Proceedings of the Standing Senate Committee on
Agriculture and Forestry
Issue No. 8 - Evidence - Meeting of April 21, 2016
OTTAWA, Thursday, April 21, 2016
The Standing Senate Committee on Agriculture and Forestry met this day at 8 a.m. to study international market access priorities for the Canadian agricultural and agri-food sector.
Senator Terry M. Mercer (Deputy Chair) in the chair.
[English]
The Deputy Chair: Honourable senators, I see we have quorum. I declare the meeting in session.
I welcome you to this meeting of the Standing Committee on Agriculture and Forestry. I'm Senator Terry Mercer from Nova Scotia, deputy chairman of the committee. I would like to start by asking the senators to introduce themselves.
Senator Beyak: Senator Lynn Beyak from Ontario.
Senator Tardif: Claudette Tardif from Alberta.
Senator Oh: Senator Oh from Ontario.
Senator Unger: Senator Unger from Alberta.
Senator Dagenais: Senator Jean-Guy Dagenais from Quebec.
Senator Ogilvie: Kelvin Ogilvie, Nova Scotia.
The Deputy Chair: Today the committee is continuing its study on international market access priorities for the Canadian agricultural and agri-food sector.
Canada's agri-food and agricultural sector is an important part of the country's economy. In 2013, the sector accounted for one in eight jobs in Canada, employing over 2.2 million people, and it is close to 6.7 per cent of Canada's gross domestic product.
Internationally, the Canadian agricultural and agri-food sector was responsible for 3.6 per cent of global exports of agri-food products in 2014. Also in 2014, Canada was the fifth-largest exporter of agri-food products globally.
Canada is engaged in several free trade agreements. To date, 11 free trade agreements are in force — the Canada- European Union Comprehensive Economic and Trade Agreement, the Trans-Pacific Partnership, the Canada-Ukraine Free Trade Agreement have been concluded — and eight free trade agreement negotiations are ongoing.
The federal government is also undertaking exploratory trade discussions with Turkey, Thailand, the Philippines and member states in Mercosur, which includes Argentina, Brazil, Paraguay and Uruguay.
For our first panel this morning, from Soy Canada we have Mr. Jim Everson, Executive Director, and from the Barley Council of Canada we have Mr. Phil de Kemp, Executive Director.
Thank you for accepting our invitation to appear. I would note that in 2013 Canadian soy exports were valued at over $1 billion. In 2012, Canada exported over $1.4 million tonnes of barley.
I now invite the witnesses to make their presentations. Following presentations, a question and answer session will take place. Senators will be given five minutes each to ask questions. There will be as many rounds of questions as time will allow, so senators are not required to ask all their questions at once. During the question and answer session, I would ask senators to be succinct and to the point when asking questions. I also ask the witnesses to do the same when answering.
Jim Everson, Executive Director, Soy Canada: Thank you very much, Mr. Chair, and thank you for introducing yourselves. That's an inviting way of being introduced to the committee.
Thank you for your time today and for your interest in market access. It is important for the soybean industry, so we are very interested in talking with you about it. It's a pleasure to be here.
I will talk about Soy Canada for a minute. Soy Canada is the national association representing the whole soybean value chain in Canada. Our membership includes all of the soybean producers across the country, mainly Ontario, Quebec and Manitoba, but also in Saskatchewan and through to Atlantic Canada. It includes the seed companies that develop innovative seed for producers, exporters, processors and various other industries that support the industry.
We are in the eighth consecutive year of record production growth in Canada, so the soybean industry is growing rapidly in Canada. Between 2005 and 2015, the seeded acreage of soybeans increased by 87 per cent; it's now over 5 million acres, and production levels are up to 6.2 million acres. Farm cash receipts to producers are $2.3 billion. Since 2005, soybean exports have increased by roughly 250 per cent.
Market access is really important for the soybean industry because as we produce more and as producers increasingly include soybeans in their crop rotation, we are looking for export markets and for access to those markets on a predictable basis as we grow the industry.
The industry contributes over $5.6 billion to the annual GDP and is responsible for 54,000 direct and indirect full- time equivalent jobs. We are pleased with the growth of the industry, and that's what our association is dedicated to.
I will list seven market access priorities that we have. In the question and answer period we will be able to expand on them.
From Soy Canada's perspective, the first is liberalized trade. The chairman spoke about the trade agreements that Canada is currently involved in. We feel strongly about the importance of ratifying and implementing the Canada- European trade agreement and the Trans-Pacific Partnership. Both are important developments for trade for the soybean industry, and we support them.
The other area is we are very interested in new developments with China. There has been a lot of speculation in the media about Canada's next steps in its relationship with China. China is an important market, and there are several markets in East Asia where we will be expanding our soybean presence in the future. We are very interested in those markets.
While Canadian soybeans are growing as an industry, we are very small in the international global trade environment. The United States is responsible for about 39 per cent of the production of soybeans around the world. Brazil is not very far behind. Canada is only 2 or 3 per cent.
What trade agreements do is set common, predictable rules of engagement in international trade. Those are important for us when we are competing in a market that is dominated by some large competitors.
The second is science-based regulation and policy. It's critical for us to be able to base our trade on science and evidence-based decisions and policy in an industry that is marked by innovation and advancements in science.
Third is the agricultural policy framework that the Government of Canada has in place. We're in the middle of Growing Forward 2, which is the agricultural policy framework that applies for a five-year period. The Department of Agriculture is now starting negotiations with the provinces towards a third agricultural policy framework, which would begin in 2018.
Those policy frameworks are very important for aligning the federal government, the provinces, the commodity groups and industries in a common focus when it comes to a number of issues, including market access and trade policy. We are happy that the government is starting negotiations and consultations on that, and we look forward to being part of those discussions.
Number four is access to approvals of biotechnology products in international markets. About 65 per cent of our production is genetically modified soybeans in Canada. We rely on approval of those technologies, those new seed innovations that our farmers use in our export markets. That can be challenging, especially in the European Union. We are currently awaiting approval on some of these, and timely approval is important for us.
Related to that is the area of low-level presence. Low-level presence refers to the very low, unintentional presence of genetically modified materials that have been deemed safe through a Codex food safety assessment in commodity shipments internationally. It's a very topical issue in the international grain trade at the moment. Canada has played a leading role in developing new regulatory policy in this area. It's a very important issue for us in the future.
The sixth issue is resources for Government of Canada services related to market access. We rely very heavily on our public service at the Canadian Food Inspection Agency, at the Market Access Secretariat at Agriculture Canada, and in the Global Affairs department. Our trade commissioners in our embassies internationally are very valuable when we are doing outward market access and development work.
I mention the Canadian Food Inspection Agency because they have a dual mandate of protecting Canadians from a food safety and feed safety point of view, but they also have a mandate to assist with regulatory issues and science- based issues internationally for export trade. There are increasing numbers of issues of that nature where an import country has a challenge with a complex issue related to sanitary or phytosanitary issues. It's critical that we have a strong, science-based regulatory agency, the CFIA, to help us manage those issues and negotiate with their plant protection organizations around the world. As tariffs come down, these issues become more complex and relevant.
The seventh issue is rail transportation. My main message is that all of the commodities in Canada are expecting to increase production in the future. We have a goal to continue to increase soybean production and exports. The canola and barley industries, flax and cereals, will be expanding production and making every acre across Canada more productive. To do so, we need to be able to take that to market, and in Canada our way of doing that is by rail. It's critical in the future that the rail infrastructure be sufficient to carry ever-increasing volumes of grain to market.
The Deputy Chair: Thank you, Mr. Everson.
Phil de Kemp, Executive Director, Barley Council of Canada: Thank you very much, Mr. Chairman. I remember the last time I was before this committee it was Senator Robichaud's last day. It was nice of the group here to pass the gavel to him. Unfortunately, in his retirement he won't be watching the Montreal Canadiens play in the playoffs this year.
The Deputy Chair: Stop picking on Senator Robichaud.
Mr. de Kemp: The Barley Council of Canada was formed three years ago, obviously as a result of a lot of industry groups coming together as a result of the abolition of the Canadian Wheat Board. The Barley Council of Canada's mandate is three or four pillars. One is certainly on market development, research and innovation, agronomy and profitability for producers and on international trade policy and market access.
The council is unique on the grain side, following the Canola Council of Canada model, if you want to call it that. It has fourteen on its board of directors. It is made up of seven from producer organizations and seven from industry. We have all the producer organizations from B.C., Alberta Barley, SaskBarley, Manitoba, Grain Farmers of Ontario, Quebec and Atlantic Grains.
On the industry side, it's comprised of the malting industry, which is a big part of the barley industry; Beer Canada; some of the grain companies; researchers are sitting on the table; seed developers; and the cattle feeding industry, which is a big part of barley.
Mr. Chairman, as you alluded to, exports of barley are around 1.4 million metric tonnes on average. That's just on the non-value-added side. Wearing my hat as president of the malting industry for the last 25 years, on the value-added side we are the second-largest exporter of malt in the world. Sometimes we are number two, sometimes three. We go back and forth with Australia. You can add another 800,000 tonnes of malting barley equivalent just on export. We buy about 1.1 million metric tonnes because a portion of that is for the Canadian domestic market.
With respect to some of the four items you outlined that you want to get a better handle on, certainly the one as far as expectations and concerns go are the stakeholders. As far as the barley industry is concerned, the number one priority for our members is the ratification of the Trans-Pacific Partnership. We understand obviously that the House of Commons and the trade committee right now are travelling and are currently in Western Canada.
As far as the barley industry is concerned, that would be the largest trade agreement where we would see enormous benefits for all those in the barley industry, whether it's on complete elimination of feed barley tariffs in Japan, lockdown quotas on malt in Japan, elimination of tariffs in Vietnam.
If that agreement is ratified, primarily to Western barley farmers, because that's where most of the production is, just in Japan alone it's probably 400,000 to 500,000 extra tonnes of barley in various forms, either as malt, a little bit in food — not much, because they still protect their value-added industry. A lot of that will go through a cow or a hog. I think the Canadian Pork Council said it could be the equivalent of another 1.2 million hogs that would be processed to meet that market demand. Certainly the Canadian cattlemen would have you think that the increase as far as value- added beef could be doubled to perhaps 40,000 tonnes. That's huge for Western Canada.
It is just another tool in the farmers' tool box because it allows them to start comparing prices for crop rotation, whether it will be wheat or canola, or soybeans, if it's in Manitoba, or barley or malting barley. That's an absolute must and a necessity for us, particularly now when Australia already has a free trade agreement with Japan.
With respect to expectations in the future, the government has signalled the possibility of at least taking a look at China. Right now China is a huge market for barley. Certainly as far as malting barley for their brewers goes, it's 700,000 to 800,000 tonnes this year, which is a spike over the last couple of years. We see a lot of opportunity on feed barley, which we didn't realize in the past, primarily because barley is a non-GMO. There is no genetically modified seed on barley. China is starting to revisit some of their issues on corn. We are seeing increased usage on feed barley.
Where Canada has an advantage is on the protein, and that's what we will start to develop. We have higher protein feed barley compared to Australia. Australia is the bulk of that market now. We could see 500,000 to 1 million tonnes, if we had those acres. We are going to be working on that.
Regarding some of the concerns that Jim alluded to going forward, the concern will be around transportation. You have heard so much over the last couple of years with respect to what is going on, at least on the grain side. Certainly the Emerson report that was tabled with the Minister of Transport is a good first step. It is not just the barley industry. If you take a look at all industries on the agriculture side through the Crop Logistics Working Group, there is not a single industry that doesn't say, "Look, there are a couple of things that are seriously missing there.'' Unless the CTA and the minister get it right, we will be back to square one.
You should at some point start to focus on that. It's not just agriculture; it's forestry and fertilizer. Everything goes through a port. We are so dependent on trade that, quite frankly, even with the Canada Transportation Act, in the review, and I think Emerson recognized this because we had asked for an inclusion, and the preamble of an act or regulation talks about the importance of why it's there. It's important that Canada recognizes, and puts into that preamble, that — he didn't use the word, but we did — it's in Canada's national economic security interest, because there are only two railways; it's an oligopoly. Unless we can get stuff to port in a timely manner, we will pay the price with our customers. We did two years ago with "the cold winter.'' I remember going with then-Minister Ritz on an invitation to sit down with our Japanese customers. We said, "Look, we're going to get it right. We have some legislation.'' They were not happy, and certainly they have other places they could go to.
So it is going to be critically important for everybody — all sectors, particularly with forestry in British Columbia and what have you — to get stuff to market. You'll see what those recommendations are. At some point, it would be really important that you gauge what the members believe needs to be in that legislation, because we have done this over two or three decades now, with the Estey report and Kroeger. This is really our last kick at the can to get this right.
Finally, on the trade side — and I think the esteemed members here know this — over the last three decades we in the agriculture sector have continually increased our exports exponentially, more than the rate of annual growth that you're going to see in the economy. A lot of these producer groups are saying that when we say there is a free trade agreement that we can take advantage of, we know we can; we have delivered in the past.
Quite frankly, the industry has walked the talk. You take a look at those exports: They are not contracting; the industry is still expanding. We're using agronomy, genetics, GPS equipment — everything. The industry really has delivered on behalf of all Canadians with respect to growth and the economy.
On sustainability, right now we started the Canadian Roundtable for Sustainable Crops, which is taking a look at the possibility of protocols in the next three or four years for sustainability, from the farm right to the plate, so to speak. The round table is about 45 members right now on the crop side. I'm sure you have heard on the beef side, whether it's McDonald's or Walmart or Nestlé, everybody is working in the supply chain to come up with a sustainability plan that we can show the world. It will help us prove to the world that, not only are we sustainable, we'll know what our carbon footprints are. We will know all that. We're going to be able to show everyone that we are sustainable, which I believe we currently are.
Last but not least, I'll talk about competitiveness and profitability in the industries. As I mentioned earlier and alluded to, Beer Canada is a member of the Barley Council of Canada, and they are a huge part of the industry — them and the malt. We make up almost 60 or 65 per cent of all the malting barley purchases.
Before I talk about that, here is an interesting fact that we're starting to let everyone know: The domestic beer industry buys about 300,000 tons of malting barley that we malt here in Canada. That's about $75 million of a product from producers that we will value-add to malt. That's $75 million in barley. By the time it hits a beer store, in any province, the federal and provincial excise tax on that is well over $5 billion. The Conference Board of Canada has the number at $5.8 billion, but I think that also includes the taxes that the employees pay on their payroll taxes and what have you.
You're not going to see any industry in Canada where you get $75 million on a $5 billion payout, year in and year out, just at the cash register, that goes to the federal government and the provinces.
I mention that because, on the competitiveness side, the beer industry, back in 2013, started to talk about reviewing what they call their compositional standards in beer. That had not been done since the early 1980s. The beer industry has changed, and we're talking about competitiveness. After all, they make up 50 per cent of all of the purchases of malting barley around the world.
So they had gone to the House of Commons Agriculture Committee to say, "We need to change the compositional standards. We have craft brews that want to add something different — a little spice — because that's what the consumer wants.'' The committee recognized the importance of it. It was so important they actually made a commitment in the 2014 budget.
Since that time, CFIA has completed their consultations. All we wanted to do was just to ask this committee that those reviews, recommendations and amendments hopefully come up before this government sometime this year. It is a competitiveness issue. It's also an innovation issue, because they have to compete with all the people around the world.
Other than what Jim has talked about regarding science-based, you will hear an awful lot more about maximum residue levels and low level presence, because those are going to be the new buzzwords for non-tariff trade barriers in the future.
Thank you very much for your time.
The Deputy Chair: Thank you, Mr. de Kemp and Mr. Everson. We appreciate your testimony. We will now go to the question and answer session.
Senator Unger: Mr. Everson, soybeans are interesting. Are they grown in Alberta?
Mr. Everson: Not in any large number. Some farmers are experimenting in Alberta. The issue there — our researchers are working very hard at faster-maturing varieties that would be suitable for the Alberta climate. We would be excited about having more production in Alberta, but, traditionally, soybeans have been grown in southern Ontario and Quebec.
The seed companies now have developed shorter-term varieties suitable for other climates. Now, in Eastern Ontario, where I'm from, there are tremendous amounts of soybeans, and they are growing into Manitoba. They are slowly moving across the West into Saskatchewan.
There's not much production in Alberta, but I know the Alberta Ministry of Agriculture is working very hard at establishing soybeans in Canada and doing the necessary research. Our research community is working hard at it.
Senator Unger: How do they affect the soil? Are they a rotational crop?
Mr. Everson: Yes, they rotate very well. For a producer, that's one of the main interests they have in soybeans — namely, that they can grow wheat and canola, and then they can rotate through the soybeans. Crop rotation is very healthy for the soil.
Senator Unger: It's also interesting to me that the Netherlands imports a fair amount of soybeans. What would their use be?
Mr. Everson: The Netherlands is a very big market for us — maybe our third or fourth market for Canadian soybeans. Soybeans are used for two different purposes, primarily. The soybean seed itself is about 80 per cent protein and 20 per cent oil. So you take the seed and you crush it, and 20 per cent of the product is vegetable oil that can go into the food vegetable oil market. However, the bulk of it goes to animal feed. It's a great feed for cattle and swine. Most of the product going to Europe will be going into the European animal-feed market.
But we also have a very healthy dynamic food-grade soybean business, almost exclusively in Ontario and Quebec, where we grow non-GMO soybeans that go for the food market around the world. It's used for tofu, soy milk and soy sauces. A fairly healthy amount of that also goes into the Netherlands and Europe.
Canada is quite unique that way in that we have vibrant, genetically modified soybeans for the animal-feed business around the world, where we compete with the Americans and Brazilians, for example, and then we have this very high- value, non-GMO food business, as well.
Senator Unger: You have both mentioned transportation by rail and how critical it is to getting all of these crops to market; yet we know that because of the issues pipelines are facing, they should be taking a lot of that burden, if you will — or that market product — from the railways, and bitumen could be sent by other means.
I know you commented, Mr. de Kemp, but do you both see — it has been a real factor, as well. How do you see this being resolved?
Mr. de Kemp: I'll start if I can, Jim. A couple of things: First of all, currently in front of the government again is Bill C-30 and whether or not they want to extend the 160 kilometre interswitching. We're hearing there may be some reticence. We certainly know that that has enabled, certainly for the line companies, we understand, better ability to negotiate rates with respect to interswitching. We are also hearing that from the forestry industry.
As to switching right now, rail cars on crude oil or back to grain or what have you, the capacity was there even before Bill C-30. The issue was they are saying that, with the cold weather, the brakes wouldn't work on the locomotives. The answer to that was you just put an extra locomotive in the middle. The issue was dealing with running stock and power, as they call it.
I'll watch what I say here, but there has been a lot of whittling down of infrastructure on some of the railways, not all of them, but certainly one in particular. I think everyone knows what I'm referring to.
A good example is that, if you are flying, as far as capacity goes, if you fall behind because of weather-related snow or what have you, people get stranded in an airport for a day or a day and a half, with all the smoke and hum around North America. Within two or three days, everybody is back to where they are. They have that capacity to bring in extra planes. If they had to run the passenger airline industry like the railways, you'd still be sitting in an airport for three months because they had only so many planes to take everybody.
Part of that is that the capacity is there. The efficiencies are there. Grain companies have gone from 3,000 elevators or 2,800 elevators down to a little over 300. They have really built in big throughput, 100-car spots. The efficiency is there. They can turn these things around in 24 hours. It is whether or not the railways are going to get it there on time. They seem to be able to do that for the automotive industry and just-in-time deliveries for auto parts. We just hope that they could do the same for us.
Senator Oh: Thank you, gentlemen. Very interesting presentation on the soybean market.
I remember that some 35 or 40 years ago, my friend used to come to Tillsonburg, Ontario, to buy soybeans.
Mr. Everson: They are still doing it.
Senator Oh: Soybeans are widely used in the Asian market. Every day, on the table, there would be soybeans.
Are Canadian soybeans embodying part of Canada's brand strategy?
Mr. Everson: That's a really good question. We are looking more seriously at whether we can brand Canadian soybeans in foreign markets. I think Canada has a really excellent reputation. When we do our work in Japan, South Korea and other markets, people think very highly of Canada. I think they are very interested in Canada from a food safety point of view. People recognize that Canada has a very strong regulatory agency, and we have high standards for food quality. That is a concern in some markets.
We are not selling a final product; we are selling an ingredient that goes into a product. So it's a bit more of a challenge to brand because you're not saying this is Canadian soy milk, for example, or Canadian tofu; you are saying it is tofu made with Canadian soybeans. We are looking at that, and we are excited about the possibilities there.
Senator Oh: What about barley?
Mr. de Kemp: Barley's interesting. There are two or three different markets. Some of the branding we are starting to do. The Barley Council of Canada's website has a thing called gobarley.com, where we've got the nutritional standards and health claims now approved, as far as cholesterol reducing goes. We have a number of recipes. It's a very expensive program that we're running on the branding of Canadian quality food barley. Certainly also, in Japan, a line company does about 75,000 tonnes of food barley in Japan right now. We are working on the branding on that.
On the malt side and malting barley, it is generally recognized around the world that Canadian malting barley is a little more expensive. In some cases, we do get a bit of a premium. The reason for that is some of the chemical composition of the beta-glucans. For brewers around the world, I refer to it almost like a cooking sherry. It goes well with everything. So they'll use that to blend with some of the lower quality, particularly in Australia. So we do that.
I alluded to China earlier in my comments. We are going to start, hopefully this fall, recognizing where we think the opportunities are now in feed barley because of China switching out of corn a little bit. For feed barley in Canada, the protein is usually 13 per cent. Australian feed barley is 9 per cent. The Chinese came to Canada, to some feed mills, back in late fall, and we talked about food barley and they asked the question about protein, and they almost fell off their chairs. They opened up their laptops and started working on what the prices would work out to on the compositional standards to go into feed, particularly for the duck market. So we do see an opportunity, and we are going to want to try to brand that on the protein side. You understand this; everything is almost commoditized now. Barley is not barley is not barley, and soybeans are not soybeans are not soybeans. If you can carve out a niche because of the qualities and if you can brand that, that gives you a bit of a leg up so that not all barley or wheat is treated equally. Good point.
[Translation]
Senator Dagenais: My first question is addressed to Mr. Everson. In listening to you, one can see that your industry is doing very well. However, you mentioned being marginal on the world stage, behind the United States and Brazil.
In the context of the free trade agreements, among others those that will be concluded with Europe and Asia, what are your export objectives? I would also like to hear about your marketing strategy.
[English]
Mr. Everson: Our strategy really focuses on markets where we feel we have a real opportunity to gain.
We have, for many years, in the food grade market, been dominant in Japan. Japan has been an extremely important market for us and continues to be. In that market, we spend time every year going to Japan and meeting with the various industry associations to make sure that they understand the development of our crop and the quality aspects of our crop and what we are doing in terms of new variety development to meet their concerns. That is one strategy there.
We are also, with our new production, interested in East Asian markets that can be quite different. For our industry, they are new markets, markets that we haven't been in before, where commercial practices and trade flows can be different. In that respect, we are doing market research so that we can understand those markets better, learning about the structure of the market. Countries like Vietnam, Indonesia and Taiwan are markets that are new for the Canadian soybean industry. We understand who the major participants are, what the competitive landscape is like and what the structure of the industry is. Our next step from that would be to go to those markets and do outgoing missions, where we meet with those people, build contacts and start to talk to them about what their specific requirements are in those countries.
In February of this year, we went to South Korea. That was our first time, as an industry association representing Canadian soybeans, to go to South Korea. It is very much building on the free trade agreement. The free trade agreement with South Korea created a special quota for Canadian soybeans, and so we are there trying to exploit that quota and also to understand from the South Koreans what their specific interests in soybeans are in terms of quality characteristics, the use profile of soybeans in that market. You can use soybeans for so many different things. We are interested in what their key requirements are.
One thing I would add to that is that at the beginning, when I talked about my list, it was the agricultural policy framework. One of the things that the Government of Canada and the provincial agriculture policy framework does is it aligns the provinces and the federal government, and it provides financial support that is cost-shared with our industry for market-developed work. It is extremely valuable to us, especially when we are up against some very big marketing budgets in the United States.
[Translation]
Senator Dagenais: I have another question for our two witnesses. Canada imposes quality standards, while other countries are less rigorous. Do these standards have an impact on the price of soy and barley destined for export?
[English]
Mr. Everson: I certainly believe that quality is key to pricing, internationally. I mentioned our food-grade market. There is a price premium attached to the quality of Canadian soybeans, and we use that as a marketing card, internationally.
We talk about our quality, and we talk about what we believe to be our superior quality assurance program, that is, the regulatory structure we have around assuring quality in Canada before export. We talk about that, and I am convinced that provides for a premium price in some markets, to an extent; at one point, it will be a price issue. But our export markets appreciate Canadian quality.
Mr. de Kemp: In malting barley and malt, that is the case. As I alluded to earlier, higher prices are paid because they use that to blend some of the lower quality.
Being in China last year and meeting about COFCO, they have continually harped on the fact of butter prices being higher than, particularly, Australia. Would we want to consider going down to the lowest common denominator, which they call feed-add quality, which is a quality slightly higher than feed. We said no because we would ruin the markets we currently have, particularly the domestic North American, Japanese and Korean markets, and it is not worth it.
The Aussies have expanded heavily on that, but we can't be all things to all people. That is our differentiation on barley and malt.
With respect to feed barley, again we see an opportunity, particularly in China. This protein thing kind of came out of the blue; we didn't realize that. Mind you, feed barley wasn't on China's radar before, either, but they have issues as far as their corn imports and GMO, and barley is not a GMO.
To brand that, we will focus on that. We have a memorandum of understanding with China Agriculture University that we signed last spring to try to work collectively at some point on feed trials and maybe extension services in bringing master's students over to study in Canada at, for example, the University of Saskatoon. We are trying to do that, particularly in some of these newer markets, because everyone recognizes that, whether it is on quality or whatever, you can't just go in there and state a price; it's all about establishing and building relationships in Asia, and that takes a while. You can have the best price and quality, but if they don't know you, they aren't going to buy from you — not until you have established that relationship.
Senator Tardif: Congratulations on the success of your industries. As you stated, Mr. de Kemp, you have delivered to the growth of the industry and to the Canadian economy.
I want to go back to the issue of genetic modification. Mr. Everson, you said you have both genetically and non- genetically modified soybeans. If I understand it, barley is not genetically modified. You also indicated that "maximum residue'' and "low-level presence'' are words we will be hearing a lot of.
Are these considered non-tariff barriers, and to what extent is this restricting your access to the European market?
Mr. Everson: In the case of biotechnology, again, the issue there is that all countries, including Canada, have a zero tolerance of GMO events that aren't approved. In other words, in order to enter that market, the regulatory agency in the importing country has to do a science-based review of the seed and approve it.
The challenge we have is that such a review is done in a relatively timely fashion in some countries and slowly in others. It sets up a situation where a seed can be approved in one country, and that gives the seed developer the legal right to commercialize the seed in that country; yet there isn't approval in an export market. We have a fungible grain supply. Producers bring their grain in, and it goes into a single system and is exported, so it is difficult and expensive to separate a GM seed from a non-GM seed, because it all essentially goes into a system, for the most part. In Canada, we have a very segmented system for GM and non-GM soybeans.
But the challenge with commodity exports is that if you don't have approval in every one of your major markets, you can't commercialize the product, because there is concern then that the non-approved event will end up in a single market.
In Europe, we have situations where the companies will apply across the world. Canada will approve it and do a science-based review that will take two years; it is a very substantial and robust review to approve the product. The United States and Japan will do that.
Then, traditionally, we find that the European Union takes longer. So we are waiting for the approval of the product in order to provide it to Canadian farmers, and Canadian farmers really want it, because it is a new innovation and tool. Yet we are being held back in providing that to a Canadian producer because of a single country's lack of approval of the technology. It is something that our government is very aware of and works with us to address.
In terms of maximum residue levels, that will apply regardless of whether there is a GMO; it has to do with crop production products. The challenge there is that it is a chaotic situation. Countries around the world are setting up their own lists of maximum residue levels that are different one from the other and could be different from the maximum residue levels in Canada. A Canadian farmer can look at the maximum residue level on a product in Canada and can produce against that tolerance level, but in the import market, it could be lower. That would then create a situation where you would have a trade problem.
Whether they are deliberately trade-restrictive, or trade-restrictive because of the lack of international order, the key thing is to try to align countries and have them work together to resolve these problems together with a science-based approach.
Senator Tardif: Mr. de Kemp, do you wish to comment?
Mr. de Kemp: In terms of the reason barley is non-GMO, if you take a look at acres around the world, it hasn't been financially feasible, in my view, for companies that want to get into that business.
Up until UPOV of 1991 farmers could use their seed over and over again. In certain industries like beer and malt, we are asking for certified seed again every year, which helps to further develop it. Basically, I think of the back-crosses on barley.
I am from a corn and soybean farm here in Nepean, at the west end of Ottawa. The whole issue there is that you can't use your seed over and over again, because of the terminator gene or whatever they call it. So you can only grow that corn that one year; you can't put it back in the ground.
The non-GMO, on the malt and barley side, is driven by consumer preference and, more importantly, the brewers saying that they don't want it. We have been successful up to this point on some varietal development in not using that.
Senator Tardif: Why would you choose not to make all of the soybeans non-GMO?
Mr. Everson: The producer has a choice of what they want to produce. GMO provides them all sorts of new capabilities for weed control. With the use of GM, you reduce the amount of work that you have to do as a producer. It changes your cultivation practices. You can cultivate less and control weeds very effectively. What GM seeds have been able to do is save the farmer a lot of money, and it goes to their bottom lines. So they are prepared to pay for that technology, that innovation, because it improves their profitability.
Senator Tardif: When you are producing soy milk or tofu, are you using GM or the non-GM soybean for human consumption?
Mr. Everson: Mostly, it is non-GM, but, if the consumer were to accept it, it would be perfectly acceptable to use GM also. There is no difference between conventional and GM from a product-use point of view. It is a consumer preference.
Senator Tardif: Is it labelled?
Mr. Everson: It's labelled in many countries. There is mandatory labelling.
Senator Tardif: In Canada?
Mr. Everson: In Canada, there is not currently mandatory labelling. There is a voluntary labelling standard. So companies that want to label that a product is non-GMO can do so, but there's no mandatory labelling, at the moment, in Canada.
Senator Beyak: Thank you for that presentation.
I was interested in what you were telling us about the new framework for 2018 for Growing Forward. I wondered if you have a meaningful seat at that table and if they share the challenges and concerns that you raised. They were excellent.
Mr. Everson: The Department of Agriculture is very consultative on most things. We work closely with them. On the agriculture policy framework, there is a group now that is working on developing what the policy framework would look like, what the themes of it will be. They will reach out to the provinces and do a lot of consultation with the provinces, and they'll reach out to our commodity groups and speak to us too. So it is a good process, I think.
Senator Beyak: May I ask Mr. de Kemp, also? I share your concern about the national economic security issue of our railroads. Many of the committees I sit on are hearing the same concerns. I think the Emerson report was good, but I don't believe the urgency was there in it.
I wondered about your opinion on that. I don't think anyone recognizes how crucial our railroad transportation and our ports are.
Mr. de Kemp: Having seen this twice before in the Kroeger report and the Estey report — and I graduated in 1981 from the University of Guelph and ended up working for Cargill — and going through all of this before and seeing the challenges back then, I truly believe this is our last kick at the can to really set it right. Sure, there are going to have to be some infrastructural issues. If there are, it'll be regarding port congestion, and it's not just grain and what have you. However, the urgency is there. If you want to construct something or you need to take a look at where you want to be five or six years from now, you had better do it now.
Hopper cars will be a huge issue in the grain industry as those cars basically go into retirement. To order a new hopper car right now, it is about a three-year wait. The grain industry, collectively, has got its act together, all of us, sitting at the table. We know where we need to go. We know what the issues are. We know what we thought could be fixed to address those issues. A lot of other groups are really impressed with the grain industry coming together, as we have, on that issue. But that urgency is there; it really is. Sure, we have gotten through this hump right now, as far as the backlog issue on grain goes, but it could happen again. It is not just if you get an increase in production. If you get cold weather, you need that power capacity. We have the data right now. We know, when you order the car, how long it takes. We know where the efficiencies are. We know where the efficiencies aren't. When you are dealing with oligopolies, everything depends on railways to ports for all our exports. That's why I say that it really is in our national economic security interest, and it is not just for grain.
Mr. Everson: I just wonder if I could add to that. I agree, and I think your question is very good from a point of view of national economic security. It is a very key point. To Senator Unger's question earlier about the principle thing. There are so many details associated with the transportation issues in grain, but the principle point is the issue of reciprocal performance accountability. I will hear from every one of our participants in the value chain that there has to be a way of ensuring that if a railway spots a car for an exporter and that exporter is not able to stick to the amount of days or the time frame to fill it and that sort of thing, there are penalties associated with that. The exporter gets hit with those penalties. If the opposite situation occurs, our industry will say, "There is no way of ensuring that the same kinds of standards are maintained by the railways.'' I believe the government has to play a role because it really isn't a market-driven sector. It has to play a role in ensuring that there is a reciprocal performance accountability.
The Deputy Chair: Gentlemen, thank you both for your presentations. I would be remiss if I didn't remind you that if you ship through the Port of Halifax, in many cases you are closer to your customer, including many parts of China and India, going through Suez. That is a paid political announcement on behalf of Senator Ogilvie and me, who are senators from Nova Scotia. We would encourage you to get people in the industry to reconsider the Port of Halifax.
Somebody mentioned labour issues. The Port of Halifax has not had a labour stoppage since 1972.
Mr. de Kemp: That is right.
The Deputy Chair: If you want stability, we're your people.
Mr. de Kemp: Thank you for reminding him because that has always been a big issue.
The Deputy Chair: There you go. See? We are here to help. Gentlemen, thank you very much for being here. We do appreciate it.
We are continuing with our next panel. I remind everybody to be succinct, both in questions and answers, when we get to the question and answer portion.
I would like to welcome to the committee today Stephen Laskowski and Jennifer Fox from the Canadian Trucking Alliance. Mr. Laskowski is the Senior Vice President of Economic Affairs, and Ms. Fox is the Vice President, Security and Customs, if I have the titles correct.
We'll follow your presentation with questions from the senators. I will ask everybody again to be to the point.
Stephen Laskowski, Senior Vice President, Economic Affairs: I will start by reading our statement into the record for the five to seven minutes, and then we look forward to your questions.
I would encourage the senators to take this opportunity of access to Jennifer. She is one of the leading experts, if not the leading expert, on border and customs issues, both into Canada and back into Canada through the United States, for ground transportation. So I welcome this opportunity and encourage the senators to utilize her expertise.
With that, I will read our statement into record, and then we look forward to a great discussion.
The Canadian Trucking Alliance is a federation of provincial trucking associations representing a broad cross- section of the for-hire trucking industry, including 4,500 trucking companies and suppliers across Canada. Our membership is in every province across Canada.
Trucking is the dominant mode of transportation for agri-food products across the U.S.-Canada border. In 2015, trucks carried 66.5 per cent of U.S. NAFTA freight, and they continue to be the most heavily utilized mode for moving goods to and from the U.S. NAFTA partners. Trucks accounted for US$28.4 billion of the US$44.6 billion of imports and US$26.4 billion of the US$37.9 billion of exports.
While not the largest in terms of value of goods crossing the border, agricultural products play an important role in the U.S.-Canada trade and for the trucking industry. For the record, it typically hovers around fifth-largest, but because of its general lower value compared to auto parts or machinery, that's why it sinks. In terms of number of shipments, it would probably be on par. It's where the value comes in.
The Canadian agriculture and agri-food system is a complex and integrated supply chain that includes input and service suppliers, primary producers, food and beverage processors, food retailers and wholesalers, and food service providers. The activities along the supply chain generate significant economic benefits, both nationally and provincially.
Trucking services are a key part of this supply chain. In 2013, the agri-food business generated $106.9 billion, accounting for 6.7 per cent of Canada's GDP. In 2014, 89 per cent of these markets in the food processing in Canada were shipped to the United States. The vast majority of these shipments moved by truck.
CFIA's Safe Food for Canadians Act: the regulatory world. To protect Canadian families from potentially unsafe food, the Government of Canada tabled the Safe Food for Canadians Act on June 7, 2012. The Safe Food for Canadians Act, then-Bill S-11, was adopted by the Senate on October 17, 2012, and passed by the house in November 2012. It received Royal Assent that same month.
The new Safe Food for Canadians Act consolidates the authorities of the Fish Inspection Act, the Canada Agricultural Products Act, the Meat Inspection Act and the food provisions of the Consumer Packaging and Labelling Act.
The Safe Food for Canadians Act makes food as safe as possible for Canadian families, protects consumers by targeting unsafe practices, implements tougher penalties for activities that put health and safety at risk, provides better control over imports, institutes a more consistent inspection regime across all food commodities and strengthens food traceability.
Although not directly impacted by these rules, our members have had to introduce preventative control measures to work with shippers. So, the rules may not be written with Canadian trucking companies in mind, but they have a significant impact on our carriers' operations.
Now we will talk about the U.S. side of the equation: the FDA Food Safety Modernization Act rule on sanitary transportation of human and animal food. This is very new and fresh; it was just finalized this month.
The new rule is now final, advancing FDA's efforts to protect foods from farm to table by keeping them safe from contamination during transportation. The earliest compliance date for some firms begins one year after publication of the rule in the Federal Register in the United States. So, some trucking companies will have to become compliant within the year today, if they are shipping in the United States.
The rule is one of seven fundamental rules proposed since January 2013 in the United States to create a modern risk- based framework for food safety. The goal of this rule is to prevent practices during transportation that create food safety risks, such as failure to properly refrigerate food, inadequate cleaning of vehicles between loads and failure to properly protect food. The rule builds on safeguards envisioned in a bill passed in 2005. Because of illness outbreaks resulting from human and animal food contamination during transportation and incidents of unsanitary transportation practices, these rules came about out of some necessity.
Key requirements of the rule with regard to trucking in the United States: vehicle and transportation equipment. The design and maintenance of vehicles and transportation equipment must be ensured such that they do not cause the food they transport to become unsafe. For example, equipment must be suitable and adequately cleanable for its intended use, and capable of maintaining temperatures necessary for the safe transport of food.
Transportation operations — the measures taken during transportation to ensure food safety, such as adequate temperature controls, preventing contamination of ready-to-eat food from touching raw food, protection of food from contamination by non-food items in the same load or previous loads, and protection of food from cross contact. This means that when carriers load trucks, they have to know what they are doing.
The training of carrier personnel and sanitary transportation practices and documentation of the training: This training is required when the carrier and shipper agree that a carrier is responsible for sanitary conditions during transport. I can assure you that, in most cases, our shippers make sure that our carriers bear that responsibility.
Maintenance of records of written procedures agreements in training, required of carriers: The required retention time for these records depends on time of record, but typically it will be 12 months. What this means, then, is that drivers are no longer just truck drivers and need to operate a safe vehicle. They must have the knowledge and also the ability to handle food products.
What has CTA done about this? CTA, assisted by an advisory committee of carriers, provincial associations and national food industry associations, developed a food safety program nearly a decade ago. We saw this coming. In 2005, CTA and a company by the name of Kasar Canada Limited, which has recently been rebranded as Iron Apple, a private consulting firm from Nova Scotia, signed an MOU to develop a trucking food safety program that would encompass HACCP's base process for addressing food safety issues. This MOU was signed in advance of anticipated food safety regulations impacting all parties in the food supply chain in both Canada and the United States. In essence, folks, what this does is allow people, trucking companies and their drivers, who take this program, to be compliant with both the U.S. and Canadian rules.
Issues: The trucking industry is a vast and complex sector. Our issues related to moving food products to and from international destinations reflect both of these attributes. CTA welcomes questions from this committee on the following matters: Recognition of CTA program by U.S. and Canadian government and supply chain members, the program that I just discussed. What we would like to see is an advocacy campaign on behalf of the Canadian government and the U.S. government recognizing our program, to ensure that shippers don't bring in a litany of other programs and that, then, our carriers are having to comply with 20 different programs, instead of one.
Cabotage: In the vast majority of circumstances, it is illegal for Canadian trucking companies to make point-to- point deliveries in the United States. The same applies for U.S. carriers in Canada. It is also illegal for Canadian companies to reposition trucking equipment or switch drivers on the same load of equipment, unless in a team situation. This issue causes a host of efficiency challenges for the entire trucking industry, including livestock carriers. CTA has been lobbying Washington for changes in this area for over two decades.
Food-related agencies hours of operation at the border: The border is a 24-7 operation. Both U.S. and Canadian officials stationed at the border and related to food service inspections are not. This causes a host of issues for carriers. The U.S. and Canadian government need to modernize the hours of operation of these agencies at the border.
Border inspection fees, referred to as APHIS: On October 29th, 2015, the United States Department of Agriculture's Animal and Plant Health Inspection Service published a final rule that adjusts the fees the U.S. government charges to recoup the cost of conducting agriculture quarantine inspections at U.S. ports of entry. CTA believes that these fees are illegal and that the Government of Canada should direct the U.S. government to remove them in their current form.
Wood packaging material rules and inspection: Wood packaging material import requirements are strict guidelines put in place to protect Canadian ecosystems from non-native pests found in wood packaging material. CFIA has not outlined how they intend to handle the removal of ISPM 15 exemption. That's definitely a Jennifer question, if you have one. Wood packaging material originating in Canada and the United States: Our questions are these: Who will bear the cost? How will exams be handled? Will they be blitzes? Will they be random?
Hauling livestock and the movement to electronic logs: It is anticipated that in Canada, by 2018-2019, paper log books will be eliminated from the long-haul trucking industry. This policy has been lobbied for and is strongly supported by the Canadian Trucking Alliance. Electronic logs may create scheduling water or feed issues for livestock carriers in certain domestic and international lanes. CTA will be working with the Government of Canada on exploring potential solutions to these issues.
CFIA requirements for goods transiting through Canada: CFIA recently introduced new requirements for carriers in care and control of goods originating outside of Canada, moving through Canada for export. There has been very little consultation with the industry to this point, despite implementation in January of 2016. The impact of the proposed changes has already resulted in trucks being denied entry to the United States. CFIA is encouraged by U.S. officials, meaning carriers would be subject to duplicate inspections. Furthermore, CFIA is asking for information from the carriers that they do not have. CTA appreciates the objective of protecting indigenous species. However, we object to the abrupt means and methods being implement. CTA will be meeting with CFIA, in the very near future, to assist in identifying less intrusive means to accomplish the Government of Canada objectives, without introducing significant barriers to Canada's role as an international trade hub.
Single-window initiative: Both the U.S. and Canada are embarking on implementing a single-window initiative, where importers are able to supply, in advance, to regulatory agencies that have established requirements for import of goods. CTA is supportive of these efforts but cautions that governments should ensure single-window limits on the data to that which is absolutely necessary and should not create a wish list of data for the agencies. Furthermore, a true perimeter approach to economic property should involve CFIA and USDA determining how to inspect once and accept twice.
My last point, B.C. marine port and ferry service: Although not a trucking, agricultural, food service issue exclusively, CTA members find issues moving food products through this marine port, due to challenges related to the marine container reservation system. Availability of reservations and difficulty of scheduling back-to-back pick up and drop off reservations and reservation fees charged for daytime reservations.
Mr. Chair, that is our list and our statement. Thank you.
The Deputy Chair: Thank you very much. We're about to start the questions. Before I start the questions, I'll remind my colleagues that at the end of this question and answer period, we do have a short housekeeping item to take care of. So I'd ask your indulgence and ask you to stay in your places while we deal with that at the end, okay? Thank you very much.
[Translation]
Senator Dagenais: My first question is for Mr. Laskowski. When transporting food, you always have to ensure that you maintain the quality of products that are stored for a few days in trucks. What monitoring measures are in place for the transportation of refrigerated products, to ensure that they are kept at the appropriate temperature between point A and point B? Secondly, is monitoring stricter for vehicles that cross the border than for those that travel within the country?
[English]
Mr. Laskowski: Thank you for that question. The issue here with regard to the transportation of food and refrigerated product is that there are standards put in place. There are HACCP standards. There is the program that we have in Iron Apple, and then there are customer standards. I think, as in everything in life, standards are introduced by government, not for the vast majority of companies, whether they are shippers or carriers, because the good shippers and the good carriers know what to do and how it needs to be done. Rules are typically put in place for those who, perhaps, are unaware of or choose not to follow those rules.
The standards put in place by both CFIA and the FDA follow strict guidelines from both the manufacturing community and government agencies. So carriers themselves have to follow. They have refrigerated units. They are set. They need to be set at certain standards for loading or unloading and during transit. That is followed, and, under the new rules, you also have to have record keeping to actually show that you did what you said you were going to do.
The rules in Canada and the United States are very similar, and we would like them to stay that similar. Our bigger concern is one that is not necessarily a governmental issue — although it would be helpful if government were championing our program — but that there are multiple refrigerated shippers, and some of them, like anything, may have various nuances to programs. As the CFIA rules and FDA rules become more prominent and more entrenched, we don't want to see the supply chain starting to develop little offsets of different rules. So you could be a carrier and service 10 customers and now all of a sudden be facing 10 programs that — it becomes an inefficiency issue. It doesn't become a food safety issue; obviously, those are guidelines that we will all follow, and they are pretty much the same. It's those other aspects.
Like anything with rules, it's a matter of clarity, consistency and communication. I think we have that in both Canada and the United States.
[Translation]
Senator Dagenais: My second question is for Ms. Fox. We often hear criticism or complaints from carriers about delays at the border. I expect, Mr. Laskowski, that your industry has discussed these delays. What recommendations could we put in our report to improve the situation and reduce delays at the border for road hauliers?
[English]
Jennifer Fox, Vice President, Security and Customs, Canadian Trucking Alliance: How much time do we have?
The Deputy Chair: You have a couple of minutes. If you don't complete your answer, you could always write us.
Ms. Fox: That would be a long document.
Mr. Laskowski: Trust me, yes, it would be a very long document.
Ms. Fox: There is a series of recommendations that we would have for improvements to the border. However, specific to the issues that we raise today, under the Beyond the Border Action Plan, there was interest in moving towards a concept of "inspecting once and accepting twice'' by the government agency. That means that anything coming into Canada from off-shore or from the United States, if it was inspected at the border or at the perimeter by one agency, it would be accepted by the other agency.
That is not happening, and that didn't happen under the pilot. It was identified that Canada and the U.S. have different standards for their inspections. What was acceptable by one country was not acceptable by the other. Although a lot of work is being done to harmonize the standards of both countries when it comes to agri-food products — really, any product but particularly agriculture and food-related products — that's not enough.
We need to get to a place where examinations and inspections are recognized by the other country — that the standards that we're doing in Canada are recognized by the U.S., and likewise those done by the U.S. are recognized in Canada. Otherwise, we run the risk of slowing things down at the 49th parallel, whether it's coming into Canada for import or for further export beyond Canada, or coming in from off-shore through a port — the perimeter — to Canada, heading into the United States.
Duplicative exams and inspections are a major problem for this industry, but there are so many things we could do.
I have to also just quickly comment about the availability of inspectors and exams. We don't yet have "inspect once, accept twice,'' and we need to get there.
Further to that, we also need to get to a place where those who are conducting the exams are available 24-7. Trade, the supply chain and logistics run 24-7, but, unfortunately, the services provided by CFIA and USDA are not available 24-7. So we will have situations where livestock haulers or somebody transporting meat or produce is delayed and then has to look for a means offload the product into a safe establishment or take it somewhere else. They accrue extra costs. Often, they will have to divert their route, going miles out of their way to be able to get to a place where there are inspectors or facilities available to conduct those exams.
Those are two of the major points that I would touch on. There is a whole host of things that could be done to improve the process and reduce delays at the border.
Senator Tardif: You have raised a lot of issues — many I was not aware of.
To get back to the issue of cabotage, that causes efficiency challenges for the trucking industry. Could you expand on that a little bit more?
Mr. Laskowski: Sure. I'm going to keep to the reference in the United States, but be aware that this applies to both sides of the border. There is a level playing field to an extent.
In trucking, if you move a load into the United States from any destination in Canada, and you drop off that load in the United States, when your trailer is reloaded or you pick up another trailer to bring back to Canada, that truck must come back to Canada. You cannot, for example, make another point-to-point move in the United States, for efficiency. So, whether you're a livestock carrier or a food carrier, you have to come right back to Canada.
That's horribly inefficient. It has been a long-standing issue. It has been perceived as a jobs issue.
The other aspect of this issue is that if you have trailers — the trucking industry works this way: I have a trailer, but if I'm on an hours-of-service regime, my time is tight. I need to load and unload as quickly as possible, because the clock is ticking on the driver. It would be more efficient to have a trailer pool. If you go by a loading facility, you will see a whole bunch of trailers in the back. Sometimes those trailers are repositioned, because it's a certain trailer for a certain commodity and a certain load. People will move those trailers between facilities.
It's illegal for a Canadian company to do that in the United States — to even reposition one of their empty trailers between two destinations in the United States. It's illegal, for example, for a livestock carrier in the United States who is shipping from Canada to switch tractors. Because of watering and feeding issues, and hours of service issues, it gets complicated.
There is what is referred to as a "bobtail,'' which is a truck without a trailer. So sometimes it might make sense to have another driver come by in his bobtail, pick up that trailer, and the other gentleman or woman who is driving the truck then bobtails to another load. That way one could feed, water, move on and do it, because it's about utilizing hours of service. You can't do that, so you end up having double the labour.
Senator Tardif: What was the rationale for that?
Mr. Laskowski: It's jobs protection. It has been a jobs protection issue.
Just so you know, I believe the act that prohibits this in the United States was introduced just after the American Civil War.
Senator Tardif: Oh, my goodness.
Mr. Laskowski: We are dealing with a very entrenched issue.
Senator Tardif: Does Canada do the same?
Mr. Laskowski: Yes. The issue, though, like with any rule, comes down to enforcement. In the United States, they enforce this rule. If you choose to disregard this rule, there is a strong likelihood that you will pay the consequences of breaking it. In Canada, that's not the case.
Senator Tardif: Do you transport elsewhere in the Americas? Would you transport to Mexico, for example?
Mr. Laskowski: With Mexican and transportation, about 12 to 15 years ago, it was seen as an opportunity. Now I would say it's seen as an interline opportunity, which means that Canadians may haul a trailer somewhere down in Texas, close to the border, drop the trailer and interline with a Mexican carrier. So the Mexican carrier would pick up that Canadian trailer because it is a free trade zone, and then bring it into Mexico and bring it back.
Senator Unger: I'm going to focus on a slightly different issue, namely, skilled labour.
At the 2016 Technology and Maintenance Council annual meeting, some of the attendees emphasized how hard it is for the industry to recruit drivers, despite fairly high wages, $70,000 to $80,000. Associated with that is another question, and that is the elimination of paper logbooks and the additional training that is required. It seems to me that there is more knowledge that the truck drivers have to have and more work that they need to do.
You are having difficulty recruiting drivers. What can be done, other than continuing the work that you are already doing?
Mr. Laskowski: I think there are two aspects here. Some of it resides in the carriers' hands and some resides in governmental hands. I will start at the carrier side of it.
One has to do with the fact that it is a changing society. Long-haul trucking is exactly what it says. It's long haul trucking. You don't see your family as much as you would if you were a person working at a factory or us at our office. That is a challenge with today's youth: Do they want that lifestyle? Trucking is a lifestyle. There is that aspect of it.
The other shortage comes from just demographics. We have the oldest and largest workforce over age 55 in Canada. So the shortage is stemming from demographics as well.
The bigger part issues: One, at the federal level, despite our continued lobbying efforts, truck driving is not seen as a skilled occupation. Under the NOC codes, we cannot bring in skilled labour. It is a challenge, obviously, for immigration purposes, when you have that. We will continue to work with the federal government to change that outlook. We believe that part of that also resides on our side as well, with the provincial governments. Many of the provincial associations, to varying degrees of success, are currently lobbying the provincial legislatures for mandatory entry-level training for truck driving. Most provinces look at licensing for a truck driver as no different than a class G. They don't see it as an occupational standard. They just see it as a licence. We want to see that changed, therefore raising the bar for everyone. Not everyone should be behind the wheel of an 80,000-pound vehicle. It is specialized, and it should be trained. We realize that. We want governments to work with us on that and then raise the bar with regard to the designation of it as truly a profession, no different than a locomotive engineer or someone driving a marine vessel, which are deemed "skilled.''
That is where we are heading with it. I think it's going to rely also on the individual companies to recognize the newer generation and how to accommodate. At the end of the day, however, it's difficult to accommodate because we are never going to be able to shorten the distance between Calgary and Vancouver because that is the distance between Calgary and Vancouver. It is a challenge. It is not a challenge exclusive to the trucking industry. But I think we have a good plan, and, partnering with both provincial and federal governments, I think we can improve the situation.
Senator Unger: I have a second question regarding the elimination of paper logbooks. You say electronic logs may create scheduling and water and feed issues. In a way, that is providing more complexity, rather than using paper logs. The electronic ones seem to have issues.
Mr. Laskowski: I was being very polite there.
Senator Unger: Okay.
Mr. Laskowski: Let's say that paper logs allow for some creativity, and, with electronic logs, there is no creativity.
With regard to a commodity, regulations are written for driver safety. For the record, we are extremely supportive; in fact, we were the group that led the charge on electronic logs. We are very supportive of it. That said, there may be situations, particularly with livestock, that need to be examined. Whether it is cattle or swine, they need to be watered, and they need to be rested properly. Depending on the lane where they are going, at times that doesn't mesh with the hours of service rules that are safety requirements. The logs will look at that. It's not like hauling a TV set. The TV set doesn't need a break. It also depends on the lane.
One of the main issues we have here in Canada, unlike in the United States, is the feedlots where truck drivers would stop to feed and water and take care of the live animals. In Canada, it's abysmal. In the United States, it is better. Therefore, that makes it less of an issue with regard to electronic logs because you can comply with all the rules. But if you have longer distances between stops in Canada at watering and rest facilities for the animals, that creates challenges on the electronic log side. An analysis needs to be done here because no one is going to advocate for reduced highway safety, but we do have to deal with the rights of the animals we are hauling. It needs to be balanced. It needs to be looked at.
As you rightfully pointed out, it adds some complexity, but it also eliminates creativity and judgment. It just says, "This is what needs to be done.'' It's clarified between the regulator and the enforcement and the driver. We will now live by those rules in those lanes. It can work.
Senator Unger: Those rest facilities for the animals, what do they look like? Do the animals need to be unloaded from the truck and put back on?
Mr. Laskowski: Yes.
Senator Unger: How do the drivers deal with that?
Mr. Laskowski: Drivers who haul livestock animals are really skilled individuals. They are part farmer and part professional truck driver. They need to understand all of that. It is unfortunate because some shippers who engage these drivers really don't respect the skill sets that they bring on.
That said, yes, it looks like a little farm, to be honest with you. That is what it looks like. Especially in the United States, they are very clean, hygienic. There are some in Canada that are in abysmal shape, and that needs to be addressed.
The Deputy Chair: I am tempted to wander, but I'm not going to. I spent two days this week in Toronto, at a Conference Board of Canada conference on driverless vehicles, including driverless transport trucks and the implications thereof. We will not get into that, but I should draw your attention to the conference so that you will look at it.
Senator Beyak: My little sister is retired now, but she drove 18-wheelers for many years with a gentleman, a team. They loved it. I thank you for your professionalism, your wonderful teams and the service you provide.
Your presentation was excellent, with the challenges and your recommendations. I certainly hope our Senate committee can help in some way.
My question, Jennifer, I hope you understand because, like Senator Tardif, this is all very new to me. We have the Canada Border Services Agency at every border across Canada. The Canadian Food Inspection Agency, as you clearly said, is not there 24-7 at many of those crossings. Is it possible to train some of the Canada Border Services agents so that there's always one at every crossing, 24-7? I will leave it to your expertise to explain.
Ms. Fox: As I understand it, the CBSA officers are designated by CFIA to conduct inspections on their behalf, and they are trained to do so. It is similar to U.S. Customs; they do inspections on behalf of USDA. There are specific officers of the CBP or CBSA who are designated to do inspections on behalf of that agency.
The challenges there is that, when it comes to the border, the inspectors doing the CFIA's inspections are doing something that is recognized by CFIA but which might not be recognized by USDA or FDA. That is where our challenge comes in.
Additionally, that is not CBSA's primary mandate. I'm not saying that there are but there could be some challenges associated with a mandate by an agency that is not their primary mandate. That is not to say that those officers are not taking their job duties seriously, but the responsibility falls to the CFIA to ensure that those discussions on reciprocity are happening with APHIS and USDA. It is not up to CBSA and CBP to make sure there is harmonization between the two in the examinations they are doing and the hours of service under which they are operating.
Senator Beyak: Could you see a possible role for the USDA, CFIA and CBSA to make a more efficient organization within those three bodies?
Ms. Fox: Absolutely — 100 per cent. I think that is where we need to go. It is troubling when the recently announced requirements from CFIA for goods transiting through Canada were discussed with the Canadian Trucking Alliance. When we asked if they had engaged U.S. Customs to make sure that the APHIS and USDA requirements were also being considered, they said that was out of scope, that it was a government-to-Canada and government-to-U.S. discussion and wasn't part of their focus at this time.
That is unfortunate, because the opportunity to have those discussions should be right at the beginning when we are looking at any new initiatives and there could potentially be barriers to trade.
Senator Oh: Thank you for an interesting presentation on the trucking industry.
My question is on the recognition of the CTA program by the U.S. government, Canadian government and the supply chain. Who conducts this program? How long is it? Does a community college conduct it?
Mr. Laskowski: I will give an overview and perhaps Jennifer can go into more detail about the Iron Apple program.
It was put together by the trucking industry, other members of the supply chain and CFIA about 10 years ago. The great thing about this program is that it is a living program, and it is written for trucking companies to comply with what we anticipated the rules to be: sanitary issues, transportation issues, refrigeration issues — both in Canada and the United States.
Jennifer, perhaps you can explain a bit more about the program itself.
Ms. Fox: We developed the Iron Apple program by working with highway carriers. It was developed by CTA and our members that are currently moving food and food-related products. We took it to the CFIA to make sure it was consistent with any of their proposed recommendations, regulations or policies that they would have on the Safe Food for Canadians Act. It was also based on their preliminary discussions with the United States to determine that we would be covering our ground and making sure we had everything necessary to ensure that the carriers were living up to any expectations that could be put upon them by the shippers.
We developed the program, but it is offered and administrated through Iron Apple. We just don't have the resources to do that in-house. Although we developed it, they own, administer and offer the program to highway carriers. Does that answer your question?
Senator Oh: Yes.
Will the trucking industry face a shortage of workers if new trade agreements take effect, such as the TPP? How do you see temporary workers from overseas come to help out?
Mr. Laskowski: In the last couple of years, we all went through the whole temporary foreign worker issue. Our industry does utilize the services of the Temporary Foreign Worker Program. It's scattered across the country in terms of those who utilize the program. We were able to reach a compromise solution with regard to access into the ongoing availability of the Temporary Foreign Worker Program.
The answer to your question is yes, the industry and certain participants in the industry would like to continue to have ongoing access to the Temporary Foreign Worker Program. It's important, and for some carriers it's critical, depending on where they are, the availability of labour, et cetera.
One of the aspects that we would like to see is an evolutionary process between the Temporary Foreign Worker Program and permanent resident status. Trucking is, as we mentioned, a skilled occupation. If you and I had a trucking company, you may train people differently and have different commodities. If someone worked for me and then went to go work for you, even if they were a good employee of mine, it still may take them six to eight months to understand your systems, how you do things and to know your customers. Under the Temporary Foreign Worker Program, which is a two-year program, you really only have someone you can trust and send out without worry for about a year.
What trucking companies and I am sure many others would like to see is the ability to transition from temporary foreign worker to permanent resident in a seamless manner, because within that year period, the person who is the temporary foreign worker and the employer may already know. The worker may say, "I want to stay in Canada. I want to take the next step to becoming a Canadian citizen.'' The employer says, "I really like this person and want them to stay. What can I do? Then they get caught in the government silo of "it's not my department; it's their department.'' You have to fill out this form. There are different periods.
There are some really good people both at the temporary foreign worker offices and the permanent residents offices, but they're different ministries and have different processes. So we would like to see something that is almost like a pipeline: As you move through the process, it moves seamlessly and easily. Then Canada wins.
What do we want? We know for a fact that the people who integrate into society and give back to Canada quickly in terms of employment status are temporary foreign workers, because they have a job, they know the system and they have been here.
This would be a great opportunity, moving forward, and our industry would definitely welcome a pilot program with that type of seamless pipeline between temporary foreign worker, permanent resident and eventually Canadian citizens.
Senator Oh: That is important. Very good, thank you.
The Deputy Chair: Ms. Fox and Mr. Laskowski, thank you very much for being here. I have one question that didn't get asked: When you talked about the vehicles going town to Texas and then someone from Mexico picks up the load, why wouldn't they keep going into Mexico?
Mr. Laskowski: The issue is security and safety.
The Deputy Chair: I suggested that to my colleague.
Mr. Laskowski: I will tell you a funny story from one of my members — funny now that 15 years have passed. They tried going into Mexico. They lost many, many pieces of equipment. He was recently down on vacation a couple of years ago and saw one of his trucks running by.
It's perhaps the best way to do it at this point. It's a security and safety issue.
Senator Unger: I have a small supplementary. Do you encounter a different set of rules when you are entering and leaving Mexico? Do you have to start over again?
Mr. Laskowski: Jennifer, maybe you want to talk about the immigration. It's very complicated.
Ms. Fox: There is a different set of rules for entering and leaving Mexico, but our members don't get into that, because they don't go into Mexico. There are different sets of rules running back and forth between Canada and the U.S., and that alone is extremely cumbersome and frustrating. We get calls all the time from existing and new members, asking questions about them in the U.S. and they'd like to start coming into Canada or the reverse. They ask a very simple question: How do I do that? That answer is days long. You need a course to understand what is involved because it is not a simple task. There are so many regulations, and there is a very real lack of harmonization between the two countries in terms of a truck that is moving from Canada into the U.S. and back from the U.S. into Canada. There are very different requirements, so it is not an easy process for any driver to understand.
Senator Unger: Does Mexico complicate things further?
Ms. Fox: It would if a carrier wanted to run from Canada into the United States and then through the United States down into Mexico. There is a third set of requirements so, yes, it would just add an extra layer.
The Deputy Chair: Ms. Fox and Mr. Laskowski, thank you very much. Very interesting, very informative. You have added a lot to our study. We do appreciate it. I thank you for being here.
Colleagues, we will now quickly move into one other subject.
Mr. Laskowski: I want to thank your staff. Thank you all, too, obviously. We had a mini crisis outside, before this event, and your staff was outstanding and so helpful to us. I just want to note it for all of you. We appreciated it very much.
The Deputy Chair: There you go. We knew they were outstanding.
Colleagues, you will recall that, the other day, we had a witness from the Canadian Beverage Association, Mr. Jim Goetz. He has written a letter to Senator Maltais and me, as the chair and deputy chair. I want to read the letter into the record, and then I will ask Senator Ogilvie for a comment. Then I don't think there is need for debate or discussion after that.
He thanks us for the invitation, et cetera. The meat of the letter is this:
I would like to address comments made during the Question and Answer portion of this meeting, which as per all committee meetings will be a matter of public record.
On page 11 of the draft transcript for the April 12, 2016 meeting, it is noted that in reference to a recent Senate report on obesity, and specifically to one of its recommendations, I stated: "The interesting thing about the report that was tabled was that the sugar tax would apply to products that have no sugar in them or no calories in them. This beverage sitting right here beside me is a carbonated beverage. It contains no sugar and no calories...'' The beverage I was referring to was a brand of diet soda.
In response to that comment, the draft transcript indicates (also on page 11) that Senator Ogilvie said: "But I am the author of that report and what you said is fundamentally incorrect. We are recommending a tax on sugar beverages, the soda pop beverages, and it was directly related to sugar.'' Also, a little further down, "... we only recommended a tax on sugar beverages. We do not recommend a tax on any other issue.'' Finally Senator Ogilvie states, "I would like him to read the report in its accuracy.''
Following those statements from Senator Ogilvie, the committee moved on to other questions from other senators.
I respectfully note that Recommendation 3 on page 24 of the Standing Committee on Social Affairs, Science and Technology's report entitled Obesity in Canada: a Whole-of-Society Approach for a Healthier Canada reads:
"The committee recommends that the federal government:
...Assess the options for taxation levers with a view to implementing a new tax on sugar-sweetened as well as artificially-sweetened beverages...''
The recommendation wording clearly shows that such a tax would also apply to beverages that contain no sugar and no calories, as per my statement.
On behalf of the Canadian Beverage Association and our members, I respectfully request that the Committee take action and amend the official record to note that my comments were factually correct. We ask that this letter be entered into record at the next committee meeting as the official correction.
As with all trade associations, the Canadian Beverage Association prides itself on credibility to our stakeholders and we cannot allow this false accusation and mistaken comment to stand unchallenged.
As we indicated that we were not correcting any transcript, the transcript stands as is, but I have read the letter into the record. I will now give Senator Ogilvie the floor for a short comment, and then we will move on.
Senator Ogilvie: Colleagues who were there will remember that the representative of the industry was dealing with the idea of tax on a number of sugar products, even jars of jam and things of this nature.
There are two comments that I would make with regard to my specific statement of a tax on sugar-containing products: One, it was in the context of that discussion of his with regard to taxing a range of sugar-containing products. In that context, our report only recommends a tax on sugar-containing beverages within the sugar products.
Second, a sugar tax, if you want to use that terminology, can only be applied to sugar-containing products.
Now, we also recommend that a tax be applied to artificially sweetened beverages. Overall, our recommendation is that the federal government assess the options for taxation levers with a view to implementing a new tax on sugar- sweetened, as well as artificially sweetened, beverages.
If you want to call it a sugar tax, it would only be on sugar-containing items. If you want to call it a tax on sweetened beverages, it also includes artificially sweetened beverages.
I think, Mr. Chair, that clarifies what the intent of the report of our Social Affairs Committee was, but it also explains how I was answering the question from the witness.
The Deputy Chair: Thank you, Senator Ogilvie. I think you have clarified it very well, and I appreciate that and appreciate your cooperation.
We stand adjourned until we return in two weeks.
(The committee adjourned.)