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Proceedings of the Standing Senate Committee on
Banking, Trade and Commerce

Issue No. 5 - Evidence - May 5, 2016


OTTAWA, Thursday, May 5, 2016

The Standing Senate Committee on Banking, Trade and Commerce met this day at 10:32 a.m. to study the issues pertaining to internal barriers to trade.

Senator David Tkachuk (Chair) in the chair.

[English]

The Chair: Good morning, and welcome to the Standing Senate Committee on Banking, Trade and Commerce. My name is Dave Tkachuk, and I'm chair of the committee. Honourable senators you're aware that Senator Hervieux- Payette, Deputy Chair of the Committee, has retired so we have a vacancy in this role. The process to elect a deputy chair is similar to the one for the election of the chair. In conducting the election, I'll ask if there are any nominations. Each nomination will be considered in order of the nomination. If there's more than one, the first will be considered first. I'll ask for a vote of all in favour. If a majority carries, then we're done. That's the way all nominations are held in committee.

Senator Enverga: I nominate Joseph Day.

Senator Greene: I would like to nominate Pierrette Ringuette. She has been a long-time member of this committee and is an independent.

The Chair: Are there other nominations? I'm going to the first one nominated.

Senator L. Smith: Can we have a secret ballot?

The Chair: The process is as I described. All in favour of the nomination of Senator Day?

Senator Campbell: I would like to know why we can't have a secret ballot. I want to know the process. I don't understand that. Democratically, we should be having a secret ballot. Nobody should be under any be pressure. If the Rules say that we can't have it, then let's change the Rules.

The Chair: I can take it to the Rules Committee.

Senator Campbell: Fine. Take it to the Rules Committee. I would like to ask how many here are in favour of a secret ballot. I think that's pretty resounding.

The Chair: I know, but I'm the chair.

Senator Campbell: I appreciate that, and I respect you. You know how much I respect you, but I believe that this should be a secret ballot. If the Rules say we can't do it, then I say to hell with the Rules.

The Chair: It says that Senate committees shan't adopt procedures that are inconsistent with the Rules of the Senate. That makes it very difficult for me. I would like to go to the first nomination. It's not complicated to me. If the nomination fails, then we go to the second nomination.

Senator Campbell: That's not how democracy works. It doesn't work in increments. Democracy works by having a secret ballot so we can all —

The Chair: I don't mind changing the Rules.

Senator Campbell: I abstain.

The Chair: I thought that's exactly what would happen, that we would have a vote. But when I looked up the Rules, they don't say that. I'm going by exactly the way the Rules of the Senate are written at the moment, and I'm not going to break them. I'm not going to deal with this matter, because I'm not going to break the Rules. I can always postpone the election of a deputy chair. We can go on to Mr. Scott, who I'm sure would like to make his presentation. We can deal with this after.

Senator Ringuette: I have just a comment. I've been in the Senate for 14 years, and I know that you have been here longer. However, senators were always told that committee members were the masters of the committee and how it operates. I don't understand why you are stating a Rule that this committee has the choice to sidestep. Given that committees are their own masters, we should agree with Senator Campbell's suggestion. As I see it, there's a motion in front of this committee to have a secret ballot.

The Chair: The Senate does not have secret ballots on any vote anywhere, in committee or in the Senate. There is no such thing as secret ballots. Yes, some caucuses have secret ballots and others don't.

Senator Massicotte: I sit on the Modernization Committee where we've had this discussion. We've had witnesses say that each committee has all the freedoms to choose whatever mode of election they want to hold, including secret ballots. But let's find out more about this subject.

Senator L. Smith: We have a witness here. Could we do this after the witness is finished? We will have time after. I'm not trying to be rude, but this is not the business of the witness.

Senator Ringuette: It should not have been the first order of business, out of respect to the witness.

The Chair: I will defer this and we'll deal with the witness. I'm sure there will be excellent testimony and we'll have a question and answer session. Then we can say goodbye to Mr. Scott and continue the infighting.

Today is our tenth meeting on our special study on issues pertaining to internal barriers to trade. I'm pleased to welcome, from the Canadian Federation of Agriculture, Rob Scott, who is a member of the CFA Board of Directors.

Thank you for being here today, Mr. Scott. Please proceed with your opening remarks. Then we will go to a question and answer session.

Rob Scott, Member of the CFA Board of Directors, Canadian Federation of Agriculture: It's not in the script, but I have to say it's nice and refreshing to see that the chair of a Senate committee deals with the same issues I do on my board at the provincial level. Obviously, I haven't got there yet. I guess, with that, I should proceed.

Thank you, Mr. Chairman and honourable committee members. I am a farmer. My youngest son Matthew and I, along with my wife Joanne, operate Bridged Creek Farm east of Brantford, Ontario. We run a sheep flock of 300 breading ewes and a feedlot finishing 2,500 lambs annually. As well, we raise a herd of purebred longhorn cattle.

I am presently the Chairman of the Ontario Sheep Marketing Agency and Vice-Chairman of the Canadian Sheep Federation. It is through the CSF that I represent the Canadian sheep industry as a director on the board of the Canadian Federation of Agriculture, the organization I'm representing here today.

The CFA is Canada's largest farm organization. Its membership includes provincial general farm organizations and national commodity groups. Through these agencies, we represent 200,000 farmers and their families. CFA's mission is to promote the interests of Canadian agriculture and agri-food producers through leadership at the national level and to ensure the continued development of a viable and vibrant industry.

Today I will talk about some of the key issues and challenges that farm groups have raised in working with all levels of government as they seek to renew Canada's Agreement on Internal Trade. This work spans many years, stretching back to 1995 when Canada's first AIT was completed. Our work has evolved since then. Most recently, in 2014, the CFA formed a committee dedicated to studying internal trade barriers. I serve on this committee and we are in the midst of consulting with our members and other groups to analyze issues and trends and develop recommendations.

Interprovincial trade in agriculture and agri-food products was valued at $40 billion in 2011, according to government statistics. There is room to grow. Farmers see economic opportunities are on the horizon, provided that governments are willing to make changes that modernize and open up our domestic markets.

Timing is critical. It's essential for Canada to seize these local and regional business prospects as it makes progress with international trade agreements, notably the Comprehensive Economic Trade Agreement and the Trans-Pacific Partnership.

CFA members emphasize that improving access to domestic markets must be a priority and must not lapse as attention is focused on export opportunities. Gaining better access to customers here in Canada will help set the stage for us to be more competitive internationally. Furthermore, it will enhance our rural economy in a broad sense, since most agricultural businesses are based in rural communities.

Regarding specific barriers to internal trade, farm leaders on the CFA's Internal Trade Committee have identified two issues as key obstacles to the flow of farm goods across provincial borders. The first is differing provincial transportation regulation; the second is inconsistencies between provincial and federal inspections required at meat processing facilities.

In regard to transport regulations, for farmers and agri-food companies, transporting commodities and livestock involves understanding the different regulations for farm vehicle weight and dimensions. Permit regulations differ widely across provinces and territories, and accommodating them can lead to extra costs, delays and other complications.

As an example, regulations in Nova Scotia are quite specific in terms of the maximum vehicle weight allowed via permit, whereas in the province of Prince Edward Island, weight restrictions are not as stringently regulated. A farmer may conduct business on both sides of a provincial border where there are many differences in requirements for farm plates, axle weights and load heights. If this activity is only occasional, there is the risk of being unintentionally noncompliant. A big part of our challenge lies in finding and interpreting the regulations themselves.

CFA recommends that the federal and provincial governments continue their work toward developing complementary transportation regulations.

Concerning the second issue, processing plant inspections, when it comes to selling meat products, our members note discrepancies between requirements of federal and provincial inspections at meat processing plants. In some cases, these are significant barriers to internal trade. Barriers can affect all commodities, but in the sheep industry they not only inhibit growth but also encourage importation of foreign lamb.

Lamb has seen an incredible growth in consumption: 16 per cent in 2015 and an increase from 0.8 kilos to 1.3 kilos per person since 2012. This has been brought on by Canada's changing ethnic demographics and is only expected to increase. CIBC World Markets predicted that 70 per cent of spending growth in the next decade will come from visible minorities.

Nationally, 70 per cent of lamb is processed in provincially inspected plants. To put that into perspective, in Ontario — where 55 per cent of all Canada's lamb is processed — only 10 per cent goes through federal facilities. In 2014, there were only ten federal plants in three provinces that processed lamb. Since then two Ontario plants have closed, citing the high cost of maintaining federal status as the reason for their demise.

Many of the large food retailers have adopted federally inspected distribution systems, not only for the potential of international expansion but because it's often marketed to consumers as the "gold'' or premium standard. Provincially inspected product is not permitted to enter a federally inspected distribution system.

For example, British Columbia is Canada's second highest point of consumption for lamb but does not have any federal lamb-processing facilities. This restricts that province's producers' ability to sell through larger grocery chains. Although there has been some promotion of local back-door distribution, logistically this is not scalable and it won't meet the needs of the industry or the consumer.

The majority of our highly populated urban areas are serviced by major grocery chains. This is where the highest rate of lamb consumption is occurring. This creates a situation where federally inspected foreign product is more readily available to Canadian consumers than domestic product.

As part of the AIT renewal initiative, CFA encourages governments to harmonize these inspection standards. There are many questions around how provincial meat processors can work to satisfy federal inspection requirements without taking on onerous and costly burden. Perhaps our governments could identify a minimum set of provincial standards and could align with those at the federal level. We look forward to hearing about potential solutions.

Another recommendation that came from the committee is in regard to supply management. Beyond the two specific issues I have mentioned, CFA reiterates that a renewed agreement on internal trade must respect our established supply management systems and must not affect current marketing structures. Therefore, the CFA supports the approach being discussed by federal and provincial governments about a general exception for supply management.

In closing, I would like to stress that CFA members support the efforts of both the federal and provincial governments to renew the AIT. We welcome any further opportunities to provide input. Thank you for the opportunity to share our views on behalf of the Canadian Federation of Agriculture.

The Chair: Thank you.

Senator Wallin: We have been hearing from multiple witnesses about how important taking down those trade barriers in a provincial deal is. There was a remarkable degree of optimism around the table. They thought if they just kept at it for another 150 years, we might actually get a deal. The question I asked them was why not try to resolve some of these issues in the court?

You used an interesting phrase. You talked about "unintentional noncompliance,'' which we understand happens. People cross a border; they do whatever. Have any of those kinds of cases ever been taken to a court? If so, how were they resolved?

Mr. Scott: Good question, but that's not going to be one that I can answer because it's technical. We'll take that question back. Janice Hall, our policy analyst, is with me. We'll get back to you on that.

Senator Wallin: That would be great. Thank you very much.

Senator Campbell: It's sort of like looking in a mirror. I'm from Brantford, Ontario. I raise sheep and lambs, and I'm in the process of raising meat rabbits. I can confirm that it's virtually impossible to find an abattoir to deal with rabbits. It's extremely difficult to find an abattoir in British Columbia, period, let alone the Gulf Islands, to deal with lamb. I want to know how we go about this. I can have the sheep dressed on Saturna Island, which is a provincial abattoir, but none of that lamb can enter into any markets that are federal because it isn't a licensed federal abattoir.

How do we get the federal government and the provinces to come to one single set of rules governing whatever the animal is across Canada? I don't know why that's so difficult.

Mr. Scott: Thanks for asking that question, because I wanted to be able to make this point. To your first point there, it's funny, when I put on Twitter that I was coming here, they put the hashtag out #fearthebeard, so thanks for your support.

Senator Campbell: No, no, you got a beard. This is just a pretend beard.

Mr. Scott: Yeah, that question seems simple to farmers. I think it's very frustrating as a farm leader to have to go back to producers and explain why we can't do that and why it isn't simple. This is one country. That is what we believe.

This was the attitude I took into this committee when I came on it, wondering how we could go about it. What I quickly found out is it may not be we're fighting the government regulations on this. We may be up against industry on this as well too. A lot of us would think of meeting federal requirements as market access tools. In fact, for some larger companies it has become a way to inhibit competition.

But in saying that, the sheep industry, with conservative economic multipliers, contributes about $900 million to this economy, and we have room to grow. Currently we're only feeding 45 per cent of our domestic growth. A lot of it isn't just because we can't supply product; we're not going to until we see those options for market access opened up to us.

To present a problem without a solution is the definition of whining. I was a little uncomfortable with that part of the presentation. The thing is we don't know what the answer is yet. It will take government helping us to get through it, for sure.

Senator Campbell: Just to continue, let's take lamb. What is the difference between provincial regulations in an abattoir and the federal regulations in an abattoir? How do they differ that we can't bring these two together?

Mr. Scott: It comes down to regulations. I'll use an example. I'm a big promoter of the food banks. Lamb is one of the products we need to get into food banks because of the changing demographics in the country. In especially the GTA and Ontario, the majority of food donated is pork.

One of the things that I came up with was a surplus of heads. Sheep heads are something we don't utilize that much in this country. I can take all of the heads from my provincial plant that are processed the same way and take them to the food bank to be utilized. All of the lambs I send through a federal plant, it's only because of the regulations that it is considered waste rather than a useable product. It's only in the regulations. There may be more stringent rules regarding sanitation. I was at a processing plant on the weekend with cracks in the concrete floor that wouldn't fall into that. In my opinion it's just regulations, but maybe somebody could speak to that.

Senator Black: Mr. Scott, thank you for being here. Great to see you. I just want to understand what you have said to us, because you represent an extremely important group. I hear that you have said that you are a big supporter of eliminating interprovincial barriers to trade because it assists your important industry. But you want to protect supply management. Did I hear you right?

Mr. Scott: Yes, you did, definitely.

Senator Black: Isn't there a contradiction in that?

Mr. Scott: In my opinion, I'm going to say no.

Senator Black: Help me understand this.

Mr. Scott: I think I can. My understanding of the Agreement on Internal Trade is that it is it to bring down the regulations that impede interprovincial trade. I think it is out of the scope of the AIT to focus on production.

Senator Black: Why should it be?

Mr. Scott: Now you're —

Senator Black: I'm just asking, right? I mean, if we are going to knock down the doors to encourage productivity, as you're urging us to do, why would we have an exemption that in fact doesn't advance that interest? That's what I want to understand, because I might have missed something.

Mr. Scott: Obviously my expertise is more in the sheep industry and we are not supply managed.

Senator Black: Okay.

Mr. Scott: I have to hold to board policy that the CFA strongly supports supply management and doesn't feel that the production side of it should be entered into the Agreement on Internal Trade. I'm sorry, that's probably not the answer you are looking for.

Senator Black: I'm not looking for an answer. I am just trying to understand, but I would suggest to you that that's very contradictory.

Mr. Scott: That's something else we can take back. We have a good representation of supply management on the Canadian Federation of Agriculture board, so I will take your comments back.

Senator Black: If my interpretation is wrong that there is a fundamental contradiction in what you have urged us to consider, then maybe you should get back to us as to why I'm wrong.

Mr. Scott: Yes, I'm sure we could do that. Thank you.

Senator Black: Final question, what should this committee do, in your view? If you're the boss of the world and you're our boss, what should we be recommending here?

Mr. Scott: I think my personal biggest concern is obviously the regulations dealing with meat. Like I said, there may be a stumbling block with industry on that, but as farmers we are good at what we do. We need the government to get in place and help us somehow figure out a way to get around those regulations. When I pointed out the differences between federal and provincial in the sheep industry, we don't want to upset those federal processors at all either. So we would like to find some way to compromise. Obviously they write the signatures at the bottom of the cheques we get currently. So to your question, it would be looking for government help. Thank you.

Senator Black: Thanks for what you do. Thank you.

Senator Enverga: Thank you for the presentation. I have a beard too, but it's not as good as yours.

Some of my questions were given in answer to Senator Black. You mentioned earlier that one of the businesses just closed down because of federal regulations. Can you explain that to us? Why would a federal regulation cause somebody to close?

Mr. Scott: I have talked to people who were involved with it. Some of them were people I knew personally because I was shipping to them, and you tend to develop personal relationships in business. Their claim is that it was not only the cost to meet federal standards, but it seemed to be a change in rules and it was trying to keep up with the changes. We see that at the provincial level as well. What is acceptable one week seems to be up to interpretation the following week and there are changes. It wasn't, like I said, the initial investment; it was a continuing investment of retaining that.

Senator Enverga: Has it changed at all recently? Is it constantly changing at this point still?

Mr. Scott: From a conversation I had on Tuesday with the owner of my abattoir, in his position he feels it's getting more difficult.

Senator Enverga: Perhaps you can give us something we could do to stabilize the regulations of federally regulated sites. Perhaps you can do that.

Mr. Scott: Sure. I don't know that I can give you the tool, but I'll give you the opinion of farmers. First of all, do you feel any less safe eating provincially inspected meat than you do federally inspected meat?

We do everything we can to put out the best and safest product possible. Why does that get lost in regulations after that?

Senator Ringuette: I would like to go back to the issue of the supply management system, and I totally agree with the federation. In order to bring the supply management, i.e., milk, eggs and poultry, are you aware that a province would limit in any way the import of eggs, poultry and milk from another province?

Mr. Scott: No, and I don't think that exists within the current supply management system.

Senator Ringuette: Exactly.

Mr. Scott: I guess that would go back to the other question that the supply management is more of an internal protection against international markets. Thank you very much.

Senator Ringuette: Exactly. To some extent, the issue that we're studying, interprovincial trade barriers, from my discussion over many years with the producers and the organization, is one example where all provinces, all of industry and the federal government have agreed, and there is no barrier with regard to the supply management production.

Mr. Scott: Maybe I could give a personal opinion as a farmer on that road. The sheep industry has very up and down price cycles. I will say that, in my community the tractor dealerships, the feed stores, the businesses that support my business, really rely on the stable incomes of those supply-managed groups. I'm glad that I have the dairy farmers down the road, and I'm not jealous of the fact that they get a steady cheque. If they weren't there, Brant Tractor wouldn't be holding out for my good cheque every four years.

The Chair: Could I ask a supplementary on that? It is supply management, so even though the stuff can be shipped — eggs, chicken — across borders without too many problems, if a farmer in Saskatchewan wants to sell eggs, he can't. If a farmer in Saskatchewan wants to have chickens and sell them, he can't. The only way he can is to go through the monopoly of the egg marketing board or the chicken marketing board.

Even though there may be no obstacles to trade, there are certainly great obstacles to production. There is no competition. You can't even make yogurt, for God's sake. I think it does fall under the auspices of interprovincial trade, because farmers should be able to produce whatever product they want. They shouldn't be told what to produce.

Mr. Scott: They should be. Again, this is just my back-road opinion. I don't think there is any other industry— and I apologize if there is — that is affected so much by weather, global markets and so many different things.

To be honest, now that I'm bringing a second generation onto the farm, I wonder, if I had the ability to buy into a system where I could buy price stability, if I might have adopted that way as well. It's hard to make a living sometimes. We had as much as a $100 a head fluctuation in lamb prices in January and February.

The Chair: I live in the West, so we are exposed to the free market constantly. Somehow, we manage to feed ourselves.

Any other questions of Mr. Scott?

Senator Campbell: I have rabbits, if anybody is interested.

The Chair: In a rabbit marketing board?

Senator Campbell: They come in a box. You have to take care of the business.

Senator Ringuette: You indicated to us that the industry produces 45 per cent of the Canadian market. Where does the rest of the supply to the Canadian market come from?

Mr. Scott: Of that, 98 per cent will come from Australia and New Zealand; 2 per cent is made by the United States and the United Kingdom; and I believe even Iceland entered into that in the last while.

The Chair: Thank you very much, Mr. Scott.

(The committee continued in camera.)