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501 Pennsylvania Avenue, N.W.
Washington, D.C. 20001
November 9, 2001

The Honorable Tom Harkin
Chairman
Agriculture, Nutrition and Forestry Committee
United States Senate
Washington, D.C. 20510

Dear Senator Harkin,

The Government of Canada has been following very closely the development of a new Farm Bill. Our interest stems from the growing integration of Canada's farm economy with that of the United States. The predominance of U.S. markets in setting global and North American prices for key commodities (e.g., grains, oilseeds, red meats) also serves to transmit the impact of U.S. policy-induced production and trade distortions to Canadian and other producers. USDA's recently released report "Food and Agricultural Policy: Taking Stock for the New Century" recognizes the unintended effects of past U.S. farm policy. These effects include encouraging over-production, depressing prices and, paradoxically, the capitalization of program benefits into land values. These have tended to hinder the competitiveness of U.S. producers in U.S. and foreign markets, which also provokes avoidable trade tensions between Canadian and U.S. producers, whether in bilateral or global trade.

Canada is working with all its trading partners to achieve real and far-reaching agricultural trade reform in the current WTO agriculture negotiations. As a major agricultural exporter and importer, Canada shares with the United States a fundamental interest in further strengthening the international rules governing agricultural trade. Canada's initial negotiating position seeks: the elimination of agricultural export subsidies as quickly as possible; significant improvements in market access for all agriculture and food products; and the maximum possible reduction, or elimination, of domestic support which distorts production and trade.

We are pleased that our two countries have been working together and with our Cairns Group partners to achieve our common objectives. The leadership of the United States is critical to the successful outcome of the negotiations. Other WTO Members will be looking not only to what the United States says about what it wants to achieve in the WTO agriculture negotiations, but to what it does in relation to the Farm Bill.

In this regard, the recently passed House version of the Farm Bill is of concern. It calls for significant increases in spending on trade-distorting forms of support. Similarly, the Senate is considering proposals to increase production-distorting subsidies, reinstate abandoned ones (e.g., honey) and extend them to new commodities such as peas and lentils. We strongly urge you to reconsider this policy direction in favour of policy options that are not production- and trade-distorting and which would allow the United States to show its traditional leadership.

Finally, Canada opposes the Farm Bill proposals for country of origin labelling (COL) of meat. Proponents of stricter requirements seek to justify them on the basis of "consumers' right to know", implying that food safety would be better assured. In fact, COL would not address food safety but would interfere with the growing integration of the North American cattle/beef and hog/pork industries, to the detriment of producers in both our countries. Canada's successful cattle import program, for example, has been largely responsible for U.S. exports of cattle to Canada increasing from less than 1,000 head in 1998-99 to more than 209,000 in 2000-01, mostly from Northern Plains states. Many Iowa and Minnesota hog operations rely on a steady supply of Canadian piglets to be raised in the United States, eating U.S. corn and U.S. soybeans until they are ready for slaughter. None of the pork or beef from these integrated producers could be labelled as product of the USA under a rule that requires animals to be born and raised in the United States. Both USDA and the General Accounting Office have studied mandatory COL for meat and found that while it is uncertain to produce any benefits to American producers or consumers, it is certain to impose costs on the government and the industry.

As participants in the largest bilateral trade relationship in the world, we are hopeful that you will consider carefully all the potential consequences of the proposed legislation, and develop a Farm Bill that will provide a realistic level of support to U.S. producers without creating unintended counterproductive consequences.

For your information, the same letter has been sent to Senator Thomas A. Daschle, Senator Richard G. Lugar, Senator Max S. Baucus and Senator Charles E. Grassley.

Yours sincerely,

Michael Kergin
Ambassador