In Canada, CASA is being undertaken by a Steering Committee of non-governmental organizations from a number of sectors, including labour, development and anti-poverty organizations. As Canada does not receive structural adjustment loans from international financial institutions, the Steering Committee in Canada chose to focus on the 1995 budget, in which the federal government pushed through many structural adjustment reforms, reforms recommended to Canada by the IMF in its Article IV consultations. A first national forum was held, December, 1998 from which four research areas were chosen:
- Removal of Subsidies on its impacts on Small Agricultural Producers
- Labour Market Reform and impacts on Seasonal Fisheries and Forest Workers
- Trade Liberalization and impacts on Garment Workers
- Reduction of Public Expenditure on Social Service Delivery and impacts on the poor
Quantitative and participatory research were undertaken over the following twelve months. Eight regional dialogues were held with the economically disadvantaged to discuss the fourth research area. A second national forum was then held in January 2000 to discuss the results of this research. Four sectoral consultations were held to address the other research areas. The research remains to be synthesized and published.
Removal of subsidies and its impact on small agricultural producers
AGRICULTURAL BACKGROUNDERS - The Impact of Structural Adjustment on the Farm Sector
The last two years have been marked by extremely low net farm incomes. Farmers argue that this is a result of a combination of factors, some of which are:
As a remedy for the current crisis, many agricultural sector leaders and feel that the next round of the World Trade Organization (WTO) must put Canadian producers on a level playing field internationally by eliminating trade distorting subsidies. However, as any solutions to be found through the WTO will not happen in the short term, they are pressuring the federal government to provide support in the meantime. Others aren=t so sure that the WTO is the route to follow, as this body has already considerably curtailed Canada=s ability to set policy and implement agricultural development strategies. Some people are at a loss to explain why it is that the Canadian Cabinet seems to be so much more eager to exceed the international subsidization benchmarks then are their counterparts in the United States and Europe.
Is this a helpful portrayal of the bigger picture. What important pieces are missing? What about the remedy? And what are the alternatives? What should be done now, and who should do it? To facilitate (or stimulate) a discussion we pose a number of questions (in no particular order of importance), and expect others will emerge.
The Link between Financial Crises and Low Commodity Prices
Lessons from the Asian Crisis
The spark that set off a stampede of capital out of Asia was a small increase in US interest rates. Thailand was the first country to suffer massive capital flight causing the Thai government to devalue the baht in June of 1997. Soon other investors, behaving like a stampeding herd, withdrew massive amounts of funds from other Asian countries. The turnaround in net flows of private capital to five Asian countries (South Korea, Thailand, Indonesia, Malaysia and the Philippines) was a staggering US$105 billion in just one year.
The IMF and Northern governments hastily arranged bailout loans totaling US$120 billion for the governments of Thailand, Indonesia and South Korea. These loans were not extended all at once but instead offered as a series of smaller credits which could only be accessed if a country adhered to the harsh conditions attached to the previous loans. The real beneficiaries were the private investors who took their money and ran, leaving the local populations saddled with new debts and more IMF-dictated austerity.
The Asian crisis had many repercussions for Canada. As Asian markets contracted due to the Structural Adjustment Programs demanded by the IMF, many Canadian workers, especially in British Columbia, lost their jobs. Although only about 6% of total Canadian exports go to Asian markets, there were other indirect effects. The Asian crisis accelerated a decline in world commodity prices. By December of 1998 raw material prices were 35% below what they had been two years earlier. This decline encouraged the money traders to speculate against the Canadian dollar (because Canada is still perceived as a commodity exporting country). It also hurt Canadian exports to other regions since price deflation weakens consumer confidence and demand for goods and services.
The turmoil that started in Asia spread to Russia and then to Brazil. The escalating crisis exposed the folly of the IMF=s policy of encouraging the deregulation of financial markets. These crises also exposed the counterproductive nature of the IMF=s Structural Adjustment Programs (SAPs). The austerity and high interest rate policies prescribed by the IMF for Asian countries made the crisis worse by stifling economic activity and driving many firms into bankruptcy at enormous human cost. (ECEJ 1998)
The Impact of Structural Adjustment on the Farm Sector
Although the language of “structural adjustment” is most commonly used to describe economic programs imposed by the World Bank and the International Monetary Fund (IMF) on countries seeking loans or unable to repay debts, much of the Canadian economy has also been “structurally adjusted”. Structural adjustment, while claiming to restore economic health and competitive vigour, often causes terrible economic and social illness to the societies undergoing the adjustment. Canadian agriculture is affected by structural adjustment policies and offers a clear example of how such policies lead to social breakdown and poverty, instead of a reinvigoration of the economy.
This paper first, provides an overview of SAP policies affecting the agriculture sector, second, discusses one of these policies in particular, the removal of subsidies and last, highlights some of the difficulties and challenges imposed on farmers as a result of this policy, among others, and the possible remedies and solutions to the farm crisis, both short-term and long-term.
I. STRUCTURAL ADJUSTMENT IN CANADIAN AGRICULTURE
Since the 1980s, the Canadian government has restructured agriculture and rural Canada using policy tools that are remarkably similar to those of the IMF/World Bank. Such instruments of structural adjustment, as applied in Canada, have not been the IMF, but rather the WTO, CUSTA, NAFTA, and an ideologically-driven campaign of deregulation, privatization, and budget cutting by federal governments.
SAP policies adopted in Canada and applied to the agricultural sector include: a focus on production for export; dramatic cuts in government spending; deregulation; measures to attract foreign investment; privatization of government industries and utilities; removal of farm subsidies, price controls, and other supports; and implementation of a freely-floating currency.
The Canadian federal government has focused on increasing agricultural exports since the 1980s. By 1989, it was clear that Canada no longer had an agriculture policy as such, but instead had “a trade policy that masquerades as farm policy”. The government has however been successful in encouraging increased agri-food exports, so much so that exports doubled in seven years from $10 billion in 1989 to over $20 billion in 1996. Emboldened by their success, Canadian Ministers of Agriculture set a new goal of capturing 4% of world agriculture (about $40 billion in exports) by 2005.
Additionally measures to attract foreign investment have resulted in foreign takeover of domestic agri-food-processing sector. One U.S. transnational, Archer Daniels Midland, now owns almost 50% of Canadian flour milling capacity. Case/IH/New Holland and John Deere dominate the Canadian farm machinery sector. Canada’s loss of its agri-food processing sector, its machinery and farm input production sectors, and its gradual loss of control of its vital railways and grain handling sector have had a dramatic effect on farm incomes. To farmers, this has meant that they must increasingly do business with a shrinking number of extremely large, global firms. Foreign transnationals have taken over almost every segment of the Canadian processing sector:
In order to grant transnational corporations maximum access to national economy and resources, publicly-owned utilities and corporations also must be privatized. This has led to the privatization of a number of Canadian corporations that have connections to farmers and rural residents. The takeover of the Canadian agri-food sector is part of the larger globalization of the sector. Not only do two firms—Case/IH/New Holland and John Deere—dominate the Canadian farm machinery sector, they dominate this sector worldwide. To farmers, this has meant that they must increasingly do business with a shrinking number of extremely large, global firms. This globalization has reduced competition and dramatically exacerbated the market power imbalance between farmers and agri-business corporations.
II. REMOVAL OF SUBSIDIES, PRICE CONTROL AND OTHER SUPPORT:
There has been a dramatic cut in government spending on agriculture by up to 52%: from the peak of over $6.1 billion in 1991/92 to approximately $2.9 billion for 1999/00. The federal government has cut approximately $3.2 billion from its annual agricultural spending. In addition, program cuts that do not show up on the federal expenditure tally---the Two Price Wheat Program, productivity gain sharing between the railways and farmers, elevator handling charge deregulation, and the loss of the Crow Rate---have cost farmers billions more.
Many of government spending cuts affected programs that stabilized farm families’ income and protected them from increasingly volatile and depressed international markets. According to the farmers who attended the NFU convention, the near complete removal of subsidies like the Crow’s Nest agreement, one of the areas affected by government cuts, have tripled the cost of crop transportation in just five years, enacting a horrible toll that only the largest corporate farms can possibly weather if left unabated for much longer.
While the government attempted to justify cutting some agricultural programs by pointing to the need to decrease spending and balance its budget, its propensity to cut programs, even where the direct costs to the government were small or zero, indicate an overarching ideological commitment to deregulation.
Examples of cuts that cannot be explained by the need to reduce costs include:
The termination of the Two-Price Wheat Program;
The end of railway costing reviews and productivity gain sharing; and
Changes to the Canadian Grain Commission that terminated its responsibility to regulate the rates grain companies charged farmers for handling grain in elevators.
The Two-Price Wheat (TPW) Program began in 1967 and the government terminated it in 1988. The program stabilized domestic wheat prices and, especially in later years, increased farmers’ incomes. With a domestic price under the TPW Program of $7.00 in 1987, Prairie farmers received a benefit of approximately $4.40 per bushel on 15% of their wheat (the portion consumed domestically). For a farmer producing 10,000 bushels, the TPW Program provided approximately $6,600. This program cost government nothing and cost consumers approximately 6¢ per loaf of bread. Since the end of the end of the TPW Program in 1988, millers, bakers, and retailers have decreased the price they pay to farmers for the wheat in a loaf of bread by about 6¢ and increased the price they charge consumers for that loaf by about 22¢.
The federal government terminated railway costing reviews and productivity gain sharing in 1992, a move that saved it nothing. Canada has two major railways, CN and CP. In western Canada, these railways operate as geographic monopolies: because of distances, most farmers are captive to one or the other. Because there is no competition, the government sets grain freight rates. The government, however, has terminated the mechanism that would have shared system productivity gains—resulting from layoffs, higher fuel efficiency, the elimination of cabooses, and branchline abandonment—with farmers. As a result, grain freight rates have risen steadily and are now far above the railways’ actual costs. The termination of productivity gain sharing transferred approximately $200 million from farmers’ pockets to railway coffers in 1999 (over $700 million in total since 1992). CN and CP’s 1999 profits totalled $867 million: more than the realized net farm income of all the 140,000 farm families in Manitoba, Saskatchewan, and Alberta combined.
The Canadian Grain Commission (CGC) has the vital dual role of protecting farmers’ interests within the grain handling system and of safeguarding Canada’s valuable reputation as the supplier of some of the highest quality grain in the world. In 1995, the government terminated the CGC’s authority to regulate grain handling charges. This CGC regulation had cost the government nothing and provided farmers with fair, equitable, predictable handling costs. More recently, the CGC and government produced a Program Review report that would have changed the CGC from an industry regulator into a “service provider.” It would have, as one farmer put it, turned the CGC from an industry “watchdog” into an industry “lapdog.” Strong farmer opposition forced the CGC and government to back away from its plan.
The government has terminated most of the subsidies, stabilization programs, and price supports on grains, oilseeds, hogs, and cattle. Where such programs remain intact is in the supply-management sectors—milk, eggs, and poultry. There is now growing pressure to weaken supply management as recent WTO decisions suggest.
Supply management is a system wherein Canadian production of milk, eggs, chickens, and turkeys are matched to Canadian consumption through a quota system—farmers can produce and sell only as much as their quotas allow. Farmers are paid based on average costs of production. Canada’s supply management system gives consumers a stable, secure source of domestically-produced milk, eggs, and poultry at prices equal to, or lower than, those in the U.S. The supply management system also gives farmers secure markets and fair prices.
On the issue of subsidy, farmers made it clear that they did not believe that the U.S. or the European Union would remove the subsidies it has in place for its farmers. More importantly, they believe that even if they did, the problems they face would not be solved. The fact remains that corporate farming operations are the only ones who can survive over the long term in a subsidy free environment. In fact, many delegates went so far as to see the removal of subsidies as a quick and easy way for corporate farms to bleed the family farm dry and swallow up the remains at an incredibly low price. They point to the hog farming industry in Manitoba where the drop in hog prices coupled with highly inadequate subsidies forced almost every last family hog-farm out of business. While appreciative of farm aid, all farmers agreed that such reactionary programs are not enough, and that a full return to subsidy levels are the only way to save the family farm.
III. IMPACTS AND ALTERNATIVES
The Canadian government has slashed agricultural spending and stabilization programs just as world commodity price trends pitch steeply downward. The Canadian government, rather than stabilizing the farm economy (increasing supports during downturns and decreasing spending when markets rebound), is destabilizing farm income.
These cuts in spending have had predictable results:
Farm debt is at the end of 1999 reached a record $35.2 billion, up 6% from the previous year and 44% over the previous five years. Farm debt now stands at nearly 12 times annual realized net farm income and that ratio is growing swiftly. Annual interest on the debt almost equals realized net farm income.
Realized net farm income of grain and hog farms has fallen to levels not seen since the 1930s. However, unlike the 1930s, the current farm income collapse comes amid booming stock markets, stable employment, good crops, and general economic growth.
Farm families are scrambling to hold onto their land and many others are driven out. While statistics will not be available until 2002, it is likely that the current farm income crisis will force a large percentage of Canadian farm families out of agriculture. The loss of these farm families leads to the rural depopulation, the death of towns, the stagnation of the rural economy, increasing control by non-farmers, and environmental degradation.
Since 1984, the federal government has terminated the vast majority of government programs and removed most of the regulations on Canadian agriculture. It has turned “the industry” over to “the market.” If the government claims that this restructuring has been beneficial to farmers, then it must explain why these farmers now face the worst income crisis since the 1930s. It must also explain why those farmers who have endured the most deregulation—western grain farmers—are hardest hit by the current income crisis while those who have faced the least deregulation—milk, egg, and poultry producers—have been largely untouched by that crisis.
The last two years have been marked by extremely low net farm incomes. Canadian farmers attribute this to certain structural adjustment policies. They argue that the huge decrease in freight subsidies that took effect in August of 1995; and gaps in the level of support being provided by existing farm safety net programs such as crop insurance and the Net Income Stabilization Account (NISA) and the Agricultural Income Disaster Assistance (AIDA) Program which have left the vast majority of producers without much support, are some of the factors that have negatively impacted on the sector.
However, while farm families have seen their net incomes drop, transnational agri-food corporations have seen dramatic increases. ADM’s worldwide revenues have nearly doubled since 1990; ConAgra’s have more than doubled since 1989; and Philip Morris’s have tripled since 1987. As these huge corporations grow, their market power---their ability to buy cheaper from farmers, sell higher to consumers, and bargain harder with workers----also grows. The effect (and intent) of structural adjustment programs---in Canada and around the world, in agriculture and in other sectors---is to turn the world’s resources, workers, and markets over to such corporations and their shareholders.
Finally, the government’s reluctance to regulate and control increasingly powerful agri-business transnationals means that these companies have increased their revenues and profits by billions per year at the expense of farmers. The total cost of the Canadian government’s structural adjustment of Canadian agriculture---the total transfer of wealth from farms and rural communities to corporations and investors---over the last fifteen years amounts to tens-of-billions of dollars.
The financial losses, however, are only one dimension of the structural adjustment saga. The global numbers don’t tell the story of the human suffering that accompanies them. Farm families who have lost or are losing their economic foothold in farming suffer social and personal losses as well as financial ones. The family farm is so named because not only does this kind of food production involve the love and labour of the entire family; in most cases, the farm is the inheritance from the generations that come before. Depending on the time of non-Aboriginal settlement, Canadian farms have been in the families that currently farm them for many generations. Because the farm represents both a family heritage and a trust for the next generation, the loss of it can evoke powerful feelings of guilt and shame.
The loss of self-esteem and social standing are partially reflected in high farm suicide statistics, as well as family violence and breakdown. The Farm Stress Lines that have been operation in western provinces over the last decade tell of a great deal of heartache.
As noted, many families have left farming because they have been unable to make a living there. And few young people are entering farming. Of those who remain (a mere 3.6% of the Canadian population as of 1996), most are seeking to cope with declining incomes by taking off-farm jobs along with farming. All or these changes contribute to the decline of rural communities. This pattern of rural migration, urbanization and the resulting decline in the countryside are the familiar results of structural adjustment everywhere.
The most keenly felt losses in farming communities are the absence of neighbours and communal life. Although this aspect is not quantifiable and hence seldom taken into account, the restructuring of agriculture has lead to a radical change in the culture of farming communities. With fewer people, and with the exodus of most of the young people, community activities are necessarily reduced. In many villages the centers of community social life – the churches, halls, arenas, clubs, and schools – have disappeared altogether. The loss of cultural diversity and vigour in the countryside parallels the loss of biological diversity and may pose similar inherent dangers to the long-term sustainability of human survival.
The out migration of people from rural areas has been accompanied by and frequently augmented by a loss of public services in rural Canada. As governments seek to cut expenditures, rural communities are always hit particularly hard. The standard cost/benefit analysis illustrates the obvious: services are more expensive per user to deliver where there are fewer users and where the distances between them are greater. Over the past 15 years, many rural communities have experienced the closure to their post offices, schools, and hospitals. When these essential services are no longer available, it is increasingly difficult for families to live there. With too few people, churches, sports facilities, libraries, and other community services also disappear. And businesses cannot remain viable either. This downward spiral is clearly illustrated on the main streets of hundreds of towns and villages where boarded storefronts are as common as open businesses.
Farm families have become much less secure economically, rural services are much more distant and difficult to access, and the transportation and communications infrastructure is literally being abandoned as railways close branch lines and roads become impassable.
The toll of this structural adjustment goes far beyond the economic impoverishment of some farm families deemed to be “inefficient producers” or “poor managers” and the loss of communities no longer considered “viable.” It includes human, cultural, and environmental costs which all of Canadian society, rural and urban, must pay. Here in Canada, as in the so-called “developing world,” structural adjustment is really the restructuring of agriculture and the entire economy for the benefit of those who own and control the transnational corporate sector. The adjustments programs force everyone to adjust to greater economic instability, less democratic control, depletion of natural resources, and increased dependence on ever fewer players for jobs, investment, and even food. For Canadian farm families--- as for peasants and farmers everywhere--- structural adjustment often means an adjustment right out of their way of living; and also out or their way of making a living, by growing food.
In addition to the above-noted components of the structural adjustment programs, these programs often have many secondary effects including: concentrating wealth in the hands of a few (thereby increasing the gap between the rich and the poor); reorganizing land ownership; and forcing migration from rural areas to the city. All of these effects are present in Canadian agriculture.
- a reinstatement of productivity gain sharing which would mean a $/tonne decrease in freight rates.
- a reversal of the subsidies like the crow’s nest agreement which were cut in recent years.
- lowering of inspection fees.
- the expansion and not the elimination of the supply-management system as a remedy to the problem of reduced return for producers despite the increasing amount paid by consumers.
- marketing programs that will ensure that the right amount of each product is produced and that consumer demand is more focused on meeting the anticipated supply and creating a demand for production when overproduction occurs.
- labeling of staple products to show what amount of the sticker price is paid to the individual farmer.
- an immediate bailout package.
- organic farming reduces the cost of running by about $40 - $60 per acre (which, based on anecdotal evidence of NFU members, is the average cost of using chemical fertilizers and herbicides) and while yields are reduced (especially during transition years), almost all the money earned from the sale of crops is money in the farmers pocket. The government would also need to invest money in organic food marketing in order to make organic farms viable (as it presently stands, most organic food is sold at somewhat inflated prices to a special market). The government could help ensure these results by helping foster organic food cooperatives (both in production and marketing) and by providing the funds needed to get a mandatory producing labeling program off the ground.
| REPORT FROM MEETING WITH NATIONAL FARMERS UNION MEMBERS
Delegates of the National Farmers Union convention identified several key reasons why the family farm is in jeopardy. First, the dominance of large, mainly foreign corporate farming operations has led to the amalgamation of many smaller farms and destruction of the economic base by which rural communities are sustained. Second, the cost of farm inputs have increased dramatically, with many farmers held hostage by the ever increasing price of fertilizers, herbicides and seeds. Finally, the near complete removal of subsidies like the Crow's Nest agreement have tripled the cost of crop transportation in just five years, enacting a horrible toll that only the largest corporate farms can possible weather if left unabated for much longer.
Delegates of the NFU did not agree with the official government stance that dropping farm incomes were the result of an oversupply of produce caused by excessive subsidies paid to American and European farmers. They said that this tendency to blame farmers is an easy out for governments. Now that Canadian farmers have done everything the government has ordered (expand, diversify and purchase the latest technology) all without the slightest increase in income, the government has simply shifted the bogeyman over seas and attempted to make all farm problems the result of European subsidies. This scapegoating ignores that the cost of inputs in Europe is as much as 25 times higher than it is in Canada, thus making subsidy a completely necessary part of agriculture. Likewise, farmers did not believe that increased trade would in any way help their situation, pointing to figures that showed farm exports to have increased from $2 million in 1970 to $22 million in 1998, with less than a $1 million increase in realized net farm income during the same period.
Clearly the family farm and the rural farming community are on the edge of extinction. Cynicism prevailed when delegates began to discuss possible solutions, with a general feeling that even the battle for control of their own cooperatives had been lost. Yet despite the despair, all delegates agreed that the family farm was not only an important part of the Canadian economy, and just as importantly, an cornerstone component of Canadian culture. Moreover, the loss of the family farm means the effective loss of sovereignty over food - an issue that all farmers believed should at least be on the level of concern that loss of cultural sovereignty now enjoys.
The NFU delegates were quite rightly cynical about their future. They did however identify some issues which they believed the AFB could make a stronger stand on.
As mentioned before, NFU delegates did not believe that America or the European union would remove subsidies, nor did they believe this option would result in any gains for them even if Canada was successful in removing subsidies of competitors through the WTO. Making matters worse is the fact that inspection fees have increased dramatically over recent years, further raising the cost of distribution of products. Faced with these realities, cuts to subsidies for farmers should be viewed as a failed experiment that have allowed only large, mainly foreign farming corporations to survive, while gutting the family farm. Reinstatement of subsidies and lowering of inspection fees are the only viable ways to protect the remaining small and medium sized farming operation in Canada.
Removal of the Capital Gains Tax
The Farm Crisis
seed much of their land this year because of environmental problems (excessive water on the ground). Farmers need between $1.3 billion and $2 billion in their hands before spring seeding if they are able to meet the bare minimum of the debts experienced over the last few years. Failure to provide these funds could force thousands of farms sell to large corporate operations, which would not only mean a decrease in Canada's food sovereignly, but also a dramatic economic loss for rural communities that rely on spinoffs from small and medium farms for much of their employment.
Based on this evidence, and the public health benefits of organic farming, it seems reasonable for the AFB to more actively promote the use of organic farming. Asides from giving farmers the funds and knowledge needed to transfer over to this form of farming, the government would also need to invest money in organic food marketing in order to make organic farms viable (as it presently stands, most organic food is sold at somewhat inflated prices to a special market). If mass consumption of organic foods and the resulting benefits are to become the norm, the average citizen must be able to identify organic produce and also be knowledgeable of the benefits of organic foods. The AFB could help ensure these results by helping foster organic food cooperatives (both in production and marketing) and by providing the funds needed to get a mandatory producing labeling program off the ground.
Low Chemical Farming
 Canadian Department of Agriculture and Agri-Food (AAFC) Agri-Food Trade Service, Agri-Food Export Potential for the Year 2000; AAFC, Canada’s Trade in Agricultural Products, various years: 1988, 1989, and 1990.
 The Canadian Ministers of Agriculture agreed, at their annual summer meeting in July of 1998, “to work with industry in reaching a target of four per cent of world agri-food trade by the year 2005.” (Federal-Provincial-Territorial Communique, July 16, 1998) Note that the 4%/$40 billion target was originally proposed by the Agricultural Marketing Council (CAMC), a “private sector led government-business partnership established to advise the federal government on how the government can facilitate the business of growing exports.” (From the CAMC website: www.camc-ccca.org) CAMC membership includes representatives from Maple Leaf Foods International, Cargill, Nabisco, and McCain Foods along with token producer representatives.
 Data in this section calculated from Grain and Milling Annual 1999, Sosland Publishing Co., except beef-packing plant share which was calculated from data collected by Jim Bateman for the Manitoba Department of Agricultural Economics.
 Realized net farm income is not the same as corporate “net income” (also called “profit”). Corporate net income (profit) is calculated after everyone from the janitor to the CEO is paid. Realized net farm income is calculated without making any allowances for the labour and management contributions of farm family members.