Proceedings of the Standing Senate Committee on
Agriculture and Forestry
Issue No. 54 - Evidence - Meeting of June 14, 2018
OTTAWA, Thursday, June 14, 2018
The Standing Senate Committee on Agriculture and Forestry met this day at 8:01 a.m. to study on how the value-added food sector can be more competitive in global markets.
Senator Diane F. Griffin (Chair) in the chair.
The Chair: Welcome to this meeting of the Standing Senate Committee on Agriculture and Forestry.
I am Senator Diane Griffin from P.E.I. and chair of the committee.
I would like to start by asking the senators to introduce themselves, starting with the deputy chair.
Senator Maltais: Senator Maltais from Quebec.
Senator Dagenais: Senator Jean-Guy Dagenais from Quebec.
Senator Doyle: Norman Doyle, Newfoundland and Labrador.
Senator Oh: Victor Oh, Ontario.
Senator Woo: Yuen Pau Woo, British Columbia.
Senator R. Black: Robert Black, Ontario.
Senator Gagné: Good morning. Raymonde Gagné from Manitoba.
The Chair: Thank you very much.
For our first panel, from the Conference Board of Canada, Jean-Charles Le Vallée, Associate Director, Food Horizons Canada, and from the Canadian Agri-Food Policy Institute, Donald Buckingham, President and CEO, and Tulay Yildirim, Director of Research.
Thank you for accepting our invitation to appear. It is a pleasure to have you with us today.
We will start with Mr. Le Vallée.
Jean-Charles Le Vallée, Associate Director, Food Horizons Canada, The Conference Board of Canada: The current Canadian value-added food marketplace is highly competitive. Firms face competition domestically, from imports and in export markets with local rivals. We often think of competitiveness as the ability of a country, a sector or firm to grow, maintain and preferably expand their market position in a given food market. Canada’s competitiveness is assisted by a robust high-quality resource endowment and food safety reputation.
I did a food safety study in 2014 comparing 17 OECD countries, and Canada ranked first in the world on food safety performance with Ireland.
Business managerial capabilities and skilled labour are very important in this area. Other factors include developing food and supply demand conditions, regulatory compliance and costs. For instance, front-of-package labelling for the industry is estimated by Agriculture and Agri-Food Canada at $1.8 billion, which takes away from monies available for investing in skilled labour and innovation, for instance. There are also factors including variations in climate, trade and policy risk.
Competitiveness is dynamic and changes with each food market, commodity and product. The food world is always shifting, reflecting a call for new directions, altering business models for industry, and modernization of policy and regulations for government. Indeed, such ever-changing agri-food market conditions thereby change competitive positions. Businesses must stay abreast of such changes in demand, incomes, market preferences, government policies, standards, new techniques and innovative processes. Significant drivers determining value-added food sector competitiveness include cost structures, productivity, economies of scale, product differentiation and innovation.
The world needs more Canada. Canadian companies face a key strategic choice to engage this challenge of feeding the world’s projected 9.5 billion population by 2050. We can compare that with Canada’s population which by 2050 might be 50 million or 53 million. Much of the demand in food will be from outside Canada, not domestic. It is quite a saturated market here.
Canada can engage more actively with the world and rely on efficiency gains from trade and specialization to feed people here and in global markets. As the world demands more food, there will be pressure on Canada to respond through greater engagement with the world. There are many possible paths to choose as Canada’s government defines the food economy policy for industry, value-added growth and viability.
Canada currently has a comparative advantage in numerous manufactured value-added food products. Major categories where we have an outsized share of global trade include pork, canola oil, beef and frozen potatoes. Overall, there are nine major segments of the industry. That includes animal feed, bakeries, dairy, processed fruit and vegetables, grain and oilseed milling, meat, seafood, sugar and confectionery products.
The characteristics of the segments can vary in each of these groups. For example, the export share of sales is 70 per cent for seafood. They are less than 3 per cent for dairy. However, only in the case of seafood, grain, red meats, processed fruits and vegetables do you see exports higher than 25 per cent of sales. These are areas for value additions. However, the supply management system limits Canada’s exports of value-added dairy and poultry.
Among all the demand for growth in protein around the world, dairy is the highest growing market right now and we can’t participate because of our system here.
With a saturating domestic market, the global export markets offer Canada’s value-added sector greater opportunities for growth. As with agricultural products, the growing populations and wealth in emerging markets provide the potential for new markets for Canadian value-added food processors.
Some success stories, such as canola oil in China and red meats in Mexico, are already apparent. CETA, China and India’s expanding middle class, which is larger than the entire population of Canada, will drive these opportunities further.
For instance, meat accounts for over half of the CPTPP-destined agri-food exports while seafood accounts for half of Canada’s $900 million processed food experts to the EU.
The U.S., China and Japan remain Canada’s top destinations. About 70 per cent of our food production stays in Canada. Beyond that, we export the rest. We are a net exporter. Of the 30 per cent that we export, 23 per cent goes to the U.S., 2 per cent to China, 2 per cent to Japan, and the remainder for the rest of the world. It is mainly the U.S., China and Japan.
There are a few high-end value-added markets in the world where we can grow exports of processed value-added food products and help achieve the country’s $75 billion agri-food export target by 2025. It was about $65 billion, according to Agriculture and Agri-Food Canada in March.
In the U.S., the most significant market for commodity processed food exports — we exported about $23 billion in 2016 — includes bakery products, canola seeds, beef and frozen French fries.
For China, it is about $2.2 billion in canola products, pork, beef, frozen crab and alcohol.
For Japan, it is about $1.6 billion. The most significant markets are in pork, beef, animal food, frozen fries, malt and special crops.
Canada’s implementation of CETA with Europe and the expanding global middle class bode well for our value-added agri-food export opportunities. However, we don’t know yet if NAFTA negotiations will temper the benefits of an expanding U.S. economy.
Elsewhere, stronger economic growth in emerging markets will support greater spending on food, providing opportunities for Canadian exporters to target these markets. We are among the cheapest markets in the world. We spend less than 10 per cent on food, like the Americans, in Canada. In other places in the world they spend a lot more on their food.
The economy in Canada is about $1.2 trillion. Food is about $200 billion, which means that households spend around $8,000 per year on food. In other countries, the relativeness of the market expenses at the household level is much higher than here. You will see much more demand because of population growth, but also because of preferences and willingness to pay more for food elsewhere outside the country.
According to the World Blank, real GDP is forecast to average gains of 3 per cent in the next three years and expand at more than double the rate of advanced economies like Canada.
A lower Canadian dollar also helps us. It supports food exports to the U.S. and elsewhere. In 2017, Canada exported $34 billion worth of agri-food products, a year-over-year increase of 5 per cent. That is wonderful. Typically, as I said earlier, over 70 per cent of Canada’s agri-food exports are to the U.S.
While oil prices are projected to remain relatively flat this year and interest rate hikes in the U.S. are expected to precede those in Canada, the Canadian dollar is not forecast to appreciate much. At the Conference Board we figure it will average below the 80-cent mark for this year.
Although higher oil prices will lead to gradual appreciation of the loonie over the coming years, it will continue to provide our sector a competitive edge in the global markets. The OECD also projects that prices for ag commodities will continue to soften over the coming decade. Most notably beef, sugar and fish should see the largest declines. This limits the cost pressures for manufacturers and value-added products that depend on these inputs. It is not great for the fishers, but it is great for the processors.
Canada will continue to find a competitive edge for its value-added food sector if it can position itself in trade agreements that our key competing countries don’t become part of. For instance, the U.S. got out of TPP. That is an advantage for us.
Expanding market access not only provides export opportunities but can also lead to lower input costs within the supply chain. One key outcome from the surge in foreign demand is that the industry now finds itself operating close to full capacity, which is wonderful news, at about 90 per cent. Thus, future value-added production growth will require a pickup in foreign direct investment, and domestic industry investment is key for growth here. It is essential to expanding the country’s ability to take advantage of rising foreign demand for Canadian value-added food products.
Unfortunately for the industry the current investment climate is not necessarily positive, given the uncertainty surrounding the market access in the U.S. right now. The differing responses by various food groups of the Canadian value-added sector provide better insights into the responsiveness, adaptability and innovation of this sector to a series of competitiveness challenges. This argues for a greater recognition by firms and industry segments of the role of their management of skilled labour and product/process innovation.
Labour is an issue. There is a labour gap along the supply chain. We did a three-year study, funded by ESDC, for the Canadian Agricultural Human Resource Council. We determined, over 25 occupations across all commodity groups, across crop and animal production, that the labour gap in agriculture in Canada right now is 58,000 workers.
It grows. If we model it out to 2025, that domestic gap grows to 114,000 workers. That is just agriculture. That’s not processing where you see most of the value added.
There are also challenges. They don’t have the skills, willingness and mobility to move around the country. We might have some skills and labour available, but we are really filling the gap with temporary foreign workers. Of the 58,000 workers in the gap in 2014, some 45,000 were filled by foreign workers.
However, there are challenges to value addition. For food processors, financial considerations ranked as the highest obstacle to innovate and develop value-added products. About 42 per cent of firms report lack of internal cash flow. R&D tax credits are the most common use of government support for innovation and value-added products. About 59 per cent of firms with fewer than 20 employees use this method. Almost all, 85 per cent of firms with 200 employees or more, use R&D tax credits. While skilled labour shortages are seen as a medium to high obstacle — around 37 per cent of firms reported this — it is just as high as regulatory barriers.
Some 16 per cent of food processors also cite corporate and management resistance to innovation as a medium to high obstacle, and 24 per cent of firms report lack of ideas in terms of value addition.
Nevertheless, key areas to focus efforts on improving value-added export competitiveness include raising R&D activity and research intensity levels. We also have research that shows R&D grows with firm size. As firms grow in terms of the number of employees or revenue, so do innovation and R&D.
We also recommend investments in enhancing productivity in greater supply chain integration and economies of scale, which is very important here. It is a challenge because our market is dispersed. It is a small market, actually. We are not a large player.
The Doha Round would have been fantastic. We would probably not recommend discussing one on one with the U.S. We support regional or multilateral trade agreements as a preference, as well as the adoption of investments in digital technologies. This would include big data. Blockchain is kind of new. AI is more robust. Automation and robotics are important.
I would add reducing pre-market approval times at Health Canada to allow us to enter the market more quickly and for potential mutual recognition, so that if the U.S. or Europeans recognize a product it would be accepted here and our firms could then enter the market more quickly. That is very important.
One last item is to modernize our food regulations. A lot of them are outdated. The regulatory burden can be quite high and eat into a firm’s ability to export far more value-added products in the global market.
Donald Buckingham, President and Chief Executive Officer, Canadian Agri-Food Policy Institute: Good morning, senators and staff of the Senate. It is a great pleasure to be appearing before this committee.
Accompanying me is Tulay Yildirim, our Director of Policy Research Partnerships. I will come back to her title because it is significant. We have done agriculture, agri-food and processing in silos for many decades. It is time we think about new patterns and partnerships. We have already decided to make that evident with that job title.
I’m very happy to be with you today. Agriculture is very important to Canada, and the processing of agricultural products is part of the Canadian growth system. This is an area close to my heart. I’ve been working in agriculture for five decades, first in Saskatchewan, with my family, who were farmers.
This is not an academic issue, but a life issue, a future issue for Canada.
The Canadian Agri-Food Policy Institute is an independent non-partisan policy catalyst, bringing insight and evidence to the public square. We are no more firmly planted in the public square than we are this morning.
We like to provide a neutral place to hold difficult dialogues. Emerging ideas are exposed and debated among the leaders of the industry and the leaders of government.
Today, we are here to talk about Canada’s food and beverage processing sector. Mr. Le Vallée has already given you a full overview of how important that sector is in the Canadian economy. In fact, it is the most important manufacturing industry in Canada, being the largest industry in Canada. It is larger than transportation, equipment manufacturing, machinery manufacturing, chemical manufacturing and wood product manufacturing. It is not an insignificant opportunity for us to say, “Let’s grow this sector of the economy.”
As Mr. Le Vallée has said, it’s a very fractured sector. Small operations with fewer than 100 employees account for 94 per cent of food and beverage processing in Canada. Medium processors, those with between 100 and 500 employees, are about 5.4 per cent, which leaves half a per cent of the number of players for large enterprises of 500-plus employees. Those large enterprises produce a lot of the products, but we see a lot of players in this sector.
That presents challenges but also opportunities because small and medium enterprises are perhaps the most nimble to try new things, to do new things, to invent new products and to find new markets, but they have limitations. Usually those are, as Mr. Le Vallée has said, cash considerations.
Since 2017, many of you will have been aware of, heard of or perhaps heard too much about something called the Barton report. This was the federal government’s advisory committee on economic growth report that said the agriculture and agri-food sector had to be tapped to drive economic growth in Canada. It was not economic growth for the agricultural sector, but economic growth for the country. For the well-being of Canadians, we have to go deeper and longer in the agriculture and agri-food sector.
That sector is quite diverse. It has the producers from Saskatchewan, Manitoba, Alberta, P.E.I., the lower mainland of British Columbia, Ontario and Quebec. It also has the processors and transformation industries found in some of our larger provinces. Then we have the new value-added, innovative technologies that actually feed those innovations.
As a whole, we see the possibility in the Barton report that primary products will only account for about 40 per cent of the growth expected to occur. We are looking for other 69 per cent to the value-added market. That will be for exports over the next 10 years.
While we have a trade surplus in primary products, we have a trade deficit in the food and beverage sector. Currently, we import more food and beverages than we export. This is an opportunity and obvious place for growth for exports.
While Mr. Le Vallée has provided you with the necessary statistical basis of the sector, how it can grow and its certain kinds of limitations, I want to take us in a slightly different direction because this is what CAPI does.
In CAPI, the Canadian Agri-Food Policy Institute, we try to look in the longer term. We try to look around the next corner of what will be important for growing the Canadian agri-food sector.
The new suggestion that I will put before you today is the subject of a report, which we will release next week, on what we heard across the country over the last year with respect to meeting the targets set by the Barton report to grow the Canadian economy through the agri-food sector by 50 per cent over the next 10 years.
Three significant factors will help the food and beverage sector as well as the Canadian agri-food sector as a whole.
The first is concentrating on the trade possibilities for new value as well as traditional possibilities for simply shipping more products outside Canada.
Second, we have to figure out how we can monetize that new value. Canada is very gifted in the kinds of products and the kinds of resources we have to produce those products, but right now a Brazilian soybean and a southern Ontario soybean are indistinguishable on the world market. In fact, there are some very significant differences with respect to environmental sustainability, for example.
Third, we will suggest that new partnership models for innovation and co-operation have to be actualized. They are starting to be formed, and some of that is at the initiative of the federal government with the supercluster program and with the national food policy, where we are bringing together companies, organizations, associations and government that don’t usually fit in the same room. That is a very welcome development.
Let me go over the three points in a bit more detail. We are suggesting that if we are to move forward with our ambitious growth agenda, both in the primary sector and in the value-added sector in the food and beverage industry, we need a new approach to recognizing and adding value.
What adds value to food products? Consumer preferences and retail food markets are changing extremely fast. Food companies are simply not able to respond to them as quickly as they would like. As a result, over the past three years average sales at North America’s top 10 food processing companies have actually declined by 4.4 per cent. Four of the top 10 have endured sales drops in the double digits. Big food has lost more than $20 billion in sales in the past three years as customer loyalty to national brands has faded.
Is this a bad thing? Yes and no. It is a bad thing because the ability to penetrate those markets is slipping. The good thing is that consumers are looking for something new.
Today, I brought one of the new products out of Peterborough, Ontario. It is 100 per cent cricket powder. This is a protein now available in Loblaws that you can add to your smoothies and muffins to add protein.
That is the kind of innovation. It was started by three brothers who used to raise crickets for their reptiles and they said, “We can do better than this.” The kind of innovation that is possible in Canada is unlimited, so we have to value these kinds of companies.
You may not want a cricket muffin but my staff were subjected to this last week at our staff meeting when I made some rhubarb cricket muffins.
We have to figure out where the new value is. The obvious thing is in new products, but that is not the only thing. We feel there is a possibility of monetizing Canada’s comparative advantage in producing high quality, safe and environmentally sustainable foods for gaining trade advantages.
Companies like Campbell and Kellogg have done the research because they have the extra money for it. There are consumer demands that are typical. They want new flavours. They want products that are safe, but they have also found that in 2018 consumers want transparency, sustainability and ethnic options to purchase.
Even more so, they want healthy ingredients, environmentally sustainable and socially conscious sourced food products. These are the ones where small enterprises will be able to have an advantage in providing the quality attributes.
Not only are those findings true in Canada and the United States but Nielsen has done an international survey. Guess what the Chinese are looking for? They are looking for food safety and health, attributes that we in Canada, as a trusted global leader in providing safe and nutritious food, can supply into the future.
Finally, our third point is new models for partnership for growth. Mr. Le Vallée has aptly pointed out that the small guys are nimble, but they don’t have a lot of cash. Every time they are to make an innovative step, it is a bit of a risk.
We need to think about a new delivery model for partnerships of growth. Our objective is to have a sustainable food system with the new products that consumers demand and that we will be able to sell. Our industry, in co-operation with science research communities, governments and policy communities like our own, will develop new ways to understand and monetize the quality of sustainable aspects of the growth agenda.
It makes no sense if we produce, produce, produce and produce, and somehow diminish our capacity as a country to grow food. We need sustainability so that 10 years down the road Quebec will be able to produce more green vegetables and Saskatchewan will be able to produce more canola on land which has not been exhausted.
We need to find public/private solutions. One interesting thing that has come out of the supercluster process is that government no longer necessarily has to step out and be the leader or the father saying how we can lead this family. There is an opportunity for industry to come alongside and ask, “What can government bring to the table? What can producer associations bring to the table? What can the corporate players bring to the table?”
While we very much support science-based developments, that those be recognized in our trade agreements and that market access not be closed down arbitrarily for protectionist purposes, we need to have one voice for the agricultural science policy and the value-added food and beverage industry.
To conclude, these are the three potential ways to improve our competitiveness in the value-added food sector in global markets.
First, we have to recognize that this sector has a great growth potential. According to the Barton report, we can count on this sector to deliver some of that growth.
Second, we need to recognize that growth for growth’s sake will not lead us in the right direction because it will fail on the economic, social and environmental comparative advantage that we need to monetize into the future. Consumers are willing to pay for this.
Third, we have to recognize that old supply chains, old manufacturing methods and even old R&D models are changing. We will realize our market advantage if we can bring to the table new models of partnership, bringing together science and policy communities and practitioners to disseminate and monetize that new research.
Thank you very much.
The Chair: Those two comprehensive presentations took a little longer than the time the clerk had allotted to both of you, but we have a number of questions.
Fortunately, our next panel is smaller so we may go over a bit on the time allotted for this panel.
Senator Maltais: I will be as brief as possible. I have two quick questions.
Mr. Le Vallée, you said in your presentation that the cost of oil will be stable this year.
Mr. Le Vallée: Yes.
Senator Maltais: Because we can’t say that oil has been the epitome of stability in the past five years.
Mr. Le Vallée: No.
Senator Maltais: What predicts that it won’t be a major factor in the coming years?
Mr. Le Vallée: I was saying that this year is more or less stable and that it will increase over the next three years.
Senator Maltais: Are you adding the carbon tax to the cost of oil?
Mr. Le Vallée: No.
Senator Maltais: Perhaps it should be anticipated.
Mr. Le Vallée: That is another calculation that is being published. It’s done from the inside. The Conference Board of Canada publishes its research regularly.
Senator Maltais: You have no figures. What will this give us for the year —
Mr. Le Vallée: This isn’t my area, but I could send you a copy.
Senator Maltais: That would be nice.
Mr. Buckingham, I would like to talk about your cricket powder. Where do the crickets come from and are they healthy?
Mr. Buckingham: You want the health profile?
Senator Maltais: Yes. Where do the crickets come from?
Mr. Buckingham: They come from Peterborough, Ontario. Three brothers raise the crickets. It’s a brand new local Canadian product. However, the product is a little expensive. A small bag costs $15.
Senator Maltais: Do they sell a lot for export?
Mr. Buckingham: I don’t know. I can find out, because that’s a good question. For the moment, world production is located more in Asian countries. This product would rather be intended for the Canadian market because, outside Canada, there are already major sources in Vietnam and Cambodia. They eat them in those countries, and I suppose they are already exporting them.
Senator Maltais: Are they licensed by the Department of Health?
Mr. Buckingham: Yes, absolutely.
Senator Oh: That’s wonderful information. It’s fantastic.
In your opinion, how is Canada perceived by other countries in terms of its cultural values, image and national identity? How do these perceptions align with all of the many Canadian foreign policy objectives?
Almost every panellist who has been here talked about labour shortage. One key thing everybody mentions when they come before the Senate committee is labour.
Mr. Le Vallée: Canada has a good world-wide reputation wide in terms of its food safety, which is why I highlighted it in my presentation. We try to put evidence behind that. At the Conference Board of Canada we are heavily evidence based.
We did this report to get a sense of our strengths. That doesn’t mean we can rest on our laurels. The Europeans are stronger in traceability, for instance. They are years ahead.
We have lower rates of food-borne illness. They have more in parts of Scandinavia, for instance. We don’t necessarily report well on chemical risk at consumption anywhere in the world. Some countries update their food guides more often than we do. The last time we had nutrition data was in 2004.
Periodically the Canadian Community Health Survey performs a nutrition cycle. The last one was in 2015. We don’t have the date yet. We don’t have access to the data. The one before that was 2004, and then before that was 1972. We don’t know well the health and nutrition of the Canadian population. It’s a bit off topic, but it’s important that we invest more in nutrition surveys in this country.
Branding is strong in terms of food safety and traceability. Immediately upon the production of my report, there were Europeans from Belgium and Italy, for example, who were last and were very upset. Years later, I talked with several people from their governments and they said the impact was that people had questioned their confidence in their products. It’s something we have to use in our favour.
The main message that I always tell firms is about quality. The first question a foreign buyer will ask is about food safety. If they want to import to this country, it’s non-negotiable. Food safety is always the top priority.
Chinese, for example, love our products because they know that they are safe. That’s one of the main reasons they trust our products.
Even though my report says that Canada did very well, there are competitors like the Europeans who will question it and say, “No, no, no.” That’s an immediate reaction because they need to promote their own products. We have a strong world-wide reputation, and we should use that in our favour, along with our Canadian brand; not a provincial brand or a local brand but our Canadian brand.
Senator Oh: Before, when I travelled the Pacific Rim, the maple leaf logo or maple leaf brand wasn’t in their conscience, but now it identifies safe, quality products.
Mr. Le Vallée: I would use that more and more, absolutely. It’s a very strong symbol.
Mr. Buckingham: Those are great questions. I would have two branches of the answer. There is a general perception and then there are some specific measures, if we are to talk about new value recognition, that we could do better.
I echo your observations and those of Mr. Le Vallée that, generally speaking, the Canada brand is recognized, particularly in Asia. It adds value in the sense it distinguishes it from other products. A consumer is more likely to go for this product than for another. That is good because it increases the market share.
There are specific intellectual property branding marks that add even more value because they tell consumers one exact attribute. I could give a few examples.
For instance, if you have a particular traceability system which is now in force in Canada through the Canadian Grain Commission, you can identify a soybean produced in a particular field in southern Ontario as a non-GMO soybean. It will be paid a very hefty premium in Taipei or Tokyo by the soy milk producers.
That’s the kind of quality we could accentuate in many other products. With what we are doing now for identity preservation of that quality aspect, we could move into environmental sustainability.
For instance, if you take a look at the way green vegetables are produced in California, they are produced with irrigation and depletion of the aquifer, which is becoming significant. In Canada, we have rain-fed agriculture. That is the most sustainable method of producing agriculture. We don’t get any value for that. The consumer doesn’t know how a tomato was produced in one place or another.
We are arguing and certainly bringing to the attention of producer associations that there are opportunities for branding beyond the general buy Canadian or buy Québécois. They are becoming quite interested because we have a specific attribute.
The Conseil des appellations réservées et des termes valorisants, or CARTV, is very advanced in Quebec. For the rest of Canada, it would be good to recognize that there are ways to promote the added value of agricultural and processed products in Canada. So much for the future.
Are processes and mechanisms available to recognize value added in Canada? Not quite, but we’re getting close.
I think we have the possibility. That’s the general and specific.
Third, we have to vigorously pursue non-compliance at the international level when we have somebody saying something isn’t safe that is actually scientifically proven.
The example that comes to mind right now is in Italy where our Canadian durum wheat is being slammed by producer associations because it’s unsafe. It is clearly not scientifically proven that it’s unsafe. In fact, it’s as safe as it was in Italy three years ago. It’s exactly the same durum.
We have to take those hard conversations, as I call them, to the WTO or to our member states and say, “This is not the way the rules say you should be playing. We have to talk.” There are other examples with canola tolerances in China and pulses in India.
It’s a very good question. We have to do it on three different levels, but the branding issue is huge.
Senator Oh: In Asia-Pacific they eat 24 hours a day. That’s a huge market.
Senator Doyle: Mr. Le Vallée, in your opening comments you said:
The current Canadian value-added food marketplace is highly competitive.
At the end of the paragraph you talked about the factors which influence the evolving food supply and demand, and you mentioned variation in climate.
To what extent does our cold climate add to the cost of our agricultural products? Do we need subsidies or programs, say, in Eastern Canada? In particular, if you were watching the national news a couple of nights ago, Nova Scotia has lost its entire blueberry supply.
To what extent would cold climate in certain parts of Canada add to the cost of agricultural products in those areas? Maybe we need food subsidies in certain parts of the country for the Nova Scotia blueberry industry, for example, to compete effectively with places like British Columbia or Alberta in summertime.
Do you have any comment on that?
Mr. Le Vallée: I can’t value the risk from climate change, but I can say that there are mechanisms in place in terms of weather insurance and production insurance to help assist those risks. If the farmers don’t pay their premiums, they are at a loss.
They don’t expect this kind of cold weather to happen this late in Nova Scotia. It’s not just wild blueberries, which is a fantastic product. It’s also apples and peaches. Everyone else was affected. To reinvest in wild blueberries, it will easily take two or three years if they’ve lost their roots and have to replant. That’s a cost. If they don’t take out the premiums on the insurance, it eats into their capital to reinvest in assets, and some might close.
We see this often. It is rain fed, but you will probably see more risks in terms of arid land in the Prairies where you see most of the irrigation in the country.
The climate risks are also moving north as weather changes. With climate change the world is getting warmer, so we will not initially grow more food because we can’t really extensify, which means going into more marginal lands. We will intensify to improve the yield and productivity with sustainable investments. We will not threaten our resource endowments because there are issues around water quality, air quality, soil quality and biodiversity.
There is some production loss, which is expected. Actually there is very little food loss and food waste. Our agriculture is quite efficient. Half of the loss and waste in this country is at the consumer level. The value of the food wasted in Canada is $31 billion.
That’s just the food. If you add in the resources that went into the production of the food, the transportation and the manufacturing, over $100 billion is lost every year in Canada.
Senator Doyle: How do we change that in a protein-hungry world? With $31 billion in food being wasted every year, do you have any ideas on what can be done?
Mr. Le Vallée: Yes. There are efficiency gains that we can still make along the supply chain, but the main focus should be on the consumer.
There is confusion around best before dates. People tend to consider them a health issue. They are not. It’s a quality date. It’s not a human health risk. Consumers look at the dates on yogurt and eggs, and at midnight they are no good. They throw them out and food is wasted.
As I already said, food is very cheap in Canada. We tend not to eat out much. In the U.S. they eat out more than 50 per cent of the time now, whereas in Canada it’s over 30 per cent. We will see growth in online groceries and, as we eat out more, we will see more freshness and a bit less waste. At the consumer level, it’s not just education. We tend to overpurchase food and we buy too large.
I know it’s a lengthy answer, but I wanted to say that there are ways municipalities can play a role in terms of composting, helping consumers reduce organic wastes and making them more conscious. I live in Gatineau. There is a brown bin. I am fined if they find organic waste in the garbage. From it they make black earth to which all citizens can have access in the end. That’s one way at the household level.
Retailers can also inform consumers. Most Canadians don’t read the food guide although it’s probably the most downloaded document in the country in terms of government documents. I teach at university and about 30 per cent of my student have read the food guide. That gives you a sense of the lack of food literacy in this country.
I can go beyond that. They don’t know the meaning of organic foods. They don’t read food labels. The people who read food labels the most are in British Columbia, and the least are in Alberta. About 60 per cent of Albertans read food labels and about 80 per cent in B.C.
Senator Mercer: A fundamental question we all have is: What wine do we serve with crickets?
Mr. Buckingham: I am glad you asked that. Canadian wines.
Senator Mercer: I knew that was the answer, by the way.
Mr. Le Vallée: I have a 30-second answer. I want to follow up on the last question about climate risk.
Climate risk in the Niagara region is immediate. If they don’t get their minus 8 degrees, the entire region will lose its wine crop. It is very close. As the world warms, you will see the wine crop going farther north and more in Quebec. That is another climate risk area in the country.
Senator Mercer: We are looking at 9.7 billion people on this planet by 2050. Nobody is having a conversation about feeding 9.7 billion people. Everybody is talking about a bit of this and a bit of that, but no one is coming up with a plan.
If 9.7 billion people show up here and 2 billion of them are hungry, we have a problem. We have a huge problem. It’s not just their hunger. It’s their anger, their frustration and how they take that frustration out on the rest of us.
You’ve talked about growth potential in agriculture, which is really encouraging. How does that translate into exports and jobs for Canadians?
Mr. Buckingham: Interestingly, in our cross-Canadian consultations that we did between last November and this May, we heard a lot about exports. It is not just growth for growth sake. It’s not just more wheat out Saskatchewan and more pork out of Quebec. It has to be something different if we are to get to these targets.
Also interestingly, with a lot of innovation happening in Canada we tend to develop it and then sell it off overseas instead of being the people who develop the technology and keep selling it around the world.
One of possibilities for export that we really have not looked at is the spinoff of new technology, whether it is precision agriculture instruments, the use of software to analyze big data, new machinery technology or new genomics. That could be a significant part of our export target.
It doesn’t really fit into our normal paradigm. We usually think of more crates of Campbell’s tomato soup or more loads of canola. There are probably three different branches of export increases. We can have the domestic primary product. We can have the value-added product, but we can also have the surrounding technology to make that new product.
If in fact we are working in those three areas, we will see significant job creation. They won’t be low-level, low-income or low-education jobs. Many of them will be high-tech jobs.
This is what I am reading: Every week I get The Western Producer, the Ontario Farmer and La Terre de Chez Nous. I am always astounded by the little inventions people are making to enhance our ability to grow agriculture.
On the innovation side, the innovation paradigm will change from how we produce more stuff to how we produce the stuff people want. That includes the technology.
I’ll give you an example. What if Canada had invented the Tetra Pak? The Swedes did, and it’s all over the world. It ultimately became a huge income source for Sweden.
If we have small R&D and then sell it to large offshore corporations, they get the benefit and job creation. That’s a paradigm we have to explore to increase our possibility of jobs.
Senator Mercer: You also talked about the need for an increased labour force in agriculture, and the 45,000 foreign workers in the sector.
There are two things about that. First, it’s good for the sector because we can get the crops in the ground and harvest them. Second, it’s good for the workers to get money to take back home, wherever home might be.
Going back to the 9.7 billion people, are they getting technology they can take home to teach their people to grow crops they are not growing now to help sustain their families and their economy and to help feed those 9.7 billion people?
Mr. Le Vallée: There are different ways of benefiting from this program. The immediate remittances you are talking about benefit farm workers. For example, foreign remittances that come back to Mexico are the second largest source of income. They don’t necessarily bring back technology, but they bring back know-how. Ideally, we would not keep them here temporarily; they would become Canadians. They are doing jobs that many people don’t want to do in this country.
There’s a multiplier effect. If you hire dozens or hundreds of foreign workers, you are creating more positions for Canadians who want to do jobs in the farm business. They want to do R&D and management. They like working with machinery. That’s doable because you have a labour base that allows the firm to grow.
To answer your question on food insecurity, about 800 million people are food insecure, according to the United Nations. The sustainable development goals want to reduce it by half. We missed our previous target as a world, so we moved the target into the future. The number of people living on $1 or $2 a day is much higher.
Can Canada play a role? Sure. Are they consumers now? They are eaters. They need to eat food. In Canada, about 12 per cent of households have some form of food insecurity once or twice a year. Those with chronic food insecurity are mostly inner city poor or Inuit communities in the Arctic. They are small populations. There are maybe 60,000 Inuit. In absolute terms it’s not very high, but in relative terms it is very high.
One area of the world where you see the most food insecurity is India. It has more middle class people than Canada, yet that’s where you see the most food insecurity on the planet. India has hundreds of millions of people, but the severity is much more in sub-Saharan Africa.
Senator Mercer: Food insecurity is not due to the lack of production. It is due to the lack of delivery and storage, et cetera, that more food rots.
The Chair: I am taking that as a statement rather than a question. We will move on.
Senator Dagenais: Mr. Le Vallée, I’d like to address the issue of NAFTA and supply management.
Given the current situation, have you already developed financial scenarios, in other words, what would happen to our export products without NAFTA?
Mr. Le Vallée: Without NAFTA, no, that hasn’t been done, but it is being done for supply management.
A report was written in 2013, I believe, proposing change management. We have to have a plan, because there is pressure outside Canada to manage supply. There is also pressure internally. Young families would like to participate in this sector, but they cannot, because it is far too expensive. The other factor is that the population is aging; these people will have to be replaced, but the quota is very expensive.
Possible solutions had been proposed that would benefit everyone. In fact, it has been found that farm businesses can grow by taking significant market shares outside the country. There is a strong demand for industrial milk protein. It’s difficult for fluid milk protein, because you need a fairly developed value chain; it’s cold, it’s heavy, and it’s difficult to transport. The focus is on processed products, value added, especially cheese and yogurt. There is a strong demand for these products. Danone is a huge success in China, but it is not possible for us to participate.
Other companies, like Saputo and Agropur, buy in the United States, Argentina and Australia to access global markets, because they can’t do it from here. We have written a report that I could share with you in which we propose long-term solutions, again in the context of NAFTA.
Senator Dagenais: Have you considered bilateral negotiations with Mexico or the United States? Everything is on the table right now. We have to be prepared.
Mr. Le Vallée: Canada is a small country in terms of the size of its economy. Negotiations with the United States are not recommended. Multilateral rather than bilateral negotiations are preferable. I would have preferred the Doha program to have been adopted, but that is now a thing of the past. We will have to be patient and wait for the current president to finish his term.
Senator Dagenais: What will you do if he’s re-elected?
Mr. Le Vallée: We will have to wait another eight years.
Senator Dagenais: There are about six years left. Thank you very much, Mr. Le Vallée.
Senator Gagné: Thank you for your very eloquent presentations. I very much appreciate the content, which makes us think about how to improve the sector.
Mr. Buckingham, you mentioned that we have to find new ways to monetize all the sectors.
New financial means must be found to ensure the development of the sector. How can we attract investment in this area and attract foreign investment to Canada to improve the processing capacity of the agri-food sector? I’d like to hear your views on that.
Mr. Buckingham: The short answer is yes, both. We have a lot of capacity here in Canada. I have confidence in future generations, researchers and students. I have two master’s students with me this morning. They are thinking about how to improve the introduction of new technologies into Health Canada and international trade. Some scientific discoveries can upset the sector, because we have a traditional agri-food system. We know what we want. We want real maple syrup, real ground meat. It is difficult to make changes. We need to manage the situation well, particularly with regard to partnerships between developers and associations.
The Canadian Agri-Food Policy Institute is one of Saskatchewan’s largest dairy protein clusters. These companies receive grants from government and local organizations to carry out new projects. So this initiative is already in place in a few areas. This is a small change. You don’t do everything without outside help. The focus is on other areas, such as protein and artificial intelligence. So we will invest in these areas instead. In the past, it was said that the same should be done for Saskatchewan as for Ontario. Perhaps we have changed our approach a little, because now it isn’t the government that decides, now it’s a partner. I would prefer it to be a local or national investment rather than a partnership with a government. We already have a few examples, such as the Kingston milk plant, and that is another model. I believe there’s a lot of opportunity, knowledge and innovation here in Canada. Why not take advantage of it?
Senator Gagné: Thank you.
The Chair: I will ask you to cut to the chase in your answers, or we will cut too much into the time for the next panel. I had intended to cut in somewhat, but not too much.
Senator Woo: Then I will cut to the chase with a question.
Mr. Buckingham, do you think Canadian agri-food producers can command a premium on the basis of low carbon-intensive Canadian production, in keeping with your comments about the premium that can be achieved through sustainability branding?
Mr. Buckingham: A very quick answer is yes, but the international system right now is not able to recognize that certain production methods in other countries are using subsidies that are not sustainable.
Our challenge is to bring in benchmarks that say this is sustainable and this is carbon negative, to find a branding mechanism, and then to find a consumer that is ready to pay for that. I am very hopeful.
Senator Petitclerc: I have a quick question on a very specific topic that may not have a significant economic impact on the market. Being from Quebec, I remember a few years ago, there was a lot of talk about local products and our ability to certify and promote them. There was a whole discussion about the fact that we weren’t doing our job properly in terms of designations. For example, for a product to bear the name “champagne,” it must come from the Champagne region.
So I was wondering if we’d made any progress. Is it important to do so? Are we missing opportunities? I’m thinking, among other things, of ice wines, Charlevoix products and ducks from the town of Lac Brome. Is it important to certify local products and make them one’s own?
Mr. Buckingham: This is a very important aspect. I think Quebec got off to a good start. Every four years I write a book on Canadian food law. From 2014 to 2018, five times more value-added claims were designated in Quebec. That’s a good start. We must now do the same in the rest of Canada. We have ice wine and the Vintners Quality Alliance of British Columbia. To have a sustainable label, you have to go in that direction. I think the future depends on it. We have to adapt, otherwise we’ll miss these opportunities.
Mr. Le Vallée: There are currently very few mechanisms in place. It’s a good way to go, absolutely.
Senator Petitclerc: Thank you.
Senator R. Black: Mr. Buckingham, in your cross-Canada tour did you feel there was confidence in achieving the Barton report objectives and getting to those targets by 2025?
Did you hear that, or what did you hear?
Mr. Buckingham: We are issuing our report next week on what we heard, and our first point is: Yes, we can. There was no hesitation that we would get to $75 billion, and we were wondering from what we heard: Is that ambitious enough?
Mr. Le Vallée: We can surpass that.
Mr. Buckingham: I would be happy to send all the members of the committee our report next week.
The Chair: Yes, please.
Senator R. Black: Mr. Le Vallée, I have a question about front-of-package labelling. Will it affect our global market?
Mr. Le Vallée: It will affect our domestic market. It will affect our industry’s ability to invest in other areas like skills, innovation and adding value because it will cost them. According to the 2016 Agriculture and Agri-food Canada report, the changes will cost $1.8 billion.
Senator R. Black: While it will affect our domestic markets, that in turn could affect research and development, et cetera?
Mr. Le Vallée: Yes, and the benefits of having front-of-package labelling are not clear in terms of health outcomes and changes in consumption patterns.
The Chair: Mr. Buckingham, you mentioned that you will send us a copy of your report.
Mr. Buckingham: Absolutely.
The Chair: Send it to the clerk and he will distribute it to the rest of the panel.
I have one question, Mr. Le Vallée. You mentioned a report done by the Conference Board of Canada on supply management. You said that it could be a detriment to greater participation in the world market.
Mr. Le Vallée: The dairy market.
The Chair: The world dairy market.
Mr. Le Vallée: Yes.
The Chair: Would you also make a copy of that report available to the clerk so that we can all see it?
Mr. Le Vallée: Yes. We also developed a food strategy for the country in 2014, which might be of interest to the committee.
The Chair: We would love to see it. Please send that to us also. We would greatly appreciate getting all that material.
Your presentations were very interesting. There were lots of great questions. I know we could have stayed here a lot longer, but there is another panel coming up next.
We have a new panel consisting of one person. From the Canadian Federation of Independent Business, we have Corinne Pohlmann, Senior Vice President, National Affairs and Partnerships.
We invite you to make your presentation.
Corinne Pohlmann, Senior Vice President, National Affairs and Partnerships, Canadian Federation of Independent Business: Thank you very much for the opportunity to be here today to share some insights from our agribusiness members on innovation and competitiveness.
You should have a slide presentation in front of you that I would like to walk you through over the next few minutes.
First, CFIB is a not-for-profit, non-partisan organization that represents 110,000 small and medium size businesses across Canada. About 15 years ago we decided to add some extra policy resources dedicated to agribusiness as we felt it was important to highlight some of the unique issues that face businesses involved in agriculture and food processing.
Of our 7,200 members involved in agribusiness, 80 per cent are primary producers. Almost half of them are involved in exporting, and many are focused on value-added initiatives.
Let’s look at some context around the current economic climate for smaller companies in Canada. In May, CFIB’s business barometer stood at 62.5, which means that 62.5 per cent of small businesses in Canada expect their businesses to do better a year from now. It is a type of optimism score. We would like to see that index between 65 and 70 when the economy is growing at its potential.
Now let’s look at the business barometer index by sector. Agriculture sits far below the national average at 55.1 per cent, the third lowest among all sectors. The good news is that its score is going up, but this survey was done prior to many of the trade escalations that have just occurred. This may change when we release our next barometer at the end of June.
What is keeping our agribusiness members from growing or producing more? It is primarily a shortage of both skilled and unskilled labour that is an issue for agribusiness. In fact, recent changes to the Temporary Foreign Worker Program are causing some difficulties in delaying the arrival of seasonal workers and making it even more difficult for these businesses to compete.
Also mentioned is foreign competition. This is why we need to make sure our producers and processors have the people and resources they need to be competitive both domestically and internationally.
Also causing concern are input costs. For agribusiness members, it is the cost of energy as well as the costs related to taxes and regulations that raise the most concern. It is more the latter issue I will be talking a bit more about.
Despite these challenges agribusiness owners want to grow, with 44 per cent looking to adopt new innovative technologies and practices, 42 per cent wanting to expand the size of their operations, and more than one in four looking to adopt value-added initiatives.
To achieve all these things they need to be competitive. This is where they look to government to create the conditions to help them get there. Most important to them is finding ways to reduce the total tax burden, regulations and red tape. Also important to more than one-third is increasing market access through international trade agreements and increasing focus on industry research, development and innovation.
I have already noted a couple of times that red tape can be a big problem for agribusiness. In fact, 73 per cent say that red tape holds them back from innovating in their business.
To get a sense of why they may feel this way becomes more obvious when you consider almost two-thirds of agribusiness members have experienced major or minor delays caused by regulations, far higher than for most other types of businesses in Canada.
This is a big deal. Governments need to get a handle on red tape and dealing with it because not only is it getting worse but it adds significant stress to their lives, reduces productivity in their business and discourages them from growing their business. All these factors are even more pronounced for those in agriculture. Probably the most discouraging is that more than one-third of agribusiness members and almost half of all businesses would not advise their children to start a business given the current burden of regulations on their businesses.
Based on this feedback from agribusiness owners themselves, a significant proportion want to grow and be innovative. Taxation and red tape are significant barriers to achieving those goals. Governments can provide agribusiness with technology tools, marketing campaigns, certifications and IP strategies that may be of some assistance to some companies and probably will be. The biggest thing governments can do is make regulatory reform and red tape reduction priorities and look at ways to reduce the overall tax burden.
I want to highlight that regulatory reform is not about deregulating but about making the regulatory environment more user friendly and improving the ease of working with government. This could include simplifying existing regulations, eliminating unnecessary regulations, clearly communicating those regulations, improving government customer service, and providing examples to business owners of what constitutes compliance.
A great first step was taken last year with the Canadian Free Trade Agreement. We need to show a more concerted effort by all levels of government to find ways to use this forum to reduce those trade barriers within Canada, and we need to do it quickly.
There are many ways government can also address the total tax burden. We would suggest dealing with some of the outstanding issues remaining around the federal corporate tax changes on private corporations. This could include potentially delaying the income sprinkling rules until at least 2019 or 2020, which was a recommendation of the Senate Finance Committee; exempting spouses from income sprinkling rules altogether; and grandfathering existing passive investments from the new passive investment income rules.
Government may also want to consider increasing the capital cost allowance for agricultural equipment to more closely resemble the depreciation rates in the United States. It may want to allow businesses to expense the first $100,000 in equipment purchases every year, similar to the U.S. expense deduction bill that allows U.S. companies to deduct up to $1 million now in equipment within the first year of purchase.
Also, we could look at ways to help lower payroll costs and assist those businesses with the costs of hiring and training. Here we consider putting in place things like a permanent lower EI rate for smaller companies and/or an EI holiday for youth hiring.
These are some of the ways that governments can help those in agribusiness and the value-added food sector be more competitive in both the Canadian and international markets.
I look forward to our discussion.
The Chair: Thank you for giving so many specific recommendations. That is very helpful.
Senator Maltais: Thank you, Ms. Pohlmann. You have written an excellent brief that summarizes the comments of many speakers who have appeared before you. Congratulations; it is very simple, but very clear. It addresses specific points.
It is obvious that paperwork and taxes are time-consuming for small producers who don’t necessarily have the means to hire professional accountants. We call them “nuisances” because this aspect takes up too much time. Regulation is also appalling and takes up a lot of time.
When it comes to increasing the capital cost allowance rate, we are in complete agreement with you; this has been submitted to us since we began working on this.
One particular point I’d like to discuss with you is labour. Of course, many foreign workers are called upon in Canada, especially for SMEs, small produce growers, whether it is for berry picking, such as strawberries, blueberries and raspberries, or for onions and lettuce. Once the labour force is trained, unfortunately, the season passes, and they return home. The following year, when they return, they aren’t necessarily on the same farm or in the same agricultural sector where they were trained. So producers are always school teachers. Every year, they take out their blackboard and chalk, which isn’t productive for them. Is there something to help small farmers ensure that the labour they have trained will return to them the next season?
Ms. Pohlmann: You’ve hit upon one of the big frustrations of many small farmers. Again, it goes back to government rules.
Many get the same people back every year. It is not uncommon for that to happen in the Seasonal Agricultural Workers Program, but I don’t know if there is a way that can be guaranteed from year to year.
I don’t have an answer to the particular question, other than government helping to find ways to try to bring the same people back. If the same people are applying year over year, maybe the same producers should be able to access those workers if the relationship worked well.
I know there is a lot of controversy around these programs with respect to how well these workers are treated. We support having inspections done and making sure everything is working the way it should, as long as it doesn’t interfere with the activities of the farm.
Again, I don’t think there is a simple solution to that. The cost of training is something with which every business owner has to struggle. The more you can bring back people who will be doing the same thing every year is an important way to deal with it.
Senator Maltais: There are two categories there. There is the small producer who will employ four or five foreign workers, who come back because they were given good lodging and were treated well, and they are used to the people.
However, in the case of a produce grower who may employ between 25 and 50 workers, it is mostly new workers who arrive. We know that the season for picking fruits and vegetables is short in Canada. Producers don’t have the time to spend a week or two training workers, because they have fairly complex machinery and other details. It’s really a handicap for these producers. How can we ensure that these producers can get back the same people they trained the year before? Do you have any recommendations for us on that?
Ms. Pohlmann: I don’t have a specific recommendation. We obviously know the names of all the workers coming into Canada, and we knew who they worked for the previous year. Is there not a way to intersect the employers with the people they had in previous years?
I suspect many of the workers would prefer to go back to a place they know. They know the equipment. They know the tools. They can jump right in as well. It seems to be a win-win situation in my mind, if there is a willingness on both parts to bring back the same people.
The piece of it that has to make that happen is the government. The government has put processes in place. Unfortunately, sometimes those processes work against the farmer and the worker. Maybe we need to find more effective ways to ensure that link is happening appropriately.
Senator Maltais: Would you agree with our including that recommendation to our report?
Ms. Pohlmann: Yes, I agree. If we can find ways to bring back people from year to year who have already been trained on a farm, it would definitely be welcomed by many producers out there.
Senator Maltais: Thank you very much.
Senator Doyle: To follow up on Senator Maltais’ question, overall, are there fewer temporary foreign workers coming into our country today than previously? Are there any negatives that are causing a slowdown in the competition from other groups?
Ms. Pohlmann: Much of the slowdown in the Temporary Foreign Worker Program began a few years ago when many changes were made to that program back in 2014 or so.
That was when you really saw the slowdown happen. It became much more restrictive in terms of how you could bring people in. It became more expensive. It went from being basically being free or $100 to get a temporary foreign worker to $1,000 per application. Even if you are rejected, you lose the $1,000. For a smaller company, it can sometimes be difficult. I think those numbers did come down.
There are all kinds of different types of temporary foreign workers. The ones we usually focus on are the ones that tend to be considered lower skilled and working in the agricultural, retail or hospitality sector. Those have definitely come down because of the rules that were in place in 2014.
Other categories may be the same or have even gone up, but the particular area on which our members are most reliant to operate their businesses, in my understanding, has come down over the years.
Senator Doyle: Would they be free to take the same as our own workers who did similar work?
Ms. Pohlmann: You are required. The government tells you what you pay those temporary foreign workers. You cannot bring in temporary foreign workers and pay them less than a certain amount because the government tells you how much you have to pay them.
We have had circumstances in the past where they are paying their temporary foreign workers more than their Canadian employees because they might be in a jurisdiction where the local economy might be somewhat lower than it is in the broader employment regions. It doesn’t happen often, but it does happen.
They are definitely paid at least the same amount, if not more, as their Canadian workers.
Senator Doyle: Food safety is important for health and a healthy reputation of our exported products.
How does Canada’s food inspection compare with those of our allies or competitors? Is it good?
Ms. Pohlmann: I will start by saying that food safety is paramount to our agribusiness members. It is absolutely essential. When I talk about things like reducing red tape or regulations, it has nothing to do with making food safety less important. That is still critical for everyone.
Food safety in Canada is of high quality. Sometimes there is some frustration, though, that the bureaucratic process around food safety is unnecessary.
It’s not so much that they are being inspected. In fact I think there is every intention and will to do that. Rather, it is sometimes the duplication of efforts or the length of time it takes for things to go through a process. That’s what frustrates food processors and those who produce food in Canada.
Senator Doyle: Are our nutritional labelling requirements consistent with those of other countries? Are we stricter or looser in that regard?
Ms. Pohlmann: I don’t know exactly. When it comes to front-of-package labelling, concerns have been raised with us by our members. It’s somewhat on the cost, but not as much on that. It’s more on how some types of foods will be labelled as being bad when there are other elements of the food that are quite good. Things like yogurt and ground beef are considered high fat but will have other elements that are still quite healthful.
That is more the concern of many of the members we deal with when it comes to some of that labelling.
Senator Doyle: Thank you.
Senator Dagenais: Thank you, Ms. Pohlmann, for your presentation. I fully agree with you about the red tape. It needs to be lightened up. But would you have concrete examples to give us or recommendations that we could include in our report to reduce this well-known red tape that annoys farmers and doesn’t serve them at all?
Ms. Pohlmann: As I mentioned, there are lots of principles we can look at. The Canadian Free Trade Agreement has created something called the RCT, or the regulatory cooperation table, which is bringing together the provinces and the federal government to look at what interprovincial areas are duplicative or causing issues between provinces.
That is one forum that needs to happen. We have been pushing them to focus on agri-food as one of the elements that needs to be addressed interprovincially across Canada. That’s one practical form that already exists. It needs to be utilized and leveraged.
As I also mentioned in my presentation, we need to find ways to simplify and improve government customer service. Business owners are looking for clarity. They want to understand what they need to do to comply. That can sometimes be difficult.
Improving government customer service at the Canadian Food Inspection Agency would be a huge step forward. They have done a few things in recent years to accomplish that, but they are only starting to show in the marketplace. We are still waiting to see how much better it can become. That is a big one. That includes things like giving us examples of compliance.
If inspectors come to your farm or your processing plant and say that you are doing something incorrectly, they should have the ability to say how to do it correctly. Often they just say, “It’s wrong; fix it,” and then leave. Sometimes that leaves business owners wondering what they can do to make it right. They are not always able to provide that or are barely able to provide that.
It’s little things that can make a huge difference. Part of it is cultural and getting the government folks who work on the other side of the table to not always apply the rules but also apply some practical advice on how to abide by those rules. Those are some of the practical things that can be done.
On a higher level, governments need to understand how many rules they are imposing on a business. We still don’t understand the number of rules out there. Governments have tried. The Government of British Columbia, for example, counted all of the requirements, regulations and rules and kept tabs on them on an annual basis.
In Canada we have a baseline count, but it’s not great at the federal level. We need to do a better job. If you don’t measure it, you don’t fix it. We need to measure it. That’s a more important, higher level of strategy that we need to start thinking about as country to get a handle on red tape.
In B.C. alone, they came up with 400,000 requirements on a business there. That’s just one level of government. Then you have the federal on top of that and municipal as well. It becomes huge, and we need to understand it in order to manage it.
Senator Dagenais: Thank you very much, Ms. Pohlmann. You’ve answered my question.
The Chair: As I mentioned earlier, you have given us some very concrete recommendations, and we greatly appreciate that.
Is there anything else you didn’t put in your brief that you feel would be useful for this committee to receive?
Ms. Pohlmann: We have talked a bit about the Temporary Foreign Worker Program. I touched on it a bit. There are some issues right now that need to be looked at more closely.
They have upped the inspections at farms, in particular, and it is causing issues. It is not so much that everyone is opposed to being inspected, but it is the timing of it. They are delaying the onset of the seasonal workers to come into the farms as result of these inspections.
There needs to be an understanding of how this industry is affected, and that needs to be translated back to Immigration or ESDC officials that monitor it. That’s an important piece.
As was mentioned in the last round, temporary foreign workers that come into Canada should have a pathway to permanent residency. Right now, they do not. We need to allow them the opportunity to become Canadians. They are doing jobs that are very difficult to fill. They become basically permanent temporary employees, and we need to make them permanent citizens as a result. I would also like to put that on the table.
The Chair: That’s an excellent recommendation, as Senator Doyle just noted.
Senator Oh: You talk about temporary workers. Do Immigration and Agri-food Canada have a policy to work together? Otherwise, every department has their own policies that don’t match or work effectively.
Temporary workers come here. They work. They pay taxes. They spend their money here. Then we are able to export and to increase productivity, and the government gets tax revenue from the corporations.
Ms. Pohlmann: There are issues occasionally. The Temporary Foreign Worker Program is interesting because the worker side is managed by Immigration but the employer side is managed by Employment and Social Development Canada. While they do work together, they don’t always communicate well.
For example, the employer has to go to Employment and Social Development Canada to get permission to bring in a temporary foreign worker. They do what they call a labour market impact assessment.
They go into the business and say, “We need to understand whether you have made enough effort to get a Canadian into the job.” They give them the rules for bringing in that person, and they have to pay $1,000 for that. Once they get an approval, they can go to find the worker. Then Immigration makes sure the worker’s permit is correct and that the worker is eligible to come into Canada. That is how they work together.
What happens sometimes is that the worker permit may be running out. You can ask for renewal, but then your labour market impact assessment runs out. They don’t always coincide. We have had instances where the worker permits expired before the labour market opinion came two days later that would allow them to keep them.
They do not always talk to each other well. There have been instances where there was a day or two between the two departments coming together on an issue that ended up sending a worker home early, when two days later they would have been allowed to stay in Canada. It can be frustrating when there is a lack of communication between those two.
Senator Oh: I don’t like the policy of government sometimes when the media brings up one case on a particular issue that affects the whole policy by saying, “We shouldn’t bring in temporary workers because they are badly treated here.”
That’s a very small percentage, and the whole industry still needs the help of temporary workers.
Ms. Pohlmann: Correct. There is a lot of misinformation out there that temporary foreign workers are underpaid or not paid as much when in fact the salaries are set by the Canadian government. The employer is not the one that sets the salary. It is the government that does.
We’ve always been big advocates of allowing inspections. We believe there should be a workers’ bill of rights when they are brought in so that they understand what are their rights and responsibilities.
Let’s make sure we have this program and that it is still available to businesses that absolutely need it. There are many that do.
Senator R. Black: I have just a comment. I think we need to be clear that there are two issues. One, as you said, is an immediate concern where you’re not able to bring in workers today because they are holding back some of the approvals. The bigger issue, though, is the whole program and the additional inspections, et cetera.
I am not sure our report can affect the first one because that should be done today. The larger one is maybe one that we can impact.
The Chair: We have one more question.
Senator Maltais: Ms. Pohlmann, farmers, it seems, rightly or wrongly, are concerned about the new carbon tax. Do you think this could affect the competitiveness of the small- and medium-sized farms you represent?
Ms. Pohlmann: Yes, I think it will. Their biggest competitors are American producers and American companies.
I’ll give an example. On many farms, I know that just to run a combine for a day costs $1,000 in fuel today. Adding carbon tax on top of that will potentially make it much higher. Those are worries and the things these businesses have to think about when those carbon taxes come into place.
It will vary from province to province. In some provinces there may be more of a worry than in others where it has already existed and has maybe been factored it in. Overall there is some concern about the impact of carbon taxes on overall input costs.
You will notice in the presentation I gave that when it came to input costs the number one worry was fuel and energy costs, and that’s today.
Senator Maltais: If farmers are concerned, inevitably consumers will be the ones to foot the bill.
Ms. Pohlmann: Correct. That’s the only way they can deal with it.
Senator Woo: Ms. Pohlmann, I am sure you’re aware that on-farm fuel is excluded from the carbon framework.
Can you at least correct the record to make sure we understand the bigger picture here? The revenues from the carbon pricing system will be returned to the provinces to invest in research and so on.
A fuller story needs to be presented rather than the one you just gave us.
Ms. Pohlmann: I am just sharing with you the data we have. I am not going to argue with you. You’re correct.
Senator Woo: Is it correct that on-farm fuel is excluded from the carbon pricing framework?
Ms. Pohlmann: I believe so but I am not sure, to be honest.
Senator Woo: Oh, you didn’t know that.
Ms. Pohlmann: No, I did not.
Senator Woo: Thank you. I wanted to make sure the record is correct.
The Chair: I think the way it was expressed was that it was a concern farmers had. That showed up in your document. It also showed up when we met with farm representative groups here.
As has been rightly pointed out, different provinces have different regimes. Then there is the federal government fallback that will happen for the provinces that don’t have an acceptable carbon regime in place already.
In the federal fallback, gasoline and diesel that are used on farm will be excluded from the carbon tax. It’s not a rebate. It’s excluded right at the front end.
Some of the provinces already have a regime in place. Some of them have a rebate. Some of them have an exemption at the front end. You’re right about there being different things happening across the country.
Now, with the federal fallback for the provinces, this will not have an acceptable regime. It will make it a bit different.
Senator Woo: There is no ambiguity about the exclusion of on-farm fuel when it comes to gas and diesel, no ambiguity whatsoever, regardless of what the provinces might do.
A combine, to the extent that it is using diesel, would not be a suitable example in the case of the issue you have raised.
I accept that farmers are still worried. That is a legitimate concern, and we need to take that into account; but it’s important that this committee not put forward inaccurate information which will mislead the Canadian public.
The Chair: Any further comments?
Senator Maltais: I think Senator Woo has got it right, except he forgot about the carbon tax on farmers. Some farmers need gas to dry their grain. Gas isn’t excluded. So when we give information, we have to consider all the factors.
Senator Woo: We won’t go further.
The Chair: Let’s say it’s complicated, and we’ll leave it at that.
At this point I would like to thank our witness. It has been very interesting, with some great questions and comments.
After I adjourn the meeting I’d like to have a very brief in-camera session, so I will ask senators to stay around for a few minutes.
(The committee continued in camera.)