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1. Why are Canadian tobacco farmers
in crisis?
Tobacco farmers are victims of conflicting government policies on tobacco and
a gap in tobacco
control policy that has led them into debt and economic devastation.
Since 2002, tobacco farmers
and their families have been in a state of turmoil,
brought on by dramatically declining crop sizes,
costly mandatory infrastructure
investments, rising contraband and an increase in cheaper
imported
tobacco.
Despite
a still existing and legal market, they find themselves unable to meet
their
debt
obligations and are at great risk of losing their farms and their homes.
At an average age
of 58, with
average debt loads of $400,000, the significant
devaluation of tobacco farming assets, and
little or no
viable employment opportunity
elsewhere, many Canadian tobacco farmers risk losing
everything they
and their
families have honestly invested in and worked for over four or five
generations.
2. What factors have forced farmers into debt?
In 2002, tobacco companies demanded that farmers convert their equipment to new
nitrosamine
burners to lower the carcinogen content in tobacco and were promised
crop sizes that, in reality,
are 49% less than promised. Announcements from the
Tobacco Advisory Committee (TAC)
presented
a stable future outlook, with imports
returning to traditional levels. Conflicting government
policies
aimed at discouraging
youth and adult smoking have indirectly and increasingly encouraged
contraband
and unregulated cigarette manufacturing that are outside TAC agreements – estimated
at as much as one in four cigarettes in Ontario. The price difference between
legal and illegal cigarettes
is so large that the consumer is in revolt. The
result is a price war that legal companies must engage in
to keep market share
undermining the Tobacco Advisory Committee negotiations. All manufacturers
are
not required to be part of TAC negotiations which leaves a huge gap in tobacco
pricing between
manufacturers. The net result is that Canadian farmers are facing
higher debt and production costs,
significantly devalued assets and fast-declining
incomes as a result of the cigarette companies’ drive to
source less expensive
tobacco for cigarettes. This flies fully in the face of Canada’s obligations
in the
World Health Organization (WHO) Framework Convention Tobacco Control Treaty.
3. What do tobacco farmers want today and for the future?
They want a fair, orderly and comprehensive tobacco control policy
that provides an exit for tobacco
farmers, their families and communities
that are facing economic devastation. At the same time, they
want
to strengthen Canada’s tobacco control policies by making them more
effective in addressing
issues like contraband cigarettes and the
loss of control over domestic cigarette production.
4. Aren’t tobacco farmers protected by the quota system?
No, unlike dairy, turkey and chicken farmers, tobacco farmers do not
have a national agency
providing protection.
5. Isn’t the real problem the fact that smoking is decreasing
in Canada, which has
reduced the market for tobacco?
The economic devastation faced by tobacco farmers in Canada is not
as much a result of the
declining prevalence or consumption rates in
our country, but more the result of conflicting government
policies
that have indirectly and increasingly encouraged tobacco contraband
and micro-producers
outside of Tobacco Advisory Committee negotiations.
Essentially, we now have two sets of rules which
does not support the
legal marketplace.
Government’s high taxation policies were intended to discourage mature
smokers and to deter the
beginning of youth smoking but, without corresponding
tracking and control of supply in all forms of
tobacco and cigarette
manufacturing, a rapidly flourishing underground economy has developed.
The
demand for tobacco from over five million Canadian smokers is still
viable to support Canadian
tobacco
farming to some degree, although
it will continue to decline.
6. Is growing alternate crops not an option for Canadian farmers
who want to exit
tobacco farming?
If tobacco farmers, with average tobacco farm sizes of between 50 to
150 acres, switched to other
crops,
it would cause existing vegetable
farmers, already struggling to make a living, to experience
devastating
price drops from an oversupplied market. A non-competing alternative
does not yet exist.
Research is
being done on the viability of producing
ethanol from corn for green energy, but the jury
is still out. With
large debt loads and little or no equity left, tobacco farmers have
no access to the
capital required for
material and equipment required
for conversion to other crops. In addition, more
agricultural, economic
and market research is needed to determine crops other than tobacco
that
are suited to the soil and
climate of the tobacco belt.
7. Are tobacco farmers not represented by the Ontario Flue-Cured
Tobacco Growers’
Marketing Board? How does TFIC fit in?
TFIC’s voluntary Canadian membership includes farm families in PEI,
Quebec and Ontario. The Ontario
members are also mandatory members
of the Ontario Flue-Cured Tobacco Growers’ Marketing Board
(OFCTGMB).
Unlike the OFCTGMB, however, whose mandate covers the marketing and
production of
tobacco, TFIC’s mandate focuses on the development and
delivery of a comprehensive, fair and
orderly
exit strategy for tobacco
growers as demand decreases, a strategy that recognizes Canada’s
health
objectives.
8. Why didn’t all tobacco farmers
exit growing during the last round of buy-outs,
specifically the
Tobacco Adjustment Assistance Program (TAAP)?
TAAP’s funding was woefully inadequate and compounded the crisis for
the number of farmers
wishing to exit. The Federal TAAP program spent
$67 million between Quebec and Ontario in retiring
tobacco quotas.
Under a reverse auction system, desperate farmers were pitted against
other farmers
with no other option. Ontario received 700 irrevocable
bids, with 252 being accepted with the funding
that was available.
In Quebec, 53 of 57 producers exited tobacco production. The provincial
governments in Quebec and Ontario provided additional monies to producers
who exited through
the program. The monies were desperately needed
by many farmers who were under severe financial
distress. In Ontario,
$50 million was spent, with $35 million for farmers and $15 million
for the
community.
Although intended to alleviate the economic crisis
facing tobacco farmers, it was little
more than a
temporary rescue,
not a long-term solution. The compensation offered by the federal
and
Ontario
governments represented less than half of that offered
to tobacco farm families in
the U.S. in 2004.
Furthermore, the
program implied that the government still wanted tobacco
growing to
continue in Canada.
9. What has been the situation after TAAP?
After federal government program spending of $67 million and a stated
goal of the program to
“improve the viability of those remaining”,
the reality has been a decrease in crop size and a
$69
million
drop
for the growers. Their equity and future planned retirement have
been destroyed.
They face
bankruptcy and no escape, while government
and company profits are over $12 billion
annually.
10. What does TFIC propose as the solution?
TFIC’s Blueprint
for Action is a win-win proposal for Canadian governments, Canadians
and
Canadian
tobacco farmers and one that re-establishes a level playing
field for cigarette manufacturers.
This Blueprint
details
a comprehensive, fair, orderly and accountable tobacco production exit
strategy
focused on a
supply-side approach to tobacco control. The
proposed exit strategy responsibly mirrors
the decline in
tobacco production
in Canada with the actual decline in tobacco consumption,
supporting
the work
undertaken over the last decade by Health Canada,
the Canadian health community and
smoking
cessation groups. This approach
also serves to strengthen Canada’s leadership role in the
World Health
Organization (WHO) Framework Convention on Tobacco Control treaty.
11. How does TFIC’s Blueprint for Action support
the WHO Framework Convention on
Tobacco Control treaty, which the
Canadian government has ratified?
The federal government is a signatory to the WHO’s Framework Convention
on Tobacco Control and
must report on its progress in complying with
this agreement by February 2007, including its activities
related to
Article 17 (re support for alternative economic activities for tobacco
farmers, workers, etc.).
The treaty supports decreased worldwide consumption
of tobacco, as opposed to increased Third
World
reliance on increased
tobacco farming. If Canada’s decline in tobacco farming reflects the
actual
decline
in tobacco consumption, Canada does not contribute to
increased tobacco farming elsewhere
in the world.
12. Does TFIC have support from other organizations and interested
parties for
its position?
TFIC has good support among its local municipal and business leaders,
who understand the financial
impact on their communities. We continue
to have ongoing discussions with smoking cessation and
health groups.
The position of members of the anti-tobacco community (specifically,
Physicians for a
Smoke-free Canada and the Lung Association) are not
that different from our own: they acknowledge
that assisting Canadian
tobacco growers and their families to get out of tobacco farming is
an essential
element of a comprehensive tobacco control policy. The
World Health Organization says the same
thing in its Framework Convention
on Tobacco Control, which Canada has ratified.
13. Do precedents exist for the type of exit program that
TFIC is proposing?
Precedents for exit programs exist in three provinces – P.E.I., Nova
Scotia and New Brunswick –
as well
as the U.S. and Australia. A
North American precedent was established in the U.S. in 2004
when
all
tobacco quota was phased out through a levy collected from manufacturers
and sellers of
tobacco
products and paid to quota owners to reimburse
them for the loss of economic value, over a
10-year period.
14. Are some farmers supplying the tobacco
for the rapidly increasing amount of
contraband cigarettes?
Tobacco farmers grow raw leaf and do not process tobacco ready for
cigarette tubes; only
multinational
manufacturers have this capability
and the facilities. The notion that some farmers may
be selling tobacco
out the back door to illegal cigarette-makers is a misconception. There
is careful
monitoring of farm
acreage and crop sales by AGRICORP (the
government agency that insures
farm crops), the Ontario
Flue-Cured
Tobacco Growers’ Marketing Board and private crop insurance
companies.
Quota holders
face substantial penalties, which include losing all
their quota, if convicted
of selling outside the legal
marketplace
and the Marketing Board auction system.
15. Is it true that some tobacco farmers wish to continue
growing?
The wish to continue to grow is a dream of the past when tobacco farmers
could make a good living
for
working hard. The stark reality of today
is very different. The drive for just-in-time delivery of the
cheapest
inputs possible no longer supports that wish. Increased foreign competition
and contraband,
plummeting crop sizes and escalating debt loads compound
the situation for farmers. On the flip side,
tobacco is very profitable
for government taxation coffers and manufacturers. By agreeing to stop
tobacco farming, farmers are not just giving up their “right” (i.e.
quota) to grow tobacco, but are also
losing their livelihoods. They’re
also giving up equipment, land and knowledge. If a viable industry
remained, naturally some would prefer to continue on in their chosen
profession, working the land
that
has seen tobacco grown by sometimes
up to five generations of their families. But that’s not
reality in
the present Canadian environment.
16. How would your proposed exit strategy be funded?
A fair and final exit strategy for Canadian tobacco farmers need not
be funded from the current
annual
$9 billion in taxes collected by
federal and provincial governments. There are several options,
including:
recovering the over $1.5 billion in taxes estimated as lost each
year to contraband sales,
through
improved enforcement of contraband
laws; revising the taxation system to levy tax earlier
in the
production
process (e.g. all filters and cigarette tubes be taxed at the manufacturer
level before
delivery
to cigarette companies; taxing all raw to processed
tobaccos at full with legitimate exemption
holders
applying for their
rebate after all taxes are collected), which would establish a level
tax playing
field for
all (legal and illegal) cigarette manufacturers
and capture more taxes on end products; levying
a tax
on manufacturers
to fund the exit strategy for farmers as was done in the U.S.; or
imposing an
additional
surtax on cigarette companies' profits.
The total cost of an immediate and complete exit
of all farmers would be $100 million per year over
10 years to fund
the proposed exit strategy. This amounts to much less than one year’s
lost taxes
due
to unchecked illegal activities. |
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