Proceedings of the Standing Senate Committee on
Agriculture and Forestry
Issue 2 - Evidence - Meeting of February 24, 2004
OTTAWA, Tuesday, February 24, 2004
The Standing Senate Committee on Agriculture and Forestry, authorized to hear from time to time witnesses, including both individuals and representatives from organizations, on the present state and the future of agriculture and forestry in Canada, met this day at 5:50 p.m.
Senator Donald H. Oliver (Chairman) in the Chair
[English]
The Chairman: Honourable senators, I am pleased to call this second meeting of the Standing Senate Committee on Agriculture and Forestry to order on our issues relating to BSE.
[Translation]
Let me begin by welcoming honourable senators and observers who are with us here today. I would also like to welcome those Canadians who are watching the committee proceedings on CPAC or listening to us on the Internet.
[English]
For several months now Canada has been faced with the incidence of BSE. Although it was just a single case, this event has greatly affected farming communities across the country. There are very few people in Canada today who are unaware of the very stressful and serious economic consequences facing the beef industry.
This evening we have invited officials from the Department of Agriculture and Agri-food Canada, as well as from the Canadian Food Inspection Agency, to brief us on the current BSE situation in Canada.
Presenting on behalf of the Department of Agriculture and Agri-food Canada is Mr. Andrew Marsland, Mr. Tom Richardson and Mr. Gilles Lavoie. Accompanying them from the Canadian Food Inspection Agency is Mr. Robert Carberry and Dr. Brian Evans. I now offer the floor to Mr. Marsland to be the first presenter.
[Translation]
Mr. Andrew Marsland, Assistant Deputy Minister, Market and Industry Services Branch, Agriculture and Agri-Food Canada: Thank you, honourable senators. We are pleased to be here with you this evening and welcome the opportunity to bring you up to date and to provide additional comments since our last meeting with you on October 30, 2003.
I am Andrew Marsland, Assistant Deputy Minister, Market and Industry Services Branch at Agriculture and Agri- Food Canada. I am accompanied this evening by Tom Richardson, Assistant Deputy Minister at Agriculture and Agri-Food Canada, who is responsible for Canada's domestic risk management programs, and Gilles Lavoie, who is a Senior Director General of Operations and responsible for much of the department's involvement in the BSE file.
In our last appearance before you on October 30, we indicated that we have based our representations to foreign markets on a joint industry-province-federal-government-agreed advocacy strategy.
We continue to work with the Beef Value Chain Round Table and the provinces to share information and coordinate our efforts. The underpinnings of our joint strategy remain straightforward. It simply asks that decisions be made on the basis of good science, and we are making progress.
In spite of the December BSE case that was subsequently traced to Canada, there has been no further disruption of our trade with the U.S. or Mexico.
The International Team of Experts' review of the May BSE case in Canada concluded that there was the possibility of finding a few additional isolated cases. Unfortunately, a BSE case was discovered in Washington State in December 2003 and traced to Canada. This discovery has been the catalyst for a lot of activity on this file, much of it positive in that it underlines the need to manage BSE on a North American basis and the need to work together to reopen international markets. Upon the close of the U.S. investigation, the U.S. subcommittee, whose members were essentially the same as the international team of experts that reviewed Canada's situation in May, unambiguously concluded that BSE is a North American problem.
[English]
While we continue to work aggressively in all markets, understandably, regaining access for live cattle in the U.S. market remains our priority. This would allow a return to a more normal market situation and relieve the immense hardship many sectors of our cattle and other industries continue to suffer.
When we last spoke, the U.S. was allowing imports of boneless beef under a permit system which, in effect, reintegrated the Canadian and U.S. markets for beef, although not for live cattle. The U.S. was also on the verge of publishing a rule to allow the importation of certain live animals that, at the time, many producers hoped could be finalized in the first quarter of this year. The U.S. published this rule on November 4, 2003, with a 60-day comment period ending January 5, 2004.
As we know, on December 23, the U.S. announced a discovery of BSE in Washington state. As the rules-comment period drew to an end, the U.S. announced it would close the comment period as originally scheduled on January 5. Canada prepared official comments based on extensive consultations with industry and the provinces, and submitted these on January 5, 2004.
Allow me to provide the clerk with copies of a summary prepared by the Canadian Food Inspection Agency, CFIA, of Canada's comments on the rule.
The discovery of BSE in the U.S. precipitated a number of U.S. policy changes in regard to BSE. I wish to briefly mention the U.S. decision to remove specified risk materials, commonly known as SRMs, from the human food chain because the decision strengthened the arguments we set out in our comments on the proposed rule. You may recall that SRMs are tissues that, in BSE-infected cattle, contain the agent that may transmit the disease.
Canada has been removing SRMs from the human food system since August 23 of last year. The U.S. is now implementing the same measure, which further supports Canada's position that the 30-month age restriction for cattle and beef imports in the proposed rule is not appropriate.
On February 9, 2004, the U.S. announced that it had finished its investigation. We anticipate that further steps toward finalizing the proposed rule are imminent, likely the reopening of the comment period for a relatively short period, perhaps 30 days. This reinvigorates due process to finalize the rule that had been stopped by the discovery of BSE in the U.S.
As we mentioned before, once the new comment period closes, under U.S. law the U.S. Department of Agriculture, USDA, will have to analyze and respond formally to all the comments received on the publication of final rule. The length of time this takes depends largely upon the extent of the comments received. While our prospects for progress are positive, it remains premature to talk about exactly when the border will open for live cattle.
The industry, provinces and the federal government are working in cooperation with counterparts at all levels to open the borders in all markets. I will provide the clerk with an updated version of a document entitled, "BSE: Summary of Actions Taken by Trade Partners," which has been prepared jointly by the CFIA, the Department of Foreign Affairs and International Trade and ourselves. We have presented you with a similar summary the last time we appeared before this committee.
In addition to the U.S. and Mexico, it is noteworthy that Antigua, Barbuda, Barbados, Grand Cayman Islands, Jamaica, Trinidad and Tobago and the Philippines have all partially opened their borders to various Canadian commodities. An industry-led trade mission, with CFIA participation, left last Saturday for Russia to continue to press for the opening of that market.
As you may know, Mr. Bob Speller, Minister of Agriculture and Agri-Food Canada, participated in a mission to Asia in January to meet with his Korean and Japanese counterparts in an effort to address their concerns about the importation of Canadian products.
As an outcome of that mission, Korea agreed to continue technical discussions and information sharing which are both positive steps to regaining access in that market. Japan committed to begin bilateral technical discussions to examine ways to re-establish Canadian beef exports to Japan as soon as possible. Canada will soon place a veterinary health official in Tokyo to work with the Japanese and other regional officials to facilitate greater understanding of Canada's BSE measures and to assist in resolving market concerns. Mr. Yoshiyuki Kamei, Japan's Minister of Agriculture, Forestry and Fisheries, also committed to work with Canada at the World Organization for Animal Health, OIE. This supports the Canada-United States-Mexico initiative that was formalized in September of last year to develop a more practical risk-based international approach to trade.
Looking at North America, a bilateral meeting between Prime Minister Martin and President Bush on January 13, 2004 resulted in a commitment by the U.S. to coordinate efforts on BSE with Canada. Minister Speller's mission to Washington later that week culminated in a trilateral meeting with Ms. Ann Veneman, Secretary, U.S. Department of Agriculture, and Mr. Janvier Usabiaga, Secretary of Agriculture for Mexico. In their joint statement to ministers, they confirmed their willingness to manage BSE on a North America basis and to return to a normal market situation as soon as possible. It was also agreed that maintaining consumer confidence in beef is fundamental to the management of BSE issues and that it will remain a top priority in future discussions to improve the international approach to BSE. Each government agreed to designate a sub-cabinet level official to coordinate the ongoing interagency efforts toward a resumption of exports based on a harmonized framework. These officials met last week and will meet again in the coming weeks to further this work. Minister Speller remains in frequent contact with U.S. Secretary Veneman.
On January 9, 2004 the Government of Canada announced $92.1 million of funding to enhance Canada's measures for identification, tracking and tracing, and increased BSE surveillance and testing. These measures will build on what is already one of the strongest food safety systems in the world and demonstrate the commitment of government to address the issue of BSE and support the industry. We continue to work very closely with industry. Since last October, we have met with the entire Beef Value Chain Roundtable on two occasions and I host calls at least weekly with the chairman of working groups of that roundtable. We appreciate the severe hardship the import bans have caused, as well as the uncertainty of not knowing when the border will open. We have modified the cull-cow assistance program to remove the requirement for slaughter, in response to the needs expressed by industry. We are meeting regularly to discuss the ability of our existing risk-management programs to address the serious economic situation in which many sectors, affected by the import bans, find themselves. We are here to address any specific questions you may have in regards to support for the industry.
I will turn to Mr. Carberry.
Mr. Robert Carberry, Vice-President, Programs, Canadian Food Inspection Agency: Thank you, Mr. Chairman. I am here today with Dr. Evans, chief veterinary officer for Canada who you may recognize due to his numerous BSE technical briefings on our national news service.
I am pleased to appear before this committee to answer your questions concerning Canada's current BSE situation.
[Translation]
As the committee is aware, the CFIA is the Government of Canada's regulator for food safety, animal health and plant protection. We are committed to maintaining and enhancing the high level of food safety Canadians expect from our food supply. We work with other federal departments, the provinces and territories, producers, processors, distributors and consumers.
In the past years, much of our activity has been focused on strengthening our ability to respond to an ever- increasing global threat and emergencies that threaten food safety and animal and plant health.
[English]
When the first BSE infected cow was diagnosed last May the CFIA immediately began an exhaustive investigation. Within weeks the agency quarantined 18 locations and conducted trace-back, trace-forward, trace-out and feed investigations. In all, we tested over 2,000 animal samples. There were no additional animals found infected with BSE.
In December, a single cow in Washington State was found to have the disease. The CFIA worked very closely with our American counterparts to investigate the source of the infection. Again, the agency was able to effectively trace the cow's origin and no additional animals were found infected.
In response to BSE, we further strengthened our food-safety and animal-health system in several areas. These areas are in public health, surveillance, and identification. I will speak to a couple of those.
In terms of public health, last July, the government announced that specified risk material, such as brain and spinal cord, would be removed from the human food chain. Canadian food is kept safe by removing these materials from animals at slaughter. This is the most effective public health measure that can be taken against BSE.
Through increased surveillance measures, the CFIA can better determine the prevalence of BSE in Canada and assess how effective our programs have been in preventing the spread of the disease. Our goal now is to have the capability to find a BSE infected cow at a sensitivity of one in a million cattle.
This year, the CFIA will increase its surveillance to test at least 8,000 animals from defined risk groups within the Canadian cattle population. From there, the number of tests will continue to increase, reflecting international standards which are expected to be revised over the next one to two years. This effort will be further supported by the continued active participation of the provinces.
[Translation]
As well, work is underway here and around the world to advance BSE testing methods. Researchers are looking for a way to perform a live animal test, and the CFIA supports this research and hopes to direct additional resources to it.
Since last June, the agency has also been expanding its capacity to do more tests. It has been equipping additional federal laboratories to do BSE tests, and has been training the laboratory staff. It has also been evaluating new and emerging test methods and verifying their appropriate use within an extended network of laboratories in Canada. The CFIA is also working with the provinces, the animal health community, and Canada's four veterinary colleges for inclusion in a broader program.
[English]
The third is the identification program. Last May, the cattle identification program provided invaluable information about the BSE-infected cow's background and last December, we used the system to trace the second infected animal to its farm of origin. The Government of Canada has approved further investment in the cattle identification program, which will increase our capacity or ability to respond to animal diseases.
Finally, we are also well advanced in our consideration of changes to the regulation of animal feed. The principal pathway for BSE transmission is through feed, specifically, rendered material from infected ruminants such as cattle and sheep being fed to other ruminants. Feed restrictions are internationally recognized as the most effective method of stopping the spread of BSE and eventually eliminating the disease from the cattle population.
[Translation]
In 1997, as a precautionary principle, Canada banned the feeding of certain animal proteins to ruminants, such as cattle. That feed ban has gone a considerable way in preventing a widespread outbreak of BSE in this country. In the wake of the discovery of BSE in Canada, we must work with our partners in the provinces and industry to fortify our feed regulations.
[English]
The international team of BSE experts recently released its report on the response of the United States to the discovery of BSE in Washington State. This was essentially the same team that assessed Canada's investigation last June.
[Translation]
The panel confirmed that the reality of BSE is a North American issue. We have a very integrated cattle industry on this continent. What affects one country will have an impact on all the North American trading partners.
[English]
The report urged all three NAFTA partners to work in collaboration to ensure that all appropriate public and animal health policies are adopted in an integrated and collaborative manner. This is what Canada has been doing. We will continue to work with the United States and Mexico to detect and manage BSE in North America.
In conclusion, Mr. Chairman, the discovery of BSE in North America has put the Canadian food health and safety system through a rigorous test. The CFIA has responded to that test and has adapted to meet new requirements and Canadians remain confident that our food, health and safety system is doing its job.
In fact, close to one third of Canadians report that their confidence in the system has been strengthened by how BSE has been handled. We are responding by making one of the best systems in the world even better.
Thank you, and we welcome the committee's questions.
The Chairman: Thank you both for two excellent presentations. Before we start our list of senators who have questions, I would like to ask two basic and simple questions that I think many Canadians would like answers to.
Mr. Marsland, when you were giving your presentation, you said that Canada has been in the process of removing SRMs from human food since August 23 of last year. The verbs that you used indicate that it is an ongoing process. The question is, how much more work must be done before human food will be safe? How far has it gone?
Mr. Marsland: Perhaps I can comment first and then turn it over to my colleagues. The measure was announced on July 18, 2003. It was implemented as of August 23. It has been implemented now across the country in both federal and provincially regulated plants.
Mr. Carberry: Food in Canada is already safe. This measure has served to further the protection specific to this particular disease or problem. The risk at the present time is extremely minimal. The food is safe within Canada.
We worked quickly with our partners. We already had regulatory presence within abattoirs in Canada where SRMs would be removed both on the federal and provincial side. We worked with the provinces to ensure that this action was put into place as quickly as possible. At this point, we can consider it implemented.
The Chairman: Good.
Mr. Carberry: There are always refinements that can be done. We are working with provinces on an ongoing basis to do that, but it is law in Canada and it is being put in place in Canada as we speak.
The Chairman: It is basically brain and spinal cord; is that right?
Mr. Brian Evans, Chief Veterinarian Officer for Canada, Canadian Food Inspection Agency: Just for precision, we have defined in Canada that specified risk material does include brain and spinal cord, as you have indicated, but also includes other tissues such as eyes and tonsils and other nerve groups, dorsal root ganglia and trigeminal ganglia associated in the animal. Those are removed in all animals over 30 months of age, which is verified by dentition at time of slaughter, aging the animals by their teeth. In addition, a portion of the small intestine is removed in all animals slaughtered because research has shown that a portion, the distal ileum, can bear some degree of infectivity in animals as young as six months.
The Chairman: In all the newspaper reports that we read about this, the big push is on getting live cows moving across the border. If the cow had gone to a house and was served as steaks and other portions, would it not bring more money to the Canadian farmer and to the processor? Surely a live animal does not go for as high a price as a processed one. Could you explain why the big push is on for live cattle to get over the border?
Mr. Marsland: Last year, Canada exported somewhere in the region of 1.7 million head of cattle to the United States. That was more than in previous years, but it is indicative of the volume of trade in live cattle.
The importance of trade in live cattle is really in the sense that there is not the capacity in Canada to slaughter that level of animals. We do have access to the United States in terms of boxed beef, but we simply do not have the capacity to slaughter at this time the volumes that we had seen in previous years.
I guess once you would see that, prior to May 2003, we truly had an integrated industry. It was integrated in the sense that exports of beef or live cattle responded to market signals on both sides of the border. Until we get trade in live animals going, we cannot get back to that state of an integrated market and build towards a normalization of market conditions.
Senator Hubley: Mr. Marsland indicated that the strategy was pretty straightforward and simple. It asks that decisions be made on the basis of good science. Mr. Carberry noted that new and emerging test methods are also being evaluating and their appropriate use verified within an extended network of laboratories in Canada.
Does this mean that Canada may have to move beyond scientific measures and take actions not necessarily justified by science to regain market access? The example would be Japan, where they are testing all cattle that are used for human consumption. Do you think Canada should implement such measures? What would that cost be, and would the recent findings of BSE in Japan have a bearing on your decisions?
Mr. Carberry: I will begin by clarifying a bit what we are trying to do. Right now, unfortunately, the only way of testing for this disease is through a slaughtered animal. We would like to find a way of testing these animals that does not require the animal being put down first. Obviously that would give us more flexibility in our testing procedures. It is not intended to create this just so that we can move into testing that may not be science based or justified based on science.
I would also like, in terms of background, to highlight that the purpose of the surveillance program is to establish the prevalence of BSE in Canada. It really assesses how well our previous measures have worked. It tells us what the level is and how well our previous measures worked, and it helps guide us to take the next step.
The testing of all animals at slaughter for human consumption is not supported by science as an effective measure. We continue to be of that position. We do know that individual producers have looked at that potential option on both sides of the border and are exploring the dollars and cents of that to address some other countries' desired protocols, but it is our view that this is not based on science. Testing animals under the 30-month period likely will not yield too many positives because of the time it takes for the agent to produce itself within the animal itself. I will let Mr. Marsland talk to the cost assessments that have been done regarding this, but from the CFIA standpoint, we do not see the benefit from a scientific standpoint of testing all animals going through slaughter.
Mr. Evans: The approach that we have adopted, in terms of putting this disease in perspective for consumers in Canada and also internationally, is that this disease has borne a reputation that is unfounded, based on risk, and has created an economic hardship for many countries. We are trying to find a balance between demonstrating leadership for the world in addressing this disease in an appropriate manner, while at the same time listening to what the marketplace is saying. Science will take you so far, but obviously consumers and societal values are also a consideration from a marketing perspective.
As has been indicated, in terms of overall costs, with the rapid test methods that are currently available, the actual testing of the individual sample itself runs between $30 and $50. The sampling time to collect the brain, transport to laboratories and other things adds other dollar costs to that. On average, we are anticipating that the actual total cost to produce a result is somewhere between $120 and $190.
In doing that, our policies, in conjunction with Health Canada, are directed at providing the highest possible health protection. As has been indicated, that is achieved through SRM removal. All countries recognize that based on the collective international experience.
In testing of animals, one has to make the distinction between a food safety measure and a marketing tool to expand economic opportunities. I think that is a key consideration as we move forward in addressing those niche markets that might like to pursue this, in terms of achieving some economic balance.
Health Canada's position has been very strong that the testing of animals at slaughter for BSE is not a true indication of the safety of the food, from the standpoint as has been indicated, which is that this is a progressive disease. You can test an animal at a certain point in its life and the animal will test negative. Later in life, if the animal is allowed to live longer and develop the disease, it may in fact test positive. The test will not find every positive animal that is out there. We do not want to leave the false assumption that testing an animal somehow increases the food safety factor because that in fact is not the case.
Again, in looking at the overall costs from an effectiveness standpoint, from an investment of public funds standpoint, we know that the testing of clinically affected animals or animals demonstrating neurological signs provide anywhere from 25 times to 10,000 times value in terms of finding those animals that are out there. Our program is designed to find those animals either at slaughter or even before they get to the slaughter system, or animals that would otherwise not be brought forward to slaughter. We are testing at all levels of the production system in order to find out the true situation in Canada.
Mr. Marsland: When you look at our exports to Japan in the last full year, 2002, they are somewhat under $90 million, which is a significant amount but that is out of $4.4 billion of total exports of cattle and beef products.
The exports to Japan, or any other market, represent only a portion of a particular carcass in that there are particular parts of the carcass demanded by that market. Many animals may contribute to those $90 million of exports, so it is not a question of a very small fraction of cattle being slaughtered. It is not an insignificant proportion of cattle being slaughtered, parts of which may end up in that market. That must be factored into any economic analysis as well.
Senator St. Germain: First, I want to compliment you, Dr. Evans. You were effective in communicating confidence when you did your job, and that is not an easy scenario when there is panic all over. I know the panic that was in Western Canada. It affects all of Canada, actually. You must be commended for showing leadership and real calmness in the eye of the storm.
My questions basically relate to what Senator Hubley asked you. Is the cause of BSE basically only from the feed process? Can it develop as a result of something else besides in the feeding of ruminants; contaminated portions of ruminants to ruminants? Is that the only way it can develop?
Mr. Evans: The reality is that we do not have absolute science around BSE. Certainly the most accepted predominant theory is a feed-transmission scenario. Again, there are those that continue to look at other factors associated with that. There have been theories put forward relative to organophosphates and other treatments associated with parasiticides and other treatments of animals as being a predisposing cause. People have speculated around maternal transmission. People have speculated around spontaneous transmission in terms of its relationship to other forms of transmissible spongiform encephalopathies, as we see with sporadic Creutzfeldt-Jakob Disease, CJD, in the human population.
Again, based on the collective international experience, the majority science opinion, the overwhelming evidence remains that a feed-borne source is the primary means by which BSE was developed or how it occurred originally in the United Kingdom through changes in rendering practices there and the crossover potential with scrapie in the large sheep population in the United Kingdom. There were some predisposing factors over there that created the disease and it has subsequently been propagated by feed.
Certainly the scenario in Japan is attributed to the importation of feed from Europe. Of the 18 countries within Europe that have developed the disease, they attribute it to having imported infected feed as well.
What makes Canada's circumstance somewhat unique in the world, besides the strong consumer support that arose following BSE, has been that we are, as far as we know, the only country in the world who can actually demonstrate that our BSE circumstance actually derived from the importation of live cattle back in the 1980s, a small number of which entered into feed systems in Canada prior to the staged removal that took place in 1994 with the detection of the imported case in Alberta.
We know from the feed records and the importing records that we can account for about 10 animals potentially that came from farms in the United Kingdom that had BSE long after the animals were exported to Canada, but given the long incubation period of this disease we cannot discount. That is why our investigation continues at this point in time, namely, to trace those animals into the feed system in Canada, to map how that feed moved back in the 1980s and early 1990s to explain the circumstance. This will allow us to demonstrate to the rest of the world just how effective all the measures were that were subsequently taken to mitigate that and prevent it from becoming a significant problem in our cattle population.
Senator St. Germain: The other thing you say is that testing of all animals will not produce the results by virtue of the fact that this is a progressive disease that takes a significant time to develop, yet Japan tests all its animals. Is this a false sense of security that the Japanese are creating in their meat market? I believe it was the last witnesses we had, if I remember correctly, that there was some thought of developing a Japanese-only abattoir and testing the animals. It seems that these are conflicting statements. I understand what you are saying. They find the comfort in testing all their animals, yet they are possibly not providing the safety that they think they are. What is your comment on that, sir?
Mr. Evans: I would comment at two levels. First and foremost, Japan has been employing a massive test program of all animals at slaughter. Of the 10 animals detected in the Japanese circumstance, they have identified potentially two young animals of less than 24 months of age. Unfortunately, these animals remain part of that aspect of science needing to be proven further from the standpoint that although they responded on the rapid test method used in Japan, they did not demonstrate positive results on direct examination of the brain through the accepted international test of immunohistochemistry and histopathology. There remains work that must be done with Japan at the international level to come to grips with those two animals and what they truly mean in the global circumstance.
It is true, in the Japanese circumstance, that when Japan did detect its first case of BSE it caused tremendous uproar in the Japanese marketplace, created significant crises for government in terms of public trust in the government, and in the food safety system in Japan. At the same level, it created a circumstance where the Japanese government, to respond to that circumstance, felt that it was equally trying to restore consumer trust and demonstrating an effective way of managing the disease. The course of action taken at that time was to convince the consumer that testing of every animal would provide a high degree of trust to that circumstance.
Japan acknowledges that they did not have significant measures in place before they found their first cases of disease. They did not have the same type of feed ban restrictions that Canada and the United States had brought into effect. They recognize that they had been importing feeds from countries in Europe that led to this circumstance. They really did not have a true sense of how this disease was being controlled before we found the disease. Now we are confronted with the reality that it would take five to seven years before Japan really knew how broadly distributed the problem was. I believe they were coming at the problem with a different agenda in mind; not necessarily to control the disease and to make the food supply safe, but to demonstrate to consumers that they would go as far as they possibly could go with all tools available, not necessarily to increase food safety but to demonstrate that the government was committed to solving the problem.
Again, this has been problematic, not just for Japan but for other countries. We take the council of the Europeans and others who have been down this road. The international panel of experts both in the Canadian and U.S. circumstances clearly articulated that the testing of all animals at slaughter is not an appropriate measure. Again, it feeds to a hysteria and paranoia about this disease and does not contribute to food safety in the way that SRM removal does. It creates the issue of requesting tests for animals for which these tests were never proven to be effective. It also creates another cadre of a pseudo, unknown science that is not helpful in managing this disease at the global level.
Senator St. Germain: I have one question. The U.S. border is currently closed tight. Is slaughtered meat 30 months and younger allowed across the border?
Mr. Marsland: Yes, it is. Live cattle and product from older cattle are not allowed across the border.
Mr. Evans: There are sectors beyond cattle as well: our sheep, goats and deer, although beef is certainly the big player economically. There are other industry sectors that have been impacted and are in equally dire straights.
Senator Fairbairn: I have an editorial comment. When you were answering the questions from Senator St. Germain about testing all animals in Japan and not here, I think it is fair to say that Canadians reacted in a very different way from the Japanese, who just pulled away from the product outright. In Canada, God bless us all, Canadians have increased their beef consumption significantly, which is a tremendous vote of confidence in our system. Dr. Evans, I think the CFIA had a great deal to do with creating that climate of trust and we thank you for that.
As you know, I come from southwestern Alberta where just about everything around this crisis lives: the producers, the feedlots, the packing plants, the truckers and the border. It is pretty grim. In fact, it is heart breaking, yet, because of the way in which this has been handled, there is still a confidence and a glimmer of hope that things will be all right.
Things were moving along well until the discovery of the second animal in December. It certainly raised the anxiety level and the questioning about the border on both sides because it is not a unified force on the other side either. We are hearing more, from the public and from some of the farm community, about why we do not test all the cattle. You have answered that question.
What about the way in which we are closing our border, even though in a much more moderate way? We have closed our border for several years to certain Japanese products. Also, there has been an endless battle over bluetongue and anaplasmosis with the Americans. Many people in the industry are asking if we are not able to find a solution to the American border issue. Would that help? If so, why is it taking so long to find a way to do that? It has been a problem for quite a while.
Mr. Evans: Certainly, I would agree with you, in a very broad context. Canada and the United States have admitted that, in the past, we have not always been part of this solution in terms of helping the world to come to grips with the adoption of agreed international standards from the basis of imports.
I would add the caveat that we have imported material from Japan previously. We have imported genetic material — wagu beef — and we worked to accommodate that. It is important for people to understand that Japan has never petitioned Canada to open up to their meat and broader scenarios. We are more than prepared to go through the process to do that with Japan to the point that they wish to pursue that. We believe in two-way trade that respects the international standards in both directions.
In dealing with the bluetongue and anaplasmosis issue, we have attempted to progress our border relationship with the United States as the science moved forward. Bluetongue does not deserve the status it has at the international level as being a List A disease under the Office International des Epizooties, OIE. In parts of world, particularly in Europe, they say bluetongue in the same way that North America fears foot and mouth disease. There is a difference between how you see a disease when you have it and when you do not have it. That has been a factor for Canada in terms of keeping the balance of our ability to export genetics in a competitive and unrestricted way and by keeping certain diseases like bluetongue and anaplasmosis out of Canada. We have tried to ameliorate the border over time, starting several years ago with allowing imports without test during the winter period. Bluetongue is spread by biting insects that do not over-winter in Canada and so animals will rid themselves of the disease come spring. That was the first- phase approach in dealing with the problem, which allowed us to go into the seasonal importation.
The second level was further work done to demonstrate that those biting insects did not exist in Eastern Canada, which allowed us to have unrestricted movement into Eastern Canada on a year-round basis without introducing the disease. We managed those animals in Eastern Canada before they could move west.
We are now at the point where progressive work has been done through Agriculture and Agri-Food Canada and the research laboratory at Lethbridge. Dr. Tim Lysyk has done work on the competency of those vectors and he is eight to ten months away from completion. We brought out a policy discussion paper in December at the consultative forum in Canada with 126 industry groups, the provinces and the veterinary faculties. That policy document was posted for comment period, which closed on February 15. We are reviewing the comments received so that we can come forward with a final policy approach in early March. We feel that we have the basis and the consensus to work with the industry in Canada to address bluetongue and anaplasmosis in a constructive way.
Senator Fairbairn: It may not be a big part but it is a definite part of the issue. Certainly, it is on the minds of those who are watching the days go by with nothing happening in their lives.
With the increased testing that you will do, to what degree are we able to do that? Must we build new facilities or expand facilities? This is where I plug Lethbridge.
Mr. Evans: We have, in Canada, the fiscal capacity in terms of laboratory capacity to meet the testing requirements. Since the announcements of the finding last May and the validating, as Mr. Carberry has alluded to, or evaluation of new test methods at our central laboratory in Winnipeg, we have been able to approve three new methods for use in Canada that can be migrated out to provincial laboratories. The Province of Alberta has taken on board one of those test methods to expand its capacity at the provincial level in Alberta. At the same time, it requires a minimal investment in certain laboratories to move to what we call level-two biocontainment. Based on certain diseases, you need a certain level of ability within the laboratory to protect both those people working with the diseases as well as ensuring that certain diseases do not get out.
We have levels ranging from one to four, four being the highest level of containment to deal with diseases like Ebola and so forth. To do testing with these rapid test methods, you must have level-two containment. You need to be able to work with the test material in some degree of containment, not because of overt public health risk but in order to ensure there is no cross contamination within the laboratory. We have a number of laboratories in Canada capable of level two. There are laboratories making additional investments to get to level two.
We do have overall in Canada the ability to meet our testing targets. The big challenge is to ensure we have that testing capacity in close geographic link, particularly on animals at slaughter, to the slaughter capacity. Any animals we test must be identified so that we can trace them, if necessary, but the carcasses must be held until the results are back. This requires us to direct the resources to where the slaughter capacity is to ensure we can turn around a test within a day so we do not impose additional economic burden on the industry to be part of the testing program.
Senator Callbeck: Dr. Evans, you mentioned the tooth identification program whereby we identify whether an animal is 30 months, over or under.
I heard it expressed that producers have a lot of concern about that method in that they feel it is really not accurate. It has a tremendous effect on the price that they receive. I would like to hear you comments on that and whether we are looking at other measures.
Mr. Evans: Thank you for the question. Currently, dentition aging of carcasses or animals prior to slaughter is the only internationally recognized norm, and that was largely put in place and developed through the early system in the United Kingdom to deal with the problem when it was at its maximum circumstance in their country
We have worked on this, and the laboratory at Lethbridge on the agricultural side has done studies to compare the accuracy of dentition against other means, including looking at when certain bones in the carcass move from being cartilage to ossification to becoming true bone. The disadvantage of that particular method is that it is somewhat further down the processing line, and currently the United States restrictions require us to segregate the animals at the start of the production line so that we can move that product in a separate way.
That particular method is about equal in terms of its diagnostic capacity. It certainly allows us to reconfirm the aging scenario through teeth, but it creates another complication in terms of you cannot use saws or knives on those same animals at that point in the slaughter line.
We have been working with the industry. Industry has proposed through the enhancements to the identification program in the Canadian cattle identification process, at the point that animals are tagged on farm, to introduce an aged parameter that would be captured through the CCIA, the Canadian Cattle Identification Agency program. The parameter would allow that information to be made available at the point that animals are slaughtered. We have also agreed to work with industry to try to find a documentation system that would give us the credibility, given industry practices of how animals are bought at a certain age to enter into fattening and feeding, and the fact that these animals normally turn over before 24 months of age, that we could then sell internationally, either to the United States or Mexico or other countries that had this restriction this place.
We are open to looking at other options, but regrettably, currently the only one that has been internationally recognized has been dentition. Whatever we agree with the industry in terms of a viable way to go, we then have to sell that process to other countries as well.
Senator Callbeck: I know there have been many programs launched since the beginning of BSE. I understand the BSE Recovery Program is complete, and I wonder if there has been an evaluation on that. I am concerned about that $45 million out of the $500 million that was given to the packers to increase the price to the producers. Are you satisfied that the $45 million actually ended up where it should have ended up? I have heard the comment that the packers really kept it.
Mr. Gilles Lavoie, Senior Director General, Operations, Market and Industry Services Branch, Agriculture and Agri- Food Canada: The concern that industry and government had last summer was mainly centred around the inability of farmers to find a slaughterhouse that would kill their animals. You will remember that toward the end of May, we were getting somewhere less than 30,000 a week in comparison to more than 60,000 before the outbreak of BSE.
The intention by government and by the industry was to find a way to encourage not only the cattlemen but also the packers to buy the cattle that were available, and also to restore the confidence of the industry, even if at that time they were not able to find a good market for a lot of the sub-products. For the prime cuts, it was relatively easy to believe Canadians would absorb all of that. However, for some of the product that we traditionally sell abroad — the livers, the tongue, the kidneys and that type of stuff — they said they would accumulate that, not knowing what to do with it. We developed this portion of the program to encourage the packers to absorb the additional cost of killing the animals even if they were not able at that time to identify a market for the product like tongues, livers, kidneys and so on.
Yesterday, in the House of Commons, the same question was asked. One packer that was present said that certainly helped him and his company to restore confidence to call back employees that had been temporarily laid off, because he more or less accepted the fact that if government and cattlemen had confidence in the industry and we can open the border, that he will be part of this process of being confident that it will work.
We have not carried out, as far as I know, a formal evaluation, however.
Senator Callbeck: Will you be doing a formal evaluation?
Mr. Lavoie: It would be extremely difficult. We can survey the companies that received the dollars to try to identify what else they have would have done in absence of that, but it is a post-factum type of evaluation. The program as a whole worked well. We moved from 30,000 a week to 60,000 a week at the end of August, which was the objective of the program. It was to bring cattle to slaughter.
Senator Callbeck: When you say the program as a whole, you are talking about the whole BSE Recovery Program, not just that $45 million.
Mr. Lavoie: Yes.
Senator Callbeck: As to this criticism about the packers really keeping that $45 million, will there not be an evaluation to see whether that has been the case?
Mr. Lavoie: It is one element of a program that was made up of two components. One component was the direct deficit payment to cattlemen, and this component was to help the packers to offer a better price.
The packers were eligible only if they were killing cattle. You had to show that you have killed cattle after May 20 in order to be eligible. It is the two components that did work together.
Senator Callbeck: Are you satisfied that this section of the program, that $45 million, really met the purpose for which it was set up?
Mr. Lavoie: From the information that we have at the moment, it seems to have delivered what it was intended to do — to move cattle to the market.
Senator Gustafson: How much American processed beef is coming into Canada?
Mr. Marsland: At the moment, there is virtually zero, since the U.S. has not worked out a method of certifying the beef in accordance with the conditions that were worked out last year for Canadian exports. However, discussions are going on presently to attempt to resolve that.
Senator Gustafson: Are dairy cattle more susceptible to the disease than other cattle?
Mr. Evans: There is no difference in susceptibility between dairy and beef. The circumstance that we have seen is that dairy cattle tend to be fed higher-concentrate rations. That has been a large part of what transpired in Europe, where in excess of 80 per cent of the cases in Europe were in dairy cattle. That is a reflection of the feeding programs associated with raising the cattle; it is not associated with susceptibility of the breed.
Senator Gustafson: Is it your understanding that Europe, or Great Britain for the most part, have their problem under control?
Mr. Evans: I think it is safe to say that the measures that have been adopted in the United Kingdom, in particular, have achieved a high degree of effectiveness. At the height of the outbreak in the United Kingdom, they were experiencing in excess of 1000 cases a week of BSE. They are now down well below 100; so, on a scale basis, they have made substantive progress.
I have every confidence that with the measures they have in place, they will achieve eradication of BSE within the decade.
Senator St. Germain: You say there are still 100 a week?
Mr. Evans: In the United Kingdom, there are now less than 100 cases per month.
Senator Gustafson: How large is the speculative market in Canada — people who are buying cattle on the assumption that the border will open?
Mr. Marsland: I do not have that information.
Senator Gustafson: That is happening, though. Are you aware of that?
Mr. Marsland: I think that is the operation of a normal market.
Senator Gustafson: Do you think that we have, as has been mentioned by all members here, a very excellent health program and done very well? Are we advertising that enough in the world market? Should we be doing more?
Mr. Marsland: We have a whole range of interventions being made continually in numerous markets around the world, from technical missions — going in and talking to the technical experts in those countries — to working with industry in the key markets to communicate that.
I mentioned in my opening comments that we will be placing a veterinary official into Tokyo, hopefully next week, based in Tokyo but covering off those Asian markets. A large part of his role will be communicating the risk management mechanisms that we have had in place in Canada for years, and the ones we are adding now.
Senator Gustafson: My concern was that when something like this breaks out, as did with the chicken situation, the media is on that; and while there may not be very much of a problem at all, it gets exploded into a big problem. It would appear to me that we perhaps should be doing more to make the public aware, both in Canada and around the world, of what the scientific reality is.
Mr. Evans: I will make two quick comments. I think the fact that Canadian consumers have maintained strong trust in the regulatory system has not been lost on other countries. Many of the questions that we have had to respond to from other countries have been, "Can we substantiate that the consumer trust in Canada is there?"
For them, having not seen that before in the world, it has forced them to look at the system differently, in terms of what was it that Canadian consumers saw in our system that other consumers did not see in their systems at the point that they first detected BSE. I think that, in itself, is playing a big role in other countries — the fact that those consumers who eat Canadian food every day feel that the system is meeting their needs. That cannot be bought in any other way.
I think the other factor — and I agree with you — we need to be doing as much as we can, not just government to government, but government to consumers in other countries to help create the demand that was there for Canadian product. We need to communicate that we have also benefited from statements made by impartial bodies — the international panel, the Office international des epizooties, OIE, the food and agricultural organization of the United Nations. These are organizations that made public statements praising Canada's efforts for transparency, our competency and our capacity to respond to the circumstance, and the fact that we took a consumer-public-interest-first approach to deal with the disease. Having that level of international organization speaking of Canada is, I think, something that will play over time to our advantage — that countries do respect the integrity of our inspection system.
We need to make that quantum leap now from the science-technical side to the political acceptance of what the regulatory organizations around the world are saying. That is where we need to make that investment.
Senator Gustafson: On the political acceptance, do you feel that the North American common market, which it is going to take, may have worked fairly well on the economic standpoint but not as well in terms of the scientific parallels that run across the borders? How important is it to build that now and in the future?
Mr. Carberry: From the outset — certainly since the U.S. has had their problem — we have been carrying an argument to them, that the world now sees us even more as a North American issue than what they did when Canada was the country within North America that had the problem. Given our integrated market, some countries understood that. I think they now understand that to an even greater degree. For us to be able to convince the world that North American products are safe and that markets should be open, we will have to take actions within the North American environment to demonstrate by actions that we really believe what we have been saying.
The U.S. appears to be listening to that, as is Mexico. In that context, Mr. Marsland and I were both in the U.S. last week and we have established a mechanism by which we will start to build that harmonized North American system. That exists in its first order, based on science with a series of policies, but it has to be carried through into its next order, which is, actions that translate into open borders to demonstrate that we are confident about North American products.
That will be one of our most effective tools in showing consumers and governments in other countries that we really believe what we have been saying. We see that as something we would like to move on as quickly as possible to help us get those borders open to the maximum degree possible.
Senator Gustafson: How big is the buildup of cow cattle? I say cow cattle, I mean hamburger cattle. I imagine a lot of it is going through McDonalds and other food outlets like that.
Mr. Lavoie: I believe Stats Canada released information two weeks ago that the number of cattle on farms in Canada on January 1, 2004, compared to January 1, 2003, is 8.7 per cent more. We have 8.7 per cent more cattle in Canada on January 1, 2004 than the previous year. If you take only the beef cattle, it is 5.7 per cent more.
Where we seem to have a significant increase is with the younger animals. We have more calves and steers that are under one year. They are somewhere on the farm, they are not on the feedlots, and it means that they are being backlogged on the farm where they are born.
We must remember as well, however, that 2003 was not a big year because of the drought that we faced. There had been some reductions in some provinces. We must be cautious when we compare one year to another year. It is a record, however; 14.7 million cattle in Canada is a significant number.
Senator Mercer: Mr. Carberry, in the conclusion to your opening remarks you said that the discovery of BSE in North America has put the Canadian food health safety system through a rigorous test.
Did we pass? Did we learn things that will help us improve for future incidents that we may have?
Mr. Carberry: Certainly my view is that we passed. What you have seen in the public domain is a public feeling that we passed as well, too.
Are we going to do things differently within North America post-BSE? Yes. We started doing that with such things as SRM removal, consideration of improvements to our feed policy and we have upped our surveillance. Yes, we will do things differently because the context has changed.
We met the test, which I believe is borne out by the fact that our public has actually increased consumption of beef products and, as Mr. Evans alluded to before, the positive comments that we received from other countries, from organizations like the OIE and the Food and Agriculture Organization of the United Nations, FAO, are significant. These are not reflections just on the tests we had at that point in time when we had the positive cow, but also on the decades leading up to that. Really this was a test of how well we have done in previous years as well.
Senator Mercer: It is a remarkable compliment to the program and to what we have responded to that consumption of beef has gone up, but according to the consumer price index, retail beef prices did decline 14 per cent between May and September of 2003. However, the decline was far short of the 50 per cent drop in cattle prices.
I am really interested to know why. I know that the consumers are really interested to know why. It is a question I will ask every witness that we have here until someone gives me an answer that makes some sense. The poor farmers are getting it in the air by getting 50 per cent less for their animals, but the consumers are not getting that same reduction.
Do you fellows have an explanation for that?
Mr. Lavoie: We would all like to know everything that has happened there. We must realize that when we present live cattle to a slaughterhouse, only 60 per cent of that ends up to be purchased by retailers. As consumers, we buy only 70 per cent of what enters the retail market. The balance is sent away to renderings or to some other products like that.
The cost of transportation, the cost of killing the animals, of refrigeration, and so on, of trimmings, of packaging, et cetera, are not changed by the situation. In addition, the costs associated with the products that are not being exported at the moment, the products that we use to balance our supply and demand, as Mr. Marsland mentioned before, the type of things that we are exporting in some Asiatic countries, for example, are no longer being exported.
The products that the renderers were paying for before May are now being collected and charged to the packinghouse. It is estimated by the packing industry — not by us but by the Canadian Meat Council — that all of that put together ends up with $192 a head more costly to packers. In addition to that you have the SRM removal on the older animals and the small intestine in all animals.
Altogether it means that there have been additional costs imposed by the situation to packers as well as others. Whether or not all of that means they are making more profit or less profit than before, the indications that we have, and it is only a partial indication with studies in some areas like the George Morris Centre, indicate that they are operating in a relatively good margin at the moment.
Senator Mercer: Relatively good margin meaning higher profits, I assume.
Mr. Lavoie: Yes.
Senator Mercer: I want to follow up quickly on one thing you did say about the cost of slaughtering an animal. I got some of that. However, earlier in the presentation you talked about the lack of capacity for us to slaughter the number of animals that we can process. That would seem to me that if that were the case, and we are doing mostly all of the work here in Canada because we are not exporting the animals, that our slaughterhouses must be working to a better capacity than they were before. If that is the case, business sense tells me that they cannot be hurting as bad as they make it sound.
Mr. Lavoie: There are some problems around the slaughter capacity, in particular about the location of the slaughter capacity. First, you have a province like Manitoba that does not have any major slaughter plants. Saskatchewan has limited capacity as well. Ontario has three or four good plants but at the moment none of them are killing, at least on the federal-inspected side, older animals. The location is also a significant issue.
During the last week of August we killed 72,000 cattle in Canada. At the moment we kill between 66,000 and 68,000. We can still kill more than what we do there with the current infrastructure that we have. Some packers are indicating that if the market were there they would be prepared to add one shift, or even add some refrigeration capacity because there is also another constraint there.
The Chairman: How many more cattle come with that added shift, between 68,000 and 72,000?
Mr. Lavoie: The addition of a second shift depends on the availability of the necessary skilled labour, and if you have to train people it may take some time. The major limit will be the refrigeration capacity. If you do not have it you will have to build it first.
At the moment the constraint seems to be the market constraint. Because we cannot export the meat, for example, from older animals, we kill roughly as many old cows today that we were killing in May but we have to consume all of that in Canada. Consequently, it is not a question of being able to kill them; it is a question of being able to market the product, to do something with it. It is one of the areas where we are working with the beef roundtable. Under the beef roundtable we have created a subcommittee that is looking at the domestication of the meat from the cows and the older animals where the packers, the producers, the processors, the retailers, the restaurants, and so on, are working together to try to find new ways, new recipes to accommodate the meat that is available. They are organizing a series of seminars across the country, in Montreal, Toronto, Calgary and Vancouver, for the people in these particular areas to sit down together, to think together and say how can we do the best in the circumstances to get the best usage of the meat available.
I believe they will find out. With all this in mind together, there is a better future.
Senator Mercer: The Canadian public has demonstrated great capacity and support for the industry, but they have now come up to the wall, and to help them consume more, there needs to be the change in price. That makes it more attractive. There is still fish, pork and poultry out there competing for this. I am not suggesting that you have all the answers, but it is certainly part of the problem.
Senator Ringuette: First, I wish to voice my admiration for Dr. Evans and the ability he has to communicate his knowledge. That, from my perspective, has been one of the factors that led to Canadians feeling that you were telling the truth. That was comforting for everyone.
My concern is mostly with regard to marketing our food. Tonight, we are talking about the beef industry, but, with all the commodities and all our industries, we have this inability to pull together and identify markets and know how to add value to our products. Instead, we have this tendency to take the easy way into the market. I guess that it takes some kind of crisis, such as we are witnessing in the beef industry, to realize that we do not have enough processing capacity. The bottom line is that we could be making much more money and having greater access to markets and greater markets throughout the world if we had that capacity to increase our slaughter and increase our processing. We have come to this kind of situation to realize that.
The Chairman: Could I ask them to comment on that? They may not agree with that conclusion. I would like to hear whether they agree with that.
Senator Ringuette: I have not asked my question yet.
The Chairman: I would like to know whether they agree with your premise.
Mr. Marsland: Perhaps I can respond to that. We have mentioned several times this evening the Beef Value Chain Roundtable, which was in existence prior to May 2003. It was one of a number of eight or nine roundtables that we established with industry in pork, grains, seafood and so on — a whole range of sectors. The basic mandate of those roundtables is to facilitate an industry-led strategy looking at the medium-to-long term and the challenges and factors for success, particularly in the international markets. They are also looking at the investments that need to be made by industry and by governments here in Canada to serve as a foundation for that success. Take the pork roundtable as an example. The first thing it did was commission a huge, in-depth study into the strengths and weaknesses of the pork industry on the world stage. It identified a whole range of actions that the industry needed to take over the next few years to position itself well in markets such as Japan, China, and so on, and to define those markets and to identify the critical factors for success.
I wholeheartedly agree that we need to do that as a sector. We need to have it as an industry-led, government- facilitated process. We have had some success over the past couple of years in having that discussion and starting to put in place policies and industry strategies that position the sector to identify and exploit those opportunities.
Senator Ringuette: I will come back later to my original question with regard to marketing. Your answer has brought forward another observation. In regard to those panels or discussion groups in different sectors of the industry, how do you communicate that information? There was a missing link in the chain of knowledge. You come to a situation where, if the packers or the processors decide that they are going for a certain market, and they will need this much increase going to this processing house and so on, there is the chain of process and the communication. You have to include the entire chain within your roundtable. In a previous study, we identified that we are not that keen on communication either.
Mr. Marsland: I think that is a critical element. The reason we refer to them as value chain roundtables is that, in discussion with industry, we purposely ensure that we have representation right from the producer level up to the processors, the wholesalers, the exporters, the input suppliers, the retailers, the food service industry, and so on. You have the whole chain there. You can understand the market issues in the context of the whole value chain and begin to respond to them in a coordinating way, so you get out the information throughout the value chain. There are obviously communication issues that one must address in that. We try to keep the roundtables relatively small in terms of 25 or 30 people. We make a purposeful effort to ensure that the information is communicated out to the broader industry.
We have various mechanisms to attempt to communicate market information that we get from missions around the world, whether it be from partially government-funded marketing strategies through associations to ensure that information gets out or through the virtual trade commission service of the Department of Foreign Affairs and so on. There is a whole range of ways.
Senator Ringuette: May I return to the original question I wanted to ask?
The Chairman: Certainly.
Senator Ringuette: Are we in this situation with regard to the lack of processing capability because it is easier to move the product as live product, or is it because it is kind of a behind-the-door deal with the U.S., like, "We will sell you our live product, and you can develop our processing industry, and we will be friends on those terms," and, "Okay, you little Canadians, you do not need to add to your infrastructure and add value to your product, because we will do that for you"? Is that the situation?
Mr. Marsland: I certainly do not think there are any hidden arrangements that led to that. I think it was effectively the results of market forces. It is important to realize that cattle move back and forth, north and south and south and north, in response to market signals; whether it was cheaper to feed those cattle south of the border or north of the border, depending on the year and on the region.
Certainly the industry, in the context of the last nine months or so, is looking at what the results of that success was, because it was a success. It was a huge expansion of the industry, but it led to certain difficulties when the border closed, as it inevitably would, with regard to the capacity to slaughter particular types of animals or relying on an export market for live cattle. It was the result of success in growing the sector, but it was a success based on, to oversimplify the matter, the export of live cattle, to some extent.
Senator Ringuette: Is it possible to be invited as an observer to one of those round tables?
Mr. Marsland: We could certainly ask the industry chair.
Senator Ringuette: Thank you.
Mr. Marsland: We do not make the decisions.
Mr. Lavoie: As a complement to that information, you will remember that the Canadian Agri-Food Marketing Council, CAMC, had challenged the industry 10 years ago to achieve an export of 4 per cent of the world trade coming from Canada in the agri-food sector. At the same time, it was referred to as $22 billion by the year 2000 as a global objective. The Canadian agri-food industry challenged themselves to reverse the proportion of commodities that were exported in the total basket versus processed products from 60 per cent commodity-oriented to 40 per cent. We have achieved this objective. Canada is now exporting more processed products than raw products in value.
I agree with you that we can do better but the industry has taken the bull by the horns and said, here we go, we have to add value in Canada, and so they have achieved the target that they set for themselves.
Senator Gustafson: My question is along the same line. It seems generally that North American economists believe that there is a movement of labour that we will lose to China, India and other countries. This committee has heard a lot about added value and manufacturing. In general, it is safe to say that it is not happening very fast. Unemployment is growing in the United States and in Canada because of those very reasons. The experts tell us that we have just hit the tip of the iceberg. It may be different in the cattle industry because it is a bit tougher to ship the bulk product, given the need for refrigeration and such. Are we looking at those kinds of things?
Mr. Marsland: As Mr. Lavoie mentioned, we work closely with the Canadian Agri-food Marketing Council, whose core objective is to increase the export value of added production.
KPMG carries out studies in respect of our competitiveness each year and we rank highly, if not the most competitive, in terms of value-added food processing. Certainly, we are the most competitive in North America and close to the top in the world. We have the infrastructure in terms of competitiveness to attract value-added processing, particularly to serve the North America market with access provided by NAFTA.
I cannot say whether I agree with you about the statement that we are at the tip of the iceberg. I do not see that.
Senator Gustafson: It may not be true specifically in the meat industry but this is what we are hearing and reading about. In fact, I was sitting on the plane with a businessman from Great Britain and he said that it is unbelievable what is happening in a country like China and India in terms of manufacturing and production. He said that we would not be able to compete. Perhaps he is wrong. The Americans will fight an election on this issue.
The Chairman: We will now move to the second round.
Senator Fairbairn: I believe it was Dr. Evans who mentioned that we had people in Russia to talk to that market. I would like to know if you could say what kind of response we received.
Mr. Evans: I realize that much of the discussion this evening has been focused on that major market to the south of us — the United States. It is fair to state up front that we have not been focused solely on the United States. We recognize that we have a genetics industry that has built its reputation in Europe, in South America and in other parts of the world, for our semen, embryos, quality of genetics and live animals. As I alluded to earlier, we have our sheep, goat and deer industries that have markets around the world and have been affected. We are trying, in addition to dealing with the U.S. circumstance, not to lose sight of the fact that Canada is an exporter to many other countries besides the United States.
Mr. Samy Watson, Deputy Minister of Agriculture and Agri-Foods Canada, led a delegation to Russia in September to begin a dialogue with the Russian authorities in respect of our ability to meet their meat demands and their live cattle needs. Russia had sent signals over the last two years that they wanted to be less dependent on the import of value-added product and to re-establish their own production system. They looked to Canada for much of that genetic material. They were encouraged by a large shipment of swine genetics that we had moved into Russia in the last months. They have indicated that Canada is their country of choice for beef genetics and replacement heifers as well. The group in Russia now are representatives of the breed associations and the Canadian Beef Breeds Council. They are accompanied by Dr. Larry Delver of Alberta from the Canadian Food Inspection Agency. We have made a submission to the Russians for a meat certificate and a live cattle certificate. We believe that we are extremely close on both. There are some issues on the meat certificate side that deal with the Russian oversight of production in Canada. We have invited the Russians to come to Canada to evaluate the system and to approve the establishments necessary.
On the live cattle side, we feel that we have addressed all issues except one outstanding that is related to the feeding of animals to be exported. We think that we will break through with Russia in the coming days and weeks.
Can I give a definitive date as to when that contract for live cattle will be signed? No, but the Russian buyers who are at Agri-Vision and Farm Fair have invited this group over to work with them, with their government. Russian industry is asking government to take the final steps necessary to access the genetics that they want. We are supporting that mission and we are extremely close to a breakthrough in the days to come.
Senator Fairbairn: That is good news.
You probably read the story out of Calgary last week about a group of ranchers getting together and discussing the possibility of opening their own packinghouse to do the whole process themselves. This is in the face of the fact that this is a very expensive business and takes deep pockets. That is why we see Cargill and Tyson Foods very much involved. Like so many other things at this time in the cattle country, it is almost a cry of desperation: What can we do that will make this move better and faster? If you were advising, what kind of cautions would you proffer before they made a hard investment such as this?
Mr. Lavoie: The first advice would be to consider not only the short term, but also the long term, in the sense that they have to invest in the context of an open border — not in the actual context — because we all hope that the border will open pretty soon. Then, the investment that they do has to be sustainable over time.
It will bring more competition in Canada, and in Alberta in particular, and this is welcome. However, they will have to compete with the U.S. packers as well, that attract live cattle from Canada for immediate slaughter.
We do have a steady export of cattle for immediate slaughter of around 1 million a year. We have had a fluctuation in recent years; it has been more on the feeder cattle side because of the drought situation. If they are good operators, they can likely attract a portion of these cattle that are now being exported live to the U.S.
They will have to be very competitive, not only with Canadian packers, but also with U.S. packers that are currently buying from Canada.
Senator Fairbairn: It would take a lot of courage and a lot of money.
Mr. Lavoie: And a good pocket, yes.
Senator St. Germain: I have one quick question. You said less than 100 cases a month are still being discovered in the U.K. We talk about beef cattle, but this impacts bison, elk, goats and sheep. Has there been any discovery of the disease in those animals, or has it just been in beef? If there has not been any discovery in these animals, why are they being penalized?
There is an industry there. Everyone is worrying about the beef growers, and rightly so; but there are also several people that were shipping these other animals into the U.S, and now they are negatively impacted.
Mr. Evans: That is a fair and honest statement. As difficult as this has been for the beef sector in Canada, we did have diversification into a larger degree of markets for our genetics on the cattle side than for some of the smaller sectors like the sheep and goat and the cervid sector. They have been doubly impacted because they have not had that diversity of marketplace that some of the genetics people have had in spite of the current difficult times.
As far as the disease is concerned, there has been no evidence in real terms in Europe, which had a very high exposure to BSE, of BSE detected in the sheep population, in the goat population, and in the other sectors in Europe. There are other transmissible bovine spongiform encephalopathies. Scrapie does affect sheep, but it needs to be dealt with as scrapie, not as BSE.
In the cervid industry, there is a chronic wasting disease syndrome that affects primarily cervids. It has been found in North America, not in other parts of the world as yet, but, again, it is not BSE.
The sad part of this has been the extrapolation of possibility of transmission between various ruminant species; but again, given the exposure in Europe, if it has not happened there, there is no justification to assume it could have happened in a natural circumstance in North America.
There have been experimental studies undertaken where BSE has been forced into sheep through means other than oral ingestion and normal ways of eating. Through brain inoculation or direct blood transfusion, it can be forced into another species; but these are not occurrences that would happen in a ranching or farming circumstance.
Again, we are dealing with a very cautionary approach, where people have taken incomplete science and applied it to other species in a way that has created very unjustified measures and impacts on those industries that, again, can be managed by managing the specific diseases of those groups for which we have programs in place.
Senator Mercer: These are not my arguments but arguments put to us at our last meeting by two gentlemen from the Lethbridge area, one from the city of Lethbridge and the other a farmer himself.
When we asked them about what could be done to help, they came up with two interesting answers, one of which surprised me. The one that did not surprise me was the appeal for loan guarantees, which is something that is probably a good idea. We need to have the department and the minister and the government working on that.
The second one, though, did surprise me, coming from one of the most independent group of people in the country. It was to talk about temporary minimum pricing for their animals. I think that is an interesting one to try to stabilize their lives so they can see what their future might be in a very uncertain future.
Do you have a comment on either one of those suggestions?
Mr. Lavoie: The loan guarantee is an option that has been mentioned on a couple of occasions. It has also been mentioned by the Canadian Cattlemen's Association, mainly in the context of helping the feedlot operators.
The temporary minimum pricing, while mentioned on a couple of occasions, is not at the moment supported by a majority of the industry. There was mention previously of some of the difficulties and criticisms that have been expressed around the BSE Recovery Program, indicating that the fact that we were offering a deficiency payment had created a situation in the market by which the packers were able to obtain the cattle they needed at a better price. To the extent that these types of arguments are valid, it will still be valid if you tried to put a temporary minimum pricing in place.
It is difficult to consider a minimum pricing in place for cattle in an open market. We have, at the same time, to make sure that the packers and the processors that can export meat to the U.S., Mexico and, hopefully pretty soon, to other countries as well, are able to price their product competitively with other exporting countries. It is not a simple equation. Many factors have to be taken into consideration.
The Chairman: On behalf of the committee, I would like to thank you very much. You have answered many of the questions that are tough very well. You have also given to all Canadians who are watching and listening some reassurance about the tremendous job Canadians are doing at many different levels in coming to grips with this enormous problem. We will all leave here greatly reassured as a result of the evidence that you have given us today. For that, we thank you very much.
Honourable senators, our next meeting will be on Thursday with the Meat Council of Canada. It will really be an extension of many of the answers given here today, particularly for some of the questions put by Senator Mercer.
The committee adjourned.