November 19, 1979

?

Some hon. Members:

Agreed.

Topic:   ROUTINE PROCEEDINGS
Subtopic:   QUESTIONS ON THE ORDER PAPER
Sub-subtopic:   HER MAJESTY QUEEN ELIZABETH II AND HIS ROYAL HIGHNESS PRINCE PHILIP-PAINTING AT RIDEAU HALL
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LIB

James Alexander Jerome (Speaker of the House of Commons)

Liberal

Mr. Speaker:

Pursuant to Standing Order 54, I do now leave the chair for the House to go into Committee of the Whole.

Topic:   ROUTINE PROCEEDINGS
Subtopic:   QUESTIONS ON THE ORDER PAPER
Sub-subtopic:   HER MAJESTY QUEEN ELIZABETH II AND HIS ROYAL HIGHNESS PRINCE PHILIP-PAINTING AT RIDEAU HALL
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GOVERNMENT ORDERS

CUSTOMS TARIFF


The House resumed, from Monday, November 5, consideration in Committee of the Whole of Bill C-18, to amend the Customs Tariff and to make certain amendments to the New Zealand Trade Agreement Act, 1932, the Australian Trade Agreement Act, 1960 and The Union of South Africa Trade Agreement Act, 1932-Mr. Crosbie-Mr. McCain in the chair.



On clause 2-


NDP

William Arnold Peters

New Democratic Party

Mr. Peters:

Mr. Chairman, the last time we discussed this bill was on November 5. At that time I was concerned about the manner in which Bill C-18 was presented, in that it does not allow for comparison between the proposals now being made, even if one looks at the schedules, and what already was in effect.

I have some questions to ask. How much money has been made on tariffs? Have they been increased? Is this a way of raising money? Tariffs raise money. At one time it was the main way of raising money for the general treasury. In those days there was no income tax, so money was raised out of tariffs. Since that time I would think that tariffs have changed.

November 19, 1979

If asparagus costs 2.5 cents in a favourable period and 10 cents in a non-favourable period from a non-favourable trading partner, does it mean that we are giving less money to the treasury than we did under the previous schedule?

I do not want to relate clause 2 to all the numbers that are in it and ask for an explanation of each one separately, but I do say that when the department brings this before us again it cannot do so in this form. It does not say a damned thing to a member of Parliament who wants to look at it, and it does not say anything to the industry except in respect of those specifics with which that industry is dealing. As far as I know, Bill C-18 does not even indicate whether the Canadian tax structure will enjoy a net gain or suffer a net loss as a result of the passage of Bill C-18. Therefore, I see absolutely no reason why we should be faced with this bill in its present form as members cannot look at it and make a decision.

Certainly when looking at these numbers, as I pointed out before, they are downright confusing. Even if you take them in conjunction with either the annex in the French part or the schedule in the English part, that does not make it much clearer. Most of us would like to know when we are dealing with food products and with seasons which are relatively short-and the length of time that can be selected by the industries is mentioned in the schedule-whether we have corrected the shortcomings in the legislation in the past. We would also like to know whether we have substituted something that will be advantageous in the future.

I do not know whether you can say that the customs and tariff legislation was mainly responsible for our having lost our canning industry, having lost a considerable portion of our hothouse industry, and having lost a considerable portion of our horticultural industry in this country, but it certainly has played a role.

Topic:   GOVERNMENT ORDERS
Subtopic:   CUSTOMS TARIFF
Sub-subtopic:   MEASURE TO AMEND
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PC

Fred Alward McCain (Deputy Chair of Committees of the Whole)

Progressive Conservative

The Deputy Chairman:

Order. I regret to inform the hon. member that his time has expired.

Topic:   GOVERNMENT ORDERS
Subtopic:   CUSTOMS TARIFF
Sub-subtopic:   MEASURE TO AMEND
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PC

Ronald Stuart (Ron) Ritchie (Parliamentary Secretary to the Minister of Finance)

Progressive Conservative

Mr. Ritchie (York East):

Mr. Chairman, when the hon. member for Timiskaming raised questions about the bill on November 5, and he has reiterated them now, I must say I was and am very sympathetic. I think it is a very difficult bill to appraise in the way it is drawn, but there are some very great obstacles to having it drawn so it would be easier to appraise. There are some things 1 can say that may help him with the questions he raised.

Part of the problem is that the fruit and vegetable tariff changes recommended by the tariff board were designed to be enacted as a package. They called for extensive changes in product descriptions and in the numbering of tariff items. The previous government, however, decided not to act on it as a package. When that government decided to implement the tariff decreases on March 13, 1979 but delay the increases until October, it was necessary to split up the schedule recommended by the board.

Customs Tariff

The only way to do this was to draft a new interim schedule for the period March to October, containing elements of both the pre-March 13 schedule and the board schedule. The bill was drafted in such a way that on the effective date of the increases, now October 24, virtually all of this schedule would be replaced by the new tariff nomenclature recommended by the board. Thus, schedule I deals only with the tariff decreases on fruits and vegetables which came into effect on March 13. On October 24 most of the items in that schedule were replaced by schedule V which continues the decreases using different tariff items and nomenclature and provides for the tariff increases as well. It gets very complicated, indeed, Mr. Chairman.

Clause 2, the clause we are now discussing, which is effective from March 13, 1979 to October 23, 1979, provides for technical amendments to section 15 of the Customs Tariff to take account of the renumbering and wording changes contained in schedule I. Simply put, section 15 of the Customs Tariff is the authority for the Minister of National Revenue to apply in-season duties on fresh fruits and vegetables. It must, of course, be read in conjunction with the tariff rate provisions of the tariff items bearing the numbers listed in the section. Some of these tariff items, incidentally, are amended by this bill and others are not.

Effective October 24, the amendments in clause 2 are replaced by those in clause 9 which relate to the new tariff nomenclature and rate structure contained in schedule V to the bill.

This must be more confusing than enlightening up to this point. It might be useful if I were to take the committee through one example of how section 15 works.

The first item in schedule I affected by this provision is 8702-1 which relates to fresh asparagus. The rates that are most relevant in terms of actual trade are those in the column headed "most favoured nation tariff'. The in-season duty shown here is 3.5 cents per pound, but not less than 10 per cent ad valorem. By virtue of section 15 of the Customs Tariff, clause 2 of the bill and the clause which appears immediately below the product description, the Minister of National Revenue may order this duty be applied for a maximum of eight weeks in any 12-month period ending March 31. At all other times the free rate must be applied. In exercising his authority under section 15 the Minister of National Revenue is guided by advice from the Canadian horticultural industry and the Minister of Agriculture. The in-season duty can be applied at different times in different regions of Canada to take account of local growing seasons. As of October 24, the tariff item for fresh asparagus is being renumbered to item 8701-1 in schedule V, and the in-season duty will be 5.5 cents per pound, but not less than 15 per cent.

I think there is some information about the over-all effect of these items that the hon. member might find helpful, as he has raised the difficulty of making any comparison with what has existed. I have some average numbers here that may be helpful. For instance, fresh vegetables at the time they are dutiable today bear a tariff of 9.6 per cent on average. The

November 19, 1979

Customs Tariff

proposed average rate during the dutiable period is 12.1 per cent. For the year as a whole the weighted average under existing arrangements is estimated at 5.2 per cent, and for the year as a whole at 5.5 per cent, a slight increase.

The corresponding figures-I will take only the year as a whole-for fresh fruits are, under the existing schedule, 1.9 per cent, and under the proposed average rate 1.5 per cent; and for processed fruits and vegetables, 9.3 per cent existing and 11 per cent proposed. Over all, for all categories, the estimate under the existing average rate is 5.4 per cent, rising to 6.1 per cent for the year as a whole. I can give comparable figures for each item, but I thought those average figures might be of some help in getting a perspective on what is proposed.

Topic:   GOVERNMENT ORDERS
Subtopic:   CUSTOMS TARIFF
Sub-subtopic:   MEASURE TO AMEND
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NDP

William Arnold Peters

New Democratic Party

Mr. Peters:

Mr. Chairman, I would like to thank the parliamentary secretary for his comments on averaging because I certainly do not want to ask about each specific category. Taking asparagus as an example, I gather from his explanation that it will now be numbered 2701-1 instead of 8702-2. That is not to put asparagus in a different category, but probably to put it in the new tariff with the restricted period, and it has been raised from 3.5 cents to 9.6. I suppose 3.5 cents was 9.6 per cent and the proposed rate is 12.1 per cent. I presume this me^ns that when the Canadian Horticultural Society and the Department of Agriculture have triggered the designated period, the duty will be considerably higher thereafter. 1 presume that it would amount to approximately three-quarters of one per cent, taking the difference between 5.4 per cent and 6.1 per cent. It may not be possible to use the average figure on anything except the specified commodity, but it is probably within that range.

I am not satisfied that the triggering mechanism is sufficient to meet the needs of producers. The agriculture department has always been plagued by the argument, which we have heard from the Bing cherry, grape and soft fruit producers and from the horticultural industry, that the date of applying the tariff may not always be the same and that when it is decided that the tariff should be applied it is not applied quickly enough. By the time the matter has been discussed by the Department of Agriculture and the horticultural society, it is too late. It has always been suggested that the Department of Agriculture have a much closer relationship with the tariff board so that the tariff can be triggered to meet the climatic conditions of the day or the conditions which govern the season of that particular product. This complaint has been brought up by all the agencies which I have mentioned.

The strawberry industry in southern Ontario has been plagued because of this indecision to the extent that most of the strawberries are plowed under. Most of our fresh strawberries come from outside Canada. Obviously the duty has not been triggered at the proper time.

Referring to my example of asparagus, is this eight-week period long enough? I do not know much about growing asparagus. I planted some at one time and some of it is still coming up, but it certainly is not a commercial crop. 1 am

wondering if the eight-week period is sufficient protection for our producers and whether or not it takes into consideration the varying conditions between the Elolland Marsh and the Niagara Peninsula. If eight weeks is enough, the horticultural society will be hard pressed to make all the decisions on the various crops and to get the eight-week period in the proper place for such places as the Holland Marsh, the Bruce Peninsula, Niagara Falls-

Topic:   GOVERNMENT ORDERS
Subtopic:   CUSTOMS TARIFF
Sub-subtopic:   MEASURE TO AMEND
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PC

Donald W. Munro

Progressive Conservative

Mr. Munro (Esquimalt-Saanich):

Vancouver Island.

Topic:   GOVERNMENT ORDERS
Subtopic:   CUSTOMS TARIFF
Sub-subtopic:   MEASURE TO AMEND
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NDP

William Arnold Peters

New Democratic Party

Mr. Peters:

I did not know that asparagus was grown there, but certainly the climate is right. If it is not planted as deeply as I plant mine and fertilized better, it will probably grow there.

Topic:   GOVERNMENT ORDERS
Subtopic:   CUSTOMS TARIFF
Sub-subtopic:   MEASURE TO AMEND
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PC

Henry Perrin Beatty (Minister of State (Treasury Board))

Progressive Conservative

Mr. Beatty:

There is lots of fertilizer.

Topic:   GOVERNMENT ORDERS
Subtopic:   CUSTOMS TARIFF
Sub-subtopic:   MEASURE TO AMEND
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NDP

William Arnold Peters

New Democratic Party

Mr. Peters:

If fertilizer is needed, we should use the hot air from this building and it would probably grow very well. I know that these time periods are switched around, that there are many periods and that they keep playing with them. I know that these periods do not meet the requirements of the Department of Agriculture but do they meet the requirements of the horticultural society? If they do, how is it that we are faced with the problem of losing certain commodities? Should we lengthen the time that the duty is applied? Would it be wise for me to wait and make my wine later when I can get grapes from California, or wait for the period in which the higher tariff is invoked and make my wine when I can get grapes from the Niagara Peninsula?

There have been presentations by the horticultural society and by individuals in the various industries. All these people say that the duty structure does not work to their advantage, that it is not applied soon enough or at the correct times. Yet a former minister has indicated that the horticultural society was satisfied with the duty structure.

I do not wish to go through all the commodities. Perhaps asparagus is a good example because it is used by both of us.

Topic:   GOVERNMENT ORDERS
Subtopic:   CUSTOMS TARIFF
Sub-subtopic:   MEASURE TO AMEND
Permalink
?

An hon. Member:

Raspberries.

Topic:   GOVERNMENT ORDERS
Subtopic:   CUSTOMS TARIFF
Sub-subtopic:   MEASURE TO AMEND
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NDP

William Arnold Peters

New Democratic Party

Mr. Peters:

Raspberries come under a different category, and I have not heard that the raspberry producers suffer the same problems. Are we solving the problem by increasing the tariff by such a small amount? I suppose we could go through each commodity. Asparagus is not the example which I would have picked.

Another commodity which we do not seem to be able to produce is lettuce. Tomatoes are certainly a good example as well. Perhaps we should have an explanation as to the effect of this duty because we buy most of our produce outside of Canada and our own produce comes on stream at a specific time. Obviously, if the tariff structure is being designed to protect our producers, then it is not working because we have lost many commodities.

I took the yearly average for asparagus as 5.7 but the average over all was 5.4 to 6.1 That is a relatively small

November 19, 1979

increase in tariff. I wonder why we think that is going to solve the problem that the various commodity groups bring to the attention of members of Parliament annually.

Topic:   GOVERNMENT ORDERS
Subtopic:   CUSTOMS TARIFF
Sub-subtopic:   MEASURE TO AMEND
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NDP

Mark Willson Rose

New Democratic Party

Mr. Rose:

Mr. Chairman, I should like to follow up on that line of questioning before the parliamentary secretary replies, because over the years it has concerned me as a member of Parliament representing an agricultural riding. I should like to know whether these percentages are based on the Canadian price or the American price. If, as I assume, they are based on the American price rather than the Canadian price, then the advantage of a percentage does not necessarily protect anyone.

It seems to me there are really only two reasons for a tariff. The first is to raise money for the treasury and the second is to protect Canadian producers, whether in manufacturing or agriculture. If the tariff is based merely on a percentage of the American price, then it does not often help us a great deal. As everyone knows, we are seasonally disadvantaged. We cannot usually blame the Americans, because we import more fruit and vegetables from them than from anyone else. By the time our product is at its peak and ready to come on the market, however, it is already the tail end of the American season, when their price is lower. We cannot accuse them of dumping or resort to anti-dumping legislation, because they are not selling the product to Canada at a price lower than that in California, Arizona or anywhere else. The mere offer of a product such as prunes to a broker in Seattle is enough to destroy the Okanagan price.

The hon. member for Okanagan North is sitting across the way. He knows that this happens all the time. The Canadian price is not protected by the various tariffs, because even an offer is enough to destroy the value of a particular commodity at the peak of the Okanagan season-which may coincide with the end of the California or Oregon season. I see the hon. member nodding his head with silent, sage approval. I am very pleased to have his support on this. Perhaps this does not relate specifically and always to the Okanagan, but it certainly happens to the berry crop in the lower Fraser Valley.

We are concerned about trying to develop, on the one hand, a system of tariffs that protects the local producer when his product is at its peak in market price. That cannot always be done by calendar months. No matter how adjustable they may be from one area to the other, they have to be adjustable from one season to the other. As the hon. member for Timiskaming said, there is the possibility that this is triggered when the product comes across the border and the damage has to be proved. Some commodity groups take the position that all that is needed to destroy the price is an offer to the broker who usually ships across the border.

There might be another way to look at it. First, price could be based not on a percentage of the U.S. price, regardless whether it is the beginning or end of their season, but on the cost of production in Canada; because in the United States they have certain seasonal advantages. Second, have the mechanism trigger at a time of the year adjustable to the best possible market season for Canadian produce.

Customs Tariff

On the one hand, through tariffs and their adjustability in terms of seasons, we have to give the consumer the best break we can at times of the year when the consumer is not threatened with having his price destroyed by American produce coming across the border. I am referring to produce that is available in Canada. I recognize that this is not an easy task, but I should like to know whether some consideration will be given or is being given to these questions which, perhaps, are more in the form of a representation.

Topic:   GOVERNMENT ORDERS
Subtopic:   CUSTOMS TARIFF
Sub-subtopic:   MEASURE TO AMEND
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PC

George H. Whittaker

Progressive Conservative

Mr. Whittaker:

Mr. Chairman, the hon. member who just spoke brought my name into this although I had not planned to speak today. I might say that the percentage basis is what the industry has been asking for. The previous system was a rather antiquated one based on cents per pound, which did not mean too much in this day and age with the increase in prices.

We are, of course, very interested in the cost of production but I think the hon. member for Mission-Port Moody was skating around the edge of this. I do not know whether he understands it. We are asking for a surcharge that can be put in place when the sort of things happen that he spoke of, such as when an already low price goes down and the produce is coming into the Canadian market at the bottom of the scale.

I might say that just the other day the Minister of Agriculture issued a press release and announced in committee that he was going to impose a surcharge. This is something that is much better and much faster than the measures which were in place before. The industry is very encouraged and very happy with the announcement. The surcharge would be based to some degree on the cost of production in Canada and we in the industry know that this is a difficult procedure. For the first time, however, we are going to get some kind of formula that we believe, and which the industry believes, will go a long way toward solving the problem.

Topic:   GOVERNMENT ORDERS
Subtopic:   CUSTOMS TARIFF
Sub-subtopic:   MEASURE TO AMEND
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NDP

Mark Willson Rose

New Democratic Party

Mr. Rose:

Mr. Chairman, I apologize to the hon. member for Okanagan North if I do not know as much about the fruit industry as he does, since he has spent a lifetime in it. I am very pleased to hear that these things are coming to pass to protect not only his industry but the industries of the farmers that I represent.

The parliamentary secretary was about to answer my question whether these percentages were based on Canadian values or American prices. I have no objection to percentage figures. I was not calling for a fixed figure, and if the hon. member for Okanagan Boundary was listening, I do not know whether he understood that. Do the percentages refer to the price at the beginning of the season, the end of the season, or what part of the season? On what date do they become active? That is really what concerns me. First, are the percentages based on Canadian or American prices; and, second, when do the percentages apply? Certainly the price varies throughout the season.

Topic:   GOVERNMENT ORDERS
Subtopic:   CUSTOMS TARIFF
Sub-subtopic:   MEASURE TO AMEND
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PC

Ronald Stuart (Ron) Ritchie (Parliamentary Secretary to the Minister of Finance)

Progressive Conservative

Mr. Ritchie (York East):

Mr. Chairman, I may be able to reassure the hon. member for Timiskaming and the hon. member for Mission-Port Moody by telling them that by and

November 19, 1979

Customs Tariff

large, the industry thinks this is a good bill. That is, the producers think this is a good bill and an improvement over what we had. 1 am sure they do not regard it as perfect but they think of it as a distinct and important improvement.

The two members opposite have been talking about two different things, I believe, and the subjects need to be separated. One is the season application of these tariffs and the definition of a season when they do not apply, and the minimum period that has been instituted in each case. The other is the emergency surtax situation. The rules are somewhat different for the two. The seasonal aspect is the basic part of the bill.

In most cases the minimum period for free or near-free entry has been enlarged. Within that enlargement there is full discretion as to when that applies in any given year, not only nationally but regionally. The minimum period can in fact be lengthened if the production pattern in Canada in a given region makes that desirable.

The Minister of Agriculture has a very big part in this. In a formal sense, the seasonal declaration for any given area or product is made by the Minister of National Revenue, but the Minister of Agriculture is the chief adviser. My information is that by and large there has not been any criticism of how this seasonal declaration has been made. It has been reasonably acceptable. When we get to the surtax situation there is more room for debate and questioning. In this area the government did not follow exactly what the Tariff Board had recommended. The feeling is that they did rather better than what the tariff board had recommended.

It might be useful information about that if I could give some specific because the hon. member for Essex-Windsor raised this question the other day about why it is not automatic and how long it takes. The modified system adopted by the government, which as the hon. member for Okanagan North just mentioned was announced by the Minister of Agriculture on October 22, is based on the tariff board proposal, although it is not exactly the same. The board had proposed a fully automatic surtax for only ten products. For other horticultural products it recommended a revamping of existing procedures and a time limit of 20 days for dealing with requests for emergency surtax. Instead of an automatic surtax for the ten products named by the board, the government has decided on a semi-automatic system based on trigger prices, very similar to those proposed by the board.

A fully automatic system would have posed a number of problems and disadvantages. In the first place it would seriously impair trade relations with the United States and it could place in jeopardy some important U.S. concessions obtained in the multi-lateral trade negotiations. The United States has already indicated concern that the modified system announced on October 22 may be applied in an automatic way. U.S. representatives had earlier made it clear to us that they would regard the system proposed by the board to be contrary to Canada's GATT obligations.

A second point is that the use of strict arithmetic formula to impose surtaxes with no regard to the situation in the market could lead to a very arbitrary result which could work to the disadvantage of consumers in some instances, and of producers in other instances. The risk of this happening is heightened by the fact that we do not have a data base sufficiently detailed to implement the system exactly as proposed by the board.

If we instituted a system based on a rigid arithmetic formula it would be very difficult to persuade either our trading partners or consumers that a surtax in excess of that generated by the formula might be necessary to prevent serious injury to domestic producers in certain circumstances.

It is the belief of the government that the procedures announced by the Minister of Agriculture will give us the main benefit of the board's proposal; that is to say, speed of application without its main drawbacks.

The hon. member for Mission-Port Moody also asked a specific question about the value on which the duty is levied. That value is the import value and in effect the import cost; therefore, it is essentially the U.S. price.

Topic:   GOVERNMENT ORDERS
Subtopic:   CUSTOMS TARIFF
Sub-subtopic:   MEASURE TO AMEND
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November 19, 1979