Voluntary Report - public distribution

**Date:** 4/1/2005

**GAIN Report Number:** CA5023

CA5023

**Canada**

**Agricultural Situation**

**This Week in Canadian Agriculture, Issue 12**

**2005**

**Approved by:**

![](media/image1.wmf)Gary Groves

U.S. Embassy

**Prepared by:**

Christina Patterson and George Myles

**Report Highlights:**

\* C\$1 Billion Farm-Aid Program \* No Provincial Top Up to Federal Aid
Package \* Canada Imposes Retaliatory Duties To Protest Byrd Amendment
\* Canada Expands Import Access for U.S. Cattle, Other Live Animals and
Meats \* Secretary Johanns and Agmin Mitchell Issue Joint Statement \*
Cuba Open to Canadian Cattle \* Health Canada Releases Food
Fortification Policy \* New Ontario Tobacco Transition Fund \* Infusion
of Money Good First Step, But Still Not Enough \* Battle Against
Mountain Pine Beetle Receives a Boost \* Farmers Win Right to go to
Court

Includes PSD Changes: No

Includes Trade Matrix: No

Unscheduled Report

Ottawa \[CA1\]

\[CA\]

This Week in Canadian Agriculture is a weekly review of Canadian
agricultural industry developments of interest to the U.S. agricultural
community. The issues summarized in this report cover a wide range of
subject matter obtained from Canadian press reports, government press
releases, and host country agricultural officials and representatives.

*Disclaimer*: Any press report summaries in this report are included to
bring U.S. readership closer to the pulse of Canadian developments in
agriculture. In no way do the views and opinions of these sources
reflect USDA's, the U.S. Embassy's, or any other U.S. Government
agency's point of view or official policy.

**C\$1 BILLION FARM-AID PROGRAM:** The GOC has announced C\$1 billion
(\$820 million) in immediate federal assistance for Canadian farmers
facing record low farm incomes. Most of the money will be paid to cattle
ranchers and grain and oilseed producers. The new Farm Income Payment
Program comes on the heels of record government financial assistance
programs that paid out C\$4.9 billion to Canadian farmers during
calendar year 2004. The Canadian government said the payout was the
first step in an aggressive all-out effort to restructure the
agriculture and agri-food industry in an attempt to return profitability
to the sector. More than half of the payout, about C\$480 million, will
go to grain and oilseed producers while cattle ranchers could receive up
to C\$300 million. An estimated C\$220 million will be for producers of
other animals, such as sheep and other crops including horticulture. For
additional information see CA5024. Canada's so called "amber box" limit,
declared in terms of a single figure "Aggregate Measurement of Support"
(AMS) is C\$4.3 billion. Despite the recent record government program
payments (federal and provincial) to Canadian farmers and the new C\$1
billion FIPP, all indications are that Canada remains within its current
WTO obligations with regard to domestic support.

**NO PROVINCIAL TOP UP TO FEDERAL AID PACKAGE:** Canada\'s Provincial
Ministers of Agriculture welcomed the federal government\'s announcement
of a C\$1 billion aid package for the agriculture sector, but rejected
additional provincial funding for the initiative. In a joint statement,
the provinces of Alberta, British Columbia, Manitoba, New Brunswick,
Newfoundland, Nova Scotia, Ontario, Prince Edward Island, Quebec and
Saskatchewan applauded federal agriculture minister Andy Mitchell for a
federal initiative aimed at improving cash flow for Canadian producers.
"We wish to commend the Government of Canada for making such a
substantial investment in short term relief for our nation\'s farm
families. This package is a significant commitment from the federal
government to Canada\'s agriculture sector. All governments acknowledge
that the combination of economic pressures resulting from BSE, depressed
commodity prices and ongoing trade disputes has put our entire
agriculture sector in an extremely difficult financial position.
However, our individual provinces already have committed unprecedented
resources to this crisis and to long-term programs developed for the
national Agricultural Policy Framework. The federal government alone has
the fiscal capacity to deliver an equitable, national agricultural
support program...."

**CANADA IMPOSES RETALIATORY DUTIES TO PROTEST BYRD AMENDMENT:** On
March 31, 2005, Canada announced that effective May 1 2005, it would
apply a 15 percent surtax on imports of U.S. live swine, cigarettes,
oysters, ornamental fish, and certain frozen fish. Last August, a WTO
Arbitrator ruled that Brazil, Canada, Chile, the European Union, India,
Japan, Mexico and South Korea could retaliate against the U.S. for the
Byrd Amendment that allows U.S. companies to receive the duties
collected as a result of the anti-dumping and/or countervailing duty
orders. In its press release, International Trade Canada made the
comparison that while its retaliation is C\$14 million this year, the
U.S. has collected softwood lumber duties from Canada of approximately
\$4.3 billion and continues to collect them at a rate of over \$1
billion annually. Canada feared that once the current lumber litigation
is complete, the United States would be in a position to disburse these
duties to U.S. producers. Trade Minister Jim Peterson said in a
statement that retaliation is not Canada's preferred option, but is a
necessary action. During its study of the issue, Canada proposed two
retaliatory options: tariff measures on certain imports from the U.S.
and the suspension of the injury test in the context of Canadian
anti-dumping and countervailing duty investigations involving imports
from the United States.

**CANADA EXPANDS IMPORT ACCESS FOR U.S. CATTLE, OTHER LIVE ANIMALS AND
MEATS:** Effective immediately, the Canadian Food Inspection Agency
(CFIA) has expanded access to allow for a range of U.S. commodities that
have been prohibited since a case of BSE was detected in Washington
State in December 2003. This is an important step towards the harmonized
North American import standard for bovine spongiform encephalopathy
(BSE) recently agreed upon by officials from Canada, Mexico and the
United States. The proposed regulations were published in the *Canada
Gazette*, Part II, on March 31 2005. Under the new import regulations,
additions to commodities now allowed include feeder cattle less than 30
months of age, goats and sheep less than 12 months of age for feeding or
immediate slaughter, and bulls destined for animal semen production
centers. Bone-in sheep and goat meat from animals under 12 months of age
will also now be permitted. With respect to fertilizers and animal
foods, the regulations have been broadened to prohibit the importation
of these products if they contain ingredients derived from any ruminant
animals. The CFIA believes this is consistent with OIE guidelines.

**SECRETARY JOHANNS AND AGMIN MITCHELL ISSUE JOINT STATEMENT:**
Agriculture Secretary Mike Johanns and Canadian AgMin Andy Mitchell met
on the margins of the Cairns Group meeting in Columbia this week and
discussed the WTO and BSE issues. In a joint statement they described
the importance of increased political commitment to the WTO agricultural
negotiations and reasserted their commitment to the normalization of
trade in live cattle and beef products in North America. The full
statement is available on the USDA homepage.

**CUBA OPEN TO CANADIAN CATTLE:** Agriculture and Agri-Food Minister
Andy Mitchell was in Cuba this week to promote trade and meet with
Minister of Agriculture Alfredo Jordán Morales. After the meeting
Mitchell announced that Cuba would accept live cattle from Canada
following a nearly two-year BSE-related ban. Cuba accepted Canadian beef
late last year (see CA4089). Mitchell also said Tunisia and Lebanon had
also recently lifted their bans on Canadian beef imports. The Minister
proceeded to Cartagena, Colombia, for the Cairns Group meeting.

**HEALTH CANADA RELEASES FOOD FORTIFICATION POLICY:** In 1998 Health
Canada launched a review of its food fortification policy, the practice
of adding vitamins and minerals to foods. This week, it released a
policy proposal entitled *Addition of Vitamins and Minerals to Food,
2005: Health Canada\'s Proposed Policy and Implementation Plans*. With
the completion of the policy review, Health Canada will draft
regulations to implement the policy. Interested parties will have a
chance to review and comment on the draft regulations when they are
published in *Canada Gazette* Part I, prior to their becoming law. The
regulatory process usually takes about 12-18 months. Health Canada has
long restricted the sale of breakfast cereals fortified at U.S. levels.
The HC proposal reportedly provides for higher levels of addition of
vitamins and minerals in an effort to allow greater trade harmonization.
A full copy of Canada's proposed food fortification policy is available
at:

http://www.hc-sc.gc.ca/food-aliment/ns-sc/ne-en/nq-n/e_foritfication_final_doc_1.html

**NEW ONTARIO TOBACCO TRANSITION FUND:** Through a new C\$50 million
Tobacco Community Transition Fund, the Ontario government will provide
C\$35 million to assist tobacco growers in the province to exit the
industry while tobacco growing communities will receive C\$15 million to
encourage economic diversification. The monies are intended to offset
some of the impact of Ontario's Tobacco Strategy that is designed to
reduce tobacco use in the province and is negatively affecting growers
and their communities. There are about 770 flue-cured tobacco growers in
Ontario, down from almost 1,100 in 1998. According to the province,
Ontario tobacco producer's revenues fell by approximately C\$140 million
between 1998 and 2004. The 2004 crop was set at 87.9 million pounds,
down from 94.1 million pounds in 2003, and from 154.9 million pounds in
1997.

**INFUSION OF MONEY GOOD FIRST STEP, BUT STILL NOT ENOUGH**: Ontario's
Grain and Oilseed group, whose members include of the Ontario Canola
Growers' Association, the Ontario Colored Bean Growers' Association, the
Ontario Corn Producers' Association, the Ontario Soybean Growers, the
Ontario Wheat Producers' Marketing Board, the Ontario White Bean
Producers' Marketing Board and the Seed Corn Growers of Ontario, hailed
the recent announcements by the Ontario and Canadian government as a
critical first step in addressing the needs of Ontario grain and oilseed
producers. But according to the group, the money announced fails to
address the \$300 million (CDN) expected shortfall for 2005. Earlier
this week, the federal government announced \$1 billion in immediate
assistance to Canadian farmers; with roughly \$480 million allocated to
grains and oilseed producers across the country. The Ontario government
announced it would be putting an additional \$79 million (CDN) into the
2004 Market Revenue Insurance (MRI) program fund, as well as making
additional payments to eligible grain and oilseed producers by spring
planting. According to the Ontario Grain and Oilseed Group, the new
money provides much-needed short-term assistance, but the group will
continue its lobby efforts to find long-term solutions, including a
replacement program for the now-discontinued MRI. The group plans to
meet with both levels of government to present their ideas for replacing
the MRI and request funding for the new program.

**BATTLE AGAINST MOUNTAIN PINE BEETLE RECEIVES A BOOST**: The Government
of Canada recently announced it would be allocating \$100 million (CDN)
to British Columbia as part of an ongoing effort to fight the mountain
pine beetle. The money will be used for research into how to stop the
spread of the pine beetle, as well as to help harvest and sell
beetle-damaged wood. The announcement by the federal government followed
closely behind the signing of a Memorandum of Understanding (MOU) by the
governments of Alberta and British Columbia. The two provinces have
committed to work together and share the costs in managing mountain pine
beetle populations in B.C. in order to minimize the potential for beetle
infestations moving into Alberta. According to the joint release, the
two provinces are committing \$1.65 million (CDN); with B.C. investing
close to \$1 million in fall-and-burn management strategies and ongoing
monitoring of attacked trees. Alberta will fund the remainder of the
commitment. The MOU is effective for five years and may be renewed for
an additional five years by mutual agreement of the provinces. The two
provinces will annually develop a co-operative workplan to determine
funding arrangements and the forestry techniques, methods and treatments
to be completed each year for controlling and suppressing mountain pine
beetle populations.

**FARMERS WIN RIGHT TO GO TO COURT**: The Western Canadian Wheat Growers
Association (WCWGA) and the Western Barley Growers Association (WBGA)
are both applauding a recent decision by the Federal Court to allow a
class action suit brought by a group of prairie farmers against the
Canadian Wheat Board (CWB) to go ahead. The suit was first launched in
February 2002. According to the WCWGA press release, the lawsuit is
seeking to ensure all administrative and enforcement costs relating to
the CWB's export licensing function are paid for by Ottawa. As it
currently stands, only western Canadian farmers pay for these costs
through the pool accounts, even though the CWB's export licensing
authority applies to all wheat and barley growers and processors across
the country. The Federal Court also ruled against a motion by the CWB
and the Attorney General of Canada to have the case dismissed. The case
will now proceed through the courts. According to the WCWGA a final
ruling in favor of the farmers would require the federal government to
reimburse the CWB for costs relating to this national regulatory
function and could possibly lead the government to assume responsibility
for the issuance and administration of all export licenses.

# Find FAS on the World Wide Web: 

Visit our headquarters' home page at
[http://www.fas.usda.gov](http://www.fas.usda.gov/) for a complete
listing of FAS' worldwide agricultural reporting.

# 

# Recent Reports from FAS/Ottawa: 

+----------------+---------------------------------------+------------+
| Report Number  | Title of Report                       | Date       |
+----------------+---------------------------------------+------------+
| ## CA5017      | Disposal of Canada's Hopper Car Fleet | 3/14/2005  |
+----------------+---------------------------------------+------------+
| ## CA5018      | This Week in Canadian Agriculture,    | 3/11/2005  |
|                | Issue 10                              |            |
+----------------+---------------------------------------+------------+
| ## CA5015      | This Week in Canadian Agriculture,    | 3/4/2005   |
|                | Issue 9                               |            |
+----------------+---------------------------------------+------------+
| ## CA5013      | This Week in Canadian Agriculture,    | 2/25/2005  |
|                | Issue 8                               |            |
+----------------+---------------------------------------+------------+
| ## CA5011      | This Week in Canadian Agriculture,    | 2/18/2005  |
|                | Issue 7                               |            |
+----------------+---------------------------------------+------------+
| ## CA5009      | This Week in Canadian Agriculture,    | 2/11/2005  |
|                | Issue 6                               |            |
+----------------+---------------------------------------+------------+
| ## CA5007      | GOC Proposes Expanded Access for U.S. | 2/2/2005   |
|                | Cattle and Beef                       |            |
+----------------+---------------------------------------+------------+

VISIT OUR WEBSITE: The FAS/Ottawa website is now accessible through the
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FAS/Ottawa office can be reached via e-mail at: <agottawa@usda.gov>