THE STANDING SENATE COMMITTEE ON AGRICULTURE AND FORESTRY
EVIDENCE
OTTAWA, Thursday, March 29, 2018
The Standing Senate Committee on Agriculture and Forestry met this day at 8 a.m. to study the potential impact of the effects of climate change on the agriculture, agri-food and forestry sectors; and 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 you to this meeting of the Standing Senate Committee on Agriculture and Forestry. I’m Senator Griffin from Prince Edward Island. I will ask the senators to introduce themselves, starting with the deputy chair.
[Translation]
Senator Maltais: Senator Maltais from Quebec. I must declare my interest. I’ve known Mr. Beaulieu for a long time.
Senator Dagenais: Jean-Guy Dagenais from Quebec. I met Mr. Beaulieu in Montreal.
[English]
Senator Oh: Victor Oh, Ontario. Welcome.
[Translation]
Senator Petitclerc: Chantal Petitclerc from Quebec. Welcome.
[English]
Senator R. Black: Robert Black, Ontario.
[Translation]
Senator Gagné: Raymonde Gagné from Manitoba. I’m delighted to meet you this morning.
[English]
Senator McCallum: Mary Jane McCallum, Manitoba.
The Chair: Thank you, everyone. We are continuing our study — we’re just about at the end — on the potential impact of the effects of climate change on the agriculture, agri-food and forestry sectors.
For our first witness today, we welcome, from the Centre d’expertise sur la construction commerciale en bois, Mr. Gérald Beaulieu.
Thank you for appearing here today. I’d like to also thank you for your flexibility in coming back a second time, since we didn’t get to have our meeting the first time when you arrived. As someone has already mentioned, a number of us also had the pleasure of meeting you when you gave us a tour when the committee was in Montreal for public hearings, so thank you for that too.
I now invite you to make your presentation. We’ll have questions afterward.
[Translation]
Gérald Beaulieu, Director of the Centre d’expertise sur la construction commerciale en bois: Thank you, Madam Chair. Ladies and gentlemen, I was delighted to accept this invitation to share our views on the impact of wood construction. You’ve had the opportunity to hear from other experts. We’re happy to appear before the committee in order to advance the use of wood in construction in Canada.
I’ve also had the opportunity to welcome some of you during a site visit organized in collaboration with Mr. Pittman, in Quebec City. We visited the Arbora housing project, which consists of three phases and more than 430 units. It’s one of the largest high-rise multi-family projects in Canada. Since the changes made to the building code, it is now possible to build up to 12 storeys using solid wood and up to six storeys using light frame construction, the same way we build our houses.
Please allow me to introduce you to Cecobois, or Centre d’expertise sur la construction commerciale en bois, a centre of expertise on commercial wood construction that has been in existence since 2007. The centre was founded following a Government of Quebec decision on the diversification of the forest industry. In 2007, the forest industry in Quebec and in Canada suffered a severe economic crisis. The government, together with all players, decided that we needed stakeholders on the ground to increase the use of wood in our markets and ensure diversification. This issue is even timelier given the crisis in American markets, resulting in our wood being taxed. Therefore, the more we use it in construction, the less dependent we are on the export market. However, we must not think that we can use all of it. Canada is a major wood producer, so we also need foreign markets to support the industry.
Cecobois’s mission is to deliver technical expertise to construction professionals so they can integrate wood in building construction. It should be pointed out that, in Canada, very few universities address the use of wood materials in civil engineering or architecture. They focus on the use of concrete or steel, but say very little about the use of wood.
We have to understand the reason for this. In 1941, when the National Building Code was put in place, using wood in high-rise construction was prohibited. At that time, cities were very worried about occupant safety. There had been fires in some cities. They weren’t equipped with today’s technology to make occupants safer. Therefore, the building code prohibited the use of wood. Now, in 2018, we have sprinkler systems in practically every building. We also have much more advanced technologies and equipment to ensure occupant safety. There have been several studies on new technology to develop highly fire-resistant wood products. This is the subject I’d like to discuss this morning, because it relates to climate change.
Climate change issues are very important. I don’t have to tell you about that. You’ve had several discussions in Parliament about global warming. It’s important to recognize that building has a huge impact on greenhouse gas emissions. Several studies by Industry Canada and other departments have shown the significant impact that building, in other words, our built heritage, has on greenhouse gas emissions. We will talk about some important indicators. Buildings account for 35 per cent of greenhouse gases, and 25 per cent of all waste is tied to the building industry. We have a very important role to play if we want to be able to contribute to the reduction of these negative impacts on the environment.
What are the main sources of carbon, according to the studies? We all now know that greenhouse gases are produced by burning fossil fuels and by manufacturing activities. In North America, the main sources of carbon emissions come from steel and concrete manufacturing, as well as from the use of vehicles. In terms of the environmental impacts of buildings, studies have shown that during the lifespan of a building over 50 years, after 20 years, the materials used in its construction will have contributed around 50 per cent of greenhouse gas emissions, while its operation will have contributed around 45 per cent. That means that if we want to reduce the impact of greenhouse gas emissions linked to buildings, we have to focus on the source, when the building is being built.
We also have to ensure that the choice of materials contributes to reducing greenhouse gases. So, when we talk about targets and commitments, I don’t have to tell you that the target for 2030 is a 30-per-cent reduction. In 2050, the target is an 80-per-cent reduction. Canada has committed to limiting global warming to less than 1.5 degrees.
Various jurisdictions across the country have put a number of environmental regulations in place to ban landfills and to develop recycling systems to help reduce emissions. We can play a role in the 35 per cent of emissions that come from buildings. So, how do we get there? By thoroughly documenting the environmental impact of each material.
A new type of scientific analysis has emerged in the past 20 years: life-cycle assessment. The purpose is to assess the environmental impact of all stages of a product’s life, beginning with its creation and prior, right from the extraction of raw materials. The following example is a good illustration: the forest grows and we have to take care of it. It’s a renewable natural resource. We harvest it. If we don’t and it dies, it will emit carbon as it decays. If we harvest and process it, the equipment used for these activities will produce carbon emissions. So that’s the first step. Then we process the material and create products that sequester the carbon. The carbon will be trapped in our buildings, which will have a lifespan of 50 to 100 years before the product can be recycled or burned. For 50 to 100 years, the carbon will have been sequestered.
Life-cycle assessment provides us with information on all the manufacturing stages and on the use of the product. Cecobois is not the one conducting this analysis; it has been carried out by internationally recognized external organizations. The work of the Canadian Forest Service has shown that forestry in its entirety — in other words, forest management and the manufacturing of products such as biodiesel or wood products — can contribute up to 10 per cent in terms of meeting the reduction target. That is compelling. We start with a natural resource. We create jobs across Canada, and we can use this very prominent sector to contribute to reaching the target through technological means. There’s a lot of research being done on capturing and reducing carbon, and so on. We have a natural resource that grows in our backyards, and the technology to manufacture the products is known. We can continue doing research and development, but it’s time to take action. This is what we’re doing in Canada.
What are the main advantages of using wood for building? First, it sequesters carbon from wood. It can serve as a substitute for materials such as steel and concrete, which are significant carbon emitters. I will show you what I mean. This allows us to have buildings. I mentioned that, over the life of a building, 50 per cent is due to materials and 45 per cent is due to its operation. Wood has thermal insulation capability superior to other materials. It is an insulator. Therefore, this helps reduce the cost and environmental footprint of the energy required for building. Comparative studies have been done. I’ll give you some raw data. We’ve manufactured a wooden beam with the same load that emits 60 kilograms of carbon equivalent into the atmosphere. You make it from steel — not of the same dimension, since it’s not the same material — with the same load and for the same purpose, and you emit 245 kilograms of carbon equivalent. You make the same beam from concrete, and you emit 345 kilograms of carbon equivalent. It isn’t Cecobois or the forest industry making that claim; it’s life-cycle assessment experts that have done the analysis and shown it to be true. These are facts based on science. You go from 60 kilograms to 252 kilograms, or a bit more than four times, to six times with concrete. That gives you a good idea.
Various studies have been done on different buildings that have validated this data. This is a very important element. A building with an exterior cladding of spruce was analyzed in detail by Athena, a life-cycle analysis research group. It was done at the laboratory of FPInnovations, in Quebec City. The government asked for a life-cycle analysis for the purposes of a comparison with other materials. When the building is built from wood instead of steel, the difference in greenhouse gas emissions is a factor of 30. So, it’s a very significant action in terms of impact on the environment.
Several countries have done studies on the impact of wood construction on occupants’ quality of life, particularly for schools, care facilities, offices and multi-family living spaces, like the Arbora buildings we visited in Montreal. Japan is doing a number of studies on the impact of wood, or biophilia. It is one of the international leaders in biophilia, which studies how human beings feel better in the presence of natural elements in their environment. Wood is part of this. Some very serious studies have shown that living in an environment where wood is predominant lowers blood pressure and heart rate, speeds recovery from illness, diminishes pain perception, promotes creativity in offices and schools, improves concentration in schools and reduces aggression, which could be useful in Parliament.
Senator Dagenais: Especially in the Senate.
Senator Gagné: There’s still a lot of woodwork.
Mr. Beaulieu: I’m kidding, of course.
Several studies have documented carbon outcomes. There is a very strong tendency to use wood in Canada. The federal government partners with Cecobois through Natural Resources Canada, which provides about a third of our funding. Another third comes from the Government of Quebec and the last third from the forest industry. All this has helped put a technical team in place that can support building trade professionals to help them integrate wood and better understand the impact of built heritage on the environment.
Our cities face major problems when it comes to congestion and the mobility of urban dwellers; densification is becoming a very important way to improve quality of life and counter the problems resulting from increasingly dense areas. We think that there are a lot of advantages to using wood from the point of view of carbon emissions into the atmosphere. There are many positive consequences to using wood.
I have thought a lot about this and consulted with my team. All our work is built on a network of professionals who represent every stakeholder in the supply chain, whether they’re manufacturers, service providers, engineers or architects. I had the opportunity last week to appear before another federal committee, the Standing Committee on Natural Resources, which was studying private member’s Bill C-354. The purpose of the bill is to give Canada a wood charter, whereby preference would be given to projects that promote the use of wood, through a mechanism that would award points for the use of wood in federal procurement projects. That’s my first recommendation. I believe that the federal government should join such provinces as Quebec, Ontario, British Columbia, Alberta and Nova Scotia in establishing its own charter to promote the use of wood.
The idea here isn’t to impose wood, but to consider wood in the selection of materials for government building construction. It’s about leading by example when commissioning buildings. So, you have a very important role to play. The idea would be to establish that the use of wood should be considered for every building that receives public funds from the federal government. Why? I mentioned that very few universities in Canada taught students about the use of wood in construction, whether in civil engineering or architecture. Imagine the impact in Quebec when the wood charter was put in place. Professionals became interested in this material, because in order to bid on government construction contracts, they have to master the use of wood in their designs. That sends a message to the universities and the professionals about the importance of using this material — which is making a comeback in construction — and to forestry communities in terms of economic diversification and the development of high-performance products. Ultimately, this allows us to achieve a number of goals at the same time.
In my view, the charter is the first step that will then set other work in motion. The wood industry isn’t asking for preferential treatment. People are recommending that this charter be put in place for the reasons I mentioned earlier. We believe that, if the building code were to evolve and adopt performance indicators for environmental footprint and energy efficiency, we wouldn’t need a wood charter. Wood would be the material used from the outset because it would have the lowest rate of carbon emissions, come from a renewable resource and help create thousands of jobs in Canada. It is a material that, by definition, is an insulator and thus contributes to energy efficiency.
However, changing codes and standards is a long-term process. The wood charter in Quebec is one tool for promoting these changes. It’s about demonstrating that there is a very important focus on this material, with the government leading by example. As a government, you have shown leadership over the past few years by funding research on the use of wood and supporting innovative projects such as the Brock Commons project in Vancouver, the Arbora project in Montreal, and the 12-storey Origine building in Quebec City. All these initiatives were accomplished thanks to the contribution of your government. We have to keep going on this path.
A recent study showed us that covering our buildings on both the inside and the outside, whatever the structural material, created an equivalent market in terms of value to that of the construction materials used for the structure. This has a significant impact on the development of small businesses in all communities in Canada and Quebec alike. Simply by introducing a policy, the federal government can have a significant impact on the reduction of greenhouse gases and on economic development across the country.
I’m going to give you an idea of the value of some products. I included the figure in my presentation. One cubic metre of wood in a mill yard is worth $70. When you take that cubic metre of wood and process it into structural products — like glued-laminated timber for large beams and columns — and install it in a building, its value goes from $70 to more than $2,000 per cubic metre. Throughout this process of value creation, we’ve created jobs at home.
That was my last point. Thank you for your attention.
[English]
The Chair: Thank you. I’ll hold senators to a maximum of two questions, and then we’ll do a second round if there are further questions.
[Translation]
Senator Maltais: Welcome, Mr. Beaulieu. As you know, I come from a region where forestry is very big, the North Shore. There’s a lot of wood. It’s one of the best regions in terms of wood resources. Wood construction began to decline during the war. With the arrival of new materials on the market, like concrete, aluminum and steel, wood went in the wrong direction, particularly in Canada, while our neighbours who invented these materials came looking for our wood for their buildings. It’s unbelievable, and yet it’s still the same situation today, whether in the Maritimes, Quebec, Ontario, the central provinces or British Columbia. And yet, wood was the first material used in the founding of Canada. Champlain’s Habitation wasn’t made of concrete, but of wood. The Château St. Louis is made of wood. Quebec and Ontario have wood charters, I believe.
Mr. Beaulieu: Quebec, Ontario, British Columbia and Nova Scotia do, not to mention Alberta, which joined their ranks last year.
Senator Maltais: Of course, this charter is a very important step forward. As you said, it is starting in Quebec. Clearly, residential construction entrepreneurs don’t have the same problem as those in non-residential construction. Still, in residential construction, I find they use a lot of composite materials that come from elsewhere and that aren’t made of wood. And yet, wood is an extraordinary exterior structure. It’s an insulator that also provides a really beautiful interior finish with wood floors, walls, and so forth.
We visited an 18-storey student residence in Vancouver. The only thing is that they installed aluminum windows. I went to see what state the windows were in after three years. They were rusted. It’s a lovely building, but there’s a mistake that shouldn’t be repeated. If the windows had been made of wood, there wouldn’t have been any rust. It’s quite a lovely building.
Seven or eight years ago, they built a soccer facility in Loretteville entirely of wood.
Mr. Beaulieu: The Chauveau soccer complex. That was the second one in Quebec.
Senator Maltais: That was the second one in Quebec. I go to see it from time to time. It isn’t deteriorating, far from it. The manager of the company says it’s one of the easiest to maintain. I thought that was good.
In my view, wood will be in demand in the near future. In the next five years, wood should regain its popularity.
The other advantage is the reduction in carbon emissions. That’s the purpose of our study, after all. British Columbia, Quebec, New Brunswick, Ontario and the central provinces are expending a lot of effort in this area. Everyone’s getting on board.
You’d like to see a pan-Canadian charter in place and changes made to the building code.
Mr. Beaulieu: The first step is to adopt a Canadian charter to encourage the use of wood, that is, a policy aimed at promoting the use of wood among designers in the structure or the finishing of buildings.
Senator Maltais: It’s different in Quebec.
Mr. Beaulieu: It’s the same thing in Quebec.
Senator Maltais: It’s the same thing, but isn’t there a requirement in Quebec for a certain part of the construction to be wood?
Mr. Beaulieu: No. That doesn’t exist. That was part of the first elements in British Columbia. Quebec decided to adopt incentive measures and the wood charter became a government commitment in 2015. It specifically says that every project that receives public funds must consider wood in the design of the building. It doesn’t impose wood as a material. It doesn’t give any preferential treatment to wood; it just requires that it be considered.
Senator Maltais: China is an importer of wood. We went to a Chinese neighbourhood in Shanghai two years ago with the Canada Wood Group. We saw a lot of really beautiful buildings made of Canadian wood there. It’s really beautiful. They came looking again for that wood in Quebec and in Canada, because we’re wood producers.
First, the charter and the National Building Code deserve to be dusted off and updated.
Mr. Beaulieu: There have been changes, but there are still changes to be made. The 18-storey building you visited at Brock Commons is 100 per cent encapsulated, and the 12-storey building in Quebec City is 100 per cent encapsulated in gypsum. To illustrate what that means, we could say that we’ve put on “a belt and suspenders” in terms of fire safety.
Summer is coming, so here is a challenge. Light a fire in your fireplace and put a big log in there. You’ll see that the fire will go out. These are the characteristics of wood. Carbonization occurs around the log, around the heavy timber, which ensures that the wood stops burning. It’s a paradox, because we use wood for heat, but we can also use it to protect ourselves. You’ve visited Arbora. You’ve seen the beams and columns, some of which are visible. Those are the kinds of changes that will gradually be made to the National Building Code for the safety of occupants and the public. The idea isn’t to put people in danger. The idea is to use the knowledge we have to build better and to leave some wood exposed, because that’s what attracts people when it comes to the advantages I mentioned during my presentation.
Senator Maltais: In sum, wood construction is evolving, and the National Building Code in force hasn’t evolved quickly enough to keep pace with these advancements.
Mr. Beaulieu: The evolution of the National Building Code rests on a consensus that the first pillar is public safety. That’s what we want to participate in and we’re getting more and more of a sympathetic ear in all the discussions across the country, and in all the provinces, when it comes to updating the National Building Code.
Senator Maltais: What is your recommendation this morning?
Mr. Beaulieu: You should seriously examine the Canadian Wood Council’s recent recommendations regarding the potential use of exposed wood in very tall buildings, in light of tests that show the fire resistance of these new materials.
Senator Maltais: Thank you.
Senator Gagné: Thank you for your excellent presentation; I appreciated it very much. You spoke about the effect of wood on health, and I find it very beneficial to incorporate this dimension into presentations, because it does indeed have an effect.
I wanted to ask you a few things related to the LEED certification system. The certification system is intended to ensure that homes are environmentally responsible and healthy. I wondered whether, in the context of the Canadian wood charter you recommended, this kind of system could also encourage builders to use wood as a material.
Mr. Beaulieu: That’s a very good comment, and thank you for the question. The LEED certification puts very little emphasis on the choice of materials in terms of scoring; it puts forward other considerations for obtaining certification, like water management, energy management and the comfort of occupants. LEED certification has started to evolve and will continue to do so in order to take the environmental footprint related to carbon emissions more into account. This isn’t the case yet. Discussions are under way, at the global level, on the subject of these major certification systems to help them evolve and take materials into account on the basis of current knowledge.
Senator Gagné: Thank you for that clarification. I wasn’t aware of that aspect. I thought wood was a material that was used more and more in order to ensure LEED certification, which has various levels. You can go up to A.
Mr. Beaulieu: That’s right. I want to be very clear. If you use wood, you’re not penalized, but you don’t necessarily get a lot more points. It can get you a few points towards the different levels you mentioned.
Senator Gagné: I was in British Columbia, where I visited the Brock Commons building. There was also talk about the way the apartments were insulated to achieve good acoustic performance. The walls were ultimately covered in wood, with four layers of plywood, of gypsum. In the end, many materials other than wood were used to soundproof the apartments. In evaluating costs and environmental impact, is this type of calculation included in the analysis?
Mr. Beaulieu: That’s another very good question. Currently, Cecobois, at the request of the Government of Quebec, is working on completing a carbon calculator that will compare the greenhouse gas emissions of materials used, whether wood, concrete or steel. At this point, we’re concentrating on the structure. The point you raise is very important, but it isn’t related to materials. If you have a steel building, you also have to cover it to ensure good acoustic performance. Owing to its embodied energy, wood already contributes somewhat to soundproofing, but you have to treat the surface by adding other materials to improve its performance. In the future, in another phase of the carbon calculator, consideration will be given to the integration of other materials in exterior cladding and interior lining. This isn’t part of Phase 1, but it’s a very important concern. It’s not just the structure that has an impact. Today, I’m talking about structure, but there’s also the building as a whole.
Senator Gagné: What are the factors that prevent the use of wood in the majority of non-residential buildings?
Mr. Beaulieu: I’ll list them for you, not necessarily in order of importance, but almost: the training of building trade professionals in the classroom. It’s not normal that wood isn’t taught in our civil engineering and architecture faculties and that instruction is limited to concrete and steel. The Université Laval has launched a career program in wood engineering where they teach structural wood. The Université du Quebec à Chicoutimi is doing it. These are the only two universities that include wood training and make it mandatory. There’s a very important change to be made in this area. We have to train future professionals, and continue to train practising professionals in order to show them that wood is a high-performance material. This is being done more and more. Cecobois is not unique in Canada; there’s also Wood WORKS, in British Columbia, doing the same work that we do. It also has active chapters in Alberta and Ontario, as well as a chapter that covers the Atlantic region. It’s our mission to do this work.
We also have to dispel the fears related to using wood. As I said, in 1941, the use of wood was prohibited in high-rise construction, for what were deemed good reasons. And yet, in Canada’s major cities along rivers, waterways and oceans, these buildings are still standing. There are magnificent buildings in Vancouver, Toronto, Montreal, Quebec City and Halifax. These are 10-storey buildings made 100 per cent of wood that have been converted into condos or office spaces. Today, technology lets us ensure fire safety, whatever the material. Fire trucks have ladders so people can be evacuated safely. We have to keep demystifying and valuing these projects.
It’s also important to continue developing performance indicators regarding greenhouse gas emissions and energy performance. If we accomplish this, we have to send the message to the building sector that, going forward, building construction will have to meet certain environmental targets, including the reduction of greenhouse gases, and not exceed so many kilojoules per square metre each year for heating and cooling.
We won’t have to keep meeting to talk about the wood charter. Wood will become a preferred choice. All the studies show the advantages of wood. This isn’t about going to extremes. A wood charter is intended to encourage the use of wood for its performance. We have to include it in our thinking. No one is saying not to build with concrete or steel. Projects like Brock Commons, in Vancouver, have adopted a hybrid approach that yields a high-performance building. The important thing is to use the right material in the right place and, at the very least, to establish targets that will favour the adoption of this new material.
[English]
Senator Oh: Welcome, Mr. Beaulieu. First, I want to thank you for showing us your centre in Montreal at the committee’s last visit. The following week, I went to the Brock Commons Building in B.C. It was a beautiful building. Unfortunately, it just covered up too much Egyptian rock.
According to Natural Resources Canada, wood-based construction materials help to reduce GHG emissions. But your company has taken an important leading role in new research and technology, so the use of wood is coming back.
But before we can go further into the international markets, I think Canada must take a leading role in building more in wood construction. As you say, in government buildings, a certain percentage of the building must be wood construction because it is also beautiful and warm and brings us back to nature in hospitals and schools. I see some city hall entrances have changed to wood. Those are things that are important for us to develop international markets. If we take a leading role, other countries will follow. Hotels and resorts are other important projects to use wood.
Do you know to what extent the use of wood as a construction material is applied in Quebec and elsewhere in Canada?
Mr. Beaulieu: Thank you for the question.
[Translation]
We did a study last fall and submitted the report on it. In supporting Cecobois, the Government of Quebec asks for a market share analysis every two years in the non-residential sector, that is, industries, institutions, businesses and multi-family projects. According to the 2007 statistics, wood had a 15-per-cent market share of the building sector. From 2007 to 2016, we reached a 28-per-cent market share. We’ve made great strides.
In Quebec and British Columbia, a number of buildings have been built, including multi-family construction projects and office buildings. If you take Highway 20 to Saint-Jean-Port-Joli this afternoon, Mr. Pittman, you’ll see the Synergia building in Saint-Hyacinthe, right by the highway. If you take Highway 15, you’ll see the wooden tower at Mirabel and another one in Saint-Jérôme. These are wooden buildings of four or six storeys intended as office space. We’re seeing more and more of these buildings. Ameublements Tanguay, a big-box furniture store in Trois-Rivières, is made of wood. The company built five other stores like this one. Some grocery stores are now built of wood. So, there’s a movement under way.
In Quebec, courthouses have been renovated and schools have been built using wood. In Place Laurier, a Department of National Defence building is being renovated. The first buildings were built with all kinds of materials, except wood. When I talk about government leadership, this is what it’s about. You have an incredible opportunity to make an impact just about all over Canada by using this material, by building high-performance buildings that rely on a local resource. I’m not up to date on the market share percentages for wood use in the other provinces, but I know that they’re also growing.
[English]
Senator Oh: I want to thank your organization for actively engaging in tackling climate change affecting Canada. That’s very important.
What are the main issues you are facing with the expansion of green building technology?
[Translation]
Mr. Beaulieu: The main issue is training, the ability of engineers and architects to integrate wood in building. The material exists. Wood products have evolved a great deal. There’s heavy timber manufacturing, there are light wood framing manufacturers all over Canada, and the sector is burgeoning. The main constraint is the training of building trade professionals and the dispelling of fears around the use of wood, particularly regarding its fire resistance, soundness and longevity. In Japan, some wooden buildings are more than 1,600 years old and are still standing after several earthquakes.
[English]
Senator Oh: Ottawa would be a good place to do projects on wood. People and politicians from all over the world come here to see.
[Translation]
Mr. Beaulieu: Thank you.
Senator Dagenais: Thank you for your presentation. I had the chance to visit the building in Montreal, and I congratulate you. It’s impressive. I also spoke to some people about it. I believe the Orchestre symphonique de Montréal is in a building made entirely of wood, which is an excellent example.
As you’ve already mentioned, we have to train more instructors to give the use of wood more prominence in education. Could our methods be used by our American neighbours, given that they use a lot of wood? Although we’re in negotiations on softwood lumber, I think they’ll keep buying it. In the southern states, they tend to use concrete, perhaps because of hurricanes, but are there marketing campaigns being done on the American side? It could be beneficial if we taught them to build wooden buildings; after all, they’re major consumers. I think that could be a promising market.
Mr. Beaulieu: Thank you for the question, Senator Dagenais. Actually, there’s a company called Woodworks in the United States, which plays the same role as Cecobois, in Quebec. We work closely with Woodworks in Canada. Canada is a country of entrepreneurs and exporters. Every time we master a technology on Canadian soil, we try to export it elsewhere. I can tell you that, today, a number of Canadian companies work in the United States on developing wood construction and promoting the use of their products in buildings, whether in New York or Boston. I’m aware of projects all over the United States that use wood, particularly in the building of hotels. They’re also in the process of renewing their building code to include wood in high-rise construction. This is going on in several states. They have to deal with fierce opposition from steel and concrete lobby groups, but the projects are progressing well.
Senator Dagenais: We know that the Government of Quebec heavily subsidized a cement plant in the Gaspésie region. These days, both federal and provincial governments talk a lot about ecology, climate change and greenhouse gases. Talk is fine, but we need results. Do you have support from the various levels of government?
Mr. Beaulieu: Yes, we have the support of the federal government, through a program led and managed by Natural Resources Canada, to develop Canadian markets for the use of wood in sectors other than single-family homes. We also have the continued support of the Government of Quebec. I’m not going to criticize the cement plant project in Gaspésie. I`m originally from the Gaspésie, so I don’t plan to start a debate on the matter. However, I focus on training to ensure that my team is supported in integrating wood and optimizing its use in construction for years to come. Yes, we get support. We just signed an agreement with the Fédération des municipalités du Québec to create guides so that more municipal buildings will be made of wood, which is great news. The Quebec municipalities have signed the wood charter. They want to further integrate the wood that grows in their backyards.
Senator Dagenais: Thank you, Mr. Beaulieu.
Senator Petitclerc: First, thank you for your input, which is both relevant and compelling. You spoke about life-cycle analysis. You said it would be beneficial to evaluate the environmental footprint, I presume, when funding is sought and calls for tender are issued. Is there a movement in that regard, so that we could prioritize certain projects with a better environmental footprint, which could be an advantage?
Mr. Beaulieu: That’s being done, in whole or in part, depending on the project. It can be done. Besides, this has already been done with some buildings after the fact. People have come to measure the environmental footprint of buildings. In my presentation, I talked about reviewing performance indicators around the greenhouse gas emissions and environmental footprints of building heating and maintenance. There would be less need for life-cycle analysis if we were able to tell the professionals that they had to respect the building’s lifespan target for greenhouse gas emissions and energy performance even before submitting a project. We could continue to document the life-cycle analysis for the use of high-performing products and materials. We’ll be able to continue doing this exercise so we can distinguish products or buildings. The ideal would be to ensure that the standards framework evolves to establish performance indicators that the professionals could follow.
[English]
Senator McCallum: Thank you for your presentation. It is good to hear that people are bringing back wood as a building material.
I was also glad to hear you say that people living in wood buildings have greater health outcomes, because as Indigenous people of Canada, we are of the mind that wood has a spirit of its own, and that’s what it promotes. It is a sustainable resource. With the sustainability comes the idea that the deforestation and replanting would be there, because we see the trees as the lungs of Mother Earth. That was an important aspect.
With respect to promoting wood as a building material, did you consult with First Nations in any of your charters? When I look at the extraction of natural resources, whether it’s mining or oil, there has been so much contention, I guess is the word, between First Nations and other Canadians, it seems. I’m wondering if consultation is being done.
The other issue with this is the transportation of the material out, and sometimes it crosses — or the resources are on — First Nations land. What is the carbon footprint of the transportation and the plant emissions?
[Translation]
Mr. Beaulieu: As regards consultation with First Nations, definitely, the responsibility lies with the provincial governments to make sure that happens. However, I can assure you that our organization works in collaboration with several proponents, including First Nations who choose wood naturally. I can show you several First Nations schools that were built of wood and where wood is very present. That’s part of the prerequisites given to architects and engineers when community halls, arenas and all other buildings are designed.
As for the environmental footprint related to forestry operations, a number of studies have been done. I think Canada has shown its leadership at the international level thanks to its reforestation and natural forest protection programs, but particularly through its reforestation programs aimed at making sure the wood is renewed. I don’t know the figures off the top of my head, because I concentrate more on construction, but I’m still a forestry engineer. So, I’m aware of your concerns, which are entirely valid. In short, yes, we are working directly with First Nations on projects in which we’re being asked to use wood in the construction of buildings. Some magnificent schools have been built.
[English]
The Chair: Thank you, everyone. We have reached the magic hour, one hour exactly, so we will have to forego further questions. It’s a very interesting topic, as shown by the interest in asking questions. I’d like to thank the witness for being with us here today. It was a great session.
We now welcome our witnesses on our new study on the value-added food sector in Canada and how it can be more competitive in global markets. We welcome them here today.
From the Canadian Meat Council, we have Mr. Chris White, President and Chief Executive Officer. From the Canadian Cattlemen’s Association, we have Mr. John Masswohl, Director of Government and International Relations.
Thank you for accepting our invitation to appear. As you can see from the last panel, there will be a lot of questions from the senators, so I now invite you to make your presentations.
We’ll start off with the Canadian Cattlemen’s Association.
John Masswohl, Director of Government and International Relations, Canadian Cattlemen’s Association: Good morning. It’s great to be here again. Thank you for the invitation. I see some new faces, some new senators. It’s great to have this opportunity.
The topic of this study is something that we think about constantly. How can we be more competitive? In global markets — and I think I may have mentioned this message in the past — exports really are the lifeblood of the beef industry: We are raising an animal, and we sell it to Chris’s members, who then disassemble that animal. For them to be able to pay us the maximum value, they have to be able to sell each piece of that animal to the customer that is willing to pay the most for it.
That customer is often not in Canada. If you think of things that Canadians like to eat, Canadians are great eaters of steaks and roasts and burgers, not so much lungs, kidneys, liver and all those other pieces that have great value. I often use the example of a tongue. In Canada, Chris’s members would often sell that, and if they had to sell it only in Canada, it would largely go into pet food. They might get 20 or 30 cents a pound for it. But in Japan they can get $5 or $6 a pound for it. A cattle tongue might be four, five or six pounds. You can do the math and see what that adds to the value.
Those opportunities are hugely important for us. I would say things are looking pretty good in terms of how we have opened up access to markets. Job one is to have access to those markets. That means getting rid of tariffs and non-tariff barriers. Last year, we had one of our best years ever on volume, so tonnage. We shipped nearly 380,000 tonnes, which was our best year since 2010. On value, we shipped beef in the box, $2.41 billion, which was our best year ever on value.
So we’ve done better on tonnes in the past but never better on value, which means we’re getting more money per pound of beef that we sell. That is a positive trend that we want to see continue.
In terms of where we sell the beef, 94 per cent of our exports last year went to five markets. The United States took 74 per cent. The U.S. is usually in that 70 to 75 per cent range. Mainland China and Hong Kong together was just a little under 200 million, or 8 per cent of the total. Japan was 7 per cent. Mexico was 4.5 per cent, and South Korea was 1.2 per cent.
So those markets take up the bulk of what we export. If you drop below those top five, we had some strong growth to the number six and seven export markets, which were Taiwan and the Philippines. There are more opportunities out there.
We’re very excited about some of the opportunities that would be available for us under the Canada-Europe agreement, CETA. We’re still working through some issues there. There are three tracks that we have to develop there. One is building the demand in the European market. That’s a different organization that is associated with us, Canada Beef, and they do the promotion. We have some regulatory issues on the EU that we’re still working through. Then there is building the supply. That’s really our job. We know that cattle have to be raised a little different for Europe. It’s a more costly way to raise them. People will have to segregate those cattle. But it looks like the returns are there.
The average dollar per kilo on what we have been shipping to the European Union is over $15 a kilo, $15.78 last year. That’s on a little bit, just under 500 tonnes. If you compare that to our next best market, in terms of China, we were $10.61 a kilo for the Chinese market and $7.30 a kilo for Hong Kong. And those other markets that I mentioned in the top five are between $6 and $6.70. You have to look at what you get per pound when Chris’s members are shipping around the world.
Those are the markets that we’re targeting. Of course, the NAFTA negotiations are hugely important for us. We need to keep the access that we have to that 74 per cent of where our beef goes. I haven’t mentioned live cattle exports. Most years, we usually ship over a million head of cattle into the United States. I think in 2016, there was about another $1.3 billion in live cattle exports to the United States.
If we look at these opportunities, the CPTPP agreement is going to be a huge opportunity for us to get a tariff advantage, especially while the United States is not in that deal. Right now it’s a 38.5 per cent tariff. Our Australian competitors already have a deal with Japan, so they’re in the 26 per cent range. We would certainly encourage the government to present a bill to the house, then have it come to the Senate and encourage swift passage of that because on day one of the CPTPP being implemented, we will match the tariff access that Australia already has into Japan and, of course, we will have that advantage over U.S. beef.
Producers often say, “Our cattle herd has been down. Where is that beef going to come from?” I would say, if you remember that million-plus head of cattle that we shipped to the United States, if Chris’s members have better opportunities, tariff advantage to ship that beef into Japan and can afford to pay us more for those cattle in Canada rather than have us ship those cattle to the U.S., that is more value adding and more job creation in the Canadian market. That is what these trade agreements bring to us.
Other priorities outside of the trade arena for us are research and innovation. We have a number of research projects we have been undertaking through our beef science research clusters. We’ve had two successful multi-year clusters running. We now have an application into Agriculture and Agri-Food Canada for a third cluster. That would bring federal investment of approximately $21 million.
We leverage that with money that we put in. Every time an animal is sold in Canada, we collect a check-off, and a portion of that is set aside for research. We are in the process of increasing that check-off amount so that we can dedicate more money on our side to research and innovation projects. To rattle off the subject areas, it’s for improving efficiencies, forage, animal health projects, genetic improvement, beef quality, food safety and studying animal behaviour in terms of care.
It would be easy to say that a lot of these projects are about increasing sustainable beef production and the environment. Many of them are. It is also, I would say, a happy coincidence or a symbiotic thing where what’s good for the environment is good for cattle producers. What’s good for the land is good for cattle. If we can raise healthier cattle that grow faster, if they’re not sick -- sick animals have a higher greenhouse gas footprint. We don’t like sick animals. We want to raise healthy animals. We want larger animals.
As I mentioned, we’ve had these projects trying to produce more beef with more efficient use of resources. That has translated. We’ve gone back and done the numbers: From 1981 to 2011, we reduced the greenhouse gas footprint of Canadian beef production by 15 per cent.
The United Nations has studied the impact of cattle production around the world on greenhouse gas, and they have come up with a global number that beef cattle produce or contribute about 14 per cent of the world’s greenhouse gas footprint. But if you look at it regionally, our footprint in Canada is less than half the global average. The footprint of countries like India, China and some others is well above the world average.
But we have taken this approach. We have natural grasslands — millions of acres of grasslands. If you want to protect the environment, you want to keep grasslands productive. You want to keep them in grass; you don’t want to plow them up and put in a crop. You want to keep them sequestering carbon, as natural wildlife habitat and natural. Before we were here raising cattle, the buffalo were on the land doing the exact same job the cattle are doing now. It is a natural state for us to have those animals on those plants.
The last thing I will mention before we go to Chris is an issue that we’re both concerned about: the availability of labour in Canada and the agriculture workforce. We have been trying to recruit labour, both to work on farms as well as for Chris’s members in the packing plants. They have been non-stop recruiting efforts, and we just cannot get enough people. We absolutely have to have a labour strategy. We have presented labour strategies in the past. The Temporary Foreign Worker Program or a foreign worker program has to be an integral piece of that, and we very much support those programs.
With that, I would turn it over. Thank you.
[Translation]
Chris White, President and Chief Executive Officer, Canadian Meat Council: I’m happy to be with you this morning. John Masswohl and I work closely together, because a good number of John’s and his colleagues’ activities affect our people every day.
I’d like to speak briefly about what we’re doing in our area and, more specifically, give you three or four examples.
[English]
The Canadian Meat Council has been around for just under 100 years. We’re going to celebrate our centennial in 2019. We represent the packers and the processors.
What’s really striking about it is that when you look at the food chain that John referenced, there is continuity from the farm to the plant to export and import. I’m quite new to the industry, and I would not have appreciated just how integrated it is. It’s really important that both senators and members of Parliament have an appreciation for just how engaged and intertwined the industries are. Whatever happens on the farm, as John referenced, impacts what the plant workers get in terms of value for their product. When John and I have travelled overseas, the messaging we have given to officials at the embassies or the high commissions is that the food chain is completely integrated in Canada in a way that is, frankly, a model to the world.
I’ll give you some brief numbers to try and provide some context. The Canadian red meat supply chain generates over $20 billion toward Canada’s GDP and accounts for over 288,000 jobs in Canada, and we represent about $6 billion worth of trade export.
Canada produces high-quality product. One of the reasons Canada has such a substantive advantage over many jurisdictions and countries we work in is the terrific reputation of the CFIA, the Canadian Food Inspection Agency. The standards and the expectations they have of the sector are critical to the ability for us to export.
Candidly, CFIA causes our members all sorts of frustrations on a daily basis. At the same time, if you talk to our members who are calling me to say how frustrated they are, they wouldn’t give up CFIA for anything. We have that classic love-hate relationship with CFIA, but the work they do is invaluable to the success of the industry, and we benefit greatly from it.
The CPTPP deal that John referenced very important, as are all the deals we’re doing: CETA, NAFTA, MERCOSUR.
What’s really interesting — and I think John alluded to it — is that if we don’t get in and if we don’t have legislation really quickly on CPTPP, we will lose the ability and the comparative advantages that we could have. The six countries that ratify the soonest will be able to access those markets in a way that Canada won’t be able to if we come late to it. For example, when John, others and I have been on the Hill, one of the messages we’ve been giving to the Minister of Trade and the PMO is that the sooner you get legislation before the house, committee and then the Senate will only help Canadian industry.
As John referenced again, we want to get into those markets, particularly Japan. The fact that Australia has a free trade deal with Japan is to our detriment. The CPTPP is one of the ways in which we could remedy that disparity on the tariff side.
Again, if there’s anything you could do to encourage the government to get legislation in front of the house, that’s imperative. Our concern is that the longer it lags — you will be into the summer recess and then won’t be back until the fall, so we might not see legislation and potentially ratification not much before the end of 2018-19. Who knows what that landscape will look like. Given the volatility of the American administration, it’s quite possible the Americans could decide to join the TPP deal, and then the advantage that Canada currently has would be lost.
We work very closely with all sorts of partners, and we’re trying to figure out — and I’ve only been in the role for about a year — what value proposition an organization and association like the Canadian Meat Council can bring both to government and also to other trade associations. Also, how do we maximize the work we are doing both domestically and internationally?
There are two areas we have begun to focus on with our members. One has to do with the temporary foreign workers issue. The mandate letters of the ministers of ESDC and Immigration, Refugees and Citizenship both have in them the responsibility to try and figure out what a path forward looks like. John references that there is a shortage. Right now, many of the packing plants in Canada are not at full capacity because they just can’t get the workers. Part of the frustration we have is that when we talk to government, on the one hand, the Minister of Agriculture and the Minister of Trade have been very supportive — they want greater access to markets, and they want to see as many of these plants as possible working at full capacity — but then there’s that juxtaposition when you’ve got the Minister of Employment, Workforce Development and Labour and the Minister of Immigration, Refugees and Citizenship, who, because of their mandates, have other concerns. It’s not as easy as we would like it to be.
The frustration in the industry is that you’ve got a $75 billion target for the agricultural sector, but you’ve got industry that can’t even, on a day-to-day basis, provide the maximum that it could if it had all the workers that it needs.
And then you look at, for example, what’s taking place in the United States with the eradication of a lot of their regulations and the tax cut. This is the concern that we have as an industry, and if you look at plants in some of the rural ridings in close proximity to the U.S. border, what’s the incentive to stay in Canada? We have more regulations. We have a higher tax rate, and we can’t get workers.
When I talk to government and to decision makers, that’s what I’m asking them to try and figure out with industry. We don’t want to set government up to fail. I worked on the political side and I’m acutely aware of the challenges at ESDC in terms of the Temporary Foreign Worker Program, but something is fundamentally not working. This is close to a two decades-old problem. When you look at it from the perspective of what is good for the Canadian economy, we need these plants because not only is it a question of bringing foreign workers in, but if you don’t bring these foreign workers in and you don’t give them a path to permanency, the flip side is that you have the potential of losing these plants.
The Canadian workers currently employed will lose their jobs. It’s a lose-lose proposition for the Canadian economy. We’re working on that. I would say that’s probably one of the biggest challenges we have.
The other thing, more importantly, is at a regulatory level. As I said, with the work we do at CFIA and the regulation they impose on industry, our members would quibble, but they wouldn’t push back too much because they know that the CFIA brand of approval opens up all sorts of markets internationally. And without those, they wouldn’t have nearly the profits or the potential for profits that they do.
The challenge we have as an industry, and I suspect it’s the same for many industries, is when you’re dealing with the United States, when you’re looking at what they’re doing on the regulatory side. It would be really beneficial, as we move forward in the process, if government tried to either marry or mimic what the Americans are doing. For every one regulation you want to introduce, you need to take out two regulations. Have something like that in mind because when we’re competing against the Americans, and when they’re looking to export their product, it is so much easier for them.
I was at a panel yesterday, and one of the speakers was Michael McCain. He was on the panel with the head of Loblaw and another company. They were talking about the new minimum wage in Ontario. He was saying, “I don’t have a problem with a $15 minimum wage. But what government has to accept is that I’m competing with a state like Missouri that has a minimum wage of $7. So you want me to do this, but I’m competing with this.”
How do you reconcile that? How do you square that circle?
Again it’s somewhat analogous to what our industry in Canada faces now that we’re competing with the United States, because the markets that Canada is trying to get our product into are the same markets the Americans are competing in. But because of what Trump has been able to do with Congress with the reduction of taxes and the reduction of the regulatory burden, that’s giving them a competitive advantage that we just can’t replicate currently.
When you marry that with the lack of workers, it’s a real challenge for Canadian industry.
The Chair: Terrific. Thank you, folks. Those were two excellent presentations.
[Translation]
Senator Maltais: Welcome, gentlemen, you represent a big part of the Canadian economy.
I have a few simple questions. The quality of Canadian meat exporters is well-known around the world. Are you subject to traceability requirements?
[English]
Mr. Masswohl: We have been undertaking nearly a 20-year project to improve the traceability of cattle in Canada. It started first with cattle identification, tagging the cattle and having a database. Then we moved from bar tags to radio frequency. Then we moved to some reporting requirements, movement reporting.
Now we are trying to work with the Canadian Food Inspection Agency on getting a full traceability. We came up with a cattle implementation plan, which is our traceability plan. We agreed on that in 2012 with the beef industry, the cattle industry, the provincial governments as well as CFIA, and we have been working and negotiating with CFIA ever since to implement that.
We all want to get there. It’s about the nuances. It really fits into the subject of this discussion. Traceability is absolutely a vital tool that can help us and help our customers feel more confident in our product, but you have to hit the sweet spot between having it as a beneficial tool versus the cost of compliance.
Sometimes with CFIA they think, well, if an ounce is good, then a tonne of it must be really fantastic, and it’s not always that way.
[Translation]
Senator Maltais: We know that China lifted the ban a year or two ago on the export of beef carcasses. Before, it had to be exported cut into pieces, ready to serve. Have you noticed an improvement in your export activities?
[English]
Mr. White: That’s a really encouraging development. I was over in Beijing last fall when we were negotiating that.
One of the developments since November has been that more plants that have been put on the list for the ability to export.
The expectation is that it will, senator. The reality is that because it only just took place, that these plants have begun to be listed, nothing has really ramped up, but the expectation is that it will.
[Translation]
Senator Maltais: Okay.
I’d like to get back to CETA with the European Community. As it’s just beginning, we can’t expect immediate results. I’m interested in this free trade agreement, and in several of the countries that I visited, I sensed a certain reluctance, particularly on the part of France, about the arrival of Canadian beef.
Here is the explanation they gave me. They said Canadian beef, especially Angus beef, has an international reputation. It is the beef of choice in America and even in Europe. There has been a war between the consumer and the restaurateur. We know that Europeans eat far more meals in restaurants than we do. We eat restaurant meals when we have to, but the rest we eat at home. Due to the price of Canadian beef, the restaurateur will have to choose between two filet mignons: the one at €8 and the Canadian one at €12. Demand is higher for the Canadian filet at €12. Therefore, the restaurateurs have a lower profit margin on the meal. If they sell it for €12, they will have paid €10 or €11, while they would have paid €3 or €4 for the one that sells for €8.
There’s an internal war between consumers and the restaurateurs. I spoke with many people from the chamber of commerce, as well as with restaurant groups and consumer groups, who are demanding Canadian beef. It’s a dilemma. Canadian beef costs more, but it’s of better quality. Comparing one pair of shoes for $5 and one for $100, I think the pair that costs $5 would be the lower quality pair. How will you adjust your prices as a result in order to retain your share?
[English]
Mr. Masswohl: I think you’ve certainly hit on what some of the challenges are in the European market. Let’s be honest, the French beef producers don’t want to see Canadian beef in their market. They don’t want the competition. We have tried to make sure this agreement also has opportunities for them coming in this direction.
I mentioned the numbers I have in front of me. We shipped just under 500 tonnes of Canadian beef to Europe in 2017. The agreement didn’t come into effect until September, and it takes some time, so I would say we’re not seeing the impact yet. But Canada did open up its market to European beef in late 2015, and 1,700 tonnes of European beef came into Canada in 2016, 2,800 tonnes of European beef came into Canada in 2017, and the numbers are already increasing in 2018.
We need this to be fair in both directions. Under the CETA, Europe will have unlimited, duty-free access for their beef into the Canadian market. Prior to CETA, they were subject to a quota, and now they are unlimited duty free.
With CETA, we are subject to a quota. We will have access for 50,000 tonnes of Canadian beef that’s reserved just for Canada, as well as access to some existing quotas that are open to other countries as well. If you consider that the Europeans eat about 8 million tonnes of beef per year — so about 500 million people eat 800 million tonnes of beef per year, and we have a 50,000-tonne quota — I don’t think they need to be overly concerned about the volumes we are going to ship. We’re at 500 now, and the 50,000-tonne quota doesn’t even come in right away. It is gradually introduced over a number of years.
In terms of the quality, I’ve eaten in a number of European restaurants, and I feel good about our ability to compete with the quality of Canadian beef. Our Canadian herd is largely built from northern European breeds, like the Angus, the Herefords, Charolais, Simmental and Limousin, so many of the breeds that they are familiar with, in Europe, we do over here.
We have been much more ago over the last 50 years in terms of crossbreeding and taking British breeds known for marbling very well but are quite small and taking the French breeds, which are known for being large, so over many decades we have been able to develop a European-based herd in Canada that is very different from the herd in Europe now.
We have some good advantages. Our research projects helped us with this. We want to continue to improve our efficiencies. We will have to produce those cattle for Europe without growth hormone, without modern technologies that are banned in Europe and have been found illegal at the WTO, but we will do it. If we are paid for it, we will do it, but there is a cost.
[Translation]
Senator Maltais: I’m going to come back to this point, because it’s important. In the past, your main competitor was Scotland. The best beef produced in Europe was Scottish beef, and I think you know that. With Brexit, beef exports from Scotland will be very limited. Doesn’t that create an opening for Canada, which produces meat of comparable, if not superior, quality to that of Scotland?
The other risk is tied to the fact that former East Bloc countries dump beef that is of a quality you could describe as ordinary. Couldn’t that also be an opening in Europe with Brexit? You’re faced with a competitor whose meat perhaps isn’t of as good a quality as ours.
[English]
Mr. White: I think the industry is looking for any export market that is available, frankly, because when you look at where you want to export, you’re looking for where you can export quickly.
Senator, you touched on a couple of very good points. Canada has a traceability system that differentiates it from many countries in the world. That gives us a competitive advantage. We have the CFIA brand, which is a competitive advantage. And as John referenced, the quality of the meat is very good, as well.
When John and I and others were at the EU last fall advocating for signing CETA on the part of Canada, correct me if I’m wrong, John, but our sense is that market will never be a substantive one for Canadian export because of the limited quota and because of some of the other challenges. We’re looking for other markets, but to John’s point, we’re not going to absent ourselves from that market, but there are other markets that are perhaps more lucrative that we need to penetrate, and China is one of them for sure.
[Translation]
Senator Maltais: My last question is for you, Mr. Masswohl. Has Canada reached its capacity in beef production?
[English]
Mr. Masswohl: Absolutely not. We have so much land that is great land for raising cattle. Cattle tend to be raised on marginal, rocky and hilly land, the land people thought was too difficult to plow up or had a small yield. With modern research, we’re finding that new crops like corn and canola are being put in what was once marginal cattle land, but if I look at just about every region of the country, there is opportunity for growth.
The real limiting factor is the mindset of the cattle producer, because it is a long-term investment, and every farmer will look at a piece of ground and figure out what they can do to maximize their return from that piece of ground. If they see that future and the opportunities that trade agreements bring, we are confident they will be optimistic about increasing the beef herd in Canada.
Senator R. Black: Acknowledging that this is a value-added discussion, and you mentioned that livestock numbers are decreasing in general terms, is climate change going to allow us to increase our numbers across Canada, which will then allow us to enhance the potential for value-added production?
Mr. Masswohl: I’m happy to see a Senator wearing a 4-H tie.
We think there are so many opportunities. The general public’s concern about climate change and greenhouse gases should be a reason why they want to choose Canadian beef and produce beef in Canada. I’m not saying we’re the only country that raises beef sustainably. Certainly, there are others making efforts.
But if you’re concerned about the environment and animal care, you should feel very good about eating Canadian beef because we’re often fighting this myth that eating beef is bad for environment. But if you want the land to do what it should be doing in terms of contributing positively to the bigger picture of the environment, then you want to keep cattle on grasslands and you want to have more of them.
Mr. White: Every packing plant and every processor is acutely aware that there are standards that the government has implemented. There are standards internationally that if we do want to export, they have to be current with.
When you look at some of the work cattlemen have done, it’s ground breaking, and on the pork side as well. We primarily represent the beef and the pork side, so everyone is sensitive to it.
The challenge for industry is when government introduces regulations with respect to climate change, sometimes I think there’s a frustration that there is a lack of consultation. One day it’s this and the next day there is a sense it’s going to be that, but there is not enough consultation to ask, “How will this impact you? How much lead time is realistic, and what are the international standards or markets that you are competing with? What are they dealing with? Are you competitively disadvantaged?”
No one is saying we don’t want to do this, but is there a more thoughtful way to implement it so that industry is consulted and can be a bigger partner at the table? I think the cattlemen have done groundbreaking work, and you will see and have seen over the last decade or so that industry has reduced their emissions, particularly in some of the plants we represent. That is just a trend that will have to continue, but it does affect the bottom line as well; the profit margins are fairly thin. The trade opportunities are paramount, but we need to get the workers, and we need look at some regulatory loss as well.
Senator Oh: Gentlemen, thank you for your great information. One of your charts says that China can pay for high-quality beef. I have received information on the beef promotion in China. You guys are doing a great job — or someone in China is doing a marvellous job — promoting high-quality beef regarding Canadian beef exports.
Value added has everything to do with innovation and new ideas. With the help of blockchain technology, known as being hard to tamper with, the Chinese e-commerce company JD.com has made it possible for customers to look at a detailed history of their steaks, from when the cow was born to what it was eating. It has been working with beef manufacturers from Australia.
Do you use blockchain technology to track the production of frozen beef?
Blockchain has been used successfully to conduct trade in other markets, such as selling canola oil to China. Have the Canadian Meat Council and the Canadian Cattlemen’s Association started conducting trade using blockchain?
Mr. Masswohl: First of all, I know there are people a lot smarter than I am who understand these technologies better than I do, but I’m very much aware that blockchain is discussed. At a more generic level, I mentioned that our ability to identify and trace cattle has vastly improved over the last 15 to 20 years. We can do things today we couldn’t do five years ago, and we know that five years from now we will be able to do things we’re very concerned about today.
I think the approach we have been taking with CFIA — and everyone is on side with this — is to do as much as we can with the technology to improve and get full movement reporting and traceability. Then let’s come back and review it once the regulations have been in for about three years, and see what more we can do and how the technology evolves.
It’s an exciting opportunity, and it will probably be part of what gets implemented.
Mr. White: When we look at some companies we represent, they’re trying to figure it out. You have a variety; we have some small operations and some large operations. For the large operations, it is very much something within their thought process, because they’re looking for efficiencies and for ways they can reduce their costs. It’s not just efficiencies in terms of how to get the product out but also how quickly they can get the product out.
These examples are things they are looking at.
They are also looking at best practices internationally. We have a plant just outside of Calgary that is based on the European model, because that’s where the market is. Every plant is looking for efficiency and to figure out what it is doing and what plants are doing internationally so that they can take those best practices or, in the instances of a blockchain, build on that to make it a more efficient process for them.
Senator Oh: In China, you go shopping in the supermarket, there is an app. You scan it, and you know the history of the beef or steak.
Mr. Masswohl: We want to make sure that we can actually do whatever we promise we can do. We hear stories about what is being offered by some retailers, but we’re not entirely sure about the delivery sometimes.
Mr. White: John and I were at a meeting two weeks ago with Paul Glover, the head of the CFIA, and some of his senior officials, and traceability was a big part of the discussion. It’s paramount to the industry. If something goes wrong, the whole industry would be damaged irrevocably, so it’s critical that everyone has a clear sense of where the product originated and that it can be traced back.
The way we left it with the Canadian Food Inspection Agency is that we will be working with the Chief Veterinary Officer on a pilot project to make sure there is a capital consideration as well as traceability. There was a bit of a disconnect between government and industry. By that, I mean that everyone agrees traceability is very important, but the issue is the capital value of traceability. John can jump in if he thinks I’m off here, but there was a bit of a supposition on the part of the CFIA that traceability is something industry should be paying for, because it gave them a competitive advantage internationally. From industry’s perspective, there is no competitive advantage to traceability in the sense that other jurisdictions don’t necessarily have it, so while we think it is important, and we are supportive of it, it’s a bit inaccurate to think there is a capital or competitive advantage when we mark our product internationally. As I said, some jurisdictions don’t have it at all and don’t necessarily see that as something they or the consumer should be paying for.
Is that fair?
Mr. Masswohl: Yes. Often in the regulatory development process, not enough attention is paid to what the impact on competitiveness is and the way the industry does business. We invited very senior officials from the Canadian Food Inspection Agency and the people working on this traceability project to come out and see how a cattle auction market functions at the busiest time of year. Don’t build a system based on how things work 40 weeks of the year. We have a small window in the fall — we call it the fall run — which is when about 80 per cent of the cattle are moving in a compressed time frame. They’re moving in rural areas where Internet and mobile data transmission are not very good. If cattle have to stand around, be read and reread and wait for data to transmit, they will lose weight while they are standing around. That’s money out of the farmer’s pocket.
So we need a tool that will make us more competitive internationally. The competitive advantage has to be more than the compliance cost, and that’s the sweet spot we’re trying to get to.
[Translation]
Senator Dagenais: Thank you to both of our witnesses.
Mr. Masswohl, I’d like to come back to the export of cattle to Asia. Our committee visited China two years ago, and our understanding is that the Chinese are now more open to beef consumption.
In your presentation, you mentioned a price of about $6 per kilo in Asia. Given all the stakeholders involved, namely the processors, vendors and suppliers of a product that is, after all, perishable over a long distance, do you think we could direct our efforts to countries that are closer, such as the United States and Mexico?
[English]
Mr. Masswohl: There’s always more. Ultimately, the touchstone we always come back to is to sell each piece to the customer who will pay the most for it. Americans are paying in the range of $6 a kilo, on average. You mentioned China and the number we have for the high quality they pay for, and it’s a little under $11 a kilo. We still don’t have access for fresh beef into China, and that’s where the good margins and good returns will be.
We’re not as concerned about the distances. I understand there is a new direct air route from Edmonton to Beijing that I believe is coming up. There are flights and even ships. Chris will probably tell you about the advancements in food safety and packaging with his customers. In fact, when we ship fresh product in what we call the cryo-vacs — it’s vacuum sealed in heavy plastic — while they’re on the ship, the beef is aging, and that is actually very beneficial for the quality. When the product arrives, it’s a little bit aged. The journey is part of the process.
There’s more we can do in China. I had a chart with me. It might be in some of the packages distributed, but this is our exports to Hong Kong and Macao. You can see how it grew, after BSE in 2003, when the market started reopening. We got back into, from those first years, Hong Kong and Macao, which became very good markets for us. China opened up in the 2012 time frame, and we have done better and better in China every year.
And we still know we can do much more when we get access for fresh and Chris’s members get approved for export to China. There is a lot of upside in the Chinese market and the dollars per pound are there. We want all the customers, but we want the ones that want to pay more for the product.
[Translation]
Senator Dagenais: Mr. White, you’ve spoken, among other things, about the tax and regulatory advantages of the Americans, which could perhaps cost us jobs. With the protectionist policies of the new American president, we’re not telling ourselves that things could be worse, but that prices could rise. Have you identified the places where we’re more vulnerable in relation to our American neighbours with regard to trade? In which agri-food sectors and in which regions of the country could we be more vulnerable further to the decisions by our American neighbours?
[English]
Mr. White: I think where we feel there is a vulnerability is with the plants that are located quite close to the American border, some of the rural plants. As I said earlier, the concern is that if I’m a Canadian packing plant and I look at my margins, and then I look at some of the challenges that I have, what’s the incentive to stay on the Canadian side versus closing the plant and going 100 miles across the border where I know they might give me an incentive to relocate? And once I’m there, I don’t have the workforce challenges I might face in Canada. I don’t have the regulatory burden we have in Canada, and the tax rate is lower. Those are the challenges.
I don’t want to specifically identify this plant or that plant, but when you look at the geographical map of Canada and see where some of these plants are situated, it is not a hard proposition to think that if things continue the way they are, if I’m a business person, that would at least be part of my thought process. When you look at some of the stories in the paper about the brain drain coming from the States that Canada has benefited from in the last 12 to 18 months, we do worry about the reverse. We know that with the American economy, while it’s working and it’s in pretty good shape, there are always those overtures to Canadian companies. That would be my concern, senator. It’s the ones close to the American border.
Senator Petitclerc: What I am getting is that our strongest competitive advantage is on the high quality and trust of the product. You just talked about it now and a little bit before. We have those challenges when it comes to workforce, regulations and minimum wage. The way I see it is that because of who we are as a country, I’m sure we can and should improve. But when I think about minimum wage, we will never be as competitive as many countries, and personally, I don’t think we want to get there.
Then I also look at trends, and I’m sure you’re waiting for the new food guide coming to Canada recommending quality over quantity. The World Health Organization also recommends limiting intake, but quality is important.
Would you say that with those trends and who we are as a country, quality is our strength and competitiveness advantage, perhaps? If so, how well are we doing in informing and maybe even promoting that competitive advantage?
Mr. White: I think there are two dimensions. Certainly, the quality is one, but it is also the safety of the product. Those two advantages are also the biggest challenges for industry. As I say, every member is so frustrated by CFIA, but no member would ever get rid of CFIA. How do you find that sweet spot? In fairness to CFIA, they are doing the best they can because they are under so much pressure themselves. It only takes one incident and then the whole food chain is put in peril, and then the Canadian brand is suspect.
So there’s that. In terms of the work that Health Canada is doing on the front-of-pack labelling, when the studies come out, it shows that Canadians are moderate in terms of their meat intake. And because the consumption of meat they do ingest is of good quality, we’re not in the same problem areas as some jurisdictions where the quality of the meat is not very good and the intake is voluminous. It’s trying to find that balance.
The one area where government could do a better job is when these types of reports come out, they are often so dire and overblown in terms of rhetoric, and it would be helpful if the government said, “On balance, Canadians are moderate in terms of consumption, and we’re pleased. And industry is doing a good job in terms of making sure the quality of the meat is very good,” those types of things. What I’ve noticed from the year I have been on the job is that there doesn’t tend to be that. It is often, “This is really bad,” and that’s all the consumer hears. For somebody who is a bit of a layperson in the industry, how do you reconcile what government is telling you to do and what you’re hearing versus wanting to make sure your children and family are eating well? It’s that conundrum where I think government and industry need to work to be more effective. I’ve seen some progress, but there is a lot more we could do.
Senator Gagné: I’m going to ask a quick question. To build on Senator Petitclerc’s question about minimum wage, we know Australia has a national minimum wage of approximately $18, and I think the processing industry is faring quite well in the world market. Am I correct in saying that?
Mr. White: I believe so.
Senator Gagné: Minimum wage is perhaps just a factor in the scheme of things pertaining to competitiveness.
Mr. White: And the reference I was making to the observation of Mike McCain has to do with food security. It was in that context, but it is certainly an issue.
Senator Gagné: If we look at the Canadian beef processing industry, what are the most important key factors for success and what would the success factors be five years from now?
Mr. White: I think currently it’s that you have highly skilled workers, and the longer you can retain a skilled worker in a plant, the more efficient the plant is because they know what they’re doing and you don’t have to train them.
In terms of the next five years, the opportunities are to ensure that those plants continue to upgrade, not only for training of the workers but also the internal mechanisms by which they get the meat, process the animal once it comes in, get it ready, cut, packaged, processed and out the door. That would be the area where there is always potential for improvements.
Senator Gagné: What about automation?
Mr. White: There is a fair bit. I’ve been to a few abattoirs and plants. It’s remarkable how some of them work. There are some plants where it’s purely physical labour, but in some smaller plants, because of the chain cycle and how many carcasses, they are fairly automated. That will be part of the challenge. You want a plant that has a higher-speed chain. Eventually, it might get to that point, and that might alleviate some of the pressure with respect to workers.
My understanding of the industry currently, senator, is that we are some ways from that.
John, do you have any thoughts on that particular point?
Mr. Masswohl: I don’t spend as much time in the processing plants, but I have toured a few. I have seen a lot of automation in European processing facilities. They are much more advanced on automation. Some of their drivers are different. The price of land per square foot where they operate, the price of labour — all of those things — the price of energy is much higher, so they are more inclined to try and do things more efficiently.
I have also heard from some of the processors that whenever they want to change a system or bring something different in, that all has to be approved in advance by CFIA. If you want to bring in a new sort of equipment, CFIA will have to evaluate it to see how it operates in terms of its impact on food safety, the cleaning systems, maintenance and all of those sorts of things.
Again, there’s an upfront regulatory component to moving in that direction.
Senator Gagné: What about your ability to produce the food or the goods that are currently favoured by the market?
Mr. Masswohl: The biggest thing we have going for us is that people love beef. They want to feel good about eating it. As I say, we are fighting a lot of myths out there. Sometimes people don’t feel as good as they should about eating beef, but they still love to eat it. So we have that going for us.
I’d also say there are so many different products in the animal. Even if you just like steaks, there’s a lot of variety of different steaks: the juicy ones that you can put on the barbecue or ones that are greater value but you have to process them differently — stew them, cook them slowly or marinate them. Those tend to be leaner. If you’re interested in fat, you just go to a different product that will cost you less, and you prepare it differently.
We have a lot of education efforts to help customers know how to prepare beef. A lot of people go to the meat counter and don’t really know the difference between various meats and don’t know what to do about it. They’ll instead get hamburger, a piece of fish, chicken or something else.
So we have a lot of work to continuously do in that area to educate consumers about that.
In terms of the food guide, we were a little disappointed that it seems fairly limited in its dimensions as to what it’s getting. One year, they’re just focused on fat, or they are focused on something. Beef is the whole package. Even a lot of the fat in beef is the good fat, the omega-3s — it’s very high in that, particularly if it’s grass-fed. Again, there’s learning the difference between grain-fed and grass-fed, and what your objective as a consumer is in your diet. It’s also about bringing in things like proteins, zinc and iron. There’s probably no more complete a package than eating beef.
You have to eat it in moderation. We’re probably not recommending that everyone eat a 16-ounce rib-eye every day. We’re okay with that if they do, but I don’t think that’s going to be in the food guide. But a blanket statement saying that Canadians should eat less meat is fundamentally wrong, and it does not look at the baseline of what the average Canadian is already eating. Many of them are already not getting enough.
Senator Gagné: Thank you very much for your presentations. They are really informative.
Senator McCallum: Thank you for your presentation. When you look at your areas of concern — foreign workers, regulatory costs and your support for the different areas — would it be safe to say that the foreign workers would be the top of the list?
Mr. White: The regulatory burden and the foreign workers are the top two, absolutely, senator.
Senator McCallum: When you look at your pathway to permanent residency, what would you recommend? It’s a promise right now. What recommendations would you make to push this along?
Mr. White: We were advised throughout the latter part of the fall and early winter that ESDC was going to implement a series of pilot projects. There’s a recognition that this is an issue, not just for our sector but the fish sector also, for instance. Our sense was that there was going to be a pilot project to try to allay some of the concerns that government had in terms of how to take these temporary foreign workers and give them a path to permanency.
Then about three or four weeks ago, we were told by government that that is no longer on the table. Our frustration is that we had this expectation.
I’m a former chief of staff under the Liberal government at HRDC, so I am acutely aware of the challenges that department has, particularly on this file. But it’s also clear that, on the one hand, you’ve got a government advocating for all these trade deals, and when you look at the economy, we need foreign workers. It was an issue when I was in government on the political side.
The frustration industry is increasingly having is that if they’re saying that even a pilot project isn’t in play, what is the policy, then, to try and remedy what is clearly a challenge for Canadian industry? That’s not clear.
We understand that Rodger Cuzner, whom many of you would know as a parliamentary secretary, is now being tasked with trying to lead the file and figure out some path forward. We have a meeting with him this afternoon.
Our sense is that, when you look at the foreign workers who come in and work in the meat plants, they have a really long retention. There’s a misperception on the part of Canadians that if a temporary foreign worker comes in, they can just stay forever. That’s not the case, either. There are very strict guidelines in terms of when you come in and when you must leave.
Industry is looking for some type of rationalization to this program. We know that in the past there have been some abuses, and that’s not acceptable, but we also know there’s a huge void right now. We need for government, from a public policy perspective, to work with industry and get it right.
As I say, if a pilot project is a challenge for government, then that’s a big concern, because if a pilot project can’t give you some reassurances, what are you looking for? That’s not been made clear to us at all.
Finally, there’s a bit of a disconnect from what we understand from the industry side. Agriculture Canada and the trade department would like to see these go forward, but then ESDC and the immigration department have competing responsibilities. We sent a letter last year to the ministers to say, “Our sense is that you guys are sucking and blowing at the same time.” We’ve got a minister saying they want trade and need these deals, but if you can’t get the workers to get the plants working at full capacity currently, how are we ever going to take advantage of that?
That’s the challenge we have, senator. We’re hoping that the meeting with Mr. Cuzner will give us a little bit of hope this afternoon, and maybe he can come and speak to this. It’s a pivotal issue.
The Chair: Gentlemen, thank you for being here today. It’s been very interesting, as you can tell from the interest in the questions.
(The committee adjourned.)