Proceedings of the Standing Senate Committee on
Agriculture and Forestry

Issue 20 - Evidence - Meeting of November 18, 2014


OTTAWA, Tuesday, November 18, 2014

The Standing Senate Committee on Agriculture and Forestry met this day at 5:02 p.m. to continue its study on international market access priorities for the Canadian agriculture and agri-food sector.

Senator Percy Mockler (Chair) in the chair.

[Translation]

The Chair: Honourable senators, I declare this meeting of the Standing Senate Committee on Agriculture and Forestry in session.

[English]

The Chair: I welcome you to this meeting of the Standing Senate Committee on Agriculture and Forestry. My name is Percy Mockler, a senator from New Brunswick and chair of the committee. Before we introduce our witnesses officially, I would like to ask senators to introduce themselves.

Senator Merchant: Good afternoon. I'm Pana Merchant and I'm a senator from Saskatchewan.

[Translation]

Senator Robichaud: I am Fernand Robichaud, from Saint-Louis-de-Kent, New Brunswick.

Senator Tardif: Claudette Tardif from Alberta.

Senator Maltais: Ghislain Maltais from Quebec.

[English]

Senator Tkachuk: Senator Tkachuk from Saskatchewan.

Senator Oh: Senator Oh from Ontario.

Senator Enverga: Tobias Enverga from Ontario.

[Translation]

Senator Dagenais: Senator Jean-Guy Dagenais from Quebec.

[English]

Senator Ogilvie: Kelvin Ogilvie, Nova Scotia.

The Chair: The committee is continuing its study on international market access priorities for the Canadian agricultural and agri-food sector.

[Translation]

Canada's agriculture and agri-food sector is an important part of the country's economy. In 2012, the sector accounted for one in eight jobs in Canada — employing over 2.1 million people — and close to 6.7 per cent of Canada's gross domestic product.

[English]

Internationally, the Canadian agricultural and agri-food sector was responsible for 3.6 per cent of global exports of agri-food products in 2012. Also in 2012, Canada was the fifth largest exporter of agri-food products globally.

Honourable senators, today we have a panel of three witnesses.

To the witnesses, thank you very much for accepting our invitation to attend this committee meeting in view of our study on the agri-food sector, enabling Canadians and all stakeholders to understand the challenges that we have.

Today we have with us, from the Canadian Meat Council, Mr. James Laws, Executive Director; from the Canadian Pork Council, Mr. Bill Wymenga, Vice-Chair; and from Canada Pork International, Mr. Jacques Pomerleau, President.

I have been advised by the clerk that the first presenter will be Mr. Laws, to be followed by Mr. Wymenga and then Mr. Pomerleau. After the presentations are made, we will have questions from the senators.

Mr. Laws, the floor is yours.

James Laws, Executive Director, Canadian Meat Council: Thank you very much. Good evening. My name is Jim Laws and I'm Executive Director of the Canadian Meat Council, based here in Ottawa. Thank you for the opportunity to provide our perspective for your study on international market access priorities for the Canadian agriculture and agri-food sector.

Canada's meat industry is the largest component of this country's food processing sector, employing over 65,000 workers and with annual sales of $24.1 billion.

Export markets are absolutely critical to the Canadian livestock and meat sector. Last year, Canadian meat processors and traders exported meat valued at more than $4.5 billion to some 120 countries around the world. Our goal is to have competitive access for Canadian meat to every country of the world.

We congratulate the government and Canada's trade negotiators on the successful conclusion earlier this year of the Canada-Korea Free Trade Agreement. We appreciate the broad support that this agreement received in the House of Commons and are most hopeful that it will receive expeditious consideration by the Senate. It is critical that the Canada-Korea Free Trade Agreement be implemented at the earliest possible moment so that we will not lose further tariff advantage to our competitors, like the United States, who are already benefiting from their own tariff reductions.

We are also very pleased by the conclusion this fall of negotiations for the Canada-European Union Comprehensive Economic and Trade Agreement, known as CETA. Access to Europe for Canadian beef and pork has been very limited to date, and the CETA will offer significant new opportunities for Canadian meat processors. When fully implemented, the CETA could allow for export of up to $1 billion of beef, veal, bison, pork and horsemeat to Europe.

Perhaps even more important, though, for the meat industry is the accompanying side agreement on sanitary measures that is intended to ensure that Canadian and European meat inspection systems and meat processing technologies are accepted as equivalent. Japan, the United States, Mexico, Korea, Australia, New Zealand, Chile, Colombia and dozens of other countries already accept our meat inspection system and processes of sanitation and pathogen control as safe and based on sound science. So should the Europeans.

We have also been following the 12-nation Trans-Pacific Partnership free trade agreement negotiations with keen interest and impatience. We have expressed strong support for an ambitious, high-level agreement that opens all TPP markets to free trade in all meat products. The bilateral market access discussions that are taking place within the context of the TPP must be applied in a plurilateral manner in which every country opens its market in an equivalent way to all other TPP partners. We would seriously question the value of any TPP outcome that is not implemented on a plurilateral basis.

The Japan-Canada Economic Partnership Agreement negotiations are no less important. Last year, Canada exported $21 million of horsemeat, $76 million of beef and $813 million of pork to Japan. Japan is a premium market for Canadian meat products.

While we are hopeful that we will benefit from better access to Japan within the TPP, should it appear that those negotiations may not be progressing rapidly, we believe that Canada should be in a position to quickly conclude a bilateral agreement with Japan. Important as trade agreements are, the removal of import quotas and tariffs is only of value if it is possible to overcome cumbersome technical regulations and requirements.

We work closely with Agriculture Canada, the Canadian Food Inspection Agency, Health Canada and the Department of Foreign Affairs, Trade and Development on the endless task of addressing those impediments. Of particular note this past year was the invaluable cooperation that Canadian pork exporters received when Russia suddenly closed its market on August 7, 2014. We had already exported over $340 million worth of pork to Russia this year before that market closed for us in August for political reasons. At that time, Canadian processors and traders had almost 500 shipping containers of pork stranded en route to Russia. That's a lot of pork. Each container holds an average of 23,000 kilograms of product. Every one of those containers had to be located and the new documentation issued for whatever alternative destination the country could identify. While this exercise was difficult and very expensive, the industry appreciates greatly the cooperation that we received from everyone in the Government of Canada who contributed to this successful operation.

Unfortunately the greatest threat to the future of Canada's livestock and meat sector at the moment is the severe shortage of butchers and meat cutters to work in our industry. The unqualified first choice of meat processors in Canada is to hire Canadians, including from among the unemployed, youth, new immigrants, First Nations and refugees. Canadian meat processors recruit aggressively and persistently in every region of this country. Our members pay higher wages than our U.S. counterparts; we offer substantial union negotiated benefits; we invest heavily in training and offer financial support for relocation.

There are more than 500 jobs available today in Canada's meat industry. Day after day, the Employment and Social Development Canada job bank website lists page after page of employers seeking butchers and meat cutters. A single employer may be seeking 100, 200 or even 250 workers. Jobs in meat processing plants are full time, not temporary. The absence of sufficient butchers and meat cutters in this country is resulting in meat processors foregoing opportunities for the production of value-added products, thereby reducing the volume of exports and losing critical profitability, competitiveness and business sustainability. As a result, fewer Canadian livestock are being processed here in Canada and we are seeing jobs, livestock and economic activity being exported out of this country.

The Canadian meat industry must be permitted where and when necessary to supplement the Canadian workforce with foreign workers. We believe that the best means to achieve this outcome is for butchers and meat cutters to be eligible for the new so-called express entry program that Citizenship and Immigration Canada is putting in place effective January 1, 2015.

Thank you very much.

Bill Wymenga, Vice-Chair, Canadian Pork Council: Good afternoon. My name is Bill Wymenga. I am a hog producer from Lambton, Ontario, and Vice-Chairman of the Canadian Pork Council's Board of Directors. I would like to thank the members of the Standing Senate Committee on Agriculture and Forestry for this invitation to appear before you this afternoon to discuss the study on international market access priorities.

The CPC serves as the national voice for hog producers in Canada. We are a federation of nine provincial pork industries, and our purpose is to play a leadership role in achieving and maintaining a dynamic and prosperous pork sector.

As you are aware, we are a sector that relies on exports. In fact, more than two thirds of hogs produced in Canada are exported either as live hogs or pork products. Exports help the Canadian hog and pork industry to grow. Our success in accessing existing foreign markets is directly linked to the level of cooperation between government and industry.

The unsung heroes in this partnership are the CFIA and Foreign Affairs officials who work on Canada's behalf around the world. Their on-the-ground support is priceless when market access is unstable or disrupted. Our industry values the Trade Commissioner Service's work in many existing and developing pork markets. However, exports or the potential of an export market are worthless if Canada does not have producers to supply the product.

Keeping farm costs under control and eliminating red tape are important to our members. Our industry supports the work and initiatives to better align U.S. and Canadian regulatory systems undertaken by the Regulatory Cooperation Council. We encourage this work to continue and are confident our input into the regulation council process is of value.

Our growing concern is labour availability for Canadian slaughter plants. The Canadian pork industry needs a sustainable and growing labour supply. Without adequate labour, we are unable to produce the pork to take advantage of access under the new trade agreements and will ultimately import more pork back into Canada.

Our industry has faced serious challenges in terms of our ability to compete in the world market in the recent past, including a strong Canadian dollar, historically high grain prices, a world economic slowdown, and country-of-origin labelling. However, we have managed to come through all of this. We are a smaller but highly competitive hog sector, and we must not lose sight of our industry's long-term interests.

The world economy will continue to evolve and we cannot afford to overlook or suspend any efforts that can improve our market access or place our industry at a competitive disadvantage.

The pork industry has turned the corner over the past year due to lower feed costs and a stable hog price. These two conditions have allowed us as producers to establish a margin, and it's allowed our industry to stabilize the producer and production base in our industry.

The Canadian Pork Council has recently commissioned a paper on the financial situation faced by the hog and pork sector. This paper highlighted, first of all, that current profits have not completely rebuilt the industry equity lost during the previous seven years. Second, current profits are at least in part due to the production impact of the PED virus disease in the U.S. Prices could come under strong downward pressure in 2016 due to processor capacity limitations.

The main point is that commodity markets remain inherently risky and hogs have demonstrated a great deal of price and margin volatility due to hog supplies, global demand, cost of grains and currency fluctuations. The industry, as well as its financiers, will remain vigilant and cautious as it recovers from the severe trauma of the past several years.

The repercussion of several years of difficulty in the hog sector is the availability of credit. Federal programs such as advanced payments programs help, but it will not be enough to help with the construction or improvement of buildings. We have an aging infrastructure. The CPC is examining the Canadian Agricultural Loans Act and the CALA program to determine how it can be improved in order to better meet the objective of supporting the renewal in the hog sector. Our building structures are aging and our industry is in need of significant reinvestment to ensure continued efficiencies. A modified CALA loan would be extremely helpful in this regard.

In conclusion, we need our government to continue its focus on export opportunities and resources there and at the same time support and maintain a strong and healthy production sector.

[Translation]

Jacques Pomerleau, Canada Pork International: Thank you for inviting Canada Pork International to appear before this committee to discuss your study on international market access priorities. CPI is the export market development agency of the Canadian pork industry. Established in 1991, it is a joint initiative of the Canadian Pork Council and of the Canadian Meat Council.

Our organization deals primarily with market access issues, the promotion of Canadian pork abroad, providing market intelligence as well as working on other significant export-related issues.

Although Canada has been exporting pork for over 100 years, Canadian pork exports have grown considerably in the last 20 years. From 250,000 tonnes, worth $600 million shipped to 54 countries in 1991, they grew to 1.1 million tonnes, worth $3.2 billion shipped to over 100 countries in 2013. The value of our exports could even reach $4 billion in 2014.

With close to 20 per cent of the total world's pork trade, Canada is the third largest pork exporter behind the United States and the European Union. More than 60 per cent of the Canadian pork production is exported, which makes our industry very dependent on exports.

It is worth noting that Canadian pork exports to the U.S. now represent just around 30 per cent of the country's total exports. When CPI was first established, this market represented more than 75 per cent of our total exports.

Our overall export success would not have been possible if it had not been for the very close working relationship our industry has with the Canadian Food Inspection Agency, with the Market Access Secretariat of Agriculture and Agri-Food Canada, and with the Department of Foreign Affairs, Trade and Development.

We should never forget that in order to maintain access to existing foreign markets and to access new ones, the Canadian pork industry has to completely rely on the Canadian government, which has the exclusive mandate to negotiate not only bilateral and multilateral trade agreements, but also the veterinary and sanitary agreements required to be able to export to any given market.

The trading environment has evolved in the last few years. Meat and meat products are already among the most regulated products in the world. Still, veterinary and sanitary import requirements set by major trading partners, such as Russia, China, the EU, and by potential markets, such as India, are getting more and more difficult to deal with as they require the development of new production and certification programs at both farm and plant levels. It is definitely expected that it will not get any easier, given that many countries will continue to implement new technical measures in an attempt to limit their imports.

A growing concern is the loss of expertise and the lack of resources allocated to meat exports at the Canadian Food Inspection Agency.

The expertise required is very specialized and cannot be easily replaced. This situation needs to be looked at very quickly as it has the potential to become another impediment to further expand our exports.

It should also be realized that this problem is not specific to the meat sector. With the new CFIA structure, it will also have an impact on all the other exported food products and commodities. Thank you for your attention.

[English]

Senator Merchant: You have presented a fairly positive and hopeful picture, by and large. What challenges do you face as you try now to work with these export markets that are opening up for us? The United States still remains our number one partner and customer. What are your hopes for country-of-origin labelling? How will that resolve itself?

Mr. Laws: My opinion is that Canada has won the challenges at the World Trade Organization on repeated occasions. No doubt, I expect the Americans will appeal once again the most recent decision, but they will not win that one either. They've lost consecutively. On that one they will have to comply. We believe strongly that the only way for them to comply is to change the legislation.

We hope that with the control in the United States of the same political party after the recent election results, they will be able to vote for an amendment to their requirements that distort trade in livestock to the United States. We remain hopeful.

In terms of other export markets, for sure we want to have so many markets open. Look at what happened in Russia, which was a huge event. It was a very large market where we felt we would sell up to $500 million worth of pork. Luckily, the farmers are benefiting from very good prices now and world supplies were tight, so we were able to shuffle the deck and redirect those products to other markets. If it had to happen, it happened at probably the best time that it could have happened. Otherwise, it could have been disastrous for the industry. There was high cost of demurrage at port, so these containers that had to stay in ports in Europe had to pay high daily rental rates and electrical power rates each day. Again, it highlights why we need as many markets open as possible.

Senator Merchant: How are you going to reconcile the fact that certain countries do not accept our products because of the use of certain hormones in Canada? What will that mean to the industry? Will it be an expensive transition? Will farmers need help? How will that work?

Mr. Pomerleau: First, it's not a hormone. It's a feed additive called ractopamine. That is a requirement made by China, Russia, Taiwan and the European Union. At the end of the year, close to 75 per cent if not 80 per cent of the Canadian pork industry will be ractopamine-free. We have developed within six months, which is quite an achievement, the national ractopamine-free certification program. We are able to offer that to those countries that do not wish to have ractopamine in our products. We turned around very quickly.

Mr. Laws: In terms of beef, and you will hear from some of my colleagues in the beef sector coming up as well as our members at the Canadian Meat Council who process beef, indeed farmers will have to receive the signal from these export markets that it's worth the extra cost of raising the animals with no growth promotant hormones, which have been proven time and time again to be safe. Nevertheless, European countries potentially present a lucrative market for us, providing the Europeans accept our way of processing meat, as do many other countries, like Japan. We fully expect that to happen; so that's the good news.

The good part about the agreement with Europe is that the access they have given us for beef includes all beef: culled dairy cattle, veal calves and beef cows, which have never been given hormones. Beef from those animals will be eligible to go to Europe.

Senator Merchant: Is this an expense that the farmers will absorb themselves, or are you looking at some sort of government program to help with the transition?

Mr. Laws: No, not at all. We expect the farmers will supply that product only to the slaughter facilities if they get the right price. We expect that the markets in Europe with the elimination of tariffs there will be the right set of criteria to allow meat slaughter facilities to offer good prices to cattle producers.

[Translation]

Senator Dagenais: I would like to thank our three guests. We I both know that increased revenues in China will create considerable prospects for beef exports, and I think the Chinese also greatly enjoy pork, which will surely remain their main source of protein. How much beef and pork do you think Canada currently exports to China?

Mr. Pomerleau: China is already our third largest export market for pork. We are expecting sales of about $200 to $250 million to China this year, despite the restrictions, not just because of ractopamine, but also because we are still unable to export shelf-stable pork or processed products. So there are a lot of problems with access. However, despite everything, it is our third largest export market.

Another factor will be to our advantage in China. We will remember all the food safety scandals. However, the elite in particular are increasingly looking for products from countries like Canada that have good inspection and certification systems. These indicators are coming from large chains in China that will focus on this type of product.

Mr. Laws: I do not have the figures for 2013 with me. However, China is the fifth largest market for beef. Canada's beef exports to China are close to $28 million Canadian. Unfortunately, I do not have the figures for 2014 to the present. It is a very large market for us. We are working very hard.

We have a Canadian veterinarian in Beijing, which is great. The Chinese are very demanding when it comes to certification for each authorized plant. They recently requested approval for the warehouses where we keep frozen meat. They want that approval. We were very pleased that the agency president was there a few weeks ago. The Chinese approved a long list of facilities.

Senator Dagenais: You answered my second question in part. I was going to ask if there were business opportunities in China that might help increase exports. I know that a lot of trips are currently being made to China.

Mr. Pomerleau: In addition to the Prime Minister's visit, Minister Fast and Minister Ritz were there, and so was the president of the agency, who helped us. Our industry was also at a fair at the Food Hotel China in Shanghai. We attended meetings in Taiwan and in the Philippines. Some twenty Canadian companies, trading firms and slaughterhouses were there.

We go to China pretty much twice a year. We attend two big fairs. The World Meat Congress took place in China in June. We have a very large presence in China.

We need to find a way to have someone on the ground who can help us, in addition to the embassy's work, to carry out our projects and move them forward through Chinese bureaucracy. China did not just invent bureaucracy; they perfected it.

Senator Dagenais: We could loan you Senator Oh.

Senator Maltais: Senator Oh is an expert.

Senator Tardif: Thank you for your excellent presentations. If I understand correctly, the Canadian Pork Council is working on developing a traceability system for pork, similar to what exists for the beef industry. Could you tell us when the system will be in place? Will it help us be more competitive internationally? What impact will it have on pork producers?

[English]

Mr. Wymenga: Currently, the traceability system is in fact a regulation to the law. It began July 1 of this year. It's something our producers and processors are working towards. It's not in a fully implemented stage just because of the many changes and little issues to work out, but we do have the traceability program up and running. Sometime within the next year we hope that it will be fully running.

I think the other members can speak to this, but certainly there are countries that view traceability in a very positive fashion, and we think that will help us also with export markets. Traceability would also be helpful for us in the health situation, in tracing back certain situations from a health point of view. In an unfortunate event if you get a foreign animal disease, which is where this whole thing on traceability started, under this system we will be able to get our industry up and running again much quicker than if we did not have this traceability system.

Senator Tardif: How will it impact the pork producers? Are they on board? You've implemented a system. Are these costs covered by a program in any way?

Mr. Wymenga: Yes. We've received support from the federal government in putting the whole traceability program together. There is a cost to the provincial organizations in running it. Producers do have to do a bit of extra work. I know in Ontario, if someone were a farrow-to-finish producer, they raise pigs right from when they're small all the way to going to market. There's not a whole lot of additional work just because of some electronic manifesting system that we're working on. The industry is working to make this system as user-friendly as possible. In some other cases, it's going to require additional work on behalf of producers, especially in a situation where they move pigs around from one location to another. We're trying to make that as simple as possible so there's not an undue burden to producers.

Senator Tardif: The trade agreements that you're negotiating, do they take into account any of these traceability systems? Is it something that's looked for or at or questioned?

Mr. Pomerleau: No. It's more of a market requirement. It's more of a consumer or customer requirement. When you deal with a very demanding market like Japan, where traceability is something that they look for — and we expect the same thing in China and Korea, by the way — that's where you get the best value for your pork. So that's something you will look for. With the fact that we would be the very first country in the world to have something of this nature, it provides us with a huge advantage.

Mr. Laws: You will hear as well from the beef producers on the next panel. A new beef slaughter facility will be opening up shortly north of Calgary, and they've designed their model so that they will be able to track all the meat in packages right back to each individual animal. That was a business decision they made, and they're targeting certain markets. They want to take the benefits of that for sure.

[Translation]

Senator Maltais: Everything is going well in exports. I will let my colleagues cover that topic. I would like to talk about something basic that you are having major problems with. You are having problems with labour, not just in pork, but also in beef, mutton and poultry.

As association presidents, whether you are in British Columbia, in the West, in Ontario, Quebec or the Maritimes, what action are you prepared to take with the provincial departments of education to train this labour? Two years ago, two senators from this committee visited slaughterhouses in the Western provinces that employed between 400 and 500 people, if I am not mistaken — my colleagues will correct me. But there was only one person from Manitoba. So you have a major labour problem.

Are we training more sociologists than butchers? Do we have too many sociologists and not enough butchers? It is great to have prospects around the world, but if we do not have anyone to slaughter our pork and butcher it, we will not sell it. We need to go to the source and train labour at the source. Your association should put pressure on the provincial departments of education to talk to them about prospects. Some areas of the country still have high unemployment rates, particularly among young people. It is true that not everyone is cut out for this work. However, surely there are some who would find this job attractive.

What action are you willing to take with the provincial governments to train this labour?

Mr. Laws: That is a very good question. Companies do their own training. They agree to take anyone willing to work. They make an ongoing effort to find people who are unemployed. The work is very physically demanding. The environment is cold, and the work is repetitive.

We have, in fact, had a number of meetings with Minister Kenney. Another meeting is scheduled for next week here, in Ottawa. He promises to ensure that employers are paired with job seekers. Right now, we do not know who is receiving social assistance, who does not have a job and who needs employees.

It is not easy, particularly in Alberta, where young people can work in the energy sector, which pays much more. It is difficult to compete with that sector. There is also the population growth rate. I have only one child. It is not like in the past, where my parents had seven children. It is a challenge to find enough new workers for the future.

At the same time, the industry is working very hard to introduce new technologies, such as robots. It is not obvious, but many companies have found technology to handle boxes in the warehouses. We are also trying to find other opportunities for further mechanizing the process.

Senator Maltais: Congratulations on your efforts, but this is your industry that is at stake.

Mr. Laws: Absolutely.

Senator Maltais: I would like your large companies to go to the school boards, into the schools, and tell them that not only will they need butchers, but they will also need technicians to operate these new robots. We need to go out and find young people where they are.

As for individuals receiving employment insurance, it is unfortunate, but only a very small percentage of them will go there. However, if you go into the high schools, the cégeps, you may find some people. Good for you if you train them, but they may also get training at technology schools. I will let you sort that out.

By the way, who do you sell our horsemeat to? Who are the cruel people who eat this beautiful little animal?

Mr. Laws: Horsemeat is sold in Switzerland, Kazakhstan, France and Japan.

Senator Maltais: I hope you prepare it better than some eastern countries. That is how the French ended up with a horseshoe in their pizzas.

Mr. Laws: We have a better traceability system. We can identify the meat.

Mr. Pomerleau: They ended up with trichinae in the horsemeat. I was at the embassy in Paris at the time. Try to convince French veterinarians to allow Canadian meat in again. The help from the agency at the time was such that the horsemeat market in France dropped by half. However, because we were the first to come back to the market, we doubled our share of the European market.

When I go back to the agency's work, it is important because we still have an advantage over other countries. My American colleagues always tell me that they are jealous of what we have in Canada, of the fact that the co-operation with our government authorities is so good. They have a lot of difficulty working with the American authorities.

We want to maintain this advantage, and we have proven that close co-operation between the government and the industry is a winning formula.

Senator Maltais: Thank you very much.

Senator Robichaud: To follow on Senator Maltais' question, you said that you are having difficulty finding butchers, and you said in your presentation that you pay better than your competitors. What is the average wage for someone working in this processing industry?

Mr. Laws: The average wage depends on the location, but it starts at least at $13 an hour, and goes up to over $24 an hour. It all depends on where the worker is in the process. However, compared with the United States, specifically, yes we pay better than they do.

Senator Robichaud: With the United States, where do they find their workers?

Mr. Pomerleau: Are you talking about legal or illegal workers?

Senator Robichaud: They have to find them somewhere.

Mr. Pomerleau: See? If the United States did not have illegal immigration, perhaps they would be in a very different situation.

Senator Robichaud: So you answered my question quite well. Mr. Pomerleau, at the end of your presentation, you spoke about new structures at the agency that, it seems, may not be to your advantage. Could you expand on that a little? What agency and what would you like to see? This is something we could include in our report.

Mr. Pomerleau: The Canadian Food Inspection Agency, of course. Under the new restructuring, the agency now reports much more to the Minister of Health because of safety problems. Everything having to do with shares and markets remained under the responsibility of the Minister of Agriculture.

In the past, there was a full division that took care of meat inspection and exports. Now, there is a single group that looks after imports and exports and, unfortunately, all the experts have retired, which means that there are very few people with this expertise, and that is the problem.

The structures may be appropriate, provided we have good expertise and the resources to make them work. Too many people are retiring; that is my point.

Senator Robichaud: Where do we find this expertise? These are professionals in this industry, are they not?

Mr. Pomerleau: Yes, and it is not something you learn in school. I worked in this environment at one point, and this is something that is learned within the agency. It is training that the government, itself, must give, because it cannot be learned anywhere else. There has to be a conscious effort to recruit and train, just to fill these positions.

Senator Robichaud: And recruitment?

Mr. Pomerleau: Right now, I do not think anyone is being recruited, as far as I know.

Senator Robichaud: And that could become a serious problem for you?

Mr. Pomerleau: Yes.

[English]

Senator Ogilvie: When I first read the document we received from Canada Pork International, it gave me a positive view of the pork industry in terms of international sales. That immediately contrasted to what I think I have heard in the media over the last decade in Nova Scotia with regard to the challenges of pork production, such as reduction in the number of producers, difficult access to slaughterhouses, cost of production, et cetera.

Then, of course, I read the other documents, and they give a much bleaker view of the overall issue over the same period of time. The Kevin Grier document gives a number of issues.

Coming to the pure question of the export market, which constitutes, according to your document, 60 per cent of hog sales, are those sales at a price that leads to a net profit for the producers without any subsidy?

Mr. Wymenga: In some cases, the producer doesn't benefit directly and in other cases they do.

I'm involved in a producer-owned cooperative, and that's Conestoga Meat Packers in Ontario. The producers own that plant. Whatever additional price increase they receive on the export market goes directly into those producers' pockets.

There are other processing plants that aren't producer owned, and that would go into those processing companies' pockets. Indirectly, producers benefit because we do need a healthy processing sector. They need to make money. They need to sell valuable products so they can pay as high a price back to the producers. We have both of those situations working with us.

Senator Ogilvie: The numbers you give — a four-fold increase in weight volume and five-fold increase in dollar value — would seem to indicate that there has been some success in that sector.

That brings us back to the cost of production. You've been talking about labour costs and so on. Obviously, those are important, but there are other factors in the cost of producing pork, which include such things as close-distance access to certified slaughterhouses and so on.

In addition to the regulations that we think of in terms of competition on the international market, are there structural changes in the Canadian infrastructure that would reduce costs and allow for production at a more competitive price? I don't want to get into the cost of grain and all that. I just want to talk about structural issues in terms of facilities, organizational matters, et cetera.

Mr. Wymenga: One challenge we have in Canada is that we are a large country and sometimes we're not as close to markets, especially when you compare it to the European situation. Their production is much closer to their markets. In Canada, our production is more spread out. It's both good and bad, but it's farther away from the processing plant.

The one consideration is length of transportation. I know the CFIA is looking at how long animals can stay on a transport vehicle before they have to be let off and given some rest. There are issues in transportation that could impact someone that's far away from a market if they wanted to deliver to that market. But, of course, the transportation cost does increase the costs to those particular producers who are farther away from the nearest processing plant.

Senator Ogilvie: We see a number of means of protecting internal producers: the situation with regard to dairy products, the supply management system, and so on. Given the issue that you identified — that is, the size of this country, the second largest land mass — what if there was a regulation that said hog producers had to exist only within such-and-such a distance of our major transportation capability in terms of giving a much more competitive development of production?

Mr. Wymenga: If you had a regulation like that, I guess you would have a few upset producers.

Senator Ogilvie: Producers are always upset one way or another, but in terms of looking at unusual ways in terms of making an area productive?

Mr. Wymenga: I think in the long run economics will take care of that. If they continue to be unprofitable because of their distance from the market, they will look at other alternatives and maybe just supply to the local market or something like that.

Senator Ogilvie: I didn't think you would go for that, but I just wanted to see if there was anything novel out there that you're thinking about in this area. Thank you.

Mr. Laws: To add to that, you may know that there was a very old meat-processing establishment in Toronto, Quality Meat Packers, which was there for a long time. Of course, it was Hogtown for a reason, but very nice condos started getting closer and closer to this facility. The price of live hogs went so high that they had trouble meeting cash flow and unfortunately that company went bankrupt. But I suppose the good side to it was there was enough other processing capacity nearby, including the one that Bill sends his hogs to, that they were able to absorb all the hogs that had been going to that facility.

Structurally, the industry is operating larger facilities. Even the very large facility that Maple Leaf operates out in Brandon, they're being challenged with being able to maintain two shifts because of a lack of workers. Structurally, they need more workers to maintain best efficiencies to compete against the Americans, who can operate world-class- size facilities at high capacity.

Mr. Pomerleau: We still have enough capacity to accommodate more hogs in Canada. We don't need more plants.

The Chair: I know that a lot of people are following these discussions and proceedings on the Web, and others participate in person in this room, so I want to say thank you for your interest.

On that, I will now ask Senator Enverga to pose his question.

Senator Enverga: Thank you for your presentations, gentlemen. Now that we're getting CETA and the Canada- Korea trade agreement, and we're working on the TPP, you mentioned the challenges with regard to tariffs and labour shortages. Maybe this will be the same as Senator Ogilvie's question. Do we have a problem with supply management? Do you think it's one of the challenges we're facing with the pork industry?

Mr. Wymenga: Supply management can be a challenge if that's a requirement to get into a certain market. I think with most of our trade agreements, even with CETA, we were able to get an agreement with the European Union that didn't undermine the supply management situation. They were maybe not quite happy with the increased access with cheese and so forth, but really their system is intact. From a pork producer's point of view, we have gained significant potential access into the European Union.

It's not necessarily a problem, but it can be a problem, depending on what markets you are going to get into and what other countries are prepared to give up.

Senator Enverga: Have you made any plans in case something like that happens, that CETA becomes wider and bigger? Will you have an answer for that kind of demand?

Mr. Wymenga: You mean if supply management were gone?

Senator Enverga: That's right.

Mr. Wymenga: We're not making any plans, but should that happen, they probably should be making plans.

Senator Enverga: It seems there's a high demand for Canadian pork. Can you describe our pork? If you compare it to the pork from the U.S., Brazil or another country, can you describe Canadian pork as opposed to another country's pork? Is it the same pork?

Mr. Pomerleau: Yes and no. To start with, we have better genetics in Canada,. Where we differentiate is that our pork is more uniform throughout the country than any other country. We have very good programs in place, like the Canadian Quality Assurance program. We have traceability. We have a lot of differentiations where we can prove to our buyers that we have not only better quality but also better management programs.

Mr. Laws: I think that foreign customers recognize Canada as being a wonderful country. We're fortunate to have clean air and clean water. When they see Canadian beef and pork on the shelves, many of them have perhaps travelled to Canada, to Banff or wherever. I think that's fair if others are concerned about where a particular food product is grown and whether it is as safe.

The other factor is that we see a lot of new technology coming out, where we can now sell fresh beef and pork to faraway markets because the sanitation in the plant is so clean, the refrigeration is so fast and the new packaging technology, with the skin-tight plastic that has been developed, allows for a long shelf life. That helps us because we can get a product over there in a boat and still have enough shelf life left on the product to compete against their domestic product.

Senator Enverga: I haven't tasted any pork from other countries. How do you compare the taste? Is there any difference from your customers' perspective?

Mr. Pomerleau: The way we do it — in Japan especially — is that we have in-store demonstrations. The difference between pork and beef is that pork does not age naturally. But if you put it in special packaging, it's more tender; it tenderizes the product. When it arrives at the other end, it's very tender, unlike what you've seen anywhere else. That's what we are demonstrating to the buyers. Also, as Jim said, just the name ''Canada,'' we don't need to promote the Canadian origin; it already has a good name.

Senator Oh: My question is for James. You mentioned the problem you have attracting butchers. You mentioned temporary work permits. How bad is the situation and does it affect your export business?

Mr. Laws: Yes. The challenge for the industry is that the rules were changed, so some companies had expanded their production quite a bit and had relied heavily on the Temporary Foreign Worker Program, which we had used quite well.

Workers would come; they would stay for two years. If it worked out well, they could stay for another two years. They would be fully trained, and then they would have the opportunity to apply for immigration status here in Canada and they were very loyal employees.

Because there were some problems with the Temporary Foreign Worker Program that we heard about in a restaurant somewhere, the government decided to change the rules. We don't believe they gave us enough time to adjust to that, so it's a problem.

When companies have to comply with the new rules, they have to send these temporary foreign workers back earlier than they had predicted, and then they don't have enough employees to run a certain line where they might have had five guys working over here taking product off something. They can't do that any longer and just have to send it into rendering. It might have been a specialized product that they would have sent to a particular market that wanted that product.

Senator Oh: Your temporary permit workers are not allowed to renew their permits?

Mr. Laws: Yes, it has become tighter, indeed. They have to go back. They have cut in half the length of time that they can stay. They are phasing in — they say you can have no more than 30 per cent temporary foreign workers and then down to 20 per cent and then to 10 per cent. It has made it very difficult for the industry.

In my closing comments I mentioned that if we have a job offer for someone — maybe it was one of these temporary foreign workers who had worked for us and we know the person, so they are not unknown — and we have tried to hire Canadians, tried to hire unemployed youth, tried to hire either refugees or Aboriginals or people on employment insurance and they are not interested in that job or they won't move across Canada to take that job, then we are hoping that we will be able to access this express entry program. We want to be ready. It is coming up in six weeks' time. We need to have access to that.

Senator Oh: You are going to get a butcher on a leash.

Mr. Laws: There you go.

Senator Tkachuk: I have a supplementary on that same line of questioning. Are there social impediments in Canada that prevent people from going to work? I think our last unemployment numbers were 6.8 per cent or 6.7, but we have areas of the country with 12 or 13 per cent unemployment. There have to be social impediments that prevent people from going to work. I don't whether the basement is really nice and the games are good, but it could be very possible that there are financial impediments. I'd like to hear what you think.

Mr. Laws: I graduated from the University of Guelph in 1981. I went off and worked in New Zealand for a year. I came back and could not find a job in Ontario, but I found a job in Edmonton. I was single and I was able to move and I did so. I think there are probably a lot of other Canadians in that situation, young, unemployed Canadians who can move. I remember my parents saying, ''Go west, young man.'' I think that still applies today.

My personal opinion is if there are current programs in Canada that allow unemployed Canadians to stay where they are unemployed, that's unfortunate.

Senator Tkachuk: But that's because probably there is competitive money, i.e., social service money and unemployment insurance, et cetera. Perhaps if we offered incentives for them to travel, to move, whether they get five years of tax reductions or something like that, it could change things. We have to get these people moving around. I come from the West and I still moved five times. You know what I mean? I don't understand.

Mr. Laws: In our submission to the Finance Committee this year, we proposed a $50 million, five-year program to help unemployed young Canadians to relocate to areas where they could find a job, and we believe that's important, absolutely.

Senator Beyak: I think all my questions were answered. They were on the labour shortage.

This report is fabulous. You are not listed in it specifically, but it says ''organizations,'' so I'm assuming you are part of the labour action plan, the task force. You have a great positive attitude about looking for the labour you need, so thank you.

The Chair: Mr. Laws, Mr. Wymenga and Mr. Pomerleau, thank you very much for sharing your comments and opinions with us.

We welcome our second panel of witnesses. Thank you very much for accepting our invitation to share with the committee your recommendations and opinions. We will hear from John Masswohl of the Canadian Cattlemen's Association; Brian Walton and John Weekes from the National Cattle Feeders' Association; Rob Smith from the Canadian Angus Association; and Michael Latimer from the Canadian Beef Breeds Council. The first presenter will be Mr. Walton, followed by Mr. Masswohl, Mr. Smith and Mr. Latimer.

Mr. Walton, the floor is yours.

Bryan Walton, General Manager, National Cattle Feeders' Association: I am joined by my associate John Weekes, who will help me with the presentation today.

I represent the National Cattle Feeders Association. We were formed in 2007 to work with some of the other trade associations in the beef industry that you see joining me here today.

In the attachment I included with my presentation, you will see that the cattle feeders are the feedlot operators. Others here at the table will be from different elements of the beef supply chain. In the top right-hand corner is where you will see the feedlot operators. Our product leaves feedlots and travels to packing plants in the Canada and United States. You can imagine that free and fair trade is important to us, which is why we are here today to reiterate that point.

Our objectives are to restore access to historical markets that were restricted or closed due to BSE, to enhance and expand access to existing markets, and develop new markets. This is done currently through some of the bilateral trade agreements that Mr. Weekes will speak about in a moment and, in some cases, multilateral initiatives.

Focus on expanded trade is important to Canada. We produce more than we consume, and so we need markets. We need markets beyond North America, and that is why some of the offshore market access issues are so important to us.

To elaborate more on that, I would like to turn to Mr. Weekes.

John Weekes, Trade Advisor, National Cattle Feeders' Association: I will touch on a few of the bilateral agreements, and I'll start with the Canada-European Union: Comprehensive Economic and Trade Agreement, which we feel is very important for our industry. We are hopeful that it will be implemented relatively soon. We recognize that a quite lengthy process still lies ahead before that agreement will actually come into force, perhaps two years or a little more. Also, we attach a lot of importance to making sure that certain parallel agreements dealing with regulatory matters that have been not negotiated as part of CETA proper but will be important to its implementation are given a high priority by the government and that they move forward to completion in the near future.

The Canada-Korea Free Trade Agreement we also see as being very important to our industry. I believe it has not yet had third reading in the Senate, but we are hopeful this will occur soon and that the agreement will come into force on January 1. This will allow us to begin catching up with some of our competitors who already have free trade agreements with Korea, although I think Australia and Canada may see their two agreements come into force at the same time.

We're also very interested in expanded markets to China and getting rid of the some of the residual restrictions still present from the BSE crisis. Exports of bone-in beef from cattle under 30 months of age are a particularly important priority.

We would note in passing that Australia and China have reached agreement in the last few days on a bilateral free trade agreement. We think it's important that Canada think of how to move our own agenda forward with China in a way that strengthens our relationship and moves us in the direction of having access to China that is not substantially less than that of a major competitor like Australia.

Japan is a very important agricultural market and a wealthy and stable market, one that is almost twice as big in terms of consumption of Canadian agricultural products as the European Union market. We see getting free trade access to Japan as being particularly important, and there are two ways of doing that. One is through bilateral negotiations, which are currently under way between Canada and Japan. In fact, this week our negotiating team is in Tokyo. The other is through the Trans-Pacific Partnership negotiations. There still seems to be some problem with the negotiation between the United States and Japan and the approach that the U.S. congress might take to these negotiations. In any event, we think we should move forward with Japan, whether bilaterally or under the TPP umbrella. Indeed, if we were able to secure access to Japan on a bilateral basis, it would put us into the Japanese market ahead of our American competitors, which might stand our industry in quite good stead in terms of building a good bridgehead into a new free trade market.

The final point I will make is not about negotiations but about the battle that Canada has engaged in to get rid of country-of-origin labelling regulations in the United States. These regulations have been particularly harmful to the cattle feeder segment of the industry and to the whole industry because of the effective discrimination they have created against imports into the United States of live cattle and swine. You probably heard that in the previous session. We're strongly supportive of the fight that the Canadian government has mounted at the WTO and the threat of retaliation that the government has put out in the Canada Gazette to make clear that it will defend Canada's rights under trade agreements against foreign action that takes away those rights in an unlawful manner.

Mr. Walton: There are three other themes that I could speak to for a moment. These are themes that you asked us to address. On sustainability, I want to advise the committee that Canada is one of the few countries moving ahead with a round table on sustainability, which speaks to economics, environment and social needs. It's a very nice complement to our social licence to operate, which deals with animal care, animal production and health, environment, and people and communities. That's one item that I wanted to draw to your attention, and you can see the elements of that sustainability round table addressed in our brief. I won't talk about them individually.

Diversity, food security and traceability: Obviously we support mandatory national traceability, but I did want to also speak to a point that this committee wrote on last year on innovation. It is important to us that we can employ and use modern production technology in raising cattle, and I thought that report touched on all the right aspects of what we need to do as an industry to be competitive in the world and advance the beef industry as a whole.

On competitiveness and profitability, we are actively supporting the Regulatory Cooperation Council on three areas: electronic certification, zoning for foreign animal disease, and veterinarian drug approvals to make sure that there is simultaneous or like-simultaneous approval for similar products in the United States as are approved here.

The last point I will mention is labour. You heard it from the Canadian Meat Council and you will hear it from us. It is a serious issue for us, and some would consider it the most pressing issue. It is a supply chain issue. If one link in the chain is affected, we are all impacted. We cannot get people to work on the food lots. Rural Canada, and in particular the Prairies, especially Alberta, is struggling to keep and attract people to rural areas. We feel the Temporary Foreign Worker Program was and should be an important way to augment our Canadian workforce, and we need to make it work.

The Chair: Thank you.

John Masswohl, Director of Government and International Relations, Canadian Cattlemen's Association: Thank you for the invitation to appear before the committee and for your attention to the important issue of international trade for Canadian agriculture.

The Canadian Cattlemen's Association was founded in 1932, representing all segments of the Canadian beef cattle production sector, approximately 68,000 cattle producers across the country.

Access to international markets and the ability to export truly is the lifeblood of the Canadian beef sector. Without international trade, Canadian beef packers — as represented by James Laws who spoke earlier, and they are our customers — can't maximize the value per carcass. If they cannot maximize the value per carcass, that means they cannot pay cattle producers top dollar revenue to buy our cattle.

We saw in May of 2003 what happens to cattle prices in Canada when all of our export markets are suddenly lost. First, the lost ability to export live cattle to the United States meant that more cattle had to be marketed every week in Canada than there were spaces to send them to. Second, even the cattle that were processed in Canada could not achieve full value per carcass because they lost the ability to send each piece of the animal to the market that was willing to pay the most for it.

In Canada we are all familiar with eating steaks, roasts and hamburgers. Those are very popular, but there are over 300 products in each animal. Unfortunately, most Canadians aren't going to the meat counter looking for things like tongues, livers and stomachs. If you take a beef tongue, in Canada maybe it's worth 40 or 50 cents a pound wholesale, whereas in Asia, that same beef tongue could be worth $5 to $6 a pound. A beef tongue probably weighs about six pounds, on average. International trade for that one item is worth an extra $30 per animal. You can repeat that example for other pieces of the animal.

Similarly, even for popular cuts like rib-eyes and tenderloins, we can often sell them for more money in export markets in places like Japan, Taiwan, or even the United States, more than we get in Canada for those. At a minimum, the extra demand we receive from international markets ensures that we can get a higher price in Canada even for the products we don't export. Having that competition from buyers helps raise the prices, and that makes its way back to cattle producers.

We've seen this impact in the market. Cattle prices today in Canada have never been higher than they are right now. At the lowest point of the depths of BSE in the summer of 2003, a 1200-pound steer was selling for less than $400. In the fall of 2005, after that live cattle market reopened to the United States, we were probably around $1,100 for that same 1200-pound steer. Today we have most of our markets back since BSE, although we still have a few issues, and today that same 1200-pound steer is worth over $2,000 at the farm gate to the farmer. It's an incredible difference, and international trade has played a significant part in that performance.

We are fortunate to have a government that understands the value of market access. In 2009, they established the agriculture Market Access Secretariat to work on technical market access barriers in a coordinated way across more departments than had previously been the reality. The Canadian Cattlemen's Association was a driver of that initiative with other organizations through the beef value chain round table, and we've been pleased with the results. Really, we feel that Canada can remain one of the elite food and agriculture exporters in the world, and a fully funded and expertly staffed agriculture Market Access Secretariat is a vital element of realizing that future.

Unfortunately, the reality is that none of us have the luxury of working with unlimited budgets, and we have to prioritize on the remaining market access issues that we have to work on. Some of them are still related to removing the remaining BSE restrictions, but some of them are related to creating new access that we've not previously enjoyed.

I think I will have a similar list to what you've heard already, but at the top of our list is the country-of-origin labelling dispute with the United States. The World Trade Organization has repeatedly ruled in our favour, but the United States continues to defy those rulings. We appreciate that Minister Ritz and Minister Fast have delivered strong messages that Canada intends to implement retaliatory tariffs if the United States does not comply, and we think those message have to continue if we are going to get this thing fixed because that's what they understand in Washington.

Next is implementation of new trade agreements: the CETA with Europe and the Canada-Korea Free Trade Agreement. I will not repeat what you have heard already other than to say these are hugely important for us, as is negotiation of a trade agreement with Japan, either bilaterally or through the TPP. To us, we are fairly indifferent as to the form as long as it results in real market access to Japan.

The most significant remaining BSE restrictions are those in China, where the next step is to achieve access for bone- in beef for cattle under 30 months, and with Mexico, where we need to achieve access for beef from cattle over 30 months. We place a high priority on the government achieving an upgrade to Canada's BSE status at the World Animal Health Organization. Currently, we have controlled risk status, and the next step is basically the gold standard, which is negligible risk status, and that would be a major step toward eliminating the remaining BSE-related barriers.

I mentioned budgets and how they are not unlimited. Often, to gain access to a market, the other country needs to send its officials to undertake an inspection mission of Canadian facilities. Their goal in doing that is to see the Canadian federal meat inspection system in action. Essentially, the other countries are auditing how well our food safety officials ensure the product we send to them is safe. Sometimes the other country pays its own way to come here, but more often than not they expect Canada to pay for their travel and expenses. Our view is that when foreign governments need to come to inspect or audit the Canadian federal inspection system, the Government of Canada should have the funding to pay for these missions and not expect us as cattle producers or exporters to pay for examining the Canadian federal system.

The last thing I want to mention, which you've heard before, is the challenge our industry faces due to a lack of sufficient labour. This is a huge problem. Although the problem is not necessarily limited to the West, it is particularly acute in Alberta and Saskatchewan, so much so that if we don't have a viable labour strategy, we will be unable to produce the beef to take advantage of the access we have worked so hard to create. So the labour issue is indeed a trade issue if we're going to take advantage of these trade agreements, and not just export cattle to have the value added somewhere else.

I've touched briefly on several areas and would be pleased to elaborate on any of them as we move into questions and answers. Thank you.

The Chair: Thank you.

Rob Smith, Chief Executive Officer, Canadian Angus Association: Honourable senators, it is with great pleasure and honour that I have the opportunity to speak with you and my esteemed colleagues at this presentation this evening.

Carrying on with what Mr. Masswohl said, it is a very good time to be a cattleman. I am a lifelong cattleman and for the last few years have worked as a servant of the industry as well with the Canadian Angus Association.

There are three topics I want to go over with you this evening, one of which is who and what is the Canadian Angus Association, our belief in the Market Access Secretariat, and the role of the Canadian Beef Breeds Council and my colleague to my left, who you'll have the opportunity to hear from next.

With respect to the Canadian Angus Association, if I can refer to the diagram that Mr. Walton actually provided you with, which is a snapshot of Canada's beef industry, over on the left-hand side you'll see that the first link in the value chain is genetics. Genetic selection actually leads to the cow-calf producers and utilization of bulls to make their decisions that furthers us down the value chain. That genetic component is where the Canadian Angus Association and our members have a significant role.

We actually represent 2,300 members nationally, which if you consider there are 68,500 beef farms in Canada, purebred Angus producers are about 3.3 per cent of that, but market share is about two thirds of those 68,500. Two thirds of beef cattle genetics in Canada are Angus or Angus influence, so 45,667 beef farms in Canada utilize Angus genetics. When you go to a restaurant and see Angus on the menu, there's a good possibility you're eating Canadian Angus and the work of our producers and the genetics our producers have provided to our cattle producers coast to coast.

We're very proud of Canadian beef. These gentlemen to my right represent that further down the value chain, and you folks have the opportunity to represent it from a retail and purchase perspective, and you also have an opportunity to help guide where that goes from a policy perspective. That's why I'm excited to have the opportunity to be here with you tonight.

The Canadian Angus Association has taken a leading role in areas like traceability, not only working with industry but creating what is the world's largest branded tag program in our Canadian Angus Rancher Endorsed Tag Program. In terms of a single identified brand tag, you can follow through Angus genetics in Canada more than any other specific tag in all of Canada. Of course, we're allowed to do that by the leadership that led to the Canadian Cattlemen's Identification Agency, CCIA, and our RFID tag. We're very proud of that, and it gives us a competitive advantage abroad.

We are an active participant in the World Angus Secretariat, which is the global collaboration of countries that produce Angus genetics. Angus is the number one breed in the world, even including those hot-weather countries that have the big-eared cattle. Angus is still number one because it crosses with all of those in the event they're not used in a pure form. We contribute to that world community through live cattle, frozen semen and embryos.

I've included some information. There's the Canadian Beef Breeds Council's data on the impact of Canadian genetics from an economic perspective exported internationally. Let me tell you, if we can't always compete on price, because truly we can't, as some of my colleagues before me said, we can always exceed on quality. That's where we have a distinct competitive advantage.

The five areas where Canadian Angus genetics have an advantage worldwide include the fact we have a closed herd book, which means there's no genetic influence in our purebred herd book other than Angus genetics going back to the creation of that association in 1905, and the national recognition under the Animal Pedigree Act, which actually is how we are incorporated. It is a piece of federal law done through Agriculture and Agri-Food Canada. That is how breed associations are actually incorporated.

We have winter resistance in our animals. There was a question by one of the senators to one of our pork industry colleagues in the last panel that talked about competitive advantage. Make no mistake: The fact we have an unforgiving winter at times is one of the reasons why, from an animal health perspective, we actually do have a competitive advantage. The globally recognized pristine environmental conditions and the fact that we have an inherent feed efficiency in our cattle, partly because a certain degree of homogeneity in terms of how they're raised, certainly give us an advantage.

The Canadian Angus Association is proud to work with the Market Access Secretariat on a number of areas, but one of the chief was the Canada-Russia Livestock Consulting Centre industry advisory group, which is an inactive group right now, but I can tell you if we ever see recognition from our Russian friends on what they need to do, we have folks across Canada that are galvanized and excited about the prospect of getting back into that marketplace because it certainly was an growth area for Canadian genetics.

There are 10 countries that have been identified to us that we are working with through the Market Access Secretariat in terms of beef genetic focus, and the Canadian Angus Association is key in all of these.

One I'd like to add to the list, because we've been focused on this ourselves in the last few months and we see it as a real opportunity, is Turkey. We work with countries that want to re-establish their purebred herd base, a lot of Eastern European countries and Central Asian countries, where essentially in a rocky transition to entrepreneurialism and capitalism they ate their cow herd and now want to re-establish it starting with a seed-stock base. We're happy to work with those countries to create that opportunity.

In terms of our folks' barriers to international trade of purebred livestock, we struggle a little at times with regulatory burden for exporters in terms of regulations that they need to work through the CFIA, the negotiation of import-export protocol between our trading partners and CFIA, creating agreements that sometimes include requirements that would not really be necessary for Canadian cattle to have to meet that requirement because it's not something that's ever indigenous to Canada.

As I said before, we do have issues with respect to price. We can't compete on price, but we can compete on quality. The Market Access Secretariat has allowed us the opportunity to open up an awful lot of markets around the world that are looking for genetics for a variety of reasons.

One of the important things I would like to follow up on with regard to what Mr. Masswohl said is if we have the opportunity to bring people here on inbound or incoming missions, we never fail to get them hooked as a buyer. Using Kazakhstan as an example, they have sourced cheaper genetics from the southern United States and Australia, not necessarily focused on quality or any conditions other than price. When we have had the opportunity to bring buyers to Canada where they see where the cow-calves operate, where our operators are, take a look at our feedlots and see our system from one end of the value chain to the next, they almost ''never not'' purchase Canada seed-stock genetics. We appreciate every opportunity the Market Access Secretariat has to make that happen and hope they have the opportunity to get more resources to be able to increase the number of those inbound missions.

The Canadian Beef Breeds Council is a group that binds us all together. I'm very proud to be a member of that organization with the Canadian Angus Association. I know Michael is going to get to speak next, so I won't finish anything else with respect to CBBC.

In conclusion, I would like to point out that it is a great time to be a beef cattleman. We always know, however, that innovation lags when our economy becomes bullish. International market access is so very important to prioritize and establish diversified products that have more value elsewhere and for the eventual softening of our price support from the Market Access Secretariat and organizations like Canadian Beef Breeds Council. This will assure we can be proactive now rather than reactive later, to actually do it now, establish and reacquaint ourselves and strengthen ties with markets right now rather than when we actually have to. Thank you.

Michael Latimer, Executive Director, Canadian Beef Breeds Council: Good evening, everybody. I'd like to thank you for the invitation to speak to you tonight. I'm Michael Latimer, Executive Director for the Canadian Beef Breeds Council.

The Canadian Beef Breeds Council was established in 1994, so we're celebrating our twentieth anniversary this year, which we think is exciting.

The Canadian Beef Breeds Council fits in at the start of the production chain. As was referred to with the snapshot of the beef industry, and as my colleague Bryan Walton pointed out, we are the start of the production chain. The genetics that we incorporate as seedstock producers translates into the cattle that are used down the line. The purebred cattle that are used, or a bull sold into a commercial cow herd, that translates into the quality of meat we sell down the road. The genetics we incorporate are very important as we work down the line.

We represent 18 different breed associations. Canadian Angus is one of those associations. They are our largest. They represent 52 per cent of the registrations of beef cattle in Canada. These breed associations are all incorporated under the Animal Pedigree Act of Canada.

We also represent 10 export companies. These are the companies that physically export cattle out of Canada. They'll take live cattle, semen, embryos, and sell them to countries like Kazakhstan, Russia, Brazil, any country we have access to.

We also represent the interests of four livestock exhibitions. In Ontario, that would be the Toronto Royal. In the West you would have Farmfair International, Agribition, and the Canadian Bull Congress out of Camrose.

The Canadian Beef Breeds Council was established back in 1994 as an umbrella organization to bring all the breed associations and these other groups together so we had one unified voice that focused on three main topics: international market development; scientific advancement, which has led to the application of a lot of the new genomic technology we have developed in Canada; and the other aspect we deal with is government and industry relations.

Under the international market development leg of our three-legged stool, I'd like to reiterate and support a lot of the comments my colleagues have said here today. What I want to bring up in addition to that is that market access is vital to the Canadian producers. We've seen what happens when those markets are shut. We saw that in 2003, after BSE, when the markets were closed. Our prices hit rock bottom, maybe even a bit lower. We need these markets open and we need access to them.

But getting the markets open is just the first step. Especially on the live cattle and semen/embryo side of it, which is a little different from the meat aspect of the business, we have to make sure we have health certificates negotiated that allow us to compete with the United States, Australia and our other competitors in any given market. With that, we need groups like the Market Access Secretariat and CFIA to make sure they have the funding and the staff available to negotiate these certificates, with all the resources they have behind them.

We have a lot of competition from countries like the United States and Australia, particularly when we're exporting to a country like Kazakhstan, which has been a tremendous market for Canadian purebred cattle in the last six or seven years. With that, we need those certificates to be at least on par, and we haven't had that in recent years.

That actually puts us at a disadvantage. We're already fighting it on the price. We have a high cattle price cycle right now in Canada, so we have that as a disadvantage, and then we also have a disadvantage on the health certificate that we've negotiated with that country in particular. We need to make sure that those agencies are funded to the fullest extent to ensure that they can do what they need to do to give our producers every fighting chance that they have to capitalize on these markets that are open, but we need to provide a bit more service to get true access into those markets.

I'll leave off with that and open it up to questions.

The Chair: Thank you, sir.

Senator Tardif: Thank you for your excellent presentations. You've all stressed the importance of international market access and the importance of focusing on expanding our free trade agreements. With the various free trade agreements that are on the table, I would expect that the demand will grow significantly for beef as well as for pork products. Will Canadian producers be able to keep up with this demand?

Mr. Masswohl: That's a question we get quite often from producers. Cattle supplies are fairly low right now, which is another contributor to why the prices are high. They ask: Well, we're doing these free trade agreements. Do we have the cattle? Do we have the beef to export?

I think of these trade agreements a bit like a pipeline; it takes them a long time to be negotiated and implemented. Just because we're putting something into the pipeline, we want to get something out of the pipeline in a few years. We know that when cattle prices are high, that creates the market signal to cattle producers to produce more, so we will produce more.

In the past, there has been a fairly predictable cattle cycle. You have high prices; cattle production increases, which lowers prices, and you go through this cycle. The way to extend the high prices for producers is to create more demand, and if you can't create more demand domestically, what you do is open access to markets.

We see that, yes, that signal from the high prices is going to increase production. We look at these agreements not only in terms of the volume that we will export, the number of tonnes, but the price that we get per pound, per kilo. That additional competition from having, say, a Colombia free trade agreement or a Jordan free trade agreement, even if we don't ship any more volume to those markets, having those bidders sometimes helps to raise the price here in Canada and we benefit even if we don't actually ship. Absolutely, they're beneficial, for a number of reasons.

Senator Tardif: As the market grows, can we sustain the land base needed for the production, or the growing, I guess? It's not the production; it's allowing the livestock the space to grow.

Mr. Masswohl: We do have a lot of land.

Senator Tardif: I know that. We're the second largest country.

Mr. Masswohl: You're absolutely right. That is something that cattle producers wonder about as cities and suburbs grow.

Senator Tardif: That's right, as we become urbanized.

Mr. Masswohl: They're growing into very good, productive land.

Another challenge is the competition for land between different agriculture products. Do you put livestock on land or do you grow a crop? Livestock, beef cattle, tend to be in areas where there is marginal land. It's a little hillier; maybe it's a little rockier; the soil is fairly thin. In the past, cattle have been where they are because it hasn't been producing a good yield for a crop. But with technologies in crop production, yields and profitability have improved.

These are some of the challenges. I don't have a definitive answer for you. We've seen more production moving into new marginal areas, farther north. I know the Beef Farmers of Ontario have a strategy to produce more cattle in northern Ontario.

Mr. Walton: One thing I would add to John's comments is that the United States beef herd is where it was in the 1950s, when Harry Truman was president. We're back where we were in 1996, but Canada does have a benefit. Your question is a good one. We don't have the pressure on the land base that they do in the United States. We also have the infrastructure, and they do, too. We need to be able to track the next generation and keep those people in the business. We're seeing from the farm stats that there are larger farms and fewer people. That's courtesy of innovation and mechanization, et cetera. We're going to be able to produce food beyond our needs here, and the Americas are going to be at the heart of that. I'm optimistic.

Senator Enverga: Thank you for your presentations. I learned a lot.

I didn't realize that we have to restore a lot of the market due to BSE. How much have we lost so far, and how much do we still have to gain?

Mr. Masswohl: We lost everything overnight in May of 2003. We export over half of our production, either as beef in a box or live cattle, and about 80 per cent of what we export goes to the United States.

We did gradually work our way back. After about three months we restored some boxed beef trade to the United States, then after about two years live cattle trade and some expanded beef trade.

Some of the other major things we got back, in late 2005 we got under 21-month access to Japan, which expanded to 30-month access to Japan just last year. Korea opened up in 2012. Mexico is a huge market for us. Taiwan and some of these have done it in stages. First they opened to boneless beef from under 30 months, then to bone-in. It's been a long road of incremental progress, and I've mentioned a couple of significant increments that we have yet to achieve.

China represents a huge potential. The growth of the middle class in China and what is happening there is amazing. What we see is, as people move up the income scale, they tend to eat more beef. It's a bit of a luxury item. Also they tend to have more infrastructure related to refrigeration. China is an area that's hugely important for us to be there in the future.

Senator Enverga: So we were basically able to recover from the BSE problem.

Mr. Masswohl: Yes.

Senator Enverga: My next question is with regards to exporting semen, embryos and live cattle. Do you think we're selling our future cattle industry when establishing them in other countries? Don't you think it's better to export our cattle instead of the embryos or the semen? Do you fear that in the future they might develop their own cattle industry and we will end up with a limited market? Is that of any concern to us?

Mr. Smith: That's a very good question. One of the things to note about the export of semen and embryos is we're not really losing anything with the export of semen and embryos. That's production that is already available in Canada and likely on genetics that are propagated in Canada already.

With respect to live animals, there's certainly merit to your concern. The one comment I might make is really for most of our overseas export of live animals, what has been sent is not necessarily the upper echelon of our elite genetics in Canada. I would say that when they're buying en masse, buying thousands of head, they're actually looking for propagators. They're not necessarily looking for the absolute greatest genetics that Canada has on offer, but what they're taking from Canada is a level of genetic quality that is vastly in excess of what they're currently working with.

I wouldn't say that we are at a point where we are afraid of the competition utilizing exported Canadian genetics.

Mr. Latimer: It's important to remember that if they didn't buy those genetics from Canada, they would buy them from the United States or Australia as well. A country like Kazakhstan, say we shut the doors on exporting live cattle, semen, embryos out of Canada, they would find an alternative source for that. We can actually export that product to them and realize a return to our producers to see added value back for their products at the same time as serving the market.

The genetics and the live cattle tend to be a bit of a gateway product as well. When we have the cattle go over there and they get a taste of what could be higher quality beef because they're from a better genetic source, it generally tends to allow them to realize they could also get the meat product as well. That would allow them to bring in complementary meat products to substitute their production.

In a lot of cases, countries like Kazakhstan — I'm trying to be politically correct here — are a long ways away from ever catching up to us genetically. They don't have the production capabilities. They don't have infrastructure; they don't have feedlots; they don't have the same grains as us. They don't even have the same environment. For them to have a meat product that's of equal quality to us, they're decades away from ever being able to compete back against us.

Senator Merchant: Good afternoon. Thank you for being here. You were very kind to say that you were so pleased to be here with us. I must say that we are also very pleased that you made the time to come and present to us. Thank you so much.

The recent drop in the value of the Canadian dollar that opens up export markets, does it hurt you in some ways?

Mr. Walton: The cattle feeders are the ones that sell fed cattle, and we also compete for feeder cattle, the calves that go into our feedlots. On one side, selling fed cattle is a benefit, and when it comes to competing for feeder cattle, it's a detriment. Overall, once you get further down the processing chain, the value of the dollar does help manufacturing.

Out of Canada every year, we ship about a billion dollars' worth of cattle on the hoof, even despite country-of- origin labelling. The market has adjusted to that and the damage has been done, but it's a fact that we're in a North American market. They're our biggest competitor and our biggest customer.

Mr. Smith: From a purebred perspective, we're not adversely affected by the decrease in the dollar. In fact, the number of American exports of our Canadian genetics increases dramatically every two cents that it drops.

Senator Merchant: I understand your problem with getting workers. Both groups have expressed the shortage of workers. Last night I was flying down from Edmonton, and there were a lot of people that work on the oil patch. They all spoke French, so they were all going back to Montreal. I spoke with some of them and I overheard their conversations.

The oil companies could be a model for you. I don't know if they can, though, because they pay well, and they have all sorts of workers that they fly in to Fort McMurray or similar places who can work there for two weeks and they fly them back home to be with their families.

If you want to hire Canadians and not bring people from outside, are you able to make it possible for people from other parts of Canada, where maybe the unemployment rate is higher than it is in Saskatchewan or Alberta, to be attracted to come out West?

Mr. Walton: We attend job fairs. Just last month we were out in Atlantic Canada. We didn't get a lot of uptake. By the way, when we do, we bring them out. The biggest problem is, once they're in Alberta, in the West, there's a big competitor, and it's the industry you just mentioned.

Agriculture is a different ball game than oil and gas, and you'll know that coming from the West. That is a fact of life, but that's where the importance of having a good policy around foreign workers — it's probably not even a good term, but these are people that augment the Canadian workforce. They want to be here. They make a big decision to come here.

We just hosted a labour congress, an ag labour summit, two weeks ago. We had 170 employers there. We had people that had come to this country with the hopes and desires no different than they did in the 1950s. These people will come. They like to live in rural Canada in an area where we're seeing a decline in population and very low unemployment. That's why we need to have that proper blend and mix. It is definitely a challenge when we're competing. If you're in Saskatchewan with the Bakken, and in Manitoba even, we're hearing it from there where one of my members lost four employees in one week. They went to work on the oil side.

[Translation]

Senator Dagenais: Thank you to our guests. We have heard about many agreements between China, Taiwan, and so on. I would like to hear your comments on the agreement between Canada and the European Union. Will it create new markets? Will it be profitable? Is it good for the market?

The other day, we heard from dairy processors who see this a different way, but we have also heard other comments concerning pork and beef producers. I would like to hear what you have to say about this.

[English]

Mr. Masswohl: Very much so. We think the Canada-Europe trade agreement holds huge potential for Canadian beef producers and beef exporters.

We've had a number of issues with Europe over the years. You've heard about the hormone ban, as it's sometimes called. I would agree with Mr. Pomerleau earlier that hormones are not the main issue, but Europe bans all growth promotants. Certainly we have plenty of cattle producers in Canada that will raise cattle without hormone implants or beta-agonists. They'll do it the European way, but it will cost them about 20 per cent more to raise their cattle without those technologies. They'd like to know that there is a market at the end that will pay them for that additional cost of raising cattle, and Europe is that market.

The problem is that Europe has had a prohibitively high tariff in the past. This agreement will create 35,000 tonnes of new duty-free access for fresh beef and 15,000 tonnes for frozen beef. There's another quota we share with the United States, a 20 per cent duty, which Canada will get duty free while the Americans will continue to pay 20 per cent. Nearly 65,000 tonnes of new duty free access that we did not have before will encourage cattle producers to raise cattle according to European standards.

The remaining piece of the puzzle that we have not quite sorted out, which Mr. Laws mentioned, is what are the technical conditions that the beef processing facilities will have to operate under? We need to know that Europe will actually approve the Canadian slaughter facilities to export to Europe. Currently, there're only two small facilities in Canada approved to export to Europe, and they're both in Alberta. If you are a cattle producer in Nova Scotia doing hormone-free and beta-agonist-free, you still cannot get to Europe even duty free if you have to send your cattle out to Alberta to have the beef sent. All these pieces have to line up, but there's huge potential.

Mr. Walton: It may have come up when the Canadian Meat Council was here that another meat plant will open in the new year. It is the largest EU-approved plant in the country that was mothballed shortly after 2007. It was built just after BSE and is just north of Calgary. The individual who bought the plant has designs on Europe. That's a positive given that there are only three large plants left in Canada. This will be a fourth medium-sized plant approved for the EU. We think that is very positive, and we're looking forward to seeing that plant open.

[Translation]

Senator Dagenais: Mr. Weeks and Mr. Walton, you spoke about country-of-origin labelling, which creates a problem with the United States. Are there other countries that have signed a trade agreement with Canada, where this well-known country-of-origin labelling problem exists? Do you know if there are other countries that pose this problem for us?

[English]

Mr. Weekes: The problem with the country-of-origin labelling regulations is not that there is a label but rather the way in which the label operates. It requires packers basically to segregate Canadian cattle from American cattle before they go through the plant because when it comes out the other end, they have to know which piece came from which animal so they can label it properly.

There are ways to provide for labelling that would not have that discriminatory effect, but the way in which the United States operates their scheme discriminates and has been found in violation of the WTO. The first American attempt to remedy that intensified the restriction rather than conforming to the WTO. Now we think we're getting near the point where they will have to come up with an honest answer.

Yes, all countries have some kind of labelling requirement, but it doesn't operate in this way that cuts off the trade in live animals.

Mr. Masswohl: The United States affects us particularly because it is really the only market to which we export live cattle for processing. These aren't purebred animals. The impact is unique to the United States.

Mr. Walton: We see some markets that want them born, raised and slaughtered in the country. That prevents Canadian feedlots from bringing U.S. feeder cattle into the feedlots because the packers here want to know that they are born, raised and slaughtered. Europe and China are examples of that. It can harm trade for us.

Senator Tkachuk: I'm not a regular member of the Agriculture Committee. I used to sit on the Agriculture Committee, but I'd forgotten how interesting it was. I do want to thank you for being here.

I come from Saskatchewan, where the cattle and meat industries are very important. I was on the Agriculture Committee when BSE hit in 2003. I remember the hearings we had and the sadness we heard. It was a terrible time. I remember beef producers coming to see us and saying they had never asked for money from the government, but here there they were, asking for help.

Under every free enterprise American, there is a protectionist, right? I mean, they are all the same. I remember talking with Senator Burns from Montana, a Democrat. They were using BSE as a pretense to prevent cattle imports. They knew we were solving our problem, but for years and years we went by with these restrictions.

I don't know whether the industry has created a history of the mess. Did we make mistakes along the way? I think we did. We allowed the Americans and other countries to use the BSE issue as a means of preventing cattle producers or Canadian beef from entering their marketplaces. They used it as protection. It's not that they weren't interested in the health of Americans, but they saw this as an opportunity. What did we learn? This could happen again, but I hope it never does. We could have a tragedy like that again. What did we learn that we should not repeat?

Mr. Masswohl: Your point that it could happen again keeps us awake at night. This really is why we are so disturbed about the labour policy situation. We live in fear that one of our customers — and we produce cattle so our customers are packers, who are the two largest packers in Canada and both in southern Alberta — will be impacted acutely by the labour scenario. They are both foreign owned. At some point, just do the math: Corporate headquarters in Kansas or Brazil might make the decision that it's not worth operating a facility in Canada. If that happens, then we are at the mercy of exporting live cattle to the United States again.

I hope we have learned that lesson and I hope we resolve the labour scenario we are in and come up with a viable labour strategy so that we manage our exposure to that possibility.

The Chair: I thank the witnesses very much. The committee will travel to Washington, D.C., in late January. There is no doubt that some of the topics and challenges that you've shared with us will be on the table.

A previous witness said to continue to practice the four Rs: the right source, the right quantity, the right place at the right time for your markets.

(The committee adjourned.)