Proceedings of the Standing Senate Committee on
Agriculture and Forestry
Issue No. 48 - Evidence - Meeting of April 19, 2018
OTTAWA, Thursday, April 19, 2018
The Standing Senate Committee on Agriculture and Forestry met this day at 8:02 a.m. to study how the value-added food sector can be more competitive in global markets.
Senator Diane F. Griffin (Chair) in the chair.
[English]
The Chair: I welcome everyone to this meeting of the Standing Senate Committee on Agriculture and Forestry. I’m Senator Diane Griffin from Prince Edward Island and chair of the committee. I’m going to ask senators to introduce themselves.
[Translation]
Senator Maltais: Senator Ghislain Maltais from Quebec. Welcome, ladies.
[English]
Senator Doyle: Norman Doyle, Newfoundland and Labrador.
[Translation]
Senator Dagenais: Jean-Guy Dagenais from Quebec.
[English]
Senator Woo: Good morning. Yuen Pau Woo, British Columbia.
Senator R. Black: Robert Black, Ontario.
The Chair: Thank you, folks.
Today, the committee is continuing its study on how the value-added food sector can be more competitive in global markets. For our first panel, we have two speakers. From Food & Consumer Products of Canada, we have Carla Ventin, Vice President, Government Relations. She’s going to speak first. From the Canadian Agri-Food Trade Alliance, we have Claire Citeau, Executive Director.
Thank you, folks, for accepting our invitation to appear today. It’s very much appreciated. Please proceed.
Carla Ventin, Vice President, Government Relations, Food & Consumer Products of Canada: Good morning and thank you, chair. Food & Consumer Products of Canada would like to thank the committee for the opportunity to provide input into the study on how the value-added food sector can be more competitive in global markets.
For yearly 60 years, our national industry association has been representing companies that manufacture and distribute the majority of food, beverage and consumer goods found on store shelves, restaurants and in people’s homes. Our membership is truly national, providing value-added jobs to urban and rural Canadians in more than 200 federal ridings across the country.
Food processing is the largest employer in manufacturing in Canada, providing Canadians with high-quality jobs in over 6,000 manufacturing facilities. Canada’s food manufacturers employ more than the auto and aerospace sectors combined.
According to the trusted adviser to the Prime Minister and Chair of the Advisory Council on Economic Growth, Mr. Dominic Barton, food is going to be one of the biggest businesses in the world. The council’s report discusses the opportunity to grow and process more of our own food here in Canada and points out that we only add value to 50 per cent of what farmers grow in Canada. This represents an enormous untapped opportunity.
The underdeveloped value chain is certainly one of the challenges we face in Canada. We are already very good at exporting primary products like canola and wheat, but we do not fare well in exporting value-added products abroad. We do, however, buy back these value-added products for about 20 times the cost. When we export our products before adding value, we are also exporting the future-facing, high-technology jobs that go along with it.
In recent years, especially in Budget 2017, there has been an unprecedented government focus on our sector. Initiatives like the Agri-Food Economic Strategy Table, superclusters, Strategic Innovation Fund and the Canadian Agricultural Partnership are significant and most welcome by our members.
FCPC is a proud member of the Canadian Agri-Food Trade Alliance, which is here with me today, as well as Canadian Manufacturers & Exporters who will appear later this morning.
Recommendation one is to address the competitiveness challenge with the United States. First, in order to address the question of how the value-added sector can be more competitive in global markets, we need to take a hard look at the rising cost of doing business in Canada. Our member companies are increasingly concerned with the cumulative and costly regulatory burden. Costs relating to energy, labour, taxes and inputs are adding additional pressure on Canadian food manufacturers.
In comparison to the United States, the operating environment for our members is not competitive. The Trump administration has introduced attractive measures to repatriate manufacturing and Canada needs to respond. Our members are increasingly contacted by our southern neighbours proposing attractive packages to incent them to relocate to the United States.
Expanding and improving the accelerated capital cost allowance depreciation in Canada to mirror U.S. rules would be a positive step in the right direction. In light of the uncertainty in the U.S., it’s more important than ever to support companies to export to growing markets around the world, including Asia. The government’s ambitious and diverse international trade agenda and renewed funding for the Market Access Secretariat are important steps in the right direction, and we would like to see a good portion of the funding of the Market Access Secretariat to support value-added manufacturers.
Recommendation two is to support investment in innovation, R&D and capital. In order to become more competitive and meet the agri-food export targets identified by the government, the industry needs to focus on making innovative products that consumers want around the world. Industry also needs to make these products that consumers want in a smarter, greener and more efficient way. This requires investment in innovation, both in the development of new products and integration of new technologies in manufacturing facilities.
The challenge is that investment in R&D and capital in food processing facilities has not kept pace with our international partners, and we are lagging in the adoption of advanced technologies. A 2014 KPMG report lists cost as the main barrier to the integration of new technology into food manufacturing facilities.
In addition to current government initiatives, we support the Food Processing Industry Roundtable’s recommendation for a food innovation fund of $500 million over five years to support the innovation of new products and production processes.
Recommendation number three is to modernize existing regulations to provide support for businesses to adjust to new regulations. We need to look at why investment is low in R&D, capital and technology in Canadian food manufacturing. The cumulative regulatory burden and costs facing our industry present enormous challenges to investment, growth and innovation. Regulations for our industry have not kept pace with advanced technologies, global practices or new product innovations. While outdated regulations continue to pile up, we are now facing a whole new level of government intervention in our industry.
The Healthy Eating Strategy, for example, will change how we make, label and sell our products. It’s hard to imagine the government asking any other manufacturing sector in Canada to make these types of drastic changes to an entire product life cycle all at once. To provide an idea of the pressures facing industry, the cost of all labelling changes currently on the table for food manufacturers amounts to $1.8 billion.
In order to avoid unintended consequences, we need regulations that are balanced, reasonable and science-based. We can do this without compromising public safety or health.
Our industry requires additional support to adjust to new regulations, manage the cost and respond to shifts in market demands. We would also like to see a coordinated approach for the agri-food sector across all departments, including coordination between the regulators and economic departments. This is important to determine the cumulative impact and consequences of regulations on both the industry that makes food and consumers who buy it.
Finally, it’s imperative that the government modernize existing regulations before introducing more regulations.
In conclusion, we are very interested in learning and continuing to work in close collaboration with the government to achieve their export targets and become more competitive in the global economy. Thank you.
Claire Citeau, Executive Director, Canadian Agri-Food Trade Alliance: Thank you for inviting me to speak on behalf of CAFTA, the voice of Canadian agriculture and agri-food exporters, regarding the competitiveness of the value-added food sector in global markets.
CAFTA represents the 90 per cent of farmers who depend on trade and producers, processors and agri-food exporters who want to grow the economy through better and competitive access to international markets. This includes the beef, pork, meat, grain, cereals, pulses, soybeans and canola, as well as sugar, malt and processed food industries.
Together our members include 90 per cent of Canada’s agri-food exports, which in 2017 exceeded $57 billion, and support about a million jobs in urban and rural communities across Canada. A significant portion of these jobs would not exist without competitive access to world markets.
Trade, free trade agreements and competitiveness of the sector are closely connected. Free trade agreements influence, in large part, the competitiveness of the sector in global markets or the ability to sustain competition over time in export markets. Many components of market access are directly under the influence of FTAs, tariffs, quotas, rules of origin, compliance to SPS-TBT provisions, trade remedies, subsidies and so forth. Competitive access to global markets through FTAs is our top priority as 90 per cent of farmers depend on world markets to sustain their livelihoods, and we export over half of our agri-food products.
The Asia-Pacific, Japan, NAFTA, Europe and China are at the top of our priority list. Our success depends on the timely negotiation and implementation of free trade agreements in markets that our competitors are also after.
First, it is paramount that Canada ratifies the CPTPP quickly. CAFTA has been a strong supporter of the CPTPP and applauded the fantastic news that Canada concluded the deal and signed it in Chile last month. The CPTPP will not only provide the sector with unprecedented access to the high-value Japanese market and rapidly growing Asian markets, such as Vietnam and Malaysia, but it will also provide Canada with a competitive advantage over the U.S. since the U.S. is not part of the agreement at this time. The CPTPP will enter into force after six members ratify it, and it’s very likely today that seven members — Japan, Australia, New Zealand, Malaysia, Singapore, Mexico and Brunei — will ratify and implement it before the end of 2018. If Canada is not part of the first six countries to ratify the deal, we may lose the first-mover advantage.
With uncertainty surrounding NAFTA, it’s essential for a globally competitive agri-food sector to have improved access to the markets in the Asia-Pacific region. Really, the best chance to implement the agreement quickly is to ratify quickly.
Second, given the importance of NAFTA to Canadian agri-food trade, our success also depends on Canada’s ability to reach a modernized agreement that will strengthen the access and competitiveness of the nation’s farm and food products. In short, maintain what’s been working and modernize NAFTA where possible. Specifically, the renegotiation should not allow it to include new tariffs or non-tariff barriers or any new provisions that could be used to limit trade.
In its submission, CAFTA has identified several areas where improvements to NAFTA can enable further growth for specific products, such as canola, grains, meats, sugar and sugar-containing products, among others, and in areas such as greater regulatory alignment and dispute settlement mechanisms.
We offer the following recommendations for Canada to contribute to a globally competitive agri-food sector. Canada should allocate proper resources to the entities in charge of negotiating and implementing free trade agreements, specifically NAFTA, the CPTPP, the WTO and China. Pursuing an FTA with China would boost our current exports to the world’s second-largest economy. China has already shown its willingness to embrace freer trade with agri-food countries, like New Zealand, Australia and Chile, and the rewards have proven substantial. With China poised to become the world’s largest agri-food importer by 2020, becoming a supplier of choice and securing predictable access to China will be critical to jobs and the economy here at home.
Canada should also allocate proper resources to the entities in charge of implementing free trade agreements and restoring market access. The CETA, the Canada-Europe Comprehensive Economic and Trade Agreement, came into force last September and presents huge potential for making greater inroads in this market, but it will take some time for some of our exporters to get real access to the EU due to the slow progress that the EU is making in allowing commercially viable access to the market.
Today, outstanding issues remain on meat processing protocols, crop protection products, country-of-origin labelling and the timely approval of biotechnology traits. Our members are also very concerned with recent protectionist measures from member states under the guise of country-of-origin labelling provisions that are not in the spirit of the CETA. Typically, once free trade agreements are implemented, multiple non-tariff barriers arise. So it’s essential that adequate funding be allocated to the Market Access Secretariat so that it can continue its critical work of minimizing technical barriers to trade and restoring real access for exporters.
Canada should also continue to support relevant ministers and senior officials in building relationships at a high-level in foreign markets. There also needs to be proper resources given to the network of Canadian representatives abroad, notably embassies and agricultural trade commissioners. Canada’s ability to build a competitive industry depends in large part on how well the country opens doors abroad. We need more high-level engagement, not less, in particular in Asian countries. Thank you.
The Chair: Thank you very much for those two excellent presentations. I’m sure lots of questions will arise as a result.
I’d like to ask senators — there are a lot of us here — to limit your questions to two maximum in the first round, and then we’ll have a second round if we have time.
[Translation]
Senator Maltais: I will address Ms. Ventin first.
You talked a lot about regulations and red tape that delay some things. You did not talk about your objectives. What are the growth and production objectives for meeting demand on international markets? That is my first question. I would also like you to give us some details on this subject, because, before getting to the heart of the matter, I would like to know your association’s objectives. Do you plan to increase the volume of products, or to refine more products in Canada? Is technological change slowing things down for you?
[English]
Ms. Ventin: Concerning the growth objectives of our member companies, the number one focus is adding value to the products that farmers grow in this country. We have incredible resources here. We have fantastic farmers. We have great technology. We have water, land and soil, so what we see as untapped potential is let’s not send these primary products abroad before adding value to them here in Canada.
That’s what we would like to see. We would like to work closely with the farmers and add value to those products, sell them abroad and then create those jobs here in Canada for Canadians. That would also feed into the entire value chain. So it would help farmers and communities, and it would also provide incentives to grow the manufacturing sector here in Canada. We see great potential in that area.
[Translation]
Senator Maltais: Ms. Citeau, you referred to the Canada-Asia free trade agreement, but Canada has 49 free trade treaties. Are you going to be able to supply enough for those 49 treaties? Is that too much to ask of you? Do you have the capacity to meet the demand?
Ms. Citeau: Absolutely, we have the capacity. Many of our entrepreneurs and processors are working under capacity at present. Yes, the capacity and resources are there. There is room in Canada to produce more. The problem today is not capacity, it is competitive access to the markets our producers and processors are aiming for.
Senator Maltais: There is one factor that is of concern to me, because farmers do not all have the same version of the facts as you have. Some agreement needs to be reached on that point. I think that when it comes to research and development in the area of new technologies, farmers are ahead of your processors. Is that perception right or wrong?
Ms. Citeau: In terms of research and development, our members are the ones who are directly involved in that kind of program. It is farmers and processors who want to export that we represent directly, and 90 per cent of them need to export their products, because we do not have the population in Canada to consume everything that is produced here.
[English]
Senator Doyle: Thank you for your presentations. You spoke about the growth objectives of your members. I’m wondering, in terms of availability and price, where Canada’s consumer food supply stands compared to the U.S. or the EU. Are we a typical G8 nation? Are we competitive in terms of availability and price? Would we be competitive with the U.S. and other countries that are doing similar things?
Ms. Ventin: Concerning the availability and price of food in the domestic market?
Senator Doyle: Yes.
Ms. Ventin: We do know that Canadians, compared internationally, spend less of their income on food than other countries, especially in Europe. In Europe, a larger portion of a consumer’s income goes towards food. We do have affordable food in this country and we are competitive in that sense, but that is not to say that we do not have issues with affordability in some rural and remote areas or Indigenous communities.
Senator Doyle: You mentioned that the EU market represents an awful lot of good opportunity for you in the future. Are Canadian food processors equipped to fully to take advantage of that new market?
You spoke about government regulations as well. What kind of new regulations would benefit your industry? I’ve heard it said that maybe we need some changes in transportation policy because the transportation systems that we have are probably better attuned to bulk shipping, et cetera. Do we need any changes in the transportation sector?
Ms. Ventin: To address the EU market, as Ms. Citeau has said, the EU market is very important for farmers and food processors, and there are the non-technical barriers. For our member companies, for example, you have a trade agreement, but what’s written on paper is different than what actually happens. There are all those little, minor details. For example, genetic modification of products and what the European Union will accept and not accept can be a challenge.
With regard to the domestic situation in Canada, it’s absolutely essential that both farmers and food processors are able to get their product delivered to their customer, so that would require predictable rail service in this country. This seems to be an ongoing issue that comes up, the unpredictability of rail in Canada, and that has a huge impact on the farmers and processors in this country.
Senator Doyle: Thank you.
Senator Mercer: Senator Doyle’s question and your answer brings me to my question. We keep talking about modernization. We keep talking in this committee about 9.7 billion people on the planet and the need to feed them. How do we do that without GMOs? You’ve already made reference to the fact that in the European Union, GMOs are not welcome with open arms. But they, too, have not come up with an answer to the question of how we feed 9.7 billion people on this planet. It’s a question that we’re all going to have to answer pretty darn soon because those people are coming and they’re going to be hungry.
We keep talking about modernization. Every time I hear “modernization,” I think of innovation. And GMOs could be part of that innovation. How do we do it? Are GMOs part of the future, or are they just in the way and we need to find a new technology to get us there?
Ms. Ventin: I think they are the future. Genetic modification is extremely important. There is no health or safety reason not to genetically modify a product. Products that have been genetically modified increase yield. They require less pesticide use, less water, et cetera. I think it’s an important technology.
There are also a lot of emerging technologies that will increase yield and a lot that we don’t even know exist at this moment. I think that genetic modification is an extremely important tool for farmers to use in this country.
Senator Mercer: Senator Doyle also made mention of transportation as being an issue. We’re a very big country, but this is also a very big world. I also sit on the Transport Committee, and one of the issues we continue to talk about is the availability of equipment to get products to market. The best example I can think of is pulse products from Saskatchewan. Getting them to the Port of Vancouver and on a vessel soon enough to get the product to Asia in a usable format that is for human consumption, not animal consumption, is a real challenge.
I would suggest that one of the possible solutions to that is to have value-added production happen in Saskatchewan and ship the product in another format where it’s not going to deteriorate sitting on the dock in Vancouver. That makes sense to me. The farmer grows it and somebody else adds to it. It’s about keeping those good-paying jobs in Canada and shipping a good quality product to our customers around the world.
The question is: Is transportation the single biggest problem?
Ms. Ventin: I think there are many challenges. Going back to a few of your points on value-added, it does make a lot of sense for value-added facilities to be right beside where farmers grow the crops. We know out east, for example, the potato products and the potato product facilities are right next to the farmers who grow those fantastic potatoes that we enjoy.
Going back to the transportation issue, it’s not just getting those products outside of the country but also within the country. Our member companies need to get those products onto grocery store shelves and into restaurants, and if we don’t supply those in a predictable way to our customer, it has a whole ripple effect.
If you look at all of the challenges we face, I think we need modern regulations and a domestic environment that supports innovation and growth. We need to address competitiveness issues and challenges. I think part of this equation is if we have a product, we have to deliver it to the customer. So I would say, senator, you are well aware that transportation is an important and essential link in this process.
Senator Mercer: Thank you.
Ms. Citeau: I wanted to add a bit more to your earlier question, if I may, on GMOs. It’s one of the reasons why we think there need to be commitments in free trade agreements to assign decision-making, timely, transparent, predictable processes. As our producers are using these technologies, the decisions need to be based on science, in free trade agreements but recognized at the international level as well.
[Translation]
Senator Dagenais: I would like to thank our two guests. Ms. Ventin, I have four questions to ask you quickly, and one for you, Ms. Citeau.
Ms. Ventin, do you have problems finding workers? What proportion of the workforce is skilled? Are there enough training programs in educational institutions? What could encourage young people to take an interest in jobs in your industry? And my last question, what difference is there, in terms of wages and benefits, for a worker in Canada as compared to the United States?
[English]
Ms. Ventin: Labour issues across the board, whether in the food processing world or farmer world, we definitely have challenges. With our member companies, there is a labour shortage. Whether in meat processing facilities or even in vegetable processing facilities, for example, we know that labour is required, because if we don’t pick that pea from the earth, wash it and flash-freeze it in three hours, we can’t use it. So labour is important and also a challenge. It’s hard getting people to show up for work and to have the availability.
In terms of skilled versus unskilled, I’ve visited many food manufacturing facilities. The people running those facilities have three degrees: engineering, food safety, et cetera. There is definitely a large skilled component.
Also, a lot of these manufacturing facilities now are automated and have robotics, so it would be very difficult for someone with my background, for example, to step in there and run those facilities.
But there are also some unskilled labour needs as well.
Attracting young people to the industry is an interesting question, and it has been a challenge. When most Canadians and youth think about food processing, they think about a 1950s model of manufacturing — a dark, dingy building — but it’s very much a modern industry. It is increasingly important because we all need to eat. But attracting Canadians to that profession is very difficult, and I know that attracting young farmers and keeping them on the farm as well is a real challenge.
[Translation]
Senator Dagenais: My last question is about the difference in wages between a job in Canada and the same job in the United States.
[English]
Ms. Ventin: I haven’t seen those numbers. That question about the salary of people working in manufacturing facilities as a whole in Canada versus the United States might be one for the Canadian Manufacturers & Exporters who will come later. I just have not seen those numbers. It’s an interesting question.
[Translation]
Senator Dagenais: I have one final question to ask Ms. Citeau. The trade agreements, if we manage to reach agreement on NAFTA — not just in principle, but with a firm agreement — will open the doors to exporting our products. Can you name the three main regulatory disadvantages that remain or that will remain, with these trade agreements, and that we could target in our work, to make clear recommendations in the report we will be preparing?
Ms. Citeau: Concerning NAFTA?
Senator Dagenais: We could talk about NAFTA, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), or the European Union. I imagine there are disadvantages or things that could be fixed, and, at that point, it might enable us to specify them in our report, by telling the government what the disadvantages are or what can be improved in agreements that will be signed in the future.
Ms. Citeau: Concerning the CPTPP, what our members are asking is that we ensure that Canada is part of the agreement when it is first implemented. That means that it should be one of the first six countries to implement the agreement when it is ratified. Why? Because there are other countries that have agreements with Japan and Australia, in particular. Europe has signed an agreement with Japan that will be implemented in 2019.
If you look at the situation, Japan is our third largest export market and a high value market. Our competitors, Mexico and Australia, already have access to it, and, because of that, our farmers and processors are lagging behind. The other countries and our competitors in Melbourne, for example, have better access than our farmers and processors. Why? Once the free trade agreement is implemented, it will remedy that. The longer we wait, however, the more our farmers and processors will be at a disadvantage as compared to their competitors. It is really important that Canada be in the first group of countries to implement the agreement; otherwise, we will continue to lose ground.
On the second point, concerning NAFTA, it is really important to make sure that we come to a new agreement, preferably one that is modernized and improved. Given the integration of the agri-food markets in North America, if NAFTA came to an end and one of the countries were removed from the equation, it could have a domino effect. What would the implications be? We do not know that, today, but they would be devastating for our farmers and processors, who have integrated systems in North America.
The Comprehensive Economic and Trade Agreement, or CETA, today is an agreement that is much talked about and that offers immense opportunities, but, unfortunately, almost half our members are unable to benefit from it, because there are still non-tariff barriers to be resolved. It is really important for Canada to work hard with Europe to ensure that it keeps the promises that were made in black and white in the agreement that we have supported from the outset, but that have not come about in reality.
Senator Dagenais: That means that, even if we sign agreements, countries do not always abide by them. It is written down in black and white, but we have trouble having them applied.
Ms. Citeau: Exactly.
[English]
Senator Woo: Thank you, witnesses, for your testimony.
When Dominic Barton and his group talk about how Canada can be an agri-food superpower — you cited that in your presentation — my sense is that they say that with a kind of surprise that we’re not already an agri-food superpower. They’re not saying it so much that this is the ambition we should work toward if we try really hard and mobilize all our resources. My reading of the report is that they look at what we have — agricultural resources in the form of land, water and crops — and yet we are not an agri-food superpower. I don’t know if you share that interpretation, but I certainly pick up that sense from the report.
To me, the underlying question is: Why aren’t we already an agri-food superpower?
I want to focus my questions on the front end of value-added food product development, which is R&D innovation. I look at your membership in the FCPC, and I recognize many of these names, as all of us do. Many of them strike me as foreign companies with subsidiaries in Canada — not all of them, of course.
Please give us a sense of how much innovation is taking place within your membership in Canada beyond simply assembling the products, manufacturing them and packaging them for sale.
Ms. Ventin: The member companies that we represent would be small companies, large companies, multinational companies, Canadian-owned companies that would supply products to grocery stores, different brands, store brands, restaurants. So it’s a wide variety. We do have multinational companies that have manufacturing facilities here in Canada.
As to the amount of innovation and R&D that takes place for each individual company, I think that would depend. There is a broad base of membership. There is a lot of innovation taking place. I think that more needs to be done.
I think the 2014 KPMG report that looked at it from a broad spectrum is really interesting. Rather than looking specifically at our member companies individually, it’s the broad spectrum of the food processing industry. A lot can still be done in adopting and integrating that technology into manufacturing facilities.
Senator Woo: That brings me to the next question, which is to ask both of you to give us a sense of the agri-food value-added/innovation capabilities in Canada. Give us a sense of the landscape in the different areas. Of course, I’m not just talking about food product innovation but also food processing technology, the use of big data, packaging technology, QA/QC, the whole value chain. Where are the strong areas of research and R&D and innovation that are going on? You had alluded to a supercluster in agri-food. Could you tell us a little bit about that? And where might we want to place some big bets if we were to do that?
Ms. Ventin: There are five superclusters in total. There is one on advanced manufacturing, which has great potential for our member companies and our industry.
As well, there’s the protein supercluster. That, I believe, is based in Saskatchewan.
It’s actually interesting; many of the superclusters touch on agri-food right across the board. I think that that’s the point of it, to be integrated and include many aspects and many industries within Canada.
I think that the focus of many of the superclusters, I know specifically the advanced manufacturing one, is how to encourage manufacturers and bring together the right people, whether it’s the academics, the universities and all the researchers across Canada, to have that discussion and connect the dots. I know that Innovation, Science and Economic Development is also working on this.
It’s interesting that you’re asking about the research currently taking place across Canada. I think that, right now, there has been recognition of the disconnect. A lot of interesting research is taking place in technology, and then there are the food manufacturers and the industry on the other side. I think that it’s trying to connect those dots and having these different groups speak to one another. I think one of the key foci of the superclusters is to bring all of these people together to try to increase innovation in this country, both product innovation, finding new products that people like, and process innovation such as automation and robotics so that we can make those products in a greener, smarter and more efficient way and be more productive.
Senator Woo: It sounds like the gap you’re identifying is the one between a lot of research that is already going on and the commercialization, the applicability, of the research by the commercial sector.
Did you want to add anything, Ms. Citeau?
Ms. Citeau: Maybe just on your earlier question.
Canada, today, is the fifth-largest exporter of agri-food products in the world, but we used to be third. Today, we’re behind the U.S., Brazil and Europe, but we used to be the third-largest exporter.
Senator R. Black: What are we today?
Ms. Citeau: Fifth. That’s the need to have competitive access to the markets that our competitors are also after. I think it’s important to get free trade agreements with large, important markets but also look at what our competitors are doing so that we are either ahead of the game or get to a level playing field.
Senator Oh: I have two questions for you. I want to talk about value-added products in each market. The key to success in value-added products is to identify the high demand in each market. It could be anything new — packaging, processing, branding, attracting or catering to specific cultures, ethnicities or even religious traditions. Canada is a multicultural nation, with people of many different ethnic and religious backgrounds. How have your members coped with these kinds of demands?
The second question is: How does your organization help your members in identifying and expanding the niche market?
Ms. Ventin: Yes, Canada is very multicultural, and we have Canadians who are interested in all types of different products. In order to be successful in the food world, you need to know your customer. It’s important to understand that consumers’ needs are changing. Consumers want different types of products than they did 20 years ago or 40 years ago, or they may come from different backgrounds and demand that type of different product, niche product.
Consumers are also looking at packaging. Some are making decisions based on packaging. For example, they don’t want a small product in a very large box. They want that packaging to be recyclable, even compostable, if that’s possible.
Consumers, when they choose a product, are also looking at considerations like the environmental sustainability record of a company. They may know that a company does very well in environmental recycling or other sustainability commitments, and, therefore, they may choose their product according to that company brand and what that company is doing internationally.
How to identify these niche products? I think that’s the type of thing that goes on every day within food companies. Again, going back to knowing your customer, know your customer in Canada and know your customer internationally. I will say that, internationally, one of Canada’s biggest advantages is the Canada brand. We are very well respected for high-quality products. When people think of Canada, they think of our pristine water. They think of our land and our soil, and the Canada brand goes very far.
Ms. Citeau: Some of the things that our members are looking for in free trade agreements with various markets around the world is the ability to not only diversify markets, get better value for their products, but also find markets where they wouldn’t be able to sell typical products here at home or in the U.S. For example, in Asia, some of our meat members will be able to sell parts of the animals that they are not able to sell in the U.S. or Canada or Europe.
Senator R. Black: Following up on that question and recognizing that consumer choices are increasingly driven by ethical, environmental and health concerns or issues, can you give us specific examples of innovation that the sector has made in meeting some of those consumer demands?
Ms. Ventin: Concerning innovation, let’s think about packaging. A lot of our members have moved toward packaging that is a lot smaller or that can be composted — for example, a coffee pod that is fully compostable, which is a huge innovation. Canadians look at that around the world and think that that’s the type of product they’re very interested in.
As to other types of innovations specifically, I would say that, on the environmental sustainability front, a lot of work is being done there.
Ms. Citeau: I’d have to refer to my members.
Senator R. Black: But there is work being done?
Ms. Citeau: Absolutely.
Senator Gagné: I’m sorry I was not here for your presentation. This is a follow-up question to Senator Woo’s question pertaining to a gap. You mentioned that there’s a gap between the research and commercialization. How does Canada bridge the gap between research and bringing the product to market?
Ms. Ventin: Yes, I absolutely think there is a gap. How do we bridge it? I think the government has been moving forward in that direction. The superclusters are a good example of bringing the right people in the room. As I mentioned, technological innovation is taking place, but it’s really connecting those dots. It’s really interesting.
We have the capacity in Canada and we are already doing it in some areas, making the technology used for manufacturing facilities. But in the food processing world, we’re importing most of the equipment used in our facilities. Why aren’t we making that equipment in Canada, rather than importing it mostly from Europe? When you import this equipment, you also have to get that technical expertise as well, because you don’t just take the equipment and put it into a facility. It needs to be integrated, and you need engineers and food safety folks involved.
How do we bridge that gap? I know that Innovation, Science and Economic Development Canada is doing work in this area, trying to make those connections. I think the superclusters are positive as well. The government’s initiative on the Agri-Food Economic Strategy Table is looking at how to grow the agri-food industry from a broader perspective and bringing in technology, folks who develop technology and innovate here in Canada. So I think there are some good initiatives moving forward on that.
But we are a big country and food manufacturing is very diverse as well. A dairy processing facility is very different than a meat processing facility or a vegetable or potato processing facility. There are diverse needs, and different types of researchers, equipment and expertise are required across the board.
Senator Gagné: On your observation pertaining to the fact that we import most of the equipment, is there a role for the government in helping manufacturers to ensure that we have the equipment in Canada or that we are doing research to have the capacity to manufacture the equipment?
Ms. Ventin: Absolutely. I think we need to provide support to researchers. Right now, in Agri-food Canada, the vast majority of research is dedicated toward the farming industry and primary products; I would say 90 per cent. To your point, I think we do need support for the value-added side. What happens once it leaves the farm gate and having that support and innovation is essential.
Senator Mercer: Going back to my original question, I talked about the use of the word “innovation” and what that means to everyone. You mentioned a couple of times the use of robotics in food production and in farming.
We continue to have the problem in this country that we’re always the nice guy on the block and we play by the rules, but all of our competitors not necessarily play by the rules. My favourite saying around this table is that the most important piece of equipment on an American farm is the mailbox, where the cheque comes in from the government — not subsidies. A cheque by any other name would be a subsidy. We don’t have that happening in our country. If we’re going to go to the agri-food superpower status that we all aspire to, we’re going to have to rethink a whole bunch of things that we’re doing.
You also mentioned the fact that you need to know your customer, which leads me to a conference this fall in Paris from October 21 to 25 that’s billed as the world’s largest food exhibition. Will you be represented there? Will you have people on the ground there? Will your organization be there, or will it be just your member companies in the room?
Ms. Ventin: Some of our member companies may be involved in that and the Government of Canada may be involved. But as an association, we don’t normally attend those.
Senator Mercer: It would seem to me that with the new agreement with the Europeans, this is an opportunity we probably shouldn’t miss. Over 7,000 companies from over 109 countries will be in attendance. When you get that many customers in one spot, we might want to put on our best suit and show up.
Ms. Ventin: It sounds like a very good opportunity.
Ms. Citeau: I think you’re referring to the SIAL trade show in Paris, which is one of the largest. There’s also Anuga, and they switch every year back and forth. Some of our members attend or their marketing organizations that are responsible for the trade promotion side.
Senator Mercer: This committee is familiar with the power of these exhibitions. A year or so ago we attended a very large agricultural conference in Shanghai and saw the power of these shows. We also saw the power of the Canadian brand. It was really quite fascinating to watch it and to be there to support it as well.
[Translation]
Senator Maltais: I would like to raise a point so that you can discuss it with your members, regarding packaging of your products. The society we live in is going increasingly green. For example, when we unwrap our groceries, there are useless plastic bags and packaging. Could biodegradable paper bags replace the plastic bags? Because when you come home from the grocery store, you get the feeling you have two spruce trees in your bag. Are efforts being made, or is new research being done, about this? I would remind you that we have a lot of wood in Canada. So there is no problem making paper. That would be one way to put our natural resources to another use.
[English]
Ms. Ventin: Packaging, yes. This is absolutely top of mind.
Before I answer your question, I spoke a lot about regulations earlier on. We have some regulations right now in Health Canada that are going to require more labels on the consumer product side. So rather than having a package this big, now the package has to be this big. It’s interesting. The regulators are wanting more information on it and we have consumers who want less packaging, yet the new regulations will require even bigger boxes. So we’re very concerned about that issue.
Concerning plastic, specifically plastic bags, there’s definitely an opportunity and our industry has been engaged with the government on looking at better types of plastics, for example, that can be compostable and also using less plastic, which is a key issue. Many of our member companies have done a lot of innovation in this area at a global level. It’s a really good opportunity for government and industry to work together on this.
At the upcoming G7 summit at the beginning of June, we understand the Minister of Environment may put forward a plastics charter to reduce the amount of plastics used in the world. This is a very topical issue. We know that China has recently closed its doors to most of the plastic recycling that we used to export there.
I always like to look at what happens in the Netherlands, and the Dutch have introduced the first plastic-free grocery store. They are really moving ahead there. The Dutch, actually, are a great example because they invest an awful lot in innovation. They have some of the largest R&D innovate hubs in their country, because they’ve made that a priority.
[Translation]
Senator Maltais: I am going to stop you there. Canadian consumers have the impression that you are not on the right track. You depend on officialdom with your regulations, and so on. I do not want to know what is happening in the Netherlands. I would like to know what is happening in my country, first and foremost. Your consumers are very critical of you for not having a long-term action plan. I would like to know what you think and what your members will do in the medium and long term regarding plastic packaging. It is ridiculous. You buy a steak on a little Styrofoam slab, wrapped in plastic. Then the butcher hands you the piece of meat in a plastic bag. I get the feeling there is more plastic than steak. Consumers are entitled to wonder about it. They are entitled to know what you plan to do in the future.
[English]
Ms. Ventin: Sure. As I mentioned, many industries use plastic, not just the food industry. There are many throughout the value chain that have to package products, not just the processors. But there have been good developments in the reduction of the amount of plastic packaging used in Canada.
Absolutely, I think it’s very important to look at the environmental impact. That is top of mind. Also, it’s important to look at what the customer is looking for. Increasingly, customers have that choice.
Those are really great points.
[Translation]
Senator Maltais: To conclude, I am going to give you a very simple example. When the cow arrives from the slaughterhouse, it is not wrapped in plastic. It has only its skin. It should be brought to the table with the least interference possible when it comes to packaging.
[English]
The Chair: I have two questions. The first is to follow up on the issue of the scarcity of labour. Temporary foreign workers were seen as a stopgap measure, but I understand that while we’ve had a lot of temporary foreign workers in our country, it seems to be increasingly difficult to get approval to bring them here. Is that your reading of the situation?
Ms. Ventin: Yes, that is our reading of the situation. Also, getting access to labour for food manufacturing facilities, and with the farm groups as well, is a huge challenge. Much of it is also regionally based, whether it’s fish processing facilities or meat processing facilities, et cetera, but it continues to be a huge challenge.
The Chair: I’m following up in terms of you having mentioned that the problem is not capacity; it’s competitive access. Actually, the capacity is being impacted because of transportation, as you acknowledged, and also the labour shortage. That’s just a note, not a question.
You mentioned equipment and innovation. It would seem that innovation in terms of equipment development in Canada is at a dearth throughout our whole food supply chain and that other countries like Denmark may well be beating us to the punch on this. Are you familiar with what’s going on in Denmark in terms of equipment development?
Ms. Ventin: Specifically with Denmark, I’m not, but I do know that countries in Europe, generally, do quite well in developing that manufacturing equipment. It’s right across the board — for example, Germany. As I said, it’s not just in food manufacturing but right across the board. It’s because they invest in innovation in those areas. A lot of good work is being done there.
The Chair: Thank you. We’ve had a lot of questions for you, and thank you so much for your presentations today. It’s been great to have you here.
We will now hear from our second panel. With us today, we have representatives from the Conseil de la transformation alimentaire du Québec, Ms. Sylvie Cloutier, the President and Chief Executive Officer; and Mr. Dimitri Fraeys, Vice-President of Innovation and Economic Affairs. Also, from the Canadian Manufacturers & Exporters, we have Mr. Mathew Wilson, Vice President of Policy and Government Relations.
Thank you, folks, for accepting our invitation to be here today and to make presentations.
My understanding is that Mr. Wilson will start. The floor is yours.
Mathew Wilson, Vice President, Policy and Government Relations, Canadian Manufacturers & Exporters: Thank you for having me here this morning. I’m here representing Canada’s 90,000 manufacturers and exporters, and our association’s 2,500 direct members, to discuss how the value-added food sector can be more competitive in global markets.
Manufacturing is the single largest business sector in Canada. The manufacturing industry’s contribution is critical for the wealth generation that sustains the standard of living of every Canadian. The industry accounts for 11 per cent of Canada’s total economic output while employing over 1.7 million Canadians directly in good, high-paying jobs.
Value-added food processing is one of Canada’s largest and most important manufacturing sub-sectors, reaching a record total output of $103 billion in 2017. The sector makes up 15 per cent of all manufacturing activity in the country and employs more than 227,000 Canadians. The value-added food industry is not only an important economic sector but one which CME believes has tremendous untapped potential.
In 2016, I had the opportunity to consult with roughly 1,200 manufacturing executives about the future of the sector and opportunities for growth. This initiative was dubbed Industrie 2030, and our goal is to double manufacturing output and value-added exports by 2030.
To achieve this goal, we examined a wide range of policy issues that would impact investment, R&D, growth and scale-up of all manufacturers across the country. We also looked at specification sectors, those with untapped potential that can and must be harnessed to meet these objectives. Canada’s agri-food manufacturing sector was one of those that stood out above almost all others for that potential.
The reason is simple. For generations, Canada has been an agri-food powerhouse. We started out as a country supplying fish and other natural resources. We became the breadbasket of the empire. We even turned into one the largest suppliers of alcohol to a prohibition-era United States. And today, Canadian companies have built global brands, supplying everything from french fries to meat products to pulses.
But so much more can and should be done. We believe Canada is only scratching the surface of what is possible for two critical reasons. First, the sector has historically under-invested in technology and productivity and has greater potential for growth if we can drive investment. Today, food processing is one of Canada’s fastest-growing manufacturing sub-sectors. In the last five years, the value-added food-processing sector has grown by 21 per cent, almost twice as fast as the sector as a whole. This growth has happened despite machinery and equipment spending in the food processing sector peaking in 2014 and declining ever since, much like the rest of the manufacturing sector. We need to reverse this investment slide if we want to see continued growth.
Furthermore, the sector today is at capacity with little room for additional growth. In manufacturing terms, max capacity of a facility is roughly 80 per cent, with the excess time needed for repairs, maintenance and product changes. Today, Canada’s value-added food sector is running at over 88 per cent capacity, which directly limits and constrains growth. Simply put, without new investment and capacity, there is no room for growth, and this holds back Canada’s potential.
The second issue is more focused on the domestic nature of the business and opportunities for growth internationally. Unlike other sectors in manufacturing, food manufacturers tend to produce and sell to a domestic consumer base, and there are much greater markets globally where Canada can succeed. While value-added food exports have roughly doubled in value over the last decade, there is more room for growth. By comparison, Canada’s auto sector accounts for roughly 15 per cent of all manufacturing output and 22 per cent of all value-added exports. The agri-food sector accounts for 15 per cent of output as well, but only 9 per cent of value-added exports. So the sector is roughly the same size and scale as Canada’s auto sector but exports less than 40 per cent of the total.
Canada is known internationally as a source of high-quality and safe food products, and we should and must capitalize on this reputation to expand global sales and growth at home. This is especially true at a time when emerging markets are rapidly growing their middle classes and are looking for exactly the products Canadian companies can offer to global customers.
These twin challenges can be significant opportunities for Canada and our food manufacturing sector. But to capitalize on them we need government to act and support that growth. Specifically, we think there are three core areas for government to focus its attention on.
First, create a competitive business environment that reduces the cost of doing business and encourages growth and production through tax and regulatory reform to ensure efforts and actions are in line with comparative jurisdictions.
Second, we should be introducing globally competitive investment support programs to assist companies with planned expansion, technology adoption, product innovation and commercialization, including an expanded accelerated capital cost allowance program to support investment.
Third, we must support international expansion by creating export readiness programs for SMEs, which would include: introducing a private sector-controlled export concierge program to link SMEs to government services, introducing an export tax credit for companies actively growing exports; develop a made-in-Canada promotion campaign for use at home and abroad; and focusing on free trade agreements and related support programs on agri-food exports.
While these policy supports are critical to drive growth in Canada’s food manufacturing sector and meet our Industrie 2030 objective of doubling manufacturing output, we believe more can and should be achieved. More strategically, we believe that Canada has the potential to be a food manufacturing superpower, one that is driven by innovation at home and can provide world-class products to customers all over the world. We have the resources and capabilities that almost all other countries can only dream of. We should be aiming for this goal and we hope the work of this committee will help set us down this path.
Thank you very much, and I look forward to the discussion.
[Translation]
Sylvie Cloutier, President and Chief Executive Officer, Conseil de la transformation alimentaire du Québec: Thank you, honourable senators, for inviting me to appear before you. The Conseil de la transformation alimentaire du Quebec, or CTAQ, is the leading business alliance operating in the food processing sector in Quebec with over 500 members.
The food and beverage processing industry is the leading manufacturing industry in Canada in terms of GDP and value of production, delivering $112.4 billion in 2016 which accounts for 18 per cent of the total manufacturing deliveries and 2 per cent of the national GDP. In Canada, the industry invests $2 billion per year in capital assets, of which 80 per cent goes towards equipment and machinery. In Quebec, investments are declining to $382 million.
The 6,900 businesses in the industry are the largest manufacturing employer providing direct employment to more than 257,000 Canadians and it employs more Canadians that the automobile and aerospace industries combined. The food sector provides approximately 70 per cent of the food and beverages processed in Canada and the leading buyer of foodstuffs. The exports of processed food products to 192 countries continue to grow and totalled $33.5 billion in 2016.
According to the Barton report, Canada is expected to export $75 billion in 2025. However, Canada can only reach this through the value creation of agricultural products. The Canada brand is a major advantage in exportation, which is something that should be leveraged here in Canada. In fact, in order to use the claim “Product of Canada,” 98 per cent of the ingredients must come from Canada. This significantly limits the use of the brand and the identification of export products. The industry recommends that the threshold be lowered to 85 per cent.
In Quebec, there are more than $28 billion of deliveries and the food processing sector is also the leading employer in the manufacturing sector, providing direct employment for approximately 66,000 persons across 1,600 businesses which are found in more than 1,800 establishments across Quebec.
The intervention of food processors adds value to food and beverages and allows all Canadians to consume a varied diet throughout the year. Our industry is a key link between agriculture and food and beverage distribution. In fact, 70 per cent of agricultural production in Quebec and Ontario is processed by the industry, which represents the main outlet for this sector.
The growth of the agri-food industry relies on market development. In Canada, the domestic market offers significant potential growth, but this is limited. As such, the growth strategy is based on agri-food exportations of value-added products, which should benefit the entire agri-food chain. The term “value-added” can be described in two ways. First, by the total return on capital and labour, which corresponds to the difference in the good’s value at the end and at the beginning of the production or transformation process. It also takes into account the raw materials and services acquired and consumed to produce or process them. The value-added creates economic activity at each step during the good’s processing, contributes to the GDP and as such, constitutes a measurement of the health status or significance of an industry or a sector.
The term “value-added” can be defined as the enhancement, improvement or processing of a product to increase its consumer appeal or to move it up the value chain. By adding value to an agricultural product to better respond to consumer needs or trends, the processor ensures an advantage over its ‘competitors and the growth of its share of the market or the ability access the market more easily.
The trade of bulk commodities and goods has always held an important place in the Canadian economy. When foodstuffs are sold in bulk with a decreased value-added, the price becomes the principal determining factor; as such, Canada is at the mercy of low-cost entrants in the global market.
The increase in value-added food products is very beneficial to the Canadian economy and the communities through increased employment and economic activity; the promotion of a culture of research and innovation; a decrease in dependence upon the global price of foodstuffs; better recognition of the distinct brand of Canadian products due to the quality assurance resulting from certifications, quality standards and the food safety, tracking and tracing systems.
I will now hand the floor over to my colleague.
Dimitri Fraeys, Vice-President, Innovation and Economic Affairs, Conseil de la transformation alimentaire du Québec: Hello. Thank you for inviting us to appear before you.
In Canada, the value-added is evaluated at $39 billion, while in Quebec it is evaluated at $11.9 billion. As such, Quebec businesses, which produce 22 per cent of manufactured deliveries, created 30 per cent of Canada’s value-added.
Canada has the capacity to generate value-added products to respond to the consumer demand around the world, all while remaining competitive in the Canadian market.
Current federal-provincial arrangements, such as the Agricultural Policy Framework 2018-23 promote value-added by emphasizing attributes such as food quality, safety and environmental standards. The approach of agri-food value chains or working in a chain aims to increase their competitive advantage by collaborating on a project, which brings together producers, processors, food services companies, retailers, service providers like consigners, research groups, in short, the entire chain. A value chain is a strategic partnership among interdependent businesses that collaborate to progressively create value for the final consumer resulting in a collective competitive advantage.
The efforts of a sector based on collaboration with the aim of developing and commercializing products in an efficient manner should permit to businesses to respond to market needs. The alignment of production, processing and commercialization with consumer demands is a winning recipe for the food industry. As such, the innovation superclusters recently announced by Minister Bains in the plant protein industries will permit the creation of a value chain, which will allow Canadian savoir-faire to be exported, and the world to be fed.
Value-added must occupy a prominent place in the future of the agriculture and agri-food system. Programs which permit action plans and strategies to be developed with the aim of helping farmers to climb the value chain and develop processing activities on the farm must be encouraged and supported. Moreover, Farm Credit Canada’s venture capital fund finances some of the venture capital investments in value-added products. Investments in agriculture and food research and development must be increased. The companies must also innovate if they want to distinguish themselves, export more or survive. Investment in company productivity, automation, robotization and modernization, in line with Industry 4.0, will equip them to deal with labour shortages.
Canadian businesses must be supported in adapting to regulatory changes imposed by the Canadian Food Inspection Agency, the CFIA, and Health Canada. A study from June 2017 estimates that the industry should invest an additional $2 billion in order to meet the new labelling rules, which will be in place in five years.
There must also continue to be investment in the development of exports, particularly in Europe, China and India. The growth of these markets, as well as the possibility of selling these products at a higher value, due to commercial agreements such as the CETA between Canada and the European Union and the CPTPP, will continue to progress as these economies grow and become richer, as those countries will be able to buy more of our products.
Value-added is rooted in the branding of health, quality, regional or other attributes that respond to consumer demand. It manifests itself in increased consumer confidence in Canadian food and by competitive prices for Canadian products beyond our borders. Canada is rich in all types of resources, which can produce quality value-added inputs and food products in large volumes. However, in order for its products to remain competitive and gain new markets, value-added attributes must play a prominent role in the future of our agriculture and agri-food system.
Thank you for your attention.
[English]
The Chair: Thank you for your presentations. We have a number of senators already indicating they want to ask questions. There are quite a number of us in the room, so we’ll start with two questions each, and if we have time, we’ll do a second round. I’ll ask senators to keep their questions concise and witnesses to keep their answers concise.
[Translation]
Senator Maltais: Thank you for your excellent presentation, ladies and gentlemen. I do not know whether you were in the room about 30 minutes ago, when we heard from another group who had something different to say. I find you to be much more progressive. Certainly, the Government of Canada has responsibilities to the agricultural sector and value added. I think it is not doing too badly, but it is on the edge of what is acceptable to the other countries in terms of the free trade treaties. With time, we will be able to do more. What I like is your positive attitude. We were presented with a litany of extraordinary requests just now, but we were not told how we were going to arrange it, while you know where you are going. Congratulations, because it is important to know where one is going.
I have a very simple question. Mr. Wilson, you said that we have reached about 85 per cent of our production capacity.
[English]
Mr. Wilson: About 88 per cent.
[Translation]
Senator Maltais: So, 88 per cent. What is lacking, in order to achieve 95 or 98 per cent?
[English]
Mr. Wilson: Eighty-eight per cent is actually way above normal production capacity for most industries. Aside from the automotive sector, which runs at about 105 per cent capacity because of overtime and other things they do, most sectors are running in the 70 to 75 per cent range across the country. Therefore, 88 per cent is quite high. In fact, we need to see that lowered by adding more production capacity into it so companies have more room to adapt and be a bit more flexible on their product nexus.
So 88 per cent is very high.
[Translation]
Senator Maltais: Ms. Cloutier, I am a Quebecer like yourself, and we hear a lot about labour problems in agriculture. How can farmers and processors combine their efforts to try to solve the problem? Because we are going to have to find a solution at some point. Do you have a solution? For farmers and processors, both of whom have shortages of skilled and unskilled labour, what is going to happen five years from now?
Ms. Cloutier: Labour is indeed a priority; in fact, it is the top priority when it comes to ensuring the survival and competitiveness of our industry. There are a few solutions. You spoke to the previous group about temporary foreign workers. That is an issue that is of more concern to the food processing sector than the production sector. The law changed a few years ago, and agriculture was exempted from the changes, but not food processing. During harvest time, which is often in the fall when students have gone back to school, we have a labour shortage already, to start with, because the temporary workers are no longer available. At that point, if we had the same exemptions as agriculture, we could use the same workers that work on the harvest, who could then work on the manufacturing end. That is a solution that we have presented to the government, in relation to regulatory changes.
Mr. Fraeys: The other factor, one that is crucial and of considerable concern, is that the time it takes to be able to hire temporary foreign workers in the plants keeps getting longer. I understand that at this time we are caught up with the issue of refugees at the border, but the fact remains that it is now April and it will soon be time to start seeding, and companies still do not know whether they will have the employees they need to run the plants. Often, the need is not necessarily for astronomical numbers of workers, but enough to allow for a second or third shift. I will give you an example. Last year, foreign workers made it possible for Quebec workers to take a weekend off after two weeks of work without a break. When you have a harvest, you have to process right away. It cannot wait; it is not a production line. When the peas are harvested, you have three hours to can them. Those are the kinds of details that are crucial.
Another factor that Sylvie addressed earlier is the way the programs are managed for agriculture and processing. There is a wall. I will give you a concrete example. A company that processes vegetables has workers in the fields to harvest and workers in the plant to pack. Those workers are not able to communicate between each other. If it is raining, the workers in the fields will be watching the rain come down, but they cannot go and work in the plants. It is the small details that can make all the difference.
Senator Maltais: Senator Mercer spoke earlier about the big exhibition in Shanghai. There is one in Paris. Are you going to be there this year?
Ms. Cloutier: The CTAQ is always there. As you no doubt know, Quebec, or Eastern Canada, has created a special partnership with Europe by recently signing the agreement with the European Union. It will stimulate an exceptional level of trade in products, and it presents a good opportunity to export our products to European countries. Quebec has a strong presence at the Salon international de l’alimentation, or SIAL. Canada will have a very large booth. It is a unique opportunity to get to know more about trends and learn where we will eventually be able to export. It is a golden opportunity. There is also the Montreal SIAL that will be held in May. It is an important exhibition, but not as large as the one in Paris. The SIAL in Paris lets us be in the vanguard and explore the major agri-food trends.
Senator Maltais: CETA gives us the opportunity to know what their new requirements are. They are very stringent regarding our products for import, and you also have to know your requirements.
Ms. Cloutier: It is an opportunity to make and form alliances with foreign companies or European companies, to facilitate the exporting of Canadian products that meet European requirements, and vice versa.
Senator Maltais: A few weeks ago, the Saskatchewan Minister of Agriculture appeared before our committee. He told us to get out of Ottawa and go and look elsewhere. Do you think our committee should take part in that exhibition, to see what is happening with producers and processors?
Ms. Cloutier: I encouraged you to do that two years ago. So I encourage you again, today, to go. It is an exhibition that really gives you an overview of what is going on at the global level.
[English]
Senator Doyle: Thank you for being here. You mentioned that the federal government probably should be much more involved in the manufacturing sector. Do you see government changing its attitude any time soon given the fact that your market opportunities are opening up a great deal with the TPP, the EU and what have you? In what areas specifically could government be assisting you to take advantage of these opportunities that TPP and the EU offer? Is there anything that comes to mind specifically that they should be doing right now to assist you?
Ms. Cloutier: The federal government has been changing its attitude toward the food industry in the past couple of years. Since the Barton report, they have identified agri-food as one of the leaders in the Canadian economy, and they recognize the need to invest in the agri-food sector. They have just launched a process for the superclusters, and we’ll have one in agri-food, which is a first in Canada. But also I believe that, right now, I see a positive change toward our sector.
The help could come in supporting productivity. As you know, we have a shortage of labour, and if we want to be able to accommodate or take advantage of these new trade agreements, we need to be more productive in the agri-food sector in Canada. We’re talking about R&D, innovation, and support in those areas to help our industry to be more toward Industry 4.0.
Mr. Wilson: I would agree with everything that she just said.
The other thing I’d add is that from an export perspective, one of the challenges we have in Canada is actually the structure of our companies themselves, whether it’s in agri-food or manufacturing in general. Our companies are very small compared to European and American companies. We’re talking about an average company size of less than 10 employees, and 95 per cent of all manufacturers across the country have fewer than 20 employees. These are really small companies, with very limited internal resources to actually do anything. It’s one thing if you’re talking about a McCain or a Maple Leaf that is looking to export. They have the internal expertise to be able to drive exports, to invest. They understand what Industry 4.0 means. Most companies have no idea at all. They’re very small. They’re mostly family-owned, run by the person who developed the food product, and they really struggle to understand what’s going on in global trends. They understand how to invest. They struggle in how to invest in the right types of technologies that would suit their companies, also how to invest in developing new markets internationally.
One of the big foci we have working with Minister Bains’ office, as well as Minister Champagne’s office, is: How do we help those SMEs invest the right way so that the technologies will be meaningful for them? They struggle with the capital necessary to make those investments because banks often don’t give the capital out that easily to manufacturers.
Finally, how do you help them to find those new markets? It’s one thing to sign a free trade agreement. It’s a whole other thing to actually get companies to go international. Most SMEs do not trade outside of their supply chain. When you look at trade generally, the majority of our trade from Canada, yes, goes to the U.S., but more than that, it’s very concentrated within a few large supply chains in the automotive and aerospace sector and some in food products. We don’t just randomly start shipping stuff to Europe or Asia. It’s not typically what we do, and we need to help companies to get there. It’s the SME support that really is necessary.
[Translation]
Mr. Fraeys: I would like to add a comment. Over the next few years, Canadian companies will have to spend over $2 billion to adapt to the regulatory changes. That will be $2 billion that they will not be able to invest in innovation and in developing markets. On the one hand, the objective is to export $75 billion, and, on the other hand, companies have an obligation to adapt to the regulatory changes, that is, to review all the labels and all the products, to be able to show everything that is in the products to be sold to consumers. We agree with this approach, but you have to understand that a company cannot both comply and also invest in robotizing and in developing markets. We are at a very restrictive crossroads for companies.
To come back more specifically to trade agreements, the sectors that will benefit are those in which Canada is very strong, that is, fruit, in particular cranberries, and vegetables. So the sectors that will benefit the most from CETA are meat, fruit, vegetables and maple syrup. When we talk about trade agreements, not everyone has access. There are certain specific sectors in which Canada is stronger than other countries, but what I said earlier has to be kept in mind.
[English]
Senator Doyle: Do you see any shortcomings or gaps in Canada’s transportation infrastructure that are negatively affecting your competitiveness?
Mr. Wilson: Yes. We hear from our members across the country that getting anything to a port to export to foreign markets, even a port like Windsor in southern Ontario, is difficult at times. So the transportation infrastructure does play a major role.
It seems to be a lot easier to get things in than get things out. Going east, for example, there’s really only one line, one track going to the Port of Halifax by train. The road is a long drive. Depending on the type of good or commodity you’re shipping, the roads may not be the best option for you, so train it is.
Yes, we have heard about complaints. Obviously, we hear a lot about bulk exports of grain, and other things like that, being impeded. We’re hearing it from a value-added side as well in terms of trying to get anything to ports. Regardless of whether it’s by rail, road or plane, it seems to be a challenge in Canada. Our global competitors don’t face the same challenges we do.
It’s much more difficult and expensive to get to.
Senator Oh: Thank you, witnesses. My question will bring you to NAFTA. Some say NAFTA negotiations will conclude soon and others believe there’s still a long way to go. Only six of roughly 30 chapters have been closed and wide differences remain on sensitive topics such as dispute resolution. How would the NAFTA renegotiation impact your members?
Ms. Cloutier: For the food processors it would be a huge hit simply because we export food, and it’s not bullets. We need to export to our closest partner, which is the U.S. Just in Quebec, we export to over 11 states within 10 hours.
[Translation]
The proximity of the market facilitates exports to the United States. We also buy a lot from the United States. Canada’s climate, as we see again today, does not provide us with continuous access to foodstuffs, and that means that we import a lot from the United States in winter, and even in the rest of the year. It would be a disaster for our purchases from the American side. We hope, therefore, that the agreement will be signed quickly.
[English]
Mr. Wilson: Maybe I’ll answer your first part. I’ve been very involved in the NAFTA negotiations with the Prime Minister’s Office, the chief negotiators and others before it started.
I will say two things. First, I’m not so sure it’s going to conclude. I think your math is pretty bang-on in terms of how many chapters have been closed, how many are left to be closed and how many big issues are left outstanding. We’re hopeful it will close soon. We would love it if it would. We trust that the Canadian government is doing everything possible to make that happen. We’ve been very pleased with what they’ve done to date, but there are a lot of big issues they still have to cover in a short time.
At the same time, we’ve never been overly pessimistic that the deal is going to be terminated. We’ve always thought since the beginning that rational minds would succeed in winning out the day and the argument. The conversation about just the food exports from Quebec and the imports back into Canada tell you how important the economies are to each other, how integrated we are and how much we support each other. It has been that way for a long time. You don’t tear that down overnight without implications.
The positive news will come out eventually over that. Across the board, no one wants to see this deal terminated — no one I’m aware of. Even the administration itself doesn’t want to see that.
At the same time, could it be updated? Absolutely. It’s a 25-year-old agreement that probably should have been upgraded 20 years ago. Hopefully we’ll see some modernization come out of this.
I’m hopeful something will be done; I’m just not sure it will be done in the next couple of weeks.
Senator Oh: What do you see in terms of increased protectionism and a trade war by imposing new tariffs on imports? I’m against this. I want the FTA and the world to grow together in prosperity.
Mr. Wilson: From a Canadian perspective on the trade arrangement with the United States, I don’t see any new tariffs or any protectionism. The bigger areas where we’ve seen historical protectionism will still be there — most likely around “Buy America,” for example. That is unfortunate and does impact the food manufacturing sector, which most people aren’t aware of. Most people think it’s just steel. You can’t, for example, supply food products into military procurement because of one change back in the 1930s. Food exporters from Canada can’t participate in supplying the U.S. military, hospitals or schools. So there are implications for the agri-food sector as well in Canada.
But we don’t see new barriers being erected between Canada and the U.S., or even Mexico for that matter. But with other countries, I don’t think President Trump is going to back down from what he’s been doing, especially around some of the more sensitive areas like steel, for example, which is outside of the scope of this. We should be okay.
Senator Woo: Thank you, witnesses, for your testimony. I have a question for each of the two groups, starting with Mr. Wilson. It’s to pick up on the discrepancy you mentioned. I don’t have the figures right, but the increase in output is far greater than the increase in exports of value-added products in the food processing sector. I’m trying to understand why that happened. Maybe you have an explanation for it. Can you comment on whether one of the reasons might be that the food products we traditionally manufacture are perhaps not suitable for the new, fast-growing markets that are gobbling up these products? Could that partly explain a sharp increase in output in our products to serve domestic markets and maybe the U.S. market — those same products are simply not that desirable for markets, say, in Asia and other parts of the world — Europe, Africa and so on?
Mr. Wilson: That might be good speculation. It’s hard to know exactly. I’m not even sure which sectors saw that massive increase. It could be almost anything. If it were beer, for example, Molson wouldn’t start selling more Coors Light back in the United States. They already manufacture there. It could be a wide variety of things. It’s hard to know.
You’d like to see a bigger increase overall when you start looking at increased production, or just the production levels overall. We’re only exporting a small percentage of what’s manufactured in Canada.
To us, the opportunity is there across a wide range of sectors. If you look at pork products going into Asia, there’s a massive opportunity. We have some of the biggest pork producers in the world. We export some, but as a percentage of overall production in Canada, it’s pretty small. One of the reasons is they could probably produce more if they had more workers, and that’s a real struggle for them, as we talked about earlier. It is a struggle overall.
The other thing is that it comes down to the size of the companies. The companies are quite small, and they just don’t have the expertise. They really don’t. I talked about travelling earlier and what this committee could do. I would encourage you to go see some manufacturers and what food manufacturers are doing. Get some plant tours in different parts of the country and understand what they’re doing.
Don’t just go to McCain, Maple Leaf and some of the bigger ones you. Go to small- and mid-sized companies. We can suggest some names. You would see how they struggle. They struggle to meet the regulatory requirements we were talking about earlier. They struggle to make those investments. They really need help to understand what those opportunities are. Governments like to focus a lot on trade agreements, but it’s more basic than that: They don’t even understand where the market opportunities are. In a lot of cases, it’s starting the search and the journey.
To me, that’s the biggest issue. We need to help more small companies understand what those market opportunities are and get them to the point where they can export to those markets.
Senator Woo: It sounds like the explanation is a lack of export readiness and capacity because of the size of firms. I appreciate your suggestion to the committee that we visit plants. I suspect that’s very much in the work plan.
On that point, I want to ask our colleagues from Quebec if they can share with us a tangible example, a good story, a nice story, of how value-added actually worked in one of their member companies.
In your presentation, you gave a compelling description of how value-added should work, where the producers get together with the consumers and the processors and collaboratively come up with a modified product that meets consumer demands, that increases the value of the product, and perhaps it’s exported as well. Do you have a story to share with us that exemplifies that combination of factors?
[Translation]
Mr. Fraeys: I could give you the example of organic cranberries. In Quebec, there are some companies that specialize in organic cranberries and a huge volume of them are exported, some to Asia, but mostly to Europe. This is one of the sectors that will benefit most from CETA. In the past, Canada had a 17 per cent tariff when it exported to Europe. Now, with CETA, that tariff will be eliminated. This means that companies in Quebec, and two of them in particular, will be able to export more dried cranberries. This is one of the sectors where the company has been able to modernize and buy equipment. It is an excellent example where opening markets has meant that the company is able to automate and robotize and to adopt Industry 4.0 innovations, because a wide range of prospects are opening up for it. Organic cranberries in Quebec are an excellent example.
[English]
Ms. Cloutier: I could also add the produce sector. In Quebec, we have one of the largest processors of vegetables. They have developed a supply chain, a partnership, between the producer, way up to the distributor. They’ve been working closely for years in developing new products, in working together towards what the consumer is asking for and wants. They work from the farm to the table in a chain. I would say that’s a great example in Quebec.
We would be happy to show you a real example in Quebec if you wanted to come to Montreal. We would be happy to have you meet the entire process. You can start with Montreal.
The Chair: Thank you for the invitation. We will be doing some field work as part of the study, I assure you.
[Translation]
Senator Dagenais: I would like to thank our guests for their testimony. My first question is for Mr. Wilson. In your presentation, you spoke about inadequate technological innovation. Can you give us a concrete example of what we are lacking in order to be more productive, and of what exists elsewhere?
[English]
Mr. Wilson: Sure. I did hear some of the conversation during the earlier panel around the same issue. I’ll get into the food sector in a second, but in general, manufacturers in Canada tend to under-invest by quite a bit in advanced technologies. We’re not risk takers. We’re very conservative in the way we run our businesses and life in general. We don’t have the financing available, as banks and government institutions aren’t as supportive as some other places in the world.
We tend to be a secondary or tertiary market for a lot of manufacturers of high-end equipment. We get the leftovers that no one else in the world wants to get. While we produce a lot of bits and pieces for machinery equipment, we don’t have a lot of Canadian-owned or in-house machinery equipment manufacturers. We have a lot of it in Canada, but they tend to make parts for other people and send them around the world, and we’re very good at that.
In Europe, for example — Germany, Denmark, Netherlands — they specialize in creating niche products to support the manufacturing sector. We’re hoping that the technology companies in Canada, which we have a lot of, can be tied better into the manufacturing sector to create a unique advantage for Canadian manufacturers through these superclusters. A big part of the superclusters initiative is to tie the two together, so we’re hopeful that’s the case across the board for all manufactures.
To give you an example of the type of thing that’s out there, KUKA robotics out of Germany makes automated meat processors, for lack of a better word. If you search YouTube for it, it will carve up a pig, for example, in a few seconds. The entire thing is automated. In Canada, companies like Maple Leaf or Cargill struggle to find workers who will do it. They don’t have those technologies readily available to them in Canada, so they rely on temporary foreign workers, which they typically can’t get. Canadians really don’t want to do that type of work anymore, so they struggle to grow to the level they could. And that technology isn’t available or they’re not investing in it in Canada.
That creates a productivity gap. We haven’t talked a lot about productivity, but it was mentioned earlier. Our productivity growth levels across Canada are at about 20 per cent growth over the last decade. In countries in Asia, it is about 120 per cent. In the U.S., it’s about 50 to 60 per cent growth. We’re far behind on productivity growth strictly because we’re not investing in technology. That would be a very specific example of how technology in an Industry 4.0 environment could really leverage and grow a food manufacturing sector in Canada and solve a specific problem, but it’s not happening at the level we need it to in Canada today.
[Translation]
Senator Dagenais: Ms. Cloutier, can you give us some examples of Canadian products that leave the country in bulk, but could be processed here? That would create jobs and could, indirectly, generate tax revenue for the various levels of government, and perhaps also increase the value of our exports.
Ms. Cloutier: There are commodities that grow in the Prairies, such as canola. That product is exported to the United States and processed elsewhere into oil, and we then buy it back at a high price. That is an example of a processed product. Most products from the Prairies are exported in bulk form, like wheat, grains, and so on.
Mr. Fraeys: Quebec and Ontario buy 70 per cent of everything that is produced. The other 30 per cent is primarily fresh produce. Yes, in fact, we could improve secondary processed products a lot. For example, you can slaughter a pig, but meat-cutting and specialized products are where you can create value. That calls for investment, but that is to produce value-added products. For example, instead of selling pig carcasses, we would have to sell pork that has been cut in Canada. That would employ Canadian workers. You can export cut pork with a much higher value than a side of pork. Creating value means offering value-added products that involve more work and more research.
Senator Gagné: Thank you for your excellent presentation. Cranberry products from Quebec are absolutely delicious, whether they are jam, syrup, port, spreads, chocolates, salad dressing, or other things. I come from Manitoba. I am interested in superclusters. Last February, we had the announcement of the supercluster initiative for protein industries based in the Prairies, but located in Saskatchewan. The University of Saskatchewan has a very busy team of researchers, and that supercluster has tried to make use of plant genomics and innovative processing technologies. The aim is to increase the value of crops such as canola, wheat, and legumes.
So when you establish a supercluster in a region like Saskatchewan, how are the other regions, like Quebec, New Brunswick, and Newfoundland, going to benefit? The same is true of other superclusters in other fields and other regions. How do we ensure that knowledge is transferred? How have we been able to arrange it so that another value can be added to the product in another region?
Ms. Cloutier: In the case of superclusters, we have been involved with a cluster proposal in Quebec. In Quebec, obviously, it was others that had it. For the Pulse Canada supercluster, based on legumes, we were indirectly involved at the outset, and we can certainly contribute to it with our know-how, our technological development, and our marketing. So that was one of the issues in that supercluster. I know they involved other provinces as well; in fact, the University of Winnipeg is participating in it.
Senator Gagné: The University of Manitoba.
Ms. Cloutier: Manitoba was involved with the EMILI project. That is a network that starts in the Prairie provinces, but that will obviously have an impact everywhere in Canada, because we are going to try to determine how we can use the products generated by the cluster in processed products and how we are going to support them in marketing those products.
Mr. Fraeys: I would like to add two things. First, regarding the universities, of course, all the universities talk to one another. In Quebec, Université Laval and McGill University will be contributing to that project. In terms of results, there are companies in other provinces, primarily Quebec and Ontario, for which it may be easier to buy vegetable proteins produced in Canada than abroad, because we know that the market for legumes is growing. We also have a food in Canada that few people know about, and that is lentils. Lentils are not widely used in Canada, and 90 per cent are exported. There is big potential to use these proteins. Using legume proteins in value-added products is going to create value.
Senator Gagné: In the context of these superclusters, I think there are also foreign companies that can participate, as companies or industries. Is that advantageous for Canada, or risky?
Ms. Cloutier: I see it as a benefit, of course, since they are probably going to buy the foods or products generated by the cluster. Certainly, for us, it is an opportunity to work with foreign companies and then export our value-added products to those markets. So I see it as a benefit.
Mr. Fraeys: One of the fundamental aspects of a supercluster is creating networks. In both universities and companies, it will be able to create networks and make new contacts. In Canada, we are good, but not necessarily at everything. It will be at the universities, particularly Wageningen University in the Netherlands, which is the leader when it comes to vegetable proteins, but there are others in the world. It will enable us to link up effectively with other networks created elsewhere in the world, whether in Europe or in Asia. It will eventually help us to export. Today, the fundamental point is that Canada has to connect.
[English]
Connection is the new innovation.
[Translation]
All of the companies and universities have to connect with what is going on outside Canada.
[English]
Mr. Wilson: I would agree with all of that.
The other thing I’d add is that foreign investment in Canada is critical. Whether it’s in agri-food, automotive or aerospace, whatever it may be, we rely a lot on foreign investment in Canada, and, frankly, it’s not high enough. So, if superclusters are one way to get more foreign investment in Canada to drive new research and innovations in Canada, that’s exactly what we need to encourage more of.
I know that in the manufacturing one, which we’re directly involved in, there are quite a few foreign companies directly involved. It’s fantastic. But to me, it’s not about the large multinationals investing. It’s about how that gets transferred into the SMEs. How are we going to leverage the supply chain that those larger companies can to bring to the table, those international connections, to benefit our SMEs? If we’re not doing that, then the superclusters really won’t work at the end of the day. But that is their goal and their focus.
The other thing I’d say to your earlier question is: How do you get the information out or create those networks across the country so that it’s not just a regionalized one like the manufacturing one in southern Ontario? Pulse is one in the Prairies. The government can’t solve these problems by itself. Often, the government tends to look at itself and say, “We’re big and we can do all of this stuff.” Companies don’t want to hear from the government all of the time. I’d say that there are a lot of private sector networks out there — us. You would have your own networks across the country through sister organizations. We’ve got offices right across the country. There are chambers of commerce and others like that. Use the private sector networks that already exist and leverage those to the maximum capacity in order to share that information and build those networks even stronger.
That is why we’re a part of one of the networks, and we’ll certainly be leveraging our network. I assume that, in the other superclusters, that’s exactly what they’re trying to build right now. They’re in their infant stage right now. They’re only a month or so old. Most of them have one staff member and that’s it. I think we’ll see that developing. Certainly, we’re working with the manufacturing one to make sure that it’s not seen as just heavy industry in southern Ontario but that it’s used for all manufacturing sectors right across the country. That’s really going to be the key to success; you’re right.
The Chair: My question is for CTAQ. It’s with regard to Denmark and the coordination that they have for industry, processors and producers to share information more or less in a round table process. Whatever the consumer needs or wants, generally the processor would be aware of it here, but the producer may not always be up to speed and know what the consumer wants right then and there. In Denmark, they seem to have vertical integration or a round table process. Are you aware of that? Would that work here?
Ms. Cloutier: We kind of have that in Quebec. We buy 70 per cent of everything that’s produced from our farmers. With regard to vegetables, for example, we do have this connection from farm to table in the value chain. It is the same thing with pork in Quebec. Everybody works very closely from the start right to the consumer.
We’ve been developing those models that we call value chains in some different sectors, and we believe it’s a model that works fairly well. We all focus on the consumer because if you don’t focus on the consumer, they won’t buy your product. We’ve been doing that more and more.
[Translation]
Mr. Fraeys: Quebec pooled its efforts for a year in anticipation of the Food Summit that was held in November, and last week there was the launch of the new bio-food policy in Quebec. That meant that we all had to work together, in what we call chains. This is an excellent example of mobilizing the entire industry to produce a policy. In Quebec, there had not been a bio-food policy for 15 years. In Denmark, there is a little more direction. When you talk about integration, one third of the sector gives orders to the entire chain. In Quebec, it is not as clear-cut. Everyone talks, but ultimately we arrive at the same result. Yes, we also work toward the same end, but in a different way, and we get the same results.
Ms. Cloutier: In fact, we took part in a mission with the Government of Canada in the Netherlands, where there is an integrated model. Researchers, academics, agri-food companies — they all work together in the same environment. So they involve everything having to do with marketing, research, food research, and input purchasing, and obviously they are all for the benefit of the agri-food industry, but also for the benefit of the consumer. They export 80 per cent of what they make. That is definitely an important model for us.
Mr. Fraeys: I was a member of the mission to the Netherlands. One of the major success factors in the Netherlands is that the ministry of agriculture has merged with the ministry of the economy. The ministry of the economy does not invest if the company does not tell it where to invest. The ministry requires researchers to work in the plant, and requires industrial researchers to work in the laboratories, to encourage dialogue, because you cannot work in silos anymore today. Everyone has to work together and in networks. So the Netherlands is an excellent example. The reason they have got where they are is because they were hit very hard by the crisis of 2008. They were forced to engage in dialogue in order to work together more. That has become a model today. The problems created opportunities for them. It is an excellent model to follow.
[English]
The Chair: Thank you.
Senator Maltais, you may have one quick question, because we have to give up the room to the next committee.
[Translation]
Senator Maltais: Since we are talking about the Netherlands, I asked the witnesses before you a question about packaging. I was not bowled over by their answers. I will not leave here reassured knowing that they are the ones who will be responsible for this initiative. The Netherlands makes packaging using products from the earth that is biodegradable. There are 700 products that are packaged that way at present. Is this an option that can be considered in Canada?
Ms. Cloutier: Definitely. A lot of research has been done in Quebec for several years to remedy this situation. The agri-food sector — I can only speak for our part of the country — is working on the gradual elimination of non-biodegradable products, or products that do not degrade. Pilot projects have been proposed in several industries. We must not forget that the number one reason for packaging in the agri-food industry is food safety. In fact, there is also the Canadian Food Inspection Agency, which is very vigilant when it comes to food safety, and also security. So the first impact would be on a food’s safety, which is something that we cannot ignore, and second — I will let you continue.
Mr. Fraeys: On the question of biodegradable packaging, that is a good solution when you have composting sites. Unfortunately, the cities are the ones that have responsibility for setting up composting sites. For example, there is a law or a regulation in Quebec that requires there to be zero landfill by 2020. The composting sites will be built in 2019. There are solutions, but you cannot throw biodegradable packaging away in landfill sites, because it will contaminate them. On the one hand, there are solutions, but, on the other hand, we do not have the necessary infrastructure. Putting biodegradable products in landfill sites will result in harmful gas emissions. So we have to wait for there to be infrastructure. Yes, there are solutions, but we are not yet able to put them to good use.
[English]
The Chair: I’d like to take this opportunity to thank the panel. It has been a very interesting discussion. We have run out of time, unfortunately, but thank you for being here today and contributing to our study.
(The committee adjourned.)