Trade Policy Review process. In 2003, the U.S. later that getting the bill passed was not on his brought a challenge against the CWB and other “radar screen in the next short time.”138 The strong Canadian grain policies under the new organi- support for single-desk marketing, together with zation’s binding dispute settlement system.144 parliamentary uncertainty and the economic In 2004, when the WTO dispute panel rejected U.S. claims that CWB had violated existing WTO

44 canadian centre for policy alternatives rules, U.S. grain interests expressed their “great Canada’s long-standing position was expressed frustration”.145 The U.S. government appealed the even more forcefully in 2003: ruling and vowed to pursue alterations to WTO “The CWB (Canadian Wheat Board) rules that would force changes upon the CWB. operated in an international market Robert Zoellick, then the United States Trade dominated by an oligopolistic set of traders, Representative, stated: many of them family-owned and completely “The WTO[ ] finding regarding the non-transparent. [The Canadian official] Canadian Wheat Board demonstrates the reminded Members that orderly marketing need to strengthen rules on state trading systems existed in Canada because enterprises in the WTO. The United Canadian producers wanted them. Recent States will continue through the WTO elections to the Board of Directors of the negotiations to aggressively pursue reform CWB saw supporters of the CWB’s current of the WTO rules in an effort to create an effective regime to address the unfair > U.S. efforts to change monopolistic practices of state trading enterprises like the Canadian Wheat WTO rules in order to scuttle Board.”146 the CWB have intensified The appeal of theWTO ruling failed, but the U.S. efforts to changeWTO rules in order to scut- tle the CWB have only intensified. mandate win four out of the five seats that Over the last two decades, Canadian govern- were contested, which was firm evidence ments of all political stripes have stoutly defend- of the continuing support of western ed the CWB at the WTO. Under Prime Minister grain producers for this form of market Harper, however, Canada’s position has shifted. organization.”148 The federal government has become a willing ac- complice, tacitly aligned with the United States, Most importantly, in 2003–2004, Canada in eliminating the Board’s single-desk authority. mounted its successful defense of the CWB in the Until very recently, Canadian government WTO case the United States brought against it. negotiators worked hard to defend the principles Ironically, shortly after Canada had won the of orderly marketing in general and the CWB in hard-fought WTO wheat case, confirming Can- particular. For example, during the 2000 Trade ada’s right to retain the CWB’s crucial market- Policy Review at the WTO, Canada made the fol- ing authority, the Harper minority government lowing statement of support: set out to dismantle single-desk selling. It an- nounced Canada’s extraordinary policy shift “A key theme underlying Canada’s approach to the WTO in 2007. In the review of Canada’s [to the Doha Round of WTO negotiations trade policies149, Canadian government officials on agriculture] is to achieve … reforms in reported on the formation of the task force to a way that levels the playing field, while recommend options for “implementing market- preserving the ability to operate ‘orderly ing choice for western wheat and barley”.150 Ca- marketing systems’, such as the supply nadian representatives emphasized at the WTO management systems in poultry, dairy, and that the elimination of the CWB monopoly “was egg production, and the Canadian Wheat not a recommendation of the task force but rath- Board.”147 er was the policy objective which prompted the

Threatened Harvest 45 creation of the task force by the Government.”151 the CWB to borrow at government rates; and, It arose, they said, from “[a] commitment [that] most alarmingly, require Canada to eliminate was made during the 2006 federal election cam- single-desk selling by 2013. If, as expected, this paign to give western Canadian wheat and barley document forms the basis of an agreement when producers the option of participating voluntarily negotiations resume, the CWB would effectively in the Canadian Wheat Board.”152 be eliminated as a viable entity within five years. Predictably, U.S. and EU officials welcomed The Conservative government’s response to this news,153 and pressed for further information. this astonishing intrusion into Canada’s inter- By striving to eliminate the CWB’s monopoly au- nal affairs has been muted, to say the least. The thority, the Harper government is knowingly im- government’s position is not, like previous gov- plementing one of the key demands of Canada’s ernments, that Canada will defend the CWB at main international grain trade adversaries — a all costs, but that the decision to eliminate its monopoly authority should be made in Canada, not in Geneva. Sensing weakness, and fully aware > Adopting the latest of the Conservatives’ hostility to the board, the WTO agriculture proposal would U.S. government and its grain interests could finally achieve their long-standing goal of de- eliminate the CWB within stroying the board through international trade five years treaty pressure. Through its inexcusably weak defense of the CWB, the Conservatives may destroy single desk selling. This is clearly an attempt to attain demand that all previous Canadian governments through the back door of international trade have successfully turned aside. talks what it could not through the front door The international enemies of theCWB are on of the democratic political process. If the CWB the verge of a major coup in the ongoing round is to survive into the 21st century, it is vital that of WTO negotiations. While the Doha round the Canadian government make clear, particu- negotiations remain stalled, the draft wording larly to the U.S. interests behind the push, that of the latest agriculture text contains proposed this unjustifiable interference in Canadian af- amendments to the WTO Agreement on Agricul- fairs is a WTO deal-breaker. If Canada fails to ture that would effectively eliminate the Wheat defend the CWB, it will likely be only a matter Board as it exists today.154 of time before WTO negotiations also spell the The amendments would end initial price demise of orderly marketing systems for eggs, guarantees from government to producers; in- poultry and dairy. crease borrowing costs by ending the ability of

46 canadian centre for policy alternatives Conclusion

Most Canadians are aware of the outstanding Argentina, where producers are located closer international reputation of Canadian grain and to coastal ports.155 By developing a quality edge, take pride in it. Indeed, endless fields of golden the regulatory system has managed to compen- prairie wheat are a national icon and an impor- sate for these geographical and transportation tant symbol of Canadian identity. This civic pride cost disadvantages, enabling Canadian grain is not misplaced. The quality and consistency of to compete successfully in international mar- Canadian grain are, in large measure, products kets. Moreover, public interest regulation has of good public policy and a highly successful attained this quality advantage very efficiently regulatory system. and cost-effectively. Few Canadians, however, understand how this Canadian grain has achieved an unparalleled exemplary regulatory system actually works. Like international reputation for quality and consist- other essential regulatory systems, it is simply ency. This excellence has enabled the industry to taken for granted. Well-functioning regulatory maintain strong customer loyalty and to com- systems tend to be invisible, to recede into the mand a better price than competitors in global background. It is only when they become dys- markets. Through the operations of the CWB, functional that people take notice — when the this price premium — along with the proceeds drinking water makes people sick, consumers leveraged by single-desk selling — is returned die of food-borne illnesses or a highway over- each year to Canadian grain producers.156 pass collapses. Unfortunately, this remarkable Shaped by decades of grassroots activism, and uniquely Canadian grain regulatory system the Canadian grain system was purposefully is under serious and imminent threat. created to redress the power imbalances be- Canada’s grain handling and inspection system tween prairie grain farmers and the large grain was designed to address the inherent challenges companies. The international grain companies, faced by prairie farmers. Higher transportation backed by the political clout of the U.S. govern- costs put prairie wheat growers at a disadvan- ment, have always been antagonistic to the Ca- tage compared to competitors from Australia or nadian system. The difference today is that the

Threatened Harvest 47 multinationals now have a sympathetic ally in system”, is a cornerstone of our current the Conservative regime in Ottawa, which is vis- system and should never have been cerally and, it appears, implacably hostile to the discarded. CWB and the broader grain regulatory system. • Unlicensed U.S. varieties of wheat must Opponents of the CWB have, to date, been continue to be kept out of western frustrated in their attempts to eliminate single- Canada’s grain system. Chaos was desk selling. They have been constrained by a narrowly averted when the government parliamentary minority, overruled by the Cana- retreated this summer from its reckless dian courts and opposed by a majority of grain proposal to allow western producers to producers. Yet they are still proceeding, through import and seed unlicensed, visually administrative fiat and pending legislation, to indistinguishable wheat varieties that dismantle the regulatory supports provided by could have contaminated the western grain handling system. The plan should now be > Canada’s remarkable grain permanently shelved. • The Canadian government must defend regulatory system is under serious the CWB far more vigorously at the WTO. and immediate threat The current agricultural negotiating text would be a disaster for Canadian producers and lead to the elimination of single-desk selling by 2013. Ottawa must the CGC that enable the CWB to function. find its backbone and make clear that this In doing so, they are endangering the qual- unjustifiable interference in Canadian ity of Canadian wheat, risking the safety of con- affairs is a deal-breaker. sumers at home and abroad, and abandoning the interests of Canadian producers in order In addition, Bill C-13, the proposed amend- to appease U.S.-based multinational grain cor- ments to the Canada Grain Act, should be with- porations. If opponents of regulation succeed drawn or defeated. in their efforts, the Canadian grain regulatory • Universal inward inspection is a vital system will be virtually indistinguishable from component of the existing grain regulatory the decidedly inferior U.S. system. A singularly system. Its elimination would undermine Canadian regulatory achievement will have been quality and consumer safety, while shifting deliberately and needlessly destroyed. the financial liability for these increased Such a tragedy is completely avoidable, but risks to individual producers. More quality will take a strong effort from a government that and safety problems would occur and, is convinced of the value of both the CWB and when they did, farmers would be on the the CGC. The harmful regulatory changes that hook to cover the damages. have already occurred can still be reversed. The federal government must take immediate action • Inward inspection should, if anything, to protect our grain-handling system; these ac- be strengthened. Without universal tions must include: inward inspection, safety threats, insect infestations and other problems in the • Kernel visual distinguishability, especially grain supply will be far more difficult and for the major varieties, must be reinstated. expensive to isolate, trace back to their KVD, “the ultimate low-cost grading source, and remedy. Early detection and

48 canadian centre for policy alternatives prevention are essential to safeguarding Given increasing industry concentration and quality and consumer health, both at home the disappearance of farmer-controlled prairie and in export markets. They should be wheat pools, the need for countervailing public enshrined as fundamental tenets of the institutions to safeguard producers has never grain regulatory system. been greater. TheCWB and the CGC — the most • The chronic underfunding of the CGC important institutions in the current grain mar- must also be addressed. The commission keting and regulatory system — are also the last and its activities should be supported remaining entities in the grain sector expressly by adequate and predictable funding, charged to uphold producer interests. preferably through annual parliamentary The recent spate of food safety concerns, to- appropriations sufficient to cover any gether with the turmoil inflicted by the current shortfall or variability in fees which, in the global financial crisis, graphically demonstrate interests of producers, should remain low. the importance of intelligent public interest regulation, strong and effective regulatory in- • Last, but certainly not least, the mandate stitutions, and appropriate constraints on the of the CGC to protect producer interests enormous power wielded by huge global cor- should be reaffirmed. The vital role of the porations. Canada’s grain regulatory system has assistant grain commissioners as producer for decades supported producers, protected con- advocates should be reaffirmed and sumers, guaranteed quality and provided stabil- adequate budgetary support provided. ity through the peaks and troughs of the com- The CGC’s mandate to protect and uphold modity cycle. Discarding it, as proposed by the producer interests is not merely symbolism. It is current minority government, would be folly. as relevant today as it was when the commission Instead, at this critical juncture, Canada should was created at the beginning of the last century. safeguard and enhance a unique policy and reg- Indeed, farmers today confront uncannily simi- ulatory success—its world class wheat system. lar power dynamics.

Threatened Harvest 49 annex 1

Undermining the CGC’s independence

Chief Commissioner Hermanson’s involvement with partisan politics and his ties to Agriculture Minister Ritz, who appointed him

Elwin Hermanson has a long history of active a steering committee to form the Saskatchewan involvement in partisan politics and close po- Party.166 He became that party’s first leader in litical ties to Agriculture Minister Ritz. 1998,167 and was elected MLA for the Rosetown- In 1988, Hermanson ran for a seat in Parlia- Biggar constituency in 1999168 — one of 25 seats ment as one of the first Reform Party candidates won by the new party.169 In the November 2003 in Canada.157 Defeated in the election, Herman- election, the won 28 seats son served three terms on the Reform Party na- under Hermanson’s leadership,170 but failed to tional executive council158 before being elected form government, as was widely expected. He Member of Parliament for the Saskatchewan stepped down as party leader in February 2004, riding of Kindersley-Lloydminster in 1993.159 and took his place.171 Hermanson did During that election campaign, current Minis- not run in the November 2007 election,172 in ter of Agriculture and Agri-Food Gerry Ritz was which the Saskatchewan Party under Brad Wall Hermanson’s campaign manager.160 Ritz also captured 38 seats to form government.173 served as Hermanson’s constituency assistant Conservative Prime Minister Steven Harper during part of Hermanson’s tenure as an MP161 appointed Gerry Ritz Minister of Agriculture and was his constituency president.162 The rid- and Agri-Food on August 14, 2007.174 In late De- ing ceased to exist after a federal riding redis- cember,175 Minister Ritz announced that he had tribution163 and Hermanson and Ritz both ran appointed Elwin Hermanson — his former em- as Reform Party candidates in 1997 in adjacent ployer and political ally — Chief Commissioner ridings. Hermanson was defeated in - of the CGC. Rosetown-Biggar, while Ritz won in Battlefords- Just two and a half weeks after his appoint- Lloydminster.164 Ritz has since been re-elected ment took effect, Mr. Hermanson undermined in the constituency in each of the 2000, 2004, the CGC’s tradition of neutrality and breached 2006 and 2008 elections.165 the government’s own code of conduct for the After his 1997 election defeat, Hermanson public service.176 On February 7th, he published a shifted to provincial politics, where he served on partisan opinion column177 in strong support of

50 canadian centre for policy alternatives Bill C-39 — the controversial Grain Act amend- “could create a perception that [their] views of ments (recently re-introduced as Bill C-13) that government policy are not impartial.” The memo, Minister Ritz had introduced but which Parlia- which was issued the day Mr. Hermanson’s ap- ment has not passed.178 Opposition MPs accused pointment was announced,182 cites the aforemen- the new Chief Commissioner of inappropriate tioned public service code of conduct, warning political intervention. Liberal MP Wayne East- CGC staff that criticizing the government policy er noted that the “legislation is before Parlia- “could result in…disciplinary action.”183 ment, it is contentious legislation and Mr. Her- Rather than “maintaining the tradition of manson has no business advocating for it...”179 political neutrality of the Public Service” as the He…“needs to be neutral.”180 In March 2008, the government’s own code of conduct requires,184 House of Commons parliamentary committee Minister Ritz stood by his partisan appointee, on agriculture expressed its disapproval of Mr. charging that the committee’s vote in favour of Hermanson’s appointment, rejecting it in a non- public service nonpartisanship was itself “a dis- binding vote.181 graceful, partisan stunt.”185 Hermanson’s con- Mr. Hermanson’s high-profile public inter- troversial appointment, and inappropriate par- vention in support of the government’s propos- tisan conduct, has deprived the CGC of urgently als stands in stark contrast to a memo from CGC needed professional leadership during a critical management, warning Commission staff not to period in the organization’s history. publicly oppose the proposals because doing so

Threatened Harvest 51 annex 2

Loss of the Prairie Pools

The recent demise of the three prairie pools is ferred the market-pooling function to the newly- profoundly significant. The Saskatchewan Wheat established CWB. Transformed into grain eleva- Pool, and Manitoba Pool tor companies, the Pools survived the Depression Elevators were among the largest, most visible and severe drought, began a period of renewal and most successful agriculture businesses in and dramatic growth and expansion into diverse the West. These farmer-owned co-operatives business interests. They enjoyed a period of pros- were for many years among the most respected perity and influence until the 1970s, after which and influential shapers of agriculture policy and they confronted numerous difficulties, including rural development across the prairies. They gave low commodity prices, an aging member popu- producers economic ‘clout’, enabling them to lation and a pervasive trend towards neo-liberal exert considerable democratic control over the economic policies both inside and outside the industry and their livelihoods. co-operative movement. In 1996, after attempts Formed in the 1920s as grain-pooling co-op- to merge the three Pools failed, members of the eratives to win fairer prices, the three pools were broke with tradition precursors to, and served as models for, the CWB. to turn the cooperative into a publicly-traded Successfully bypassing the Winnipeg Grain Ex- corporation. Initially profitable, the company change, they marketed their grain together and embarked on an ill-fated acquisition program, pooled revenues so that members received the incurring large losses at a time of low commod- same price for a grade of grain, regardless of ity prices. It was also forced to compete with its when it was delivered. The Pools achieved higher former partners — the Alberta Wheat Pool and prices through their central selling agency, which — which merged to they jointly owned and controlled, and the Pools form Agricore in 1998, and then merged with expanded rapidly until the stock market crash in 2001 to become Agri- of 1929. The central agency collapsed, unable to core United. After restructuring its debt in 2003, cover the financial liability of that year’s initial the Pool launched a take-over bid for Agricore payment. By 1935, the federal government trans- United in 2006, and the companies were amal-

52 canadian centre for policy alternatives gamated into a new company, Viterra, which trol. They have also lost a vital mechanism for continues to operate today.186 advancing their collective political interests. In The transformation of Canada’s farmer-owned the absence of the Prairie Pools, the CWB and and controlled prairie cooperatives into an inves- the CGC now stand as producers’ most important tor-driven publicly-traded company has altered allied institutions in the current grain marketing the dynamics of western Canadian agricultural and regulatory system. The destruction of these politics. Producers now do business with compa- two sister organizations would leave producers nies over which they no longer have direct con- more vulnerable than ever to political attack.

Threatened Harvest 53 annex 3

Intensified corporate integration, concentration and control in western Canadian agriculture

The conversion of the three prairie pool coop- oil and gas exploration, financial services, real eratives into one business corporation also ex- estate and property management.189 U.S.-based acerbated a trend toward corporate concentra- Archer Daniels Midland (ADM), which sold its tion and vertical integration in Canada’s western interest in to what is now Vi- agricultural sector. terra,190 is one of the largest agricultural proc- In the absence of the co-operatives, the sec- essers in the world and is the largest producer tor is now dominated by large, diversified, in- of the ethanol in the U.S. It had sales revenues vestor-driven corporations with a global focus. in 2007 of over $44 billion, and operates in 60 For example: Cargill, one of the world’s preem- countries.191 For its part, Viterra — the successor inent food and agriculture companies with an- of the three Pools — has expected annual sales nual revenues of over $120 billion, operates in of about $4 billion and claims to be “Canada’s 67 countries. It trades in products ranging from leading agribusiness and the country’s largest soybean byproducts, ethanol and plastics made grain-handling company and agri-products re- from corn, to risk management, futures and tailer.” It advertises that its goal is to extend its other financial instruments.187 Louis Dreyfus reach, seeking “ways to advance [its] interests has annual gross sales of over $20 billion, oper- internationally.”192 ates in 53 countries, and is involved in process- These global corporations act to maximize ing, trading and selling agricultural and energy the economic returns of their international commodities. It also owns and manages ocean shareholders — an aim that can bring them in vessels, develops and operates telecommunica- conflict with the needs of Canadian producers. tions infrastructure and trades in real estate.188 These mega-corporations are involved in vir- James Richardson International, or JRI, is the tually all steps in the grain commodity chain: largest privately-owned Canadian agribusiness, breeding new varieties, selling crop seed, selling handling grains, oilseeds and special crops, and fertilizer, fuel, herbicides and other farm chemi- crop inputs. It is a subsidiary of James Richard- cals, transporting and marketing raw product, son & Sons, which is involved in the grain trade, processing grains into food, energy and other

54 canadian centre for policy alternatives products, and providing loans, insurance and producers have become increasingly depend- other financial services. Producers once pur- ent on vertically-integrated global companies. chased essential crop inputs and expertise from These transnational giants have very different their Pool, which aimed to obtain the necessary economic interests from producers and their inputs at the best price possible. This made good economic power dwarfs that of Canadian grow- business sense, as producers helped control the ers. This power disparity resembles that which Pools in which they had an economic stake. To- existed prior to the creation of the Pools in the day, individual producers purchase inputs from 1920s and is counterbalanced today mainly by former competitor corporations that have a le- the marketing and regulatory authority of the gal obligation to maximize profits. In doing so, CWB and the CGC.

Threatened Harvest 55 annex 4

Beyond KVD

Sweeping changes proposed for Canada’s seed registration and importation system

195 Beyond KVD — deregulating seed imports • for or research purposes. into western Canada These more stringent requirements for the CWB area supported the region’s unique grain The proposed changes to the existing Canadian handling system, which does not exist in east- seed import regulations extend beyond those re- ern Canada or elsewhere. lated to the elimination of KVD, removing im- The August 2008 amendments eliminated portant regulatory elements of Canada’s wheat not only the KVD requirement for imports into seed import system. western Canada; it also removed the other ob- Contrary to the impression left by the gov- ligations that seed has to be pedigreed and of a ernment’s announcement of the changes193, only registered variety (see below). In both instances, one of the amendments was KVD-related. as with the elimination of the KVD requirement, Canada’s Seeds Act, adopted in 1985, provided the federal government cites conformity with in- a broad prohibition against the importation- into ternational trade rules as its primary rationale any part of Canada — of unregistered crop vari- for the import changes.196 eties, with limited exceptions to be specified by The Canadian Food Inspection Agency origi- regulation.194 Under the Act, all wheat seed im- nally proposed to permit the importation of un- ported into Canada had to be seed of a variety licensed wheat varieties into the CWB area for that had undergone a rigorous testing program seeding by the importer, as is currently allowed resulting in the variety being formally registered in eastern Canada.197 This proposal, which would in Canada. The Act’sSeeds Regulations placed ad- have allowed CWB area producers to import, grow ditional, more stringent requirements on wheat and sell unlicensed varieties, was the most ex- seed within western Canada (the so-called CWB treme of four options the CFIA had considered. area), requiring seed imported into that area be: It could have resulted in a rapid proliferation of • pedigreed seed of a registered variety unlicensed, indistinguishable wheat varieties • visually distinguishable, or throughout western Canada.

56 canadian centre for policy alternatives The plan sparked widespread concern about monitored. Only individuals “actively engaged” the potential for cross-contamination, even in wheat or barley research could import these though producers would have had to sell grain seeds;203 plant researchers were prohibited from produced from unregistered varieties for con- selling the seed to anyone else in Canada;204 the sumptive uses such as animal feed or ethanol seed could be grown only for plant breeding or production and not as seed.198 The Western Grain plant research;205 and scientists had to provide Elevator Association’s Wade Sobkowich warned written records of the materials’ use and ulti- that “[t]hat grain is bound to eventually get into mate disposition.206 the export system and contaminate shipments The new regime is much less stringent, allow- to export customers.”199 CWB quality control ing more and broader exemptions for imports of manager Lawrence Klusa expressed similar con- unregistered varieties into western Canada.207 cerns, stating that the change “could have dis- Seed from unregistered wheat varieties can now astrous consequences, depending on how many be imported into the CWB area if the imports are of these varieties get mixed up into the milling used for conditioning of the seed lot.208 for so- grades.”200 The CFIA revealed its own concerns called closed-loop sales,209 or for “research”210 — an about the regime it was proposing. It noted that exemption that is now broader and more per- increased imports of unregistered wheat varie- missive than the narrow, tightly-crafted provi- ties for seeding by the importer “could result in sion it replaced.211 This new research exemption increases in the illegal sale of seed of unregis- allows imports of unregistered wheat seed im- tered varieties within Canada” — the prevention ports for seed production.212 Gone are the strict of which would require increased monitoring requirements that had facilitated the tracking and enforcement efforts.201 of the importation, distribution, use and dispo- In the lead-up to a closely contested feder- sition of unlicensed wheat seed and its progeny al election, the government backed away from in western Canada.213 this extreme proposal. For the time being, it re- tained the longstanding prohibition against the Removing the requirement importation into Western Canada of seed from for seed to be pedigreed unlicensed wheat varieties for seeding by the im- porter. The CWB’s senior manager of technical The new regime also permits the importation services, Graham Worden, was quoted as stating into western Canada214 of non-pedigreed wheat “[i]t looks like we dodged a bullet.”202 seed — that is, seed that does not meet accepted The government did, however, weaken two standards of variety purity and whose perform- other safeguards that have long protected the ance and characteristics cannot be assured.215 integrity of the western Canadian wheat system. These two amendments allow the importa- tion into the CWB area of the following:

Removing the requirement • registered wheat varieties for seed to be registered - common (unpedigreed) seed of registered wheat varieties Under the established system, only wheat seed “of pedigreed status of a registered variety” was • unregistered wheat varieties allowed into western Canada. The sole exception - unpedigreed and pedigreed seed for 216 for this blanket prohibition was for the import of conditioning unregistered varieties for plant breeding or plant - pedigreed seed for so-called closed loop research, and this was strictly controlled and production of pedigreed seed for export

Threatened Harvest 57 - pedigreed seed for so-called closed address the issue of importation of unregistered loop production in anticipation that the varieties for ‘seeding by the importer’” which variety will be registered in Canada. would form the basis for “a subsequent proposal for regulatory change.”223 Together, these deregulatory changes permit The government’s own public statements increased flows into western Canada of unreg- strongly suggest that it fully intends to implement istered and unpedigreed seed, thereby increas- its original extreme proposal — to allow wheat ing the risk that western Canada’s established producers in the CWB area to import and grow wheat handling and export system will become unregistered wheat varieties — despite widespread contaminated. Moreover, through the use of an concerns about cross-contamination of Canadi- interim registration procedure, the Canadian an wheat.224 Indeed, a scant two weeks after the Food Inspection Agency indicates that a number October 14 federal election, the federal govern- of these unregistered foreign and Canadian-bred ment began public consultations on this issue.225 varieties could be tested, registered and availa- ble to producers in western Canada “possibly as early as spring 2009”217 with a greater number Deregulating Canada’s available the following year.218 seed registration system Further deregulation could expand the pro- Even as the federal government allows increased liferation of previously-unregistered varieties flows of unregistered wheat seed into western in western Canada. First, the newly-elected mi- Canada, it is deregulating the registration sys- nority Conservative government could revert to tem itself to make it easier for seed varieties to the original May 2008 recommendation by the be registered. CFIA that would allow imports of unlicensed The main impetus behind Canada’s original wheat varieties into western Canada for seed- regulatory system for seeds was to protect Ca- ing by the importer. At that time, the CFIA was nadian producers from fraud. In the early 1920s, clearly intent on pursuing this option, arguing unscrupulous U.S. seed sellers were successfully against other available options, including the marketing a variety of wheat in Canada on the option it implemented just nine weeks later. It fraudulent basis of its exceptionally high yield. criticized the option of deferring the allowing of To halt the problem, Parliament passed the Seed imports for seeding by the importer because do- Act, requiring all new varieties to be tested at a ing so would “maintain a discrepancy between federal or other approved experimental facility requirements for domestic and imported prod- and to be accepted for registration by a commit- ucts…which could be inconsistent with Canada’s tee of recognized plant breeders.226 international trade obligations.”219 TheCFIA also Canada’s regulatory system for seeds has argued against the option it later implemented evolved over the years to accommodate new on the basis that it “would be inconsistent to priorities, while retaining its original purpose maintain this import restriction”220 and would of preventing fraud. According to the Canadian delay producers’ access to currently-unregistered Food Inspection Agency, wheat varieties.”221 The CFIA also publicly stated that it would “[t]he purpose of variety registration is to continue to pursue options for a post-KVD sys- provide government oversight to ensure tem “that extends beyond [the] regulatory amend- that health and safety requirements are met ments” that were adopted in August 2008222. It and that information related to the identity plans to “hold supplementary consultations to of the variety is available to regulators

58 canadian centre for policy alternatives to prevent fraud. It also facilitates seed In an apparent effort to deflect or defer con- certification, the international trade of seed troversy,233 the CFIA is proposing initially to set and the tracking and tracing of varieties in up only the framework for deregulation, by auto- commercial channels.”227 matically assigning wheat and the vast majority of Canada’s crops to the first, most stringently “Variety registration also currently requires regulated tier. Once the framework is in place, that varieties perform at least as well as the CFIA plans to re-assign individual crops to standard reference varieties in Canada.”228 the other two tiers, effectively relaxing the re- Currently, variety registration gives the CFIA quirements for their registration.234 The CFIA “oversight of the varieties available in the mar- notes that “any of the 52 kinds of crop requiring ketplace”229 and is “intricately woven into…the registration could be placed in Part II or III at structure of the seed regulatory system.”230 some point in the future…”235 This would result Under the Canadian system, each variety of in new varieties being registered and marketed wheat or other crop undergoes performance test- without their merit having been independently ing prior to registration to determine its agro- assessed. Producers would have to decide for nomic attributes (e.g. how long the variety takes themselves which varieties have merit for their to mature; how much it yields), its quality (e.g. individual farms. This would be very contro- the variety’s protein content) and its tolerance to versial. While some producers may relish this crop diseases. In addition, registration requires difficult task, the lack of independent merit -in a merit assessment, to determine if the tested formation would increase most producers’ risk variety is equal or superior to established refer- of choosing unsuitable varieties more often, po- ence varieties in terms of yield, quality, disease tentially causing substantial economic losses.236 resistance and other criteria deemed important If the new framework is established, govern- for the crop in question. ment can soon be expected to re-assign wheat — or In June 2008, the CFIA announced its inten- certain types or classes of wheat — to one of the tion to deregulate the variety registration system less stringent tiers. This would allow easier Cana- by eliminating the requirement for pre-registra- dian approvals of new varieties and unregistered tion performance testing and/or the requirement varieties from the United States and elsewhere. for merit assessments for certain crops. It is pro- Ironically, where once the Canadian govern- posing a “flexible” regulatory system with three ment successfully protected its producers by tiers, each with a different level of strictness231: creating a national registration system that was more rigorous than that in the U.S., it is now • Part I (most stringent; similar to status harmonizing the Canadian system downward quo232) toward the lax U.S. “buyer-beware” approach. - pre-registration testing Grant L. Watson, Senior Advisor in the CFIA - merit assessment Plant Production Division, reflected upon the • Part II (relaxed) pending transformation of the Canadian system - pre-registration testing only in a paper that was recently removed from the - no merit assessment CFIA website. He wrote:

• Part III (minimal) “As one looks back over the 80 years history - no pre-registration testing and adjustments that have been made to - no merit assessment Canada’s variety registration system, if the proposals under discussion237 come into

Threatened Harvest 59 effect, the system will have almost come full • ending government involvement in circle. Canada’s seed certification system,240

Canada appears to be headed to a buyer/ • modifying the variety verification testing seller relationship much like what exists in program, the United States.”238 • harmonizing seed testing rules, • simplifying Canada’s seed grading system, Other related government initiatives • reviewing exemptions from variety registration,241 Deregulating Canada’s seed registration system • determining when plant varieties with is but one part of a broad government initiative novel genetic traits require environmental to revamp Canada’s seed program. Under what release authorization242 is called the Seed Program Modernization Ini- tiative (SPMI), the federal government is active- These proposals could have important long- ly pursuing a number of deregulatory changes term effects on western Canada’s grain system that are highly relevant to the Canadian grain and warrant close scrutiny. system but are beyond the scope of this paper. These include the following:239

60 canadian centre for policy alternatives Notes

1 Such as Canada Prairie Spring Wheat and Canada 8 This is achieved through the Grain Standards Com- Western Hard White Wheat. mittees, see Sect. 20–22. 2 This description is adapted from the Canadian 9 Canada Grain Act. Part II. Wheat Board website: “The wheat quality control 10 Canada Grain Act, Part III. The Canadian Grain system in Canada” at: http://www.cwb.ca/public/en/ Commission publishes a list of licensed grain el- customers/buying/quality/ ; viewed 7 August 2008. evators and grain dealers; see: Grain Elevators in 3 Canadian Wheat Board website, http://www.cwb.ca/ Canada, Crop Year 2007–2007, available online at: public/en/library/publications/popups/farmers_gen- http://www.grainscanada.gc.ca/Pubs/GrainEleva- eral_brochure.jsp ; viewed August 24, 2008. tors/alltables/2006AUG.PDF . 4 TheCWB ’s borrowings are guaranteed by the fed- 11 Canada Grain Act, Sect. 45. eral government allowing it to access capital markets 12 Canada Grain Act, Part IV. at better rates. 13 Canada Grain Act, Section 14(e). 5 Ibid. 14 Canada Grain Act, Part VI. 6 Canada Grain Act, Sec. 13. The Commission’s main 15 The CGC used to set maximum charges for stor- functions are specified in Section 14. The text of the ing grain and for other services, but this role was Act is available online at: http://laws.justice.gc.ca/ eliminated in 1994. The only requirement now is for en/showtdm/cs/G-10. A useful summary of the Ca- elevator companies to file their tariffs with theCGC . nadian Grain Commission’s organization and op- There is no maximum and the companies can charge erations, published by the Commission, is available whatever they like. This was a move that hurt farm- online at: http://www.grainscanada.gc.ca/Pubs/Or- ers, but helped grain companies. Canada Grain Act, gOps/orgops-e.pdf . Secs. 50–54. The Canadian Grain Commission pub- 7 Canadian Grain Commission website, http://www. lishes these charges; see: Current and historical el- grainscanada.gc.ca/Whoare/who-e.htm . evator tariff summaries, CGC website, http://www.

Threatened Harvest 61 grainscanada.gc.ca/statistics-statistiques/tariff-tarif/ The 2003 Canadian Grain Commission Performance letm-mtsa-eng.htm . Report describes how drought-reduced grain volumes 16 Canada Grain Act, Secs 35–41; Part VI. can shrink CGC revenues derived from user fees: 17 Canada Grain Act, Part VI. “Last year marked the second year of a drought in Canada’s grain growing regions. Grain production 18 Canada Grain Act, Part I. and volumes through Canadian ports were reduced 19 Blanchard, James, Canadian Grain Commission, significantly. This had a negative financial impact University of Regina and Canadians Plains Research on the CGC because most of the CGC’s revenues are Centre, 2007, available online at: http://esask.uregina. generated from fees charged for the inspection and ca/entry/canadian_grain_commission.html . weighing of grain exported through terminals. The 20 See: Canadian Economic History, William Thom- CGC’s revenue dropped nearly 35% from the previous as Easterbrook and Hugh G.J. Aitken, University of fiscal year. Although limited in its ability to reduce Toronto Press, 1988, p. 499. expenditures, the CGC did respond to the reduced 21 In addition to the preceding reference, other sources volumes by adjusting its staffing levels at the ports provide useful information on the background Mani- of Vancouver and Thunder Bay and reducing expen- toba Grain Act, including: ditures by $5.0 million.” • Sherman, Patricia, Manitoba Grain Act, available (Canadian Grain Commission, Performance Report online at: http://www.westmanitoba.com/things/ for the Period ending March 31, 2003, Challenges, grainact.htm , and Drought-reduced Grain Volumes, available online at: http://www.tbs-sct.gc.ca/rma/dpr/02–03/CGC-CCG/ • Siamandas, George, Manitoba Grain Growers As- CGC-CCG03D01_e.asp#Challenges .) soc.; Fighting for Farmers’ Rights, http://siamandas. 29 com/time_machine/pages/institutions/united_grain_ The Canadian Grain Commission Performance growers.htm . Report for 2003 notes that: 22 Canadian Economic History, op. cit., p. 499. “The bulk of theCGC ’s fees have not increased above their 1991 levels. In 2000, Cabinet froze the CGC’s 23 Review of the Canada Grain Act and the Canadian fees until 2003.” Grain Commission, Report to Agriculture and Agri- Food Canada, Number 01C15–05AJ01/A, Compas “The CGC has…struck various external committees Inc., August 15, 2006, p. 42. In describing its mandate, to review the structure and level of fees. These re- the report notes that Compas was selected by Public views have taken place in 1986, 1990, 1992, and 1999.” Works and Government Services Canada on behalf of Canadian Grain Commission, Performance Report for Agriculture and Agri-Food Canada “as mandated by the Period ending March 31, 2003, External Charging Bill C-40 from the 28th Parliament.” (p. 3, footnote 1). Information, available online at: http://www.tbs-sct. 24 Ibid., p. 44. gc.ca/rma/dpr/02–03/CGC-CCG/CGC-CCG03D-PR_e. asp?printable=True . 25 Ibid., p. 42. 30 “Prior to 1991, the level and structure of fees were 26 Ibid., p. 42. reviewed annually in-house and proposed changes 27 A list of these fees is available on the CGC website were published in the Canada Gazette.” (Ibid.) at: http://www.grainscanada.gc.ca/services-services/ 31 The Canadian Grain Commission plans to keep sfm-msf-eng.htm . revenues derived from fees constant at $41.3 million 28 For example, user fee revenues dropped 32% be- for each budgetary year between 2007–2008 and tween 2002 and 2003, and increased 29% between 2010–2011 inclusive. (See Canadian Grain Commis- 2003 and 2004. sion, Report on Plans and Priorities, 2008–2009,

62 canadian centre for policy alternatives Table 6: Revolving Fund — Statement of Operations, tor charges.” (Canadian Grain Commission, Depart- Line 1 (“Respendable Revenue”), available online at: mental Performance Report, March 31, 2007, p. 46, http://www.tbs-sct.gc.ca/rpp/2008–2009/inst/cgc/ available online at: http://www.grainscanada.gc.ca/ cgc09-eng.asp .) cgc-ccg/cr-rm/dpr-rmr/2007/dpr-rmr-2007-eng.pdf ). 32 According to the Compas Report, the Canadian 38 The 2004 Canadian Grain Commission Perfor- Grain Commission “estimates” that inward inspec- mance Report indicates “The Assistant Commission- tion and weighing are “cost centre[s]”, that is, the cost ers in western Canada handled nearly 1,800 producer of providing the services is substantially greater than concerns in 2003–04 regarding failure to pay or late the amount the CGC obtains from its relevant user payment, grade and dockage disputes, producer cars, fees, and the losses are covered by Parliamentary ap- shrinkage deductions and elevator charges. (http:// propriations. (See Compas Report, op. cit., pp. 43–44, www.tbs-sct.gc.ca/rma/dpr/03–04/CGC-CCG/CGC- and footnote 37 on p. 55 .) CCGd3401_e.asp ). 33 Canadian Grain Commission, Report on Plans 39 This formulation is derived from the CGC; in ex- and Priorities, 2008–2009, Priority #4, p. 22, avail- plaining the role of a newly-appointed assistant com- able online at: http://www.grainscanada.gc.ca/cgc- missioner in 2005, a CGC news release states: “[As- ccg/cr-rm/rpp/2008/08_09rpp-e.pdf . sistant commissioners] also present the concerns of 34 Ibid. The Harper government-commissioned Com- producers in their regions to the CGC.” (CGC assis- pas Report also strongly promotes contracting public tant commissioner for Alberta appointed, CGC news services to private service suppliers. release, June 21, 2005, para. 5.) 40 35 Minister of Agriculture and Agri-Food Gerry Ibid., p. 46. Ritz introduced Bill C-39 on December 13, 2007. The 41 See: Canadian Grain Commission, Departmen- formal title of the bill is: “An Act to amend the Can- tal Performance Report, March 31, 2007, pp. 42–47, ada Grain Act, chapter 22 of the Statutes of Cana- available online at: http://www.grainscanada.gc.ca/ da, 1998 and chapter 25 of the Statutes of Canada, cgc-ccg/cr-rm/dpr-rmr/2007/dpr-rmr-2007-eng.pdf . 2004. The 31-page bill is available online at: http:// This report identifies “protecting producers rights” www2.parl.gc.ca/HousePublications/Publication. as a strategic outcome: aspx?Docid=3211066&file=4 . A 11-page Legislative “Strategic Outcome 4: Producers’ rights are sup- Summary of Bill C-39, prepared by the Parliamen- ported to ensure fair treatment within the grain tary Information and Research Service, is available handling system. online at: http://www.parl.gc.ca/LEGISINFO/index. asp?List=ls&Query=5361&Session=15&Language=e. […] Bill C-13, which is identical to C-39, was introduced on Key Program or Service February 23, 2009. The text of the bill can be found on- […] line at: http://www2.parl.gc.ca/content/hoc/Bills/402/ 3. Fair treatment of producers by grain companies Government/C-13/C-13_1/C-13_1.PDF and dealers” 36 Cf. Bill C-13, p. 3, clause (9)3 and Explanatory 42 Under the Canada Grain Act, the appointment of Notes, pp. 2a-3a. assistant commissioners is optional and their function 37 According to a CGC departmental report (see be- is undefined. Section 9(1) of the Act reads: low), “Assistant Commissioners in western Canada “The Governor in Council may appoint six persons as responded to many producer inquiries regarding officers of the Commission, to be known as assistant failure to pay or late payment, grade or dockage dis- commissioners, to hold office, during good behaviour, putes, producer cars, shrinkage deductions and eleva- for a renewable term of up to five years.”

Threatened Harvest 63 43 Fréchette, Jean-Denis, Bill C-39 Legislative Sum- and Priorities indicates that government plans to re- mary, LS-601-E, 8 April 2008. op. cit., p. 10, available duce funding for its Licensing and Security Program online at http://www.parl.gc.ca/LEGISINFO/index. from $2.0 million in 2008–09 to $660 thousand in asp?List=ls&Query=5361&Session=15&Language=e. each of the next two years, and the Producer Protec- As previously noted, Bill C-39 was re-introduced as tion Program from $4. 8 million in 2008–2009 to Bill C-13 on February 23, 2009. $1.6 million in each of the following two years. (CGC 44 The 2007CGC Departmental Performance Report Report on Plans and Priorities, 2008–2009, available confirms that Assistant Commissioners received data online at: http://www.tbs-sct.gc.ca/rpp/2008–2009/ and reports that could uniquely inform their efforts inst/cgc/cgc-eng.pdf). As previously noted, this bill to reduce fraudulent activities on behalf of producers was re-introduced as Bill C-13 on February 23, 2009. and the grain system generally. The report notes that 53 See clauses 24 and 25 of the bill, which affect weigh- the CGC “[c]ontinued to provide the Assistant Com- ing at primary elevators, and clause 31 which elimi- missioners with detailed weigh-over reports identify- nates mandatory weighing and inspection at terminal ing reporting delinquencies and anomalies for moni- elevators. (See especially the proposed section 70(1)- toring and investigative purposes.” (Canadian Grain (3), on pages 11–12 of Bill C-13.) Commission, Departmental Performance Report, 54 In certain countries, such as Argentina, inspection March 31, 2007, p. 47, available online at: http://www. at the point of delivery is mandatory, not optional as grainscanada.gc.ca/cgc-ccg/cr-rm/dpr-rmr/2007/dpr- in Canada. A sample is taken from every shipment rmr-2007-eng.pdf .) when it first arrives at a primary elevator and sent to 45 Cf. Canada Grain Act, Section 39. government labs for a binding determination about 46 Cf. Canada Grain Act, Section 36(4). grade and dockage. 55 47 Cf. Bill C-13 Clauses 14, 15, 16, which together Canadian Wheat Board, “Benefits and Services of would eliminate Sections 35–38, and replace Section the CWB,” available at http://www.cwb.ca/public/en/ 39 and 41, of the existing Act. (Clause 2 of the bill hot/legal/judicial. would also eliminate authorization for the payment 56 The tasks of weighing and tracking were once per- of Grain Appeal Tribunals.) formed by two public officials. In the early 1990s one 48 Cf. Bill C-13, p. 6–7, Clause 16, (which would replace of these positions was eliminated. When the second the current Section 41). See the last two sub-clauses. official was eliminated, elevator operators pledged to take over certain functions to lighten the workload of 49 Note that unlike the current statute, which re- the remaining official, but these commitments were quires that individual Grain Appeal Tribunal mem- not honoured. Consequently, both tasks, weighing and bers must not have pecuniary interest in the case tracking, are now performed by a single CGC official. at hand (Cf. Section 36(4)), Bill C-13 makes no such 57 stipulation for individual contractors sitting in judg- Canada’s official reference on the grading of grains, ment of grain appeals. oilseeds and pulses contains descriptions of each of the grading factors for the crops under the prevue of 50 Cf. Bill C-13, pp. 7–8, Clauses 19–21, affecting por- the Canadian Grain Commission. The grading factors tions of Sections 45, 46 and 49 of the current Act. for wheat appear in: Official Grain Grading Guide, 51 Canadian Grain Commission, Report on Plans and Chapter 4, Wheat, Canadian Grain Commission, 1 Priorities, 2008–2009, available online at: http://www. August 2008, available online at: http://www.grain- tbs-sct.gc.ca/rpp/2008–2009/inst/cgc/cgc-eng.pdf . scanada.gc.ca/oggg-gocg/04/oggg-gocg-4e-eng.htm . 52 Even though Bill C-39 was not passed, the Cana- 58 House of Commons, ���������������������������Standing Committee on Agri- dian Grain Commission’s 2008–2009 Report on Plans culture and Agri-food, “Report on the Review of the

64 canadian centre for policy alternatives Canada Grain Act and the Canadian Grain Commis- “TheCGC proposes to eliminate all requirements for sion Conducted by Compas Inc, November 2006, p. 8. official inspection and weighing of all grain exported 59 Ergot of Cereals and Grasses, Fact Sheet, Govern- to the US. This would apply to all types of facilities ment of Saskatchewan, January 2009, available on- and conveyances. The CGC would continue to pro- line at: http://www.agriculture.gov.sk.ca/adx/aspx/ vide inspection and/or weighing services for US ex- adxGetMedia.aspx?DocID=952,340,185,81,1,Docum ports on an optional basis. Such services would be ents&MediaID=6546&Filename=Ergot+of+Cereals provided at the request of the shipper, and would be +and+Grasses+-+Printer+Friendly.pdf . subject to CGC operational capacity.” 60 Caporael, Linnda R., Ergotism: The Satan Loosed (Canadian Grain Commission, “Inspection and weigh- in Salem?, Science 192:21–26, 1976. A popular descrip- ing requirements for grain exported to the United tion of the mystery can be found online at: Ergot Poi- States,” Available at: http://www.grainscanada.gc.ca/ soning — the cause of the Salem Witch Trials: PBS industry-industrie/consultation-consultation/geus- “Secrets of the Dead II”—Witches Curse, http://www. egeu-eng.htm.) hbci.com/~wenonah/history/ergot.htm . 68 On its web site the Canadian Grain Commission de- 61 See: Tom Volk’s Fungus of the Month for October scribes the reasons for the proposed change as follows: 1999, online at: http://botit.botany.wisc.edu/toms_ “The original purpose of inward inspection and in- fungi/oct99.html . ward weighing was to ensure that grades and weights 62 Raine, Michael, Ergot problem prevalent in 2008 were recorded accurately and fairly. The service was cereals, The Western Producer, 22 January 2009, p. 63. established when primary elevators in Western Can- ada and terminal and transfer elevators were owned 63 Crawford, Tiffany, Maple Leaf Foods listeria law- by different companies. Shippers wanted a system suits settled, National Post, 18 December 2008, http:// of checks and balances and the CGC to act as a third www.nationalpost.com/news/story.html?id=1091025 . party. There have been many changes in the grain See also: Maple Leaf Foods Class Action Settled, Fal- handling system which call into question the need coner Charney LLP and Sutts, Strosberg LLP, at http:// for the CGC to inspect and weigh every shipment of www.mapleleaffoodsclassaction.com . grain that is unloaded at terminal or transfer elevators. 64 Branigan, Tania, Milk sickens thousands of babies For example, many companies have consolidated and in China, The Guardian Weekly, 26 September 2008, consequently, many primary, terminal and transfer p. 7. See also, “China Milk Scandal ‘Guilty’ Plea,” BBC elevators are owned by the same company. Therefore, World News, 31 December 2008, http://news.bbc. there is less demand for a third party to be involved.” co.uk/2/hi/asia-pacific/7805560.stm. This description was removed from the web site 65 Imported Dairy Ingredients and Soybean Meal for (http://www.grainscanada.gc.ca) before the October, Livestock Feed, Canadian Food Inspection Agency, 2008 federal election but has recently been reposted. news release, 17 October 2008, available online at: 69 There are currently eight milling classes of west- http://www.inspection.gc.ca/english/anima/feebet/ ern Canadian wheat. They are: ind/chinmele.shtml . • Canada Prairie Spring Red (CPSR) 66 McCurry, Justin, Japan shaken by contaminated rice scandal, The Guardian Weekly, 26 September • Canada Prairie Spring White (CPSW) 2008, p. 7. • Canada Western Amber Durum (CWAD) 67 The CGC, on its web site, describes the proposed • Canada Western Extra Strong (CWES) changes as follows: • Canada Western hard White Spring (CWHWS) • Canada Western Red Spring (CWRS)

Threatened Harvest 65 • Canada Western Red Winter (CWRW) 74 Wilson, Barry, Ritz warned on timing of KVD • Canada Western Soft White Spring (CWSWS). changes, Western Producer, March 20, 2008. 75 Each of these classes has particular quality and The U.S. had long complained about theKVD system processing characteristics, which are described on the because since U.S. varieties are not visually distinct, Canada Grain Commission website at: http://www. they are not registered in Canada they can only be sold grainscanada.gc.ca/Quality/Wheat/classes-e.htm . as low-priced “feed” wheat. The United States Trade Until August 2008, every variety of wheat grown in Representative conducted what he called “extensive western Canada was required to conform to the vis- consultations” on the issue in 2003, and followed the ual characteristics of the class to which it belonged. issue ever since. In 2007 the USTR complained that while the U.S. government considered the elimina- 70 The United States Trade Representative, intent on tion of KVD for higher priced wheats was a “step in gaining greater access for U.S. grain in the Canadian the right direction” it didn’t go far enough. “[I]t only market, stated that the KVD changes were “a step in opens the door to varietal registration in Canada of the right direction.” The U.S.T.R. complained, how- lower priced, non-milling U.S. wheat varieties typically ever, that the move “only opens the door to varietal used for feed and industrial end-uses (biofuels, etc.). registration in Canada of lower priced, non-milling U.S. wheat varieties typically used for feed and indus- (United States Trade Representative, 2007 National trial end-uses (biofuels,etc.).” (United States Trade Trade Estimate Report on Foreign Trade Barriers, Representative, 2007 National Trade Estimate Report Canada, Restrictions on U.S. Grain Exports, p. 62., on Foreign Trade Barriers, p. 62. available online at: available online at: http://www.ustr.gov/assets/Docu- NTE http://www.ustr.gov/assets/Document_Library/Re- ment_Library/Reports_Publications/2007/2007_ _ ports_Publications/2007/2007_NTE_Report/asset_ Report/asset_upload_file312_10933.pdf ) upload_file312_10933.pdf ). 76 In an opinion piece that appeared in the January The head of the Western Canadian Wheat Growers 2008 edition of Wheat & Barley, Cherilyn Jol- Association complained that eliminating KVD for the ly-Nagel, president of the Western Canadian Wheat minor wheat classes was “not enough”, arguing that the Growers Association, wrote: KVD constraint would still restrict new winter wheat “The kernel visual distinguishability registration re- varieties, since these were commonly confused visually quirement will be a thing of the past as of this Au- with Canada Western Red Spring, where KVD would gust, but only for some wheat classes. TheW CWGA says still apply. (Jolly-Nagel, Cherilyn, Moving forward on that’s not enough.” KVD , editorial, Wheat, Oats & Barley, January 2008.) 77 Black-box technology is intended to provide a 71 Rampton, Roberta, Canada seeks new way to sort quick and reliable technical means to identify grain wheat by 2010, Reuters, April 27, 2007. varieties, for example by using wave-length measure- 72 The National Farmers Union stated that “[t]he elim- ments from molecular signals. The CWB and others ination of Kernal Visual Distinguishability (KVD) as have invested in developing black-box technology, the primary method for grain variety identification but it remains unproven. will severely undermine Canada’s reputation for high 78 (Canada—Measures Relating to Exports of Wheat quality standards for grain.” (National Farmers Union, and Treatment of Imported Grain, Reports of the Pan- Elimination of Kernal Visual Distinguishability Poses el, , WT/DS276/R, 6 April Risk, news release, April 20, 2007.) 2004, paragraphs 108–111, page A-38.). 73 Wilson, Barry, Minister urged to postpone KVD 79 A sample declaration form can be viewed online plans, Western Producer, May 8, 2008. at http://www.grainscanada.gc.ca/wheat-ble/ds-sd/ declaration-eng.htm .

66 canadian centre for policy alternatives 80 The seriousness of this liability is made clear in to use certified seed. But it is decidedly more expen- the wording of the aforementioned sample declara- sive than saving seed from a previous crop.” (Rance, tion. It states: Laura, Loss of KVD system will plant seeds of discon- “If an ineligible variety of wheat is delivered by or on tent in farmers”, Winnipeg Free Press, May 10, 2008.) behalf of the Producer to the Grain Handling Com- 84 Canadian Grain Commission website, Grain pro- pany and it is represented to be eligible for the class ducers: an important change for your wheat deliver- of wheat for which payment is being requested in ac- ies, http://www.grainscanada.c.ca/wheat-ble/ds-sd/ cordance with the Acts, I acknowledge and agree that gpwd-pglb-eng.htm ), op. cit. the Grain Handling Company and/or the Canadian 85 In December 2007 the CSTA promoted Canada’s Wheat Board may consider the representation I made seed certification system as a “tried and true”KVD re- in paragraph 1 and 2 above, to have been made fraudu- placement. The Association expressed its confidence lently and/or negligently. I acknowledge the Producer that “producer affidavits provided at time of delivery will be held accountable in accordance with authority of grain, based on the use of certified seed would be a granted within the Acts. I further acknowledge and very reliable system to replace current KVD require- agree that the Canadian Wheat Board may consider ments.” (Fostering Innovation and Sharing the Costs; the Producer to be in default of his/her delivery con- A Certified Seed Tax Incentive, Canadian Seed Trade tracts and, in addition to any other remedies available Association, December, 2007, p. 3. to it, it may cancel any contracts of the Producer. In 86 In effect, by eliminating theKVD system, the fed- addition, the Grain Handling Company may jointly eral government is driving producers towards greater with the Canadian Wheat Board or severally, claim use of certified seeds. At the same time, the federal against the Producer for all claims, damages, losses government is withdrawing from the delivery of the and costs (including legal fees) that may result.” seed certification program, transferring this respon- Sample of the declaration of eligibility for the class form, sibility and authority to the Canadian Seed Growers paragraph 3, available online at: http://www.grains- Association (see below). canada.gc.ca/wheat-ble/ds-sd/declaration-eng.htm . 87 The May 24, 2008 Regulatory Impact Analysis 81 Morris, John, More than meets the eye, Manitoba Statement (p. 1, para. 1) states that “[t]he change in Co-operator, July 17, 2008, p. 4 and Alberta Farm Ex- domestic wheat policy necessitated the removal of the press, July 28, 2008. policy requirement for seed of wheat varieties to be 82 The Canadian Grain Commission tacitly acknowl- visually distinguishable for each quality class in or- edges this problem, warning producers to “[m]aintain der to be registered in Canada.” (underlining added; careful records” and to have “old or common seed http://gazetteducanada.c.ca/part1/2008/20080524/ tested at a private lab before seeding” or to “purchase html/regle1-e.html ). certified seed” or ”both”. (Canadian Grain Commis- 88 The changes eliminated Section 42 of the Seeds sion website, Grain producers: an important change for Regulations, which, in subsection (b) “required that your wheat deliveries, http://www.grainscanada.c.ca/ wheat seed imports into the CWB area be […] visu- wheat-ble/ds-sd/gpwd-pglb-eng.htm ). ally distinguishable from all registered varieties suit- 83 Laura Rance, editor of the Manitoba Co-operator, able for milling, baking or making alimentary pastes” points out that increased concerns about liability (See Regulations Amending the Seeds Regulations, “means farmers must know — for sure — what they SOR/2008–228, July 28, 2008. Canada Gazette, Vol. are delivering. The only way to be sure is to plant 142, No. 16, August 6, 2008, description and ratio- certified seed, which fewer than 20 per cent of cereal nale, wheat import requirements, available online farmers do. There are lots of good reasons for farmers

Threatened Harvest 67 at http://canadagazette.c.ca/partII/2008/20080806/ 91 Ibid., see Consultation, para. 2. html/sor228-e.html ) According to the May 24, 2008 Regulatory Impact 89 The CFIA states in the regulatory impact analy- Analysis Statement, the trade treaty provision to sis that “the CFIA has not held consultations spe- which the Canadian government is seeking to com- cifically on the changes to seed import regulations ply is part of the World Trade Organization’s Agree- proposed above.” ment on Technical Barriers to Trade, which states: (Regulations Amending the Seeds Regulations, Regula- Technical Regulations and Standards tory Impact Analysis Statement, Proposed regulatory “With respect to their central government bodies: amendments to seed import requirements, Canada 2.1 Members shall ensure that in respect of technical Gazette, Vol. 142, No. 21, May 24, 2008, available online regulations, products imported from the territory of at: http://canadagazette.gc.ca/partI/2008/20080524/ any Member shall be accorded treatment no less fa- html/regle1-e.html ) vourable than that accorded to like products of na- 90 The Regulatory Impact Analysis Statement is tional origin and to like products originating in any misleading in its use of the term “consequential”. other country.” The Statement fails to distinguish between what is (See para. 1 of the Statement. required to conform with other changes under do- TBT mestic law, and what is not required under domestic The text of the so-called agreement can be found law but is required to conform with the provisions of online at http://www.wto.org/english/docs_e/legal_e/17- an international trade treaty that Canada has ratified. tbt.pdf . ) The conflation of these two uses of the term is illus- 92 The May 24, 2008 Regulatory Impact Analysis trated in the following excerpt from the Statement: Statement correctly points out that: “In light of the broad domestic policy decision to “Historically, CFIA policies and regulations have acted eliminate K VD requirements for domestic wheat, as ‘gate-keepers’ for the KVD-based grain quality as- consequential amendments to the Regulations are surance system by only allowing seed of wheat varie- required to ensure consistency between import and ties that are visually distinguishable for each quality domestic wheat policy.” class to be sold or imported into the CWB Area. Spe- CFIA (Regulations Amending the Seeds Regulations, cifically, the has supported the grain quality as- SOR/2008-228, July 28, 2008. Canada Gazette, Vol. surance system through its variety registration sys- 142, No. 16, August 6, 2008, Regulatory Impact Anal- tem and import requirements.” (Ibid.) ysis Statement, description and rationale, Regulatory 93 The previous federal government raised a concern amendments to seed import requirements, available on- about the potential for KVD elimination to directly line at http://canadagazette.c.ca/partII/2008/20080806/ undermine the authority of the Canadian Wheat html/sor228-e.html ) Board. Deep within an appendix of the Canada-U.S. The May 24 Regulatory Impact Analysis Statement WTO wheat dispute panel report, the Canadian gov- is even more misleading, stating: ernment responded to a question about the need for grain segregation as follows: “As the proposed regulatory amendments are conse- quential to the Minister’s announcement of the Gov- “[Grain segregation] measures are necessary to se- ernment of Canada policy decision to eliminate KVD, cure compliance with the provisions establishing CWB the CFIA has not held consultations specifically on the the as a single desk exporting S[tate ] T[rading ] CWB changes to seed import regulations proposed above.” E[nterprise], as contained in the Act, because the relevant CWB privileges apply to the sale of Canadian (italics added for emphasis; http://gazetteducanada.c.ca/ wheat for export or for domestic human consump- part1/2008/20080524/html/regle1-e.html ).

68 canadian centre for policy alternatives tion; if foreign wheat were not distinguished from (Canada—Measures Relating to Exports of Wheat Canadian wheat, the monopoly authority of the CWB and Treatment of Imported Grain, Reports of the could not be enforced.” Panel, World Trade Organization, WT/DS276/R, 6 (Canada—Measures Relating to Exports of Wheat April 2004, page B-7.) and Treatment of Imported Grain, Reports of the 95 “A 2003 study by the Boston Consulting Group Panel, World Trade Organization, WT/DS276/R, 6 for the Australian Wheat Board reported that four April 2004, page A-38.). companies — Cargill Inc., Louis Dreyfus Corporation, According to this interpretation, the authority of the Archer Daniels Midland and Bunge Limited — effec- CWB could be threatened by indistinguishable wheat, tively control 73% of the global market for grain.” Af- grown outside the Canadian Wheat Board Area (and fidavit of Adrian Measner, in Canadian Wheat Board hence outside the CWB’s purview), being imported into and Attorney General of Canada, Federal Court of western Canada. Section 32 of the Canadian Wheat Canada, file # T-2138–06, paragraph 22. Board Act grants the CWB authority to market only 96 A full copy of the Canadian Wheat Board Act is “wheat produced in the designated area” (which is available at: http://laws.justice.gc.ca/en/C-24/index. defined as Manitoba, Saskatchewan, Alberta, and html. CWB the Peace River District District of B.C.) (The 97 The Canadian system differs markedly from the Act is available online at: http://laws.justice.gc.ca/ highly subsidized U.S. system, where the government en/ShowTdm/cs/C-24///en) guarantees a minimum price for grain, and makes 94 In the WTO dispute with the United States, Canada so-called “deficiency payments” whenever the mar- emphasized the vital importance of preventing con- ket price drops below the minimum price. This has tamination of Canadian grain, raising the specter of been described as “a system designed to keep produc- contamination by trace amounts of unapproved ge- tion high and prices low.” (Michael Pollan, The Om- netically modified grain. Preventing contamination nivores Dilemma: A Natural History of Four Meals is crucial, Canadian government officials argued at (New York, 2006), p. 62.) Most significantly, the U.S. the time, because: system permits huge grain trading companies, such “…once the grain enters an elevator, it is very diffi- as Cargill and Archer Daniels Midland, to dominate cult, if not impossible, to deal with the consequences. the production and marketing of U.S. grain... Pollan Such an occurrence would have a serious negative im- observes that “these companies are the true benefi- pact on both the level of consumer confidence in the ciaries of the ‘farm’ subsidies….” (Ibid., p. 63.) Canadian quality assurance system, and indeed the 98 The U.S. government, private grain companies and ability of Canada to ensure and guarantee the qual- many U.S. growers have long objected to this system, ity of grain it is exporting. including the government-guaranteed initial price. The [...] The importance of this was highlighted recent- draft agricultural text that was on the table when the ly by the discovery in Canada of a single cow with WTO negotiations collapsed in the summer of 2008 BSE, with significant and continuing negative con- would have required Canada to eliminate these gov- sequences. As a result, many countries around the ernment guarantees. world banned the importation of beef from Canada. 99 John Herd Thompson, Farmers, Governments and In the case of grain, if certain products (for example, the Canadian Wheat Board: An Historical Perspec- even trace amounts of GMO grain) not approved in tive, 1919–1987, p. 21. Canada or other countries were found in shipments 100 The 2005 Conservative party policy platform on of Canadian grain, it would have a deleterious effect the Canadian Wheat Board stated: “A Conservative on Canadian exports…” Government will give farmers the freedom to make

Threatened Harvest 69 their own marketing and transportation decision and Robert Hughes, June 19, 2008, paragraph 39, available to direct, structure, and to voluntarily participate in at: http://www.cwb.ca/public/en/hot/legal/judicial/ producer organisations.” Conservative Party of Canada. pdf/decision_061908.pdf. “Policy Declaration”, March 19, 2005, paragraph 97. 108 Canadian Wheat Board Act, Section 47.1, avail- 101 The participants in the July 27, 2006 Marketing able at: http://laws.justice.gc.ca/en/C-24/index.html. Choice roundtable are listed on the Agriculture and 109 Moreover, the gag order eventually struck down Agri-food Canada Web site at; http://www.agr.gc.ca/ by the courts was still in effect in effect during the cb/index_e.php?s1=b&s2=2006&page=n60912 plebiscite period. As CWB president Adrian Meas- 102 Canadian Wheat Board, CWB Response to Min- ner testified “The Direction has had a chilling effect ister Strahl’s Task Force Examining Implementation on the CWB and has created uncertainty and confu- of Marketing Choice,” November 6, 2006. sion during a period when producers are faced with 103 The directive read: “Her Excellency the Governor critical decisions relating to the future of the single General in Council, on the recommendation of the desk.” Measner affidavit, paragraph 105. Minister of Agriculture and Agri-Food, pursuant to 110 The heavily redacted Cabinet memorandum is subsection 18(1) of the Canadian Wheat Board Act, available at: http://www.cwb.ca/public/en/hot/legal/ hereby directs The Canadian Wheat Board to conduct judicial/pdf/cabinetmemoB.PDF. its operation under the Act in the following manner: 111 Province of Manitoba, News Release, “Manitoba (a) it shall not expend funds, directly or indirectly, Farmers Send Strong Message On Canadian Wheat on advocating the retention of its monopoly powers, Board Single Desk,” January 16, 2007, available at: including the expenditure of funds for advertising, http://news.gov.mb.ca/news/index.html?archive=2007– publishing or market research; and (b) it shall not 1-01&item=883. The mail-in ballot administered by provide funds to any other person or entity to en- the province, employed the question recommended by able them to advocate the retention of the monopoly farm organizations, which offered a straightforward powers of The Canadian Wheat Board.” choice between the single desk and the open market. 104 “ No previous direction has dealt with how the 112 Bob Friesen’s quotation, and other statements board is to conduct itself with respect to advocacy, critical of the ballot wording, are available at the web distribution of information, or entering into policy site of Save My Canadian Wheat Board, http://www. debates.” “Attorney General of Canada and the Cana- savemycwb.ca/archive/home/20070314barleyvote.php. dian Wheat Board,” Affidavit of Adrian C Measner, 113 Affidavit of Adrian C Measner, December 4, 2006, December 4, 2006, available at http://www.cwb.ca/ paragraph 105., available at http://www.cwb.ca/pub- public/en/hot/legal/judicial/pdf/affidavit_ameasner.pdf. lic/en/hot/legal/judicial/pdf/affidavit_ameasner.pdf 105 “Attorney General of Canada and the Canadian 114 Agriculture and Agri-food Canada, Backgrounder, Wheat Board,” Ruling of the Honourable Mr. Justice “Plebiscite Results,” March 2007, available at: http:// Robert Hughes, June 19, 2008, paragraph 46. avail- www.agr.gc.ca/cb/index_e.php?s1=ip&page=ip60908a_ able at http://www.cwb.ca/public/en/hot/legal/judi- bg1. cial/pdf/decision_061908.pdf. 115 Measner affidavit, Op. cit., para. 53. 106 “Attorney General of Canada and the Canadian 116 Wheat Board,” Affidavit of Adrian C Measner, De- Canadian Wheat Board Act, section 47.1. cember 4, 2006, available at http://www.cwb.ca/pub- 117 See Friends of the CWB web site at: http://www. lic/en/hot/legal/judicial/pdf/affidavit_ameasner.pdf. friendsofcwb.ca/. 107 “Attorney General of Canada and the Canadian 118 “The Canadian Wheat Board and the Attorney Wheat Board,” Ruling of the Honourable Mr. Justice General of Canada,” Ruling of Madame Justice Do-

70 canadian centre for policy alternatives lores Hansen, July 31, 2007 available at: http://www. 132 Federal government calling for unlimited third cwb.ca/public/en/hot/legal/barley/pdf/T-1124–07.pdf. party spending in CWB elections, Manitoba Co-op- 119 “The Attorney General of Canada and Canadian erator, August 5, 2008. Wheat Board,” Judgement of the Federal Court of Note that the NCC currently maintains an anti-CWB cam- Appeal, February 26, 2008. available at: http://www. paign on its website, where its ads can be viewed. See: cwb.ca/public/en/hot/legal/barley/pdf/022608_fac- http://nationalcitizens.ca/cgi-bin/oms.cgi?rm=show_ judgement.pdf. product&pid=35 . 120 Canadian Wheat Board gag order unconstitu- 133 Ewins, Adrian, Spending limit plan for CWB tional, court rules, CBC News, June 20, 2008. baffles farmers, Western Producer, August 14, 2008; 121 The text of Bill C-46 can be viewed online at: Group sues Ottawa over CWB Act violation, Western http://www2.parl.gc.ca/HousePublications/Publica- Producer, September 18, 2008. tion.aspx?Docid=3318470&file=4 . 134 Group sues Ottawa over CWB Act violation, West- 122 “Arbitration could cost farmers ‘tens of millions’: ern Producer, September 18, 2008. CWB”, Alberta Farmer Express, March 4, 2008, avail- 135 Single desk supporters held 8 of the 10 elected posi- able online at: http://www.albertafarmexpress.ca/ tions. All four government appointees are opposed to issues/ISArticle.asp?id=81033&issue=03042008&st single-desk marketing, and the CEO is uncommitted. ory_id=&PC=FBC . 136 Ewins, Adrian, CWB vote ends but controversy 123 The text of Bill C-57 can be viewed online at: continues, Western Producer, December 4, 2008. http://www2.parl.gc.ca/HousePublications/Publica- Some of the letters were reportedly addressed in ways tion.aspx?Docid=3516430&file=4 . that suggest the MPs had gained access to the offi- 124 Ewins, Adrian, Lawsuit targets CWB voters list cial CWB voters list, which is prohibited under the changes, Western Producer, September 25, 2008; CWB Act. (Ibid.) Friends of CWB sue again over elections, Manitoba 137 The CWB announced the results of the election Co-operator, September 20, 2008. in a December 7th news release. See: Farmers make 125 Ewins, Adrian, CWB vote ends but controversy their voices heard in CWB director elections, CWB continues, Western Producer, December 4, 2008. news release, December 7, 2008, available online at: http://www.cwb.ca/public/en/newsroom/releas- 126 Federal government calling for unlimited third es/2008/120708.jsp?pf=1 . party spending in CWB elections, Manitoba Co-op- 138 erator, August 5, 2008. See: Ewins, Adrian, CWB ‘off the table’ for now: ag minister, Western Producer, January 8, 2009, http:// 127 Ewins, Adrian, Spending limit plan for CWB www.producer.com/free/editorial/news.php?iss=2009– baffles farmers, Western Producer, August 14, 2008. 01–08&sec=news&sto=001 , and 128 Ewins, Adrian, Spending limit plan for CWB Franz-Warkentin, Phil, CWB deregulation off gov- baffles farmers, Western Producer, August 14, 2008. ernment’s radar, for now, Manitoba Co-operator, 129 Federal government calling for unlimited third January 19, 2009, http://www.manitobacooperator. party spending in CWB elections, Manitoba Co-op- ca/issues/isarticle.asp?id=94756&issue=01192009& erator, August 5, 2008. PC=FBC&story_id=&link_targ=DailyNews&link_ 130 Ewins, Adrian, Spending limit plan for CWB source=aypr_MBCO . baffles farmers, Western Producer, August 14, 2008. 139 Wilon, Barry, Harper says rural issues to get Ot- 131 Ewins, Adrian, Spending limit plan for CWB baffles tawa’s ear, Western Producer, November 27, 2008. farmers, Western Producer, August 14, 2008.

Threatened Harvest 71 140 Wilson, Barry, Harper says rural issues to get sue reform” of the CWB at the World Trade Organi- Ottawa’s ear, Western Producer, November 27, 2008. zation. “USTR Chief Ag Negotiator Tells Senate the 141 Throne Speech promises moreCWB battles, Mani- Administration Will Aggressively Pursue Reform of toba Co-operator, November 20, 2008. Canadian Wheat Board”, News release, Office of the United States Trade Representative, April 19, 2002. 142 For example, negotiations culminating in the es- The news release states: “In testimony before the tablishment of the World Trade Organization and the U.S. Senate Committee on Commerce, Science and adoption of the NAFTA in 1994 played a key role in the Transportation, [USTR Chief Agriculture Negotiator elimination of Canada’s historic “Crow” payments to Ambassador Allen Johnson] stated: ‘USTR shares the the railways for transporting grain to Canada’s ports, goal of the North Dakota Wheat Commission and ready for export. These longstanding payments, which U.S. wheat farms in seeking meaningful and perma- helped make up for the nation’s geographical disad- nent reform of the Canadian Wheat Board. USTR is vantage of having to transport grain long distances pursuing multiple actions which mutually reinforce to tidewater, were classified as an export subsidy un- this goal as well as the objective to improve U.S. wheat der these treaties. The federal government eliminated access to the Canadian marketing system.” them in 1995, a move that created considerable con- troversy in Canada but was welcomed by Canada’s The news release also states that Ambassador Johnson’s international grain export competitors. report to the Senate committee included a report “on the U.S. success in getting export competition as the TheW TO’s Secretariat blandly noted this change in its first negotiating agenda item to be discussed in June review of Canada’s 1996 Trade Policy Review, stating: [2002] at WTO agriculture negotiations.” “With the abolition of the Western Grain Transpor- 145 tation Act on 1 August 1995 and the attendant termi- North Dakota Wheat Commission, August 30, nation of transport assistance, Canada has currently 2004, “Appellate body fails to see how Canada’s gov- over-achieved the reduction commitment for export ernment monopoly operates outside of commercial subsidies under the W TO Agreement, according to considerations”, News Archive, available online on the the authorities.” (Trade Policy Review, Canada, 1996, ND Wheat Commission website: www.ndwheat.com . WT/TPR/S/22, Part 5, IV Sectoral Policy Patterns and 146 North Dakota Wheat Commission, April 7, 2004, Trends, (iii) Cereals and related products, para. 2.) “U.S. Trade Rep should appeal ruling in WTO wheat 143 The WTO Secretariat noted in 1996 that “[t]he dispute”, News Archive, available online on the ND Uruguay Round has brought no major changes in the Wheat Commission website: www.ndwheat.com . operations of the Canadian Wheat Board (CWB). The 147 Trade Policy Review—Canada, 2000, WT/TPR/S/78, Board is to remain the sole marketing agent for wheat Trade policy priorities, Agri-food trade, p. 8. and barley grown in western Canada for domestic 148 Trade Policy Review—Canada, 2003, WT/ human consumption, interprovincial and interna- TPR/M/112, Replies by the representative of Canada tional sales.” Also, while noting that “[s]ome WTO and additional comments, p. 28. members have raised questions about these opera- 149 Trade Policy Review—Canada, 2007, WT/TPR/179. tions [of the CWB]…the Government sees no need 150 to change the current system.” (Ibid., WT/TPR/S/22, Trade Policy Review—Canada, 2007, WT/ Part 5, IV, (iii), para. 3.) TPR/S/179/Rev.1, p. 97, para. 49. 151 144 In 2002, dissatisfied with the results of its bilateral Trade Policy Review—Canada, 2007, Minutes of interventions with Canada, and following a 16-month Meeting, WT/TPR/M/179/Add.1, 22 June 2007, p. 254. formal investigation of the CWB, United States offi- 152 Trade Policy Review—Canada, 2007, Minutes of cials announced their intention to “aggressively pur- Meeting, WT/TPR/M/179/Add.1, 22 June 2007, p. 210.

72 canadian centre for policy alternatives The 2006 Conservative platform stated: proach, including among other things single-desk sell- “A Conservative government will: ing, sourcing grain by means of a contract call system, and providing negotiating leverage for farmers results […] in farmers earning between approximately $530 mil- -Give western grain farmers the freedom to make lion and $655 million more for their grain each year their own marketing and transportation decisions. than they would in an open market.” The Canadian Western grain farmers should be able to participate Wheat Board, “Annual Benefits and Services of the voluntarily in the Canadian Wheat Board.” CWB,” available at http://www.cwb.ca/public/en/hot/ (Conservative Party of Canada, “Stand Up for Canada”, legal/judicial/pdf/measner/Tab_5.pdf. 2006 Federal Election Platform, p. 19, available on- 157 ZoomInfo Business People Information, Elwin line at: http://www.conservative.ca/media/20060113- Hermanson biography, available online at: http://www. Platform.pdf ). zoominfo.com/people/Hermanson_Elwin_437362127. 153 The Chairperson of the meeting report states: aspx . “The United States was concerned about the practices 158 Ibid. CWB of the Canadian Wheat Board ( ). It was encouraged 159 Ibid.; also that a staged elimination of the CWB’s monopoly had Susan Munroe, Elwin Hermanson, Canada Online; been recommended, and asked to hear more about http://canadaonline.about.com/od/partyleaderssk/p/ plans and timetables to implement the recommen- elwinhermanson.htm . dation.” (Trade Policy Review—Canada, 2007, Min- 160 utes of Meeting, 29 June 2007, WT/TPR/M/179/Rev.1, Gerry Ritz, Candidate Profile, CBC, 2008 elec- pp. 12–13, para. 39.) tion, available online at: “The EC welcomed the Government’s preparations to http://www.cbc.ca/news/canadavotes/riding/228/ remove the monopoly powers of the Canadian Wheat candidate.html ; also Board, and asked about Canada’s plans for opening Wilson, Barry, Ex-Reformer to lead CGC, Western Pro- the market for newcomers, and on the issue of trans- ducer, January 3, 2008, available online at: http://www. parency.” (Trade Policy Review—Canada, 2007, Min- producer.com/free/editorial/news.php?iss=2008–01– utes of Meeting, 29 June 2007, WT/TPR/M/179/Rev.1, 03&sec=news&sto=003 ; p. 11, para. 33. Grain commission chief fails to win approval from 154 The revised “draft modalities” for theWTO Agri- committee, CBC News, March 19, 2008, http://www. culture negotiations were released on December 6, cbc.ca/canada/saskatchewan/story/2008/03/19/her- 2008. The document is available on the WTO web manson-committee.html . site at: http://www.wto.org/english/tratop_e/agric_e/ 161 Grain commission chief fails to win approval chair_texts08_e.htm. from committee, CBC News, March 19, 2008, http:// The provisions restricting agricultural state trade en- www.cbc.ca/canada/saskatchewan/story/2008/03/19/ terprises are found in Annex K. hermanson-committee.html ; also 155 Historically, transportation subsidies (such as the Prime Minister Harper announces appointment of Crow rate) addressed this geographical disadvantage. Gerry Ritz as Secretary of State (Small Business and The Crow rate and other transportation subsidies Tourism), News Release, Prime Minister Stephen have now been eliminated. Harper, January 4, 2007, available online at http:// 156 A recent internal analysis by the CWB estimates pm.gc.ca/eng/media.asp?id=1485 ; these benefits to producers at approximately $530 to $655 million annually. “The CWB’s marketing ap-

Threatened Harvest 73 Gerry Ritz, biographical information, CTV, available 169 Saskatchewan Party Website, The Party, at: http:// online at: http://www.ctv.ca/mini/election2006/can- www.saskparty.com/theparty.html . CON didates/47001_ .html ; 170 Saskatchewan Party Website, The Party, at: http:// Gerry Ritz, Candidate Profile, CBC, 2008 election, www.saskparty.com/theparty.html . available online at: 171 Saskatchewan Party Website, The Party, at: http:// http://www.cbc.ca/news/canadavotes/riding/228/ www.saskparty.com/theparty.html . candidate.html ; 172 Susan Munroe, Elwin Hermanson, Canada Online; Wilson, Barry, Ex-Reformer to lead CGC, Western Pro- http://canadaonline.about.com/od/partyleaderssk/p/ ducer, January 3, 2008, available online at: http://www. elwinhermanson.htm . producer.com/free/editorial/news.php?iss=2008–01– 173 Saskatchewan Party Website, The Party, at: http:// 03&sec=news&sto=003 . www.saskparty.com/theparty.html . 162 Wilson, Barry, MPs have issues with CGC com- 174 Gerry Ritz online biography, Silobreak- missioner, Western Producer, February 21, 2008. er, at: http://silobreaker.com/FactSheetReader. 163 See the CBC’s description of the riding of Bat- aspx?Item=5_779133952; tlefords-Lloydminster at: http://www.cbc.ca/cana- See also: Gerry Ritz’ Member of Parliament and Min- davotes2004/riding/228/ and http://www.cbc.ca/news/ isterial websites at: www.gerryritzmp.com/about.php canadavotes/riding/228/index.html . and http://www4.agr.gc.ca/AAFC-AAC/display-afficher. 164 Maps of these ridings are available online at: do?id=1203439690684&lang=eng , respectively, and http://www.cbc.ca/news/canadavotes/content/rid- the biographical sketch that appears on Prime Min- ings_pdf/237.pdf and ister Harper’s website at: http://pm.gc.ca/includes/ send_friend_eMail_print.asp?URL=/eng/bio.asp&id http://www.elections.ca/scripts/fedrep/searchengine/ =78&page=ministry&langFlg=e . PDF2/47/47001.pdf , respectively. 175 The appointment was announced December 21, 165 Battlefords-Lloydminster Riding Profile, 2008 2007 and took effect January 21, 2008. (Appointment election, Canadian Broadcasting Corporation, avail- to Canadian Grain Commission, Agriculture and able online at: http://www.cbc.ca/news/canadavotes/ Agri-Food Canada news release, December 21, 2007, riding/228/index.html . available online at: http://www.agr.gc.ca/cb/index_e. 166 ZoomInfo Business People Information, Elwin php?s1=n&s2=2007&page=n71221 ) Hermanson biography, available online at: http://www. 176 The code of conduct for Canada’s public service zoominfo.com/people/Hermanson_Elwin_437362127. states that “Public servants must work within the laws aspx ; also of Canada and maintain the tradition of the political Susan Munroe, Elwin Hermanson, Canada Online; neutrality of the Public Service.” (Values and Ethics http://canadaonline.about.com/od/partyleaderssk/p/ Code for the Public Service, Canada Public Service elwinhermanson.htm . Agency, available online at: http://www.psagency- 167 Saskatchewan Party Website, The Party, at: http:// agencefp.gc.ca/pol/vec-cve01-eng.asp .) www.saskparty.com/theparty.html . 177 Hermanson published the opinion piece in the 168 ZoomInfo Business People Information, Elwin February 7th edition of the prominent Western Pro- Hermanson biography, available online at: http://www. ducer. (New chief outlines CGC changes — Opinion, zoominfo.com/people/Hermanson_Elwin_437362127. Western Producer, February 7, 2008, available online aspx . at: http://www.producer.com/free/editorial/opinion. php?iss=2008–02–07&sec=opinion&sto=00111 .)

74 canadian centre for policy alternatives 178 Mr. Hermanson’s letter concludes: “As chief com- • Saskatchewan Wheat Pool, Wikipedia, http:// missioner of the CGC, I strongly support this legisla- en.wikipedia.org/wiki/Saskatchewan_Wheat_Pool ; tion…” (New chief outlines CGC changes — Opinion, accessed Aug. 24, 2008. Western Producer, February 7, 2008, op. cit..) For a more detailed, academic examination of the 179 Wilson, Barry, MPs have issues with CGC com- recent history and transformation of the Saskatch- missioner, Western Producer, February 21, 2008. ewan Wheat Pool, see: Lang, Katherine (2006) Cog- 180 Grain commission chief fails to win approval nition, Agency Theory and Organizational Failure: A from committee, CBC News, March 19, 2008, avail- Saskatchewan Wheat Pool Study, M.Sc. Thesis, De- able online at: http://www.cbc.ca/canada/saskatche- partment of Economic, University of Saskatchewan. wan/story/2008/03/19/hermanson-committee.html . Available online at: 181 Grain commission chief fails to win approval http://library2.usask.ca/theses/available/etd-01032007– from committee, CBC News, March 19, 2008, avail- 132828/unrestricted/Lang_MScThesis_Dec2006.pdf . able online at: http://www.cbc.ca/canada/saskatche- 187 Cargill website; 2008 Summary Annual Report, wan/story/2008/03/19/hermanson-committee.html . available online at: http://www.cargill.com/2008- 182 December 21, 2007 annual/index.html , and Summary of Cargill’s His- tory, available at http://www.cargill.com/files/histo- 183 The Agriculture Union for the Public Service Alli- rysummary.pdf . ance of Canada released the full text of the memo, which 188 cites the aforementioned code of conduct, formally Louis Dreyfus website; Worldwide Businesses of known as “The Values and Ethics Code for the Public Louis Dreyfus, available online at: http://www.louis- Service”. See: Retract Grain commission Gag Order, dreyfus.com/content.cfm?page=index.cfm&gbus=8 . Agriculture Union news release, February 6, 2008, 189 James Richarson & Sons, Limited website; http:// http://www.agrunion.com/en/2008newsreleases.html . www.jrsl.ca ; accessed August 28, 2008. 184 The code states: “Ministers are responsible for… 190 ADM Tenders Shares of Agricore United to Re- maintaining the tradition of political neutrality of vised Bid by Saskatchewan Wheat Pool, Inc., Archer the Public Service…” (Values and Ethics Code for the Daniels Midland Company news release, June 24, 2007. Public Service, Canada Public Service Agency, avail- Available online at: http://www.admworld.com/naen/ able online at: http://www.psagency-agencefp.gc.ca/ pressroom/newspopup.asp?id=466&name=ADM_Ten- pol/vec-cve01-eng.asp .) ders_Shares. See also, ADM 2007 Annual Report, pp. 185 Rabson, Mia, Opposition rejects new grain com- 4, 21 and 24, available online at: http://www.admworld. mission head, Former Reform MP Hermanson called com/pdf/adm_2007_annual_report.pdf . too partisan, Winnipeg Free Press, March 16, 2008. 191 ADM 2007 Annual Report, available online at: 186 This brief summary of the history of the Pools is http://www.admworld.com/pdf/adm_2007_annu- drawn from the following sources: al_report.pdf . 192 • Lang, Kathy, Saskatchwan Wheat Pool, The Encyclo- Viterra website, Extending Our Reach, corpo- pedia of Saskatchewan, available online at: http://es- rate profile, available online at: http://www.viterra. ask.uregina.ca/entry/saskatchewan_wheat_pool.html . ca/portal/wps/wcm/resources/file/ebc63d0503c083a/ VT_ProfileFINAL.pdf ; Viterra 2007 Annual Report, • Saskatchewan Wheat Pool: From Farmer’s [sic] Fields available online at: http://www.viterra.ca/portal/wps/ to Bay Street, Canadian Broadcasting Corporation, wcm/resources/file/eb4e0900a8186c0/VT_07_AR.pdf Available online at: http://www.cbc.ca/sask/features/ ; accessed August 28, 2008. saskpool/ , accessed August 28, 2008.

Threatened Harvest 75 193 The May 24, 2008 news release by the Canadi- […] an Food Inspection Agency is misleading in that it (b)“sell, advertise for sale in Canada or import into implies that all of the proposed amendments to the Canada seed of a variety that is not registered in the Seeds Regulations were related only to KVD elimi- prescribed manner” nation, when in fact the changes were broader. The (The Act can be found online at” http://laws.justice,c. release states in part: ca/en/showdoc/cs/S-8/bo-ga:s_3//en#anchorbo-ga:s_3 ) “The proposed amendments would revoke section 42 195 The text of Section 42, which was eliminated, is of the Seeds Regulations thus removing the import not readily available online. It is reproduced here in requirements related to KVD and distinguishability its entirety: for seed of wheat and spring barley imported into the Canadian Wheat Board Area of western Canada.” “42. Seed of spring wheat, winter wheat, durum wheat or spring barley may be imported into the Canadian It also states: Wheat Board Area only where “The proposed amendments will align import re- (a) the seed is of pedigreed status of a variety regis- quirements with the policy tered under Part III and there are no restrictions with decision, announced by Minister Ritz on February respect to its sale in the Canadian Wheat Board Area; 11, 2008, to eliminate KVD from all classes of western Canadian wheat as of August 1, 2008.” (b) the seed (Proposed Amendments to Seeds Regulations Pub- (i) in the case of wheat, is visually distinguishable from lished, Canadian Food Inspection Agency news release, all varieties of spring wheat, winter wheat and durum May 24, 2008, available online at: http://www.inspec- wheat that are suitable for milling and baking or for tion.gc.ca/english/corpaffr/newcom/2008/20080524e. making alimentary pastes, and that are registered un- III shtml ) der Part for the Canadian Wheat Board area, and This misleading announcement has not been corrected, (ii) in the case of barley, is distinguishable from all and the correct information was provided only when varieties of spring barley that are suitable for malt- III the changes were adopted and published — five days ing or pearling and that are registered under Part after the elimination of KVD. The formal registration for the Canadian Wheat Board Area; or of the new regulations, published in the Canada Ga- (c) in the case of seed that is of a variety not regis- zette on August 6, 2008 states: tered under Part III for the Canadian Wheat Board “While paragraphs 42(a) and (c) are not specifically Area, is imported into the Canadian Wheat Board related to the removal of KVD import requirements, Area for plant breeding or plant research purposes, they were also repealed in these amendments.” and the importer (Regulations Amending the Seeds Regulations, (i) is actively engaged in plant breeding or plant re- SOR/2008–228, July 28, 2008. Canada Gazette, Vol. search with spring wheat, winter wheat, durum wheat 142, No. 16, August 6, 2008, Regulatory Impact Anal- or spring barley, ysis Statement, description and rationale, wheat (ii) agrees in writing that the seed imported and any import requirements, available online at http:// progeny thereof canadagazette.c.ca/partII/2008/20080806/html/ (A) will not be sold to any person in Canada sor228-e.html ) (B) will not be distributed to any person in Canada 194 Section 3 of the Seeds Act states: who is not qualified under this paragraph to import “(1)Except as provided by the regulations, no per- such seed, and son shall

76 canadian centre for policy alternatives (C) will not be sown or otherwise used for any pur- “Except as provided by the regulations, no person shall… pose other than plant breeding or plant research, and (b) sell or advertise for sale in Canada or import into (iii) undertakes in writing, on request, for the pur- Canada seed of a variety that is not registered in the pose of verifying compliance with the agreement prescribed manner.” referred to in subparagraph (ii), to provide the Min- (Seeds Act, R.S., 1985, c. S-8, available online at http:// ister with information relating to the importation, laws.justice.gc.ca/en/ShowTdm/cs/S-8///en ). distribution, use and disposition of the seed and of 199 Ibid. any progeny thereof. SOR/85–903, s. 2; SOR/88–297, s. 200 1; SOR/96–252, s. 2.” Ewins, Adrian, Seed rule changes pose threat, Western Producer, July 17, 2008, p. 1. 196 With respect to the elimination of paragraph 201 42(a), the July 28 Regulatory Impact Analysis State- The CFIA proposal noted in turn that “[T]his ment states: would result in an increase in the administration and enforcement of the Regulations by the CFIA. It would “The World Trade Organization trade rules require also result in increased monitoring and enforcement that imported products are not treated any less fa- for the Canadian Grain Commission.” (May 24, 2008 vourably than domestically produced products. It has Regulatory Impact Analysis Statement, op. cit.) therefore been decided to eliminate the requirement 202 that all wheat seed imported into the CWB Area be of Dawson, Allan, Unregistered wheat still re- pedigreed status when domestic seed sold in Canada stricted, Alberta Farmer Express, available online may be of either common or pedigreed status.” at: http://digital.albertafarmerexpress.ca/xta-asp/ storyview.asp?pc=AE&viewtype=browse&tpl=sho With respect to the elimination of paragraph 42(c) of wart_body&vpath=/xta-doc/ae/2008/08/25/007/ae- the regulations, the Analysis Statement states: 20080825–007-unregisteredwhe-16155.html . “These amendments ensure Canada is consistent with 203 Paragraph 42(c)(i). its international trade obligations by aligning import 204 with domestic wheat seed requirements.” Paragraph 42(c)(ii)(A). 205 (Regulations Amending the Seeds Regulations, Paragraph 42(c)(ii)(C). SOR/2008–228, July 28, 2008. Canada Gazette, Vol. 206 Paragraph 42(c)(iii). 142, No. 16, August 6, 2008, Regulatory Impact Anal- 207 Imports of these unregistered wheat varieties for ysis Statement, description and rationale, wheat seeding by the importer remain prohibited. import requirements, available online at http:// The amendments eliminate paragraph 42 (c) of the canadagazette.c.ca/partII/2008/20080806/html/ regulations and add provisions, which are less strin- sor228-e.html ) gent, to Section 41 of the regulations. The revised sec- 197 In its May 24, 2008 Regulatory Impact Analysis tion 41 is reproduced in its entirety as follows: Statement, the CFIA proposed option two, the re- “41. (1) Subject to subsection (2), seed of any variety is moval of restrictions on importation of wheat seed exempt from the operation of paragraph 3(1)(b) of the into western Canada, but ultimately adopted option Act if it is imported into Canada for the purpose of four, the removal of the restrictions on importation of wheat seed into western Canada, while retaining (a) conditioning; existing restrictions on import of seed of unregis- (b) research; tered varieties for seeding by the importer. (See the (c) seeding by the importer; or July 28, 2008 Regulatory Impact Analysis Statement.) (d) sale pursuant to subsection 5(4). 198 Section 3(1)(b) of the Seeds Act prohibits the sale of seed of unregistered varieties. It states:

Threatened Harvest 77 (2) Seed of any variety of spring wheat, winter wheat (i) seed sold for the production of pedigreed seed, or durum wheat that is imported into the Canadian all of the progeny will be delivered to a destination Wheat Board Area is exempt from the operation of specified in the contract, or paragraph 3(1)(b) of the Act only if it is imported for (ii) varieties that are entered into variety registra- the purpose of tion trials, all of the progeny will be delivered to an (a) conditioning; industrial mill or plant for the sole purpose of evalu- (b) research; or ating the variety for its suitability for processing; and (c) sale pursuant to subsection 5(4). (e) all of the progeny of the seed is delivered to the destination specified in the contract referred to in SOR/96–252, s. 2; SOR/2008–228, s. 1. ” paragraph (d). This provision can be viewed online at: http://laws. 210 In other words, the change eliminates the distinc- justice.gc.ca/en/ShowTdm/cr/C.R.C.-c.1400///en. tive western Canadian wheat (and barley) research 208 The Seeds Regulations define “condition” as follows: allowance for unregistered variety imports, and re- “’condition’, with respect to seed, means to prepare places it with the broader research allowance that ap- by cleaning, processing, packing, treating or chang- plies for other crops throughout Canada. ing in any other manner the nature of a seed lot…” 211 The change eliminates the tightly-circumscribed (Seeds Regulations, C.R.C., c. 1400, available online at: exemption for the Canadian Wheat Board area that http://laws.justice.gc.ca/en/ShowTdm/cr/C.R.C.- had allowed imports of unregistered wheat for “plant c.1400///en ) breeding or plant research”. Under the previous sys- tem, only individuals who were “actively engaged in 209 Section 41(1)(d) of the Seeds Regulations pro- plant breeding or plant research with spring wheat, vides an exemption from the import prohibition for winter wheat, durum wheat or spring barley” could so-called “closed loop sales” — seed that is imported import unregistered varieties into western Canada, “for the purpose of sale pursuant to subsection 5(4)” and only if they met a series of stringent requirements. of the Regulations. All of this seed must be pedigreed 212 seed and its ultimate destination of all of the seed is The CFIA acknowledges this loophole, but plays strictly controlled. it down. The July 28, 2008 Regulatory Impact Analy- sis Statement of the changes states: Subsection 5(4) states: “There may be a slight increase in the importation (4) Seed of any variety is exempt from the operation of of seed of unregistered varieties for … production of paragraph 3(1)(b) of the Act [--the prohibition against pedigreed seed (for export or in anticipation of reg- imports of unlicensed varieties--] in so far as it may be istration of the variety in Canada).” sold or advertised for sale without being registered if (Regulations Amending the Seeds Regulations, (a) the seed is of pedigreed status; SOR/2008–228, July 28, 2008. Canada Gazette, Vol. (b) the seed is labelled in accordance with section 35; 142, No. 16, August 6, 2008, Regulatory Impact Analysis (c) the seed is to be sold Statement, Implementation, enforcement and service (i) for the production of pedigreed seed, or standards, second to last paragraph, available online at http://canadagazette.c.ca/partII/2008/20080806/ (ii) where the variety is entered in variety registration html/sor228-e.html ). trials, for the production of material for evaluation of 213 its suitability for processing; The relevant portion of Section 42, which was eliminated, read as follows: (d) the seed is sold pursuant to a contract that speci- fies that in the case of

78 canadian centre for policy alternatives “42. Seed of spring wheat, winter wheat, durum wheat tice.gc.ca/en/showdoc/cr/C.R.C.-c.1400/bo-ga:s_2// or spring barley may be imported into the Canadian en#anchorbo-ga:s_2 . Wheat Board Area only where 216 As noted in a previous endnote, the Seeds Regu- […] lations define “condition” as follows: (c) in the case of seed that is of a variety not regis- “’condition’, with respect to seed, means to prepare tered under Part III for the Canadian Wheat Board by cleaning, processing, packing, treating or chang- Area, is imported into the Canadian Wheat Board ing in any other manner the nature of a seed lot…” Area for plant breeding or plant research purposes, (Seeds Regulations, C.R.C., c. 1400, available online and the importer at: http://laws.justice.gc.ca/en/ShowTdm/cr/C.R.C.- (i) is actively engaged in plant breeding or plant re- c.1400///en ) search with spring wheat, winter wheat, durum wheat 217 The Regulatory Impact Analysis Statement em- or spring barley, phasizes the rapidity with which previously unreg- (ii) agrees in writing that the seed imported and any istered wheat varieties could become available in progeny thereof western Canada: (A) will not be sold to any person in Canada “While this regulatory amendment does not provide (B) will not be distributed to any person in Canada immediate access to foreign varieties of wheat that who is not qualified under this paragraph to import have not been registered in Canada, foreign and Ca- such seed, and nadian-bred varieties will be available to producers after variety testing and registration in Canada. Af- (C) will not be sown or otherwise used for any pur- ter two years of agronomic trials and disease testing, pose other than plant breeding or plant research, and Canadian or foreign-bred ethanol and feed varieties (iii) undertakes in writing, on request, for the pur- are eligible for registration. Further increasing the pose of verifying compliance with the agreement timeliness of access to new varieties, only a single referred to in subparagraph (ii), to provide the Min- year of testing is required for interim (time-limited) ister with information relating to the importation, registration of varieties. These varieties may then distribution, use and disposition of the seed and of be eligible for permanent registration after further SOR SOR any progeny thereof. /85–903, s. 2; /88–297, s. testing. In summary, foreign varieties may be eligi- SOR 1; /96–252, s. 2.” ble for variety registration in Canada after registra- 214 This change was effected through the elimination tion requirements have been met and then available of paragraph 42(a) of the regulations. to producers after testing and registration in Canada, 215 “Pedigreed status” is defined in the Seeds Regu- possibly as early as spring 2009.” lations as being seed that is either (Regulatory Impact Analysis Statement, SOR/2008– • of foundation status, 228 July 28, 2008, p. 5, bolding added for emphasis) 218 • of registered status, The CFIA website states: • of certified status, “There are a number of Canadian varieties currently going through variety registration trials for the feed • each of which entail meeting specific standards for and ethanol markets. It is anticipated that a number varietal purity—or of varieties will be supported for registration at the • is approved as breeder seed or select seed. February 2009 Recommending Committee meeting The first three of these categories are defined in the and a larger number at the Recommending Commit- Seeds Regulations, available online at: http://laws.jus- tee meeting in 2010.”

Threatened Harvest 79 (Canadian Food Inspection Agency, Regulations 225 On October 28, 2008, the CFIA sponsored a Na- amending the Seeds Regulations to remove the kernel tional Workshop on Seed Program Modernization, visual distinguishability (KVD)-related and distinguish- which included at presentation by the CFIA’s Wendy ability restrictions for seed of wheat and spring barley Jahn on “Importation of Unregistered Varieties for varieties, respectively, imported into the Canadian Seeding by the Importer” This presentation, which Wheat Board Area, Information Bulletin, Questions is available from the CFIA, indicates that the gov- and answers, available online at: http://www.inspec- ernment “is committed to holding stakeholder con- tion.gc.ca/english/plaveg/seesem/visqueste.shtml .) sultations on whether or not to maintain the prohi- 219 Regulatory Impact Analysis Statement, May 24, bition on the importation of seed for seeding by the 2008, p. 5. importer of unregistered varieties of wheat into the CWB area.” (p. 4). 220 Regulatory Impact Analysis Statement, May 24, 226 2008, p. 6. It is not clear whether the CFIA believed Watson, Grant L., 80 Years of Variety Registration, the inconsistency to be with “the Minister’s announce- un-dated paper that was posted on the CFIA website ment” or with international treaty obligations. but has since been removed. Upon request, CFIA of- ficials provided a copy to the authors. 221 In May, the CFIA criticized the option it later 227 implemented in August: Regulations Amending the Seeds Regulations (Part III and Schedule III), Regulatory Impact Anal- “Implementation of this option is not recommended ysis Statement, Description, Canada Gazette, Vol. as it would not provide producers with timely access 142, No. 26, June 28, 2008, available online at: http:// to new varieties.” gazetteducanada.gc.ca/partI/2008/20080628/html/ Regulatory Impact Analysis Statement, May 24, regle1-e.html . 2008, p. 6. 228 Phase II of the Modernization of the Variety 222 Regulatory Impact Analysis Statement, SOR/2008– Registration System: Discussion Document on Crop 228 July 28, 2008, p. 7. Specific Registration Requirements in a Two-Tiered 223 Regulatory Impact Analysis Statement, SOR/2008– Registration System, Section 1.1 What is variety regis- 228 July 28, 2008, p. 5. tration?, November 29, 2007, provided to the authors 224 In backing away from the CFIA outlined the by CFIA officials. reasons for the opposition for its recommendation. 229 Amendments to the Seeds Regulations to In- As the Regulatory Impact Analysis Statement notes: crease the Flexibility of the Variety Registration Sys- “The major concern raised with the recommended tem, Questions and Answers, p. 1 of 5, CFIA website, option was that allowing the import of unregistered http://www.inspection.gc.ca/english/plaveg/variet/ varieties for seeding by the importer would increase varqueste.shtml . the risk of the delivery of unregistered varieties into 230 Regulations Amending the Seeds Regulations the grain handling system, thus impacting the qual- (Part III and Schedule III), Regulatory Impact Analy- ity of grain shipments. In particular, allowing import sis Statement, Description, Canada Gazette, Vol. 142, of unregistered varieties would inhibit tracking and No. 26, June 28, 2008, p. 9 of 22, available online at: tracing of seed and, subsequently, the tracking and http://gazetteducanada.gc.ca/partI/2008/20080628/ tracing of the resulting crop entering the grain han- html/regle1-e.html . dling system.” 231 These tiers are referred to as “Part I”, “Part II” and Regulatory Impact Analysis Statement, SOR/2008–228 “Part III” referring to the three parts of the schedule July 28, 2008, p. 6. that lists crops subject to variety registration under the regulations. See: Regulations Amending the Seeds

80 canadian centre for policy alternatives Regulations (Part III and Schedule III), Regulatory would have eliminated pre-registration performance Impact Analysis Statement, Description, Canada testing and merit assessments for certain crops. The Gazette, Vol. 142, No. 26, June 28, 2008, pp. 20,21 of CFIA reports that ‘[t]here was … a lack of consensus 22, available online at: http://gazetteducanada.gc.ca/ on the proposed changes to the variety registration partI/2008/20080628/html/regle1-e.html . system, particularly with respect to crop placement 232 Note that the CFIA misleadingly refers to the first in the proposed flexible (tiered) registration system.” tier as the “status quo” even though it is proposing de- This failure to reach consensus provided the impetus regulatory changes to it. For example, the assessment for subsequent consultation processes. of merit is to be made on the basis of fewer criteria (Phase II of the Modernization of the Variety Reg- than is currently the case, and in future could be made istration System: Discussion Document on Crop on the basis of only one criterion. The CFIA states: Specific Registration Requirements in a Two-Tiered “[T]he CFIA would continue to revise its policies to in- Registration System, Section 1.2, Consultation His- crease the flexibility and effectiveness of the variety tory, November 29, 2007, provided to the authors by CFIA registration system. This would include a revision of officials.) policies that require assessment of the agronomic, For a critical analysis of the 2006 proposals, see: quality, and disease merit criteria to allow for merit An Analysis of the Canadian Food Inspection Agen- to be specifically defined as one type of characteristic cy’s ‘Proposal to Facilitate the Modernization of the (e.g. quality only) if there is rationale and consensus Seed Regulatory Framework’, National Farmers Un- for this change.” ion, December 2, 2006, available online at: CFIA Significantly, according to the , “no regulatory http://thenfu.sasktelwebhosting.com/briefs_policy/ change is required” for the merit criteria for crops briefs/2006/Seed_changes_brief_FINAL.pdf . within the first tier to be loosened in this way. (See: 234 The CFIA states: Flexible Variety Registration System: Proposed Proc- ess for Crop Specific Changes,CFIA Draft, p. 3, Octo- [In addition to the four crops that are placed in Part III ber 2008, supplied by CFIA officials.) II or , “All other crop kinds [subject to registration] would … be listed in Part I … as per the status quo. It The amendments would also make recommending is expected that there would be future changes in the committees subject to approval by the Minister. the placement of crop kinds, effected through regulatory committees’ role in assessing testing would be lim- amendments, as the rationale and consensus for change ited to determining “whether the variety has been are established through crop specific consultation.” tested in accordance with the relevant testing pro- III tocols.” (See Section 2 of the proposed amendments) Regulations Amending the Seeds Regulations (Part and Schedule III), Regulatory Impact Analysis State- (Regulations Amending the Seeds Regulations (Part III ment, Description, Canada Gazette, Vol. 142, No. 26, and Schedule III), Regulatory Impact Analysis State- June 28, 2008, p. 2 of 22, available online at: http:// ment, Description, Canada Gazette, Vol. 142, No. 26, gazetteducanada.gc.ca/partI/2008/20080628/html/ June 28, 2008, pp. 6, 10, 17, and 18, available online at: regle1-e.html . http://gazetteducanada.gc.ca/partI/2008/20080628/ CFIA html/regle1-e.html .) The has commenced consultation on assigning crops to tiers. This process will be controversial, and 233 The CFIA has contemplated relaxing aspects of the CFIA emphasizes that while it plans to consider the the Seeds Regulations for many years, and has con- views of all stakeholder groups, it will not require con- ducted workshops and consultative meetings on the sensus before making changes. (See: Flexible Variety topic since 1998. In early 2000 it proposed what it Registration System: Crop Placement Process, Pres- called a “flexible (tiered) registration system” which entation by Cindy Pearson at National Workshop on • CFIA seed program Strategic Action Plan—2008, Seed Program Modernization, October 28, 2008, p. 5.) provided by CFIA officials. 235 Regulations Amending the Seeds Regulations 240 At the October 28, 2008 Seed Program Mod- (Part III and Schedule III), Regulatory Impact Analy- ernization Meeting held in Ottawa, the CFIA re- sis Statement, Description, Canada Gazette, Vol. 142, leased a presentation entitled “Reviewing Canada’s No. 26, June 28, 2008, p. 10 of 22, available online at: Seed Certification System”. In it, theCFIA indicated http://gazetteducanada.gc.ca/partI/2008/20080628/ that it would form an industry-government working html/regle1-e.html . group to “develop options for change” with respect 236 The CFIA acknowledges this risk, but plays it to many aspects of the seed certification system and down, noting that “[A]s in the current system, pro- that these proposals would be the subject of “further ducers would have to carefully research varieties prior consultation” in 2009. to making purchasing decisions.” While consultation on some aspects of the program Ibid., p. 11 of 22. are still relevant, one of the key issues — the future extent of CFIA involvement in delivering the seed cer- 237 Watson was referring specifically to the “general tification system — is moot. The issue has apparently trend to move away from the merit principle” in va- already been decided; CFIA’s direct involvement in seed riety registration. certification will end. 238 Watson, Grant L., (undated) 80 Years of Variety Last November, the federal Treasury Board approved Registration. This paper was posted at: Http://www. the CFIA 2007–2008 Strategic Review proposal for inspection.gc.ca/english/plaveg/variet/vrhiste.shtml the CFIA to withdraw from the current seed certifi- but no longer appears there. CFIA officials report that cation program. TheCFIA currently delivers it jointly it was withdrawn from the website. The Watson pa- with the Canadian Seed Growers’ Association (CSGA). per was recently cited in: Treasury Board approved “shifting the program de- Berwald, Derek, Carter, Colin A., & Gruere, Guil- livery of seed certification (including inspection) to laume P. (2006) Rejecting New Technology: the Case an industry-led third party” resulting in the creation of Genetically Modified Wheat, American Journal of of “an industry based single administrative process Agricultural Economics, May 1, 2006., available free and unit for seed certification in Canada.” The confi- online at: http://www.allbusiness.com/north-america/ dential Treasury Board document revealing this and united-states/1173779–1.html . other deregulatory changes was leaked to the public 239 See: and is posted online at: http://www.theglobeandmail. • Update from CFIA, CSTA Annual Meeting, St. com/v5/content/pdf/cfiamemo.pdf . John’s, Newfoundland, July 5–8, 2008 (available on- 241 This is listed as item 10.5 in the 2008 Strategic line at http://www.cdnseed.org/convention-summer/ Action Plan. S2008/CFIAUpdate.pdf ). 242 See part V of the Seeds Regulations, sections • Chancey, Glyn, Welcoming Address, National 107–112, available online at: Workshop on Seed Program Modernization, Octo- http://laws.justice.gc.ca/en/showdoc/cr/C.R.C.-c.1400/ ber 28, 2008 bo-ga:l_III//en#anchorbo-ga:l_III .

82 canadian centre for policy alternatives

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