Proceedings of the Standing Senate Committee on
Agriculture and
Forestry
Issue 11 - Evidence
OTTAWA, Tuesday, March 4, 1997
The Standing Senate Committee on Agriculture and Forestry, to which was referred Bill C-60, to establish the Canadian Food Inspection Agency and to repeal and amend other Acts as a consequence, met this day at 4:35 p.m. to give consideration to the bill.
Senator Leonard J. Gustafson (Chairman) in the Chair.
[English]
The Chairman: Honourable senators, we have before us today representatives from the Canadian Federation of Agriculture. Will you proceed, please?
Mr. Jack Wilkinson, President, The Canadian Federation of Agriculture: Mr. Chairman, thank you for having us here today. As I am sure you are all aware, the whole issue of cost recovery, in general, and the food inspection agency, in particular, are of major concern to members of the farm community. There are a number of points that we would like to make to you today. We have two recommendations that we would like to see come out of your hearings.
We made some suggestions on the earlier go around with regard to the advisory committee being made accountable to the minister. Those changes have been made, something which we are pleased to see.
From the beginning, we have supported the whole overview on the question of integrating the system and trying to find efficiencies within it. I hope that, with a continuation of that process, down the road we will be putting into place a more efficient system in some provinces. From our point of view, this is a positive step toward dealing with overlap, duplication and efficiencies.
Having said that, and having got the compliments out of the way, we still have a number of points about which we are concerned. They fall into two or three areas. The first has to do with the question of accountability. Having an arm's-length agency does, to some extent, worry us. The relationship has changed dramatically, from a group that works within a department and is accountable directly to the minister to a group that is not within government. Obviously, in the first instance, the minister is accountable to the House and available to a host of organizations, such as ourselves, if concerns arise. There is a significant shift in that accountability in the arm's-length agency under the cost recovery proposals, something which concerns us. That is one of the reasons we are pleased that the advisory group will report to the minister, who will deal with any bumps which may be encountered on the road to initially determining the agency's role.
The other question that is of concern from our point of view has to do with the details that accompany the overall budget. We are a month away from the time when some of these fees will be tabled. We thought that the overall budget of the agency would be available for public comment and that we would know in detail how and where the system will work. However, what we have is an estimate from the department itself which forecasts a shortfall of $9.3 million. There is no reason to assume that the amount would be different from that estimate in the agency's first year of operation.
We have had some clear statements to indicate that there will be no new fees to recover costs in the first year of operation, that being April 1, 1997 to March 31, 1998. We know that a new battery of fees will be imposed on April 1, 1997. That creates, at best, a level of suspicion and scepticism when, as part of the Department of Agriculture's own estimates, they indicate a shortfall in the first year.
Another of our concerns has to do with the make-up of the advisory group and how it will operate. We hoped that the advisory group would have been up and running early to make recommendations about the formation of the agency, as well as to answer the question of the budget and other points that I have already raised. It has been suggested that there be a 12-person advisory group. We think there will be a number of provincial government people who will want to be part of that group. We think it is critical that a majority of the individuals making up the advisory group be farmers. Further, we feel that those people should be chosen from a list of producers which the various commodity and general farm organizations would provide to the minister.
If the advisory group is to be meaningful in the whole process, it is our sense that they, too, have to be connected to farm organizations that are involved in the outcome and know in detail the problems and concerns which may arise in future developments. Commodity groups that are involved in the negotiations with the new group and general farm organizations, such as ourselves, which have an elaborate input system going back to the producer level , should be able to provide a medium-length list from which the minister can choose names. We view it as critical that, in the transition period, the advisory group come from the farm community.
At the bottom of page 2 you will find our first recommendation. In it, the CFA urges the committee not to allow this legislation to come into force until a business plan and a budget have been tabled and approved by the House of Commons. Industry consultation must be included in the formation of both the business plan and the budget of the agency.
The financing of the agency has been a critical issue from the beginning. As I have indicated, with such a short time period until the fees come into place, no budget has been tabled. There is still a degree of uncertainty among groups as to what will be the absolute fees.
If the example of the Pest Management Regulatory Agency is to be followed, clearly, that is of concern from our point of view. There were some shortcomings in the final stages of negotiations with that agency, although there is some light at the end of the tunnel at this point.
With the proposed shortfall of $9.3 million in the budget of the proposed food inspection agency, we are concerned that no additional cost recovery initiatives will result from the creation of the agency. We recommend an assessment of the total cost recovery initiative of the bill, which the agriculture sector will pay, and its impact on producers in the processing industry .
Clearly, there are still some concerns, just as there were when we went through hearings before the standing committee of the other place. At that time, concerns were expressed by many participants, including those from the processing side, the meat council, poultry processors, as well as many of the commodity groups. In fact, we are at risk in some areas of losing our competitive edge, given the overall cost recovery process as it applies to agriculture. These issues cannot be looked at in isolation. There is a cumulative effect, even though we have viewed the consultations with this agency much better than in some other areas. We acknowledge that up front. However, there are still areas of concern that can be addressed by the two recommendations we have suggested. Strong recommendations from the Senate would help ease the transition and would give us input right up to the end to deal with some of the questions.
The Minister of Agriculture, in his evening speech at our annual meeting on Wednesday past, indicated clearly that they were looking at some cumulative impacts in general and some commodities that will be most negatively impacted by cost recovery. He indicated there are possibilities for change, and we view that as a positive comment. The problems being raised on this issue should and can be fixed, versus steam rolling ahead and pretending that there are no problems. To a great extent, the border is open when it comes to food processed products, and we want our processors and producers to be competitive; hence the suggestions that we have made.
Ms Sally Rutherford, Executive Director, The Canadian Federation of Agriculture: There are general things about this legislation which make it difficult to deal with, and it is not this piece of legislation alone.
This is enabling legislation. Many of the concerns that people have do not or cannot relate to the specifics of the legislation because the legislation provides a framework. Our concerns are largely for what will happen within that framework. The truth is that we will not have much to say about what actually happens and how decisions are made within the framework.
The advisory council will be there. We are hoping that it will work well and that it will be used properly, but we are not sure about its overall goal and its mandate, since these are not outlined in the legislation. Given the kind of legislation it is, it is probably properly not there. However, it is a concern that we are setting up a body which will govern the food industry in Canada, and we do not know what it is we are setting up. I presume the gentlemen sitting here know what they are setting up, but the rest of us do not have a handle on some of the mechanics and policies that are likely to come out of that process.
It is a bigger question, but it relates directly to the issues mentioned by Mr. Wilkinson, such as not knowing about the budget and how the shortfall will be dealt with. There is no direct linkage to the minister in the way that there has been in the past, when, for example, inspection was within the purview of the Food Production and Inspection Branch.
Those kinds of issues are beyond the specific points that Mr. Wilkinson mentioned, but certainly are of concern. There is a growing concern about them because of the proliferation of this kind of agency. Our experience to date has not been a particularly happy one. We are hoping to have a better experience with this agency. However, we would like to see some recognition of the fact that we are moving into new territory, that we must be cautious about how we do this and that everyone will be brought into the concept and operation of it.
Senator Rossiter: In your presentations, both of you referred to the fact that you have had, to use your words, recent experience with the Pest Management Regulatory Agency which has reinforced CFA's concerns about accountability. Could you be specific, please?
Mr. Wilkinson: We are concerned about the details, for example, of the number of people required in each area of work. Until recently, there was always a moving target in relation to the size of the budget. It was not the type of consultation process which, we think, should define a new partnership. The sense is from not just the farm community side that when you move from the old system to the new one of cost recovery there has to be a redefinition of the type of partnership you have. In fact, we consider that it must be more open and that we must be able to have input. We have always wanted to maintain a high level of operation while maintaining that many of the areas should be more open for discussion.
One of the most difficult problems has been with the pest management agency, in that we disagree totally with many of the agency's areas of emphasis. We thought that we had signed on to reviews and agreements in the past. However, they interpreted much of that in one way and we clearly in another way, and there was little ability to change through consultation the direction the director in charge of the agency wanted to take. There was not the type of linkage that should have been there.
On a case in point, we are still waiting for the economic stakeholders' committee to move into full force and make recommendations. The advisory board is not up and running. The fees have already been published in the Canada Gazette, and we are moving to what we believe will be the second publication in the Gazette shortly, yet many of these details remain unresolved and unsolved, although we have recently seen some positive indications from the Minister of Health, who is moving in those directions and trying to deal with those problems. However, this has only come about with a great deal of lobbying and energy. It has somewhat soured what we think of as a good working relationship that can be developed.
We are concerned about the accountability question. Will we be successful down the road in getting to some of these agencies, as we have been in the past, through aggressive lobbying with MPs and senators and what not, or will we be told that they are an arm's length agency that should not be interfered with by a cabinet minister? We could almost be held at ransom, depending on the individuals involved.
Senator Rossiter: How long has this agency been semi-operative? When did it come into being?
Ms Rutherford: It came into being about a year and a half ago. In this past week, we have begun to see some more positive moves that we are finally having some impact.
The interesting point, and it may be the major point, is that it comes back to the whole issue around the federal Food Inspection Agency, our concerns for accountability and the fact that there is a basic difference in culture. When we visited with Marcel Massé a few weeks ago, he referred to the different culture in the private sector than in government or in the bureaucracy. Having to bring the two together is a problem that everyone is facing. Clearly, for the bureaucracy, in many instances, it is not easy. For us, it is not easy either.
We do not appear to be on a level playing field in terms of having to work out this situation. Indeed, the private sector is at a bit of a disadvantage because we do not hold any of the cards. That is a concern. We are not trying to impugn horrible motives to anyone, however it is a fact that we are in a situation of change and everyone is having to adapt. We are concerned that we adapt collectively and together to a new system where there will no longer be parts of departments directly, but arm's length parts of departments. Ministers no longer feel able to direct these agencies and, therefore, we must seriously consider the kind of accountability that will exist.
We are told they must report to Parliament. Quite frankly, reporting to Parliament once a year is a nice gesture, but, except for some huge problem which becomes obvious, problems will never be stated in the report to Parliament. This is really not an accountable system, especially when we are moving to a situation where, indeed, a good portion of the cost of the agency is actually being collected from the private sector. If there must be fees, people feel quite strongly that they must have some input into the way things run.
Regardless of how one defines public and private good, there is a great deal of public good involved in many of these areas over, and which, frankly, the private sector cannot and, probably in some areas, should not be the decision-maker. There is a role for government in many of these areas. There are areas parts of it, in terms of the overall expenditures, where private industry , those who are paying the fees, there should have be some opportunity for private industry, those who are paying the fees, to make an overall statement. Being held to ransom over the fees, where either you will pay this fee or you will not get your export permit, which is the way some of the negotiations have run from at the outset, is not, from our point of view, an adequate consultative or advice-giving-or-taking system.
Senator Rossiter: The CFA is considered a stakeholder in an agency such as this. Do you have any representation on the advisory board, or do you expect to have?
Mr. Wilkinson: In fact, when this first started, Dr. Franklin did not consider us a stakeholder. The chemical companies that made submissions to the Pest Management Regulatory Agency were considered the stakeholders, and it took some effort to get into a position where we could have the type of consultations we thought were required, especially when it came to setting fees and a host of other areas such as that.
In our lobbying, we have put names forward. The assumption is that we will be part of the advisory group there. Quite frankly, with regard to the single food inspection agency, there are many from within the commodity sector who are involved and whose names would obviously go forward from organizations such as ours, because they are would be the most knowledgeable about in the type of system that they needed for their particular commodity.
The critical aspect, from our point of view, is the a direct connection back to the farmers because, in all fairness, there is a place for political appointments and there is a are places where appointments should not be political. If there is to be credibility within the system at the end of the time period, there must be a great deal of respect given to the process for naming of the advisory group in order that there be the appropriate balance among the groups represented and to ensure that everyone has an opportunity to solve a problem. The problems which must be solved are critical because there is a are real risks on a host of competitive issues.
As Ms Rutherford has indicated, we acknowledge that there are many areas which are still government's responsibility. There is concern across our membership base that one can go too far in privatization on some of these issues. Quality can be put at risk. However, there are clearly other areas where the quality is not up for debate, where it is clear that there are many different approaches, whether it be the introduction of technology, new ways of doing things or putting the same energy into cost avoidance and cost reduction as has been put into cost recovery.
To expand on Ms Rutherford's point, there is an honest concern that the culture within government is being given more time to adapt than is the culture in the farm community. Sometimes governments sign trade deals that put us in direct competition with many people, and we are givenhave little time to adapt, with few resources. Yet, we are constantly told that the reason this is taking such a long time to happen is that we have to change our thinking. Ministers are telling us this.
It is frustrating when people start overlaying with fees in cost recovery areas and where it appears that the process is painfully slow from one side but incredibly rapid from the other.
Senator Spivak: Are the people working in this agency not civil servants? Are they not accountable in that sense to the department? Where is the lack of accountability? Are you speaking mostly about the financial end of it or the reporting end of it?
Ms Rutherford: It is a little bit of both. The financial end of it is circumscribed by and in other respects circumscribes the activity of the agency.
This legislation sets up an agency with a president and a chief executive officer who have control of that budget, and that budget will be is now removed from the Agriculture and Agri-Food Canada budget. Therefore, while the agency is responsible to the minister, there is an extra separation there. We are not saying that there is no accountability, but that the accountability is further removed. It is even harder to convince someone to change something when you are that much further away.
Senator Spivak: In consultation on this legislation did you ask for a board rather than an advisory board?
Ms Rutherford: We did Our position was not to support this particular model. We wanted it to remain within the branch, largely for reasons of accountability.
Senator Spivak: Would the cost recovery have been able to go forward in that way?
Ms Rutherford: Yes. There is cost recovery in other branches. It is not a problem.
Senator Spivak: What was the reason for choosing this model?
Ms Rutherford: It was seen to be the most efficacious way of bringing in the other departments in. Agriculture and Agri-Food Canada has been given responsibility for food inspection across the board. One of the little wars which has gone on within the Pest Management Regulatory Agency has been to bring together the three departments involved. It is never easy. Perhaps it was seen as a cleaner way to do it. However, being "clean" from some points of view makes it more problematic from others.
Senator Spivak: You asked for an estimate assessment of the total cost recovery bill. Do you know what itthat is? Are you looking for an assessment on the impact of cost recovery? Do you know what the total cost recovery amounts to now is?
Ms Rutherford: No one has any idea; the government least of all. That is one of our major concerns. It is almost impossible to make even an estimate.
Senator Spivak: What is the time frame in which the cost recovery initiatives happened?
Ms Rutherford: Cost recovery actually started 10 or 12 years ago. This is not a new concept, but it has only been applied for the last three years with a vengeance. In terms of the actual application, people are only now beginning to see the impact.
Mr. Wilkinson: For example, there were numerous meetings with the Pest Management Regulatory Agency and some discussions about fees, but until they were published in the Canada Gazette, we had no idea of exactly how they would be applied and what the fee structure would be. There was a period for comments back. The minister has not shown any movement in that area, but he and still has the opportunity to deal with the hundreds of comments that have come in on the level of fees, the concern over losing product and so forth.
The Minister of Agriculture attended our annual meeting in Victoria on Wednesday. He indicated that they are reviewing some of the fees that apply to the single food inspection agency and involve around some products which are viewed as incredibly hard hit. We do not know what the outcome of those negotiations will be. Groups representing a number of commodities have made application and have been told that they are in the middle of the review and that everything is on hold until that is completed.
There are estimates from government. I believe they estimated $120 million in relation to the overall budget, but from what we have seen, those are very broad estimates with little breakdown.
That is a concern. The other issue is the cumulative effect, but not as it applies in particular to this piece of legislation. The cumulative effect has never been assessed and is totally unknown. That has been admitted by Mr. Massé.
Senator Spivak: How are these fees shared? Who is paying all these fees?
Ms Rutherford: That is one of the reasons it is difficult to get an assessment. It depends on what you are doing and where you live. If you are a potato producer in Alberta, you will have inspection fees and a number of other fees in relation to the production and sale of your product. You will probably put them on a truck and drive them somewhere.
If you live on Prince Edward Island, you have to put them on a boat, more than likely. There are other fees beyond this agency, but it becomes part of the problem. There are marine fees, service fees and port fees. As you add all of these up, it becomes a major problem. The potato industry in Prince Edward Island is suffering quite badly at the moment.
That is our biggest concern. We are concerned about accountability and financing. We are not complaining that nobody knows how to proceed. We will admit that nobody knows and that maybe we need to be cautious about what we are doing and how we are doing it. We need to be quite up front with each other about what should happen in the future.
A commitment that there will be assessments and that they will be done in conjunction with the stakeholders is really crucial to the way this thing goes forward.
Senator Spivak: If I could summarize your concerns, an agency will be set up. You have no control over how many people they hire or how they will run their operations, whether they will rent space at $100 per square foot or $200 per square foot. That will be taken into account in the fees. You are worried that no one will check on this? Is that why you want a business plan, or are the standards a concern?
Mr. Wilkinson: That is part of it. For example, there is supposed to be some sort of determination -- we acknowledge it is a difficult determination -- between public good and private benefit. Where there is private benefit, then you can look at a certain level of cost recovery in that area. Dollars will be transferred from the department, through base financing or whatever, to the agency. Those funds will, in theory, pay for what is perceived as public good.
Much of the inspection that takes place is not to the benefit of the producer. It clearly is for the benefit of the consumer and the buying public, to guarantee a high standard which is above reproach.
Yet there are other areas, and we will acknowledge this from our side, where one could clearly tag that there is a benefit to the producer or the processor. To that end, we are willing to say that we will pay. However, it varies dramatically depending on the service and the level as to what should be considered there. Within that, it is our opinion that the Treasury Board guidelines are very flexible. There is more than one way of meeting those guidelines, such as cost avoidance, cost reduction and, in the final event, cost recovery. In theory, that was not done to put us at a competitive disadvantage. That was not the goal.
Someone sitting in a department could say that a 6 per cent increase will not put you at a competitive disadvantage. Other people from the industry, such as seed exporters, will put forward documentation to say that is the total profit margin in the export of seeds and that if they lose that 6 per cent, there will be no reason to bother growing seed for export.
How do you solve that problem? At what point is this agency putting people out of business? At what point and at what speed is it supposed to move? There are people who will say that, in a particular area -- maybe private veterinarian lab services -- it is more efficient to do things to the government standard. The person running the agency who must look at laying off people may have a different opinion. They may choose to continue to run government services at a certain cost and then present their portion of the bill.
Many issues like this are still under discussion. As Ms Rutherford said, there are many different approaches and cultures. What is the "art of the possible" in trying to find the solution?
If our system is not easy to access and is starting to move away from accountability, it will become difficult from our side to resolve those problems in the future. Do you understand the point and the frustration?
Senator Spivak: Yes, I do. What is your suggestion? Do you suggest we amend the legislation? Should we pass it and make some observations?
Mr. Wilkinson: We made the point at the bottom of page 2 in bold print:
The CFA urges this committee not to allow this legislation to come into force until a business plan and budget have been tabled and approved in the House of Commons. Industry consultations must be included in the formation of both the business plan and the budget of the agency.
It is our opinion that these industry advisory groups should have been up and running before the legislation was put in place as an integral part of determining budgets, the process involved and the business plan. Instead, the advisory groups will come into existence after the agency is in full force. It will then be making future recommendations as to the way the agency operates in particular areas, even though, again, we do not know its mandate yet. It will depend on the mandate as determined after the agency is in place; what they can look at, who can call the meetings, et cetera. This issue is clear. These things must be addressed up front.
The other recommendation is on page 3. No additional cost recovery initiatives should result from the creation of the agency. Then we suggest completion of an assessment of the total cost recovery bill paid by the agriculture sector and its impact on the producers and processing industry.
In the event that the initial negotiations recover fewer dollars than anticipated in the overall budget and before returning to the sector to address the shortfall, we must pause and look at the competitive problems that may develope by asking us to pick up that shortfall.
Senator Spivak: I presume you made these points in the House of Commons?
Ms Rutherford: Yes.
Mr. Wilkinson: Yes.
Senator Taylor: You have not spoken about our competitive position vis-à-vis the Americans and NAFTA. Four of us were in Washington last week and that was one of the things that concerned me, as sponsor of this bill. I asked the senators and congressmen what they would do about cost recovery. Before we went down, I heard they had much less cost recovery than we do. However, they assured me that that heavenly way of operating was coming to a rapid end. On beef, they were moving to 70-per-cent recovery of total cost. They were moving quite fast to include cost recovery .
I realize that it is not all producers' costs. Part of it should be the public's costs because the public inspections may allow a producer to gain export markets around the world. The quality of inspection can give a good reputation. Then producers make money and they pay taxes on that basis. There is a public good to having a good inspection system. The French champagne and the Australian dry wine industries are examples.
The Americans made it fairly clear that if we had low inspection fees compared to theirs, they would not hesitate for a minute to call that an artificial subsidy.
I notice that the American Federation of Labour has come out against fees but one would expect them to say that. Have you worked with anyone down there to try to harmonize the inspection systems and the cost-recovery systems in food production on both sides of the line?
Ms Rutherford: The reason you do not see that kind of thing in our brief is that this legislation does not deal with fees at all. This legislation sets up an agency. That is all it does. That is one of our concerns.
Senator Taylor: However, you know that fees will follow.
Ms Rutherford: Passing this piece of legislation will have no impact on fees. All you are doing is considering a piece of legislation that creates a framework, and it is within that framework that the fees will be set. That is where our concern about accountability and financing comes in, because those issues are not addressed within the legislation. All the legislation does is give this agency the ability to set fees. It does not discuss the kind of fees, nor how high they should be. That is one of the concerns. At the moment it is a shell.
Senator Taylor: You are worrying about your input.
Ms Rutherford: We are concerned about our input and the competitiveness issue.
Senator Taylor: That is why I am asking you about harmonizing with the American system.
Ms Rutherford: The competitiveness issue is a real one. We have been speaking with our counterparts in the United States. They are concerned about cost recovery and many other areas. The area of most discussion has been the pesticide issue because of the problems we have had there. We keep hearing that the fees in the U.S. are significantly higher than ours. They are not. We know that fees are being charged in the United States in a number of other areas. Many of the fees proposed now for Canada will either be the same or slightly higher. There are not many that will actually be lower.
In terms of the Americans using that measure as a trade issue, they will use anything as a trade issue. Frankly, it does not matter what we do. They will find some way to turn it into a subsidy. We cannot simply stop and say we are not going to do anything.
Mr. Wilkinson: Further to that and in relation to the U.S., under the GATT, the NAFTA and the World Trade Organization in particular, issues such as research, development, training and education are exempt from any countervailing action. Even though the U.S. may say, as you indicated, that these things are subsidies and could take us to a panel, the reality is that they would lose at the panel.
Another concern is that we are one step ahead of the U.S. It is not always a good thing for a producer to be one step ahead, to have higher standards, or to be the first to do cost recovery or the first to do something else. Sometimes there is an advantage, from a competitive point of view, in lagging behind a bit. Even though they are proposing a host of fees in some areas in the U.S., from our information, as Ms Rutherford has indicated, what is going to be put in place in April will put us significantly ahead of them.
That is not just our opinion. From the evidence given at the hearings in the House of Commons, it was clear that the meat processors and others were gravely concerned that they are at risk of losing their competitive position. People in general do not appreciate how open the Canada-U.S. border is to trade in agriculture products. A modest shift at any time can make the difference between a live hog going to a processing plant on the other side of the border and processed product coming back. That was a real concern of the meat council. They said that the level of cost recovery in Canada was putting them at a competitive disadvantage. I do not know how accurate that is, but I know that they put it on record in front of the house committee.
There is a broad concern that we are out of step, once again, with the movement in the United States. That can have a serious impact in the short to medium term. Again, as Ms Rutherford indicated, unless we have a good process to deal with those concerns -- to quantify, qualify and deal with them -- it can be a major problem.
We have been fighting for harmonization and changes in the system on pesticides since we signed the Canada-U.S. trade deal, in particular with regard to horticultural products and other commodities, and for lost tariffs. There were some definite statements made by the government of the day to try to deal with harmonization. We are a long way from being there yet. The tariffs will soon be at zero, if they are not already there. We will soon be ten years into the deal. It is little wonder that the patience of producers appears to be thin when they continually run into these sorts of problems. We do not want that to happen.
Senator Taylor: You say you want input in arriving at a solution, and you acknowledge the fact that the fees are coming in on both sides of the line. Is this type of system that we have started to set up -- which is not perfect by any means -- where you have a separate unit with a chairman and deputy minister and an advisory board, not a better way of ensuring that long-term harmonization and that you will have input than the old system when you are talking to a government with a huge majority? Would it not be better to actually have a bit of control? In the old system, you could hire as many inspectors as you wanted and that was buried in the cost. Was there not a tendency in the old system, where the government did everything, to mystify the process and to build costs into the inspection? Under this new method, will it not be more open and streamlined so you can keep your costs down? I am talking like a converted market man from Washington, which I am not, but I want to hear your answers.
Mr. Wilkinson: If, in fact, one went outside of the departments and brought in private business people to be in charge of the agency, perhaps the model would unfold as you suggest. In many cases the people who were in charge of the branch when it was in the department will be in charge now that it is in the hands of the agency.
Senator Taylor: According to the complaints I am getting from the other side, they are worried about 500 or 1,000 inspectors being laid off.
Mr. Wilkinson: Art Olson is in charge of the new Canadian Food Inspection Agency, and he was in charge of it beforehand.
Senator Taylor: You are speaking of the man at the top. They are complaining about their staff being cut.
Mr. Wilkinson: I am sure they are complaining about their staff being cut, but what would make anyone think that there would be a radical shift in the approach at the new agency when, in effect, many of the players are still the same? There is nothing in the system which puts extreme pressure on finding efficiencies. For example, in the Pest Management Regulatory Agency, we lobbied quite aggressively to make sure that the advisory committee was, in fact, part of the draft legislation. It was not even a given until there was a great deal of pressure put on them, that the economic stakeholder committee would be part of the system. Because the enabling legislation is so broad, that sort of thing may depend on the type of relationship that you have with the minister involved in setting these agencies up. We still do not know, for example, who will be on the advisory committee for the Pest Management Regulatory Agency. We have submitted names. We hope that they will pick the appropriate people to represent us. However, that is an open question.
I do not see anything in the system that would result in the scenario which you suggest.
Maybe I misunderstood you. I thought you said we had more or less agreed that these things were coming forward at the same pace in Canada and the U.S. I do not believe anything in the brief or anything we have said would suggest that as our point of view. In fact, it is my opinion that we said the opposite. Given the information we have, we are concerned that we are out of step with what is happening with one of our major trading partners. We believe that can put us at a competitive disadvantage.
Senator Taylor: Do you prefer the old system to the one that is coming now, or do you want a different system altogether, particularly from the old one?
Ms Rutherford: To be clear, our brief deals with the legislation itself.
Senator Taylor: Therefore, you are not arguing systems, you merely wish to improve this system.
Ms Rutherford: That is right. We clearly understand that efficiencies needed to be developed and that there had to be a change in the way things were being done, whether it was within the department per se or outside of it. The model before you is not our first choice. It could have been located in the Department of Agriculture and Agri-Food as part of a branch. The decision was to go with the agency. That is a given now.
We are trying to improve on this situation. Whatever model is there, this legislation creates a framework. Our concern is how the meat will be put on the bones, essentially. That is what it comes down to.
Senator Taylor: You have a Chev and you want an Olds.
Ms Rutherford: No, we may want it the other way around.
Senator Taylor: At least you want the tires full of air.
Ms Rutherford: We want to be able to go to the dealership and make the decision. We do not want someone to give us the Chevrolet when, after looking at it, we have decided that we would like to take the Oldsmobile. It may be the other way around as well. We may have an Oldsmobile, when what we really need is a Chevy. We are paying the bill, but we do not get to decide on the options.
Senator Taylor: My impression from the briefing with the department is that there will be more input from big producers than there is now because if you are paying part of the costs, you have a right to demand how that money is spent. Before, the government representatives said, "We are here from the government to do inspections, and we will tell you whether it is good or bad." Actually you had some input on the payment of fees. You automatically had a lever every four years at election time as to how you would achieve the input.
Ms Rutherford: Many companies can go bankrupt in four years.
Mr. Wilkinson: With all due respect, do you actually think that people from the department come to this committee or another committee and say that they are making a horrendous error in what they are doing, that they should not be going down this road, that they have flubbed it all, that farmers have no input and that they have a perfect case for their complaints?
Because there are two different cultures, we have recommendations to make to this committee. We think they are real. Many organizations support us in our thinking. We just had our annual meeting where our entire membership said that cost recovery is still a major issue. They would like to see further changes to the way things are put forward and how they operate.
Senator Taylor: We will hear people from the department who are complaining about the system, too. In other words, we do not have a whole bunch of happy troopers on the other side. That may make us suspect that we are okay, but both sides do not like it.
Senator Anderson: I have been hearing a great deal of criticism about the cost recovery system in agriculture. Do I understand you to say that an assessment of the cost recovery for which the agriculture community is now paying has not been done prior to this point?
Mr. Wilkinson: That is correct.
Senator Anderson: In other words, no one knows the total amount of user fees an individual farmer now pays.
Mr. Wilkinson: Recently Agriculture Canada indicated an overall figure of $120 million, that they will collect.
We talked to Treasury Board officials when we were involved at the standing committee in the House of Commons, and they admitted openly to us that there has been no overall assessment as to the impact of cost recovery on agriculture. They admitted openly that such an assessment is almost impossible because some 40 some areas will be impacted at various layers. They will not know exactly what the rates will be even on April 1, and some will be later than that. Their estimates at this time on the competitive impact, according to Treasury Board, have not been done. They have indicated that they should look at doing that in the future.
Senator Anderson: I have been looking over the major provisions of the legislation. I note that the bill will allow the minister to enter into agreement with one or more provincial governments to establish a federal-provincial corporation. Has anything been done in that respect?
Ms Rutherford: To date?
Senator Anderson: Yes.
Ms Rutherford: I am not sure. I do not believe so. I am sure Mr. Doering could answer more directly. In conversation earlier, Mr. Doering was talking about having come to agreement with some provinces, but not with others.
We understand that there is a need to change the way the inspection system runs. Right now, it is a major problem. There are so many different levels at which inspection takes place that there is a need to harmonize within Canada, let alone the United States. The need for harmonization is a great deal more evident within Canada than it is across international borders. We must have a system in Canada that works well, in order that we can be confident that the products we export meet all of our standards. That is one of the major issues.
In terms of corporations, my understanding is that provisions have been worked out with the provinces in respect of the way they want to operate. Some provinces are happy to delegate responsibility to the federal government and other provinces are not. Our interest there is simply that the harmonization within Canada take place as quickly as possible.
Senator Anderson: I also noticed that the bill will mandate the agency to enter into contracts, memoranda of understanding and other agreements with other parties. Does this mean privatization of, say, the inspection procedure?
Ms Rutherford: Yes, potentially. In some cases that is not necessarily a bad thing. It depends on the specific instance and whether the stakeholders involved see that as an appropriate move. That is one area where we want to be sure that there is significant input and that those decisions are not made solely by those running the agency. The advisory committee clearly needs input into what will happen.
The other issue is how much the fees will be. If there is a choice between going to a private lab and saving money versus keeping the existing lab that is costing a great deal more for the same level of service, which is the better way to go? From the industry's point of view, if the service is the same, if costs are significantly less by privatizing and if no risk is run, clearly that is the better way to go.
A good example of this is grading in both beef and pork. It has been privatized, and the standards are the same. In the case of beef, it is clear now -- because it has been up and running for a while -- that the costs are significantly less. The pork industry is projecting that their costs will also be significantly less for that kind of service. There are ways of streamlining processes. In terms of competitiveness, that is the kind of thing that we feel is necessary to take into consideration. We must be able to deal with what is actually on the table.
Mr. Wilkinson: Further to that point, grading is a pricing mechanism. I do not want people on the committee to confuse that with inspection service.
The industry itself would say, "We do not mind being privatized because that will not deal with the quality of food. It is the assessment of the quality of the carcass and the price the farmer will be paid", and so on. They may have clearly indicated that there are only certain parts of the inspection side where they would pursue privatization to government standards. No one is more interested in maintaining the reputation of the food than the individual farmer or processor. The Canadian reputation, both domestically and on the international market, is our best selling point.
There are many parts that we would not like to see privatized. Grading determines whether it is an "A", "B" or "C" carcass pricing for the individual farmer, which is quite different from inspection.
The Chairman: Do you see the cost to the agricultural community increasing as a result of this bill? Obviously, you are concerned about that. For example, fertilizer prices have gone through the roof. Fertilizer companies should be able to afford to pay some of the costs. Can you give us an indication of what you think the breakdown should be?
Mr. Wilkinson: At this point there are firm commitments that up until "X" date there is no intent to initiate any more cost recovery. Those are definite statements.
We will see how things turn out. If we do not have balanced budgets, and so on, it is hard to believe that future governments would not view things such as cost recovery as income generators. We hope that never happens, but that is one of the issues that we have fought aggressively within the Pest Management Regulatory Agency. The fees being passed on to the farm community are past the point of what would be considered by us, and many who look at them, as legitimate areas of cost recovery. In fact, they have moved into the area of income generation. That is why we have been so aggressive in the campaign and in that whole area regarding both the private and the public benefit. We want the price tag lowered. It should be allotted to us at a much lower rate.
Once you start down the road of cost recovery, it becomes an easy way to say next time around, "Maybe the cost should increase by 5 per cent." No one knows what will happen past a certain budget date and a certain line. However, both sides are saying that there is no intent to do a second round of cost recovery.
Our concerns are that if the revenue requirements are not met, will the shortfall be picked up by government or will they tell the sector, "We need another $9.3 million in this legislation." As yet, we have no way of dealing with that and have no idea what the decision might be.
The Chairman: In your opinion, the advisory committee does not have any teeth.
Mr. Wilkinson: We do not even know the mandate of the advisory committee. That is one of our recommendations to you; namely, that you return the bill with a clear recommendation that the mandate and the way in which the advisory committee is appointed be worked out early on, so that we will know what they will be able to do. At this point, no mandate has been given to the advisory group in the enabling legislation.
Ms Rutherford: There is a precedent for naming an advisory committee before the legislation has passed. That took place with the Pest Management Regulatory Agency. It did not work particularly well, but the precedent is still there.
With the right kind of will on all sides, that kind of situation can work well. This legislation will pass soon and there is no reason why the advisory committee cannot be named immediately in order that its work can be undertaken. We would prefer to have the mandate and the budget tabled before the legislation comes into force.
Senator Spivak: I am not familiar enough with the legislation, but you are worried about standards. There is no guarantee that cost recovery will not take precedence over standards. We have seen it happen in other fields. Is there anything in the legislation that would guard against that?
Ms Rutherford: That is not a concern that we have. We are confident that the people who are running this system are cognizant of the fact that if they do not do it, all hell will break loose, that the industry will begin to go down the tubes.
We have no intention of trying to impugn their motives or to look at it from that point of view. There has never been any suggestion that the creation of the agency would promote a decline in standards. Everyone wants high standards. Our concern is how we balance and enforce those standards in the most efficient and cost effective way possible.
The Chairman: Unless someone has a pressing question, we want to thank you for appearing here this afternoon and putting forth your position on behalf of the Federation of Agriculture.
The next witness is from the Agriculture Union -- PSAC.
Mr. Leng, please introduce your colleague.
Mr. Larry R. Leng, National President, Agriculture Union -- Public Service Alliance of Canada: With me today is Steve Jelly, Special Assistant to Daryl Bean, President of the Public Service Alliance of Canada.
I should like to thank the Senate committee for inviting my appearance during your review of Bill C-60, the Canadian Food Inspection Agency Act.
The Agriculture Union, a component of the Public Service Alliance of Canada, has the privilege to represent some 3,000 of the 4,500 federal workers who are to be transferred to the new agency. Last fall, I had an opportunity to appear before the house committee during its review of Bill C-60. At that time, I outlined our support in principle for the centralization of food inspection in a single agency and raised a number of problems with regard to the process that the government had chosen to follow during the development of the agency.
In large measure, the concerns that I expressed to the house committee with regard to food safety, the structure of the agency and the labour relations environment remain today. In my opinion, the most critical question that your committee should address during its review of Bill C-60 is the potential impact the legislation, as currently drafted, will have on food safety. In this regard, we are specifically concerned that the new agency will have the authority, under clause 13(3), to delegate inspection and other functions to the private sector.
Members of your committee should understand that while Canada is not leading the international drive to private inspection, it is legislating the new agency in such a way as to quickly transform the inspection service in the event that other countries, notably the United States, amend their regulatory environment to allow private inspection.
As members of your committee are no doubt aware, the Canadian government has participated in a number of international meetings. These meetings were about the transformation of inspection service from an explicit government responsibility to a hybrid system that reduces the governmental role to one of monitoring private inspection.
At meetings that I have attended, both in Canada and the United States, the Canadian government has adopted a more or less neutral position with regard to company inspection and appears to be prepared to follow the decision reached by the U.S. government. Despite its public position of neutrality, I understand that the government has had discussions with producers during which it has been supportive of industry overtures for the devolution of inspection services. The fact that these discussions are going on is a cause of concern. The fact that the government has engaged in the discussions, both domestically with producers and internationally with other governments, without initiating a public discussion in Canada, is unconscionable. As a result, we have continually pressed the Canadian government to initiate a dialogue with Canadians to openly and honestly indicate where it stands on the issue of company food inspection.
We hope that your committee will echo this sentiment and join us in urging the government to initiate a public dialogue on food safety. It is our hope that you will go further and amend Bill C-60 to ensure that only agency employees can enforce and administer the various acts for which the agency is responsible under clause 11 of Bill C-60.
Members of the committee should understand that our proposal in this regard is not unique. On the contrary, the U.S. government is in the middle of an extensive consultation process. Moreover, U.S. legislation specifically requires that the inspection services of the U.S. government be performed by government inspectors.
Let me take a moment or two to explain why company inspection is wrong and why it has the potential to erode the protection currently afforded Canadians. If Bill C-60 is adopted as currently worded, company inspection will be permitted under clause 13(3), which deals with the delegation of powers. In our opinion, company inspection is, by nature, a conflict of interest.
The reality is that company-employed inspectors will be beholden to their employer and not to the public. This is particularly the case in a country such as Canada where workers do not enjoy adequate protection from arbitrary disciplinary action when they speak out against the policies and actions of their employers.
Moreover, even in countries where adequate whistle-blowing legislation does exist, employees who blow the whistle must make an individual decision. In short, government inspectors operating within the law and following the regulations are far more likely to protect the public and challenge company policies and actions than are inspectors employed by the company.
As a result, I believe it is inappropriate for third-party workers to perform any of the historic tasks of government inspectors. In no case should such third-party workers perform as part of the Hazard Analysis and Critical Control Point System anti-mortem, post-mortem, carcass-by-carcass or bird-by-bird inspection, evaluation and verification tasks. The question that remains and must be addressed in my opinion is how can a proper, efficient and effective government inspection system operate in the context of budget cuts and expenditure restraint?
The question "Who pays for inspection services?" is being urgently addressed in Canada and elsewhere. Industry appears to be arguing that the imposition of cost recovery, full or otherwise, should not occur; and that if industry is to pay the bill, then it must have control over the process and who it hires as inspectors. From my union's perspective, inspection should be provided by governments and paid for out of general revenue because it is a critical public safety function and, ultimately, the responsibility of the state.
That said, the reality is that expenditure restraint and budget cuts have resulted in reduced inspections that will, arguably, imperil the food safety system. Moreover, there is some merit in requiring the industry to pay part of the cost of inspection because the industry benefits directly. However, care must be taken in establishing cost recovery rates because there is some level at which the integrity of the inspection system will be undermined. That is to say, at some user fee level, companies will work to undermine the inspection system because of the costs imposed.
Members of your committee should understand that as a stand-alone system, HACCP is untried and unproved. As a result, it would be a dangerous experiment where the integrity of the food system and the safety of Canadians are at risk.
One final comment with regard to inspection and food quality is warranted. Canadian industry and government have embraced the HACCP system and believe it can result in the production of safe food. The members of my union who are actively involved in the food inspection system believe that while HACCP can be beneficial, it is not a panacea. To be clear, while HACCP can improve company-based quality control, it is not a substitute for historical inspection services. In other words, HACCP must be supported by other programs, such as preoperational sanitation and proper inspection.
Let me turn briefly to the structure of the new agency as outlined in Bill C-60. While we have no quarrel with the fact that the new agency is to be operated by a president and vice-president accountable to the minister, we believe that the proposed advisory board is inadequate and insufficient. To be clear, the mandate and representation of the advisory board is deficient in numerous ways: First, by establishing an advisory board, the government is limiting oversight of the agency.
Second, the advisory board can only act when it has an issue placed before it by the minister. As such, the advisory board will remain largely impotent. We believe that the advisory board should have the authority to advise the minister and the agency on any matter that it considers to be important, as well as on matters that are referred to it by the minister. As well, we believe that your committee and the House of Commons Standing Committee on Agriculture and Agri-Food should have the opportunity to refer matters to the advisory board.
Third, the make-up of the advisory board leaves much to be desired. Given that it is the government's intention to use the agency as a vehicle that will, in the words of the 1996 budget, "facilitate the transition to greater provincial participation, leading to a truly national system," we believe that the legislation should specifically ensure adequate provincial representation on the advisory board. As well, we note that the government has not included unions in the list of sectors that are eligible for appointment to the advisory board.
On balance, the PSAC believes that the advisory board should be mandated to review the operations of the agency and provide advice to the agency and the minister whether solicited or not. Moreover, we believe that the board should be structured to ensure a balanced participation that includes union representation and greater provincial government representation than is proposed in Bill C-60.
Before concluding, I should like to say a few words about the collective bargaining environment that is contemplated in Bill C-60 and the relationship between the new agency and other government departments. In initial conversations with us, the departments involved indicated that the context for collective bargaining and the employment relationship was open. Having said that, the departments put on the table three options; namely, the status quo; the Canada Labour Code; and separate employer status under the Public Service Staff Relations Act.
PSAC made it clear from the outset that existing federal employees would be seriously disadvantaged when transferred to the new agency, unless the status quo or the Canada Labour Code were to be adopted as the labour relations structure for the new agency. When drafting Bill C-60, the government rejected this position because of a concern that the Canada Labour Code does not provide for the designation of workers and is poised to legislate the entirely inappropriate separate employer status under the Public Service Staff Relations Act. In other words, when the government agreed to consult, it simply ignored the legitimate positions that were advanced by the unions. Moreover, the government took the position, even though PSAC indicated, both verbally and in writing, that it was prepared to discuss the designation process for the new agency. It did so, in our opinion, despite the fact that the separate employer status is not in the best interests of the government or any stakeholder, including the industry.
Senator Spivak: You heard the reply to my question about whether this agency might threaten standards. Representatives of the Canadian Federation of Agriculture do not seem to think so. You have stated your opinion, but why do you think that private agencies might not be interested in high standards? It seems to me they are saying that their position is that high standards are the marketing advantage of Canadian food.
I am highly sceptical. The public interest is served by not having the people who produce the food inspect it.
Mr. Leng: If the companies employ their own inspectors, to whom will they be accountable? I come from an inspection background. It is public health and safety and the export market about which you are concerned, and one or two bad operators could ruin the export market in Canada. That is where we would have trouble.
Senator Spivak: When we were in the United States, we saw some figures on people who died from food poisoning. France had less than 5 people, Canada had 0, and the United States had 9,000. Do they have private-company inspectors?
Mr. Leng: It is not only private company inspectors. They are also short of inspectors in the States. After the Jack-in-the-Box incident where three or four children died, President Clinton announced that there would be an increase in plant inspectors. I have had discussions with inspectors down there, and they are worried about the way the system is being eroded.
Most certainly, Canada, the United States, New Zealand and Australia have been in meetings, and Australia is pushing hard for having one veterinarian and one inspector per plant and for turning the rest of it over to the plants. They have also had outbreaks. When I was there, a little girl died from contaminated meat. We see outbreaks in Japan and in Scotland. Australia now has a bad outbreak of anthrax and Q fever.
Senator Spivak: This is an example of creeping privatization where everything has to be privatized because it is cost efficient. What about safety, and what are the guarantees in this bill which would ensure that that does not occur?
Mr. Leng: There are no guarantees in the bill because it says exactly the opposite -- that they can privatize it. That should not happen in this country. We have one of the best food inspection systems in the world, and we have been trouble-free. Why would we start to water it down now?
Senator Spivak: Why has this not received more publicity? I have not seen much in the newspapers.
Mr. Leng: I receive many calls from the press on different scenarios, and I explain it to them. They say, "Until something drastic happens, until we can sensationalize it, we will not print it." Why not do some preventive medicine to ensure that they do not erode it?
Senator Taylor: I find your evidence in some conflict with the other witnesses. You are arguing that if we open this up and start charging fees, somehow that will give a poorer class of inspection. Therefore, we are jeopardizing public health. Other people have argued just the opposite. Having a reputation for high quality goods will lead to people being too persnickety. In other words, they are overdoing it. I compare that to the French or the Australian inspectors for wine. In other words, there has always been a tendency to upgrade in order to have a hand up. Do you not agree with that position?
Mr. Leng: I did not say that I do not agree with cost recovery, but there is a limit to it. New Zealand charges 120 per cent and Australia pays $70,000 for an inspector and $100,000 for a veterinarian. Companies say they can do it cheaper. In Canada, you are charging about $6,000 for an inspector, and they cannot do it cheaper. They see us as a sometime necessary evil, but they do not want too many of us around. They say they can do part of this and that we should just monitor it. That is taking shortcuts, and that is what we are against.
Senator Rossiter: I gather you want to see a mandate in place for the advisory committee.
Mr. Leng: Yes.
Senator Rossiter: What would be your recommendations for the make-up of an advisory committee, and how it should operate?
Mr. Leng: The provinces will come on side, and we should have only one inspection agency in Canada. There should not be the two systems. You need provincial and union representation. You should have the processor, the producer and also the Consumer Association of Canada. There should be a balance there, not one or the other dominating the advisory committee. That is why we do not advocate having a board of directors. If it was overloaded by one or the other sectors, it would destroy the agency itself. The advisory board is right, and it should be expanded but it needs equal representation from all groups.
Senator Rossiter: Should they have a specific order to meet once a month?
Mr. Leng: That can be determined once it is up and running. As I said in the opening statement, this committee, the agriculture committee in the House and the minister should be able to refer things to this advisory committee or board. They could be mandated to meet three or four times a year or whenever needed. I know we have meetings with the department, and we usually meet every so often. However, if there is a need, we will call meetings to deal with things. I do not see anything wrong with that.
Senator Rossiter: It should meet at least a minimal number of times.
Mr. Leng: Yes. I am also one to advocate that if there is nothing to discuss, you should not have meetings. They sometimes set meetings every month, but they do not have an agenda. They should set up meetings for three or four times a year. If there is nothing to discuss, they should postpone it.
The Chairman: I thank you, Mr. Leng, for your presentation and for putting forth your position.
The committee continued in camera.