Standing Senate Committee on Agriculture and Forestry
Download as PDF

Proceedings of the Standing Senate Committee on
Agriculture and Forestry

Issue 30 - Evidence - Meeting of June 4, 2015


OTTAWA, Thursday, June 4, 2015

The Standing Senate Committee on Agriculture and Forestry met this day at 8:30 a.m. to continue its study on international market access priorities for the Canadian agricultural and agri-food sector.

Senator Percy Mockler (Chair) in the chair.

[Translation]

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

[English]

I am Percy Mockler, senator from New Brunswick and chair of the committee. At this time, I would ask the senators to introduce themselves.

Senator Merchant: Pana Merchant from Saskatchewan.

Senator Beyak: Lynn Beyak, Ontario.

[Translation]

Senator Tardif: Good morning. I am Claudette Tardif, a senator from Alberta.

[English]

Senator Moore: I am Wilfred Moore from Nova Scotia. Welcome.

Senator Oh: Victor Oh, Ontario.

[Translation]

Senator Maltais: Good morning. My name is Ghislain Maltais, and I am a senator from Quebec.

[English]

Senator Enverga: Tobias Enverga from Ontario.

Senator Unger: Betty Unger from Alberta.

[Translation]

Senator Dagenais: Good morning. Jean-Guy Dagenais, and I am a senator from Quebec.

The Chair: Thank you, honourable senators. I would also like to thank the witnesses for joining us today.

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

Canada's agriculture and agri-food sector is an important part of the country's economy.

[English]

In 2013, the sector accounted for one in eight jobs in Canada, employing over 2.2 million people and close to 6.7 per cent of Canada's gross domestic product. Internationally, the Canadian agriculture and agri-food sector was responsible for 3.5 per cent of global exports of agri-food products in 2013.

[Translation]

Furthermore, in 2013, Canada was the fifth largest exporter of agri-food products globally. Canada is engaged in several free trade agreements, or FTAs. To date, 12 FTAs are in force, the Canada-European Union Comprehensive Economic and Trade Agreement is concluded and 11 FTA negotiations are ongoing.

The Standing Senate Committee on Agriculture and Forestry received an order of reference from the Senate to study, and report on, international market access priorities for the Canadian agricultural and agri-food sector. The study will focus on the agreements and concerns that exist across the industry, sustainable improvements to production capabilities, diversity, food security and traceability.

Honourable senators, we have with us this morning, Martin Lavoie, Director of Policy, Innovation and Business Taxation for the Canadian Manufacturers and Exporters.

Mr. Lavoie, thank you for accepting our invitation and agreeing to share with the Standing Senate Committee on Agriculture and Forestry your views, comments and recommendations in relation to our study.

I would now ask you to go ahead with your presentation, after which senators will have the opportunity to ask questions.

Martin Lavoie, Director, Policy, Innovation and Business Taxation, Canadian Manufacturers and Exporters: Thank you, Mr. Chair. It's always a pleasure to contribute to the studies of Senate committees, which are known for their comprehensive examinations. In addition, I always try to ensure follow-up in terms of their recommendations because that is also a very important piece.

It's a pleasure to be here with you today to talk about the competitiveness of the agri-food sector in Canada. Today, I will focus on food processing, the specific sector that our association represents.

I am the Director of Innovation and Advanced Manufacturing Policy at Canadian Manufacturers and Exporters, Canada's largest industry and trade association. We represent approximately 10,000 companies across all provinces.

While manufacturing accounts for just 10 per cent of GDP, it makes up over two-thirds of Canadian exports. Our sector represents over 5 per cent of private sector investment in research and development in Canada.

[English]

First, I have a few words about food processing in Canada. You summarized the importance of the sector well. We totally agree with what you said. Today, it is definitely Canada's largest and one of the most important manufacturing sectors in the country, accounting for more than 15 per cent of all manufacturing activity in Canada.

Food processing has also been one of the fastest-growing manufacturing sectors in the country in recent years. To give you an example, from 2011 to 2014, food processing sales rose by 12.2 per cent compared to 8.6 per cent for all other manufacturing industries combined. Growth has continued into 2015. For the first three months of this year, manufacturing sales of processed goods are up 4.9 per cent compared to the first quarter of 2014. By comparison, total manufacturing sales were down 0.2 per cent over the same period.

Within the food processing sector itself, the three largest industries for sales in 2014 were meat products manufacturing, dairy products manufacturing and grain and oilseed milling.

In 2015, to date, seafood products have been the fastest-growing food processing industry. When we look at the statistics in the food processing industry, it varies from year to year, especially with exports. Some sectors are highly concentrated in certain commodities.

Exports of manufactured food products reached a record of $26.8 billion in 2014 and have doubled in the past 15 years. Processed food products account for 5.1 per cent of Canada's total exports. Within the sector, the largest exporters are meat products, grain and oilseed milling, and seafood products.

As you will notice, dairy products are not in the exports because of the internal regulations and supply management.

If you look at exports by destination, the U.S. accounts for 71 per cent of Canada's food processing exports, and Japan and China are the next most important destinations.

I would like to say a few words about one of the initiatives that CME put forward in recent years to help manufacturing products, including food processing products to be exported abroad, especially in Europe.

We were commissioned by the European Commission to set up what we call the Enterprise Canada Network. The network is the Canadian component of a much larger initiative called the Enterprise Europe Network. It is a single window, industry-led matching platform that helps to create international partnerships by connecting Canadian SMEs, including in the agri-food sector, to international companies. The platform allows Canadian SMEs to reach out to other companies in Europe and elsewhere, including the U.S., Mexico, Brazil, India and China. In total, there are 60 countries represented in the platform.

We started that about a year ago and have about 850 Canadian SMEs registered on the platform. Last night, I found 75 in the agri-food sector. There are, of course, about 25,000 business offerings in the whole database if you include the 60 countries.

To give you an example, yesterday I found a quote indicating that a Danish seafood import and export company was looking for a Canadian supplier of snow crabs. The company needs a 40-foot container a month to begin with. These are the kind of opportunities for Canadian SMEs. We work with EDC and other government agencies to try to get more SMEs to register in the database and find business opportunities in Europe.

I would like to say a few words about the challenges that the food processing sector is facing. The food processing sector is no different from other sectors, if you look the macroeconomic challenges that this country is facing in general. I include in there an aging population, a shrinking active population as a consequence, and more difficulties to bring foreign workers into Canada and a keep them in the country as highly skilled people.

The sector, as with other sectors in manufacturing and in the economy in general, needs to improve its labour productivity, and companies must pay more attention to industrial automation solutions for their businesses. I am sure you have heard that from other witnesses.

There is no specific data on automation levels in the country, but in general, if we talk to our members, even if you look at the larger companies that are more likely to look at automation solutions, they clearly say that we seem to be lagging behind compared to other countries, when we look at automation and adopting industrial robotics.

Another challenge faced by the industry, and it is more a structural challenge present in many other sectors of our economy, is the reliance on small firms and the overrepresentation of very small firms in the industry. We see again, in Canada, to have a hard time growing those small firms into larger ones.

Consider this: There were about 5,700 food processing companies in Canada as of 2014. Of this number, only 625 have more than 100 employees, while the remaining 5,100 companies have under 100 employees and many of them have less than 20.

In conclusion, I would like to make three recommendations for the committee or for the government. We think that the federal government should adopt its innovation support programs for the food processing sector, especially with a particular focus on marketing innovation, which is definitely needed to help our Canadian producers expand internationally.

One thing we hear a lot about food processing in Canada when we cross the border or go into Asia or other countries is that they do not know about Canadian food outside of maple syrup and lobsters. Our sector needs to brand itself a bit better. As you know, there is a lot of marketing going on in food. None of us go to the grocery store and taste the product before we buy it, so we rely on the message and what we are told by the producers.

We also think that the federal government should look at providing loan guarantees and other funding mechanisms to SMEs interested in financing automation and robotic systems for their plants. One thing that we hear a lot is that SMEs don't have the financial capacity to acquire large automation systems and sometimes it can be expensive. We hear a lot that the traditional financial institutions will not finance them for a variety of reasons. We need to find a way to provide loan guarantees so that the private sector can step up and provide more funding. We started some discussions with the BDC about that. It is important because the capacity to finance those industrial robotic solutions is crucial.

You mentioned trade agreements. The third recommendation is that the federal government has to continue to aggressively pursue trade agreements with key emerging markets so that we do not lose competitive advantage over countries that may sign FTAs with those countries before Canada. We have seen this in the case for Korea and the pork producers, for example. Given that the U.S. signed the FTA before us, they have a competitive advantage over us.

We live in a world of bilateral or regional FTAs and it is no longer large, multilateral FTAs. Timing is important here. We need to sign those FTAs with emerging markets as soon as we can.

I will stop there and am happy to take questions, comments, or suggestions.

The Chair: Thank you, Mr. Lavoie.

[Translation]

Senator Tardif: Thank you, Mr. Lavoie, for being here today and for delivering such an informative presentation. It's quite impressive to hear about everything the processing industry is working on and just how many processing companies there are. You said there were 5,700 food processing companies in Canada. Do those agri-food companies use solely Canadian products?

Mr. Lavoie: Are you referring to the ingredients used in the recipes?

Senator Tardif: Yes.

Mr. Lavoie: The most common ingredients are dairy products, eggs and meat, all of which are Canadian. One of the concerns our members often raise is the cost of ingredients, which is subject to supply management and limits productivity. Ingredients aren't as affordable as our members would like, especially eggs and dairy products such as cheese.

Obviously, processors would welcome reforms in that regard. It's a tricky subject, it's sort of the elephant in the room. At some point, it will be necessary to examine the free trade agreements. As an association, however, we don't have a firm position on the matter. We understand the purpose of supply management and the history behind it. Recommendations were made to reform the supply management system, to enhance the sector's competitiveness and make products more affordable. I have to sing the praises of producers who sell to large processors at a discount. Some dairy producers have established a discounted pricing scheme, and already, that's a great first step.

Companies like Maple Leaf Foods buy large quantities of eggs on a weekly basis. I don't know the number, but I know it's a huge amount. It's quite a sector. Unfortunately, under supply management, companies can't bring them in from outside the country, as they would have to pay import tariffs.

Senator Tardif: In April 2015, three associations, including yours, wrote a letter to the Prime Minister to reiterate the value of the Trans-Pacific Partnership, arguing that Canada should make concessions. Is that still your position, and if so, why?

Mr. Lavoie: Things are coming to an end in terms of that agreement. I've often heard it said of late that supply management is an offensive interest for the U.S. and other countries in Europe. As I see it, reforms aren't possible under those agreements. In fact, we saw what happened with the free trade agreement with Europe, which changed the rules governing cheese import quotas.

Free trade agreements have to be treated as a whole. It's quid pro quo. In our view, if reforming the supply management system, slightly or significantly, translates into gains in international markets, it has to be viewed as having an impact on the whole and not just a single sector.

Senator Maltais: Welcome, Mr. Lavoie. Yours is by far the largest industry association, with nearly 10,000 member companies in Canada who are responsible for two thirds of exports. That's a lot of money. The work you do is necessary and important. Are interprovincial barriers a problem for your members?

Mr. Lavoie: Clearly, some major barriers exist. I always like to differentiate between barriers and irritants.

You have irritants, things like trucking associations, and then you have barriers. One of the barriers that our smaller members encounter has to do with food safety and certification. When that falls under provincial jurisdiction, it's impossible to sell products in another province.

I live in the National Capital Region and I see it every day. I have a friend in Chelsea who used to own a fish- smoking business. He would have liked to be able to sell his products in the Byward Market and to restaurants in Ottawa but he couldn't because he didn't have federal certification. Obtaining federal certification is a costly and intensive process involving a number of steps. The rules around food safety, hygiene and traceability are much stricter. The company has to be of a certain size. So that's a significant barrier. So, those of us who live in the region wonder whether we are more at risk of being poisoned if we eat out in Ottawa, as opposed to Quebec City. The provinces should have a mutual recognition system for food safety and hygiene rules. That's a major barrier.

The issue of supply management came up. Even though I realize it wasn't really part of Industry Canada's initiative and may be the elephant in the room, it's an issue we have to discuss domestically because it's something that arises a lot when it comes time to sign free trade agreements. It's almost as though other countries force us to confront the issue domestically, and it seems to me that we should use this forum on internal trade barriers to discuss that important issue.

Senator Maltais: I won't get into supply management; I'll leave that to our resident expert on the subject, Senator Dagenais, who will no doubt discuss it with you. One of your recommendations is that the federal government should give the sector innovation support geared towards automation and robotic systems to improve processing methods. In order for the food processing sector to face the challenge posed by Canada's existing and upcoming free trade agreements, will its methods and equipment have to undergo transformation?

Mr. Lavoie: People always assume that exports will go up because we have a free trade agreement. As I see it, however, in order to export more, we have to produce more. We aren't, all of a sudden, going to be able to produce enough to feed a billion Chinese with small-scale companies that have four employees. We have to produce more, and in order to produce more, we have to operate on a larger scale.

That means two things. As far as automation is concerned, the technology is mature and ready for adoption; all that's missing is the financial resources and larger scale production.

Innovation, however, is another story. What I was trying to point out with the recommendations was that, in reviewing federal innovation support programs, it became clear that a lot of focus was on product innovation without much consideration necessarily being given to what that would mean for the agri-food sector.

I often visit our members' plants. I visited a Maple Leaf Foods plant. They're doing some very innovative and unique things. They're working, of course, on product innovation to come up with more delicious products, but they're also doing a lot of innovative work in terms of marketing.

They have to understand what their customers want. They want to understand how ethnic diversity in some regions affects their product offerings and how long people spend making dinner when they get home after picking up the kids. So there's a lot of innovation happening as far as marketing goes.

But that kind of innovation doesn't qualify for the research and development tax credit, which is more tailored to science-based solutions to more traditional manufacturing challenges. That's why the sector invests very little in that regard; the government doesn't offer any innovation support to complement those activities. It's important to look at this sector, specifically, and figure out what companies need.

In terms of investment in machinery and equipment, we have seen somewhat of a resurgence since 2011. According to a CAPI report, that is largely attributable to the accelerated capital cost allowance for the purchase of machinery and equipment. The tax measure allows for a shorter depreciation period for machinery and equipment.

That report also talked about the fact that the aging plants and facilities across the sector could hinder equipment modernization. You don't bring $2 million worth of new equipment into an aging facility in need of renovation. That's another issue that needs to be looked at. When you walk through older neighbourhoods in Montreal, down Notre- Dame Boulevard, for example, you see all the older food processing plants, which are really showing their age. Just like with houses, sometimes it's cheaper to build a new one than to renovate an old one.

Senator Maltais: Do your members invest enough in modernization?

Mr. Lavoie: We think they need to invest more. But one of the things preventing that investment, especially in automation, is financing. And that extends beyond the agri-food sector. Companies just starting out invest a lot of personal equity in order to obtain the financing they need. It happens all the time: business owners put up just about everything they have as collateral in order to secure financing. And if the company grows quickly, it has to apply for a loan in short order. Those are the companies that often run into problems obtaining financing; there is nothing left to give the bank as security, no other assets, and the bank can't really extend credit on the basis of future growth. So companies end up turning to the BDC, which sometimes offers more flexible solutions. But they don't want to dilute ownership and have to look for outside partners; they want to retain control over their company. So that's something that hinders our members' growth.

[English]

Senator Merchant: We have had witnesses who have talked about traceability and that gaps exist in the food chain, particularly around abattoirs and processing plants. Could you explain to us what some of these difficulties are? Are you doing something to improve the system? Can the federal government do something to improve the system? How are the consumers affected by all of this?

Mr. Lavoie: To be honest, we have not looked at traceability in particular. I don't have much to say on that, but I have heard about other people in other reports talking about this. I would be interested in looking at our membership to see what they think about this, because there have been a lot of discussions about that. Of course, it becomes an important factor for trade.

In general, how much you trust the traceability system will affect your ability to export. We hear, especially about meat products, that a lot of products get stalled at the border for inspection and testing. That becomes another factor that limits our ability to export.

It is definitely an important factor that we need to look at in more detail.

Senator Merchant: When Senator Tardif asked you about when we do the EU agreement — CETA and the EU — the products that we export must be 100 per cent Canadian. Is that correct? You spoke about it in the periphery, but I would like to pursue this a bit more. Do any processed food manufacturers use only Canadian ingredients?

Mr. Lavoie: If you look at primary processing — live animals — those are probably the ones that are mostly Canadian. This is probably why the primary processing companies export much more than the secondary processing companies. This is one of the contradictions.

If you look at the food processing sector, we have a positive trade balance in primary processed foods and a huge negative trade balance in secondary processed foods. That might be a factor. For example, if you take lobster, pork and others, the primary processing will make 100 per cent Canadian product, but once you have a secondary processing sector, you are more likely to import ingredients from other countries.

Senator Merchant: You will not be able to do that, though, when you trade with Europeans if they insist that everything be Canadian.

Mr. Lavoie: Yes. With regard to the secondary processing products, that would be a challenge if you are looking at 100 per cent Canadian, because there are more ingredients involved and probably many of them are not available in Canada, or are not available at the same price.

Senator Unger: Mr. Lavoie, you have given us so much information in such a short time. It is extremely interesting.

In our meetings, we've had some very small firms setting out to export internationally. They talk a lot about the need for funding, and yet they didn't have any focus on the domestic market at all. They wanted to go global. What can be done to maybe get them to build up a good market domestically and then look globally?

Mr. Lavoie: I would start by saying that one of the reasons why today we have such an overrepresentation of small firms is because, as you've heard from other witnesses I'm sure, between 2006 and I think 2014, 143 plants shut down in Canada, and 90 per cent of them were owned by multinationals. They just left the country. That's one factor why we have such an overrepresentation today.

I think there are two things we must do: attract more investments from multinationals in Canada, and help those small firms to grow and go from a more labour intensive production to a more automated production, which means growing facilities and equipping them with automation.

You're quite right about the domestic market. But I wonder if at some point in certain sectors it's easier to export to the U.S. from Quebec than export to Ontario because of these internal trade barriers. If you're not nationally certified, there's no way you can sell a meat product from Quebec to Ontario.

I myself own a business. We sell sausage made in Montreal. We're the last one in Quebec because we can't sell in Ontario.

It's not a small company. They provide sausage for about 35 stores across Quebec, but they don't have the national certification even at their size. So it becomes a major issue. You're quite right; if we could resolve that by mutual recognition of standards, we would open up a lot of domestic opportunities for those SMEs for sure.

Senator Unger: Why did those multinationals leave Canada?

Mr. Lavoie: I haven't seen any reason. Some people were saying it was because our dollar went up quickly. That might be a reason.

Investment in the sector started to slow down at the beginning of the 2000s, late 1990s. It was kind of a longer trend. As I said, the cost of the ingredients in Canada was quite high also, and of course the global recession made a lot of countries repatriate production closer to either their head office or other plants.

I think what also happened in Canada is that a lot of old plants required a lot of investment to be revamped, and I think some multinationals wanted to spend their money in other plants.

Don't forget that at the same time our dollar went up and our labour costs went up dramatically in Canada as well. In manufacturing in general, if you look at labour cost of unit per production, Canada was half the cost in the United States back in 2000-01. Today we're even more expensive than the United States in terms of labour. Combine that with skills shortage, labour shortage, the restrictions that have been put into the Temporary Foreign Worker Program and the rapid access program, and these reasons together probably played in the picture.

Senator Unger: Regarding labour costs, I heard this morning on the radio that a study was done about what union workers get paid in Canada versus people in the private sector. Union employees earn 10 per cent more, plus they get very good benefits. That would factor into what you just said, I assume, or would it?

Mr. Lavoie: I wouldn't blame the unions for this. Is the solution to bring everybody down to lower wages?

Our solution is if you want to become less labour intensive, you have to go into automation. Even if you were getting rid of all the unions in the country, bring down your labour costs by 10 per cent, it's just a matter of time before it comes back.

We've seen, for example, all these companies that went to China for low labour costs back 15 years ago, and now they find that labour costs in China are almost as expensive as they are here. They are not as cheap as they were.

I think it would be a short-term solution to look at unionized versus non-unionized. The only long-term solution has to be automation with industrial robotics. Over the long term, that's the only way you can become less labour intensive and more competitive.

Senator Unger: Personally, I'd like to see private-sector jobs be able to be paid similarly. They used to be more and now, of course, it has changed.

Thank you.

Senator Moore: Thank you, Mr. Lavoie, for being here.

You mentioned one of the elephants in the room was supply management, but we know that the United States and a number of the countries with which Canada is doing business in the European Union heavily subsidize various sectors of their economy. I read recently about the TPP and Australia targeting our supply management and other countries with regard to the TPP and the European agreement targeting Canada. What are we doing and what do you think we should be doing with regard to the subsidization by these nations of the key sectors of their economy? There must be some reciprocity here. It's not all us.

Mr. Lavoie: My view is that direct subsidies to agricultural companies or food processing companies, or if you look at supply management, they're both subsidies. However, one of them is a subsidy from the government and the other one is a subsidy paid by the customers. Supply management is an indirect subsidy paid by the customers. We set the price and the ones who buy the products are indirectly subsidizing the producers by paying a price that might be a bit higher than what they would get maybe if it was imported.

That's an argument I hear a lot, every time we talk about supply management: Other countries subsidize so we have to do supply management. Again, I'm not a negotiator. I don't know what is on the table. I'm sure the Canadian negotiators are addressing those subsidies. As I said, it's a give and take. If we're going to attack supply management but we don't win anything and we don't end those subsidies in other countries, I don't think that's a good deal. As you said, there has to be reciprocity.

Senator Moore: I don't think you're recommending that we subsidize, are you? If the other countries are subsidizing, say, agricultural areas, should the federal government be doing that?

Mr. Lavoie: Why do you subsidize in the first place? Do you do it because other countries do it or because there's a market gap? To me, subsidies are when there's a market gap. If there's a market gap on financing, sure, let's have the government intervene. You could probably find subsidies in all the sectors of the economy anywhere in the world. That's not a reason in itself to subsidize everything in Canada.

Senator Moore: Some of these sectors, I would suggest, are heavily subsidized by their nations, particularly in the U.S. and some of these European countries. They load up and that creates an unfair advantage for Canada. I don't think we should just cave and say, "Oh, well, we'll give you this,'' because they're not changing. They're targeting us, but they're not changing their own system.

Mr. Lavoie: We're not looking at getting rid of the whole system. For example, you can look at the import quotas or the tariffs. You can relax the rules a bit so we can make some gains in other sectors.

When you talk about supply management, sometimes the problem is the notion of getting rid of the whole thing. I don't think you could get rid of the whole thing. The quotas have a lot of value for the farmers and the banks lend money based on the value of those quotas.

Senator Moore: Exactly.

Mr. Lavoie: It's not like you could just get rid of it tomorrow morning because you would affect the finance industry and the producers. Anything would have to be transitioned over a very long period of time.

Senator Moore: When Canada decides to negotiate a trade agreement with a country, I wonder what drives that. Is it the population of the other country? Is it the trade of products?

We had a report earlier this week in the Senate that said most of these trade agreements we've entered into have resulted in a deficit trade imbalance, a couple on the positive side, but they're nominal. So I wonder what we're giving up.

I'm thinking about that in the context of NAFTA. Does that expire in October of this year? I get that confused with the softwood lumber deal. We got killed on that. It's to the tune of $5 billion, which the U.S. has yet to give back.

You've got NAFTA, and there are many forces in the United States that don't want that renewed, and yet we're trying to say, "Buy North American, Canada, Mexico and the U.S.''

I was involved in a meeting, the first one of Canada-U.S. interparliamentary people, and trade was the biggest discussion. But it really morphed into a situation of the U.S. making demands on Mexico, because the Mexicans have lower labour. Have you thought about that? If that agreement is different than the current provisions, what would that mean for your sector or your organization?

Mr. Lavoie: At the time of NAFTA, the trade agreements were mostly focused on tariffs. That has changed a lot. The new trade agreements put a lot of emphasis on non-tariff barriers, including government procurements. All the things we're addressing now in our trade agreements were not addressed under NAFTA. In a certain way, NAFTA, if you compare it with CETA, is an incomplete trade agreement. CETA looks at government procurement, federal, provincial and municipal. NAFTA only looked at federal procurement, which is not much compared to all the money thrown at transportation infrastructure by municipalities and provinces, for example.

I take your point. I think what's driving it in the food sector is that tariffs are still big. A lot of Asian countries have high tariffs on certain products and we would like to get better access. For example, in the case of Korea, the pork industry was keen on this. It becomes a competitive advantage.

But with the U.S., to be honest with you, the non-tariff barriers we have not addressed will have to be addressed at some point. With manufacturing in general, one of the most important non-tariff barriers we're facing in government procurement is the Buy American Act. It was excluded from NAFTA because it wasn't a tariff barrier; it was a non- tariff barrier. Unfortunately, we're stuck in sectors like public roads and highways, airport infrastructure, water and waste water infrastructure, with Buy American requirements that don't allow Canadian SMEs to get in the market.

I've had discussions with American companies about it, and unfortunately I think what happens when the —

Senator Moore: What happens when you have those discussions? Do they realize the situation? How do they justify continuing that policy?

Mr. Lavoie: The first thing they tell me when we raise the Buy American issue is that it is focused on the steel fabrication. They say that they want to keep these steel products and raw steel from — they say Asian countries, but I think they mean China — countries that are heavily subsidized and under dumping measures. They want to keep them outside the U.S. My response to that is, "Do I look Chinese to you?'' We're Canadians. We have the same labour costs, even a bit higher. We have the same environmental regulations as the U.S. Our companies are fully integrated, both from internal and external supply chains. So I get your point about keeping Asian steel out of the U.S. market, but we're not Chinese. We're Canadian.

I found U.S. companies that were directly affected by Buy American because they have plants in Canada. As an example, last year there was a bridge built in Morrison, Colorado. The steel structure, all the steel parts were given to a local company. That local company had a plant in Ontario. They couldn't meet the demand for all the steel, so they asked their Canadian plant to provide some steel and export it to Colorado for the bridge, and the company was penalized under Buy American for asking their Canadian subsidiary to meet the demand.

On the one hand you have the U.S. government saying take advantage of free trade agreements, fully integrate your supply chains with Canada and Mexico because that's where we want you to go. On the other hand, when they give a big bridge contract or big road building contract, they have a stick and if you don't buy from the U.S., "We'll beat you up.''

Senator Moore: They legislate it. They slide that into a totally unrelated piece of legislation over a little lie.

Mr. Lavoie: That's what they do now.

Senator Moore: It flies in the face of the whole spirit and rule of law. Anyway, thank you very much.

Senator Oh: Mr. Lavoie, thank you for being here. Your information is fantastic.

The government, EDC and the Business Development Bank of Canada have been doing a lot to help the manufacturers export to the international market. Are your members aware of all these tools that they can get, and are they using them or could there be better tools to use that your members are looking for?

Mr. Lavoie: EDC has done a fantastic job in the last years to reach out to companies. What I think has changed with EDC is that in the past, EDC would only enter into discussions with a company that already exported. Their mandate was to help companies that were already exporters. We've had a lot of discussions with them. There are a lot of companies out there that are not exporting now, but obviously if they want to grow and survive, they will have to export. We have a small market in Canada. Maybe you want to start having discussions with those before they export. I mentioned that they will become your customer.

They bought that argument. That's why they came on board with the Enterprise Canada Network, because they want to better identify companies that have export potential. They know they will become their client. This is great.

We do a great job with EDC. I would say most of our members are aware of what they do. We run Go Global sessions with our members across Canada and we bring between 50 and 100 companies each time, and EDC is always there giving information.

BDC has done a lot of work with our members for financing. As I said, they really close the gap where traditional banks are not there or don't want to step up. They also have a bit of an international mandate as well. For example, with a company that wants to open a plant somewhere else, they can finance some real estate projects.

BDC has been doing well. Now I think the next step for them is to step up in automation adoption, industrial robotic systems. We would like to see something more customized, especially for the food processing sector. We started discussions with BDC and they're really open. As you know, in the last federal budget there have some new programs on the go to help SMEs. I'm confident we'll get there with BDC at some point.

Senator Oh: Do you agree that the FTA is very important, and governments should always be on top and developing more FTAs? Because our farmers need exports. Our population base is only 36 million. We have a vast farmland for producing food, and they have to export.

Mr. Lavoie: Absolutely. That's what I said about needing those FTAs and we need them fast as well.

Senator Oh: Another thing about innovation on food processing, if you are aware, is that in Asia, the new international market or the new emerging market, KFC or McDonald's have already gone far ahead on innovation, adapted to the local market. KFC in Asia is huge. You're talking about 40,000, 50,000, 100,000 square feet, compared to the KFC here in Canada or the U.S., and 2,000 square feet you would consider a big one.

Mr. Lavoie: If you take the food retail market in China, it's so diversified. It's one thing to say "export to China,'' but who do you talk to? You need some advice.

I read somewhere that the top five Chinese grocery retailers only account for 6.5 per cent of all grocery sales. Compare that with Canada, where the top three largest grocery chains account for 70 per cent of all food retail. It's quite the opposite in China; the five biggest account for 6.5 per cent. It's the Wild West for Canadian companies that want to go there, and they need advice for sure.

Senator Oh: My point was that in order to export you need to adopt innovation in food processing. How do you get into that market? Their market is huge; the emerging market is tremendous.

Mr. Lavoie: If you look at the meat sector especially, I think the Chinese would welcome more Canadian products because of the trust they have in the safety and the traceability.

Senator Oh: Or the Canadian brand.

Mr. Lavoie: The good Canadian brand.

I mentioned the Agriculture Resource and Innovation Centre. They did an interesting study on China. They interviewed a lot of Chinese distributors, some of which have offices in Canada. The biggest problem they see with Canadian foods is that there's no branding around them. We know here that Canadian food is safe, but they say the Chinese population is not necessarily aware of that. They were saying Canada has to put together a good branding campaign about their products in Asia.

Senator Oh: We need your help.

Mr. Lavoie: You need my help. I'll start learning Chinese.

[Translation]

Senator Dagenais: Good morning, Mr. Lavoie. Coming back to what Senator Maltais said, I wouldn't call myself an expert on supply management but, when I was a Conservative candidate in Saint-Hyacinthe, a farming heartland in the eastern part of the country, I had to speak to the UPA. You've had dealings with the UPA, you know about supply management. Just a quick sidebar, since the UPA has been around, it's had to adjust its position.

I want to ask you about the WTO. In May, it ruled in favour of Canada and Mexico regarding the U.S.'s country- of-origin labelling policy. Canada is going to ask the WTO to authorize retaliatory measures against U.S. exports, in other words, Canadian imports from the U.S., and that includes agri-food products. A U.S House of Representatives committee has voted to repeal the country-of-origin labelling policy. Were you aware of that? Will those retaliatory measures have an impact on your members?

Mr. Lavoie: Obviously, I can see both sides of the issue. A lot of companies say retaliatory measures also hurt the imposing country, let's just be frank. On the one hand, producers will be affected because they import products from the U.S. On the other hand, if we win our case at the WTO and don't put retaliatory measures in place, what message are we sending countries like the U.S., who are in the bad habit of taking unilateral action against Canada, as we saw with softwood lumber? That, too, comes at a hefty price. If we don't impose retaliatory measures, what will happen going forward? We would be telling other countries that they can do whatever they want. Countries that aren't satisfied will simply have to go to the WTO, knowing full well that the measures will be in name only.

We fall somewhere in the middle, reasoning that for the greater good of the country, at a certain point, it's necessary to impose some retaliatory measures on the Americans, lest we send them the message that they can just keep doing what they've always done and that all they have to do is figure out another way to go about it. It's a bit like the Buy American Act, which Senator Moore was talking about. Canadian firms have been subject to discriminatory practices for 25 years now, even though we never impose Canadian content requirements on anything. Any American company can contribute to our infrastructure projects, and yet when we try to do the same, we aren't allowed to export.

We should probably make it clear that we aren't going to be pushed around anymore.

Senator Dagenais: Canadian agri-food manufacturers use a lot of inputs from the U.S. Could the proposed measures affect the cost of those inputs?

Mr. Lavoie: We've heard other industry associations talk about that. Some are even beginning to come out internally against imposing any retaliatory measures. I think they need to be careful. I realize that they have to stand up for their members' interests but, at the same time, they are dealing with an issue that has a broader impact, Canada's ability to prevent future unilateral action from, let's face it, the U.S.

[English]

The Chair: Senator Unger has a supplementary question and Senator Moore has one as well.

Senator Unger: I had read very recently that a bill amending the Agriculture Marketing Act was repealed. Chairman Conway said:

We must do all we can to avoid retaliation by Canada and Mexico, and this bill accomplishes that through full repeal of labelling requirements for beef, pork and chicken.

Alberta has a lot of beef for export and the industry has been affected. Assuming that that bill has been repealed, how long will it take for things to normalize in those areas?

Mr. Lavoie: I can't answer that question.

Could you repeat the bill in question? Is it a federal piece of legislation? Oh, are you talking about COOL?

Senator Unger: Yes.

Mr. Lavoie: I don't know how much time it will take, to be honest. They probably have a deadline, which the WTO gave them, to repeal that as soon as possible.

Senator Unger: He goes on to say:

I appreciate all the support from my colleagues on both sides of the aisle. We will continue working to get this to the House floor as quickly as possible to ensure our economy and a vast range of U.S. industries and the men and women who work for them do not suffer any economic implications of retaliation.

I did hear recently that it had been repealed.

The Chair: Are they on the right track? This is what Senator Unger wants to establish.

Mr. Lavoie: How much time it's going to take.

The Chair: That's the question.

Senator Moore: Further to that discussion, early in March of this year the chair and others, including me, were part of a Canadian delegation, and we were in the office of Mr. Conway and met with his top representative, his adviser, who encouraged us to encourage Canada to take retaliatory action. If we don't, he said we'll be stumbling along trying to get through the legislative process. His committee is in favour of getting rid of it, and then it has to go through the House of Commons and the Senate.

He made it clear that the time to get through that legislative process could take who knows how long. He said that if we started some sort of retaliatory process, it would get their attention immediately and we'd get the proper results.

So it's the same thing. When you go there, they're 10 times our size and they have 10 times the issues we have. If you're not there pushing your thing, they just move on to the next issue, so we have to keep our trade issues with them in the forefront.

We've had WTO decisions before. It didn't matter. On softwood lumber, it didn't matter. Rule of law, you have to stay in their face. They understand the economic hurt and the retaliation, and I think then they would move on it.

Chair, I just wanted to make that point.

Mr. Lavoie: I agree with that. To go back to our discussion about Buy American, I remember companies telling me the day Canada starts having its own Canadian content, the U.S. will react. That's how it plays out in the U.S. It's about who is hurting them. Their system is much different.

Senator Moore: It's easy politics in the U.S. to say "Buy American.'' They always say, "Oh we didn't mean Canada; we're just trying to stop trade with the Chinese. We didn't mean to hurt you guys.'' But they don't put that in. They never accept us and they never say, "Buy North American.'' They could do that. They could just stick the word "North'' in there and we would be happy.

Mr. Lavoie: Would that include Mexico?

The Chair: Thank you for clarity, Senator Moore.

Senator Moore: You were there, chair.

The Chair: Yes, I was.

Senator Beyak: Thank you, Mr. Lavoie, for an excellent presentation. Your organization is as old as Canada, almost, founded in 1871?

Mr. Lavoie: We were, but I wasn't there at the time. So there is an official and unofficial story about this, but I will say it off the record.

Senator Beyak: It is very impressive and I think it is impressive for Canadians that watch this.

I am always given practical questions in my riding. I am amazed how many Canadians actually watch CPAC and these Senate committee hearings. I think it is because they are unbiased and unfiltered; they are just the facts.

Consumers come to me and don't understand why Maple Leaf products may have chicken and turkey in vacuum packs, but not beef. Is there a reason why they can't put beef? Is there a reason, or is it just their decision?

Why is milk expensive in cities, but not in small town? Comparable to the U.S., in Toronto or other cities, but in small towns, milk is almost half the price in some cases.

Do you know the answers to those practical questions?

Mr. Lavoie: Honestly, I see a difference in the price of milk and butter sometimes between Super C and Loblaws. To be honest, the retailers have to explain their pricing strategy because I don't understand sometimes why you can buy three pounds of butter for $10 at the Super C, but at the Metro and it's like $4.25 for one pound. What explains the difference?

At the same time, this government has put a lot of focus on the Canada-U.S. price gap. To your point, I would argue, how do you explain price gaps within our own country?

If you look at the price of milk, because I live here, I always see a huge difference between Ottawa and Gatineau, for example, because the two systems are a bit different. Again, there is no reason.

What I don't like from a customer point of view is when you were talking about subsidies, who drinks milk the most? Kids. You are kind of asking people who drink a lot of milk to indirectly subsidize this sector. It seems to me that we shouldn't be asking those people, who are sometimes single moms with three kids, who buy a lot of milk because they eat cereal and drink a lot of milk. From a consumer perspective, it's something that we hear, and I kind of agree with that.

Senator Beyak: I think the questions sometime make the matter personal. We talk about supply management, free trade and competition, but right down at the real roots, they see it first-hand and they don't understand it. I can never explain it, either.

Second, can you elaborate a bit more on the problem with temporary foreign workers? We heard from other agencies but not yours, and I am impressed with your knowledge.

Mr. Lavoie: What we hear from our members, in the past, is that a lot of companies were bringing foreign workers into the country. There were a certain number of workers — I can't remember how many — that you could bring in during any given year. These people could stay in Canada for two years and those companies would train them, hoping they would apply for permanent residency and stay as a worker here. As you know, in certain sectors like meat processing, the turnover rate for labour is something like 50 per cent. It is huge. Sometimes immigration is one way to get those people. If they find a good job here and they are trained, then they will stick to the company.

What I am hearing is, for example, industrial butchers are no longer eligible for the fast-track program within the Temporary Foreign Worker Program. So that is an issue. The number of people that you can hire through the program is lower. Instead of two years, now it is only one year that you can keep them before they can apply for permanent residency. Everything has been restricted, and that is exacerbating this problem of labour and skill shortage.

Senator Beyak: Is your agency doing anything to work with the government to try to show how important the problem is?

Mr. Lavoie: Yes. We have had a lot of discussions with the minister of the ESDC, at the time, and we wrote pieces in the newspapers. A lot of this had to do with the restaurant business.

Sometimes you have one thing happen and everyone else is affected by a decision of the government. Unfortunately, a lot of our sectors were affected. I think the food processing industry is paying their people well. They are not looking at cheap labour. They are just looking at labour — good labour they can rely on. They are willing to train them if they know they will stick around. We have had this discussion.

The government has showed some openness, but I know it is a tough political question. As I said, the only other way to cope with this problem is to automate your plants. There is no other way.

Senator Enverga: Thank you for your presentation. Most of my questions have been asked already, but I want to follow up with regard to temporary foreign workers.

With this ruling, do you know of any lost opportunities for manufacturing companies, what percentage of their income, or has it affected the industry that much?

Mr. Lavoie: No, I haven't put a number on it. Just in meat processing there is probably a shortage of over 1,000 people right now, in some big companies that I spoke to. I don't know how that translates into lost opportunities, but again, it is part of the picture of a large multinational looking at investment. Are you going to throw $100 million into a new plant when you know you are going to have a hard time finding the right people to be there? That is part of the picture.

The more you get into automation, the more you need high-skilled people to operate that industrial robotic equipment. Where do you find those people?

We are trying to close that gap right now. Last year, we went to Germany with one of our members, Siemens. They were talking to us about the German system and how it works. The kids have to choose a path early on in high school. We saw how they integrate the kids into their plants at an early age. We were fascinated because in Canada we don't really do that.

We went there and came back with the idea of doing a pilot program with Siemens in Canada. We call it the Siemens Canada Academy. It was announced in the last federal budget. The federal government announced $65 million for industry associations like CME to better adopt the curriculum in colleges to the needs of the private sector, the market.

Our first cohort of 30 students started in May. We will see how it goes. The idea is to use those companies, especially from Germany, that have this experience with this educational system and to try to implement it in Canada. If it works for us, it will work for many other industries as well.

Senator Enverga: As a follow up to that, we may have some problems with workers. We have a shrinking population. Have these manufacturing companies thought about outsourcing it to where there is cheaper labour?

At the same time, one of issues regarding why people are not working in far-flung places, like remote areas, is that they are too far from where they are. Has the manufacturing industry thought about moving maybe closer to the poorer areas to get more workers?

Mr. Lavoie: No. This is not something I have necessarily heard. Moving from rural to urban areas, is that what you mean?

Senator Enverga: That's right, in order to attract more workers.

Mr. Lavoie: No. Moving production plants is not cheap. A lot of multinationals, if they are about to shut down a plant, they will consider other countries as well. It is not just about staying just in Canada. They have the flexibility to invest in other countries as well, as you mentioned, maybe in some countries where they can better cope with labour costs, for example.

A lot of companies that shut down in the U.S., in general, were headquartered in the U.S. What we have also seen in the United States is that they were aggressive in repatriating production in the U.S. because the government was pretty aggressive. We have seen, not necessarily in food processing but in other sectors, where local cities, especially in Tennessee in the southern States, where they build the plants for the companies. They tell the company, "If you do production here, we will build the plant and lease it back to you for 10, 20 or 30 years, and help you out if you need.''

That is what we saw with Electrolux, when they left Montreal, and Kruger. They all went to the southern states. They've been very aggressive. Textron, the headquarters of Bell Helicopter, just opened a brand-new plant at a Louisiana regional airport. The plant was entirely built by the regional government there, and they lease it back to the company. That is $100 million of capital that they don't have to spend. That is a huge incentive.

I would say if a company has an old building and they are thinking of a new building, they look at Toronto and the southern states. It is difficult to compete sometimes.

I am not arguing that Canada should start building plants for companies; that is not my point. I just want to raise the fact that some other countries are getting very aggressive in what they call "reshoring'' in the United States, and it is affecting Canada and other countries as well.

Senator Enverga: On the trend now, are you saying we are not giving enough incentives to our manufacturing companies?

Mr. Lavoie: As I said, I think we need to better customize our government support for the food processing industry, because if you look at innovation, there are not many programs where you can go and get government support.

I have to give a lot of merit to the Ontario government, which announced the new Jobs and Prosperity Fund. One of the three streams of the fund is just for beverage- and food-processing industries. I think they got that in Ontario; there will be money available just for this industry.

At the federal level, what you see in the direct support programs, again, it is focused on sectors like automotive, aerospace and forestry. All the other programs are not a good fit for food processing, and I think that is becoming a problem. We will have to look at this sector in a unique way, I think, because they are very different. You cannot really compare food with metal-bashing companies or automotive. They are different.

Again, when I talk about automation, it is much easier to automate a car factory than it is to automate a meat- processing factory. We are thinking about very hostile environments for robotics and electronics. A meat-processing factory has a lot of water and humidity, and that does not cope well with electronics in general. An automotive plant is much easier to automate. So this is a unique sector.

If we look at automation in the food-processing industry, I would strongly argue that we need to put together a demonstration program first, because a lot of companies will not invest hundreds of thousands of dollars, or millions of dollars, on something that might not work well in their plants.

The aerospace sector got a demonstration program in the budget before last. I think that is a great program, and we should use it as an example as something to do for the food-processing industry.

The Chair: I have a few questions that I would like to ask, with the indulgence of all the senators.

[Translation]

We have a lot of questions for you, given the number of food processing companies in Canada, 5,700, according to you.

[English]

I would like to relate a fact, because you do put a lot of emphasis on innovation and also robotics for the challenge that we have with the displacement of labour.

In 2012, the OECD talked about Canada and its science and innovation side. This week, comments were made that we were not doing enough innovation and R&D.

A chart has been shared with me by our research people. When we look at the role of the Government of Canada and universities, which would also include provincial governments, we are above the average when it comes to innovation and R&D as we consider our 500 most important universities in Canada.

When I look at the role of the private sector, we are building a bridge. What plan do you have with your membership to encourage more investment in R&D and innovation in Canada?

Mr. Lavoie: That is the million-dollar question. If we take a step back, we asked this question to the Jenkins panel in 2011. The report has driven a lot of government measures since then in the last three budgets. We have had a mixed reaction with respect to how well the report was implemented by the government.

A lot of the measures adopted not received well by our organization. One of them is the exclusion of capital expenditure under the Scientific Research & Development Tax Credit. When we talk about automation and R&D in the manufacturing sector, we are not talking about desktops and research as you see, for example, in the video game industry. We are talking about big machines that cost a lot of money, so capital is a big part of your R&D. The elimination of capital means that companies no longer receive a tax credit for machinery and equipment used exclusively for research and development. That has had an effect on the adoption of adaptive manufacturing technologies and automation robotics for R&D purposes.

When you mention the government is over-performing in R&D expenditures, our universities are doing great. They publish how many articles and they patent a lot of innovation. But if that doesn't translate into economic growth, who cares? Who cares if we are publishing all these articles?

I spend a lot of time looking at Canadian patent database. I was looking at all the university patents. I found about 350 patents filed every year by all the universities in Canada. Honestly, I am still trying to find a couple that were successfully commercialized. Who cares? All these patents are sitting there. If you look at the cost of patenting the innovations from universities versus the revenues generated from those patents, it cost them more money than they generated. So what is the point?

We seem to have this incapacity to translate all these good things we are going from government and university research into the private sector.

One of the interesting tax measures that floated around in recent years was that in other countries like in the U.K. and the Netherlands, they have put together the Patent Box measure. It is a tax incentive. Any company that commercializes a patent in Canada has a lower corporate income tax rate on their revenue-generated product for a certain period of time. For example, if I license a patent from the University of Toronto and I build a product in Canada and commercialize it from Canada, in the U.K. or the Netherlands, I would pay like a 5-per-cent income-tax rate on the revenues associated with that product for five years. So it becomes an incentive for companies to commercialize the Canadian patents in Canada.

I think Communitech went to Industry committee five years ago. They said that 65 per cent of all start-ups in Canada end up, on average, after five to seven years, being sold abroad for the value of their IP. Again, great companies. As a society and as a government, we throw in a 35 per cent refundable SR&ED tax credit and a lot of direct support, and at the end of day they take a lot of the value of their innovation, and they are sold elsewhere because their investors don't see the value of commercializing their products in Canada.

The last thing I would say about some of the reforms the government has been doing in research and innovation support, they have set up a lot of great programs for companies to take advantage of. Especially if you look at FedDev Ontario, they put together the $200-million Advanced Manufacturing Fund and some other programs. There have been a lot of problems in getting the money out of the door.

The Advanced Manufacturing Fund started last year, so has already been one year. They have only spent $10 million of the $40 million they had available last year. It is only one company. That is not going to change the game of innovation in Canada. They need to get the money out the door faster.

What we find in talking with those direct support mechanisms is that they have 150,000 criteria, and if you don't meet 149 of them, you don't get the money. My point is to try and be flexible. Those working for the companies know what they need to do for innovation. Public servants should not be the ones deciding what companies are best for doing innovation. They should be more flexible in the kinds of projects they support. That is my view on it.

The Chair: There is no doubt, when I look at the impact of economic contribution in Canada, there is $2.3 billion in farm cash receipts and that is the chicken industry. They have quite a challenge. We have had some comments at the committee and I would like to know, what is the position of your association when it comes to the import of spent fowl poultry? Are you aware of that process?

Mr. Lavoie: No.

[Translation]

The Chair: Reforms have targeted poultry. Small changes have been made.

[English]

It is in a package of 10 or 15 per cent, and the balance is chicken. It is imported from other countries, namely here and the U.S. It is comes in most of the time not to be labelled as a chicken product because we misreported or underreported what we call marinating, glazing and sizing of the products. The different yields result in less chicken for our Canadian producers, less export, and we are sometimes flooded by some of those products coming in. They are not labelled "chicken.'' Has that been brought to your attention?

Mr. Lavoie: Not this one in particular, but I understand the concept. This is one way companies are finding to go around the supply management rules. We saw that in the cheese sector in the past. Some companies were importing cheese that was not made with milk. They would go around the supply management rules to bring in cheese for frozen pizza, for example. If they are doing that, it's because they find the ingredients they buy from Canada are too expensive and they are trying to find ways to become more competitive.

Senator Moore: I am thinking of our guest's comments. At the beginning, you had a customer looking for snow crab. I have a couple of ideas that I will tell you after the meeting. I know some Nova Scotia companies that might be able to help your customer.

Mr. Lavoie: Yes, a container every month.

Senator Moore: I will tell you after the meeting.

The Chair: I think there was a question in that.

Senator Merchant: Someone told us that some European countries and the U.S. have established non-tariff barrier monitoring committees. Should we be doing that? Would that help your concerns, and why do you think that is a good idea?

Mr. Lavoie: Yes, I think that is a good idea. I have been following more closely the regulatory council work around the joint action plan between Canada and the U.S. in order to have a more common approach around food safety. As I said, lots of meat products are being stalled at the border for testing and inspection. A lot of non-tariff barriers need to be addressed on a bilateral or multilateral basis. I would absolutely support those initiatives.

As I said, trade agreements in the past only looked at tariffs and we realized that tariffs don't mean much when you have a lot of tariff barriers that don't allow your product into the country.

Senator Merchant: Is something being done with such a committee?

Mr. Lavoie: Maybe not as fast as we wish, but these are complex questions involving a lot of people. These joint action plan committees have been going on for a little while. We think they are on the right track and we will get there at some point, yes.

Senator Tardif: I am curious as to why seafood is the fastest-growing food processing sector.

Mr. Lavoie: The fastest growing this year? That is an interesting one. I was talking about good branding for Canadian products, and I think seafood is one of the best. It is recognized internationally. I think that now you can even track down the person who caught the lobster in Gaspésie. That is part of the building of trust from customers. Internationally, Canada has a good reputation for lobster and seafood products.

Senator Moore: The maritime international certification has to do with traceability and we are part of that, a number of our companies.

Mr. Lavoie: It's about good branding, and we need to use that as a model.

I don't know why, but I also heard that frozen potatoes from Canada are growing fast as well.

The Chair: Are there any other questions?

[Translation]

Thank you very much, Mr. Lavoie, for being here today and sharing your views and insight with us.

[English]

With that, honourable senators, the meeting is adjourned.

(The committee adjourned.)