Proceedings of the Standing Senate Committee on
Agriculture and Forestry

Issue 20 - Evidence - Meeting of November 20, 2014


OTTAWA, Thursday, November 20, 2014

The Standing Senate Committee on Agriculture and Forestry met this day at 8:02 a.m. to study international market access priorities for the Canadian agricultural and agri-food sector.

Senator Percy Mockler (Chair) in the chair.

[English]

The Chair: Welcome to this meeting of the Standing Senate Committee on Agriculture and Forestry.

[Translation]

I am Senator Percy Mockler from New Brunswick, chair of the committee. I would like to start by asking the senators to introduce themselves.

[English]

Senator Beyak: Senator Lynn Beyak, Ontario.

Senator Merchant: Pana Merchant, Saskatchewan.

[Translation]

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

Senator Tardif: Claudette Tardif from Alberta.

Senator Maltais: Ghislain Maltais from Quebec.

[English]

Senator Oh: Senator Oh, Ontario.

Senator Enverga: Tobias Enverga from Ontario.

[Translation]

Senator Dagenais: Jean-Guy Dagenais from Quebec.

[English]

The Chair: To the witnesses, thank you for accepting our invitation to come to the committee to share your opinions and your professionalism with us.

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

[Translation]

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

[English]

This morning we welcome from Agriculture and Agri-Food Canada, Mr. Frédéric Seppey, Acting Assistant Deputy Minister, Market and Industry Services Branch.

[Translation]

We also welcome Mr. Gilles Saindon, Associate Assistant Deputy Minister, Science and Technology Branch.

[English]

From the Canadian Food Inspection Agency, we welcome Mr. Tony Ritchie, Executive Director, Strategic Policy and International Affairs.

Thank you for accepting our invitation. Before we proceed to questions, we will ask the witnesses to make their presentations. I am informed that Mr. Seppey will make the first presentation to be followed by Mr. Ritchie.

[Translation]

Frédéric Seppey, Acting Assistant Deputy Minister, Market and Industry Services Branch, Agriculture and Agri-Food Canada: Thank you, Mr. Chair and honourable senators. We appreciate the opportunity to speak to you in the context of your ongoing study of international market access priorities for the Canadian agriculture and agri-food sector.

As you know, an ambitious trade agenda is a key part of the government's focus on generating jobs and economic growth. Trade drives 6.7 per cent of our GDP and one in five jobs. To focus these efforts, the government has created the Global Markets Action Plan. Under this plan, efforts are being concentrated on the markets that hold the greatest promise for Canadian businesses. A commitment to vigorous trade promotion and ambitious trade policy helps our agriculture and agri-food sector. With almost half of Canada's total agricultural production exported, the potential for continued growth in the sector lies in its ability to expand markets abroad. Canada's agriculture and food exports have been on a growth curve for a number of years. Indeed, for 2013, Canadian agri-food and seafood exports reached an all-time high of over $50 billion.

Trade and market access is one of our top priorities at Agriculture and Agri-Food Canada. We work closely with the Canadian Food Inspection Agency and our colleagues at the Department of Foreign Affairs, Trade and Development — to maintain, expand and open new markets for the agriculture sector. We are doing this in close collaboration with provinces and industry.

The department's international efforts are mainly guided by three strategic objectives. First of all, focusing our efforts in priority markets that offer the most economic potential. These include the United States, Mexico, the European Union, Japan, China and India.

The second objective consists of clearly articulating and committing to specific market access issues with our partners and stakeholders, which I will elaborate upon later.

The third goal is aligning Agriculture and Agri-Food Canada's science and trade objectives to direct the department's resources to achieve maximum impact.

This approach helps us ensure coherence and integration not only within the department, but also with our federal government partners, provincial and territorial governments, as well as key stakeholders. Collectively we endeavor to use all available levers in influencing and advancing the international agenda. One of these levers is the Market Access Secretariat. Created five years ago — at industry's request — it works collaboratively across governments and industry to enable improved identification and resolution of market access issues to aggressively and strategically improve competitiveness and trade opportunities for the sector.

The Market Access Secretariat has been instrumental in resolving a number of bilateral trade barriers in key sectors, including beef, pork and canola. At the same time, beyond addressing urgent trade barriers, officials are working hard to ensure that access to important markets for our sectors is maintained and uninterrupted.

Complementing this work, we are aggressively negotiating free trade agreements with a number of trading partners — with some significant results. Since 2009, eight free trade agreements have been concluded with 38 countries — and Canada is also currently negotiating trade agreements with more than 32 others.

Today, Canada has signed trade agreements with countries representing close to half of the world's agriculture and agri-food markets; some 44 per cent of the global market falls under our free trade agreements. The trade potential more than doubles when you take into account countries with which we have ongoing negotiations. Once ongoing negotiations are concluded, Canada will have access to almost two-thirds of the world's agriculture import market. These include agreements with Europe and Korea. The agreement with Europe is Canada's most ambitious trade initiative, broader in scope than the North American Free Trade Agreement. We are also engaged multilaterally in the Trans-Pacific Partnership, as well as the World Trade Organization.

Beyond formal trade agreements, our department also puts significant efforts towards advocating bilaterally and multilaterally for the use of science-based trade rules, regulations and international standards. All of our efforts on market access are focused on maximizing opportunities for our stakeholders. We want to help them get their products into the most profitable markets abroad. To this end, we have created a number of tools to assist our stakeholders.

[English]

The first of these tools is the market access support system, which was introduced to prioritize Canadian agricultural and agri-food market access issues and allow for the allocation of appropriate resources. The tool allows us to evaluate market access issues based on a number of predetermined factors in consultation with the industry. It is then given a priority ranking that is shared with industry on a quarterly basis for information and ongoing validation.

Industry stakeholders and provincial and federal government representatives come together once a year to discuss market access priorities and align our objectives for the year. It happens that this meeting took place yesterday, and the discussions were rich.

One of our biggest strengths is our team of 12 agricultural trade commissioners abroad. They act as our eyes and ears in key markets overseas and are dedicated to promoting and expanding Canadian trade in agriculture. These AAFC-funded positions complement members of the Foreign Affairs, Trade and Development Canada Trade Commissioner Service, and all together they cover every inch of the globe in support of our sector.

CFIA technical experts, including veterinarians, are also posted abroad to allow the delivery of on-the-ground, timely responses to market access issues. In addition, the department continues to support industry's pursuit of commercial opportunities through a number of programs and activities. Let me name a few briefly.

The first one is the $341 million agri-marketing program which helps national associations and small- and medium- sized enterprises in their efforts to undertake promotional and market-development activities, both in traditional and new markets.

Second, market intelligence, such as trade data and client-focused research, helps inform industry decision-making about new opportunities.

Third, promoting Canadian products in new markets helps expand our awareness of our industry and we are using the Canada brand, which helps industry to differentiate Canadian food products from the competition, raise their profile and support the sector to increase sales.

In addition, we provide leadership in fostering coordination and collaboration across all market development efforts while ensuring that industry reaps the benefits of a common approach to promoting Canada and Canadian products. This includes support for eight flagship trade shows around the world and generating targeted market research reports. Food exhibitions, such as SIAL in Paris, which took place last October, provide enormous opportunities for Canadian companies to expand exposure and sales.

Under Growing Forward 2, our framework of agricultural policies at the federal and provincial level, provinces and territories have greater flexibility to tailor market development and trade promotion programs to local needs and are well-placed to play a more hands-on role in these areas.

As mentioned, I am joined by my colleague Dr. Gilles Saindon, Associate Assistant Deputy Minister of our Science and Technology Branch. I would like to take a moment to highlight the important relationship between our two areas.

The Science and Technology Branch uses an approach based on partnerships, working with industry, universities and colleges and other science providers to deliver advances in science and innovation that enhance the sector's resiliency, fosters new areas of opportunity and supports the sector's overall competitiveness, both here in Canada and in global markets.

For example, with respect to market access, our Science and Technology Branch teams are working, often in collaboration with experts in other countries, on issues such as improving the potential for increasing exports of canola by researching how to increase the crop production at reduced cost and through reduced pesticide application using biological control agents. This is relevant given that the European Union is moving to lower maximum acceptable residue levels for pesticides.

With respect to the United States, our scientists cooperate on pest management and pesticide issues, helping improve faster access to the global market for newer and more effective pest control tools. They work globally on solutions for food safety issues that can limit market access, such as reducing contamination by mycotoxins in cereals.

Today our network spans the country with 19 research centres located across diverse agricultural ecozones. Each of our centres has a critical mass of expertise and specialized facilities that contribute to the international success of Canadian agriculture. For example, at the Semiarid Prairie Agricultural Research Centre in Swift Current, Saskatchewan, spring and durum wheat research programs have been key to providing Canadian farmers with wheat varieties that can compete in world markets. The centre's work with wheat illustrates how science investment by AAFC has provided yield and agronomic benefits for farmers, as well as quality attributes that are recognized in many markets around the world.

Another example is at the Greenhouse and Processing Crops Research Centre in Harrow, Ontario. The department supports market access for Canadian food-grade soybeans through its research and variety-development program.

Two industry-led projects are currently under way to support the sector, including producers, processors and exporters in meeting the quality requirements of international markets in a competitive and profitable manner.

The Food Research and Development Centre in Saint-Hyacinthe, Quebec, supports the market for access to Canadian pork through its research program on meat quality. Researchers are collaborating to develop tools and products that specifically support Canadian pork sector access to the very lucrative Japanese market.

Those are some specific examples of our work, but more generally the Science and Technology Branch is taking a sector-by-sector approach to support industry in meeting key scientific challenges facing 21st century agriculture, increasing agricultural productivity, but also enhancing environmental performance, improving attributes for food and non-food uses and addressing threats to the agriculture and agri-food value chain.

A key mechanism for accomplishing this work is the AgriInnovation Program under the Growing Forward 2 framework. This five-year program provides up to $698 million, of which $468 million is available for funding projects based on applications from the industry.

Industry-led research and development funding through agri-science clusters and agri-science projects also provide a direct pathway for supporting the domestic and international market-driven science requirements of the sector. Clusters aim to mobilize and coordinate a critical mass of scientific expertise in industry. Agri-science projects are aimed at a single project or a smaller set of science projects that would be less encompassing than a cluster and may be national, regional or local.

As you can see in the context of our strategic planning around science, we are focused on finding solutions for the sector, taking a comprehensive approach in our collaboration with our partners so that our research, development and knowledge transfer efforts fit within the landscape of other science providers in addressing the scientific priorities of the sector.

[Translation]

In closing, Mr. Chair, I would like to provide you with a few examples of concrete results brought about by our efforts thus far. Following extensive negotiation, an agreement was signed with Taiwan in February to expand market access to include Canadian bone-in beef and other specified beef products from animals under 30 months of age.

The Canadian beef industry expects the market for under 30 month bone-in beef to be over $3 million next year, with the potential to grow $10 million annually in the years to come.

Furthermore, the recently concluded free trade agreement with Korea will also result in significant benefits to Canadian farmers and products through the elimination of tariffs on a wide range of agricultural products. The Canadian Agri-Food Trade Alliance estimates that the agreement could boost Canadian agri-food exports to Korea by over $800 million.

In China, our intense efforts continue to generate results. Just this month, we signed an arrangement for permanent access for fresh cherries. Trial exports of B.C. fresh cherries in 2014 reached almost $7 million. Industry estimates that exports could reach $22 million annually.

We also signed a cooperative arrangement of intent to work towards trial shipping of blueberries for the 2015 season. Industry estimates access to reach $65 million annually.

Our recently negotiated agreement with the European Union will be fully implemented; 95 percent of European Union agricultural tariffs will be eliminated, including for our key export interests such as meats, grains and oilseeds, fruits and vegetables, and processed foods.

Once again, CAFTA estimates that when the agreement is fully implemented, it is expected to increase annual Canadian exports by over $1.5 billion.

You can see for yourselves some of the tangible benefits that our work on market access brings to our agriculture sector and our economy. I would like to underscore that, in undertaking these activities, we work closely with our federal colleagues and with industry and the provinces. All of our efforts combine to ensure the highest possible returns for our Canadian agriculture and agri-food sector.

We appreciate the opportunity to appear before you today and are happy to answer any questions you may have. Before doing so, I will turn to my colleague Tony Ritchie who will provide an update on how the Canadian Food Inspection Agency works with our department to support the government's trade agenda.

The Chair: Thank you, Mr. Seppey, for providing us with that information.

Tony Ritchie, Executive Director, Strategic Policy and International Affairs, Canadian Food Inspection Agency: Thank you. I am pleased to appear before the committee this morning.

[English]

Increasing Canadian competitiveness and expanding trade opportunities is a priority for the Government of Canada. As you have heard, Canadian agriculture producers participate in a highly competitive trade environment. The sector's ability to compete internationally relies heavily on the stability and security of Canadian domestic animal health, plant health and our food safety systems and an international trading environment that is science-based.

The CFIA plays a key role in this regard. As Canada's largest science-based regulatory agency, the CFIA leads Canada's participation in the World Trade Organization Sanitary and Phytosanitary Committee, the World Organisation for Animal Health, OIE; the International Plant Protection Convention, IPPC; and partners with Health Canada at the Codex Alimentarius.

We participate in these international fora to influence the development of science-based rules and standards, and to encourage harmonization with like-minded countries on matters related to food safety, animal and plant health, as well as consumer protection.

Engagement with other foreign regulators is routinely undertaken to resolve technical market access issues in order to establish the import requirements for Canadian products. The CFIA also engages through formal bilateral mechanisms established under international agreements and arrangements to advance regulatory cooperation activities.

[Translation]

The CFIA also plays a significant role in the negotiation of sanitary and phytosanitary chapters of free trade agreements, to help ensure that the Government of Canada's interests are reflected and articulated in advancing its ambitious trade agenda.

[English]

As we have heard, agriculture is a sensitive domestic sector for many countries. In the context of tariffs on agriculture commodities going down as a result of international agreements, countries will often create trade barriers for Canadian products by imposing unnecessary and not scientifically justified sanitary and phytosanitary import conditions to protect their own agriculture sector.

We have also seen that as emerging economies modernize their regulations and infrastructures related to animal health, plant protection and food safety, they can develop import conditions and new regulations which are not consistent with the risk being managed, thereby negatively impacting Canadian exports.

These trade barriers and non-scientifically based import conditions vary from country to country and from commodity to commodity.

The CFIA engages with other countries' regulatory agencies to defend and seek science-based solutions to advance the interests of Canadian industry. The agency negotiates technical export conditions and plans the logistics of visits by foreign regulators who are required to audit the Canadian system before agreeing to access. Negotiating import and export conditions is complex. It involves risk assessments or completion of questionnaires, and requires trading partners to have a good understanding of the Canadian regulatory system. The effectiveness of Canada's regulatory system for animal health, plant protection and food safety serves as the basis of the CFIA experts to negotiate our import and export conditions.

We've just heard from my colleague around some of the successful joint efforts that CFIA and AAFC have undertaken in the past to open up markets. He mentioned the Canada-Taiwan expanded market access to Canadian bone-in beef, as well as a number of other examples.

[Translation]

The CFIA plays a key role in certifying compliance with export requirements and issuing certificates; testing commodities prior to export as required by the importing country and conducting surveillance of animal diseases or plant pests to demonstrate or maintain freedom status.

[English]

The collaborative effort by CFIA and AAFC, which has been highly effective in resolving market access issues, has also been instrumental in mitigating the impact of unanticipated market disruptions. The Russian embargo of Canadian food exports this summer resulted in CFIA and AAFC, with industry, working to quickly identify other markets where Canada meets the requirements.

I would also like to take a moment to highlight some legislative efforts that CFIA has been involved with. In December 2013, the government introduced amendments to the seven agricultural statutes administered by CFIA, the Agricultural Growth Act or Bill C-18. Many of the amendments proposed in that bill support international and trade in agricultural products and will help support our Canadian farmers on the world stage.

Three examples from that bill that touch directly on supporting trade include the amendments to the Plant Breeders' Rights Act to support Canada's agriculture industry accessing the latest international plant varieties; amendments to the Feeds Act and Fertilizers Act to allow for the registration of fertilizer and animal feed operators and facilities that import or sell products across provincial or international borders in order to align Canadian legislation with that of key international trading partners and to help our feed and export fertilizer industries maintain their export markets; and, finally, authority for the minister to issue export certificates for many of the agricultural products to help our farmers and agricultural industry demonstrate they meet domestic or foreign requirements.

In summary, the CFIA engages with other countries' regulatory agencies and officials bilaterally and through international multilateral fora to advance a science-based trading environment. Within such an environment, the CFIA can confidently defend its own import framework, thereby ensuring the continued protection and viability of our own domestic resource base while advancing the Government of Canada's market access objectives to the benefit of the Canadian economy.

[Translation]

The Chair: You played your part in providing us with supplementary information to that provided by Mr. Seppey.

Senator Tardif: Thank you for your most instructive presentations. Given the large number of trade agreements that have been signed and the number of agreements that are currently being negotiated, it is clear that demand for Canadian products will increase.

The issue of food safety is important if we wish to ensure that our Canadian products maintain the expected quality and standards.

How would you ensure those standards are met? Of course, there is the whole issue of food inspection. Do you have the necessary resources to ensure there is enough inspection to protect food safety, which is of such vital importance?

[English]

Mr. Ritchie: Thank you very much for the question. It is extremely important that we protect our domestic resource base. Because, as I've indicated and as you have indicated through your question, if the domestic resource base isn't well protected it compromises our ability to trade internationally.

The CFIA has a very progressive import framework, based in regulation and legislation, which enables us to take particular actions. If you think about the best way to protect Canada, we take multiple stages. First and foremost we engage with other countries in our comparative regulated partners to ensure that we can take interventions overseas before the product gets to Canada, if required. So sometimes we get into arrangements with foreign countries around pre-clearance activities or arrangements whereby we may undertake inspection of the product at foreign sites before it leaves for Canada. That way we are assured, when it arrives at Canadian shores, it's a safe product.

We also take activities or interventions at the border itself, and so we will work very actively with our colleagues at Canada Border Services Agency to ensure that products entering Canada meet Canadian conditions. We do that through a series of activities. We can do that through monitoring import requirements, surveillance, border blitzes and those kinds of things.

As well, post-market, when products are in the markets, the CFIA has a very progressive program of surveillance in monitoring as it relates food, our plant health requirements and animal health requirements as well.

We do surveys. We do monitoring of the market conditions. We'll do inspection as required. Certainly if we find non-compliance we have a range of tools at our disposal that we can use, depending on the risk of that particular activity.

We have a very solid import framework that enables us to have a high degree of assurance that our domestic resources are well protected.

[Translation]

Senator Tardif: I have a question for Mr. Seppey. If I have correctly understood you, your report on the Market Access Program states that you have a $211.5 million budget, which should go down by about 16 per cent over the next two years. How does the federal government plan to promote market development while reducing the expenditure budget?

Mr. Seppey: With respect to market development, it is true that we have had to review our way of going about developing international markets. If the federal government's role decreases, we can still maintain our effectiveness by working more efficiently in partnership with the other stakeholders. That is why I mentioned the various tools at our disposal. There are certain federal tools such as the agri-marketing program, which over the next five years, still has a $351 million budget which can be funnelled to national associations or small and medium-sized businesses.

Furthermore, earlier this year, we implemented the second phase of programming under the Growing Forward 2 Initiative, which is the federal, provincial and territorial framework of agriculture and agri-food policies. Under this policy framework, which includes many cost-sharing envelopes that offer greater flexibility, there is a focus on market development activities. This allows provinces to play a greater role. On top of resources here in Canada, there is an entire network of agricultural trade delegates attached to the Department of Agriculture, of which 12 are working all over the world in the main agricultural markets, as well as all the trade delegates working for the Department of Foreign Affairs abroad.

I must add that the private sector is often a better judge of how to develop export opportunities in foreign markets. The private sector also devotes more resources to obtaining representatives in key countries. In our opinion, thanks to this new distribution between federal government, provincial governments and industry partners, we are in a position to be highly effective in developing markets.

Senator Tardif: Good luck to you.

Senator Maltais: Welcome, gentlemen. I congratulate you for the work you do. Canada's presence in all the free trade contracts and agreements is impressive. This file is moving forward, and we believe Canada has a promising future when it comes to agricultural production to feed part of the planet.

One thing is bothering me a bit; not our exports, as they are growing. However, our imports are also growing, and this represents numerous jobs that could be filled here in Canada. I see in the food section that we are importing nearly 50 per cent of our manufactured food products from the United States. Are efforts being made to manufacture more here, or is that protected under NAFTA?

Mr. Seppey: Thank you for the question, senator. There are no provisions in the free trade agreements that prevent us from improving our manufacturing capacity. You are speaking specifically of food processing. Truth be told, we have an extremely rich and competitive industry in several areas. Canada is one of the rare countries in the world to be both a major exporter — you mentioned our high ranking when it comes to agricultural exports — but we are also among the six biggest importers of agricultural and agri-food products in the world. I tend to view this situation as being rich and positive, as it demonstrates we are fully integrated into global value chains.

Mother Nature has provided Canada with incredible biomass resources. Our agricultural production is much higher than our capacity to absorb it into the market. Consequently, it is very important to be fully integrated into global trade chains. That being said, we have very few tariff barriers in sectors such as food processing or commodities, with the exception of supply management. This strategy serves us extremely well. Frankly, it is one of the most promising aspects of the free trade agreement with the European Union, where tariffs on processed products are traditionally very high and very complex, as they are based on the percentage of inputs such as grains and sugar; when it comes to dairy products, tariffs may vary considerably.

Thanks to the agreement that was negotiated, once that is fully implemented, from day one, Canada will no longer have to pay tariffs within the European Union market. We will be the only developed country to enjoy that advantage, besides neighbouring countries like Switzerland. Consequently, we will have a huge advantage.

I believe that in the North American context — you mentioned the integration of the North American processed products market — this may provide increased opportunities for further investment in Canada in the area of food processing, since that could provide a platform for North American companies to export their products into a larger global agricultural market, meaning that of the European Union.

Senator Maltais: Thank you for those explanations. You mentioned, with respect to free trade agreements or markets that we are opening up in China, Japan, et cetera, that there is another market of nearly one billion people which Canada has not yet focused on much, and that is India. We know that India has a huge need for food products. Can Canada penetrate that market? Under what conditions? After all, we are talking about nearly one billion hungry people. Can Canada get through that door without negotiating a free trade agreement, and that being the case, at what cost for our producers?

Mr. Seppey: You raise a very important issue. India is indeed a major market not only because of its size, but also because of changing demographics. There is a quickly growing middle class, and all analyses indicate that a growing middle class leads to changes in dietary habits, that is an increased consumption of higher-value products. That is why India is one of the six priority countries under the department's market access program.

That includes two stages: first of all, we must develop relationships, maintain a presence and go on trade missions. To that end, the Honourable Gerry Ritz, Minister of Agriculture and Agri-Food, visited India over the last few months, in September, and met with several ministers and senior officials to discuss business opportunities. He met with the Minister of Agriculture, the Minister of Industry and Food Processing, and the Minister of Fisheries. All of this work allows us to foster a relationship, helps to open doors for our businesses and to work together in the longer term.

On top of these efforts, I must emphasize that we are currently negotiating a free trade agreement with India. However, this negotiation creates certain challenges, since India is not accustomed to negotiating bilateral free trade agreements. Canada is one of the few countries with which India is negotiating a free trade agreement. We are currently in the 10th round of negotiations. These are intensive negotiations, aimed specifically at creating unique market access and providing us with an advantage over our international competitors.

Senator Maltais: Thank you very much.

[English]

Senator Merchant: My question is regarding the CETA agreement with the European Union. We phase out the tariffs over I think it's a period of seven years, but I think that our farmers could immediately engage in exporting sweetcorn. They have concerns about the GM attitudes that the Europeans have. Should they be concerned? And how are you working to resolve this?

Mr. Seppey: You are absolutely right that the agreement with the European Union will see the vast majority of tariffs to be phased out immediately upon entering into force in terms of tariffs to the European Union.

With the exception of a few sensitive products for the European Union, which include pork, beef and sweetcorn, the liberalization will take place over seven years, after which we will have greater access. We will have a volume of sweetcorn free of any duties. Thereafter, a most-favoured-nation tariff will apply.

Genetically modified organisms in Europe are a sensitive issue. It has not been flagged by our industry as an issue because, especially in the red meat sector, they feel that opportunities in terms of volumes and access justify developing lines of production to allow for hormone-free in the case of red meat or GMO-free.

We considered the basis on which the European Union makes its regulations with respect to GMOs. It is not always based on science but rather on other factors. Given the reality and the commitments we obtained in the Canada- Europe free trade agreement, we continue to have advocacy and corporate efforts at the level of regulators from the food inspection agency as well as the science side to ensure that the benefits of biotechnology are better understood. With the challenges we face globally with respect to food security, we cannot afford to ignore the advances of technology. It is not a panacea but it is part of meeting the challenges we face globally.

Senator Merchant: Mr. Ritchie, we heard from you this morning and also from other witnesses about the Russian embargo. How did you handle that?

Mr. Ritchie: The first part of that answer has to be in partnership. We work in partnership with both the industry and our colleagues at Agriculture and Agri-Food Canada and the Department of Foreign Affairs and International Trade.

The issue on such an embargo is that sometimes you have products already out on the water. Our first intervention with Russia would be to ask if they would accept the product already on the water or close to their shores. That would be the first intervention. We would try to negotiate with the Russian authorities. If they were to decide that they don't want it, which was the case, then we would work quickly with industry to open up alternate markets. The industry is already engaged in other markets and has a good sense of where they need to go.

As well, we are negotiating with a broad range of markets in a variety of countries in terms of market conditions for our Canadian products. With our advanced intelligence and that of the industry, we would get together and quickly identify alternate markets available within reasonable economic distance. We would work with those countries to ensure that their import conditions are met. From our perspective, we would issue the valid export certificates that would be acceptable in those markets. The product on the water would then be diverted to alternate markets.

A product that has not left Canada wouldn't go anywhere. However, we would begin negotiations with the markets we opened up for the product already on the water to see if they would accept additional volume. Product that perhaps has not left Canada could automatically find its alternate market.

The only way to do that efficiently and within the necessary time lines is through partnership. Quite frankly, this is thanks to the great work done to date with the industry through the Market Access Secretariat to identify priority markets. There is an open and transparent dialogue with industry. They have certain intelligence that we don't have. They know where they want to go in terms of market openings. The relationship we have built with the industry has been instrumental in allowing us to better prioritize the use of our resources and to engage quickly when we have a disruption of that nature.

[Translation]

Senator Dagenais: I would like to thank our three guests. I would also like to come back to supply management. Supply management is a commitment to producers made by the current government, but we know that sometimes, it creates irritants with our global partners. Can you tell us about the difficulties this may create in developing our exports? I would like to know whether it is possible to make changes to the principle of supply management, in order to better help our own producers.

Mr. Seppey: First of all, with respect to the first aspect of your question as to the impact on our exporting efforts, we favour — and I believe you heard the testimony given by Mr. Bonnett, president of the Canadian Federation of Agriculture, during the earlier portion of your study — Canada adopting a balanced position, meaning an extremely diversified agricultural sector, to improve its exporting capacity. We also have the supply managed sector, which is more focused on the domestic market. That characteristic has not prevented us from negotiating free trade agreements so far.

In the case of the European Union, it did pose certain challenges given the Europeans' marked interest in cheese. That did not prevent us from achieving a result that preserves the supply management system.

I should mention that a major part of the interest our trading partners have shown in the Canadian market's supply management system is an indirect result of supply management itself, which guarantees producers an adequate income, but also ensures that the market prices are higher than global prices. That is what makes the Canadian market attractive for our international trade partners.

In that spirit, when our foreign counterparts speak to us of greater access to Canadian markets in the poultry and dairy product sectors, we always remind them of the fact that the Canadian market is appealing specifically because of the supply management system. Therefore, you can be sure this has generated a great deal of interest on the part of certain trade partners, for example our transpacific partners, which include New Zealand and Australia, who are major dairy product exporters and who consequently have a marked interest. From our perspective, we have a marked interest in other countries for red meat and grains. Each participant has interests to which they are more sensitive.

The government's position has been extremely clear. As negotiators, our instructions stem from government policies. Supply management only covers a very small portion of trade and a very limited number of our tariff lines. When it comes to all the other tariff lines, Canada is extremely open. We are in a position to develop a very advantageous negotiating relationship which allows us, specifically, to advance our exporters' interests while preserving a system that has worked well for our producers so far.

Senator Dagenais: Thank you very much.

Senator Robichaud: I cannot help but follow up on the issue of supply management. When you say you have protected the supply management system, you seem to have a different interpretation from mine. Supply management will remain in place as long as we protect it; protecting it means not allowing products in, as we have with the European Union, when it came to 18,000 tons of cheese entering the country. You mentioned I forget how many litres of milk that will not be produced by Canadian producers. So you should not be claiming to protect the entire system. You are trying to protect it. If supply management disappears, it is because we are quietly pulling on a small rug here and a small rug there. Do you understand what I mean? I understand your position, and I understand you must defend the government's position.

However, that was not my question. We heard witnesses on Tuesday, including Mr. Pomerleau, the president of Canada Pork International. They defended the efforts made by the government, and it was quite something to hear.

Mr. Pomerleau shared his concerns about the structural changes within the agency. He feels that this is a threat to Canada's brand, which is known worldwide and which is based on our efficient oversight system. The agency in question was the Canadian Food Inspection Agency. Mr. Ritchie, my question is for you. Mr. Pomerleau is concerned about the fact that there is no longer any recruitment. He said that inspectors cannot get their training from a training centre or community college. They have to take their training on-site. He said that the people working there were extraordinary, because of their expertise. However, there has been no recruitment and he is very concerned about this, is he not, Mr. Chair? Can you reassure us and tell us that there will be recruitment?

[English]

Mr. Ritchie: Thank you very much for the question.

The agency, as you know, is undergoing an extensive modernization of its activities. That modernization is taking place at multiple levels. We are looking at our legislative and regulatory base and making sure that that particular legislative and regulatory framework is the most modern it can be. The Safe Food for Canadians Act is a prime example of that particular direction. We are also looking at the way in which we are modernizing our inspectorate. That includes, for instance, ensuring that our inspectorate is well trained. We do have training requirements in place at this point, and we are looking to the future to be able to modernize those training requirements and ensure that they are progressive and in line with other countries. We do ensure that, through appropriate organizational structure and guidance and direction to those particular inspectors, there is consistency in the way in which they interpret our regulatory regime so that our regulated parties can be assured that they will get a consistent response, regardless of where they are in the country.

We do ensure, as well, from a risk-based perspective, that we allocate inspectorate resources to areas and products of highest risk in Canada. So we are taking a risk-based approach and refining the way in which we do that as we move forward.

At this point, through those modernization efforts, the CFIA will be very much in line with some of its progressive international partners and, in some cases, more advanced in terms of those particular partners. We have a very strong framework on which we are continuing to build and modernize. Where there is a requirement to recruit inspectors, we would recruit those inspectors as the need arises, and those inspectors will be trained as required and used on a risk basis, as required.

[Translation]

Senator Robichaud: You have spoken about the issue, Mr. Ritchie, however you have not spoken at all about the skills of these inspectors. I am not questioning CFIA's operations, because inspections are carried out everywhere. Mr. Pomerleau is concerned that not enough recruitment is being done in order to ensure that that expertise remains. You told me that there will be recruitment. Is that currently the case?

[English]

Mr. Ritchie: Let me back up a little bit first. The agency, through Budget 2014, has received resources for a number of particular areas. We've received some $390 million for five years to strengthen our food safety system to better protect Canadian families. We received resources to look at how to better prevent unsafe food from entering Canada and to continue with some very important programs. That investment from the Government of Canada does permit us to advance our inspector recruitment where necessary, in line with those particular risks and activities. So yes, thanks to the government's intervention, we do have the ability to move — and have moved — forward on Budget 2014 announcements.

As in any case, we have inspectors who will leave, retire, for instance, and the agency, as in all organizations, will take a decision in terms of replacing and proceeding with staffing based on our requirements, on the needs and on the risks of those particular positions.

Sure, we do advance our staffing as required, and we do, in fact, proceed on government budget announcements that provide additional funds to the agency. In those particular cases, yes, we would recruit as required.

[Translation]

Senator Robichaud: You said that at this point in time recruitment is not necessary?

[English]

Mr. Ritchie: In terms of recruitment, we would recruit, as I have indicated. If a position is vacant, and it's a position that we deem to be of importance and that deals with a particular component of the agency that we would deem to be high risk, sure, we would recruit if necessary. So it's a question that's dealt with on a case-by-case basis in terms of the inspectorate we have. As I have indicated, in terms of areas of new and emerging priorities, where the government has deemed that these are priorities that should be funded, with the funding that comes from the government through various budget allocations, we proceed to enhance our staffing requirements.

[Translation]

Senator Robichaud: I hope that that answer will satisfy Mr. Pomerleau. No doubt industry will continue to encourage you to maintain CFIA's services at the highest level, because this is key to our commercial trade.

You stated that there had been budget adjustments, in other words less money, and that you have found ways to work more efficiently with your partners, that is industry and the provinces. Provinces are currently faced with significant operational deficits. Apparently, the federal government is on the verge of generating a significant surplus that it will not know what to do with. To use a common expression, are we not putting the cart before the horse by counting on the provinces to fill the gap when they do not have the means? The federal government is gradually withdrawing while it does have the means. This is a political question and you probably will not be able to answer. I, however, will have expressed my point of view.

The Chair: Without answering, Mr. Seppey, no doubt Senator Robichaud will participate in the future committee meetings.

Senator Robichaud: I will send my questions in writing.

The Chair: We can always count on your presence, Honourable Senator Robichaud. Now, Senator Oh has the floor.

[English]

Senator Oh: Thank you, gentlemen, for being here today. Your presentations were just wonderful. I want to say that AAFC and CFIA have both done a great job of helping Canada to export agri-food all over the world. I would say that there is no other government than this government, this federal government, that has helped Canadian farmers the most to export agri-food all over the world.

I had the honour of accompanying Prime Minister Harper to China just last week and witnessed the signing of the cherry and the blueberry market access to China. You mentioned that there would be $20 million worth of cherries and $65 million worth of fresh blueberries exported to China yearly. Does that come from British Columbia or from across Canada?

Mr. Ritchie: The cherries are primarily from British Columbia. For blueberries, British Columbia as well is a key player in that. We may find it comes from other parts of Canada as well. I think the Maritimes are quite active in blueberry production as well.

Senator Robichaud: And Quebec.

Mr. Ritchie: And Quebec and Ontario.

Senator Oh: That's great. Are we still negotiating on exporting more beef to China?

Mr. Ritchie: Absolutely. Those discussions continue, as well as in a number of other countries where we're trying to increase our beef access.

Senator Oh: It is now capped, I think, at 30-months old?

Mr. Ritchie: That's correct. There are certain conditions imposed by China in terms of our ability to access its market. A lot of those requirements are not necessarily in line with the OIE and its international standards. Like any country, they are imposing those particular conditions. Our perspective with China is that it's not in line with OIE and they are not scientifically justified, so we continue to have those discussions.

The minister has been very active in China. We're very active. There is a working group that we have, a CFIA and China working group, on animal health, and a key part of that discussion is to look at those technical barriers that are in place with China to be able to assure them that those conditions that they are imposing are not scientifically justified and that we should be able to open that particular market for increased access to beef.

Senator Oh: We had a witness yesterday who was saying that when they export cattle to China or wherever, there is more value added on the international market than the domestic market. For instance, the tongues are worth far more. They increase $30 per cow when you are talking about international exports.

In closing, I want to thank CFIA and AAFC for the great work they have been doing. Thank you.

Senator Tardif: I have a supplementary question further to Senator Robichaud's question on the inspection program. It's interesting, because every time we hear the words ''modernization'' and ''efficiencies of the framework,'' it also means that there are budget cuts involved. That seems to be a general term that we use for those situations.

I remember when we had the meat recall crisis with Maple Leaf three or four years ago. At that time, I don't know if it meant more inspectors, but certainly closer surveillance of what was happening. I understood further to that that, in fact, there had been reduced monies and that the number of inspectors had been reduced. I'm talking here about the meat industry. How many inspectors do you have presently? How many did you have four or five years ago? Where are we at?

Mr. Ritchie: I do not have those numbers with me today so I cannot answer that particular question.

Senator Tardif: Could you send that to the committee? I'm interested in the last five years, over the five-year period, the number of inspectors.

The Chair: Mr. Ritchie, could you provide the clerk with that information, please?

Mr. Ritchie: We can provide that information to you.

Senator Tardif: Thank you. Can you tell me how many of the recommendations have been put into effect from the report that was chaired by Sheila Weatherill?

Mr. Ritchie: All of those recommendations are now in effect.

Senator Tardif: They are now in effect. Thank you.

Senator Enverga: Thank you for the presentation. I know that you have been working very hard on these free trade agreements. As we try to market our products from one country to another, we are also opening our markets to certain pressures. We heard last time about dairy producers and CETA, and they are having challenges with this trade agreement. Do your organizations have any resolutions for this? How could you assist the sector in this? How many more affected industries in Canada are you assisting? Do you have any details?

Mr. Seppey: I can provide you with a certain indication. It is clear that, as part of any trade negotiations, it's like any contract. In order to get something from the other side, you need to address their issues of interest. In our case, in agriculture, we are a very open country. It's only for those few products under supply management that are more directed, and the operation of the system requires that we have import controls, that we are not as open.

In that context, that's reflected by the announcement that the Prime Minister made in October 2013 when this agreement in principle, and I mean by that the broad scope of the elements of the agreements, was announced. There will be additional market access concession made with respect to cheese. It was clear that this could have an effect on the Canadian dairy industry, both the dairy farmers as well as the cheese producers, the dairy processors. In recognition of that, the Prime Minister, upon the announcement of that agreement in principle, made the commitment that the government would closely work with the industry and closely monitor the implementation of the agreement, and, if there is an impact, committed to provide compensation to those directly affected. That commitment stands by itself. It's a solemn commitment by the Prime Minister.

Since 2013, throughout the negotiations, we consulted very closely with the industry, especially with the dairy farmers and the dairy processors. Over the past year, I had numerous meetings with individual companies, with farmers, farmers' organizations at the provincial and national level. You heard testimony from the Dairy Processors of Canada and other interested parties. I met with all these individuals over the past year on several occasions, as recently as last week, in order to understand how we can accompany their efforts toward adjustment.

It is important to note that the agreement includes a market access commitment for 17,700 tonnes of cheese. This will start to be implemented only upon the date of entry into force of the agreement, which is from 18 to 24 months from today. It's not before 2017 that we will start seeing that increase in imports. It will be phased in. The 17,700 tonnes will not come in on day one. It will be spread over a period of seven years. During that period of time, there's a lot of things that governments can do, and it's not only the federal government that has levers in that area, but both provincial and federal governments, as well as the dairy sector, which has a number of levers in their hands to address these issues.

If you allow me, just in reference to a point that the senator from Saint-Louis-de-Kent mentioned earlier about the 170 million litres of milk that would no longer be produced, I beg to differ that it is a guarantee that it would happen that way, because I think that the dairy sector has recognized that it's very difficult to assess what would be the impact in reality, as is always the case with economic elements. You can have the sector adjust to reality. There's a growth in the dairy consumption — not a high growth — because of the growth in population. The per capita consumption of dairy in Canada is lower than in other developed countries. There is a shift through marketing, various innovations and developing further the artisan cheese expertise that greatly exists in Canada by building on the excellent assets we have in dairy. For example, we have one of the best dairy genetics in the world. These elements may contribute to mitigate. It's not to say that it will eliminate completely a negative impact, but it has potential. A certain number of tools are at the disposal of industry and the government to mitigate those impacts.

Senator Enverga: Of course, you're opening up the market for them here. Is that right? They will have a broader market. It's more like you give them the tools. Is that how you do this? Is there more information about other markets?

Mr. Seppey: In terms of the market access, it is true that through the agreement with Europe, all their dairy tariffs will be eliminated upon entry into force. That being said, the tariff is one element that prevents access; but it's not the only element. The industry would have to get organized to create the condition to be able to take advantage of that opportunity if it wished to do so. I think that you heard testimony from both the dairy farmers and the dairy processors about the challenges that exist in terms of their ability under the current system to be able to take full advantage of these export opportunities. Again, our supply management sector is managed largely within the hands of the provinces and how the sector is regulated. It's largely regulated at the provincial and industry level, not at the federal level.

Senator Enverga: I have one other question, please, with regard to the Canadian Food Inspection Agency. Recently, we have been studying bees and low-level neonicotinoids. Will the agreement have a big impact on our bee trade? Is that a concern for the industry?

Mr. Seppey: There's no direct connection between the free trade agreement and those elements because under the free trade agreement you codify tariff measures, market access conditions, and phytosanitary and sanitary principles. Your committee has been studying this issue for some time, so you know that intense discussions are taking place among regulators and the industry sectors in that regard.

Nothing in the agreements would affect the ability of Canada to export products that have been grown from seeds treated with those products. It really is a matter for Canada and Canadians to decide how to regulate those types of substances. You can regulate them in a way that is deemed appropriate in Canada well within the principles set out in the free trade agreements.

Senator Merchant: I have a supplementary question in regard to supply management. You have been talking with industry. You seem to be very well versed in the issues. You concede that things will have to be repaired. Do you know the amount of compensation that will be appropriate? What is the industry asking? What are they saying to you will happen? We'll see how things turn out and what markets will open up but surely you have more substantive conversations with them.

Mr. Seppey: Definitely. Part of the main reasons to have discussions with them after the terms of the agreement were made public was to get their perspective as to how they think things will unfold so it can inform the government's actions in terms of how to accompany the sector.

On the issue of compensation, it's almost impossible to define a number prior to seeing the real impact unfold with the progressive increase in imports. So many factors can come into play.

One indicator that can be used to assess is how it affects the volume of milk produced or sold to dairy processors. From a dairy farmer's perspective, given that there's time to adjust, they may well decide to adjust things so that through promotion, for example of a variety of dairy products, they may adjust elements of the system to allow for an increase if there is an expectation that the demand for Canadian cheeses would diminish in the demand for other dairy products, such as yogurt, nutraceuticals and other products where consumption increases.

A number of other elements can inform the issue of compensation, which needs to be based on observed impacts. We will not see any observed impacts until the date of entry into force and over that period of seven years of the progressive phase-in of the market access commitment.

Senator Beyak: Thank you very much, gentlemen. Canada's agri-food and agriculture sector is in excellent hands under your work. You're professional and knowledgeable; but most important is your attitude. I've never seen a better use of taxpayer dollars in changing conditions. You didn't talk about doing more with less but doing better with less, and I appreciate that.

Most of my questions have been answered from your presentation. We've heard from witnesses about the labour market shortage. Do you talk across other ministries about that problem? How do you see it being solved?

Mr. Seppey: It is definitely an issue that we hear a lot from our stakeholders. As part of our mechanisms in place to engage in dialogue with the industry, we have a series of value-chain round tables where we meet on a regular basis with the meat, food processing, grains and all seeds sectors to discuss issues of importance to the competitiveness, sustainability and the innovation of those sectors.

I would say that across all sectors and at different levels, issues of access to competent skilled people, temporary staff or work seasonality come up. I'll give you two examples: In meat processing, you can simply not operate without access to temporary workers. The conditions of the work and the economics of the sector require assistance. We're all familiar, especially in Quebec and Ontario, with the huge contribution that foreign workers make in the fruit and vegetable sectors. In the horticultural sector, for example, you have challenges similar to those in the fisheries sector with periods when work is intense over long hours and periods when the work is dormant because that's how Mother Nature works.

We hear a lot from stakeholders about this issue. In that vein, many discussions take place with departments across government with those issues in their core mandate, for example Citizenship and Immigration and Human Resources and Skills Development. Yes, we have discussions to try to find solutions that address the needs of the sector while being in line with the overall orientation of the government and trying to address the challenges that give rise to the proposed changes. That's what we are doing.

I made reference to the annual market access meeting that we have with all stakeholders in the industry, which covers everything from poultry to cattle and beef. This issue was raised in that context by some of the same individuals who appeared before your committee. The points are well registered, and we are trying to assist the industry. It is our responsibility at Agriculture and Agri-Food Canada to look at the issues facing our sector to see how we can assist in influencing the development of policies and regulations that are supportive of their competitiveness. Yes, we are working with other departments.

Senator Beyak: I'm sure you'll find a solution with the positive attitude you've found with all the other things. Thank you.

[Translation]

Senator Robichaud: My question is about supply management again. In your reply to an honourable senator's question, you said that there are checkpoints at the border when these products come into our country. If I have understood correctly, and if nothing has changed, the border officers are the ones who inspect what comes into the country, are they not? They are the ones who let the agency know that another inspection is required? Is that accurate?

Mr. Ritchie: Yes.

Senator Robichaud: We heard from the poultry producers who told us that there was more poultry for processing coming in from the United States that was actually produced in the United States, which means that poultry other than poultry for processing was coming in that way.

As a matter of fact, the same happens for cheese. When a pizza mix comes in, cheese is coming in but it is not considered to be cheese. Is that issue being examined? From the producers' perspective, this is economic activity which is not to their advantage.

Mr. Seppey: Thank you, senator. You are referring to cull chickens? It is known under different names.

The second point you raised was that of mixes for pizza. The short answer is yes, the government is examining those issues in its discussions with industry.

With respect to cull chickens, we are working closely with Chicken Farmers of Canada, the Canadian Food Inspection Agency, and the Canadian Border Services Agency in order to figure out how we are going to deal with this. It boils down to two things: there have always been cull chicken imports because they are an important input for the food processing industry.

Some groups like the stronger taste of these products. It is a very important input for the food processing industry, for chicken soup, for example, which accounts for a large part of imported cull chicken. There has always been that kind of import and chicken farmers acknowledge that.

On the other hand, the problem is that there appears to be a large quantity of chicken labeled as cull chicken and which therefore is not subject to the same inspection when it comes in, when it actually might be standard chicken. That raises the issue of labelling practices that may not be compliant and which could therefore suggest fraud. That is what we are working on closely, not only with Chicken Farmers of Canada, but also the American authorities, in order to figure out how we are going to deal with this. It is a very complex question that we are working on.

With respect to pizza mixes, an amendment to the customs tariff was passed last year in order to clarify the tariff treatment of these products because it was obviously a legal vacuum that was being taken advantage of. I do not mean that negatively, but it was used by some importers to import something that really was cheese. The correction was made to the customs tariff. It was part of the legislative amendments in the 2013 Budget Implementation Act, therefore it was done last year. The problem has been resolved because now these products are considered to be cheese-like and are therefore subject to the same border checks that cheese products are subject to.

Senator Robichaud: With respect to the cull chickens, producers have been telling us about this for a while now. When will the issue be resolved? Until it is, there is chicken coming in and that is certainly not to the advantage of our producers.

Mr. Seppey: You are right. However, the challenge is to distinguish between legitimate and not-so-legitimate imports. The key is finding a solution that does not involve throwing the baby out with the bathwater. That is very important because if our reach is too long, we will end up with a situation that is going to be very harmful to the food processing industry. It is a problem that chicken farmers understand perfectly well. That is why we are working with them in order to find a solution. The producers have come up with a few innovative approaches that will allow for that distinction. We are working very closely and collaboratively with them.

Senator Maltais: There are a lot of chicken stories. One happened to me recently. I went to my grocery store to buy some chicken. The label said ''fresh Canadian chicken'' but there were lots of other chickens on the shelves. I asked the young man at the counter if my chicken was fresh because it was a Canadian product, and if the others were spoiled or rotten, then why were they being left on the shelves? If this chicken was fresh and the rest was not then why was it being kept? The young man did not know. He went to find the owner who provided me with an explanation.

Let us leave supply management for a moment in order to look at demand. We have an unused commodity in the Gulf of the St. Lawrence, near New Brunswick, Nova Scotia, Quebec, Newfoundland-and-Labrador and Prince Edward Island, which the Europeans have excluded from the free trade agreement. It is an extraordinary resource, providing meat and protein, and it is called seal.

When you are negotiating other free trade agreements with other countries, could you highlight that in order to help our fishers? Canada could easily increase its seal quotas because there are so many and we do not know what to do with them. They are destroying other fisheries resources. I think we could make breakthroughs outside Europe. Europeans do not remember that they ate seal meat during both World Wars and they liked it. Is there a way to actively promote the sale of seal products?

Mr. Seppey: With respect to free trade agreements, the tariff treatment of those products is no different than that of other products. That is not the problem. There are two types of measures that can affect the trade of these products. On the one hand, we have sanitary issues and, on the other hand, technical measures that may impact trade. It is the latter that is problematic with the European Union and that has nothing to do with the safety of the product or the health of the animal or aquatic mammals. The European Union adopted measures that are not based on science and that have more to do with consumer concerns about a series of what they feel are ethical issues. Canada complained to the European Union about these kinds of measures arguing that they were inconsistent with the World Trade Organization's technical trade barriers position. From Canada's perspective, this type of restriction is inconsistent with existing trade rules. With respect to our dispute with the Europeans, the special group that was struck to deal with this issue rendered a decision that did not answer to nor reflect our arguments. We were very disappointed. I do not really see what more we can do about this within the framework of free trade agreements.

Senator Maltais: I understand. There are two important points to make clear. First, our seals are the most well- nourished in the world; they only eat salmon and cod. They are also better quality. There are 500 million Europeans, but let us leave Europe aside and offer this product on bigger markets. They can be shipped live, boxed, frozen, in all kinds of ways. Let us actively tackle these markets and forget about Europe and the European Community, given that they are still involved in litigation on this. Let us not waste our time on this and let us turn towards other markets. That is where we have to launch our marketing offensive. I will not name the countries but you know which ones they are.

Mr. Seppey: In terms of market development, we can examine the issue with our domestic partners, industry and the provinces. For example, the federal-provincial committee on market development identifies priority markets and coordinates our actions if industry and provinces with the necessary resources express an interest in promoting those products. So that is definitely something that we could integrate into our market development strategies.

Senator Maltais: However, in order to sell products we have to be able to offer them. There are several billion individuals who are not aware of the quality and mildness of seal products. If we were to go there and have them try it, then maybe they would buy it. For example, if there was no beer advertising in Canada perhaps less would be sold. We have to make seal products known. ''Bardot burgers'' sell well in Quebec and they could also sell well elsewhere. We have to launch a marketing offensive for these products elsewhere than on the European market, which is a small market for seal. There are other people around the planet who would no doubt enjoy consuming quality commodities such as seal meat.

The Chair: Could you pass Senator Maltais' recommendation on?

Mr. Seppey: Yes, we will do that.

The Chair: Thank you.

Senator Robichaud: Senator Maltais' question is a good example of how some countries can use trade barriers that have nothing to do with scientific data on seal. In the case of neonicotinoids, there is a moratorium in some European Union countries. How could we defend ourselves, using other reasons besides scientific reasons, in order to gain easier access for some products to the European Union, given that neonicotinoïds are used?

Mr. Seppey: There are several aspects to that. Canada has a very strict and longstanding policy based on scientific criteria. This is extremely important, because our imports suffer. The strategy for counteracting that kind of behavior happens at several levels. I mentioned that Canada is very active within organizations that set international standards. Mr. Ritchie listed those involved with agricultural commodities, including the Codex Alimentarius, the World Organization for Animal Health and the International Plant Protection Convention. Canada must be very involved in order to make sure that international standards are properly defined and based on science.

Within free trade agreements, it is also important to use science-based principles and — in the event Canada is accused of a violation — that we turn to independent dispute resolution mechanisms. We do not always win but sometimes we do. Take, for example, a trade barrier in the United States, mandatory country of origin labelling; we won three times.

Senator Robichaud: We win, but we end up losing anyway.

Mr. Seppey: It puts the United States government in a delicate position. The American Secretary of Agriculture admitted for the first time yesterday that the legislation is a problem and that this inconsistency with the WTO cannot simply be solved through regulation. That is an opportunity for us to put forward our arguments.

The third and last point is to defend our interests. A large part of our efforts, including in Brussels but also elsewhere — increasingly in China — involves, through our embassies, having representatives involved with those making regulatory decisions. These decisions are often supported, as is the case in Brussels, by staff from the Canadian Food Inspection Agency based abroad. They can have daily technical discussions on the ground with, for example, the European Union's Directorate General for Health and Consumers, in order to improve their understanding of our regulatory framework. These are tools at our disposal that can be used to keep practices in other countries that are not based on science at a minimum.

Senator Robichaud: I encourage you to continue your efforts.

Mr. Seppey: We do not have any other choice.

The Chair: I have a question given that you raised the issue of labelling. You just said that the American Secretary of State has begun acknowledging the problems with the legislation. Mr. Seppey, could you please tell the committee what measures the federal government will adopt given what the WTO has just done?

Mr. Seppey: There are two possibilities: the WTO legal process and our work with our allies in the United States, both at the industry level and at the level of Congress, in order to have some influence over legislative changes in Congress. Those are our two strategies. With respect to the WTO, they confirmed last month that the measures taken by the United States last year to render their regulation more consistent with their international commitments were not always compliant.

That is the stage we are at with the WTO. The United States can appeal the decision, which was not in their favour last month. Everyone expects them to appeal the decision. They still have a few weeks to do that. If they do, we will definitely, as well as Mexico, which is also a party to the trade dispute, present our arguments in detail. We will be presenting our arguments but in terms of legal steps, the next step is that Canada — if the United States persists in not complying with WTO requirements — could take retaliatory measures in the shape of additional tariffs on American imports, in other words, the equivalent in value of the negative impact this has on Canada. To do that, we will need authorization from the World Trade Organization and we will have had to exhaust all legal recourse. In terms of the last legal recourse, that will be a potential appeal on the part of the United States regarding the last ruling that was not in their favour.

We are preparing for that possibility. This is also important because the solution does not lie in Geneva nor does it lie with retaliatory measures. The solution really lies in legislative change in the United States. However, mid-term elections recently took place in the United States. In January there will be new dynamics in the House of Representatives and in the Senate. We are therefore working very hard to continue promoting legislative change amongst members of Congress. There are many stakeholders in the United States who have a problem with mandatory country of origin labelling for meat products. This has been very problematic within the United States. There are Republicans and Democrats on both sides of the debate. It is important to get the numbers to have the necessary legislative changes made.

Mr. Chair: No doubt during our visit at the beginning of February 2015 this will be a topic of discussion. Is there a limit to the number of times a country can appeal to the WTO?

Mr. Seppey: Yes, and I believe this is the United States' last chance to appeal. If they decide to appeal, we will then ask for the right to impose retaliation measures. The United States will be able to make a case about the legitimacy of giving Canada the right to retaliate. However, given that the United States lost their case at the first level and on appeal, we have good reasons to argue for retaliation measures. Once again however, reprisals are not an ideal solution. They are a way of wielding influence; they are not a remedy for our pork and beef producers.

[English]

The Chair: For Mr. Ritchie or Mr. Seppey, from November 2012 to January 2013, the federal government held many consultations on the proposed domestic policy on the management of low level presence of GM crops in imports. Witnesses also said that the LLP of GM crops is a challenge for Canadian exporters, especially for exports to the EU.

How is the LLP of GM crops currently managed in Canada? In this regard, what is the status of proposed domestic policy that you believe would impact emerging markets?

Mr. Seppey: I suggest that Mr. Ritchie deal with the treatment of low level presence, in Canada, and I can address the question of policy.

Mr. Ritchie: The way Canada proceeds when it comes to genetically modified organisms is that there is a very intensive safety assessment that takes place around a new novel plant or product that comes forward. That safety assessment is done in collaboration with Health Canada, to ensure that any newly developed product is safe for human consumption and has no negative impacts on food safety. As well, a safety assessment is undertaken in terms of animal feed and environmental impacts. Once the product is deemed safe from a Canadian perspective then there is no difference between that product and a non-genetically modified product.

In a context of low level presence, the issue is that in most industries, when they develop a product, they'll try to get that product approved in multiple countries, so there are no trade barrier implications. Canada has approved the majority of the GM products that are currently in the marketplace. Some of the issues that might happen, through low level presence, is that there may be products that might come into Canada that were approved for domestic use in another country and that were never intended to get into the marketplace. They may have gotten into the marketplace through unintended circumstances.

So from our perspective, because a good majority of the GMO products currently traded are already approved in Canada and, if there is a product that is encountered, then it most likely is a domestically approved product that would have got into the systems unintentionally. Overall, therefore, the risk is very low. Again, I go back to the way that we would allocate our resources; we would react to those kinds of circumstances, as required, on a risk basis and, as required, undertake surveillance and monitoring. Globally, we would most likely come to the conclusion that it would be a low risk situation and we would react accordingly.

The Chair: Thank you.

Mr. Seppey: Just to confirm what Mr. Ritchie said, because this is an issue that we have faced in the case of flax, where a very small trace of GM flax was found in a shipment and then, overnight, led to the European Union to halt all trade. This is an indication that these types of issues can emerge in the future and given that Canada is a significant grain and oilseeds exporter, we felt it was important to encourage other countries to adopt practical solutions to deal with low level presentation.

It is important to note that low level presence is referring always to the very small traces of GM events that have been approved, in at least one country, for food use. Therefore, it is not an issue of food safety because at least in one country it is approved for food use. It is really an issue of risk management, as Mr. Ritchie pointed out. For example, when you think about a ship that would carry a typical load of grain to Europe, which is 28 million kilograms in one load, then even with a trace level of 0.2 per cent of unauthorized GM event, you are then talking about something that is about 3,000 kilograms. For anybody familiar with grain transportation and how grain handling operates, then you don't need much to reach a level of 0.2.

That is why using the expertise of the Canadian Food Inspection Agency of Health Canada and Environment Canada, Canada is developing a domestic policy, even if we are not a significant importer of grain. Our industry feels strongly that if Canada shows the example and develops a practical policy, then it is a good way to encourage others to adopt similar policies. We had the consultant draft a policy in 2012 and we analyzed the results in 2013. We are still in the process of improving the elements of that draft policy. Our intention over the coming months is to issue a revised draft policy, taking into account these comments and additional analysis that we have done. Then we will resubmit that for consideration by Canadian as well as international stakeholders, because when we tabled our draft paper earlier we did it also internationally and got comments from other countries.

We are still in the development stage, because it is a complex issue. But it is very important for our grain and oilseed sector in Canada.

Senator Enverga: We have all of these demands from other countries that we are looking at. How are we protecting our own local supply? I buy cherries all the time and they are all from California and you are exporting more cherries to China. How do you protect our local supply with all of the free trade agreements?

Mr. Ritchie: You make a very good point. As I indicated before, the domestic supply enables us to undertake a very active export activity. So protection of that domestic supply is extremely important. We do that through our import framework. Canada, like other countries, is able to put in place import conditions to ensure that we are not, through imports, subject to unwanted pests or unwanted diseases that could impact our domestic resources. We work through the various international standard setting bodies.

We mentioned the OIE, the Codex and the IPPC. It is at those international bodies that we work collectively with partners to ensure that there is an appropriate science-based trading program in place. That then enables us, when we set our import conditions, to set the conditions according to the international standards. If all countries did that, then trade would be fine. We do get into these situations, as we've mentioned before, where certain countries don't adhere to that kind of thing. We work very hard with our international colleagues to set those particular standards. Once the standards are set, we work bilaterally with our major trading partners to ensure that, through bilateral arrangements and agreements and those kinds of things, we could put in place conditions that are appropriate, that respond to our import as well as their export requirements.

We would then, as well, in some of those cases, in particular high risk areas, for instance, work on situations whereby we might be able to put in place, let's call it, ''pre-market clearance,'' for instance. So we would, again, working with those authorities, be making sure, for products that are about to come to Canada, that our partner authorities in that other country understand Canada's import requirements and can sign-off that those import requirements have been met. It's an outreach; it's sort of an education arrangement with them. As well, in certain cases, we'll have more formal arrangements whereby we would maybe have a presence overseas that would be able to ensure that products that do meet those requirements are legitimately signed-off and approved by Canadian resources overseas. There are certain arrangements that enable us to have some assurance that the product that comes forward is safe.

When they get to Canada, we have our own intelligence and risk-based approach to those particular products. We do active surveillance and monitoring across the Canadian landscape for a range of products and activities. We also work very actively with the provinces because they do have their own abilities to do surveillance and monitoring, and they do have their own ability to undertake control measures. So we work with them as well to ensure that there is a comprehensive approach across the Canadian landscape.

The Chair: Mr. Ritchie, Mr. Seppey and Mr. Saindon, thank you very much for appearing and sharing your comments and informing the committee on Agriculture and Agri-Food Canada.

I now declare the meeting adjourned.

(The committee adjourned.)