Proceedings of the Standing Senate Committee on
Agriculture and Forestry
Issue No. 9 - Evidence - Meeting of May 5, 2016
OTTAWA, Thursday, May 5, 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 welcome you to this meeting of the Standing Senate Committee on Agriculture and Forestry. I'm Senator Terry Mercer, and I'm deputy chair of the committee.
I would like to start by asking senators to introduce themselves, starting on my left.
Senator Beyak: Good morning. Senator Lynn Beyak from Ontario. Welcome.
Senator Tardif: Good morning. Claudette Tardif from Alberta.
Senator Moore: Good morning. I'm Wilfred Moore from Nova Scotia. Thanks for being here.
Senator Plett: Hi. My name is Don Plett. I'm from Landmark, Manitoba.
Senator Oh: Good morning. Victor Oh, Ontario.
Senator Pratte: Good morning. André Pratte from Quebec.
Senator Ogilvie: Kelvin Ogilvie from Nova Scotia.
The Deputy Chair: Today, the committee is continuing its study on the international market access priorities for the Canadian agriculture and agri-food sector. That 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 Canadians and being responsible for 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, the Trans-Pacific Partnership, and the Canada- Ukraine Free Trade Agreement have been concluded, and eight free trade negotiations are currently ongoing.
The federal government is also undertaking four extraordinary trade discussions between Turkey, Thailand, Philippines and the member states of Mercosur, which includes Argentina, Brazil, Paraguay and Uruguay.
Before we start to hear from our witnesses, we do want to take a moment to recognize and perhaps ask Senator Tardif to pass on our best wishes to the people in northern Alberta.
Our first witness this morning is from the Canadian Sugar Institute, Ms. Sandra Marsden, who is the president. Thank you for accepting our invitation, and I would invite the witness to make her presentation. Following that, we'll have a question-and-answer session. I would ask senators to follow our usual practice of five minutes per intervention. We will keep the clock and try to keep us on track, but we've been very good lately and have been able to actually get to a second round.
During the question-and-answer period, I would ask that you are succinct and to the point in asking your questions, and I would ask the witness to do the same in her answers.
We will now begin. Ms. Marsden.
Sandra Marsden, President, Canadian Sugar Institute: Thank you, Mr. Chair and members of the committee. The Canadian Sugar Institute represents Canadian refined sugar producers, and that would be Lantic Inc. and Redpath Sugar Limited, on nutrition and international trade affairs. We have a very focused agenda on issues of generic importance to the industry. We're also members of the Canadian Agri-Food Trade Alliance. They were to appear today but, unfortunately, had to cancel.
The industry has three cane-sugar refineries in Vancouver, Toronto and Montreal, and a sugar beet processing plant in Taber, Alberta. The industry has also added further value through investments in two other processing facilities for products such as iced tea, drink mixes, sweetened gelatin desserts and so on, and these are for domestic and export markets.
Whether from cane sugar or sugar beets, refined sugar production in Canada is truly Canadian. The origin of Canada's refined sugar industry dates back 200 years and is an integral part of Canada's history and the development of a vibrant food-processing industry.
Of Canada's 1.1 million to 1.2 million tonnes of refined sugar production, about 90 per cent is refined cane sugar and 10 per cent beet sugar. Sugar beet production and processing has remained competitive in the Prairie region, inland from deepwater ports, and benefits from preferential access to the United States and other markets where rules of origin limit our exports to those at favourable duties to beet sugar.
I won't get into the specifics of cane and beet production in Canada, but I'm happy to answer any questions after my remarks.
On that note, I have provided separately some factual corrections to a previous witness on April 16 — Mr. Lumley from the Ontario Sugar Beet Growers' Association. I believe they have been circulated.
Canada's sugar industry is a capital-intensive value-added industry, historically based on the refining of raw cane sugar at major points. This is because we cannot produce sugar cane in Canada, which is the major source of sucrose, that is, sugar around the world. Our market is an open market. For that reason, we have to remain competitive with the large suppliers of sugar around the world — the United States and Europe, for example, who have protective sugar policies, whereas Canada does not.
The only protection we have from world market distortions is a $31-per-tonne tariff, which is about 5 per cent. It's low in relation to tariffs in the European Union and the United States, for example, that are over 100 per cent. Japan is close to 300 per cent.
Globally, sugar is one of the most distorted agricultural commodities around the world, characterized by widespread government support and trade-distorting policies, such as guaranteed minimum prices, marketing controls, restrictive quotas and tariffs, and export subsidies and incentives. The Canadian sugar beet processing and producing industries don't benefit from any of these policies.
Given that very uneven international trade environment, Canadian sugar operations have had to rationalize in response to those pressures. The refiners and beet processor have reinvested in existing operations to improve efficiencies, but all of those plants are currently underutilized. So we need new market opportunities.
The Canadian sugar market is a mature market, and per capita sugar consumption has been declining. Production increases have reflected sporadic opportunities, such as when there is an emergency shortage of sugar in the United States due to unforeseen weather events. Going forward, we need more certain market opportunities.
The Canadian sugar industry is an integral part of Canada's food-processing value chain. Our industry depends on food processing for more than 80 per cent of our production. Consumers are cooking less at home and so not buying as much sugar at retail.
Refined sugar is an input to about 30 per cent of Canadian food processing, in large quantities in some products and much smaller quantities in others. Collectively, major sugar-using industries account for about $18 billion in revenues, $5 billion in exports and 63,000 Canadian jobs.
Although Canada continues to be a highly competitive location for food-processing investment, Canada's trade balance has been deteriorating. Food manufacturing investment has been on the decline in Canada, and food product imports have been growing faster than exports. Since 2005, Canada's trade surplus in products containing sugar declined from a surplus of $800 million in 2005 to a deficit of $160 million in 2014. That trade loss affects our industry directly and relates to about a 140,000-tonne decline or about an 11 per cent decline in sugar production in Canada. That, of course, accounts for the underutilization of our plants.
Our first priority to address these challenges is to support Canadian government initiatives to secure meaningful increases in export access so that we can diversify our markets and improve our capacity utilization and competitiveness. We strongly support a renewed effort to engage the WTO toward a new multilateral agricultural agreement that would reduce market access barriers and address all of those trade-distorting policies in a comprehensive and meaningful way.
In the absence of multilateral reform, free trade agreements such as CETA are critical because the target is a highly developed, high-value market. The FTA benefits the full value chain, which includes Canadian sugar, high-sugar- content sugar-containing products, and further processed products, such as confectionary, baked goods, breakfast cereals, cookies, processed fruits and so on. All of these products contain other important Canadian inputs.
We fully support timely implementation of the CETA, including the necessary export procedures, to ensure our industry can fully benefit from the negotiated access improvements.
The next major priority, of course, is the Trans-Pacific Partnership. It is critical that Canada ratify this historic agreement, as the costs of exclusion would put Canada further behind in food manufacturing investment and trade, including our sector. While the agreement has certainly not addressed all of the international sugar trade distortions, it will provide meaningful improvements in access to the United States, Japan and other markets.
However, much work remains to be done to analyze and promote the benefits of that FTA, particularly in accessing new quotas in Japan so that the benefits can be realized for both our sector and the further processing sectors.
We are encouraged by new government mandates to develop trade agreement implementation plans because it doesn't stop at the negotiation of the final text of an agreement. Much work remains to be done on targeted strategies to promote trade and investment. Further investment and exports from Canada will improve capacity utilization of our cane sugar refineries and our sugar beet processing plant and will enhance the competitiveness of our food manufacturing customers, both at home and export markets, because the better and more efficient and competitive food processing facilities will of course be enhanced by new trade opportunities.
It is absolutely essential that Canada take the lead in advancing trade liberalizing initiatives, particularly with high- value markets such as the EU and the TPP region, where our industry and our customers can maximize synergies through the value chain.
Thank you.
The Deputy Chair: Ms. Marsden, thank you very much for your very detailed and succinct presentation. We will now go to senators for questioning. We'll start with Senator Plett.
Senator Plett: Thank you, Ms. Marsden, for being here this morning. Some of my questions may be the same as I asked the person from Ontario here a while ago, and you did answer my first question and that was on the TPP. Thank you for that clarification. I agree; I think it is great that the TPP should be ratified and hopefully will be.
I'm from Manitoba, somewhat on the eastern part of Manitoba, and we used to grow a lot of sugar beets in my area and don't any more. I think they still grow some further west. And we don't have a processing plant in Manitoba, but there is one within half an hour from the border in North Dakota.
I'm wondering why more farmers in Manitoba are not growing sugar beets with the processing plant as close. Clearly farmers will do what makes them the most money. Is there not the same type of revenues in sugar beets as there is in some other crops that they're growing?
Ms. Marsden: Revenues in the United States compared to Canada would be very different. The United States has a support program, and a marketing allotment program, so there's control on the sales of beet sugar and cane sugar, which therefore controls how many sugar beets can be grown. But they do have effective price support. The price in the U.S. market is substantially above the price in Canada.
On average, Canadian sugar prices are about 40 per cent lower than in the U.S. because we operate on the world market. Sugar beet production and processing in Canada has to get its returns from the world market, so all the pricing of sugar is driven by the world market here.
The export of sugar beets in Alberta to the United States would be at the discretion of a U.S. cooperative that might not have enough land to produce beets. That isn't the case in that part of the country. I think the situation in Ontario is somewhat unique in that Michigan Sugar had a requirement for more sugar beets to meet their marketing allotment.
Senator Plett: You're telling me that the people in North Dakota wouldn't be taking that many sugar beets and that's why we're not growing them; is that the short answer to that?
Ms. Marsden: They have enough sugar beets of their own.
Senator Plett: Thank you. Now there is still some going over there. Does that sugar come back into Canada? Is it Canadian sugar or is it U.S. sugar?
Ms. Marsden: It is U.S. sugar. A sugar beet is a plant and is transformed into sugar. The origin of that sugar relates to the country where it was transformed. Those are the rules of the NAFTA.
Senator Plett: Is it less costly to grow cane than beets? We can't do it, I understand, but are they doing it cheaper in the southern United States than for growing beets?
Ms. Marsden: I'm certainly not an expert on the cost of production for sugar cane and sugar beets, but both sugar cane and sugar beets in the United Stated would be operating under their higher-priced market, so you would have to look at the efficiencies in that context. Our sugar beet production would be very competitive given that it has to operate under world market conditions.
Senator Plett: I think the chair pointed out earlier that his wife and my wife have the same goals, and that is to try to put us on diets and try to keep us a little healthier than we are. It's not working for me, but I do try. So this morning I had brown sugar with my oatmeal. Is that healthier than white sugar, and is Sugar Twin healthier yet?
Ms. Marsden: I think the important thing is that that little bit of brown sugar made that oatmeal enjoyable, and it's a very healthy food.
Senator Plett: Thank you.
Senator Tardif: Thank you for being here. I asked a few questions of Mr. Lumley when he was here talking about the sugar beet industry, and I asked questions particular to Alberta, the province that I'm from, and I notice that quite a few corrections have been made to the testimony that was given at that time. I've asked about Taber, and I understand that Taber produces about 2 per cent of the sugar production in Canada, if that's correct.
I asked where the sugar is exported. Is it sent out to the U.S. or is the Taber sugar production for the Alberta market, and it appears it would be for the Alberta and Saskatchewan market, although you've corrected that and you've indicated that it is for the Prairie market. However, in your explanation, and if you could explain this, you've added that current access to the U.S. is 10,300 tonnes of refined beet sugar only. To ensure this benefits Canada's sugar beet sector, the Government of Canada issues export certificates, which are tightly controlled under Canada's Export and Import Permits Act. No refined cane sugar is exported through the Canada share of the U.S. refined sugar quota. What does that mean?
Ms. Marsden: Thank you for the questions. I'll start with your first comment in terms of the share of beet sugar production. Cane sugar has represented 90 per cent to 93 per cent of total Canadian sugar production. Therefore, beet sugar production is in the range of 7 per cent to 10 per cent, not 2 per cent. It's still a very important contribution to Canadian sugar production and importantly serves the Prairie market and the export market.
Beet sugar from Alberta is exported to the United States to that Canada specific — the U.S. has a refined sugar quota, and the United States has allocated 10,300 tonnes of that quota. It's a very small quota, only 22,000 tonnes relative to the U.S. sugar market, which is 10 million tonnes, so this is one of our challenges. Nonetheless, Canada was successful in negotiating that 10,300 tonnes access, and the only sugar that qualifies is beet sugar from Alberta. You correctly noted that that's controlled through Canada's export control regime.
I hope I've answered that last question.
Senator Tardif: Does the sugar that is produced from the beet sugar in Taber come back into Canada? You're saying that it can be exported as part of the export market to the U.S. Can it come back, or is that considered a Canadian product, or then it becomes a U.S. product? I guess it's exported, so it becomes a U.S. product.
Ms. Marsden: The rules of origin are extremely complicated for these trade agreements, but what is very clear is that the 10,300 tonnes is Canadian beet sugar and it is the only sugar that qualifies for that U.S. quota. It's still that Canadian sugar, but it is consumed in the United States; it doesn't come back.
Senator Tardif: And I notice you've indicated as well in a correction that now 6,000 more acres will be planted in Taber. That's an increase of 25 per cent; is that correct?
Ms. Marsden: Yes. Lantic Inc. has just announced that they have reached an agreement to contract an additional 6,000 acres, bringing the total to 28,000 acres in the upcoming fiscal year.
Senator Tardif: I understand that the Taber plant is an older plant and it would need a lot of upgrading. Can it handle this extra production?
Ms. Marsden: I would assume that if Lantic has contracted the additional acres they are confident they will process that sugar. Many years ago when the factory in Manitoba closed, the company reinvested in the Taber plant. It is very efficient.
Senator Oh: Thank you, Ms. Marsden. My question will shift back a little to the Asian market, which has become the most important for Canadian companies exporting to Asia. If the TPP is ratified, do you see the sugar market going into the Asia-Pacific region from Canada?
Ms. Marsden: Well, the first priority is the Japanese market. Japan, through the Trans-Pacific Partnership, has offered a number of sugar-containing product quotas. It's a very complicated result, and we still need some help from the Canadian government to evaluate what it means. But many of those quotas are for products that our industry does produce, such as for sweetened cocoa products and confectionary that our customers would produce. We see a new competitive opportunity to reach that market.
Other markets like Vietnam and Malaysia may provide opportunity.
The result is that the TPP is not consistent across all countries. They've all offered something different, but we are confident that we will benefit from those improvements in access. It will take time. It's not going to happen overnight, because there are phase-outs of tariffs, and quotas will be at one level and then increase, and so on.
Senator Oh: How much sugar do we have for new markets exporting to Asia? Are any forecasts coming in?
Ms. Marsden: The industry overall in Canada is at about 70 per cent capacity utilization. We're producing approximately 1.2 million tonnes, and we have 30 per cent additional room to reach new markets, so we have plenty of capacity available to reach new markets. Remember that the increases are relatively small in relation to our capacity because these countries are still highly restrictive. Any new access is important to our industry and we will be able to serve it.
The Deputy Chair: Your answer to Senator Oh's question raises another: Is the industry monitoring the process on the Trans-Pacific Partnership so that they can respond to that? If there is room for expanded production, is somebody saying, "Okay, the Taber plant is planting more sugar beets this year?'' Is somebody looking, post signing of the TPP, to increase production even further?
Ms. Marsden: Absolutely. There are a number of means by which we can monitor that. First of all, the Canadian Sugar Institute is monitoring it very closely through our collaboration with the provinces. We have participated in a number of round tables in British Columbia and Alberta, most recently, where we have talked to other allies in the food processing value chain. We're also monitoring it through the Canadian Agri-Food Trade Alliance; we're an active partner in that organization. And our member companies would be doing that on their own commercial basis.
[Translation]
Senator Dagenais: You spoke about an industry that has reached maturity, and for some time now, food chain processors have been talking about a decrease in sugar content. Where are you going to focus your efforts to take advantage of international trade, among others the Trans-Pacific Partnership Agreement and the Canada-European Union Comprehensive Economic and Trade Agreement? Those are interesting markets for you. Where do you intend to focus your efforts to promote sugar?
[English]
Ms. Marsden: Thank you for the question. First, the most important thing is we are not promoting sugar consumption; we're promoting new market opportunities for our products and those of our customers. The Canadian sugar market is a mature one as it is in other developed countries, like the United States and Europe.
Canadians are not consuming more sugar, and we're not promoting that they do so. Sugar is a vital ingredient in a number of food products. As I mentioned, 80 per cent of our sugar production goes into food processing, so many of these products are the ones that our customers would be promoting in export markets, and we will supply those customers, so both our industry and those sectors would increase. Sugar confectionary, baked goods, biscuits and sweetened jams and jellies are all products that you cannot produce without sugar as an ingredient. In addition to sweetness, it has a functional role in those products.
[Translation]
Senator Dagenais: Do you think there are openings in the European market for the sugar industry?
[English]
Ms. Marsden: I'm not sure I understand the question.
[Translation]
Senator Dagenais: In your opinion, can your industry break into the European market?
[English]
Ms. Marsden: Yes. The outcome for the CETA is quite clear to our industry, and our members are already looking at opportunities. Canada successfully negotiated a number of quotas, some for very high-sugar-containing products such as gelatin deserts, drink mixes and iced tea — products that are commonly consumed. It is restricted in volume, but it will nonetheless provide opportunity. There are other quotas for processed food products that, again, the Canadian manufacturing sector will benefit from, and we can supply those customers.
Senator Pratte: I'm a rookie, so maybe this stuff is well known to the other senators around the table, but I'm interested in the cause of the overcapacity. You mentioned that food manufacturing investment in general, but specifically in sugar-based products, has been on the decline in Canada, and food product imports have been growing faster than exports. I understand that's in general, but in particular for sugar-based products.
I'm curious to know why this is so.
Ms. Marsden: Thank you for the question. There are a number of factors, of course. One of the most significant was that under the NAFTA, Canadian food manufacturing and processing increased dramatically to take advantage of new access into the United States. Part of that is linked to a very favourable exchange rate. Beginning in about the mid- 2000s we saw a dramatic change in the exchange rate, and if you looked at the trend, that would match it very closely. That's certainly not the only factor, but it was a very significant one.
In our sector, the biggest impacts on our overcapacity have been related to that change in the food manufacturing in general, but also trade restrictions. For example, when the WTO came into being in 1995, the United States cut back our access.
That directly affected Manitoba sugar because 60 per cent of that plant's exports were going to the United States, and the U.S. imposed a new quota that effectively stopped that trade. It also affected Eastern Canadian refineries because drink mixes, which had previously been unrestricted, were folded into a quota effectively stopping about 50,000 tonnes of sugar content trade.
These restrictions have not changed in that time frame. That would take a new WTO agreement. The TPP will improve that somewhat, but we had hoped it would open it a little bit more. We have a long way to go.
Senator Pratte: I understand your overcapacity is about 30 per cent, if I'm correct. Does that have anything to do with the health concerns of Canadians who would like to reduce the sugar content of what they're eating?
Ms. Marsden: That would be a very minor factor because the population is still growing. Per capita consumption is not growing; it has been on a modest decline. Previously, that had a lot to do with the shift from sugar to the use of high fructose corn syrup in soft drinks. So there's very little business in the liquid sector today relative to what it was, but those are historical changes.
Senator Beyak: Thank you very much, Mr. Chairman.
I think jam will be a huge export. Our friends in Monaco and in the United States, any time they come to Canada they want our jam because it's so good with the thick fruit, and however we process it, it's better than anyone else's.
My question pertains to the corrections you made to Mr. Lumley's testimony. It's good to have updates. I think that's important. But it seemed to me you were both on exactly the same page for the industry. So I wondered if you worked together and if this is perceived correctly.
Ms. Marsden: In fact, our industry represents the Canadian sugar industry in Canada, so that would be sugar produced from raw cane sugar refineries in our sugar beet processing plant.
Mr. Lumley represents the Ontario Sugar Beet Growers' Association, and they don't produce sugar, so they wouldn't be part of our organization. They are not part of the Canadian Sugar Institute, and we don't have the same agenda.
Senator Beyak: Thank you very much.
You both seem to want better access to world markets and to have a growing industry.
Ms. Marsden: Absolutely. Certainly, we would support all producers in trying to improve their sector and gain improved access. Unfortunately, refined sugar itself is a restricted commodity; sugar beets can trade freely.
Senator Beyak: Thank you.
Senator Ogilvie: Thank you very much.
Ms. Marsden, I'm trying to get an overall sense of the Canadian sugar production from the two testimonies overall. I think you have been clarifying it quite well, and I'd like to make sure that I understand it.
First of all, one of the key issues, if I understand the testimony correctly, is that Canadian sugar production, raw sugar production is only protected by a very low tariff. You mentioned $31 per tonne. Is that correct?
Ms. Marsden: That would be the refined sugar tariff. There is no tariff on raw sugar.
Senator Ogilvie: I will be asking all my questions about refined sugar.
From your testimony, Canada produces about 1.2 million tonnes of refined sugar annually, 90 per cent from sugar cane and 10 per cent from Canadian-grown sugar beets. The sugar cane is all imported, is that correct?
Ms. Marsden: It's a raw sugar which is not fit for consumption. It's milled from sugar cane in sugar-producing countries such as Brazil.
Senator Ogilvie: That would all be contributed to our refineries?
Ms. Marsden: Yes.
Senator Ogilvie: The real value of sugar in the Canadian economy comes from the efficiency of refiners within Canada and their ability to compete within the usage market of sugar in Canada against international producers, is that correct?
Ms. Marsden: That's correct, yes.
Senator Ogilvie: Of the total amount of refined sugar used in further processing in Canada, the 1.2 million tonnes, what percentage of the total does that constitute? To put it differently, how much refined sugar is brought directly into Canada as refined sugar for further processing?
Ms. Marsden: If I can interpret the question, how much refined sugar would be brought in for food manufacturing?
Senator Ogilvie: I'm trying to get a sense of what does the Canadian refined sugar constitute as a percentage of the total refined sugar used in Canada on an annual basis.
Ms. Marsden: Just to reiterate that we do have to compete with refined sugar imports. The Canadian International Trade Tribunal imposed anti-dumping duties on imports of refined sugar from the United States and Europe because those are trade distorting.
Outside of that, all other refined sugar can enter the market, and it's in the order of about 50,000 tonnes, so relatively small. I think it's an indicator of how competitive our industry is.
Senator Ogilvie: That's where I was going. The way I was reading it, it sounded to me like our refineries must be very efficient and our sugar beet producers must be very efficient to be able to compete against massive production in the United States, for example. So I wanted to get a magnitude of how efficient the refining here must be.
Ms. Marsden: Canada is unique in that regard, sitting next to a giant that is highly protected and highly supported. The only other countries in the world that are not supported by sugar policies would be countries like Brazil, which, of course, is distant from Canada, and Australia has some natural geographic protection.
Senator Ogilvie: On that basis, then, I'm assuming that the production capability, the value of farmland usage in Canada is such that growing sugar beets is not terribly competitive with other uses of Canadian farmland in terms of going from, let's say, grain to sugar beets in order to provide the access to refining here to sugar beet contribution away from importing the product of sugar cane growth.
That's a convoluted way of asking it. What I'm saying is that farmers are very smart business people, so I guess the use of their land for growing sugar beets, even given the efficiency of the Canadian facilities here, it's not sufficient to drive them into sugar beet production.
Ms. Marsden: I think history is the evidence, and it is economics that has driven it. The industry was founded on cane sugar refining, and there was some sugar beet production processed in Eastern Canada before that stopped in the fifties. So it proved not to be economic relative to the cane sugar refining. Again, it comes back to the fact that we're an open market and we have to be competitive.
The Deputy Chair: You've made a couple of references to the protectionism of the United States market.
Are you suggesting that sugar producers in the United States may receive, directly or indirectly, a subsidy for the production of their products in the United States?
Ms. Marsden: The United States has a very rigid sugar regime that has a loan rate that effectively serves as price support. So it does guarantee certain prices in the market for raw cane sugar and refined sugar. It's an indirect subsidy.
The Deputy Chair: Again, the most important piece of equipment on an American farm is the mailbox.
Senator Plett: I have two questions. The first one, just very simply, is what are trade-distorting sugar policies? Can you explain that?
Ms. Marsden: They would be specific to different countries. In general, import protection in the form of very high tariffs that are often combined with small quotas. So I refer to that, for example, with the U.S. So that's the first thing, import protection.
Domestic support, such as that loan rate which props up the price in the market, and it gives producers a guaranteed return. They try to maximize their production under those high prices, and then they have to dispose of their surplus.
Effectively, that becomes an incentive to export at unfair prices. Coming back to my earlier point, that's why Canada imposed anti-dumping duties on this unfairly traded sugar from the U.S. and the European Union.
Senator Plett: I'm not sure whether I should be asking the witness this or the chair. I'll simply throw it out there.
We have a document here that is entitled "Corrections to Errors in Evidence,'' and Senator Tardif already referred to it and others. The analyst briefly explained that some of these were probably updates, but we have a document here that is saying corrections to a number of things that a witness a few weeks ago said.
I'm sure our witness, Mr. Lumley at that time, was telling us what he believed to be correct and Ms. Marsden is now telling us what she believes to be correct. Without wanting to suggest that either one of them is not correct, there are some very big differences in evidence here.
The Deputy Chair: I have ruled that we will accept Ms. Marsden's document, which is entitled "Corrections to Errors in Evidence of April 14, 2016.'' We will take it as her opinion, and we will weigh it ourselves as we deliberate for our report at some future time.
I don't think this is the place for us to provide a debating spot for witnesses with each other, but we do appreciate the comments from witnesses with respect to what someone else may have said. It will up to us to determine what we see to be the actual testimony that we will accept when we get down to writing our report.
Senator Plett: Which is — with respect to our witness — why my question was directed at the chair and not at the witness. Thank you for that. I'm happy with that explanation.
The Deputy Chair: Thank you very much.
Senator Tardif: You've spoken about the fact that some countries do have a sugar protection policy. Canada does not have a sugar protection policy. Is that good or bad?
Ms. Marsden: I think it's good. I could suggest we impose new duties to seek protection, but that is not realistic. Our industry has had many challenges, but it certainly supports the concept of freer trade and opening of markets. Again, being linked to food manufacturing in Canada, it's vitally imperative that we remain competitive. I don't think we would have the sugar industry that we do today if we didn't have that customer base.
Senator Tardif: Thank you. I wanted to put everything on the table to make sure that we understand.
The Deputy Chair: Further to Senator Plett's comments, I think it's significant that we've had comments on witnesses, which means that people are paying attention, and that's a good thing. I don't mean to belittle. I think it's very important that we hear contrary opinions.
We've heard it, and we will decide what we will accept as the swaying factor in what we say in our report.
Ms. Marsden, on behalf of the committee, I sincerely thank you for appearing today. As you can tell from the questioning, it's a subject that is of deep interest to us.
Our next witnesses are from the Ontario Fruit and Vegetable Growers' Association, Mr. Jason Verkaik, Chair of the Board; and Mr. Craig Hunter, Research Advisor.
Thank you for accepting our invitation.
I'm going to ask the witnesses to make their presentations. Following that, a question-and-answer session will take place where each senator will be given five minutes to ask questions before the chair recognizes another senator. There will be as many rounds of questions as possible, and if need be, we can go to a second round or maybe even a third round. During the questioning, please be succinct in the questions and in the answers.
Who will start?
Jason Verkaik, Chair of the Board, Ontario Fruit and Vegetable Growers' Association: I will.
Good morning. Thank you for having us today. My name is Jason Verkaik. I am an onion and carrot farmer in the Holland Marsh in Ontario. I am also chair of the board of directors of the Ontario Fruit and Vegetable Growers' Association.
The Ontario Fruit and Vegetable Growers' Association was established in 1859 and is one of Canada's oldest farm commodity organizations. As the voice of Ontario fruit and vegetable growers and greenhouse farmers, the OFVGA is a nationally recognized not-for-profit association that advocates on behalf of the Ontario fruit and vegetable farmers and the edible horticulture industry. It represents its members provincially, nationally and internationally.
The sector supports 30,000 farm-based jobs in Ontario. We do about $2 billion worth of farm gate values, and we are the largest contributor in the country for edible horticulture production. We are members in good standing with the Canadian Horticulture Council.
Our sector is about providing fresh, nutritious, and healthy food to consumers domestically and internationally. We produce a wide variety of fruits and vegetables, and meet the needs of millions of consumers. We do this in a safe, environmentally responsible and ethical manner.
Our sector is key to the food security of this nation. That food security and our competitiveness are under threat. Whenever we see items that increase the cost of production, it must be crystal clear that we cannot pass these costs down the chain. We are price takers.
There are three main things that affect us. The first is labour. We rely on labour day to day for operation of the farms, for a multitude of tasks. We are also an energy-intense business, from electricity for cold storage to natural gas for greenhouse production. These factors are very important to our competitiveness, and then, obviously, the plant fertilizer, crop protection material and capital equipment going into these farms to create viable businesses.
The government has a major role to play in what we do. With regard to labour, we have the Seasonal Agricultural Worker Program, SAWP. This is an extremely valuable program to the members of the OFVGA. It is critical to the success of fruit and vegetable production in Ontario and across the other provinces.
This is not to be tied in with the temporary foreign worker programs that have maybe not got the greatest news as of late. This program probably is the pinnacle of all labour programs, and we're very happy to have it. It is important for market development and trade that we have that base labour to do what we're able to do.
One of the things that are currently under review is the Growing Forward program. I would encourage the government to have edible horticulture at the discussions for creating the new framework for that program. Those programs are very important to us. We really need to see, for innovation and stuff, that that money gets funnelled down to the farms for the farmers to be able to do what we do and give us an opportunity to be competitive and develop new markets.
One of the things on the top of my list is preparing a Canadian deemed trust similar to that of PACA in the United States, the Perishable Agricultural Commodities Act.
In 2014, we had reciprocity pulled from us, where we had preferential treatment. In losing this, we lost our ability to develop new markets in the United States because there's no protection against bankruptcy or threat of bankruptcy.
We had dual licensing, and this was one part. The government has moved to move to a single licence program, which helps in the case of buyers that haven't gone bankrupt but are threatening bankruptcy; therefore, slow and non- pay. We do have a system in play now to start helping with that, but it doesn't help the insolvent firms, the people that do go bankrupt.
Over the last number of years, there's been a lot of miscommunication and misinformation that has stymied the process in moving forward.
In my area in the Holland Marsh, the lack of protection has cost growers millions of dollars. This isn't directly related to international trade. This is actually trade within Canada and interprovincially.
When we're formulating this deemed trust, we have to be clear it needs to be a Canadian deemed trust dealing with our Canadian laws, which are different than the United States' laws.
This was supposed to be done under the RCC, the Regulatory Cooperation Council, processes and never got done. It was signed by Harper and Obama. It never went through. That's the reason we lost our reciprocity with the United States.
In Canada, our constitution prevents the federal government from interfering in contact with payment issues until a buyer becomes insolvent. There's been a lack of clarity on that. In the United States, the government can get involved whether they're solvent or insolvent.
The industry knows that we're looking for something with a deemed trust in Canada for insolvent buyers or sellers. We have enlisted the help of Professor Ron Cuming, a noted bankruptcy and constitutional law professor, to research. He's drafted a Canadian-made solution. The industry has really gone to work here.
Professor Cuming has done the research and written a draft piece of legislation, which comes into force when the buyer becomes insolvent. That's very important to know.
It costs the government no money. It's acceptable to all segments of the Canadian industry in horticulture. It is limited to assets stemming from the sale of fruit and vegetables.
As a second benefit, the legislation will also stage to restore our lost rights in the United States. You will hear from some that we still have access to these programs. It is true; however, we no longer can afford them. If a buyer is in a dispute over $100,000, he will have to post $200,000. That would be $300,000 out of that farmer's pocket to get a claim for money he's rightfully owed. That's why it's not workable in that situation.
We also believe this is a non-partisan issue and good for the industry, thus good for expansion, trade and developing markets.
I'll leave my presentation at that for now.
Craig Hunter, Research Advisor, Ontario Fruit and Vegetable Growers' Association: Thank you, Mr. Chair and members, for having us here today. I appreciate the opportunity.
I've had the chance to present to the committee from the Commons, and this is my first chance to speak to this committee from the Senate.
I've been involved in pesticide issues for over 40 years. Since I retired from the provincial government, I've been working full-time for the Ontario Fruit and Vegetable Growers' Association, helping them resolve issues around pesticide availability and use.
I've chaired the annual Minor Use Priority Setting meeting since we started it, and they've asked me back every year. I'm not sure why. Maybe nobody else was dumb enough to take the job.
I have worked in many aspects of pesticides over my career. I'm very proud of being one of the people that developed the Grower Pesticide Safety Courses in Ontario that are now available in every province in Canada except Saskatchewan. I'm also proud to say that I helped develop the on-farm food safety programs that Canadian Horticultural Council has put in place and that over 2,000 of our growers across the country participate in, where they document what they do and are audited for it.
It's important that you understand that growers have demonstrated their willingness not only to obey the rules but also to document them and face auditing. This is important to part of what I'm going to say.
The competitiveness of the Canadian horticultural industry depends upon our ability to be more efficient producers than all of our global competitors, and it also depends very much on the regulatory support that we expect from our government partners. I stress that word "partners.''
We are dependent upon having harmonized access to crop protection materials that are also available to our global competitors, especially those in the United States. These products not only allows us to produce our crops efficiently, but the produce that comes back from these programs is valued for its quality and its freedom from pests, including quarantine pests.
When Canada signs bilateral and multilateral trade agreements, the market access that they might afford may still be elusive if we haven't been able to control these pests. Our crops can be rejected in foreign markets if they find, for instance, in Brazil, one calyx leaf on the stem of an apple. They will send the whole load back because they're afraid that, on that leaf, there might be a mite, and the mite could then get into their country. We face that kind of rigor in foreign markets, so we have to be able to control the pests.
Recently, we have come to believe that PMRA, the Pest Management Regulatory Agency, which is part of Health Canada, has been unduly and unfairly criticized by the Commissioner of the Environment and Sustainable Development's office. As a result, it would appear, to us at least, that PMRA has now been forced to speed up re- evaluations of old pesticides. By speeding up, I mean they have been working on these a long time. But, all of a sudden, every case has been closed, and they've been forced to get them out in whatever condition they were in.
In so doing, we find that their approach and the recommendations that they're making are becoming disharmonized with the U.S. and with the European Union. We've always thought the European Union were the most rigorous. Maybe the word isn't rigorous, but the most difficult place, but not so. It's now becoming here.
PMRA persists in creating regulatory positions in secrecy and then publishing these without any prior consultation with registrants or growers. As a result, in order to get these positions put into place, they're being forced to use out-of- date information, obsolete information and, in some cases, in my opinion, incorrect data. The result is that these published proposals are out now in the public eye, and they are at odds with the facts.
I want to be perfectly clear, the Canadian horticultural producers face ruin if the current re-evaluation proposals on eight fungicides go ahead as published, and I use the word "ruin'' knowing what it means. That's how serious it is. It's really hard to get attention to that.
We seek an immediate halt to all of the current re-evaluations until accurate data can be brought to bear. Growers would much prefer a consultative, collegial approach, rather than the current approach that's been forcing us to question the science of PMRA in public. All of that should be done behind closed doors. All of that should be done in a way that we agree on the outcome. It shouldn't be put out on the street, and then we have to fight against it.
I'm sure you understand that, once something is written down, the person that wrote it down will defend the written word rather than accept, with impartiality, our counter-arguments, our new data. We were never even asked for that data before the piece went on the street. If they had asked, we could have provided it to them.
As an example, they're proposing to ban the use of one of our fungicides for use on blueberries. Part of the reason is that they think that workers are overexposed, but part of their reason for that is they have assumed, for low-bush blueberries or wild blueberries, the ones that grow along the ground in Nova Scotia, a factor in there for transplanting the plants and that a worker transplanting the plants is going to come in contact with fungicides.
These are wild plants. They don't transplant them. But, in the absence of production knowledge by the people that wrote that paper, they have made these assumptions, and they're out and out wrong. We just want the chance to provide the data that would help them make better decisions.
We suggest that, in the future, growers and registrants should be sought out at the beginning of the process, with a chance for us to provide information on how we use a product and how much we need and for the registrants to provide all of the current data from all of the studies that they have done since the last time these products were reviewed. Then they can make their judgments, and then they can put their proposals on the street. They would be working from knowledge, rather than a lack of knowledge.
I'll move on to my second point.
The other big trade-related issue, once we have the pesticides we need to grow our crops, is that there is a lack of harmonized international limits on pesticide residues in produce or in all crops. The intolerable delays in the Codex Alimentarius process for setting global residue limits means that, even if we get a registration here, it could be four or six years later that Codex sets a residue limit. So we can use the pesticide to grow our crops, and, if we're only selling them in Canada, we're okay, but if we were to get a new registration for a fungicide on blueberries and we wanted to sell those blueberries to Germany, we might wait six years before we could legally use it and then sell them.
In spite of the best efforts of our government to sign these multilateral trade agreements, they don't immediately give us market access. The market access is also governed by things like MRLs.
I think that you have to understand that, right now, today, Canada has thousands of unaligned MRLs across the crops that we grow, and that's apples, strawberries. It's canola. It's lentils. It's all of our crops.
These unaligned MRLs truly are a barrier to our ability to enhance trade into foreign countries. One of the recommendations that a working group on MRLs has come up with is that if Canada took a leadership role in trying to develop a system that we call recognition of scientific standards with the trading partners who have solid regulatory programs, they would accept our MRLs that we have set based on good science, and we would accept the ones that they have set using their good science.
Not everyone understands that MLRs are in no way a measure of health risk. MLRs are simply an assurance that growers follow the label directions on the pesticides in the jurisdiction in which they live. MRLs are set to show that they've complied with the rules. They were never set and never were meant to act as trade barriers, but that's how they're being used around the world today.
If we were to add a few words to each of our multilateral trade agreements that said "We will accept yours if you will accept ours,'' trade would go up overnight, because if we can use the new modern pesticides that we're talking about, we would be able to grow better crops, better quality, better yields, and we would be able to trade. If we're forced to use old products that are being taken away from us, our production levels aren't as good and the quality isn't as good. However, if that's all we can use and then be able to trade, we've already lost part of this point that I made at the beginning, that we want to be the most efficient producers in the world. That gives us an advantage. But if we can't be efficient and also trade, we're being asked to do something with a hand tied behind our back.
The third thing is a little different. Horticultural producers want to applaud the government, especially the Canadian Food Inspection Agency, for their strong support and working very closely with the USDA on what they call a North American border approach for dealing with invasive pests. We expect the CFIA will continue to work ever closer with the USDA to devise a means to keep these invasive pests out of North America.
Just a couple of examples: The Spotted Wing Drosophila, which is just a tiny little fruit fly, and another one called a Brown Marmorated Stink Bug, which is a little bigger, are already costing our industry, especially in British Columbia, millions of dollars in lost crops and in the cost of trying to control them.
The drosophila is now in Ontario, Quebec and the Maritimes, as well as in B.C. Our growers are already spending money to try to control them. We are having difficulty in getting new pesticides registered, and then we could face the MRL double whammy if we do use them. Invasive pests are very important.
Foreign trade rules also apply. If they know we have these pests, they will check our loads very carefully; and if they find them, they will reject them, so we must be able to control them.
The USDA estimates that they are intercepting one new invasive pest every day of the year; 360 that they're finding. We know that some are still getting through, but if we work closely with them on a North America-wide approach, looking at all the imports that are coming in, that's our best way of ensuring that we don't have any more of these, or we minimize the number we have to deal with. As I say, just the cost of these two — and there are others — is very high.
To recap, we need to get the house in order at PMRA so that we can maintain the use of some of these old fungicides. They're proposing we're going to lose all the uses of four of them and most of the uses of another four, and those are the backbone of our disease-control programs in Canada. These are the old multi-site materials that we can combine with some of the newer, very narrowly focused products and use them together.
We haven't seen pest resistance developed to the old fungicides, but the new ones are very prone to resistance if we overuse them or use them alone. If we don't have any partners, we're going to lose the new ones like that.
The second part is MRLs. We have to take a leadership role internationally to resolve this problem, and through our trade agreements I think we have a real opportunity.
Thirdly, the work of the CFIA in keeping invasive pests out of here is terrifically important to our future.
Thank you very much for the opportunity, and we would both be glad to answer any questions you have.
The Deputy Chair: Thank you, gentlemen. We will get to the questions.
Mr. Hunter, I'm looking for a little clarification on the second problem that you discussed. Is this our problem or is this a problem of the people that we've signed free trade agreements with? You said that if the problems were overcome, trade would go up overnight. I would suggest that perhaps getting the problem solved would mean that there will be very few free trade agreements signed because of this becoming a stumbling block. Perhaps I could have your comment on that.
Mr. Hunter: Canada, the United States and the European Union have long had their own programs to set residue limits domestically, and Canada and the United States have worked hard to get their limits very much aligned. So trade between Canada and the United States —
The Deputy Chair: How close are they?
Mr. Hunter: They're very close, but they're not exact. Anything that we have here, we can trade to them; and almost anything they have, they can trade to us. They have many more registrations than we do, so there are some slippages between them and us; but we have almost nothing registered that they don't already have, so we're okay with them.
The Codex Alimentarius process started in the 1960s in an attempt to have international MRLs set, so all countries that didn't have their own system could use that. Unfortunately, in the last 15 years Codex has fallen behind, and that's why we're four to six years' delay in getting these international MRLs set at Codex.
Sometimes the Codex MRLs are not aligned with Canada or the United States, but as long as there is a positive MRL, we can find ways of changing our use patterns — either using something earlier or reducing the rates so that we can meet those international numbers. But if there is no number, zero. If they find any residue, they reject your crop.
What is really irksome right now is that because of the slowness of Codex, five and counting nations — including Taiwan, South Korea, Japan and a couple others — are now in the process of setting up their own MRL system. Unfortunately, the numbers they are coming up with are very different from the ones we have. By the ways in Codex, we're having a country like Japan, who under TPP is proposing to eliminate the 20 per cent tariffs, and that's great, but it still doesn't mean we can sell commodities there if their MRLs aren't aligned with ours.
The Deputy Chair: A couple of these problems that you've outlined are immediate, as in needing action fairly quickly. Have you had the occasion or opportunity to meet with Minister MacAulay with respect to these problems and to get your message in front of him?
Mr. Hunter: I actually talked to Minister MacAulay last night, and I'm meeting with the Minister of Health tomorrow afternoon.
The Deputy Chair: There you go. That's good. I didn't want our viewers to think that nothing else was going on.
Senator Plett: I'm sure that after meeting with the ministers, all the problems will be solved.
Mr. Hunter: I wish I were as hopeful. I'll buy some lottery tickets.
Senator Plett: I'll tell you; I'm sitting here and I became extremely depressed listening to this presentation. Is there anything good happening in the fruit and vegetable market at all? We're talking about having to sell to insolvent buyers. I want you to explain to me why we are selling to insolvent buyers. If people aren't paying their bills, we shouldn't be selling to them. I am getting the feeling that becoming efficient is a bad thing. I think it's a good thing. Pest management and pest control is a bad thing; I think it's a good thing. Making deals behind closed doors I think is a bad thing, not a good thing. Unless something happens here in the next half hour, I'm going to leave this meeting very depressed.
Mr. Verkaik, one of your problems was that no one is interfering, or helping you, when you are selling to bankrupt buyers. Why are you selling to bankrupt buyers?
Mr. Verkaik: I maybe misspoke, so I apologize if I led you to believe that. I'll give an example from my own situation. I'm a farmer and I sell carrots and onions. We deal with brokers to help sell our food. We worked with one gentleman's company for 12 years. He was paying in 30 days, I was doing very well, and it was great business. We were doing probably over $1 million worth of business with this gentleman.
Senator Plett: Per year?
Mr. Verkaik: Per year, yes. And that happens in a short time, because of the window for selling produce; obviously, you're not keeping it year-round.
What happened with him is he got overzealous in his business. We had a great long history of selling to him, but he got overextended on his business through, perhaps, expanding too quickly, and all of a sudden the payments stopped happening. To have $200,000 to $500,000 within 30 to 60 days is not unheard of in our business. That's just the value of the product.
I spoke earlier about the licensing. At the time, I had the ability to work with him because we had this long-standing, positive relationship, but he just doesn't have the money now to pay. He made bad decisions.
I'm not selling to somebody who has gone bankrupt.
Senator Plett: That's a good idea.
Mr. Verkaik: I wouldn't suggest anyone is. But in this scenario, when something happens and if he goes bankrupt, I do not have any ability to collect on my receivables for that perishable commodity, and I can't take it back because it is either consumed or, by the time you go through the legal process — it's not like getting a television set back. So, here I am stuck in limbo; I can't collect my money and it's affecting me.
A deemed trust puts those fruit and vegetable sales in front of the bank. With a proper deemed trust setup here in Canada, if he does go bankrupt, I'm able to access that money, not the bank's. If a company goes bankrupt, then the bank can access everything there, but the banks don't have title to the produce. They have title to the land, his buildings and that type of thing.
The Deputy Chair: And that's where your produce is sitting.
Mr. Verkaik: That's right. That's what the bank has title to in case of a bankruptcy. However, the sales get mixed in with that, so we're looking for a deemed trust to protect us from that.
The United States has something called the Perishable Agriculture Commodities Act, or PACA, and that worked very well for that. We got preferential treatment: If I sold to the United States and that same scenario happened there, there was a mechanism for me to be able to get my money ahead of the bank's on that, because it was never the bank's money in the beginning. That's kind of what I meant by that.
Senator Plett: Thank you very much for that. Maybe other senators understood that, but I did not. Thank you for that explanation.
Mr. Hunter, I want to give you an opportunity to maybe correct, at least in part, the comment that you made, because I really do not think many viewers — we do have some viewers that have insomnia and can't sleep after midnight, so they watch some of our broadcasts — would agree with you that deals should be made behind closed doors. Please explain that comment, because I don't think you meant it in the way that I heard it.
Mr. Hunter: Thank you. I think the way you heard it isn't the way I meant to say it.
Currently, when the PMRA does their re-evaluations, they do them will without consulting either users or registrants. They do not ask them for any data that they may have that would make the PRMA's job easier. Instead, they do the review based on whatever they already have in their file, they create numbers themselves, or they make access to generic databases that are no longer, or maybe never were, applicable here in Canada. But they need the numbers to come up with their risk analysis.
What I'm suggesting is that rather than doing that in secret, which is how they're doing it now, they invite growers and registrants in to share information with them so that they have the most modern, up-to-date and applicable data to make their decisions. Then it can get out onto the street and it can be commented on. But to create something out of old and perhaps incorrect information is a waste of time, and it gives people the wrong impression about the reality of the safety of these products.
Senator Plett: Thank you. I think you just now said the opposite of what you said before, even though you probably meant it the same way both times. I think this was a much better way of saying it.
I don't know the name of the leaf, but you did talk about some kind of a leaf that, if it is on an apple, the whole load gets rejected.
Mr. Hunter: That is the little tiny calyx leaf.
Senator Plett: I think the public demands that if there is a pesticide in a load, the whole load be rejected. I seem, again, to be getting from you that it shouldn't be. I would like you to explain that to me, as well.
Mr. Hunter: That was not about a pesticide directly. You may have a mite, an insect related to a spider, on that leaf that Brazil wants to keep out of its country as an invasive pest. They regulate that by saying if there are any leaves on those apples, the whole load is rejected.
I want to be able to control that mite here so that the problem goes away. The example was that something as small as one little leaf on one apple can reject a whole load, and that is very real to our people, and we have to spend extra time to make sure there aren't any of those leaves.
[Translation]
Senator Dagenais: Mr. Verkaik, I would like to ask you a question about foreign workers. In Quebec for instance, strawberry season is very short. I have a friend who has a strawberry farm. I do not know if the situation is the same in Ontario when it comes to growing strawberries, but it is very hard to find workers in Canada. These farmers have to hire Mexican workers. I would like to hear what you have to say about the Temporary Foreign Worker Program. Could the government help you hire foreign workers to help with the berries, since the season is very short?
[English]
Mr. Verkaik: Thank you for the question. The government right now does have what I referred to earlier as the Seasonal Agriculture Worker Program, and it allows farmers across Canada to bring people in from the Caribbean and Mexico to do just that. I bring them into my farm, as well, for helping with the harvest, seeding and planting the crops I grow.
Through this program, you're allowed to bring these ladies and gentlemen into the country for up to eight months, starting January 2 or 3, and they all have to be home December 15. There is a large window there to meet the need, or they can come for three or four weeks for a short season. This Seasonal Agricultural Worker Program is very valuable to us, and it is incredibly well run.
In Quebec, they have access to this through FERME, I believe it is called, and in Ontario, B.C., and the Atlantic and the central provinces it is called FARMS.
For a temporary foreign worker program, when we get the press from stuff like what McDonald's or RBC was doing, this one is in a league of its own. It is very well respected among government and within the industry. The farmers have due diligence to do to ensure paperwork is correct and the workers are treated fairly, to make sure you're doing all the things you need to do.
There is responsibility on the farmers; however, it is such a well-run program that my advice to the government on this program is don't touch it. We have something that works so well. The industry and government have worked together, not only the Canadian government, but the governments from the other nations that the workers come from. The vetting process for all the workers is done well. The same workers will return to a farm year after year after year. It is the reason why Canadians are able to have affordable fruit and vegetable production currently. Please continue to celebrate that program.
[Translation]
Senator Dagenais: Mr. Hunter, you talked a lot about the use of pesticides to improve fruit crops. When the fruit reaches the market, what proportion of the price of the fruit do pesticides account for? Does their use allow you to be competitive on foreign markets when you put your products up for sale?
[English]
Mr. Hunter: Thank you for that question.
Yes, indeed, when growers are forced to protect their crops, they try to use the least amount of pesticide and spray the least number of times necessary to maintain high quality in yield. Sometimes we can get through a season with very few applications. Disease depends upon weather conditions. We have programs that monitor weather conditions, the wetness of the leaf, where a fungus may start.
We use programs that predict pest development based on current weather, and we use our pesticides in a timed fashion with so many days or weeks in between intervals. We do the same thing with our insects as well. So we use the least amount we can, and our competitors are doing the same thing. Maybe they're not doing it as well as us, and that's part of our advantage. They don't have some of the integrated pest management programs developed by our federal and provincial government partners and universities. Our growers are taking full advantage of every opportunity to reduce the applications.
The spray bill in some crops is quite high. In some crops, it can be very low. Even organic producers use pesticides. They have a list of products from their certifying bodies that dictate which ones to use. Even organic producers use pesticides in our conditions to grow a crop that they can make money with.
I don't know if that answered your question.
[Translation]
Senator Dagenais: That allows you to compete with the other producers on the market?
[English]
Mr. Hunter: Yes, it does. If we didn't use these products, our crop quality would keep us out of markets. There's no foreign market for anything except the very top quality. Anything that's less than optimum stays in the field.
Senator Ogilvie: Mr. Verkaik, the issue of Canadian producers shipping fruits and vegetables into the United States and the difficulties that arise when the importer has financial difficulties have come before this committee a number of times. I thought I understood the situation until your presentation this morning regarding the challenge to the Canadian producer and your answer to Senator Plett.
It was my understanding that if you ship your carrots into the United States to a buyer who subsequently has financial difficulties and can't pay you, you do not have any access under American law for recovery of your loss. Is that part correct?
Mr. Verkaik: We do have access. It would have cost us $100 to go for a dispute resolution on that.
The United States had asked Canada to create an equal program for their sellers into Canada, and Canada did not have that. However, we were treated basically as one of their own with their system.
That preferential treatment was taken away in 2014. So we do still have access, but the only way to access that is to pay twice the bond of what we're trying to claim.
Basically, I can give an example from earlier. There was a farmer owed I believe $80,000 from somebody struggling with bankruptcy in the United States. When we had preferential access, he was in negotiations for the $100 submission fee.
We lost preferential treatment in the middle of his case, so on Friday he was in discussions. On Monday, they said that in order for us to continue you now have to post $160,000. He's already out the $80,000 he's owed. Now he can't afford to go after the money he's rightfully owed. That's the challenge where we lost reciprocity.
I sell my product mostly in Canada. I have the ability to expand my business into the United States — Boston, New York, Chicago, going down to Florida. It is a challenge. I know who the Canadian buyers are.
Senator Ogilvie: You answered that part.
You mentioned urging the Canadian federal government to create legislation which — if I heard you correctly — you said wouldn't cost the Canadian taxpayer anything to implement. I want to understand how legislation that winds up giving you financial protection against losses of the type we just described doesn't cost the Canadian taxpayer any money.
Mr. Verkaik: I would say creating legislation, obviously, is government doing their job.
Senator Ogilvie: Creating legislation doesn't cost any money, but it's the implementation of it.
Mr. Verkaik: We have a system in place already, the DRC, the Dispute Resolution Corporation, which can handle this. The government does not have to put any funds away to help supplement these farmers while they're trying to get their money or anything like that.
Once the legislation — it comes through the bankruptcy —
Senator Ogilvie: In any event, if the loss occurs and you win your case, who winds up paying the money to you to cover your loss?
Mr. Verkaik: The person that owes you the money.
Senator Ogilvie: That's an American?
Mr. Verkaik: Yes.
Senator Ogilvie: There's reciprocity with regards to your access to that.
Mr. Verkaik: Once we set up a deemed trust here in Canada, we will get that preferential treatment back, and it's through the Dispute Resolution Corporation that works on both sides of the border.
Senator Ogilvie: I think I understand that this is nevertheless a problematic situation. I wouldn't want to have to get into that situation, based on what you've described.
Mr. Hunter: If I could characterize it in different words: It's a forced self-insurance program by the buyers. For the buyers to get their licence, they all have to cover the losses of all the buyers —
Senator Ogilvie: Thank you.
Mr. Hunter: If you don't have a licence, you don't get to buy. Is that —
Senator Ogilvie: Absolutely. That gives me the answer. Thank you very much.
I have a quick comment for Mr. Hunter. I understand the issues you are talking about with regard to the pesticides. I think it's inexcusable that regulatory authority is taking forever. We've heard in other studies that we've done the incredible length of time it takes to study, test and give a final approval based on scientific fact and evidence for pesticides and so on. This is inexcusable in today's technological world in that regard.
Second, the issue is extremely important in terms of international competitiveness. So you're not only dealing with the legitimacy of pesticides that you're authorized to use, on the one hand, but you're dealing — the agriculture industry is one of the most viciously competitive, national-pride areas of virtually anything that I've encountered during the course of my work and activities.
So not only do you have to meet the legitimate regulations of residue and so on, but now that we can test down to the parts per trillion, the non-legitimate trade barriers that are being established — that is when a country establishes that there will be zero residue on the product; it's impossible for you to meet that today, even if, under normal regulations, the amount of residue on your product is well below that which is acceptable.
I don't have a question here; I just want to indicate that we have understood the significance of this issue, and we urge you to continue to work with our federal organizations to, one, get faster approval or rejection of pesticides that are applied for, and, two, to try to deal with these non-acceptable, deliberate trade barriers of zero residue on products.
Mr. Hunter: I will characterize our concern with the fungicides that I mentioned earlier. I had a chance to talk to my family doctor, who is also a friend, and I said, "Bill, how would you feel if, next week, you got a message from Health Canada to say that they are going to cancel the use of Tylenol, aspirin, Advil and Aleve — all gone.'' He looked at me and said, "They can't do that.'' And I said, "What would you do?'' He said, "We'd have to prescribe morphine for everybody.'' I said, "Well, at least you've got morphine. Our alternatives are copper and sulphur.''
And then you understand this is how serious this matter is.
Senator Unger: On the pests and pesticides, you said the U.S. will reject — and other countries I think you said. Does Canada do the same? Do we find things that are — you talked about mites on the calyx leaf. How do they get into Canada? I really just want to know, does Canada do the same?
Mr. Hunter: Yes. Canada checks shipments for quarantine pests. They have a list of the pests that they are concerned about, and, yes, CFIA does check that. PMRA checks incoming produce for pesticide residues.
I'm happy to say that they check domestic products and foreign products at the same level, which is something in the order of 3,000 samples per year. The compliance is over 99 per cent, and about 90 per cent of domestic produce has no detectable residues in them. Even though we could have it, because of our use of pesticides being as low as it is, they're not finding residues in 90 per cent.
Senator Unger: Would you say that pine beetles are such a pest?
Mr. Hunter: Absolutely they are. They don't affect horticulture directly, but the pine beetle is a terrible example of an invasive pest.
Senator Unger: Last question: You said the oldest pesticides took care of things that the new ones can't. Would that include, for example, DDT?
Mr. Hunter: The last time we could make use of DDT was in 1973, so, no, it's no longer available at all. I'm talking about the older products that have been and continue to be approved for use. Of the fungicides we have that I'm talking about here, some of them came from the 1950s and some from the 1970s. They are more modern, shall we say, than DDT, which was around much earlier.
Senator Beyak: I concur with everything Senator Ogilvie said. We hear that all the time, and our chairman is right that when we write our report, we are listening to what we're hearing.
I hope you have better luck with your federal liaisons, that they will listen to your collaborative and collegial approach, which you mentioned all through your presentation.
I come from an agricultural area, and I have responsible friends in southern Ontario who are in the pesticide business. For the last 15 years in Ontario, good science has not been prevailing. Behind-the-scenes things have been happening that are not good for farmers or for anybody, so I certainly hope the federal counterparts listen better than the province has.
How do you feel you're doing so far?
Mr. Hunter: I am also a sitting member of the Ontario Pesticides Advisory Committee, and I have been for almost 20 years. I have seen great changes in what the committee is allowed to do and the results of what we do, so I concur with what you said.
We made tremendous progress in our relationships with PMRA between 2001 and even up till now. The changes in the relationships, and the ability to work together and collaborate, have been tremendous. Before that, it was like a black hole.
But these current changes in approach have just come out of the blue, and I'm not sure what they reflect. I really don't care what they reflect; I believe that they have to change. We don't want to be looked upon as whiners or complainers. Rather, we want to be looked upon as people who want to see good science and using the most up-to-date information. That's what we want. Hopefully that's not asking too much.
Senator Tardif: Many comments and questions that I had have been made or have been answered. Perhaps for our viewers, we've used the term MRLs, so it might be good to specify that it means "maximum residue limits.''
You've indicated that even organic produce would have the use of pesticides.
Mr. Hunter: That's correct.
Senator Tardif: So organic produce would have a residue level; is that correct?
Mr. Hunter: That's correct.
Senator Tardif: What proportion of your market is organic, and are MRL standards applied to the organic market that are different than those applied to the non-organic market?
Mr. Hunter: The MRLs are across everything — domestic and imported produce — and it's the same level for each pesticide. Those are determined by field tests, where they will apply the registered material to the crops at the registered rate. They will harvest the crop at normal harvest time, and they will look at the residue that's there and the range of it. Then they'll determine, using a very complicated mathematical model, what the MRL should be set at that will meet 99.9 per cent of the time the pesticides used at the maximum rates and the maximum number of times and the last possible use date before harvest. So a pesticide might be allowed to be used only up until 14 days to harvest or might be allowed to be used the day before harvest. That's what they'll do; they'll accentuate the worst possible scenario, get the results, and then set the MRL at that level.
Senator Tardif: Is there less use of pesticides in organic produce than in regular produce?
Mr. Hunter: It depends on the crop. They use different pesticides, so they're not necessarily using the same pesticide that a conventional farmer would use, but they're coming closer together. Conventional farmers are using as little as they can, and they're using things that have the least amount of environmental impact, so they're coming closer.
Some of the pesticides organic producers used to use, honestly, they were ineffective so they've had to shift a little bit. But the standards for the pesticides they use are set by their licensing bodies, and they have to abide by those. They can't just say, "I've got a big problem; I'm going to use one of these.''
Senator Tardif: Mr. Verkaik, in your business, do you have an organic market?
Mr. Verkaik: We do. We sell carrots and onions wholesale to chain grocery stores and to food service companies, but we also run a food box program. We have 500 families on that program, and we work with other farmers. We have both organic produce and what's termed as conventional produce within those food boxes.
We do get a lot of questions about pesticides and different things when you're working directly with the consumer. With apples, you could be spraying more often if you are running an organic orchard than you would if you are doing a conventional orchard for the efficacy of the different products you're using.
The organic market in North America is about 3 to 4 per cent of that of total fruit and vegetable production. So even though it gets a lot of play — it is a growing market — it is still relatively small. I think what's important to note is that no matter what method people are using, farmers take care in how they apply what they apply, and they are well within environmental and health limits; they are not going to hurt us.
My family has been farming there for nearly 100 years, growing vegetables on the same land. We're the ones who are in closest proximity to any pesticide application, and we're doing all right.
Senator Pratte: I have a short question, but I think the answer may be important.
You just mentioned, Mr. Hunter, in your answer to my colleague that you're not sure what the recent change in attitude reflects, but in your testimony you had a hypothesis of what is happening. Would you care to elaborate on that, please?
Mr. Hunter: Sure, I would.
Senator Pratte: You have just five minutes, I think.
Mr. Hunter: I can do it faster than that. The PMRA took some what I feel was unwarranted heat in their review, and there were several factors that were criticized. All of those things, in my opinion, could have been answered by not only the PMRA, but if the auditor had spoken to the stakeholders, they would have explained why things are the way they were.
Senator Pratte: That is by the commissioner as part of the Auditor General?
Mr. Hunter: Yes. They didn't ask us those questions so we didn't have a chance for input there, either. But I feel that PMRA reacted to the criticism by telling their staff, "You've got to get these out on the street. Just clean them up and get them out.'' So that's kind of why we've got a bit of the kerfuffle we have now.
They've had to make several other changes as well, and all of this happened at a time when they lost half of their senior managers who were there for years. They left within a short period of time for other opportunities, so you've got some newer senior staff there, and they're all good people, nice people, but adding this extra burden is difficult.
Canada is the only nation in the world that's required under Canadian law to re-evaluate a pesticide if any other government in an OECD country decides to ban the use of it. In some cases we just finished doing a review, but we have to do it again; we are required to by law. They've had 32 of those come out of the blue. They tried to stop doing it, but they were forced by the courts to do it, so they've got this extra workload all in the same section that's doing these other re-evaluations. So that's a problem.
I still don't understand why they don't consult at the beginning with the registrants and growers to let us know that they're doing this. One of these fungicides was completely reviewed and a final report issued in 2011 that said everything was fine, and then in February they announced a revision to their results in one section that basically says we've got to cancel all these uses. Nobody knew that it was even happening, and so how do you plan?
The registrants probably all have one or maybe two of these products. Because I'm the only one in Canada doing the kind of work I do for the growers, I have all of them on my plate, and there's a very short turnaround. In some cases, we asked for and got extensions; in other cases we didn't. But trying to gather all the data we can on on-farm practices and worker practices, which we feel will make a huge difference to their outcomes, they had years in secret to do their work, and we have a few weeks to do ours. If I sound frustrated, I am.
The Deputy Chair: If Senator Pratte were still practising his former profession, there would be a very interesting article coming out of this. By the way, you could still write that article.
Mr. Hunter: I do write an article every month in this paper, of which I have copies for everybody. I do write about things like that, and it's also available on our website. Our association also has a who-we-are-and-what-we-do booklet.
Senator Beyak: Thank you. My question is along the lines of Senator Pratte's question. I thought maybe you could talk about neonicotinoids. We heard a lot about them during our study on bee health, and it was a prime example for Senator Ogilvie, me and many others of where they only listened to a few scientists and didn't bring in all the good science that would have shown a completely different picture.
Mr. Hunter: I agree.
The Deputy Chair: Now that's a short and succinct answer. That's what we've been looking for.
Gentlemen, thank you very much. As you can tell by the questions, this is a subject we're very interested in. Many of the things you said I think are pertinent for decisions that need to happen now.
I would encourage you to continue your discussions with the Minister of Agriculture and Agri-Food as well as the Minister of Health. When we have the Minister of Agriculture here, perhaps we might put a bug or two in his ear. Excuse the use of the word "bug.''
Thank you, gentlemen and ladies. We'll convene again on Tuesday next. Thank you.
Mr. Hunter: Thank you very much for the opportunity.
(The committee adjourned.)