Proceedings of the Standing Senate Committee on
Agriculture and Forestry
Issue No. 9 - Evidence - Meeting of May 3, 2016
OTTAWA, Tuesday, May 3, 2016
The Standing Senate Committee on Agriculture and Forestry met this day at 5:08 p.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 welcome you to the meeting of the Standing Senate Committee on Agriculture and Forestry. I'm Senator Terry Mercer from Nova Scotia, deputy chair of the committee. I would like to start by asking senators to introduce themselves, starting with my colleague on the left.
Senator Merchant: Welcome. I'm Pana Merchant, a senator from Saskatchewan. And we love farmers in Saskatchewan.
Senator Pratte: I'm Senator André Pratte from Quebec. We love farmers in Quebec, also.
Senator Ogilvie: Kelvin Ogilvie, Nova Scotia.
Senator L. Smith: Larry Smith, Quebec.
The Deputy Chair: Senator Ogilvie told me on the walk over that while he is not officially a farmer, they have just finished their collection of maple syrup on their property, and they had a good return this year. That's good news, Senator Ogilvie. I just wanted to get it on the record. Your farming accomplishments need to be recognized.
Today, the committee is continuing its study of international market access priorities for the Canadian agriculture and agri-food sector. That sector is an important part of Canada's economy. In 2013, the sector accounted for one in eight jobs in Canada, employing over 2.2 million people and representing close to 6.7 per cent of Canada's gross domestic product. Internationally, the Canadian agriculture and agri-food sector was responsible for 3.6 per cent of the global exports of agri-food products in 2014. 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 and the Trans-Pacific Partnership have been concluded, and eight free trade agreement negotiations are ongoing. The federal government has also undertaken four exploratory discussions with Turkey, Thailand, the Philippines and the member states of Mercosur, which are Argentina, Brazil, Paraguay and Uruguay.
For our first witnesses, we welcome from the Ontario Broiler Hatching Egg and Chick Commission, Mr. William Bearss, Chair; and Mr. Jack Greydanus, Director. From the Chicken Farmers of Ontario, we have Mr. Ed Benjamins, Vice Chair of the Board; and Mr. Rob Dougans, President and Chief Executive Officer.
I understand the first presentation will be from the egg people. Thank you for accepting our invitation to appear. After presentations, a question-and-answer session will take place, and each senator will be given five minutes to ask questions before the chair recognizes another senator. There will be as many rounds and questions as time will allow, so senators do need to be succinct in their questioning. I would also ask that the responders be as succinct as possible as well.
We will now begin with the presentations from the Ontario Broiler Hatching Egg and Chick Commission.
William Bearss, Chair, Agri-food (poultry), Ontario Broiler Hatching Egg and Chick Commission: Thank you, chair and members. This establishes if anyone is going to ask the question what came first, obviously. We do thank you very much for the opportunity to contribute to the important work of this committee and the important work of the government, generally.
As all of you know, the chicken industry is a key contributor to both urban and rural communities in terms of economics, right from coast to coast. The Ontario Broiler Hatching Egg and Chick Commission, which I will refer to as OBHECC, is an important participant in that poultry value chain, at both the provincial and the national levels.
It comes as no secret that our ability to have achieved the success and to continue the ongoing success we have is a direct function of the supply management system in Canada. That's a system that has been in place for more than 50 years and has been pretty much universally endorsed and supported by federal and provincial governments throughout the entire time frame, in addition to being very well supported and endorsed by the public.
The earlier presentations to this committee in the first part of February were made by national agencies representing chicken farmers, turkey farmers and egg farmers who described in pretty comprehensive detail — I've seen their presentations — the magnitude and importance of this entire "feather sector'' — that is what I'll call it — for the benefit of all Canadians. So I won't spend a lot of time in that area.
However, the national agency that represents our particular hatching egg and chick sector is the Canadian Hatching Egg Producers. They will be presenting to this committee later this month, and they, too, will have some pretty comprehensive and detailed calculations and information to share with you relative to the financial impact, particularly of the recently completed Trans-Pacific Partnership agreement.
Today it is my intent, along with our colleagues from our customers, the chicken farmers, to give an Ontario perspective on that subject.
OBHECC is the nine-person board that is represented by me as the chair, four farmer-elected representatives and four hatchery representatives. So we have the buyer and seller at the table, representing that sector of the industry.
For those of you who aren't familiar, broiler-hatching eggs are fertilized eggs that are produced at the farm. They are shipped to a hatchery, and 21 days later, they hatch into a chick that is then placed into a broiler barn. Then, six to eight weeks later, our friends send those to chicken processors. They ultimately become the Kentucky Fried Chicken, the Swiss Chalet chicken and the chicken you would eat regularly.
In addition to representing that hatchery group and those in the egg-producing group, we also represent the producers who take the day-old female chick and raise it for 20 weeks in a rearing barn. At 20 weeks, those are the hens that go into these broiler-breeder barns for about a year and produce those hatching eggs that go to the hatchery. We represent those two elements of that sector.
Just to give you some very high-level statistics, we put about 1.6 million of those hens in barns in Ontario every year, and they produce about 214 million hatching eggs. In addition to that, by virtue of trade agreements, we import another 30 million eggs, plus another 6 million day-old chicks that end up going into those barns, as well. Out of that total, the total number of broiler chicks is about 211 million, which includes a certain component of our production that is generated in Quebec and moves into chicken broiler barns in Ontario.
All of that ends up in generating almost 500 million kilograms of live-weight chicken in Ontario. But you will hear a lot more about that from our friends in a couple of minutes.
The committee has defined in its mandate the importance of a number of key focus areas, and I want to specifically address a couple of those. One is productivity, food security and traceability. Our sector has a fairly solid track record of innovation in that area and of adapting new technologies that provide great value and quality and food-safety assurances to the Canadian consumers.
In terms of benchmark measurements, against any producers in the world, we are as good or better than any that you might care to mention in terms of bird livability, feed efficiency, eggs hatched per hen and some of the other very important measures of productivity performance.
In addition to that, we have adopted through both national and provincial programs a Canadian Hatching Egg Quality program that is HACCP-based and covers the area of biosecurity, poultry health, egg handling, storage, pest control, cleaning and disinfection. Producers who are part of this program are subject to annual audits. All of this helps to ensure that the food safety and security of Canadians is certified.
More recently, we've embarked on a program called Be Seen, Be Safe, and it is a joint initiative with egg farmers and turkey farmers. It provides a traceability mechanism that goes right from the very origins of the parent-grandparent stock, which is often largely generated in the United States, right through to the end point of the grocery shelf. This information-gathering system allows for that full trace-back, which is important, especially during real-time disease outbreak situations.
Part of that entire communication and traceability program embraces work we've done with our colleagues at Chicken Farmers of Ontario in tracking that value chain production.
In terms of sustainability, we've adopted and adapted to any number of changing dynamics in the industry over the past number of years which embraces technology that's developed not only here in Canada but in Europe and the U.S. as well.
Along with that, we've undertaken research initiatives that address bird health and welfare, which take into account ammonia levels in barn, litter moisture, laying nest design, optimal feed intake and any number of disease management studies that have been undertaken, all of which are part of a process to ensure the long-term sustainability of our industry and continue to meet the demands of Canadians.
The primary concern of this committee, as identified in the mandate, was this area of market access. In that regard, we are active participants and certainly commend the government on negotiating various trade agreements, as cited earlier by you, Mr. Chair, to provide expanded access opportunities for Canadian exporters. Yet under the provisions of supply management, by definition, hatching egg and chick marketing is almost exclusively a domestic activity with very limited export activity in that realm.
That said, we are responsible by virtue of WTO and NAFTA commitments that have been undertaken over a number of years for importing specific volumes of hatching eggs and chicks every year. That combined access is at about 20 per cent at the moment, which means that one in five broiler hatching eggs required in Canada are already being imported duty-free largely from the United States.
So any new and additional access into Canada's broiler hatching egg market as part of the TPP agreement would obviously increase that volume beyond that 20 per cent level, which I think you'll hear from other presenters, and that the normal amount of trade in poultry products around the world is at about 10 per cent.
At the presentation on May 12, our national counterparts will provide you with more detail in the area of farm cash receipts, increased operating costs, profitability, and overall net financial impact, and there will be numbers that will accompany that presentation.
At the Ontario level, as the biggest player in the game in both the hatching egg and chick levels as well as the broiler production level, clearly changes in trade agreements that allow for increased imports have their greatest impact in our province. Our sectors are directly impacted by additional imports of eggs and chicks in and of their own right, in addition to lost sales due to the additional chicken imports. That is a chick that we would otherwise have produced. So we have this double-whammy effect in our sector.
Hatcheries are also impacted by the TPP, obviously, with their lost chick sales and the greater level of imports, with no requirement on the exporter to provide the product but an absolute commitment on our part to take it if they do. It makes this whole notion of production planning a lot more tenuous and a lot less predictable and more difficult to establish to meet the domestic chick needs.
Over the projected 19 years of this agreement, it is pretty clear that there will be a gigantic gap between the losses incurred by the industry and the proposed compensatory adjustments that emerged in the original iteration of the agreement.
In conclusion, it would seem that with this Canadian market growing and us ready and willing to serve the expanded demand for chicken, which has grown at something on the order of 20 per cent over the last 15 years — and more specific figures will be presented in a moment — there is a clear preference by Canadians for local food produced by fellow Canadians.
That said, we're also very much a trading nation, so we want to sell product abroad. Many Canadian businesses are in that position to do so. But in terms of the hatching egg and chick sector, it is our view that we have already offered our fair share of market access to our trading partners at the levels that we're currently operating. We are capable and eager to continue to build the hatching egg and chick production in our provinces to ensure that that increased demand is supplied from Canadian sources rather than imported sources.
All in all, the intent today was to give you some perspective on the passion that our producers have to continue to serve Canadians and build an industry that has the kind of economic impact that it has had for the last number of years. We thank you for the opportunity to make this presentation today.
The Deputy Chair: Thank you very much for that presentation. Before we move on to the next witness, I want to draw your attention to the fact that we are joined by Senator Unger from Alberta, Senator Beyak from Ontario, Senator Tardif from Alberta, Senator Plett from Manitoba and Senator Dagenais from Quebec.
The next witness will be Mr. Benjamins.
Ed Benjamins, Vice Chair of the Board, Chicken Farmers of Ontario: Thank you, Mr. Chair.
Good afternoon, ladies and gentlemen and members of this committee. My name is Ed Benjamins, and I am second vice-chair and on the board of Chicken Farmers of Ontario. I am a farmer, and I live near Almonte, Ontario. With me is Rob Dougans, the president and CEO of Chicken Farmers of Ontario.
We appreciate the opportunity to speak to the committee and provide our thoughts on setting priorities on how to help grow Canada's chicken industry. In the few minutes we have, we would like to briefly touch on three areas: number one, ongoing growth opportunities for the chicken industry; number two, our successful and innovative approach to meeting new and emerging consumer markets; number three, the importance of enforcing existing border and import regulations.
Chicken Farmers of Ontario, CFO, represents 1,100 family farms across Ontario and is the largest supply-managed marketing board in the country. Our farmers know from experience the value of stability, the certainty that the supply management system provides our farmers, allowing us the security and flexibility to develop innovative growth programs to serve the increasingly diverse and changing needs of local consumers.
For example, Ontario consumers are increasingly looking for a greater variety of chicken and for chicken raised using different growing methods. To serve these emerging markets, CFO recently developed an Artisanal Chicken Program that allows smaller-scale farmers without quota to grow up to 3,000 chickens a year for niche markets, local restaurants or farmers' markets. We have registered 100 of these new artisanal farmers since last September.
In response to the demand from the Asian-Canadian community for more of their traditional chicken, CFO developed a specialty breeds program. Twenty new farmers have now entered this business over the past year alone.
Six weeks ago we announced a new kosher chicken processor for Ontario. That company is now building a plant in Niagara and should be up and running to serve Ontario's Jewish community by January of next year.
We have had success with these programs because we're not just farmers. We're entrepreneurs. We're market- focused, innovative, and responsive to the evolving needs of family farmers, processors and, above all, the Canadian consumer. This focus has contributed to the stability of our industry and makes it a major contributor to the Canadian economy. The Ontario chicken industry now generates more than $2.7 billion in economic activity each year, supports over 19,000 jobs, provides $850 million in wages, and contributes almost $400 million in government tax revenue, and we continue to grow each year.
Canada's supply management system provides tremendous stability for our farmers. As you know, this economic system is built on three pillars: effective production planning, strict import controls, and pricing that is fair to both farmers and consumers. For this system to work effectively, all three pillars must be supported by regulators at all levels. For the federal government, that means effective trade policy and border controls.
CFO, working with our national agency, Chicken Farmers of Canada, has been supportive of Canada's trade deals, including the recent Trans-Pacific Partnership. However, it is important to understand that the TPP, once ratified, will allow more than 26 million kilos of additional duty-free chicken to enter the Canadian market each year. Canada is already a major importer of chicken. Seven and a half per cent of our broiler meat comes into Canada duty free. Additionally, Canada allows fowl meat to be imported without duty.
Other products are imported using import-export programs originally designed for non-food products. Unfortunately, these programs have also created opportunities for mislabelling and other forms of duty evasion, and these fraudulent imports are increasingly reducing opportunities for Canadian farm production and economic growth.
There is a solution ready to be put into action. On October 5, the former government announced measures to support the Canadian chicken industry. These measures included, number one, removing chicken from the duty relief and duty drawback program; number two, the mandatory certification of all spent fowl imports; and number three, the modification of the 13 per cent rule to eliminate products that have been created to circumvent Canadian tariff restrictions. Chicken Farmers of Canada estimates that by implementing these solutions, the Canadian chicken industry can create an additional 8,900 jobs and increase national GDP by $600 million annually.
To conclude, with the stability provided by supply management, Ontario chicken farmers continue to deliver innovation and economic growth for the province and for this country. We want to see this continue for the future. For us to do so, it is imperative that the Canadian government not only continue to support the principles of supply management but also enforce the rules and regulations that create that certainty. This will allow chicken farmers and the rest of the chicken value chain to continue to create growth and economic value. It will also ensure that communities, local communities across Canada, continue to benefit from an innovative, entrepreneurial family-based chicken farming industry.
Thank you very much for your attention, and we would be happy to answer any questions you may have.
The Deputy Chair: Thank you, Mr. Benjamins. Before we begin the questions, I want to welcome Senator Wilfred P. Moore from Nova Scotia. Thank you Senator Moore. We will start questions quickly, but before we do, I want to sneak in a question myself.
Mr. Benjamins, you outlined a number of interesting developments in the industry where you have had a number of non-quota farmers producing product. Is there potential for those farmers to at some point become part of the quota system?
Mr. Benjamins: The answer to that would be absolutely. It would require a greater investment on their part. Especially in probably some of our more remote regions, particularly northern Ontario, where maybe the volumes of chicken that we're producing commercially for the market wouldn't be needed, but the local programs, the local farm markets would require a much smaller volume, it would definitely allow that to take place, for that infrastructure to start. Having abattoirs, et cetera, in those regions is definitely a possibility, but it certainly would not preclude them from entering the business.
The Deputy Chair: Thank you very much, Mr. Benjamins. We will start now with questions from my colleagues.
Senator Plett: Thank you for being here. I was going to apologize for being late, and then I find out that almost everybody around the table was not on time.
The Deputy Chair: Not everybody, senator.
Senator Plett: I said "almost everybody.'' I was careful on my wording. I said "almost everybody.'' I do apologize for my tardiness.
Mr. Benjamins, you talked about a number of initiatives that I think you said agreements had been reached on with the previous government. Without listing them, have you spoken to our current Minister of Agriculture? Do you feel the new government will honour those agreements you reached with the prior government?
Mr. Benjamins: That's an interesting question. We have had those discussions; at least our colleagues from the national group of Chicken Farmers of Canada have had that discussion. I would think a fair assessment would be that many of the people would view that we're basically starting over simply because of the change in government, but whether or not they are receptive to that, I think we will need to continue to press that issue. I think that would be a fair way to characterize it.
Senator Plett: Far be it from me to ever want to blow the horn of the new government now because I would rather blow the horn of the old one, but the present government has over the years been favourable to supply management.
Mr. Benjamins: Absolutely.
Senator Plett: So probably you should be able to make deals with them?
Mr. Benjamins: If this government would honour what was agreed to by the previous government, we would be very happy.
Senator Plett: I think you both talked about border controls. I know Mr. Bearss talked about import and export. You have concerns about too much import, clearly, and I understand that, but are we importing because we can't produce enough?
Mr. Benjamins: For ourselves, with what was previously coming in under previous agreements, we were at about 7.5 per cent or 7.8 per cent. With what is coming in or projected to come in under TPP, we would be at about 9.7 or 9.8 per cent, I believe, which is in line with the rest of the world. However, when you add in all the products that are coming in under these different programs, some of which are fraudulent — and not because we want to stop spent fowl; it can come in and that's not a problem whatsoever, but when you fraudulently label that product as chicken, that's when it becomes an issue. When you add up all of those products, you're looking at 20 per cent, which is well above what any other country in the world that is involved in any of these trade agreements would allow in. So we think we have done our part; we're just asking for the rules to be enforced fairly, which we believe is a reasonable position to take.
Mr. Bearss: We hold the same position with respect to increases in access. The reason that broiler hatching eggs and chicks are currently and have historically been in the range of 20 per cent is that we were a late addition to the supply management system. Our colleagues have had supply management since the mid-1960s. Supply management was introduced at the broiler hatching egg and chick level in 1986. At that stage, the existing import levels were in the range of 20 per cent, so the cutoff point was established on the basis of what existing market levels were. It has continued at that level on an ongoing basis since then.
The answer to your question, though, are we interested or even capable of meeting that Canadian market and reducing that number? Absolutely. Our Canadian farmers could do it equally well, both in our sector as well as our colleagues' sector. We are not averse to competing on that stage in terms of productivity and efficiency to meet those Canadian demands.
Senator Plett: Clearly this is not going to happen — this is a hypothetical question — but would we be able to completely meet Canadian demand if we had no import?
Mr. Bearss: Today?
Senator Plett: Yes.
Mr. Bearss: No. We don't have the production capacity right at this moment, and no one is built to do that because there would be no reason to overproduce. It would defy the whole intent and definition of supply management.
Senator Plett: We have talked about imported spent fowl. You spoke about the chicken, the egg, the hatchery and the broilers. What do we do with old laying hens once they are done laying eggs? Where do they go in Canada?
Mr. Benjamins: They would typically go to a processor. The largest processor to deal with spent hens is in Ontario. They would mix that product with other by-products of the chicken, and they actually produce a lot of premium products, whether it is chicken bacon or chicken wieners, and those get exported —
Senator Plett: Chicken nuggets?
Mr. Benjamins: Not chicken nuggets per se. Those chicken products would get exported. I have no reason to doubt that those are premium products in a lot of the Asian markets simply because of the constitution of the product, because it has that older, little tougher spent hen in it. If your mother would have had a spent hen as you were growing up, same as me, that was a little tougher meat and sometimes required a little longer of a cooking process in a pot of soup or something else to tenderize it.
Senator Plett: Sometimes it's tastier.
Senator Merchant: First of all, you talked about the Asian market requiring a bit of a different chicken. Maybe you answered that just now. Did you mean an older chicken?
Mr. Benjamins: No. In this case, when I was referring earlier to specialty chicken, that is a different chicken as well, and that chicken would have a darker textured skin. It would have head on, feet on and be offered for sale to the consumer that way, which would be different than what our traditional shopper would be looking for. That's a different product, and that's definitely geared to the Asian community because we're a very multicultural society today, so that would definitely speak to that need there.
Senator Merchant: So that is not chicken we're exporting? That is for use in Canada?
Mr. Benjamins: Domestically. That's correct.
Senator Merchant: I understand. When you spoke of fraudulent labelling of chicken that is imported into Canada, are they competing at par for price at the supermarket with products that are supposedly replacing or imitating?
Mr. Benjamins: That I don't know for sure.
Senator Merchant: Or is that a cheaper cut? I'm thinking from the consumer point of view. Is that chicken you can buy for less money at the supermarket?
Mr. Benjamins: You would think you would be able to, but I think the people who are taking advantage of this system are mislabelling the product coming into the country. It comes in labelled as spent hens or spent fowl. Then it would be sold to the consumer and it would again be mislabelled and sold as chicken. So if it was featured or sold as spent fowl, you would think it would be greatly discounted or should be because in many cases that's a real by-product of the egg industry, and the price for those birds would be severely discounted.
Senator Merchant: I'm not aware of that in the supermarket. Is there an issue with chicken as there seems to be now, for instance, with beef? There is an appetite in Canada for — the consumer seems to think that from a health point of view there are different ways of raising the animal that makes it perhaps healthier for us to consume. There was the instance last week about the Earls thing.
Do you run into that problem? If so, what is it and what do you plan to do to correct it?
Mr. Benjamins: So far we have been ahead of that curve quite a bit. In my previous life, which was just a few months ago, I sat on the production committee of Chicken Farmers of Canada, and we dealt exclusively with that topic. We were on that topic for several years.
In our consultation and work, we worked with restaurants such as McDonald's and Swiss Chalet, et cetera, around the world to make sure that when they are looking for raised without antibiotics — in the U.S., that would be raised without antibiotics that have human importance — we're very much ahead of that; we will be able to meet the needs of our customers. They have set some deadlines, and we will be able to meet those targets without a problem, and that will not be an issue for us in chicken whatsoever.
Senator Merchant: Is there a big demand for organic chicken? Are you able to supply organic chicken that Canadians may require?
Rob Dougans, President and CEO, Chicken Farmers of Ontario: Absolutely. One of the shifts to organic, as you mentioned, is growing. It's growing at a moderately faster rate than what I'll call conventional chicken. We have organic farmers in Ontario who are meeting those needs and will continue to meet those needs as we move forward.
I think the key point we would like to share in message is that our job is to understand the needs and expectations of consumers, and consumers are changing. They are changing in Canada in terms of demographics. New Canadians come with different usages, different tastes, et cetera.
One of the great things about the chicken business as a meat protein is that we're very well positioned in terms of the nature, healthfulness and versatility of the product. It carries well across a number of markets.
Our markets are becoming more complex. That means, to Ed's position, we need to be entrepreneurial in terms of understanding how the consumer is changing, and with those insights, changing the product we offer and ensuring that we're always out ahead of what we like to call the growth curve. We think we have a reasonably good track record and are very well positioned in terms of capturing domestic growth opportunities, which Bill mentioned earlier.
Our industry is highly adaptive. It has been successful at meeting consumer opportunities, and we think we're very well positioned to do even more of that in the future.
[Translation]
Senator Dagenais: Thank you for your presentations.
My question is for Mr. Bearss and Mr. Benjamins. You raised a topic that a number of witnesses have mentioned: the impact for Ontario of U.S. exports to Canada of what is known as spent chicken. This is chicken that is not subject to import controls and that is used in food products. What are the various impacts of these exports on your market?
[English]
Mr. Bearss: I'll defer to my colleague to talk a little more in detail about spent fowl, but the issue around spent fowl and the fraudulent part of it is that there is chicken that crosses the border and is identified as spent fowl, but it's well known that it is not spent fowl. The U.S., as an example, exported about 120 per cent of its total spent fowl production to Canada. That's an obvious indication that some of that chicken was not spent fowl; it was broiler chicken.
So, it is pretty obvious that there needs to be a management of that and regulatory controls.
The impact from our perspective is that it is a broiler chicken that would otherwise have been produced in Canada. If that broiler chicken were produced in Canada, or more specifically in Ontario, the chick and the egg that produced that chick would also have been produced in Ontario, which is production that we are not getting. We are losing. Therefore, Canadians are not having the benefit of serving their own market, because it's being served by a fraudulent product that is coming from off shore.
Mr. Benjamins: The impact to the market can't be overstressed, would be the best way to put it. For last year, if the numbers from CFC are correct, and I believe they are, apart from what they have killed in the U.S. as spent fowl, we have imported almost 98 per cent of their spent fowl. That seems a huge stretch. So you can't overestimate or underestimate the impact that has on the Canadian market.
If you looked at 10 per cent of our production today coming in above the 9.7 per cent, that's a huge number. I haven't done the calculations, but they would be fairly large.
Mr. Dougans: If I could add to the conversation. Much of the imports that we speak to come in — I'll call them components. As Ed and Bill have mentioned, they are often used in further food products as component. They also show up at grocery shelves, and you might eat them at a restaurant or a particular meal occasion.
But why is this so important? It's important to Canada, but it's also particularly important to Ontario where 60 per cent of the further processing industry is located. The balance, senator, is in Quebec. So between the two provinces, something between 80 or 85 per cent of the further food manufacturing and food processing business is in our provinces.
Two weeks ago, Ed and I were at our Quebec colleagues' annual general meeting. This is important to them, too, and it's one of the areas of common focus that we have with Quebec. Together, working with Chicken Farmers of Canada, we are looking to ensure that as we move forward, our new government will effect some of those programs for prevention and control that we had already spoken to.
Senator Unger: It's not the first time that we have heard about spent fowl being sent back here in much greater quantities than it should be. Is there not something you can do? Who do you have to lobby, and what do you have to do to stop this practice? It's hurting both of your provinces and Canada.
Mr. Benjamins: I think CFC has developed a kit. That would be a DNA-testing kit; you can actually test the chicken coming in to see whether it's spent fowl or chicken. It's a very simple test and costs only a few dollars to do. It is very efficient, very quick and very accurate. All we need is for the government to actually enforce it, so whether that becomes something for the Canada Border Services Agency or whatever, it probably would need to have some coordination between different departments. But it is quite doable. The solutions are there.
We asked the previous government — those were ready to be put in place once a TPP deal was signed. We're asking for that to take place.
Senator Ogilvie: Essentially, the supplemental was a question that I wanted to put to you. Over the last few years, I've been involved with the chicken producers who have come to my office and met with a number of us on these particular issues, which I think are very serious, as you have outlined. It has astounded me the degree to which the subterfuge exists with regard to bringing in higher-quality chicken under the spent-chicken category.
We worked hard on the previous government to get the regulations changed and enhanced in order to deal with that end of it, but the other side of it is detection. One of the things that I understood to be moving forward, which I think you just touched upon, is the use of much more rapid DNA testing, because inspectors have to be able to quickly determine at a border what they are dealing with.
The other thing I understood was proceeding to some degree was the idea of a barcode system from producer through to product, all the way through to the end consumer. Has that moved to the point that it's having any kind of general efficiency in terms of detecting where the product came from?
Mr. Benjamins: I'll defer to Rob, if he knows the answer to that one. I don't. I'm not sure where that one stands, sorry.
Mr. Dougans: Senator, I can't give you any specifics about that particular program, but I would offer you this thought. The Canadian supply chain has good integrity to it. Part of the reason is our ability to understand from inputs through to growth through to processing where our products are, and we can effectively trace them.
Barcoding or working with RFID placards is a program that certain processors have in place, but it isn't broadly based at this point in time. The world is changing in terms of logistics and also in terms of the insight that we can have on our industry.
We in Ontario just are completing a program called CFO Connects where we have digitized our industry. It used to be paper-based in terms of transactions. We now are doing that all digitally. That's been a three-year effort to give us a good understanding of the commercial transactions but more importantly about the product quality and safety through the value chain. So these are long-term initiatives.
Just as the previous senator asked the question about imports and the previous government's commitment to the program, this is work that we've been doing for three or four years, good work with the Chicken Farmers of Canada as well as the appropriate agencies at the federal level. It took a good amount of time to get motivation and momentum and get to actually having programs that could be implemented. Unfortunately, a federal election disrupted our plans, so we now need to refocus and get some concentration on that.
We have no reason to believe that the new government will be any less interested in this outcome or outcomes than the previous government because it's the right thing for Canadians. We are going to continue to come to venues like this, meet with MPs, which Ed and I were doing earlier today, as well as within our own province to keep the heat on.
Senator Ogilvie: I think the issue is that detection at the border is one thing, but if you can get it where the source is clearly identified, then the control ultimately will be far superior, and it is a problem. The volume and economic impact on your industry is very substantial.
Senator Moore: Thank you, gentlemen, for being here. I wanted to follow up on a question by Senator Plett. Mr. Bearss, I think you said the Canadian producers could produce and meet the gap of 20 per cent between the Canadian demands and the imports, right? I think you said that. You're not doing it now, but I think you said you could.
Mr. Bearss: I said the Canadian producers are willing to ramp up their production capacity to fill that demand.
Senator Moore: So if you could do that, why don't you do that? Why don't you coordinate your production capacity so that you can do that and seize that 20 per cent? Why let it continue?
Mr. Bearss: Well, the reason that the imports are at 20 per cent is by virtue of agreements.
Senator Moore: Is there a rule that says you cannot?
Mr. Bearss: There are trade agreements in place for hatching eggs and chicks that stipulate an allowable access to Canadian markets up to that figure, and those are prescriptive by virtue of those agreements.
Senator Moore: So the fraudulent products are coming in as if they were part of those legalized imports?
Mr. Bearss: Well, the fraudulent products aren't part of that agreement. Spent fowl does not fall under the umbrella of those agreements. Spent fowl comes in as a non-chicken item. So when the reefer arrives at the border and the Border Services agent opens the back and says, "Oh, looks like chicken to me; away you go,'' and it's declared as spent fowl, that's the extent of the inspection.
However, with the kit, and that was my supplemental comment, with this kit, he can instantly check that and say, "Hey, that ain't spent fowl.''
The Deputy Chair: This is an appropriate break. I'm going to turn the chair over to Senator Plett right now. Unfortunately, gentlemen, I apologize, I have another event that I'm currently, believe it or not even though I'm not there, chairing elsewhere on Parliament Hill, so I'm going to ask my colleague and friend Senator Plett to take over. Senator Dagenais is next on the list, Senator Plett.
Senator Moore: While Senator Plett is getting in the seat, I thought I would ask a question.
Is there an expiry date for the agreements? Do you have an opportunity to look for changes so that you can get more of the market produced in Canada, or will the TPP impact on that? This is the root of the problem.
Mr. Bearss: I don't have a specific answer. My answer would be that to the extent that any and all trade agreements are subject to review and discussion at any given time by the trade partners, the ones that influence our business would fall under that realm, but no, we don't have a defined date at which this would be subject to review.
Senator Moore: There is no sort of sunset clause where you get a chance to review?
Mr. Bearss: Not to my knowledge. I'm not familiar with international trade agreements to that degree.
Senator Donald Neil Plett (Acting Chair) in the chair.
The Acting Chair: We are a little bit over time, but our next panel is only one witness, so I will allow Senator Dagenais one quick question, and then I will have one quick question, and then we'll wrap it up.
[Translation]
Senator Dagenais: I would like to return to the matter of spent foul arriving from the United States. Can you give us an example of labelling of the American product as compared to the labelling of chicken processed in Canada? Labelling is the crux of the issue, would you not say?
[English]
Mr. Benjamins: I guess in my mind it's not so much a problem of the labelling. It's the people playing with the labels and fraudulently changing those labels, and you have to wilfully go out to do that.
I think if you talk to the American people who regulate spent fowl, they actually want to see this problem corrected as well. This is not just something that we want to have corrected because the rules are being abused, but I think even they want to know what's going on. I think this is just wilful circumvention of rules that are in place.
Mr. Dougans: If I could, Mr. Chair. When we tend to think about labelling, it's often the package of boneless, skinless breasts that we buy at our local grocery store. A different way to think about labelling, and this is I think pertinent for clarity in terms of how much of this product comes into Canada, it could be the labelling on the bill of lading and the labelling that is on a pallet or box and the like.
It's more likely to be coming in in bulk and then to be remanufactured here in a processing facility, or it could be slacked off from frozen to fresh, then repackaged into that grocery item. So the misuse, if you will, or the deception, lies in a 53-foot freezer container being opened, looking at boxes, looking at pallets and how that might be labelled. It's labelled as fowl. We know that a good portion of it is in point of fact chicken, broiler chicken produced in the U.S. and being misrepresented as it comes into Canada. That's what we contemplate with the federal government. This is what we need to focus on and change.
Senator Pratte: Could you elaborate a little bit more, because I want to be clear exactly where the problem lies. Does it happen in the U.S. just before the border, or does it happen somewhere in Canada after? I just want to make clear who does something wrong and where we should intervene.
Mr. Dougans: I think the phrase is "It takes two to tango.'' I would suggest to you that there are parties on both sides of the border who are demonstrating creativity in how to dance around Canadian regulations. There's not one way it's done; it's done multiple ways with multiple parties. Therein lies part of the challenge, to be able to identify and then seek the appropriate ways to solve the problem. This isn't just those who are exporting to Canada. There are Canadian partners, parties to this dance who also need to be addressed.
The Acting Chair: And this has been an ongoing problem for quite some time. We have heard from chicken producers that spent fowl seems to be one of the problems.
The last question I will take the liberty of asking is about, Mr. Benjamins, I don't know if you called them specialty farmers but farmers out of the quota system. My wife and I like to go to the Hutterites to get chicken; they taste better and they're plumper and juicier. Are those the farmers you're talking about when you say specialty farmers?
Mr. Benjamins: The short answer is yes, but I want to say they do fall under our regulatory powers, but we do not give them a quota. They operate under a licence. So those are the types of people that we do operate with.
The Acting Chair: Gentlemen, thank you very much for accepting our invitation. It has been enlightening, and we certainly wish you well. We will take very seriously your comments in our further deliberations. Thank you.
The committee will now reconvene and hear our next witness from the Freight Management Association of Canada, Mr. Bob Ballantyne.
Mr. Ballantyne, thank you very much for accepting our invitation to appear. We will give you 10 minutes or so for a presentation, and then we will hopefully flood you with some questions.
Bob Ballantyne, President, Freight Management Association of Canada: Thank you very much, Mr. Chair.
I do appreciate the opportunity to speak to the committee on this important study that you're doing on access priorities for the Canadian agriculture and agri-food sector.
Of the four bullets in the committee's Order of Reference, the Freight Management Association of Canada will provide comments only on bullet (b), which is sustainable improvements to the production capabilities of the supply chain, and these comments will focus on the transportation elements of the supply chain.
FMA, Freight Management Association of Canada, formerly the Canadian Industrial Transportation Association, has been representing the freight transportation concerns of Canadian industry to various levels of government and international agencies since 1916. So this is our one hundredth anniversary this year. We'll celebrate that on October 25. We even know the office and the room number where it started in 1916.
Unlike most industry associations, which represent companies in one industry, FMA has a very broad membership of about 100 large and medium-sized companies in the retail, manufacturing, food processing, agriculture, mining and forest product industry industries, but it has a very tight focus only on freight transportation. So we advocate for shippers on air freight, trucking, marine and rail issues in Canada and internationally.
FMA chairs the domestic Coalition of Rail Shippers, which is a 19-industry association whose member companies represent about 75 per cent of the revenues of CN and CP. There is also an international group called the Global Shippers' Forum, and FMA is the Canadian member of that group. And through the GSF, the Global Shippers' Forum, we are active with UN agencies such as the International Maritime Organization and the International Civil Aviation Organization on marine and air freight issues. A decision by the IMO on container weighing becomes effective on July 1, 2016, and this will have implications for international supply chains using containers.
The last time I had the honour of appearing before this committee was on May 15, 2014, when you were considering Bill C-30, the Fair Rail for Grain Farmers Act. The conditions that led to Bill C-30 and also the recent final report and recommendations of the Canada Transportation Act review are both relevant to the study that your committee is undertaking.
Looking first at supply chain needs, the first questions to consider are these: What are the elements of a supply chain? How well are they functioning? Where are the potential bottlenecks? What are the long-term needs? Where should sustainable improvement be targeted?
Within our borders, the supply chain consists of the physical infrastructure of roads, rail lines, intermodal terminals, ports, Great Lakes facilities, marine navigation facilities and supporting electronic data interchange. It also consists of the right number of vehicles of the right kind, such as trucks, railcars, locomotives, ships, and terminal handling equipment at shippers' facilities at inland terminals and at marine ports. A very important element is the right number of skilled people to operate and maintain the transportation system.
It also includes the operation of the system, which has both private and public sector participants. The effectiveness of market competition within the transport sector is also a factor, as well as the legal and regulatory framework that is necessary for effective operation of the system.
As many supply chains are international in scope, there are international elements that do impact the market access for the agriculture and agri-food industry. The customs and immigration facilities at our borders with the U.S. need to be considered, as well as our transportation security systems and the operation of various federal agencies, such as the Canada Border Services Agency and the Canadian Food Inspection Agency. Ocean shipping services, both bulk and container, need to be considered.
Within the international container trades, there is currently some consolidation of shipping lines and restructuring of the various shipping alliances, and these changes could impact service to Canadian importers and exporters.
Looking at the current situation over the long term, public and private infrastructure investment has been sustained at levels that have generally allowed our freight transportation system to work reasonably well. When bottlenecks arise, these tend to be addressed as the supply chain delays become costly and impact our competitiveness. Maintaining the right number of vehicles is complex, especially in the rail industry. There are peaks — for example, fertilizer in the spring and moving harvest in the fall. Ensuring that traffic peaks are met while not having equipment sit idle for long periods is a balancing act and can be the source of frustration for both shippers and carriers.
When necessary, traffic can be shifted from one mode to another — for example, from rail to truck — if there tend to be bottlenecks. But then there are other implications that society needs to consider, such as possible increases in greenhouse gas emissions by the mode that has taken up the work, and this could result in other pressures from society.
While FMA has within its membership a number of agriculture companies as well as food processors, my comments will address largely issues affecting shippers and exporters broadly.
As a first comment, FMA was pleased to see the April 22 announcement by the Minister of Transport that the provisions of Bill C-30, which were to automatically sunset on August 1, are to be brought back to Parliament for a one-year extension. The provisions of Bill C-30, especially the provision of extending the regulated interswitching limits in the Prairie provinces from 30 to 160 kilometres, has turned out to be a very effective provision for shippers, especially agriculture shippers in the Prairie provinces. FMA strongly recommends that swift parliamentary passage of the government's resolution would be appropriate.
What is needed and where do we go from here? Public investment in transportation infrastructure is vital to support growth in agriculture and many other industries. The government's recent budget includes plans to invest over $120 billion in infrastructure over the next 10 years. While this is a big number, and it is welcome, there will be competing demands on how it is to be allocated. There is some concern that the first phase of this investment will focus on public transit, green infrastructure and social infrastructure. While these are all worthy, it would have been useful for the first phase to include at least some investment in transportation infrastructure in support of the Canadian economy that would enhance supply chains for Canadian exporters.
There is also significant private infrastructure investment that also needs encouragement. For example, the rail infrastructure is largely provided by the shareholders of CN and CP. These two companies have committed to spend $4 billion in 2016. That is about $2.9 billion from CN and about $1.1 billion from CP. The carriers in all modes invest in vehicles, terminals, terminal equipment, computer networks, recruitment and training of staff and improving their environmental performance. There is a role for government in supporting these private sector initiatives.
As one example and as recommended by the recent Canada Transportation Act review, improvements in the capital cost allowance for railway rolling stock — that is, locomotives and railcars and also in the fixed plant track and bridges and for shippers' terminal handling equipment — would facilitate productivity, improving investment by the railways and their customers. FMA will recommend that the government implement that particular recommendation.
There is concern that skills shortages could develop within the transport sector, and a shortage of truck drivers in the range of 30,000 across the country is forecast by about 2020 by the Canadian Trucking Alliance. Recruitment, training and other human resource actions will be necessary to meet the needs, and these may include even further consideration of immigration rules and regulations.
There is also a need to encourage innovation throughout the transportation industry, for example, to gain better understanding of the connection between the modes. One example is the introduction of the larger container vessels that will handle up to about 20,000 20-foot equivalent units, and that's putting pressure on ports, railways and supporting road infrastructure, as well as on the customs and security services.
There needs to be better public-private sector collaboration to address these connectivity issues. I would point out the recentaTransport Canada Asia-Pacific Gateway and Corridor Initiative that brought together all levels of government and the private sector and led to significant investment in the B.C. Lower Mainland that had broad stakeholder support. This is a reasonable model for further broad stakeholder collaboration.
Lastly, the legal and regulatory framework needs to be continuously monitored and revised to keep pace with new technology, new operating procedures and new supply chain patterns. The statutory requirement to periodically review the Canada Transportation Act is an attempt to keep the law current. In this case, the period between reviews may actually be a bit too long. The previous review of the Canada Transportation Act was completed in 2001, and the resulting amendments to that act did not receive Royal Assent until 2008. That was a seven-year period.
Part of this regulatory process requires various levels of government to work in close harmony. For example, standardizing the vehicle weights and dimensions of trucks across the province has been a work-in-progress for over a decade. It was also recommended to look at this further in the CTA review report.
In many areas, it's necessary that there be regulatory harmonization with the U.S. In the recent Canadian Trucking Alliance presentation to this committee, Steve Laskowski provided information for you on some of the cross-border issues that impact the efficiency of trucking throughout North America.
On the Great Lakes and seaway, regulatory proposals by the border states on ballast water exchange for ships coming in from overseas could have a serious impact on Canada if not harmonized. These are all areas within the control of various levels of government, and they can impact the production capabilities of the supply chain.
It's also important to work with the broader international community, such as the U.K. agency that I mentioned, the International Maritime Organization, to promote action by these agencies that facilitates trade as well as safety and security.
In this introduction, I've tried to outline many of the elements that have to be designed and managed to ensure that the transportation system supporting agriculture and the agri-food supply chains, and the supply chains of other Canadian industries, is working effectively. I've tried to identify areas that may be worthy of this committee's further consideration.
Thank you very much, Mr. Chair. I would be pleased to try and answer any questions the committee has.
The Acting Chair: Thank you, Mr. Ballantyne. I want to congratulate you on your one hundredth anniversary. We wish you well in your celebrations. We'll start the questions.
[Translation]
Senator Dagenais: Thank you very much for your presentation, Mr. Ballantyne. I have two questions for you. First, could you please provide a few examples of restrictions or measures you have to take to export to the United States, Asia or Europe?
[English]
Mr. Ballantyne: There are a number of things, some of which I alluded to in my remarks. With regard to the United States, one that comes to mind is the difference in the hours-of-service regulations for truck drivers. There are some differences there. There are also differences in the weights and dimensions in the various jurisdictions across North America for trucks.
There are some differences in environmental laws and regulations that are in play, too, between Canada and the United States. There certainly has been some continuing action on the part of both the U.S. and Canadian governments to try to harmonize some of these things, and some good work is going on with those.
Regarding Europe, I was going to say issues of ship capacity, but there isn't so much in the way of constraints in terms of ship capacity at this time. As for the transportation-related issues with Europe, there aren't too many issues that currently are a problem. In Asia, it's pretty much the same thing.
There do get to be some different standards and so on with regard to the various modes of transport. In that, we're talking air and ship. But those are largely handled through the international agencies of the UN and aren't too bad.
[Translation]
Senator Dagenais: What proportion of Canadian exports is rejected at the reception point due to delays in transportation that have affected their safety? Are any Canadian products rejected at the reception point due to delays that have affected their safety?
[English]
Mr. Ballantyne: The simple answer is that I can't answer that question; I don't have that information.
I will make just a few comments on it, though. For the most part, most exporters are quite sophisticated and understand the rules and regulations that they have to meet when they are exporting to other countries, especially to the United States. So I don't hear of any significant delays due to those issues that you have raised.
[Translation]
Senator Dagenais: If I understand correctly, when merchandise arrives at its destination, it is intact. The vast majority of merchandise is safe because the transportation methods take this into consideration.
[English]
Mr. Ballantyne: Largely, that is what you should understand. Those carriers that deal in food products know the rules. They also are really on top of what is required. For example, on intermodal containers, if they are either heated or refrigerated, they know what is required. They do keep on top of it to make sure that the temperatures are maintained. It is not so much railcars that are temperature-controlled anymore, but certainly with trucks, it's the same thing.
There probably are always exceptions to those things, but by and large, the carriers are doing a pretty good job there.
Senator Tardif: Thank you, Mr. Ballantyne, for being with us this evening.
A few weeks ago, the Canadian Trucking Alliance made a presentation to our committee and stressed the importance of having harmonization standards between Canada and the U.S. They also indicated that the lack of regulatory harmonization standards was hindering their industry.
How is it affecting your industry, Mr. Ballantyne?
Mr. Ballantyne: Our members are the customers of the trucking companies, the railways and the shipping lines, so to the extent that our member companies use those services, it is affecting them.
I know Steve Laskowski, who made the presentation to you. I read his prepared remarks to you before I came today. He mentioned the problems of cabotage, which is if a Canadian trailer goes into the U.S., there are constraints on what kind of moves it can do within the U.S. before coming back to Canada.
Again, as I mentioned before, some of the hours-of-service regulations for truck drivers and those kinds of things come into play, as well. So those things can have an impact.
Senator Tardif: You mentioned in your presentation that the U.S. border states' ballast water exchange could have a serious impact on Canada if not harmonized. What is a ballast water exchange?
Mr. Ballantyne: That's one of those many technical things. Depending on whatever industry you are in, if you're not in it, it makes your eyes go glassy when you get into those details. However, I will go down into those details for you.
When ships come in from overseas, they have ballast tanks, depending on how much cargo they have, in order to keep the ship properly ballasted so that it's tracking properly through the sea. There may be more or less water in the ballast tanks.
Sometimes organisms can be picked up in other parts of the world and brought into the Great Lakes system. The fact of the matter is that after the St. Lawrence Seaway was opened in 1959, that did start to happen. There are a number of examples where invasive species came in that way.
There is a concern of some coming up through the Mississippi River that could get into the Great Lakes system right now, as well.
Senator Tardif: Are there different standards in the U.S. as opposed to Canada on those invasive species?
Mr. Ballantyne: What is happening with this ballast exchange business is that there are international rules from the International Maritime Organization on ballast exchange. The whole idea is that ships coming into the Great Lakes are supposed to do this exchange, for example, in the Atlantic Ocean before they come into the St. Lawrence River.
Not only the U.S. Coast Guard, but some of the individual states in the United States have set up regulations that, for the most part, the shipping companies say they can't meet — that nobody could meet. New York State was one. They have pulled back from what they were proposing to require, but I think Michigan is still playing around with something, as well.
It's never been clear to me why the International Joint Commission isn't the one responsible for that and why individual states even have a role, but apparently they do.
So, this is something that the Canadian government has been on top of — Transport Canada. They have been lobbying in the U.S. on this issue, as has the Chamber of Marine Commerce, which represents the Great Lakes shipping industry and a lot of their customers, as well.
So there is work going on with that, but it's still an uncertain situation. I think sensible heads will prevail on this, and it will be reconciled.
There was some concern about Canadian ships that may go further into the Gulf of St. Lawrence than most U.S- flagged ships in the Great Lakes fleet. It looked like some of the U.S. rules were likely to target those Canadian ships that go further out into the Gulf of St. Lawrence, and so, again, that's something that is being worked on.
Senator Tardif: Thank you.
Mr. Ballantyne: I hope didn't make your eyes go too glassy on that one.
Senator Tardif: I think I got the gist of it.
Senator Moore: Thank you, Mr. Ballantyne, for being here. In your remarks you said your association advocates for shippers on air freight, trucking, marine and rail issues in Canada and internationally. You went on to say that a decision by the United Nations International Marine Association, the IMO, on container weighing is effective July 1, 2016 — in two months.
Mr. Ballantyne: That's right.
Senator Moore: I have just heard a bit about this peripherally, but my understanding is it will have implications for international supply chains. A container could have more than one shipment; it could have 10 smaller shipments within it. Does each shipment within a container have to be weighed, and that data given to somebody? With whom lies the responsibility of having it done, the authority to make sure it has been done, and to answer to the —
Mr. Ballantyne: To the IMO?
Senator Moore: Yes.
Mr. Ballantyne: This has come up as a safety issue. Whether it's a container loaded by one shipper or by a freight forwarder which has, as you suggested, a number of smaller shipments in it, the issue here is to ensure that when the containers are loaded on board the ship, the stowage plan is accurate, so that the weights —
Senator Moore: Balancing . . .
Mr. Ballantyne: Absolutely. That's the requirement. There is a convention called the Safety of Life at Sea convention, or SOLAS, and Canada is a signatory to it. Since 1977, it has required that the accurate weight of containers is supposed to be provided to the shipping line so that they can load the ship properly.
But all over the world, a lot of the weights have been estimated — they haven't really been properly measured — and a number of marine accidents have been attributed to that. The World Shipping Council representing the container lines went to the UN regulator, the IMO, and said this needs to be tightened up, so starting in about 2010 through to 2014, the IMO came up with a revision to SOLAS that basically requires a verified gross mass for each container. That means that somebody has to put their signature on it saying this is the accurate weight.
This provision as can be managed one of two ways. The obvious way is that, after the container has been loaded, you weigh the whole thing with the stuff in it. The other way, as you alluded to, is to weigh the individual packages and any packing material or tonnage or whatever and then add that to the weight of the box, which is listed on the side of it. That's considered okay. That has to go from the shipper or the freight forwarder to the shipping line. That's what is required, and it has to be done in time to load the ship.
Senator Moore: I don't know if this is accurate or not, but I have heard that in the United States — and this is terms of an international transaction, say, from Canada — the shipper is responsible to have the container properly weighed and that data forwarded to the shipping line.
Mr. Ballantyne: Yes.
Senator Moore: In the United States, the Coast Guard has the authority to enforce and oversee that, but they don't have the manpower or the equipment, and they are saying they are not going to do it. So, how does all that work? What happens with the container whose weight isn't properly documented and given to the shipping line?
Mr. Ballantyne: In fact, according to the SOLAS convention, the shipping line is supposed to refuse to load that container. Now, in terms of the regulation —
Senator Moore: It stays on the wharf.
Mr. Ballantyne: Yes, until they got a properly verified gross weight. The regulatory side of this is fairly interesting. I have seen where the U.S. Coast Guard has basically said they are kind of washing their hands of it. Just so you know, Transport Canada is responsible here, and they are putting out a guidance document. Similarly, they are saying that unless somebody brings a problem to their attention, they are really only going to oversee it by exception. But there is a provision, too, for fines. I think they are proposing fines that would vary from a low of about $500 to a high of about $12,000 per incident if they find out anything. There is still a lot of uncertainty all over the world.
Senator Moore: But it's coming in on July 1.
Mr. Ballantyne: Yes. The IMO made this decision in May 2014, and it's only been since last summer that people have really started to take notice of this.
Senator Moore: This has implications that could be costly.
Mr. Ballantyne: Yes, and it could cause delays. There is a lot being done right now by all the participants — the shipping lines, the shipper community, the freight forwarders, the terminal operators in all the big ports — to try to get themselves geared up for this.
Like a lot of countries, Canada hasn't put out its regulations yet. There is a second draft out of the guidance document for the Canadian regulation, but the final document from Transport Canada hasn't been issued yet. The Chinese government just issued theirs a couple of days ago, New Zealand has theirs out, and the British are the furthest ahead of anybody, having put theirs out last year. There is still a lot of uncertainty in various parts of the world.
Senator Moore: I'm concerned because in Canada, the U.S. is our big trading partner. It has got to be tightened up. Thanks, Mr. Chair.
The Acting Chair: I would like to ask a question, if I could. The committee is studying international market access priority for the Canadian agricultural and agri-food sector. Part of your presentation, I think, dealt specifically with C- 30, as you mentioned, and interchanging, from 30 to 160 kilometres, which was certainly a huge benefit to short line rail and to Western Canadian farmers.
The previous government implemented some regulations. A year or two ago, we had reasonably cold winters, and CN and CP, according to many farmers and the government, were not meeting their obligations and not moving Western Canadian grain. They were moving oil instead. We put some time restrictions on them, and clearly you, in your position, must have been at least involved in some of that, and although we may not have had you as a witness, we certainly have had CN and CP here.
Because this is really a study about market access for the farmer, what are the agricultural industry's three biggest concerns when it comes to shipping?
Mr. Ballantyne: I can only speak to the transportation part of it.
The Acting Chair: Fair enough. I know it's maybe a difficult question, but perhaps you have something for our report.
Mr. Ballantyne: Rail service is probably the number one issue that I see and hear about. This has a number of elements to it. One is car supply, and another is consistency of service — transit time and that kind of thing. That's probably the biggest. There are some issues at the ports periodically. It may be a case of looking at the relationship between the various elements in the whole transportation system, that is, getting grain from the farmers to the inland terminals and from the inland terminals with enough railcars to the port, and the capacity of the elevators at the ports as it relates to ship arrivals and that kind of thing. All those elements can come into play.
Certainly, I've heard most about the rail thing over all the years that I've been involved in this, and of course I wasn't around 100 years ago when the association started, but it's been quite a long time. This is an issue for many shippers and industries, not just for agriculture.
The Acting Chair: Hopefully things have gotten a little better, but I guess the general complaint today is the same as it was four or five years ago and even further back than that.
Mr. Ballantyne: Sure.
The Acting Chair: Do you think there is an answer to the problem?
Mr. Ballantyne: Yes, there probably is, and it's complicated for everybody. As I said in my remarks, one problem that all modes have, and we'll focus on the railways because of the agricultural side of what we're talking about, is peaks. If you're a railway company and you've invested in railcars and so on, can you afford to have enough equipment to meet the absolute peak, or is there something less than that? How to balance off the peaks is just the way our world works. The harvest comes when it comes, and planting comes when it comes. If you're talking consumer products, Christmas comes when it comes. There are all kinds of peaks that the transportation system has to meet; and how to do that in a way that is economical for both the carriers and their customers is a real challenge. It is something that everybody works on.
I would say that I'm not sure the communication between all the players in the various supply chains is as open and effective as it could be. There is always a tendency to protect your own particular situation, so that sometimes inhibits the communication that should be going forward.
The Acting Chair: Short of government intervention and telling the rail lines, since we believe that that might be the biggest problem, that they're hauling this product instead of that product, it's very difficult — not wanting to promote more supply management than we have. That would be the only solution to it.
Mr. Ballantyne: Well, that's a difficult one. The government's decision to mandate CN and CP to haul 500,000 tonnes of wheat is a very dangerous way to do it. It causes potential problems for all the other shippers and industries that depend on rail for moving their products. In fact, some portions of the agricultural industry other than grain probably were impacted negatively by that, to some extent. There is no easy answer to this. It is a case of trying to balance all the competing needs.
The railway is a network business, and how to fit all that in is a real challenge for everybody involved in the various supply chains. Improving the communication to a more open way between the carriers, the shippers and the farmers, et cetera, is in the short to medium term the best we could do.
The Acting Chair: Not wanting to make this a debate, I apologize if I am. When you have industries that are hurt, like the farming industry, the automobile industry, and now with Bombardier and the oil industry, often the only answer is government intervention.
Mr. Ballantyne: Yes, that does happen. In the most general sense, that's right. The problem in the 2013-14 crop year was quite unusual. Bill C-30 had the provisions to allow the government to do that. With this extension of Bill C-30 for one more year, that provision will remain; but a lot of people in the shipper community would like to see that particular provision not extended.
My feeling is that the conditions in the 2013-14 crop year were so unusual. We have had two crop years since where the government has had the right to do that and hasn't. The chances of it happening again, between now and August 1, 2017, when Bill C-30 presumably will end, are pretty slim.
The Acting Chair: Let's hope so. Mr. Ballantyne, thank you very much for appearing. It has been very valuable information. We appreciate that.
I'm sorry, Senator Unger, do you have a question?
Senator Unger: Yes.
The Acting Chair: I apologize. Last question to you.
Senator Unger: Mr. Ballantyne, I live in Alberta and I have a question about whether or not your industry is impacted by the drop in the price of oil. In your presentation, you touched on skilled workers. I wonder if you would just briefly elaborate on that.
Mr. Ballantyne: Our association has a very broad membership of companies in Alberta. One of the big ones that come to mind is Agrium. Someone from Agrium is the chair of our rail committee. All industries have been affected, to some extent, by what has happened to the petroleum industry in Alberta. In terms of what our member companies have seen, I haven't heard anybody indicate that any immediate problems have emerged for them from that. The issue of the cost of fuel at the pump, whether diesel fuel for trucks or whatever, is obviously a factor that comes into play.
In terms of skill shortage, a lot of people have been laid off in the oil industry, which is a real tragedy. Whether some of those people would consider retraining as truck drivers, where there may be a significant shortage across Canada, remains to be seen. Those are the very most general comments I can think of in answer to your question.
Senator Unger: Thank you.
The Acting Chair: Thank you, Mr. Ballantyne. Thank you, colleagues. We will start again on Thursday morning at eight o'clock. The meeting is adjourned.
(The committee adjourned.)