Cover

The Pressure Builds on Ottawa

Farmers are demanding more relief, and the Chrétien government may come through in the coming budget

John Geddes February 28 2000
Cover

The Pressure Builds on Ottawa

Farmers are demanding more relief, and the Chrétien government may come through in the coming budget

John Geddes February 28 2000

The Pressure Builds on Ottawa

Cover

Farmers are demanding more relief, and the Chrétien government may come through in the coming budget

John Geddes

By the look of his weary, red-rimmed eyes, Lyle Vanclief might pass for a farmer who has been scanning the horizon and glimpsed nothing but the wrong kind of weather coming. Or squinting at the financial pages and seen grain futures falling—as usual. But it has been more than a decade since Vanclief, the federal agriculture minister, sold his spread near Belleville, Ont., to his son. The strain on his face these days has been put there by a political hailstorm his friends say has hurt him personally. He has been coping for months with the repeated outbursts of anger from Prairie farmers who often dismiss him as a central Canadian who just doesn’t get it, or worse, doesn’t want to. As if to prove he still remembers what it’s like to have dirt on his boots, he rhymes off the dismal returns his farming son is getting. “Two years ago, he sold his soybeans for $380 a tonne and this year for $225. He sold his corn for $ 180 a tonne two years ago and this year for $ 105,” Vanclief says. “I see how he is struggling.”

Yet Vanclief is not willing to merely sing a sad song about Canada’s beleaguered farmers. He refuses to apologize for a federal policy mix based on the premise that the woes of Saskatchewan, in particular, are too complex for a simple solution. Yes, massive agricultural subsidies in the United States and Europe have pushed down commodity prices—the root cause of the crisis, in the eyes of many beleaguered westerners. But Vanclief also points to the need to cut grain handling and transportation costs and push ahead with diversification of the farming economy. And while he agrees that most farmers are striving to modernize, he is willing to venture into the largely taboo discussion about whether some farmers may have themselves to blame for failing to keep pace with a challenging world market. “I’ll be very frank,” Vanclief told Macleans. “There are always the cases of some individuals who have not had a great desire to change.”

He hastens to add, though, that even for some farmers determined to keep up with the times, today’s very low prices have created a punishing debt crunch. “When you’re in the process of changing, if you’ve made capital investments and you get hit with tough times, that hurts you even more,” Vanclief says. While the current crisis is maddeningly diffuse— with local factors ranging from drought to flood, and global ones from the subsidy issue to the after-effects of the Asian economic flu—the overarching cause is huge world surpluses. The past four years have seen four out of the five largest world wheat crops on record. Since 1995, according to the Canadian Wheat Board, wheat stocks among the five major exporters—Canada, the United States, the European Union, Australia and Argentina—have soared by a massive 93 per cent. While supply is way up, demand is weak, mainly as a result of economic slumps in Asia and Russia.

Vanclief responded to these grim market conditions last month by offering another $ 1 billion in farm relief for 2000 and 2001. Saskatchewan Premier Roy Romanow called that “woefully inadequate.” Publicly, federal Liberals have seemed reluctant to offer more. But Macleans has learned that last Wednesday, Prime Minister Jean Chrétien telephoned Natural Resources Minister Ralph Goodale—his lone Saskatchewan cabinet minister and MP—and gave him the green light to try to negotiate a further injection of cash in time for the Feb. 28 budget. One well-informed Liberal said that between $200 million and $500 million in additional aid may be forthcoming.

But officials stressed there is no guarantee Goodale will succeed. One daunting challenge: coaxing the Prairie provinces into putting up some of their own cash to leverage more of Ottawa’s. As well, there are technical difficulties in deciding exactly who to help. “There are some farmers who you would think would be in difficulty who are OK,” says Goodale. “Others who you would think would be doing OK are in difficulty. That’s what makes it so perplexing when it comes to identifying those who are really in the most severe difficulty, and targeting resources to them.”

That targeting is what makes Canada’s approach so different from U.S. and European subsidies that flow to all farmers. The federal government spends about $600 million a year on crop insurance and other programs aimed to assist farmers who face a short-term money crunch. As well, Ottawa put another $ 1 billion into the system in the past two years under a relief plan called Agricultural Income Disaster Assistance, the program Vanclief promised last month to match with another $ 1 billion in the next two years. The fine print of how it will be allocated must still be negotiated. But whatever the details, the Liberals vow not to go back to the sort of broad payments to all farmers that ended when the Crow rate—the nearly centuryold transportation subsidy for Prairie grain—was eliminated in 1995. Federal officials say demands from the Saskatchewan government for cash to all farmers, even prosperous ones, are simply too cosdy.

Vanclief hopes to have details of who will qualify for federal support hammered out by the time he meets provincial agriculture ministers in late March. But he warns that the underlying problems of Saskatchewan farmers will likely linger much longer. Canada is in a marathon struggle at the World Trade Organization to force down U.S. and EU subsidies. Reforming the transportation system for western crops may also take years. But Vanclief, who knows firsthand the vagaries of the farming business, holds out hope that weather and market forces might ease the pressure on rural communities. “Last year was the fourth world bumper crop of grains and oilseeds in a row. We don’t know what this year is going to bring. If there’s a major drought or whatever, prices can turn around,” he says. “One person’s prosperity sometimes hinges on someone else’s unhappiness.” Political fortunes, too, can turn on forces just over the horizon.

The finance minister’s tax-relief plan

Hard-pressed Saskatchewan farmers may get a helping hand in the forthcoming federal budget—but others have also been competing for federal cash. The allure of multibillion-dollar federal surpluses in the post-deficit era has made the run-up to the year 2000 federal fiscal plan, which Finance Minister Paul Martin is slated to table on Feb. 28, even more feverish than usual. Vying with pleas for a massive federal injection of cash into agriculture has been a well-organized push for spending aimed at children. Among the more narrowly focused lobbying were demands for boosting foreign aid, and funding for Canadian filmmakers. In the end, though, all these ideas and more will be overshadowed—some could be squeezed out entirely—by another federal priority: tax cuts.

Martin is expected to unveil a five-year tax-relief plan, starting with about $3 billion in reductions in the fiscal year 20002001. The centrepiece of the tax-cuts feast: a reduction in the middle-class tax bracket (defined by the government as $29,590 to $59,180). Easing the burden broadly for Canadians with modest incomes may be key as Martin also plans to deliver other tax breaks—such as reducing the levy on stock options—that will benefit mainly well-off taxpayers. Still, with Martin estimating he will have $95 billion over five years to divide among tax cuts, new programs and debt reduction, there will be enough left over for some new spending.

Farmers have already been promised $1 billion over two years for relief from low commodity prices. A one-time injection of about $2 billion into health care is probable. But the main item in the “children’s agenda”—only a few months ago touted as this budget’s big theme—will be a previously announced extension of parental leave benefits under Employment Insurance. Meanwhile, Heritage Minister Sheila Copps has downplayed the chances of a new film fund, and lobbyists for foreign aid groups say they are growing less optimistic as budget day approaches about their chances for a big boost.

J.G.