Proceedings of the Standing Senate Committee on
Agriculture and Forestry
Issue No. 2 - Evidence - Meeting of February 16, 2016
OTTAWA, Tuesday, February 16, 2016
The Standing Senate Committee on Agriculture and Forestry met this day, at 5 p.m., to continue its study on international market access priorities for the Canadian agricultural and agri-food sector.
Senator Ghislain Maltais (Chair) in the chair.
[Translation]
The Chair: Welcome to this meeting of the Standing Senate Committee on Agriculture and Forestry.
Our mandate is to consider the access of Canadian products to international markets. Today, we are hearing from two panels of witnesses. The first witness will be Don Jarvis, Executive Director of the Canada Pasta Makers Association.
[Translation]
My name is Senator Maltais from Quebec. I am the chair of the committee.
Senator Mercer: I am Senator Terry Mercer. I'm the deputy chair of the committee.
Senator Moore: I am Wilfred Moore from Nova Scotia.
Senator Mockler: Percy Mockler, New Brunswick. I'm substituting for Senator Dagenais.
Senator L. Smith: I am Larry Smith. I am substituting for Senator Oh.
Senator Merchant: I am Senator Merchant. I am from Saskatchewan.
Senator Unger: I am Betty Unger. I'm from Edmonton.
Senator McIntyre: Paul McIntyre, New Brunswick.
Senator Beyak: Senator Lynn Beyak, Ontario.
The Chair: Welcome, Mr. Jarvis.
Don Jarvis, Executive Director, Canadian Pasta Manufacturers Association: Mr. Chair and committee members, I'm very pleased to be here, particularly on a blustery day like this, and I quite admire the fortitude and the dedication of the committee. You cleared quorum quite early.
On behalf of our members, I thank you for inviting our organization to appear this afternoon to assist in your study on international market access priorities and issues.
The Canadian Pasta Manufacturers Association, CPMA, represents the trade public policy and regulatory interests of the pasta manufacturers of Canada. Many senators would quickly recognize this because of the introductions you gave me that Canadian durum wheat is grown in the three Western provinces of Saskatchewan, Alberta and Manitoba. It's the semolina from this wheat that makes 100 per cent Canadian pasta so unique in the world.
Our four members are responsible for more than 95 per cent of the dry pasta production in this country. Italpasta, Catelli, Primo and Grisspasta are well-known pasta manufacturers and brands to Canadians. They make a wide variety of pasta shapes and sizes and market them across Canada, the United States and elsewhere. These companies have large and modern pasta plants. Two are located in the Montreal area and two in the Greater Toronto Area. Their combined sales account for about $400 million annually.
I'm going to take the opportunity in my first seven or ten minutes to review with your committee a number of issues that Canadian pasta manufacturers have that relate to your study, in particular, CPMA's involvement in some trade issues over the years, our members' combined activity in trade promotion with the support of Agriculture and Agri- Food Canada for a number of years, and the challenges this sector of the Canadian food manufacturing industry faces today to remain competitive internationally and in Canada, our home market.
My involvement with these businesses began more than 20 years ago. Since 1996 I've been directly involved with CPMA as their executive director. At that time, for a period of almost two years, CPMA and these four companies were involved in a dumping and subsidized complaint at the Canadian International Trade Tribunal involving Italian dry pasta products under tariff line 1902.19, which is uncooked pasta, not stuffed or otherwise prepared, not elsewhere specified; and that's the product that you find in grocery stores in the cellophane or the boxes. That's the basic kind you find in every grocery or food store in the country.
Despite the direct evidence of both the subsidization and the dumping of pasta into the Canadian market, the CITT ruled that there was not sufficient evidence of injury to impose new and additional duties on those products. However, because of the length and the cost of that case and because of the provisional duties that were in place for some time, the volume of imports stabilized and has remained fairly constant in the ensuing years. Only recently have we seen a worrisome surge in imports, this time not from Italy but from Turkey.
A short time after that case, CPMA, with the assistance of Agriculture and Agri-Food Canada and the Canadian Wheat Board, undertook a study on "Generic Promotion as a Market Development Strategy: Canada's Pasta Industry 1997-2001.''
A major conclusion of that work was that the best defence is a strong offence and that increasing exports would strengthen our industry. At first, CPMA members began to commit additional resources to export opportunities beyond the immediate and large U.S. export market. They focused on their individual quality-branded Italian meal products with dry pasta — like spaghetti, macaroni and vermicelli — as the base, accompanied by pasta sauces, condiments and other associated foods.
By 2001 this export promotion program conducted by CPMA had evolved into a very formal and ambitious activity with investments by the four companies and support funding from Agriculture and Agri-Food Canada's CAFI program. In 1997, pasta exports were valued at $42 million; in 2002, $70 million; and by 2005 we had an export surplus, despite the rising value of the Canadian dollar, with sales in excess of $115 million. Last year exports were valued at $165 million, but the vast majority of those exports were to the United States.
I brought with me some of the visuals and promotional material used in that program — brochures, signage, et cetera — and we can talk about that later during the question and answer period.
In addition to promotional activity, these Canadian companies pioneered the development of innovative new products, such as whole wheat pasta and pasta for children, and this played a part in expanding and developing the trade into the U.S.
Some of the activity was aimed at non-U.S. markets like Japan, the Caribbean and the Middle East, but with very little, if any, long-term success. In the question period, I will elaborate more on these materials and the challenges and difficulties we have faced, if the committee is interested.
I know that last March the Honourable JoAnne Buth, the CEO of the Canadian International Grains Institute, appeared before this committee. In addition to providing information on the excellent work that Cigi does and their programs, she raised concerns about tariff and non-tariff trade barriers, where the promotion of the Canada brand can be constrained, and the role and value of new trade agreements and other initiatives, and I can explore some of those issues with you.
Let me raise a concern that our members have that impacts them here in our Canadian market — labelling. Labelling is very important and customer-driven. Our members are proud of and value very much the high standards and quality of Canadian-made pasta produced with 100 per cent Canadian semolina. Many of their brands and packages clearly advise customers that they are a product of Canada and provide other information and hold strictly to Canadian labelling regulations.
The ongoing concern has been that some imported pasta we compete against is often improperly labelled, and in many cases states that it has been imported, without stating from where.
Another challenge facing the pasta industry is the constant evolution and changes in food fads and consumer demands like the low-carb and Atkins diets of 15 to 20 years ago, the publication of Wheat Belly and GMO wheat, and the more recent gluten-free movement.
A few years ago, CPMA participated in the formation of the Healthy Grains Institute, following the leadership of allied associations and partners like the Baking Association of Canada, the Canadian National Millers Association and Cereals Canada. That institute, along with its scientific advisory council, works at informing and improving Canadians' knowledge and understanding of the health benefits of grains. It is committed to providing Canadians with science-based information on grain-based foods, including pasta, as an important part of a healthy and balanced diet. We can discuss these issues as well, if you have questions.
To finish these introductory comments, I will return to a more current and pressing trade issue facing Canada's pasta manufacturers: a sudden and significant increase in imports of pasta from Turkey. Last June, CPMA advised the federal government of its concern, and I have provided this committee with that communication. Since then, these imports have continued to increase, and earlier this month the association circulated a public release to provide interested stakeholders, including current and potential importers, with our industry's concerns. The release states that:
According to Statistics Canada, more than five million kilograms of uncooked pasta were imported into Canada from Turkey between January and November 2015, almost tripling the total quantity imported for the entirety of 2014. The same report also shows a dramatic price disparity with other imports — 50 per cent less than Italian pasta and 40 per cent than U.S. pasta imports.
Since then, CPMA has been advised by one of the importers and manufacturers of this pasta from Turkey that they receive no subsidies from any government, that they are importing fairly based on their low costs of production, and that they sell their pasta in Canada at prices higher than those given to large retail customers in Turkey. Our members in CPMA acknowledge that information, these facts, and a clarification that one importer has provided to us, stating that they are not subsidized or dumping product into Canada, and that significant or future injury has not yet been proven.
However, the fact that the landed average FOB price of Turkish imports generally, according to Statistics Canada, is so low compared to imports from the U.S. and Italy — and the manufacturing costs in Canada of our members — means these imports raise questions related to our members' cost competitiveness, not just in their home market but on the international trade front as well.
CPMA is supported in these concerns by the Canadian durum millers, Cereals Canada and other millers. The millers have stated publicly that they are highly dependent upon the Canadian market and that this surge in imports of pasta is a concern. Cereals Canada too has clearly indicated that it is in Canada's interest in all of the value chain to have that processing in Canada.
Canadian durum exports to Turkey rose to 105,800 tonnes in 2013-14 versus 82,000 tonnes the previous crop year. Given Canada's market share in Turkey, it is suspected that some of the pasta coming to Canada from Turkey was probably made with Canadian durum, according to Cereals Canada.
Those are my introductory comments. I hope this information and those comments are helpful, and I look forward to your questions.
The Chair: Thank you very much, Mr. Jarvis, for your excellent presentation.
The first question is from the vice-chair of this committee, Senator Mercer, followed by Senator McIntyre.
Senator Mercer: Mr. Jarvis, thank you for being here on a snowy night.
One of your first comments was that the companies each have large, modern pasta plants — two located in Montreal and two in the Greater Toronto Area — and combined sales amount to $400 million annually.
We're politicians. We're impressed by sales, but one number we're more impressed by is the number of employees. How many employees are working in these four plants? If you can do it by city, that would be an even better breakdown.
One the problems we have constantly at this committee is that some of our viewers are watching, saying, "The Agriculture and Forestry Committee is of no interest to me in downtown Toronto or downtown Montreal.'' Well, guess what, it is of interest to you in downtown Montreal, downtown Toronto and downtown Halifax, because there are people making their living off of agriculture products. Numbers like that help us underscore the importance of agriculture when you've got four plants making pasta, two in Toronto and two in Montreal.
Do you have those numbers handy?
Mr. Jarvis: I can give you an approximate figure. The four plants have been in place for a long time; they have traditionally been there. The two in Montreal are a very large Catelli plant right at the port, and Grisspasta, in Longueuil, on the south shore. I'll move to Toronto and give you an average figure that I think is close to being accurate. In Toronto, you have the Italpasta plant north of the Pearson Airport, and the Primo plant is in north Toronto. They've all been there for many years, all four. I would estimate 300 to 400 employees in total.
Senator Mercer: Total?
Mr. Jarvis: That is in total, for the four plants. That's being very conservative; I don't want to overestimate the number of employees. They're not all in the plant, either. You're talking about sales forces and all the other administrative support. In today's world, pasta production is highly mechanized. There are huge machines, and the actual production is not an employee-intensive activity.
Senator Mercer: You mentioned in your presentation, that labelling doesn't tell you where the products are made or where the raw materials come from. This is where we find ourselves in a bit of a conflict, because we're interested in what you're saying, but at the same time we've sat at this table many nights and we've talked about the Americans' country-of-origin labelling and how we're opposed to that.
How do we square that circle, with us saying that it's a good idea if we knew that the past was coming from Turkey, or wherever, and then turning around and saying that we're opposed to country-of-origin labelling of meat products in the United States?
Mr. Jarvis: That's a very good question, Senator Mercer. Let me respond to it with a couple of initial comments.
It's not just the country-of-origin labelling that we're particularly worried about. You often see imported products not following our nutrition facts table properly, and with other errors in the labelling. I mention in my notes that labelling is consumer-driven; the reason the labelling is there is for the information of the consumer. It's very important, and the Canadian Food Inspection Agency does take note; we've pointed out errors and problems with some labelling, and they've taken the necessary measures to have nutrition facts tables, and the other mandated information on the label that has to be consistent with Canadian-produced products, changed and addressed when we have pointed them out.
When it comes to where it's imported from, I must say that many of the retailers — who are the major purchasers of these products — are quite conscientious and insist that — in fact, it's not mandatory — the product be designated as far as where it comes from. In fact, I think there is Turkish product in the Canadian market that is properly labelled, imported from Turkey, or imported from the U.S.
As long as it's not mandatory — I think one of the problems you had with the COOL issue was it was a mandated or mandatory regulation. This can be, in a way, self-regulated by the customer base and the retailers. Very responsible retailers do ask that type of product be labelled, because the consumer is very interested in where the product comes from.
Senator Mercer: It seems to me, though, that retailers in general — I come from a household where I am the principal shopper for groceries. I make it a point of being that person in my family. I also share the cooking responsibilities, so I am on the preparation side. I read labels most of the time, but I'm usually reading labels for salt content more than for country of origin. I assume that if I buy pasta in Canada, where we grow all this durum wheat, it's Canadian; but you've forced me into reading my pasta labels a little more closely.
However, when this committee has witnesses from major retailers, should we put them on the spot and ask, "Why aren't you advertising more that this is Canadian-made pasta?''
As I say, I do the grocery shopping and have done for years. I don't remember seeing a lot of signs in the pasta section saying "Canadian-made'' versus anything else. Now, if it said "Canadian-made pasta,'' it would have raised in my mind as a shopper that they're saying "Canadian-made pasta'' because there's something else on the shelf that is not Canadian-made.
Mr. Jarvis: Let me react to that too. Almost all of the Canadian manufacturers I represent in some way clearly state that the product is Canadian, such as it's made with 100 per cent Canadian wheat or it's Canadian. It's a fair question, though, to retailers. It's not difficult, providing that added information for imported products. As I said, many retailers do state actually. I look at labels too when I'm at the grocery store. I've been in the food industry for 40 years. Consumers are very interested, and it's not just pasta; it's food products. They want to know where the food products come from, particularly if they're not Canadian.
Senator Mercer: I want to note for our researchers that if at some time in the future we have retailers before us for one reason or another somebody should remind me that we want to go back and ask a pasta question.
Mr. Jarvis: Thank you very much.
Senator McIntyre: Thank you, Mr. Jarvis, for your presentation. You have talked about dumping and unfair competition. You are correct. I recall that in February 2016 Canadian pasta was subjected to unfair competition in the Canadian market due to the import of large quantities of pasta coming mostly from Turkey.
You talked about ways to limit the negative consequences of dumping. What about the TPP agreement? Do you think that agreement will cure dumping and unfair competition?
Mr. Jarvis: That's an interesting question about the TPP or even the Canada-European trade agreement. Dumping and subsidization are increasingly not acknowledged or supposedly tolerated within the world trading community. The WTO, which is the overarching trade organization, announced in December the ending of all export subsidies so that countries should not be subsidizing the production of agricultural products or food. The WTO has slowly but surely been trying to address that on a global basis for many years. Apparently, effective in 2020, it has eliminated dumping, in particular subsidization, not necessarily dumping.
Dumping is not anything that you can mandate or prevent through international trade agreements. It just shouldn't be done. A manufacturer within a domestic market should not sell whatever they produce in that market at a price for the domestic customer base and then export it at a lower price. That's just unfair trade.
Senator McIntyre: Dumping brings a lot of commercial losses to companies; that's for sure.
Mr. Jarvis: Yes.
Senator Moore: Do we have a trade agreement with Turkey?
Mr. Jarvis: No, I don't think we do.
Senator Moore: I don't think we do, either.
Mr. Jarvis: In fact, there's currently momentum between the two countries to attempt to develop a freer trade agreement.
Senator Moore: They are part of the EU; right?
Mr. Jarvis: I don't think so. No.
Senator Moore: Oh, they're not. In your letter of June 5, 2015, to Minister Ritz and other ministers, at the bottom of the first page you say that CPMA has retained legal counsel to begin preparing a potential complaint to the Canada Border Services Agency, which in a matter of a few months could result in the application of provisional duties on these exports. I'm a little confused as to the role of CBSA. I didn't think they enforced tariffs and duties. What was the result of that effort?
Mr. Jarvis: That letter was prepared in June last year. We have legal counsel. If there is an apparent problem, and we did the same thing 20 years ago, you have to prepare an initial submission to the Canada Border Services Agency. It's a rigorous test to attempt to find sufficient evidence of subsidization or dumping before you submit quite a significant amount of information to the CBSA.
If you are able to find evidence and complete the submission and you're comfortable that you have found evidence of dumping and/or subsidization, then you submit it to the Canada Border Services Agency. They make an initial ruling and can put provisional duties on those products. Then the case goes to the Canadian International Trade Tribunal for public hearings, where you present the evidence. The various parties involved then present their facts. The importers can defend themselves, et cetera. That's the process.
Senator Moore: On the second page of your letter, you say that wheat is a major beneficiary of Turkey's agriculture support and benefits from minimum purchase prices. How do we know that? How does your organization know that?
Mr. Jarvis: It's based on reference to the United States, the market immediately south of us. The Americans have had duties on both Italian and Turkish pasta for almost two decades; and they've renewed them. They go through a process every three to five years. They go through that rigorous test; look at and analyze the government programs in Italy, Turkey or elsewhere; determine if, in fact, subsidization is still there or dumping is occurring; and they maintain the duties. The Americans have done that a number of times.
Senator Mockler: We heard your presentation and the question that was asked about the TPP or CETA. I want to quote you, and then I'd like to have your opinion on what the U.S. is doing and maybe what we should do if this is factual. Then I will say, Mr. Jarvis, that you've got the big Eastern Canadian players who have been established for a long, long time, and it sounds like they don't want a lot of competition. Al-Katib said, and you're in the article, and I will quote:
Jarvis said it is absurd that Canadian durum can be shipped to Turkey and then turned into pasta that is shipped back to Canada and sold at a lower cost than Canadian product.
"That's the real issue when you have subsidized production.''
The U.S. has been applying import duties on Turkish pasta for 20 years. Those duties were recently reviewed and additional duties were applied.
"You can't buy Turkish pasta in the U.S. and that's our concern that it's being diverted here,'' said Jarvis.
So if the U.S. does apply import duties — and I'm a free trader — if we could all eliminate barriers, I think we would have better markets. That said, how should we — when I look at the big boys of the industry, such as Catelli, Italpasta, Primo and Grisspasta — how would that impact on refraining you from becoming a world competitor?
Mr. Jarvis: First, you quoted me extensively there. Let me just correct at least one thing. In the American market you probably will still find Italian and Turkish pasta. There is Italian and Turkish pasta. It's just that they have to pay additional duties, which are countervail duties, or dumping duties, that are applied, so the product entering the country then has an additional set of duties and a tax put on those products before they can enter the country, which helps balance off what the American government has determined after complaints by the American pasta industry — manufacturing pasta in the U.S. — which they initiated 20 years ago.
Let me state in my remarks as well — and in that letter that was quoted earlier — we indicated that we were doing initial review to determine if, in fact, there was evidence. We will not initiate any formal complaint to the CBSA until we are certain that there is or has been dumping of subsidized product. That is not the case at this time. We haven't got significant evidence yet. I said in my introductory remarks that one of the largest importers clearly has advised us that they are not dumping, nor is their pasta manufactured in Turkey subsidized.
They are defending themselves, and we will not proceed unless we're convinced that we have evidence that's factual, accurate and current that would actually withstand the test before you submit it to the Canada Border Services and then initiate a formal hearing process with the Canadian International Trade Tribunal.
It's not up to the Canadian government to do anything. It's actually a private action by the domestic industry to initiate it. We have in Canada a process that will allow us, as business people, to attempt to correct problems there.
The point I'm making in my introductory statements is that if, in fact, the case is that the large importers of Turkish pasta now are not dumping or subsidizing, then we have a tremendous competitive issue exporting product because in many cases, as I said in my introductory comments, as you quoted, they might even be shipping the Canadian durum over into Turkey, manufacturing it into dry pasta, shipping it back to Canada and landing it here in Canada at a price that we have trouble competing with.
Senator Plett: Regarding the last part of your comment, they are importing from us product, then making pasta and selling it back to us at a price that we can't compete with. How does that make any sense? Why can we not compete when they have to import the product over there, make the pasta and then send it back? Are we paying too much in labour? What is the reason that they can do that?
Mr. Jarvis: That is a very good question. To add to the senator's observation, generally 80 per cent of the cost of the finished pasta product is the raw material; it's the semolina. Your transportation, labour and energy costs only make up 20 per cent. That's the question we're raising. We have either a competitive issue here in Canada — and you have to come to your own conclusions. We're observing a surge of pasta right now that's coming into this country at a very low price that we're having trouble competing with.
Senator Unger: I have two questions, but actually a third one, which is this: Why does Canada import so much pasta when we should be, by the sound of it, exporting more durum? Why do we export durum?
Mr. Jarvis: I will answer first that we are net exporters of pasta as well. We have a trade balance in pasta. Our shipments to the U.S. are larger than the imported pasta from the U.S. It's North American free trade, and so we are very comfortable with that. When it comes to durum, Canada is probably the largest durum exporter in the world, and we're not disturbed by that at all. As I said in my introductory comments, it's the best durum wheat in the world, it makes the best semolina, and we should continue to export, and we do. We export, I believe, within a highly competitive commodity world.
Senator Unger: The second part of my question is this: What is the real impact of Turkey's alleged dumping when it's so small relative to the size — and this is with regard to imports — of Canada's import market for pasta? The U.S. is $114 million and Turkey is at $6.4 million in exports. Why are we so bothered about Turkey when there's Italy at $46 million, China at $15 million, Thailand at $11 million and then Turkey?
Mr. Jarvis: Some of those import figures are not dry pasta. They are noodles and that to start off with. When it comes to the Turkish pasta, in the last 10 or so years Turkey has turned itself into a major exporter of pasta. It's now the second- or third-largest pasta exporter after Italy in the world.
We do acknowledge and recognize that the import levels into Canada so far are not huge or significant. All we have observed is that in the last year or year and a half they've tripled. We're identifying a potential problem. As I've stated already, based on our experience as an industry, we conducted a very significant case 20 years ago. Subsidization and dumping were clearly factually proven, but the CITT at the time indicated that there had not been a sufficient injury to the Canadian industry. So we won't proceed unless we really believe that the industry is being significantly injured in Canada, but we're pointing out a problem. However, we're also identifying a competitiveness issue.
I want to tell you the story of our export program. Our export program was very ambitious. Despite significant — about 70 years — of expenditures and effort in the Middle East, in Japan, in the Caribbean and even in some South American countries, we attempted to find markets for Canadian pasta. If you take a look at our export figures, 95 per cent of the export of Canadian pasta is to the U.S. market only.
Senator Beyak: Senator Plett asked my excellent question, so I will go on to the next point I had. I wondered why we weren't competitive, and you have explained that.
Can we learn anything from the United States putting these countervailing and antidumping duties on? How were they able to find out that there was a problem? Do we know?
Mr. Jarvis: Well, 20 years ago they were successful, within their review process that they have, in convincing the agencies in the U.S. that there had been injury, and we were unsuccessful in Canada. If you just want to cut to the bottom line on that, we were unsuccessful at the time.
That is why we are very cautious and why I just mentioned that that is something you have to really make sure that you — and rightfully so — are demonstrating very clearly that your 300 or 400 jobs and the investment in Canada are being injured. It is increasingly hard to just make an argument of future injury.
Senator Merchant: Thank you for your presentation. You have given us a lot of interesting information to think about. You have raised a lot of questions, and you haven't given us too many answers, really, because you cannot answer some of the key questions that have been asked. So I won't repeat those.
You also touched on consumer patterns and that consumers might read the labels to see where the pasta is coming from. However, consumers will often buy the cheapest product. As to the label, what would that tell us? That something is coming from Turkey or Canada or the U.S.? You have to be very patriotic, unless there is something else on the label that may indicate that you don't want to ingest whatever it is in the pasta. Does pasta have a variety of ingredients that may cause me, when I read the label, to say, "No, I don't want that in my diet?'' Salt, I understand. Sugar, I understand. Maybe even GMO, if it says that, but I must say that I do not read the label on the pasta. I buy the pasta that is on sale that week because I always think that, for dry pasta, it depends what you do with it that makes it edible. Pasta is not something very sexy looking on the shelf; it all looks the same.
You raised that there have been diets over time. Now there is an anti-grain sentiment that we should not be putting grain in our food because it causes — I eat everything, so it is not a problem. How are you going to deal with the consumer? I know there are other problems that you have stated. You want to prevent the dumping and other things, but what do you want the consumer to do exactly?
Mr. Jarvis: We have 35 million consumers in this country, and they all have varying interests and varying needs, varying nutritional requirements and varying attitudes. They change. The Canadian Pasta Manufacturers — I, personally, and our members — would disagree with you about the value and quality of the product itself when you are using Canadian durum. That is why it is so readily demanded across the world. It is high in protein.
The Canadian pasta is fortified, whereas many pastas from other countries are not. You can find that on your nutrition labelling. That is why it is very important that labelling is done properly. If you are a keen student and inquire, you'll see that you can see that information on products.
The other thing is I mentioned whole wheat. I mentioned changes. There have been very significant additional offers of different types of pastas. We have gluten-free pasta now prepared; we have other fortified products. Innovation is occurring, and the consumer demands that. Manufacturers are attempting to meet new demands and changing consumer trends.
Senator Merchant: I agree with you on that, that I do look to see if it is whole wheat. I understand that our durum wheat is good, but you said that the pasta that is coming from Turkey has a lot of durum wheat in it. This is what I'm saying: Will the label indicate to me the difference in quality? Does it say on it that it is made with durum wheat or made with some other kind?
Mr. Jarvis: Yes.
Senator Merchant: You have to be a very educated consumer.
Mr. Jarvis: If you take a look at the ingredients for pasta, it will have two ingredients or one ingredient. That's durum.
Senator Merchant: Which are?
Mr. Jarvis: Semolina. Flour. That's it.
Senator L. Smith: Is Turkey a net producer of durum wheat, or do they import? What's the percentage that they actually grow versus what they import?
Mr. Jarvis: Senator, I am not sure. I believe that, because they are such a significant exporter as well, now — they have been producers historically, for hundreds of years, of durum wheat — they would probably be a net importer of durum.
Senator L. Smith: The other point is that the market has shifted in 20 years in Canada with the acquisition of Catelli by the U.S. people. When we talk about exporting product into the United States, that's the American company exporting its product into its own market. We also know that, with the arid growing conditions, Canada is still privileged, with our climate, to be able to grow the best-quality durum wheat in the world. The only reason I know that is because I worked for Catelli for 10 years, with Ogilvie, so I negotiated the deal to the States, for 20 years, to buy the raw material.
The challenge I think existed then, but when I hear you talking, it seems like there are similar challenges 20 years after. As to the marketing of the product, the challenge with durum and pasta was always how do you add value to the product. This is why companies like Olivieri were struggling back in the late 1980s, because an entrepreneur was trying to put value added into the product, but they didn't have the funds. So the big producers, the mass producers — and that goes to your point — are just pounding out pasta, pasta, pasta, but what value added was in the product? The value-added issue has been a challenge for the industry for years, and it sounds, from what you're talking about, like it's still a challenge.
The other issue is controlling the market. It would be interesting to see, with the dollar at its present level, what impact that has on the pasta manufacturers. If the U.S. guys who own Catelli now are shipping back to the States with the Canadian dollar, it'll be interesting to see what their books are like because it probably gives them some advantage in terms of the cost of their product.
Mr. Jarvis: Those are very valid comments. The other companies that are producing pasta here, though, are exporters as well — they really are — to the U.S. The Canadian dollar and its current value is one reason we have a very healthy surplus right now, just, in the last several years, the devaluation of the Canadian dollar, which has been an advantage.
The value added is absolutely an issue, but there has been an attempt, not just in marketing, to address consumer changes. Pasta is still, just like bread, a very significant source of grain, of wheat, and of all of the nutrients that the Healthy Grains Institute promotes and develops. That is why consumer education is so important.
Senator L. Smith: Could Turkey, because they are a large producer, theoretically produce the product, sell a lot of the product in their own market, ship or dump over here, and sell it at any price because, with the incremental cost of manufacturing, they can still make money on it since they are paid a premium for the raw material? Our durum wheat is the best in the world, and it is known to be the best. People want our product. As you get into countries with arid conditions, since the world changes through climatic change, durum wheat will become more valuable. It looks like we will possibly be one of the only people able to produce such a large volume en masse.
Mr. Jarvis: The case I am bringing here to the committee is that it is a competitiveness issue we are facing, and we're attempting to actually point out some of the observations of recent changes in the trade.
Senator Plett: I agree with my friend Senator Merchant that it seems you have asked more questions than given answers. I think the opposite should be happening here; we should be asking questions and getting answers. Then, when I ask a question, you say I am supposed to draw my own conclusions. Well, I'm not sure I want to draw my own conclusions.
Consumers buy product for different reasons. Senator Mercer says he does most of the shopping at his home and he looks at labels and looks to buy Canadian products. We should all probably aspire to do that a little more than we do; I don't argue that. I also do a lot of our shopping, but my wife gives me a list and then I go and shop. If she wants a certain brand, she puts it down.
Now, I have a weakness that if she doesn't mark the brand down, I look to buy the most expensive product because I think that has to be the best. I am sure that is not always the case, but I think if it is the most expensive, it has to be good.
Senator Mercer: We're not all as rich as you, senator.
Senator Plett: People buy because of price.
I will repeat what I said, and I am hoping to get a better answer from you. We export the wheat. We import pasta; yet we are a net exporter of pasta, you also said. Then you say we have a competitiveness problem. I am trying to figure out where the problem is. We are a net exporter, which is good. We import some, which is good; it gives people a choice. We support free trade.
I want you to tell me, sir, what is the problem — other than the fact that you want everybody to buy your product, and that is also good. That is what a good businessman does; he tries to get everybody to buy his product. But why should I do that if I can get a better deal, and you will still stay in business because you're exporting, and you're doing well there, and you're importing some, and the Canadian farmer is happy because they are exporting their durum? To me, this is just a great story to tell and not a problem.
Mr. Jarvis: I don't know how extensive a response —
Senator Plett: You have five minutes.
Sorry, chair.
Mr. Jarvis: The chair will give me one minute to respond to the senator's comments?
I think what we are observing — and whether it is a straight answer or not — is a concern with a sudden surge from a new source. We are not questioning right now. We've been advised by one of the larger importers right now that they, in fact, are not dumping, or subsidization, but we do see a highly competitive issue with this surge of imports coming. Other jurisdictions, like the Americans, when they see these issues — and of course subsidization and dumping should not be tolerated anymore within a liberalized trade and a global environment.
We are just making these observations. We were invited to appear here to provide the current state of the Canadian pasta industry, and that is what I have tried to relate to you. The current state of the pasta industry is healthy. We are exporting. We are competing well against imports, but all of a sudden we see a surge from a new importer.
[Translation]
The Chair: Mr. Jarvis, in conclusion, I would like to ask you two short questions. I come from Quebec, and Catelli has always existed for me. I think it is one of the oldest pasta makers. The product must be good because, when Senator Smith was playing football, he ate Catelli pasta and won the Grey Cup. He is now in the Senate and no longer eats pasta.
Unfortunately, we are not seeing any Catelli-manufactured products. At the supermarket, we see that there are different companies making pasta of all kinds. However, there are no Catelli products. What is happening? Does the company produce only dry pasta, or is it also focusing on processing and on ready-to-eat products for today's generation?
[English]
Mr. Jarvis: I really can't comfortably answer that question because I am representing Catelli, Italpasta, Grisspasta and Primo as dry pasta manufacturers. I did indicate in my opening remarks, though, that many of these companies do market what we call "Italian family products,'' which are sauces and other products that accompany the pasta products. That is a general comment back. I can't comment on any specific business.
The Chair: Thank you very much, Mr. Jarvis, for your information. It is very helpful to our committee.
Thank you very much, senators.
[Translation]
I want to let the senators know that Mr. Van Tassel is my riding neighbour, so please be nice to him. It is a pleasure to have with us representatives from Quebec and Ontario side by side. All the senators are looking forward to hearing your arguments to help them with this committee's mandate, which concerns access to international markets.
We are very happy to have you with us. However, I have to ask you to go through your brief quickly. I also want to ask the senators and the witnesses to keep their questions and answers brief, so that all the senators can have an opportunity to ask questions. That way, we may be able to have a second round of questions.
Mr. Van Tassel, go ahead.
William Van Tassel, First Vice-President, Producteurs de grains du Québec: Thank you, Mr. Chair, my riding neighbour.
[English]
I will do my presentation in French, because I am a Quebec farmer, but afterwards, the questions can be in both languages.
[Translation]
Thank you for giving me the opportunity to make this presentation. Our federation represents about 11,000 grain and oilseed producers who market their grain, or at least a part of it.
Quebec's grain sector has an annual production of over 5 million tonnes. The main crops are grain corn and soy, followed by cereals — wheat, barley and oats — and canola. The grain is destined for the Quebec market, of course, but also for foreign users. This is especially true of soy production — 1 million tonnes was exported in 2015, with an estimated value of more than CAN$500 million — which is destined primarily for export markets. Identity-preserved soy beans — commonly called IP soy beans — are sold to Southeast Asia, where Japan is a key market. The Asian markets are high value-added markets and demand top quality. Soy beans that are not genetically modified are also sold to European importers, who pay a premium for a certified non-GM product.
Quebec's corn crop is destined mainly for the local market for animal feed and the production of ethanol and spirits. However, when Quebec has a bumper crop, as it did in 2015, with a yield of 3.76 million tonnes, then export markets are needed for the surplus corn. As our immediate neighbours, Ontario and the United States, also have large surpluses to sell, significant quantities of Quebec corn — about 500,000 tonnes — will have to be marketed overseas, mainly in Europe, in the coming months.
We must not forget cereals. The United States has attractive and profitable markets for Quebec oats — my region, Lac Saint-Jean, is a major oat producer — whether for human consumption or horse feed.
Quebec's grain sector operates in competitive North American and international markets. Access to those markets is vital to our sector. That access must be free, without interference by the authorities in other countries, and in compliance with international phytosanitary regulations, Codex. However, we are afraid that access will be restricted or even threatened. One example is sustainable agriculture in Europe. There is no doubt that agricultural producers in Quebec have adopted the best agronomic practices in this regard. The problem could arise in the certification of these practices, which European countries could soon require. No consensus has been reached on the certification of sustainable agriculture, as there are several competing systems. That is creating confusion and uncertainty.
Because it is strategically located in relation to the ports along the St. Lawrence, Quebec is particularly well placed to take advantage of international market opportunities. Producteurs de grains du Québec is, therefore, asking that foreign market access rules be based on clearly defined scientific principles on which there is consensus. Otherwise, the flow of international trade will suffer.
Producteurs de grains du Québec would also like to take this opportunity to underscore the importance of maintaining and bolstering public research in the grain sector. A number of research projects and fields, such as crop breeding, have led to improvements in Canadian farms' productivity and competitiveness, and these advances were facilitated thanks to a greater commitment to and better funding for public research.
To protect and improve the position of Canadian agriculture, it is crucial to make appropriate public efforts and investments in order to maintain an infrastructure and a level of knowledge that meet international standards.
As agricultural producers, we have to be competitive because our competitors are our neighbours, the Americans. We have to maintain the same level as our competitors, be it in terms of research or in terms of our risk management programs.
Thank you for your attention. Quebec and Ontario are working together. We are something of a coalition. In fact, we are called the Ontario-Quebec Grain Farmers' Coalition.
[English]
The Chair: Thank you, Mr. Van Tassel. Now we will hear from Mr. Haerle.
Markus Haerle, Vice-Chair, Grain Farmers of Ontario: Thank you, Mr. Chair. On behalf of the 28,000 farmers that the Grain Farmers of Ontario has as members, I thank you for the opportunity to provide our thoughts on the expectations and concerns of the grain and oilseed sectors in Ontario.
We are pleased that this committee has undertaken to study international market access priorities for the Canadian agriculture and agri-food sector. Our industry has become increasingly reliant on exporting our products and is likely to be more export-dependent in the future. This especially is true for soybeans and corn. For example, soybean production over the past 10 years has more than doubled in Canada, while domestic demand has been flat. As a consequence, exports have more than tripled and last year were valued at well over a billion dollars. Ontario corn and wheat exports have also grown.
Given this growing dependence on exporting, we would like to see continued emphasis by government on opening new markets and maintaining access to current markets. Our industry will benefit in a significant way from the recently concluded free trade agreements with the European Union and South Korea. Free trade agreements with other markets would be very helpful.
Access to crop production via biotechnology has been one of the principles reasons for the rapid growth of corn and soybean production in Ontario and Canada. However, some of our key markets, especially China and the European Union, have very cumbersome and slow approval processes for products of biotechnology. Continued attention by Canada to dealing with this issue will be extremely valuable.
We believe it is important that Canada recommit to having an active and significant role in plant breeding. As regards exports, many countries have, for example, very low tolerances for certain toxins that are products of fungi that infest crops, especially corn and wheat. We need to develop plant-breeding programs of grain varieties that are much more resistant to these fungi.
Our industry also needs to ensure that it does not lose any competitive edges in our major markets. In this respect, we must maintain a science-based approach to determining the type of crops that we grow and the inputs that we use. In Ontario, you will be aware that the provincial government has restricted our access to federally approved seed treatments that we use to control certain soil pests. This restriction was not based on science and will be handicapping us in competing against producers in the U.S., Brazil and other countries where the use of those products is allowed.
A redesign of the market risk management programs is important for innovation on their farms. Market risk management programs currently do not work for the grain and oilseed sector. In order to grow and compete globally, we need to invest in innovative practices on farms.
Growth in the grain and oilseed sector does not just equate to economic wealth for the nation. The growth in our sector will enrich the lives of Canadians by ensuring food security, providing alternatives to fossil fuels and maintaining ecosystems that contribute to a healthy environment.
The Ontario grain sector produces more than $9 billion of product, and we expect to grow in the future. We would like to see our industry at the forefront of government agendas and being top of mind for decision makers. There are many challenges ahead.
Thank you for the opportunity to speak to you this evening.
The Chair: Thank you very much, Mr. Haerle. We will start our first round of questions.
Senator Mercer: Thank you for being here on a stormy night. We do appreciate that.
You both have used the words "science'' and "science-based'' in your presentations, which I honed in on right away. When you use that term, it raises a question: Are our competitors not science-based, or have we, in the past, not been science-based with what we've been doing?
Mr. Van Tassel: To answer that, it is more internally and internationally. If we talk about science-based decisions, we look at it provincially — like with what Ontario is talking about; namely, they're cutting off different products that we use. It's not really based on science. If we base it on science, it would have to be passed — you have here in Ottawa the Pest Management Regulatory Agency.
Internationally, you have the same way. Often in Europe, they don't accept different products. It can be more because of the will of citizens or something, so it's not really based on science. You look at GM products amongst others.
So those are two examples — there's internationally and internally — of decisions that are not based on science, if we look at GM.
Senator Mercer: Is this really about genetically modified? Is that the issue that we're talking about when we talk about "science-based''?
Mr. Van Tassel: It can be genetically modified. Much of that is international — often different levels of toxins are more difficult, so we're looking for decisions based on Codex, for example, so different levels of toxins there. But GM products are mostly if you look internationally.
Senator Mercer: But in your presentation, Mr. Van Tassel, you talked about European importers who pay a premium for certified non-GM products. You've talked about European markets. Is that restricted to European markets?
Mr. Van Tassel: No. The biggest premium we get — like in my presentation, the IP soybeans — the biggest premium is to Japan. Europe buys a certain amount, but, surprising, they separate it. They take some GM beans, but it goes mostly to feed their animals, because they don't grow many soybeans in Europe. They take GM beans, but that goes for animal nutrition.
Otherwise, they can take non-GM beans but not necessarily really IP — but take a mixture of others.
Europe is our second-biggest importer of Canadian beans after Japan.
Senator Mercer: Mr. Haerle, you talked about fungi-resistant crops, and you both talked about research. Historically the Government of Canada has been involved in research and agriculture research. Are we doing enough now, or do we need to do more? Are there specific things that the Government of Canada should be doing now to assist the industry in meeting the demand domestically and also, because of the mandate of this committee, to put ourselves in a position where we can be exporting more Canadian products?
Mr. Haerle: Yes. Actually, these last years, there have been plant-breeder positions within Canada that have not been refilled by researchers. So now we're lacking research capacities from Canada that are basically always the base for Canadian research, especially on wheat, and now corn and soybeans.
In wheat, we see it more significantly, because it's a crop that's being grown across the country. We do need different research projects for the eastern part of Canada compared to the western part of Canada.
It is very important that our government of today reevaluates the plant-breeder positions that are there today and reinvests into that because the demands from the global markets, and even within Canada, have changed. We need to adapt to all of that.
Senator Mercer: Mr. Haerle, you talked about the export of soy and corn. We heard from your colleague that genetically modified soy is sent to the Europeans to feed their animals, which they will turn around and eat, but we won't get into that argument. But you export your corn to the U.S. What is it being used for?
Mr. Haerle: Some of the corn goes into ethanol production that is being exported and also feed production. The European Union buys for feed consumption also, and there are some non-GMO crops that are being exported, both soy and corn.
Senator Plett: You said that the domestic market has been flat. Why is that?
Mr. Haerle: That is because we lack processing capacity in Canada. If you look at the soybean processing side especially, there are only three major companies in Canada that process soybeans for the extraction of oils, and then we're left with the soybean meal.
Those markets are flat because you're competing against major markets like the U.S., Brazil and Argentina, which flood the market in short periods of time.
Senator Plett: What is the answer to that?
Mr. Haerle: We need to find uses for our products, such as biofuel. Soybean oil can go into biofuel, biodiesel. The ethanol mandate has to be revisited. Those are all things that help our sector grow and help the economy in general. Farming has always been the backbone of a country, and if we can keep that growing, it will do well.
Senator Plett: Certainly I support that. I'm from a small community where I made most of my livelihood on the backs of farmers, so I certainly appreciate that and want the farming industry to continue. But I look at it and determine that whether the farmers use it locally or we export it, either way, the farmer makes money.
The last 10 years have probably been, for Canada, the biggest 10 years in our history as far as free trade agreements are concerned. We have gained access across the world, in the European Union, Asia and many other areas, areas that will never be able to compete with Canada because of our land mass compared to them. So when people tell me that they have a concern about the Europeans competing with us and that we will be importing more from them than we will be exporting to them, that just doesn't make any sense at all to me.
Explain that to me. Where do you see a problem? Maybe you don't. The last witness, I thought he was just giving us a good-news story, and maybe you have been as well. But tell me, do you not agree that it's got to be better now than it has ever been for farmers being able to export? Both of you, please go ahead.
Mr. Van Tassel: Yes, we have very good product, but we can't sit on our laurels. We need to have quality, and with quality, as Mr. Haerle was saying, we need to have, for example, very low Fusarium in wheat. It needs to be very low, so we must have breeding done to be able to keep it low. But they have cut many positions, like one in Quebec City.
We have problems here in Canada that if we don't watch out — Transport is one example: Here in Ontario we're closer to the markets, but if you look at Saskatchewan, they're very far. So there are many issues that can make us less competitive.
We need to have policy that keeps the farmer competitive. The Americans have the farm bill that helps them out. They are our competitors. Our prices are based on the Chicago Board of Trade.
The dollar is low. The price of grain went down, but the dollar is low, so that helped a little bit.
As I wrote in here, we need to be competitive, so we need to have policy to keep the farmer competitive. It could be policy through safety nets or research, et cetera.
Senator Plett: When you say the low dollar helps a bit, I think it helps a lot. When you have a 40 per cent advantage all of a sudden from one year to the next, I think that's a pretty significant one, but obviously that's not something we want to continue with. We want our dollar to be worth a bit more.
When you say that you need to continue to enhance your product and you need to do better breeding and so on and so forth, whose responsibility is that?
Mr. Van Tassel: If you look historically, when it's something for the public good — and if you look at return investment, the private companies don't — I'll talk mainly about wheat. Corn, well, corn has been private. But here in Ottawa, you have a breeder working for different trades that work for the Canadian market. We can say it can be private, but the private is not there, so return investment for the companies is not really there, either. So it's always been public.
I believe in public research. There are two sides. It has to be private, but there still has to be a public side.
Senator Merchant: I want to thank you both for being here, and I want to thank you for mentioning Saskatchewan, because it's always nice to know that people far away in Quebec and in Ontario, large provinces, are also — and I know that you are very aware of what is going on across Canada. I thank you for mentioning problems with transportation. This year we might have a problem with the weather, too, because we need a little more moisture.
With the trade agreements that we have signed, Europe really is just beginning. There are so many countries in Europe that need to ratify that agreement. Where is that going exactly?
Mr. Van Tassel: Well, as a farmer, we look at what is happening so we can't really see — there are 27 countries, I believe, or more that must sign. Whether it's going to be done, we don't know.
In Quebec we think it's important to have the agreements ratified. We encourage you, but it's about all we can do.
Mr. Haerle: For Ontario farmers, it's certainly an asset to have the European Union signing onto that free trade deal, because at the end of the day, it's going to give way to low-protein wheats, which are common for the eastern part of Canada. That access is going to open up.
Corn and soybean markets are there for us to develop. We have not focused as much as we should because of the trade restrictions, and now that it is opening up, it's certainly going to be an asset.
We have the infrastructure in place in Canada to export, so we need to use those aspects to the benefit of the farmer. It all translates to dollars at the end of the day. If a farmer can get it from the market, it's always better than coming to see government through any risk management program.
Those are things that we feel are an asset to all farmers across the country, not just Ontario.
Senator Merchant: Mr. Haerle, you also mentioned a couple of times some government action. You're looking for scientific-based government action. This committee has just finished a study on neonics concerning bees. We heard many presentations from a variety of people. We heard from scientists and others. Exactly what do you want the government to do? You talked about a balanced ecosystem. We have heard from another side, too. How do you feel about neonics? I know they are important to the growth of corn. Farmers were doing many things with their machinery to try to eliminate the residue, the dust, and so on. What are you looking for the government to do concerning your presentation?
Mr. Haerle: The neonicotinoid issue was driven by public perception and by activists. The Government of Ontario acted in such a way that the general public is happy with the decision.
We farmers know that we have to be the stewards of the land, and we have to make a dollar on the investment we have. If a product is proven by CFIA to be nontoxic or by any institution that it doesn't harm, why should a sector within Canada not be allowed to use those products? You are basically segregating, and you are not competitive anymore. It is a snowball effect, so the farmer does not know where he stands anymore. At the end of the day, it doesn't really help the situation because it's probably bigger than just neonicotinoids.
Regarding science-based, I always say that's the way everything has been proven in the past, so why discredit the process now? Why is this no longer the way to go, especially in Ontario? I am speaking openly about it. It is an issue. You are looking at different aspects of it coming down the line, like the Great Lakes protection. Ontario is surrounded by the Great Lakes. That is another issue coming up. What regulations will farmers meet there? It is not only the farmer but more than that; it is industry. Again, why should farmers be the ones to solve the issue? I don't think it should always be them.
Senator McIntyre: Thank you, gentlemen, for your presentations. I have two short questions regarding the TPP agreement. One has to do with tariffs, and the other has to do with subsidy programs. As I understand, when the agreement comes into force several Canadian products will have access to TPP markets without tariffs. However, there is a variable transition period, which will be prescribed by sector. How will this transition period affect your industry? For example, in Vietnam tariffs of nearly 30 per cent will be eliminated over a seven-year period regarding corn.
Mr. Haerle: Yes. There is still a slow process that we can adapt to regarding how those markets will develop. Canadian production at present is ready for those markets, so it will be doable. I think we are capable of supplying a good product.
With the duties, at present, we were holding back, I guess, as market development. Within the Grain Farmers of Ontario, we have a market development side, and we do trade missions and stuff like that. Where we see potential, we focus on it. With the TPP, it certainly will be a quicker process to get into those niche markets. Canadian farmers are good at supplying niche market products such as IP soybeans, lentils and peas. You name it, and we can do it. I see it as a major benefit.
Senator McIntyre: As I understand, Ontario and Quebec grain farmers welcome the TPP agreement with open arms. However, some of them were worried about subsidy programs existing in both the United States and the European Union. According to them, it could harm the element of competition for Canadian grain producers and the markets of TPP member countries. Is this a real problem? What are your recommendations to resolve this problem?
Mr. Haerle: Subsidies are a patch-up at the end of the day. It is not what a Canadian farmer should look for, because the market should give a decent return.
In the U.S., it is to be seen how strong that subsidy program actually is because the farm bill that's been in effect for about a year and a half roughly has not given the U.S. farmer as much as they thought it would. It is being evaluated, I think, regarding what impact it will have on the global market. They are struggling, too, even with the dollars that are assigned to it.
Canadian farmers are asking to revisit our risk management programs in case we need them. At this time, for grain and oilseed farmers those programs do not work. It's not that we are looking forward to getting dollars out of it, but we need them for the years when they are needed. In the past, we had good programs. They were eliminated because there weren't enough dollars to cover them off. However, now we are basically at the point where we really have to take a look at them closely because it is hurting all aspects of agriculture, not just grain and oilseed sectors. It's flowing down the line. Even animal production is being hurt by this.
Mr. Van Tassel: If I could add to that, we have two programs in Canada: AgriStability and AgriInvest. AgriStability was cut down to 70 per cent of net sales, so it does not work too much. We were protected over the last three years from high grain prices, so we were lucky and didn't need the programs. It was very nice. Now we're saying that the Canadian dollar helps out, but our inputs are going up, given the costs of fertilizer and others.
In the past when the price of corn was low, our two organizations did a countervail case for American corn because we were really hurting. You were talking about that the last time. It cost our two organizations a fortune and didn't last any time. The case was hard to get done. The U.S. had programs that were really hurting our corn producers, so we started a countervail case that came in for a little while, but then everybody was against us. It cost us around $3 million for our two farming organizations. We were in debt for a long time over that. It's a hard thing to do.
We would not go that way again. All we ask for, and what I would ask for here, is that we can be a bit more competitive with our neighbours; and AgriStability does not make us competitive.
Senator Moore: I, too, thank you, gentlemen, for being here. Did your organizations have input in the CETA and TPP negotiations?
Mr. Van Tassel: Not really in the TPP. We had more with the European Union. They used to come and meet us — the negotiators — and talk to us about it. But the TPP happened pretty fast. My own organization did not; maybe Ontario did, but not mine.
Mr. Haerle: Our organization hired a lobbyist. He kept us up to speed about where things were going and what impact it would have, and there was a bit of communication with the negotiators, but not significant. The Grain Farmers of Ontario saw this trade deal being an asset for our industry. Redirecting it along different routes to harm other industries wasn't our goal at all.
Senator Moore: Mr. Van Tassel, in your brief you talked about Quebec having adopted the best agronomic practices. You said problems could arise in the certification of these practices, which European countries could soon require. No consensus has been reached on the certification of sustainable agriculture, and there are several competing systems.
Can you tell the committee about that? What are the competing systems? Are they in each country, or in world trade organizations? What are they, and what are the ones that really impact your organization?
Mr. Van Tassel: I believe there are four different international mechanisms. The Europeans are further than we are, and they will come down soon. Brazil is pretty advanced, too, with which sustainable — I am trying to find a name for it. It is not an action, but it is an initiative.
In Canada, we have the Canadian sustainability round table working on it. We are not as advanced. We have to make sure that if there is something going forward our Canadian farmers will be able to have it, if our European importers say we need to have such and such. Maybe Mr. Haerle can help me out there.
There are four different marketing organizations certifying; we have to make sure which ones make the farmers certifiable.
Senator Moore: How do you have that input? At what level?
Mr. Van Tassel: We work with the Canadian government and also the Canada Grains Council, and the Canadian sustainable round table. We are working on different ideas as to how we should get there and which certification we should have.
Sorry — both of my languages are coming out at the same time and it is not going well.
Senator Mercer: You are doing fine.
Senator Beyak: Thank you very much. Like Senator Merchant, I sat on the bee health committee and I was surprised by the Ontario decision, as well, concerning pesticides; there wasn't consensus at all. Did your organization have input with the Ontario government before they made that decision? Are they going to evaluate it or keep looking at it? I think it is quite a disadvantage to you, and I was disappointed.
Mr. Haerle: We did have input before everything basically went off the rails. There was conversation with government people up to the premier level, and when they came in with the consultation process, that's when it fell apart. It turned into more of a public perception activist movement that government had to react to.
The regulation has been in place since July 1. Farmers have to comply with the regulations to purchase treated corn and soybean seed, and it is only on those two crops.
We are hoping that at a certain point there will be a reevaluation because this regulation is not workable for the farmer. It is questionable how much of a positive impact it will have towards the bee industry.
It is sad to say that it had to come to that point. You might know that our organization has taken that regulation to court. We are doing our best to see where it's going to go. We are asking for a reevaluation before it will be fully implemented and before the farmers hit the field in the spring.
Senator Beyak: Thank you very much. That is reassuring.
Senator L. Smith: You fellows have brought up a lot of interesting points and concepts that have got me thinking. What are the three things that you really need to solidify your producers in terms of success? You have given us hints, and then you kind of backed away; I'm not saying that in a negative way. We are running a business; you guys are representing your producers. Okay. You know the issues in front of you. You know there are trade deals, but they are not in place. There will be regulatory issues, and all sorts of day-to-day stuff. What are the three things that you need for your industry to be successful over the next term? We can define "term'' in terms of years.
Mr. Van Tassel: I have three for you right away. We have to have competitive Canadian policies that can be safety nets. There have been competitive policies in Canada at the same level as the others.
Senator L. Smith: Give us an example.
Mr. Van Tassel: We talked about safety nets. Americans have their farm bill, and we have to be able to answer them because they are our neighbours, and that is what our prices are based on.
I talked about supply safety nets, but there can be different competitive policies.
Senator L. Smith: Is that subsidies?
Mr. Van Tassel: Those are different programs that, when the prices become low, help us out like the Americans have, and when the prices are good we don't need it.
Senator L. Smith: So you need buffers when the price goes down?
Mr. Van Tassel: That is true.
You can say subsidies, but is AgriStability a subsidy? When your price is cut down, that can be one.
Senator L. Smith: Do you need to change your product mix?
Mr. Van Tassel: What do you mean?
Senator L. Smith: You talk about soy being a value-added product that can be used in many things, but corn came from the milling industry. We had what we call mill feeds where you threw stuff in when you can't fill it anywhere else. So you have corn that is sold that we eat, and corn sold for feed. Is your product mix properly set up so that you can be successful in these international markets?
Mr. Van Tassel: We can't just grow one crop. We have a rotation schedule.
Senator L. Smith: Absolutely.
Mr. Van Tassel: Some you make more; some you make less. You have to have a rotation. We grow the best quality.
To answer the other one, another one is research.
Senator L. Smith: Yes, you talked a lot about research.
Mr. Van Tassel: Because I believe in it. I have been following it for many years. I don't know which one to put number one there, but if you have good varieties well-adapted to our needs, it will go far.
Senator L. Smith: When you say variety you are talking about the actual grains used to plant?
Mr. Van Tassel: Yes. It can be public or private research. It depends. We have really good public researchers in Ottawa, but they are fewer than they used to be.
That is the second one. If you want good quality going out, you have to have good varieties coming in, and you have to have agronomic work on it, also.
You also need to have science-based decisions. Not like what they have in Ontario, cutting out the neonics, which is coming in my province, also. You have to have decisions based on science, not based on the Sierra Club placing social pressure on them. You have to have it based on science.
Senator L. Smith: But give us an example of science-based decisions.
Mr. Van Tassel: Okay. I will give you a good one, and then maybe Markus can give you a good one.
Neonics are being cut out in Ontario and Quebec because there is pressure from different groups. The CFIA just said that one of them does not touch bees, but we don't hear much about it. A preliminary study came out in the month of January saying it doesn't touch bees.
Wait for something that really has standing — and I believe the CFIA does — to come out and check it before you say whether or not you will ban a product.
Senator Plett: I want to make this observation: I agree with 90 per cent of what you have said here today, and I couldn't agree more when you talk about keeping the Sierra Club out of your hair.
From what I heard, the one comment disturbed me greatly, and that is when Senator Smith asked whether you want subsidies. Although you didn't say yes, you certainly alluded to "Help us when times are bad, but stay out of our hair when times are good.'' I have a problem with that.
Either we are involved at both ends or we're not involved at all. I believe in a free market and trying to take care of ourselves, but if we do help on one end, we don't stay out of your hair on the other.
Mr. Van Tassel: I'm sorry if it came out that way.
The AgriInvest helps more, if you like it or not, when the prices are good. I don't believe it is a good program. When times are bad, and it will happen sooner or later, you need to have something. AgriStability used to be based with your net sales at 85 per cent. They put it down to 75 per cent. Now it is a catastrophic program. The only way it can happen is if there's a catastrophe or a huge problem.
Put us on the same level as the Americans. If times are good, we have many different policies we have to follow to make sure we have good grain; but when times are good, the safety net doesn't work. We don't need it and we don't get anything, which is normal because we get it from the market.
As Markus said, we would rather make the money with the market. Believe me, 2012-13 were great years, and I hoped it would always be like that. I got grey hair somehow. I remember some bad years. When you have five or six bad years, you have to make sure our farming community keeps on.
We have many family farms in my province. At times you need programs to help when times are bad.
Senator Plett: Farmers need to realize when they have five or six good years that there will be bad years coming and operate accordingly.
Mr. Van Tassel: Yes.
Mr. Haerle: We should look at it a bit differently. It should be an insurance base where the farmer pays in its share. At the end of the day, you can bank on those dollars and they are sitting there. As a farmer that has a good year or two or three in a row, they will invest that money into those programs; but make it accessible and not that you have to prove such a huge loss that you will never touch it, because then it becomes a nuisance.
We have seen multiple farmers in Ontario dropping out of AgriStability because they never touched any dollars, and they paid into it, because the trigger points are not where they should be. Make it worthwhile for someone to be in it.
We are willing to put the dollars in. In my operation, within Ontario we have our risk management program. I put the maximum dollars in, and I will never hesitate to do it because it is something that is there in case of need.
That is the way we see it within Ontario. I think nationally there could be a process established at the present time to get to the point that we have a good program established in a short period of time.
[Translation]
The Chair: Gentlemen, thank you so much for your testimony and your presentations. I am sure that my colleagues, the senators, have also appreciated your presentations, which are very helpful to us in the achievement of our mission. I want to thank you for being here despite the storm. You should know that the 40 centimetres of snow we received today in Ontario and Quebec will benefit your crops. They will bring water to the mill. I wish you a great harvest next summer.
(The committee adjourned.)