Proceedings of the Standing Senate Committee on
Agriculture and Forestry
Issue No. 55 - Evidence - Meeting of September 20, 2018
OTTAWA, Thursday, September 20, 2018
The Standing Senate Committee on Agriculture and Forestry met this day at 8 a.m. to study how the value-added food sector can be more competitive in global markets; and, in camera, for the consideration of a draft report.
Senator Diane F. Griffin (Chair) in the chair.
[English]
The Chair: Thank you, everyone, for being here. We all had a wonderful summer break. Now it’s time to get back into our study. I’ll ask the senators to introduce themselves. I’m Senator Diane Griffin from Prince Edward Island.
[Translation]
Senator Maltais: Ghislain Maltais from Quebec.
Senator Dagenais: Jean-Guy Dagenais from Quebec.
[English]
Senator Doyle: Norman Doyle from Newfoundland and Labrador.
Senator Oh: Victor Oh from Ontario.
[Translation]
Senator Petitclerc: Chantal Petitclerc from Quebec.
[English]
Senator M. Deacon: Marty Deacon from Ontario.
[Translation]
Senator Gagné: Raymonde Gagné from Manitoba.
[English]
Senator Mercer: Terry Mercer from Nova Scotia.
The Chair: I’d like to thank our witnesses for appearing today. This is an important study we’re doing regarding value-added to the food sector and how Canada can be more competitive in the global market.
On the first panel, from Pulse Canada, we have Gordon Bacon, the Chief Executive Officer. Welcome. From the Canadian Horticultural Council we have Rebecca Lee, Executive Director. Thanks for being here.
Gordon Bacon, Chief Executive Officer, Pulse Canada: Good morning and thank you very much for the invitation to appear before the committee. I want to add my comments to those witnesses you’ve already heard from. All players in the food sector strive to find the niche in a global market where Canadian commodities and value-added food products can be competitive. Beyond that, the focus must be on finding a niche where a Canadian product will hold a unique and lasting advantage. It’s clear there are many definitions of value and value-added. For many consumers in Canada and indeed around the world, value is often defined as affordability. In the commodity market, competitiveness is enhanced by selling at a low price, a price lower than others can match. It goes without saying that to remain competitive, Canada must continue to invest in plant breeding and production technology, and also ensure that government regulations and taxes don’t drive up food production costs in Canada and reduce our competitiveness.
While being competitive on price is a necessity, value expressed on economic terms alone surely can’t be our only focus. Canada faces competition from other countries in the commodity business. In the pulse sector, I can tell you that markets that once were ours are now being supplied by countries that originate out of the Black Sea. We know we will continue to be challenged economically in the commodity market by other suppliers who can supply products at very competitive prices.
Canada’s goal must include going beyond a single focus on the commodity model of being competitive for growth. Consumers and society, as expressed in government policies, also see value in things like nutrition, health, and the cultural aspects of food. The value of food is also tied to the whole food experience. It’s for that reason that food companies and restaurants build their business by developing food and selling food that’s tasty, healthy, interesting, novel, easy to prepare and, of course, has to be safe. Other presentations that you have heard have addressed some of these issues.
I want to focus on the emerging definition of food quality in the area of environmental sustainability. For reference, I’ve handed out material to members of this committee. Some of that information appears on The Lancet web commission and the EAT-Lancet Commission notes in their information the global food system is responsible for a third of all greenhouse gas emissions and that the need for people to eat is the largest driver of biodiversity loss and fresh water depletion. It’s understandable then that action to meet the goals of the Paris climate change accord would focus on greenhouse gas emissions and climate impact. It’s also clear that the definition of sustainable food systems has to include water use, soil protection and conservation of biodiversity.
I was very interested to see that in the food policy consultations that Ag Canada recently released a report on, these were the very same topics addressed there.
The commission is set to release a new report this fall. In setting up the panels that worked on this report, the commission noted that meeting the sustainability development goals and the Paris agreement targets to reduce carbon emissions means urgently and fundamentally changing the way we eat and produce food. The EAT-Lancet Commission goes on to note that we “don’t have a comprehensive review of how food production must change to be sustainable,” and we don’t have clear, science-based guidelines telling actors in the food system how we can provide humans with healthy and sustainable diets.
Just take a look at the second handout I’ve passed around, because there are ways that we can address both of those key issues about improving the nutrition and the sustainability of our food. If you’re interested, we can chat more about that.
But in unpacking The EAT-Lancet Commission statements, two things should be very clear to Canadians. First, the “we” that is referenced is a global we, not a national one. Canadians need to be mindful of the importance of being part of global approaches to fundamentally changing the way we eat and produce food in a way that it also ensures safe, adequate and affordable nutrition for all.
Food moves around the world and, by and large, it is freely traded. Actions like a carbon tax in Canada not only undermine the global competitiveness of Canadian agriculture but can have the perverse consequence of reducing the amount of Canada’s lower-carbon ingredients used in foods, as Canadian ingredients are substituted out for lower-cost or more readily available but potentially higher-carbon ingredients from other countries. Canada does need to take a strong leadership role in being part of a food industry approach to meeting sustainability and health goals, but we really should be questioning whether this is an area for a made-in-Canada approach or whether we would benefit more from being an advocate for change on a global basis.
Second, sustainability measurements cannot be limited to the simplistic approach like focusing solely on greenhouse gas emissions, nor can environmental health be looked at separate from economic sustainability and social issues like human health. For instance, an attempt to reduce greenhouse gas emissions can potentially have the unintended consequence of degrading soil. The Lancet commission and critics of the metrics for assessing progress toward the Sustainable Development Goals have pointed out that a more holistic approach is needed to ensure that actions both protect and enhance the health of people and the health of the planet. Canada, as a major food exporter, needs to be at the forefront of this holistic approach at the global level to providing people with healthy diets from sustainable food systems.
Getting the measurements right at the global level and agreeing on how we will provide healthy diets from sustainable food systems are keys to what will be a new opportunity for the Canadian agri-food system and, I believe, an area where Canada can develop a unique advantage adding value beyond simply being the lowest-cost supplier of food ingredients.
Defining the value of food from both a human health and environmental perspective is Canada’s area of opportunity for the future. Canada has the climate, the technology and the sophistication in production and handling systems to be a preferred supplier of foods that contribute to healthier people and a healthier planet.
In conclusion, I hope the Senate report will take time to explore how Canada will be a leader in the global focus on healthy, sustainable food systems. I hope the Senate report recognizes the need to empower consumers to make informed choices that are right for them in the areas of sustainability and nutrition. This means that a strategy for sustainability has to be consumer facing and address why consumers choose to eat, and not simply looking at how food products are grown. We are still in the first generation of thought on sustainable food. It’s often the words “sustainable food” that are used without a common understanding of what it actually means. We need to advance to the next generation of science-based measures for food consumption and look at air, water, soil and biodiversity as well as environmental health and nutrition.
It is against these holistic measures that consumers and government can assess the environmental impact of food industry players like farmers and manufacturers, as well as the success or failure of government policies. More importantly, we need to give consumers the fact-based information so they can make informed food choices.
The challenge I believe we have in front of us is to create a food environment in Canada that fosters global leadership in the food sector and is focused on healthy people and a healthy planet. Thank you.
The Chair: Thank you, Mr. Bacon. Excellent presentation.
We await the next excellent presentation, which will be from Rebecca Lee.
Rebecca Lee, Executive Director, Canadian Horticultural Council: Honourable senators, good morning. Thank you for inviting the Canadian Horticultural Council to provide input into your study on competitiveness of the value-added food sector.
The Canadian Horticultural Council is an Ottawa-based voluntary, not-for-profit national association that represents fruit and vegetable growers across Canada involved in the production of more than 120 different types of crops, with farm cash receipts of $5.4 billion in 2017, which is the foundation of an estimated produce value chain of $13.9 billion of real GDP and 181,600 Canadian jobs. We promote healthy, safe and sustainable food while we ensure the continued growth and success of our industry. An Internet search quickly demonstrates interesting numbers on how the market for value-added produce has grown significantly between 2011 and 2015. The value-added fruit and vegetable sector realized a 12 and 15 per cent compound annual growth rate increase, respectively.
Value-added produce, such as pre-chopped vegetables or ready-made salads, which offer freshness and convenience, remain part of a healthy diet. Consumers also enjoy these as a healthy on-the-go snack.
Transparency and sustainability are among six food trends in 2018. The value-added concept includes transparency regarding the information on the food. Today’s consumers can scan the package to find out more about what they choose to eat. Food manufacturers that adopt complete transparency are rewarded with 94 per cent consumer loyalty, according to Label Insight. To do this effectively, producers require access to affordable technology.
Sustainability also requires more than producing food in environmentally conscious ways and selling it in recyclable packaging. It also involves creative ways in which to use the whole product. One example I’ve read about is Whole Foods’ root-to-stem strategy, which makes use of entire fruits and vegetables. It would not be surprising if these trends became mainstream. To remain competitive and relevant, today’s farmers need to consider what is required to integrate their produce into the value-added food sector.
Today, Canada has a good reputation internationally for safe, high-quality food. Consumers have demonstrated a sustained interest in buying local Canadian products. CanadaGAP, initiated by CHC in 1999, is a certified food safety program for companies that produce, handle and broker fresh fruits and vegetables. It was successfully benchmarked to the Global Food Safety Initiative in 2012 and obtained recognition against version 7.1 of GFSI benchmarking requirements earlier this year. Furthermore, farmers certified by CanadaGAP will be well on their way to be compliant with the Safe Food for Canadians Regulations.
To remain competitive, the sector first needs to be able to maintain today’s level of product offerings. If we are unable to do this, production will disappear from our shores and happen elsewhere. We also need to motivate our farmers to increase their volume, and embrace value-added products and the benefits they can derive from these products. They will need to be able to ensure consistent product quality and quantity. To do this, appropriate business conditions need to exist to help farmers overcome the challenges they face.
On the fresh produce side, there is sustained interest in buying local and Canadian. Conversely, there is a concern for food security. How do we manage our dependence on imports? We see the emergence of new products such as ethnocultural fruits and vegetables springing up from the demands of the growing immigrant populations. We also see a growing demand for day-neutral fresh fruits and vegetables.
Moving up the supply chain, craft cider, like the craft beer market, is booming. In fact, the market has grown from $90 million in 2006 to more than $250 million in 2017. We are also seeing a growing demand for beer, wine, jams, jellies, and even vodka fruit and vegetables products.
A less typical value add is agritourism. This involves a wide range of tourist activities from farm visits and pick-your-own orchards to farmers’ markets and distillery tours. Such activities provide a valuable revenue stream for farms and rural communities, and at the same time, connect urban populations to how food is produced. This is one area that would benefit from more government support in terms of business start-ups, human resources, infrastructure, pest management and more.
There is an example of the Province of New Brunswick that promoted a value-added initiative program to help producers address this market.
The advantage of cider or pick-your-own is that farmers don’t need the perfect produce that fresh market requires. Producers can protect crops less aggressively because the ugly apples go to cider. Consumers are happy to pick them themselves.
Today’s farmers face challenges that limit the sector’s ability to meet consumer demand for value-added products. These include a shrinking toolbox that precludes effective and adequate pest management and mitigation measures. These measures need to be developed in partnership with and be accessible to farmers so they can offer safe, high-quality Canadian produce to Canadian consumers and export markets while maintaining a thriving agriculture industry.
Today’s Canadian farmers have fewer options available to them to protect their crops from pests and disease. Existing crop protection products are being lost through Health Canada reevaluation processes while few to no new useful tools are being developed. For example, the use of the fungicide Mancozeb has not been removed from the market in any other country. In Canada its continued use is in serious peril. The paradox is that U.S. farmers will be able to use it on their produce that they can then import to Canada as long as the chemical residue is below the maximum residue limits.
This is one example of negative impacts of current legislation and regulations on the competitiveness of Canadian crops. Government can help Canadians farms by funding more research into environmental issues, such as water sampling, exposure and efficacy trials, especially for alternative products already available elsewhere.
We also encourage the government to revisit the PMRA’s mission. The current mandate is to regulate pesticides, and regulatory decision-making should reflect that, beyond the human and environmental health obligations, it should be extended to a consideration of the potential impacts of their decisions on Canadian agriculture and farmers. This can be done through an analysis of risk benefit as part of all regulatory decisions.
Government should actively support the development of a crop protection toolbox that includes more than pesticides; it should include innovative practices, biocontrol, cultural controls, new technology and machinery, and more that will put Canadian producers on a level playing field with other countries. We have issues with access to labour that is required to run the year-round operations for farms and the elaboration of value-added products. Packing plants also need access to seasonal labour to meet demand. We’re even seeing a shortage of truck drivers. Failing access to international labour for drivers, the government should, for example, move swiftly on any appropriate legislation regarding the use of driverless trucks.
Business risk management is another issue. We applaud the support from agriculture FPT ministers over the past year in the review of the risk management program for the sector, but we encourage the government to look closely at programming that will consider the producer perspective at the farm business level. We’re looking for flexibility in managing risk. Complexity, timeliness and predictability challenges need to be addressed, as does program equity. These concerns are critical to intergenerational transfers and continuity of farming in Canada.
Innovation is another big area. We believe investment in the long-term research and education should be continued and be done on a continuous basis. I have some examples in the text you have of some of the research that could be done on innovation and machinery, such as mechanical harvesters and pruners, and mowers to replace pesticides used for keeping weeds down. State-of-the-art apple storage facilities are often acquired from France or the Netherlands, and these are a limitation to being able to keep year-round fresh produce. Also wines, jams, ciders and other consumer products need cold storage for their products as well.
The heavy regulatory burden is the last area that is a significant concern to the modernization of the agri-food sector and adding value to it. As competitors in a global market, it is essential the Canadian farmers’ voices are heard, understood and acted upon through the regulatory cycle. The constant layering of government policy initiatives, regulations and related costs facing our farmers add to the challenge of navigating an unsustainable, unpredictable, unsupportive business investment climate, and the lack of harmonized government policy and regulations across federal departments and jurisdictions as compared to international competitors.
Farmers have ended up bearing the unintended consequences of legislative and regulatory decisions. CHC encourages the government to ensure that any actions and decisions regarding fruit and vegetable production are analyzed well in advance for potential side effects, optimum efficiency and public relations potential. We encourage government to consult with this sector before they deliver these decisions. The government needs to ensure that Canadian production is encouraged rather than limited. Regulations on food safety, pest management, labour, carbon pricing and small business deductions have combined and cases are known where farmers are subject to over 13 audits a year. We also support our industry stakeholders in technology, marketing, environmental certification and intellectual property.
These are some areas where a lot of work could be done to not only maintain our sector and agriculture as a whole but be able to work in the future of value-added and have a broader range of these value-added products.
Again, thank you very much for this opportunity. I welcome any questions or follow-up.
The Chair: Thank you. Again, it was an excellent presentation. We have a number of senators here lining up to ask questions of the panellists.
[Translation]
Senator Maltais: Mr. Bacon, Ms. Lee, thank you for your testimony, which was very insightful. What I have read in your briefs has been voiced already in a different way by other stakeholders who are extremely concerned about adding value to products. What sticks out the most in your testimony is that the seemingly strong disadvantage for farmers — those we have visited and those who came to us — is the carbon tax. It apparently imbalances the price margin. Did I understand your testimony correctly when you said that this was one of the factors that could lead to an increase in prices and make you less competitive?
[English]
Mr. Bacon: Yes. When you add a tax to Canadian agricultural production and food producers that our competition does not face, then we are at an economic disadvantage. Simply looking at greenhouse gas without providing direction to consumers informing them about how to make important choices is an incomplete strategy. While we agree sustainability is a prerequisite for the food industry, it’s also an opportunity for Canadian agriculture to be an example for markets around the world. Approaching it from a carbon tax perspective, one, it does not tell us how much we’ll reduce the carbon footprint of the food that Canadians eat and, two, it undermines our competitiveness. I think it is not an approach that positions us from a competitive perspective, or gives us a measurable outcome in terms of a reduction of carbon footprint of our food.
[Translation]
Senator Maltais: You are entirely right, especially since agriculture accounts for only 5 per cent of greenhouse gas emissions in Canada. After all, it is far from being the most polluting industry.
We have free trade agreements with Europe, and we are preparing to sign such agreements with Asia. We won’t talk about NAFTA with the United States, but based on your experience, how much less competitive and less able to export to Europe are you becoming?
[English]
Mr. Bacon: To export, we will have to match the price of our competitors, but if the net return of our farmers and our agri-food industry is reduced, it basically erodes our ability to continue to make needed investments. Farmers are going to respond either by reducing the inputs, which are taxed. This is going to be negative to their production, or they’re going to have to take lower returns. If we are going to export, we’ll have to be competitive, but the cost is going to be paid either in our productivity or net profitability.
[Translation]
Senator Maltais: Ms. Lee, in your brief, you rightly highlight reinvestments in new technologies. The carbon tax should be used for research on new technologies. Two factors stood out to me, and they are the same ones Canadians often bring up. Organic products, in particular, which are produced using a method with the lowest possible GHG emissions, are not accessible to all Canadians, as they are expensive. Could a new technology be developed some day to make those products more accessible to average Canadian families?
[English]
Ms. Lee: Interesting question. I think it partly goes back to the availability of alternative tools. Right now conventional agriculture relies, to a certain extent, on conventional pesticides. Those are being taken away, and we don’t have the replacement tools, biological, cultural or otherwise, that can take over and provide enough — it’s a question of quantity as well — options as tools to be able to manage pests and diseases in an organic fashion. It takes a lot more of these alternative tools to be able to manage organic production on a larger scale. If you want to reach the larger scale that would then bring down the prices, and then also bring down the input prices to be able to have a large population access them, there’s going to be a lot more work required in research.
[Translation]
Senator Maltais: Thank you very much, Ms. Lee.
[English]
Senator Mercer: Thank you for your presentation. Very good presentations and thought-provoking.
Mr. Bacon, you made mention in your presentation about the changed soil. I don’t know that you expanded on that enough. Perhaps you could tell us a little bit about that.
Mr. Bacon: Thank you. I’ll use a Western Canadian example as someone from a farm background whose first great-grandparents moved when the West was being settled, we can use our family farm as an example. For many years, for decades, we cultivated the soil and put very little additional nutrient back into the soil and depleted the organic matter levels in the soil. Organic matter is the carbon sink, from an agriculture perspective. Not only did we decrease the ability of the soil to hold moisture, to provide nutrients to the crop, we also released carbon into the environment. From a technology perspective, things that limit soil cultivation are good for building soil organic matter levels. This is one of the areas of great pride of Canadian agriculture. We are doing the right things from an environmental perspective and we have done many reports that show we have reversed this trend of depletion of soil organic matter.
We have to take a look at ensuring the policies and tax policies, et cetera, that are in place are promoting proper farm practices, not only from a soil quality perspective, but greenhouse gases, water, and biodiversity. Just a quick example, we don’t want to do things that are negative to some of these environmental factors, and soil is one that’s often overlooked. I work in the pulse industry with plant protein, but certainly from a livestock and animal agriculture perspective, the role of animals in agriculture systems is an important one because there are many soils that should not be cultivated. Livestock pastures provide a source of bird-nesting sites and other homes for wildlife. I think we need to have a more sophisticated assessment of what sustainability means so that we can more properly understand what’s good from an environmental and health perspective and how we can be better.
Senator Mercer: There are a number of us who have talked in the past about production of animals moving further north on to land that is not as good for growing crops.
Both of you talked about healthy diets and the volume of production. By 2050, we will have 9.5 billion people on this planet and absolutely nobody has a plan on how we’re going to feed these people. Hungry people are angry people. Angry people cause conflicts and it affects all of us; it doesn’t matter whether it’s here or on the other side of the world.
Ms. Lee, you talked about root-to-stem strategy, which I gather is at the heart of not wasting anything from the plant production. Could you explain that a bit more for us?
Ms. Lee: It’s a pretty neat name that I found when I was looking to see what ideas were out there. For example, when you have a beet, you can eat the beet leaves but not everybody knows how to eat the beet leaves. They know how to eat the beet root. How can you make sure that the whole root, including the leaves, is being used? There is also an example of some of the herbs where the bulb of the herb might be used but they don’t know how to use the leaves. It’s really trying to make the most use of absolutely everything. Obviously you could put whatever is left over into compost and put that back into the soil. If you’re trying to increase fruit and vegetable consumption to increase health, then you want to get the best out of the plants that you’re producing.
Senator Mercer: Many Canadians, or many people around the world, don’t know how to use all of the plant.
You use the beet leaves and the beet root. My father knew how to cook the beet leaf.
It is important, as we meet the challenge of 9.5 billion people, that we find creative ways of producing the food. I think we are getting more creative in Canada at producing products that maybe we haven’t traditionally consumed but that people around the world have, or will, if we produce it.
You also mentioned PMRA’s mandate. We heard about the inability of Canadian agencies to respond quickly enough to the licensing of products that will assist in the management of agricultural products. Have you seen any improvement over the last few years? We’ve been told that efforts are being made. I continue to ask this question. Are they getting better?
Ms. Lee: That’s a complex answer because they have certainly increased and have been looking at more products coming through the pipeline for evaluation and reevaluation. The problem is there are a lot of products coming together at the same time that need to be analyzed. And because there has been pressure put on them to speed up the whole process, it’s our concern that they may not be following science-based decision processes as well as could be desired.
The example I gave of Mancozeb is one where they have had to go back. It was a decision about some difficulty or process issue, and they had to go back and analyze again. In the long term, that will make things a lot slower. On December 1, 2016, they were supposed to change their process for any new products that would be coming into reevaluations. Any product that was being evaluated or reevaluated before that was still with the old process. If they had somehow been able to move the old products and process into the new method, it would speed things a lot more. The new process is basically to confer with industry before they do the analysis to find out what the real usage is rather than looking at information from 15 years before, saying: “Based on the information that was registered for the product 15 years before, this is what we expect now. Is this true?” Then they would have to go back, based on actual use, and redo all of the analysis.
I think there are some ways that can still be improved. Our main concern is that whatever decision is made really does follow science-based and accurate information that is available if they confer with the sectors first.
Senator Mercer: You both mentioned the shortage of workers. Ms. Lee, you talked about the shortage of truck drivers, and, Mr. Bacon, you and others have mentioned temporary foreign workers.
I’m trying to change the terminology we use at this table to continue talking temporary foreign workers or the shortage of truck drivers. Let me put a positive spin on our immigration policy. If we need truck drivers, long-haul truck drivers in particular, there are only certain parts of the world where we can recruit people to come here who can do that job. Interestingly enough, it is mostly eastern Europe because the weather conditions are similar to ours and it makes it easier.
Is there a movement in the industry for people to stop talking about temporary foreign workers or the shortage of workers to talk about the need for immigration to satisfy those needs?
Ms. Lee: The horticulture sector is very much a seasonal sector. Especially in terms of value-added, which is the topic today, we’re looking in the sector to see how there can be production and availability of produce all year round. The main part of production is seasonal. Somebody who is living in Canada is not going to be as interested in a seasonal job. They want a full-time, year-round job. It would help the jobs that are full-time year round, for example, in these value-added packaging plants for the drivers, but for jobs that are definitely on the seasonal side, I don’t think it’s going to help our sector, unless, of course, it’s part-time work that they’re after.
Senator Woo: Thank you, colleagues, for letting me jump the queue. I have to leave for another meeting shortly.
I have a quick question for Mr. Bacon. Your presentation was quite abstract, and it focused a lot on the consumer side of the business. But in the pulse industry, my understanding is the whole issue of plant protein is the next big thing. Everybody is talking about the dramatic move to plant proteins and the way in which Canada can be a world leader in producing value-added products based on plant proteins. We even have a so-called supercluster in this country investing hundreds of millions of dollars into plant protein research.
Could you spend a bit of time talking to us about the prospects for very tangible, value-added products, made in Canada, developed in Canada and exported to the world that this committee can think about and focus on in our recommendations? The study ultimately is about the processing side of the industry and how we create more value out of the products we currently are growing in this country.
Mr. Bacon: Thank you. I will have to delve into the abstract because I think that’s where our opportunities lie. We will always be challenged to be a commodity producer. The question we have to ask ourselves, even though we are the biggest pulse producing and exporting nation in the world, is how we will remain competitive. Five years ago, Kazakhstan did not produce any lentils. Recently, 500,000 tonnes of Black Sea port origins have displaced us in the Turkish market. We have to look beyond what has got us to this success point today and look at social trends, consumer trends like interest in plant protein, requirements from an environmental perspective, and define how we will be competitive in the future.
We need to understand the kinds of varieties needed for the types of processing that we’ll see going forward. What do we know about varieties best suited for protein isolate production — not nearly enough to be a world leader. What do we know about how farm management practices impact extraction rates for protein isolate production — not nearly enough to be a leader. The Lancet commission addressed a concern that I have as well, which is we do not yet have the parameters that guide farmers and industry on what will be considered nutritious food that can be sustainably produced. Without the right metrics, it’s difficult for us to build the industry that will keep us competitive in the future.
Clearly, environmental sustainability, human health and nutrition are key. What we don’t have are integrated measures of success which allow us to know whether we’re moving in the right direction.
I think it has to be lower carbon consumption by consumers, but how do consumers know that when they’re making a choice they’re making the right one? When we have 12 different types of bread on a grocery store shelf, how do we as consumers know which ones provide us with the kind of nutrition that’s best for us? Some will be higher in fibre, some will be higher in fat, some will have higher salt, and some will have higher sugar. It’s much too complex.
Just referring back to this study that we commissioned with ETH Zurich, one of the leading world institutions on environmental sustainability, we tried to answer the question the Lancet commission raised. That is we don’t yet have the proper metrics. We used a nutrient balance score, which is a complex algorithm that takes a look at a number of factors. We combined it with greenhouse gas emissions but expressed it on a per-serving of food basis so that we could look at a combination of nutrient and carbon footprint in a way that could you simply express it to consumers. We just put that out there as an idea of what we need to do and the kind of leadership that we could provide on a global basis.
All of that then comes back to answer your question: How do we build an industry that will be competitive on a global basis? We have to find ways that retain the advantage that we have in Canada.
We need science-based approaches. Without these science-based measurements of success, it’s difficult to answer your question because right now the answer would be we need to grow more at a cheaper price than anyone else.
To me, that’s not a successful business model and it can suboptimize other environmental outcomes like environmental protection.
Senator Woo: Let me follow up. Presumably, one of the ways in which we can be more competitive than other countries that grow the same product is through the value-added processing of that product, adding value to it by providing different taste options, of course, providing better protein concentration and flavours and so on. Is that not one way in which the industry can differentiate itself from the Black Sea producers and others who are trying to muscle in on the lower end, the raw end of the commodity production?
Mr. Bacon: It is, but competition on a global basis moves very quickly. The speed of innovation in other countries is faster and faster. We may have an advantage this year, but in 18 months, when a new plant is constructed using the exact same technology, we now are competing against labour costs, environmental protection laws, et cetera, in other countries, and we’ve seen this.
One of the biggest protein fractionators in the world is China. I’ve seen new plant construction going on in China with the latest German engineering. Will we have an advantage? The answer is that we can have an advantage, but we have to go beyond being the lowest-cost producer and put value to things like measurements on sustainability and continue our stellar record of issues like food safety. But we do have to go beyond, and this will then ensure we have advantages that Canadian farmers can express and uniquely service. I think that’s the key. It is not a commodity model alone but one that addresses emerging social interests and consumer demands. Those are the metrics that are lacking. I think that’s where our food policy needs to be integrated on a global basis. With that, we build the industry for the future.
Senator Doyle: Thank you for your presentation.
We export about $56 billion worth of agriculture and agri-food products, but we import about $44 billion. Does that $44 billion refer to foods or products that cannot be produced here, or is there room and some more capacity, say, to replace part of that $44 billion by means of local production? Can that be done more competitively with more valuable to you?
Ms. Lee: I believe there is a lot that can be done in that area. One example is the apple industry. As you know, Canadian apples have been around for a long time. We have our own varieties here and it’s a staple of the Canadian diet. However, the growers right now are using technologies and storage buildings that, at their time, going back to technology, were state of the art. But the newer countries who have been starting up into growing apples — for example, China, South America — have been able to invest in newer technologies because they are more recently into that market.
Canadians are now stuck, as it were, with the old technology and, in order to be able to compete, they would need to have some help in being able to update that technology.
Yes, there is definitely the capacity. We have a study out on that. We have a proposal in this particular case with apples. It would be wonderful to see more Canadian cherries from B.C. instead of the ones from Washington, for example. It is the same with apples. I know there’s the capacity to do it. We just need the business conditions and the infrastructure support to be able to do it.
Senator Doyle: NAFTA is currently under renegotiation, as if I need to tell you. However, do the sectors you represent see that as an opportunity for more export business, or are we in a defensive posture right now because of the highly subsidized U.S. farming industry?
Ms. Lee: Certainly, at least the produce industry, the horticultural sector — and I know many, just like the auto sector — is extremely highly integrated among the three countries. There has been a lot of development and a lot of exchange — part of the import exports that were mentioned before — because of this integration. There are parts of the year where it’s very difficult to produce apples and lettuce; there’s no way around it. In fact, Canadian companies have established their own places in the States and in Mexico to be able to supply produce on a year-round basis in Canada.
Our stance has been that we’d rather have not any harm done to it. It was working quite well. There are certain things that could be improved but we would not want the current situation to be brought back down, to be lessened. The integration is extremely important to us and, as I say, there are people on all sides of the border that work very closely together.
Mr. Bacon: I think predictability is the key in these trade relationships and some of the import of food products contain ingredients grown in Canada, for example, exported to the United States processed and then shipped back to Canada. Ideally we’d like to have the processing job in Canada, but it’s also an important market for primary production and agriculture. And also predictability so investments can be made and supply chains developed with some certainty that access is going to continue in the future.
Senator Doyle: Why is the food and beverage industry made up of almost entirely firms of fewer than 100 people? Are these small operations more efficient, or is that your way of being more competitive? What is the reason that you have so many small firms and not large plants? Is it because you’re trying to cater to the small farms in scattered areas around the country? Why is that?
Mr. Bacon: There isn’t one reason that comes to mind. In the food sector, we deal with the large companies, one has a 60 per cent of global snack food share. We also deal with companies who are small, nimble and grow aggressively. One example that comes to mind is Beyond Meat, which came out with a meatless burger whose success has grown so quickly that they aren’t able to keep up with the demand. It wasn’t a major meat or food company that developed that product; it was a small one.
At times, small companies can take more risks. They don’t have fully developed brands so they can move into new spaces. To me, it’s a combination of both the large companies playing an important role and needing to have small innovative companies to push our food sector into new areas.
Senator Doyle: It is 94 per cent, actually. It’s kind of high. Thank you.
The Chair: We have about 10 minutes left and five people wanting ask questions, so there is a maximum of two minutes each.
Senator Oh: Thank you, panellists. My question is about Canada as a global leader in pulse production. Canada is taking the initiative to celebrate pulses and ensure they have a bright future both in Canada and around the world. How is Canada contributing to the pulse industry now at the global level in the wake of protectionism? What is your suggestion to the Canadian government?
Mr. Bacon: We’re living with a rapidly changing pulse industry. India is a very good example where they have decided to become more self-sufficient in pulses, which has had a global impact.
At the Canadian pulse industry level, we’re working globally to try and ensure that as policies change, first of all, we’re competitive in the commodity market. I think the big thing we see as our opportunity in the pulse sector is to focus on social drivers of change in the food industry where people are focusing on nutrition. They’re looking at health outcomes and sustainability.
To build that model successfully, my request to the Government of Canada would be that we need to be the leader of being on a global stage to work to develop those definitions of what success in nutrition, health and sustainability in the food sector looks like. Until we have clear definition of an outcome, it makes it difficult to know that we’re on the right track.
Senator Oh: Do you have any comments, Rebecca?
Ms. Lee: I think I’ll just leave it at that. Thank you.
Senator Gagné: I’ll come back to the example you gave about how to prepare beets. You could do a lot of things with the leaves and also with the root. I think consumer knowledge, as you mentioned, Mr. Bacon, is probably key to changes we need in the food industry.
Food preparation, actually, is a category currently growing in the world markets. How is Canada faring? How can we do better?
Mr. Bacon: Changes to the Canada Food Guide certainly have been and will continue to be an area of focus and some debate. I think government’s role is to provide guidance and direction, working in partnership with the food industry and in close proximity to groups like the Canadian Horticultural Council. All of us play a role in educating consumers. Some clear policy and industry encouragement in ways that improve the health of Canadians are important, because that impacts all of us. It’s another role of government.
I’ll keep my comment brief because I’m sure Rebecca has additional comments.
Ms. Lee: From the point of view of all the organizations that make up the horticulture industry, there are a lot who have a place on their website where people can go. If they don’t know how to use beet root leaves, they can learn how to use them. That is part of the whole picture that has to be drawn up.
Social media has certainly gotten in on the orientation and tendencies of where to look for information. To a certain extent, there has to be a bit more action taken on how to orient that curiosity of the consumer to the kinds of information that would help them make the appropriate decisions and not just because it is pesticide-free, for example. There could be some exports that have a default that is a certain amount of residue on it that falls below the thresholds that are acceptable for Canadian use of products.
It’s being able to orient how the consumer thinks and the types of criteria they have to consider in choosing what their food is and not just on a more commercial basis of who produced it — that’s important — but what goes in behind the production of that is also important.
I’m not sure if I’ve been clear.
Senator Gagné: I have a lot more questions.
The Chair: We’ll put you on second round, if we get there.
[Translation]
Senator Dagenais: I want to thank our guests. I have two quick topical questions. We know that the United States has signed an agreement with Mexico, and that Canada may potentially be unable to renew NAFTA, or that the agreement may be substantially amended. Does that make you think about the future of your industry?
[English]
Mr. Bacon: We certainly have. To date, the discussions have not focused specifically on pulses, but pulse farmers and processors are also wheat farmers and canola farmers. Many of them are livestock farmers as well. Clearly, not just with the U.S. but on a global basis, the seeming move toward protectionism is challenging for an industry in pulses, of which 75 to 80 per cent of our production is exported.
While the U.S. is a large market for certain types of beans, as we see, protectionist policy in one country often has reaction in others. As an example, the U.S. action on steel had the EU take action on beans from the U.S., which then impacts what may be demanded from Canada. Even though issues start out bilaterally, such as U.S. and China, they often end up having global impacts on trade. That is the challenge for all of us.
[Translation]
Senator Dagenais: My second question is about the infamous carbon tax. I was reading this morning in a newspaper that the initiative was turning out to be a dismal failure in Quebec. It is difficult to administer the carbon tax.
When we look at Canada’s production and carbon tax, what do you think will be the consequences on producers and consumers, given the fact that the tax will be passed on to consumers? It will impact the market. Let’s take the example of the Quebec government, which is struggling to administer the tax. Everything the government has implemented, and not only when it comes to agricultural products, seems to have failed miserably. So how do you view the impact that could have on producers and consumers?
[English]
Ms. Lee: Part of the issue we’re seeing within Canada is that, because the way the carbon taxing system has been applied differently across the country, there are interprovincial competition issues. This is particularly visible with the greenhouse industry. Ontario is a bit in flux. We don’t know how that’s going to end up. When you consider that, in Ontario, for example, there was not as much credit or return of the costs to the farmers and growers whereas in B.C. they did have a reimbursement of certain expenses, because it’s part of their business model. This creates uncertainty within the country. Then on an international basis, it might be more competitive for B.C. to export their products than for Ontarians, for example. There’s a bit of difficulty from that point of view.
I would love to have all of the legislation, regulations and extra demands put on farmers be reflected on the consumer price. Right now, I don’t believe that’s happening to a very great extent. The farmer is having to bear the brunt. They’re having to absorb the costs. They are price takers, not price makers. That’s another place where I would see some kind of influence on the part of government: If these requirements are made, there ought to be some kind of adjustment for the prices so that the same apple is not the same 50 cents or whatever it is per unit as it was 10 years ago, with all these additional taxes added to it.
Mr. Bacon: I will make a quick comment.
Let’s not forget what we were trying to do when we started this process: We wanted to reduce the carbon footprint of food. Unfortunately, we focused solely on tax as a method to get there when there are other methods, including changing consumer behaviours, reformulating food products and giving consumers the tools to make the right choices. Through the work the Lancet commission is doing, through the work that ETH has done, we can show we can reduce the carbon footprint of food in a dramatic way simply by reformulating and encouraging consumers to make planet-friendly food choices. That has to be part of our discussion about the direction forward.
Senator Petitclerc: I will take a quick answer, because I know we are at the end. I know it could also be a long answer.
After everything I hear, in both your food domains, when we’re talking about value-added food products, I’m trying to get a sense — you were talking about prepackaging, pre-cut, healthy choices, the same thing with protein — I see a trend that’s not going away. In my idea and many people’s, value-added food used to be more transformed, processed and fast food. We’re going away from that.
I guess my question is: Is it a big market? Is it a niche? Is it a bit of a side from your product but you have to do it? Depending on the answer, are we jumping in and making an opportunity in that market?
Ms. Lee: I think it’s definitely a trend that’s probably going to become more mainstream. People are definitely seeking more convenience. The way we can address those in the future will certainly help draw consumption for healthy fruits and vegetables, among other things.
Are we making total use of it? Seeing what’s been going on in the Netherlands, I think we’re behind. There’s a lot more that it can be done.
Mr. Bacon: A global trend is less time in food preparation. A study I saw in North America said that on a daily basis it’s less than 20 minutes involved in food preparation. That’s why people are buying washed and cut salads, because it is simply a time issue. We certainly see this in developing countries as well. As women enter the workforce, both parents are working and having to come home and look at food preparation for children. I think convenience and ease are driving it. Chopping is preparing food. What we have to do is separate this idea that prepared food is bad food. I think we have prepared food that is very healthy and nutritious as well. What we’re trying to do is not to be against prepared food but ensure people are making the right choices when they seek ready-to-eat food.
Senator M. Deacon: Thank you for being here today. I was happy to hear in your closing comments, Mr. Bacon, that you would like to make sure we keep having a conversation and deeper thought on sustainability. What it is, what we think it is and what it needs to be, and the terms, as Senator Petitclerc just said, about things being value-added. I think it’s really important.
Over part of your conversations this morning, you made a comment about Canada needing to take on a strong leadership role in being part of the food industry. You were referring to almost a continuum. Are we going to be made-in-Canada, or whether we benefit more from being an advocate for change on a global basis. It is a conversation that we’re going to need to have. I wonder about your thoughts on it. You’re immersed in this. Where is that sitting for you right now? It’s not really one or the other. I understand that. I think we all understand that; but from your perspective, an absolute, strong leadership role required, what is your take on this?
Mr. Bacon: I have in front of me a committee on agriculture from the Food and Agriculture Organization where the committee acknowledges the need for an integrated multi-stakeholder approach to addressing complex challenges of food system development. We have the EAT-Lancet Commission, which is issuing a report this fall. When I look at who are some of the leaders in this, I don’t see Canadians. I don’t see Canadian research scientists. I don’t see Canadian ideas being brought to the table. I don’t want to go on and on about carbon tax, but carbon tax is not a global best management practice to change how diets impact the environment. I think if we are going to be a leader in value-added food processing and exports around the world, we have to be at the leading edge of where the food industry needs to go. I think the EAT-Lancet Commission has it right when they say we need a fundamental rethink of how we produce and consume food that’s healthy and can be done in a sustainable way. That’s the challenge, the high-water mark we need to shoot for and ask ourselves what contribution are we making?
I’m challenged to come up with a best practice on a global basis. The forums, the discussions are held in Europe. They’re held in other parts of the world. Often Canadians are not even involved in the programs, let alone bringing forward ideas. I think we have the opportunity. We have one of the best records in the world. We have educated farmers, we have tremendous regulatory systems, but I don’t think we have shifted our focus to look at where we need to be in five years and how we’ll get there. That’s our opportunity but also our challenge.
Senator M. Deacon: Thank you.
Ms. Lee: I agree with the last statement especially. That’s what I’m trying to look at. We’re starting to look at that in the horticultural sector. Where do we need to be in five, 10 or 20 years and what do we need to do so our farmers can be there? So that we’re not importing all of our food and we also have the right research and education behind all of this. The students who are going through the system and considering agriculture in broader terms and how the different technologies could influence our agriculture. Getting education out to potential students on what agriculture really is and where they could have an input as well. I think, especially for the next generations in schools and also on farms, that’s going to be key.
Mr. Bacon: I want to add one quick comment. I think we focus too much on farming. We don’t think of ourselves as key parts of the food industry. I think you really look at a question differently when you look at it through a consumer’s eyes versus a production mentality. We have to do both. I think where we are underestimating and under-delivering is looking at it from a consumer perspective on a global basis, and even on a national basis, through the lens of healthy people, healthy planet.
The Chair: Thank you, senator.
I would like to thank our panellists. We’ve gone a little over time, but we do have this room for longer than we normally do. We’ll catch it up in the next panel. Thank you, everybody.
I have a couple of housekeeping items before senators introduce themselves to the second panel. There will be an in-camera session after this panel. We have to consider a budget. It is important that people stay around. Second, I’ll apologize in advance; I have to go to another session. Senator Maltais is going to take over the last part of the meeting. I’ll warn you in advance we’re going to switch chairs, or I’m leaving. He’ll switch chairs.
With that, I’d like to introduce the topic. We’re looking at how the value-added food sector can be more competitive in global markets.
This us today we have Paul Hetherington, President and CEO of the Baking Association of Canada. I bet he was watching the television program last night about the bake-off? No? Prince Edward Island is still in the competition is all I can say.
Second, from the Canadian National Millers Association we have Gordon Harrison, President; Buck (Harold) VanNiejenhuis, Member of Executive Committee; and Bruce MacIntyre, Member of Executive Committee. Welcome.
We are going to lead off with Paul Hetherington.
Paul Hetherington, President and Chief Executive Officer, Baking Association of Canada: Thank you for the introduction and the invitation to be with you. The Baking Association of Canada is a national not-for-profit trade association representing the country’s $8 billion baking sector. Our independent retail, in-store and commercial baker members produce a wide range of nutritious breads and rolls, along with indulgent products such as cakes and pastries. This is usually when I get asked if I brought samples; I did not.
The committee’s focus on how the value-added food sector could be more competitive in global markets is timely. Canadian bakers have grown exports on bread and bakery products, along with cookies and crackers, from $1.5 billion in 2013 to almost $2.8 billion in 2017. So far this year, exports are up an additional 17 per cent. This trade is almost exclusively with the United States, which consumes some 96 per cent of our exports. For reference, imports in these categories was $721 million in 2013, growing to slightly less than $1 billion in 2017. Again, the vast majority of that is coming from the United States. As you can see, we have substantial positive trade balance with the U.S. I would ask, considering the trade environment, that we keep that amongst ourselves at the moment, please. We don’t want to be subject to any further considerations south of the border.
Not surprisingly, there are issues with this trading relationship and challenges to growth. U.S. tariff rate quotas on sugar-containing products limits certain bakery exports. The new U.S. Food Safety Modernization Act requires new regulatory compliance to maintain market access. These issues are well known and, where possible, being addressed by Canadian officials. The reality is these are issues not within the control of Canadian legislators or government departments and agencies. I would instead like to focus on areas wholly under the control of Canada. In our view, the priority is to have a refocus on evidence-based regulatory development with clear and measurable objectives.
Already submitted to the committee is the Treasury Board submission by the Baking Association of Canada and the Canadian National Millers Association in response to the Government of Canada’s regulatory review of the agri-food sector. This submission outlines in detail our concerns. Chief among those is that we see a creeping reliance on empathy, not evidence-based regulatory development and we refer to Health Canada’s Healthy Eating Strategy as an example. It is not that the problems such as obesity and related chronic diseases aren’t real and supported by evidence. The issue we have is that the proposed policy and regulatory solutions don’t have such foundations.
As identified in our paper, we now have regulations or regulatory proposals that are not based on science but instead a rule of thumb or, in some cases, literally criteria that are unique to the regulator’s authors. Regulatory proposals are in a contradiction with our major trading partners. We have multiple overlapping regulations and policies. Do you know that Canadian bakers have four sodium targets that have all been issued by Health Canada? We also have proposals not taken into consideration as unintended consequences. As an example, under the proposed restrictions on marketing unhealthy foods to children, almost all bread will be deemed unhealthy. Health Canada has not, to our knowledge, identified the impact of unintended folate, fibre and other nutrient deficiencies that may occur in children as a result of such a declaration. Bread is a major source of all these essential nutrients, along with other grain-based foods.
In addition, what will be the adverse effect on trade once the Government of Canada declares to the world that Canadian breads are unhealthy to children? Our critique of these recent regulatory proposals should be taken into consideration that we have a long history in supporting evidence-based policy and regulatory development with some of the highlights including the Baking Association of Canada, the Canadian National Millers Association, and the Canadian Pasta Manufacturers Association supported first the voluntary then actively lobbied for the mandatory fortification of refined flour with folic acid even though this was resisted by Health Canada.
We estimate this initiative has saved more than 5,000 children and their families from the nightmare of birth defects with the corresponding estimated savings to Canadian health care of up to $4.5 billion in direct costs, not including billions more in indirect and opportunity costs.
The Baking Association of Canada supported the voluntary removal of trans fat from the food supply, which was 97 per cent trans-fat-free before the government brought in regulations banning its use.
We have also been supporters of sodium reduction, even though it’s an essential ingredient in the baking industry. Bakers have reduced sodium levels in pantry breads by some 14 per cent.
Based on these efforts and others, we believe that Canada is a world leader in population sodium reduction, as demonstrated by Health Canada’s recent sodium report.
Last, we need to return to evidence-based policies and regulations with clear and measurable objectives, as they put a real cost burden on industry, a cost that inhibits growth and competitiveness. Agriculture and Agri-Food Canada’s food processing round table has estimated that compliance with Health Canada’s Healthy Eating Strategy for the labelling and packaging changes would be some $2 billion. This estimate does not take into account product reformulation costs, loss of market share, et cetera.
In summary, bakers have made substantial investments in supporting past public health initiatives. We simply ask that demands for future investments of limited financial resources be evidence-based with clear and measurable policy objectives. Thank you for your time.
The Chair: Thank you for your presentation.
Gordon Harrison, President, Canadian National Millers Association: I have a few remarks to add, if I may.
The Chair: Yes. Is it a separate presentation, or are you remarking on his presentation?
Mr. Harrison: It’s a joint submission that we made to the Treasury Board. It’s a continuation of what Paul has presented today.
The Chair: Okay, because I had you down for a separate presentation, but the floor is yours.
Mr. Harrison: We’re twins.
The Chair: Go ahead.
Mr. Harrison: We, too, are a national not-for-profit industry association representing the cereal grain milling industry in Canada. The association is 98 years old, and I’m 97.
What Paul has spoken to and what you’ve seen in the Treasury Board submission that I think has been circulated to you, or shall be when it’s translated, is that we’ve been highly critical of some parts of Health Canada. In particular, the nutrition evaluation division that’s been leading these various initiatives over the last few years. They’re very disruptive to business. They’re very puzzling. They’re not substantiated, and they lead to a lot of business uncertainty. Business uncertainty is bad for the value-added industry, and it’s bad for investment.
Generally speaking, transparency has been a favourite word in Ottawa in the last five years. We want to understand the evidence for regulatory development and change, and we want it to be predictable and participatory, meaning that we get to be part of it all along the way, like consumers and health interest groups, and that we do not play favourites at any point in the consultation process.
We included in the submission to the Treasury Board, even though we understand it’s probably going to be received separately from Agriculture and Agri-Food Canada, a report of the regulatory subcommittee of the various value chain round tables that Agriculture and Agri-Food Canada supports.
As noted in our submission, almost all of the recommendations that went into the subcommittee report — recommendations coming from the entire food sector, primary and value-added — are resident in federal regulatory policy. That’s not by accident. As we went through our 18 months of work, we kept going back to the federal regulatory policy which says that these are the things we’re obligated to do as regulators in Canada and we should adhere to those. Organizations like Pulse Canada, Canada Grains Council and others will probably also say that over time as you meet with them, if you haven’t already.
The negative aspects of the way we’ve been developing regulation doesn’t have to happen that way. We’ve included in our submission examples of things that have gone quite well that have been science-based and evidence-based outcomes of policy development. With that kind of experience with other areas of Health Canada, namely, the Bureau of Chemical Safety, Bureau of Microbial Hazards and the Canadian Food Inspection Agency, we have partnered and helped one another define research. We have regulatory outcomes and more research is being done in support of regulation because we shared information and recognized we needed more information, so we cooperated.
If this committee would like to support one thing in the next 12 months, it would be to advocate a simple bill to amend section 4 of the Food and Drugs Act. Section 4 of the Food and Drugs Act was identified to the federal government in 2011 as being a major impediment and a major source of uncertainty. In the submission to Treasury Board, which you have, it explains the general prohibition against selling foods with poisonous or harmful substances in them with no qualifications for things that are naturally occurring results in a lot of foods being sold out of compliance with the law, even if those who are selling the foods are not being investigated or prosecuted by Health Canada. To put it as simply as I can, it is not possible to predictably comply with section 4.1(a) of the Food and Drugs Act, and it hasn’t been for decades. We’ve been talking about and recommending it for the last seven years, and both the Canada Grains Council and the Canadian Supply Chain Food Safety Coalition have pointed it out in this submission. That’s over 60 organizations from all supply chains have recommended this amendment to section 4. It would be easy to amend this in the next budget implementation bill, for example. In fact, I wrote to ministers this year to recommend that, but we were a little bit late.
I emphasize if you’d like to do one thing of importance that will help the future of the value-added industry and international competitiveness, it is to get that section 4 amended so it at least aligns with the United States of America’s law. Thank you very much.
The Chair: Terrific. Often when we have the senators asking questions of the panellists, they cut to the chase and say, “What’s the most important recommendation?” You’ve gotten ahead of us on that. That’s terrific.
We have some senators who have questions for you, and we’ll start off with the deputy chair, Senator Maltais.
[Translation]
Senator Maltais: Mr. Harrison, your presentation is short, but it is hard-hitting. I found it impressive and have learned a lot. I did not know that you have been working on getting section 4 of the act amended for such a long time. As you know, unsafe foods are harmful. Adults and children consume them. Could you give us examples of unsafe foods I may find in the bakery section of my grocery store, IGA, just to name one? I don’t think I’m the only one who wants to know that. Canadians want to know whether they are buying foods that may be harmful to them and their children.
[English]
Mr. Harrison: Thank you for the question. My answer would be none of them. We have a very robust food safety system. Industry leads in that effort. CFIA inspects and audits, but we have a robust food safety system.
Products that make it to retail, packaged foods and those prepared in-store are so extensively regulated that it’s very difficult to describe in a few minutes.
As I referred to in regard to section 4, one needs to realize there are chemicals that are naturally occurring in the environment in the production of cereal grains, a family of chemicals called mycotoxins. Farmers cannot prevent them from growing pre-harvest in bins after the grain is harvested. They’re present in a large percentage of bakery products, for example. But they are at such low levels they’re not of concern.
I spoke fondly and highly of the Canadian Food Inspection Agency in that context because they did a multi-year study of the levels of mycotoxins in grain-based foods with many samples in bakery products. They found no reason to have a regulatory intervention. But section 4.1(a) still says that no person shall sell a food that has in it or on it a poisonous or harmful substance. These toxic chemicals are there in minute quantities but unavoidably present. People who are selling bakery products — I apologize, wheat flour, bakery mixes — are in contravention of section 4 because of the way it’s worded. There are no qualifications for those and no maximum limits. The only way people who sell those foods can be exempted from the Food and Drugs Act is by regulation under section 30(j) of the Food and Drugs Act. The minister can only exempt by regulation.
I don’t think we’re at risk from those kinds of things. I don’t think we’re at risk from the product formulations and the nutritional qualities that Paul was referring to. Things that are being called into question as we go forward with new labelling requirements — I just don’t believe that we have a great deal of risk at retail or food service because of all the efforts, the billions of dollars, that are going into protecting consumers already.
[Translation]
Senator Maltais: If I understand correctly, flour mills buy grain, and you process it into flour. You don’t add anything to the flour; you make flour with the products you receive without adding anything. So the problem stems from the source, from the farmer. The farmer will tell us that the problem comes from the grain seller. How can steps be retraced to get to Mr. Paul who produces bread? How can harmful products be prevented from potentially entering the food chain?
[English]
Mr. Harrison: The accusations need not be accusations. The grain supply chain understands this problem. The farmers, farm organizations and producer organizations have invested millions of dollars over many years in North America and elsewhere to try and find ways of preventing these fungal diseases from growing on cereal grains while they’re growing in the field. The farmer does not have tools to predictably eliminate those fungal diseases. As a consequence, we can’t prevent those from being present in low levels in grains. This is true all over the world; it’s not a Canadian problem.
You said we don’t add anything in the milling. We do add some things in the milling process permitted under regulated, standardized foods, and some things are mandatory to be added to enrich flour under the regulations since 1963, and folic acid was added in 1998. Paul spoke about the health benefits achieved, and our industry supported that.
The farmer does not have the ability to predictably prevent mould from growing in a grain bin. You can try, but grain bins are designed to keep out snow, birds and rodents, and they’re not 100 per cent successful in doing that.
Scientists around the world, now we know in Canada because of research we did privately, supported by Agriculture and Agri-Food Canada and the Canadian Food Inspection Agency or Health Canada, they know these things are unavoidable. Our issue is that section 4 prohibits them. Even if you’re not investigated and prosecuted, when those grains become food, they’re technically non-compliant. Let’s put it that way.
In the United States, it says “a food is adulterated if,” but it’s not adulterated if the chemical is not deliberately added and would not ordinarily present a health risk. Those qualifications in the United States of America allow the U.S. Food and Drug Administration to exercise a great deal of discretion as they do compliance monitoring and enforcement.
Health Canada is exercising discretion as well, doing case by case risk assessments, but that process isn’t enabled and supported in law or regulation. It’s being done religiously, consistently and scientifically in the way they go about it, but we’re still dealing with the situation where it’s a deterrent.
[Translation]
Senator Maltais: I have one last question, Madam Chair. It is very important for Canadian consumers who are watching us and it will likely be part of our recommendations.
Let’s take the example of a consumer who goes to a grocery store and buys a few kilograms of pure flour. Can small particles of dangerous materials be found in that bag of flour?
[English]
Mr. Harrison: They are unavoidably present chemicals that occur in nature, in agriculture and not removed in the milling process. The simple answer is that flour can and does contain contaminants at levels that do not present a health risk. This is true of naturally occurring chemicals, which is what I’m talking about. I’m not talking about pesticide residues or man-made chemicals of any kind.
This is the issue. We all need to recognize this is where we are. Science will not assist us. We must have regulations that reflect this.
Senator Oh: According to Agriculture and Agri-Food Canada, grains and grain products represented 21.9 per cent of Canadian agriculture and agri-food exports in 2016. The United States remains Canada’s largest export market for milled grain products. How would you assess the efficiency of Canadian free trade agreements to increase market access to grain products? What recommendations would you make to the federal government to improve access to international markets for your members? If we have a problem, we have to look for a new market.
Mr. Hetherington: Thank you very much for the question. It’s an interesting challenge we find ourselves in. As I said as part of my opening comments, 96 per cent of Canadian bakery exports go to the United States of America.
A year and a half or two years ago, we actually undertook a pilot project looking for opportunities to expand export markets beyond the United States. We had a small number of member companies and we proceeded to engage in various marketing activities. We started off in the United States. That just happened to be coincidental. The result of that exercise was the participating members received so many business opportunities as a result of engagement in the U.S. that we ceased the rest of the project. There were simply too many business opportunities existing in the United States. It’s obviously geographically very close, we speak a common language, we have very similar cultural similarities, et cetera. It’s just so easy to do business in the U.S., and it is profitable to do business in the United States.
I have members for whom 70 per cent of their business — and I know one member for whom it’s 100 per cent — is export-based.
On the other side, that fact is well known by American trade folks as well as U.S. states. You may already be aware, my members are constantly being lobbied by American states to relocate their businesses to the U.S. If you will think about it as if we were a sports team, we’ve got some star athletes and others are interested in them. If we don’t have the right conditions in Canada, then the business reality will end up, I would offer, as a relocation of those businesses to a more hospitable environment.
Mr. Harrison: You made reference to the Canada-U.S. Free Trade Agreement, and therefore NAFTA. In the value-added sector in cereal gains, starting with milling but also things like pasta and bakery products, as Paul mentioned, two-way trade between Canada and the U.S. has grown. It hasn’t been a one-way flow. What we hear about Canada taking advantage of a situation simply isn’t true.
If you combine all wheat-based and grain-based foods, I think you would find with statistics that Agriculture and Agri-Food Canada could provide that we’ve seen a gradual and long-term growth in cross-border trade in grain-based foods since 1992. We’ve seen it in grain milling, pasta and bakery products.
The participants are North American industries. Our milling industry companies think and invest as North American companies. However, over the last 15 to 20 years, particularly in recent years, larger facilities have been able to serve larger regions, and larger facilities also become, in some cases, North American-product-mandated. Whether they’re in Canada or the United States, they make certain products for distribution throughout all of North America.
That phenomenon is real and will not go away. What Paul is talking about is there is competition among states and among countries for investment. If there is something that we keep coming back to, it’s to have a predictable regulatory environment that is equivalent to the United States. Largely that’s true, but to put a finer point on it, if I was an innovator in the area of food, for ingredients that required premarket evaluation, Canada would be the last country I would go to and risk my science for approval. Historically, people who made things like novel fibres — and some are just recently approved like inulin in the United States — would go to as many as 16 other countries before they even apply in Canada, because Canada would ask questions and seek more research that other countries simply didn’t think was necessary.
That’s quite remarkable. I haven’t heard cases of that recently, but I’m talking less than 10 years ago. Canada is last in line with a small market and a lot of regulatory risk.
Senator Oh: If we don’t retain our people here, the companies here, they are going south and we are losing jobs and investment.
Mr. Harrison: That’s true and there are many examples, and to name a few companies, Kellogg’s has made decisions that way, Heinz has made decisions that way and exited their manufacturing activities in Canada. If you don’t have a friendly regulatory market which puts your product reputation, a global brand, at risk, you have a decision to make. You either exit the category, you exit the market or you exit the country as a manufacturer. Unfortunately, because of the economy of scale along with these other uncertainties, the people who help you with research could identify for you how many corporations have made that decision and how many jobs have migrated out of the country.
Senator Oh: You have to put in a stronger recommendation. We will support you.
[Translation]
Le sénateur Ghislain Maltais (vice-président) occupe le fauteuil.
The Deputy Chair: I would ask the senators to keep their questions short and the witnesses to answer briefly. We have 15 minutes left. We will begin a second round of questions and answers if we have enough time.
[English]
Senator Gagné: I believe that innovation is obviously imperative in the food processing industry. I also believe the level of investment in research and development is quite important.
How has the industry responded to the opportunity of the growing global demand for food, in the innovation and research and development sector?
Mr. Hetherington: Based on conversation and anecdotal evidence with my members, what we’re actually seeing is a shrinking of the number of product offerings rather than an expansion. Much of that has to do with the regulatory compliance associated with each product.
I have had similar conversations with grocery retailers who are complaining about it, the fact that they don’t see the same number of new product offerings coming to market and being put forward. That is a combination of things, the very competitive marketplace here in Canada, but it’s also a regulatory compliance issue. The cost of ensuring your product complies, the cost of labelling and refocusing on that. Anecdotally what we are seeing is a rationalization of product offerings to accommodate that new associated expense.
Mr. Harrison: It’s not that innovation isn’t happening. On the contrary, Canada has a tremendous research community that is publicly funded to a large degree, also with private and public sector partnerships. Currently we have federal programs, as you know, that are encouraging that. They’re not just about innovating for market access but they’re innovating for nutrition and they’re innovating for greater certainty.
As I mentioned, some companies are global or North American companies. To my right Mr. VanNiejenhuis works for Ardent Mills. Ardent Mills has a new initiative, which he’s going to speak very briefly about right now, but a competitor called ADM Milling also has an initiative. These companies are investing in new and emerging technologies.
Buck (Harold) VanNiejenhuis, Member of Executive Committee, Canadian National Millers Association: We’ve looked at ancient grains, we are moving back to what is old is new again. We’ve invested in Canadian-based quinoa. We are partnering with smaller organizations and trying to grow those markets. We’ve invested in organic, we’ve invested in heat-treated flour. We continue to make investments to give consumers more choice.
We’re developing teff and other ancient grains as well. It is something we’re definitely looking at both in the U.S. and in Canada in our research and development arm.
Senator Gagné: That is based on consumer demand? Is that the case, you’re investing in research, trying to find the qualities of the ancient grains so that we can make better or healthier choices as a consumer?
Mr. VanNiejenhuis: I would not say healthier because I believe whole wheat and white flour are very healthy choices. I think consumers make choices of their own and we want to provide them access to various choices.
It’s not that our core products aren’t healthy, it’s we want to provide different choices for different consumers.
Mr. Hetherington: If I may, senator, the overriding, number one consumer demand right now is for health and wellness. You’ve probably heard that. It’s driving a number of initiatives, the focus on clean labels and going back to natural. As Buck said, what is old is new again.
Food manufacturers are striving to remove anything from a product that is very difficult to pronounce. If it ends in “oxide” or something like that, the focus is to get it out of the product.
I would offer that the industry is actually very sensitive to that. I go back to my opening comments when I mentioned the issue of trans-fats. The industry was well ahead of government in that regard simply because consumers were demanding it. The consumers were driving the subject. They said to the grocery retailers, we don’t want to buy anything with it and that message was pushed back, so the market was driving issues. The market is driving the health and wellness issue, and we’re going to continue to see innovation and focusing on those areas.
There are limitations, as you get into that. You start talking about sodium reduction, as an example. In the baking industry, as I said earlier, it’s a fundamental ingredient. It’s essential. It’s a very functional ingredient. Anybody who has ever done any baking, particularly if you need a leavening agent or you’re into breads, and you don’t put any salt in, you quickly find out that you have made a mistake.
There are limits and there are opportunities. We have some discussion going on now within the industry about a potential nomenclature change with regard to potassium chloride, maybe renaming it to potassium salt would be more palatable to consumers. It’s not a misrepresentation; it’s just a change in nomenclature. We’ll see where that might go. There are opportunities and they are being driven by consumers.
Senator Petitclerc: I’m trying to see where the opportunities are when it comes to value-added products in your sector. I was a little surprised by your initial comments on the non-science-based approach of the new health guides and Health Canada. I’ve been following that very closely, and when I look at the nutritionists, the health experts and the environmental expert organizations with no commercial interest, they seem to be very welcoming and supportive. Even saying we are not being audacious enough compared to Switzerland, for example. I understand the challenges and where you’re coming from.
Knowing that this is where we are going, and it’s been supported by the health sector and by the consumers, are those opportunities as well?
I understand they are expensive challenges at some level, but are those opportunities? And does the industry get support in order to move in that transition? I guess that is what I want to know.
Mr. Harrison: Yes, there are opportunities. When the market sends signals for whatever reason — taste, or a variety of foods — the industry responds. When the market does what Paul was referring to and you want to make a simpler product that looks like a simpler label, then that’s an opportunity for a company to innovate in product formulation and processing methods to create a product that is simpler, has fewer ingredients, and that’s a major trend in North America.
Pick up any trade magazine to do with food and there is article after article and ad after ad in those magazines about better and simpler products. I want to make that clear.
Our concerns that have been expressed and supported more directly by the baking industry have brought forward a great deal of evidence and science. We had a presentation at our conference yesterday morning. It would be ideal for this committee to hear that presentation. I’ll turn it to Paul now.
Mr. Hetherington: I’d like to address the question about science-based foundation for these initiatives. My comments aren’t particularly directed with regard to discussion of the food guide. It’s a number of the initiatives that are also part of the healthy eating strategy. If you take, for example, the front-of-pack labelling initiative, the criteria they are using for triggering the warning label they are proposing, they being Health Canada, is 15 per cent of the daily value plus, versus serving size and reference amount, whatever is larger.
There is no scientific basis for that 15 per cent. It came out, I assume, on the nutrition facts table, of a recommendation that less than 5 per cent of a nutrient is a little and more than 15 per cent is a lot.
That contradicts, as an example, the United States, which says 5 is a little and 20 per cent is a lot. If you look at the United Kingdom, they’ve had a stoplight labelling system for many years and they use more than 25 per cent of the daily value as a lot so we question the scientific basis for that.
We also question the scientific assessment of the success of these initiatives. I’ll give you examples. In both the cases of trans-fat removal and sodium reduction, it was advocated by Health Canada right up front that the rationale for these initiatives was that we would receive a certain amount of health savings as a result of it. We’d see a reduction of coronary heart disease and stroke as it relates to trans-fat. We would see a reduction in hypertension, which would result in a reduction of various chronic diseases due to sodium reduction.
We have asked Health Canada when we will get these benefits. That was the rationale for the objective and the initiative. The response is: Well, you have to understand they are multi-factorial so it’s very difficult to measure. Well, that wasn’t the rationale used to support the initiative. If you cannot measure it, how can we be assured we’re actually receiving a benefit?
Mr. Harrison: Under federal regulatory policy, regulators are obligated to measure the outcomes of things they do. They do not invest the money to do it, and Paul has neglected to add that we’re not using what should be the most publicly available information about health outcomes and nutrition. Simply, the most up-to-date information is not being applied here and that’s described in this submission.
Mr. Hetherington: I appreciate the chair saying to speed it up, but I would like to ask this group about the research on marketing to children that emanated from the Senate. Was it the expectation or intent that bread would be deemed unhealthy for children? That’s a question that is coming out of our industry now.
Mr. Harrison: It’s on a list at Health Canada’s website of foods that are unhealthy for children.
[Translation]
The Deputy Chair: I was chair of the committee at the time. Far from it, no, bread is not a harmful food to children. On the contrary, it is necessary to their growth. We seek out the bread of the best quality with the fewest harmful products. The quality of options in production, to the liking of consumers, is also important. In short, bread is a dietary staple essential to the healthy growth of our children. That was the gist of our committee’s research. I think we will achieve our objective thanks to your testimony, among other things.
Senator Dagenais: I thank our guests. My question is for Mr. Harrison. You talked about quality control in major food chains. When it comes to small bakeries we see in many of our cities, how can the same quality control be conducted as in major industries?
[English]
Mr. Harrison: Not in all cases in terms of personnel and qualified people who are professionals in that area. What is important to note is that grain-based foods, and bakery products in particular, are among the safest food categories in all of the food categories. The information about food recalls we have available in Canada from CFIA, from the U.S. authorities as well as the data, the epidemiological evidence, shows that bakery products are among the safest in North America and certainly among the safest in the world.
In terms of food safety, the bakery process typically involves temperatures of 350 degrees or much higher, depending on what’s being made.
The ingredients that are used in bakery products are typically extremely safe. There have been very few, in rare exceptions. Those ingredients, including milled grain products, have been inherently safe for decades and centuries. A small bakery or a large bakery is one of the last places to go if you really want to find risk associated with food safety.
Bakery products are so far down the list among all foods that present food safety risk that it’s difficult to describe. If you wish, I’d be happy to provide some statistics that are of public origin.
Bruce MacIntyre, Member of Executive Committee, Canadian National Millers Association: In layman’s terms for that, the flour millers have all invested a lot of money over the past few years in food safety in order to comply with regulations and be a good supplier.
The little baker gets the same flour as the grocery store chain or the major bakers. We don’t make inferior products. Flour is the biggest ingredient, and to Gordon’s point, all baked goods hit a baking point of 350 degrees at least, so that makes them incredibly safe.
[Translation]
The Deputy Chair: Thank you very much, gentlemen, and before you leave us, I would like to ask you to send to our clerk any written recommendations you may have, both regarding flour mills and bakeries. Your testimony this morning is among the most important ones, as it is at the basis of our study.
We have heard from witnesses from the entire food chain, from farmers, to grain sellers, to flour mills and to producers. Mr. President and Chief Executive Officer of the Baking Association of Canada, what would be the best bread a mother could buy for her young children or adolescents?
[English]
Mr. Hetherington: It’s the one they would eat. I’m not being facetious in saying that.
Taste is the number one factor when it comes down to food purchase and consumption. If we look at the industry, it produces an enriched white product, we have a whole wheat and we have a whole grain product.
We know by evidence and marketing that, simply, the whole grains and whole wheats have additional nutrition value because of the germ inclusion, but there’s resistance to eating them. I know health professionals who will not eat a whole grain product because they don’t like the taste or texture. I would remind everyone when we start looking at all the bakery products, due to enrichment, due to folate-enriched white products, the contribution of iron, et cetera, to the diet, it’s really important we understand and appreciate that.
I’d also offer, just to finish up, there’s new research coming out of the University of Saskatchewan looking at the whole issue of contributions to the diet of enriched baked products. I think we just have to wait on that data, which should be out within the next six months. I think it will give a real sound foundation for further discussion.
[Translation]
The Deputy Chair: I would like to raise one last issue before we part.
I note that bakers, when it comes to the sale of their bread in ads, always present bread covered with a lot of jam or hazelnut spread, while in Europe, bread is eaten plain. Aren’t they promoting sugary products at the same time as bread? Could bread be promoted, be it whole grain bread or white bread, without adding products such as jam, peanut butter, cheese spreads or any other spreads children eat? I think Europeans are ahead of us in that respect. When Canada started out as a colony, our ancestors ate bread on its own. Would it be possible to promote plain bread, without spreads, in ads?
[English]
Mr. Hetherington: I’d have to take that one back, quite frankly, senator. I haven’t noticed the same that you’ve indicated. In discussion with my members, they’ve actually indicated to me that it’s not their focus to promote bread to children. That is not their market. Certainly with regard to the European consumption, they definitely have different food practices; I’m in full agreement with you. I have seen situations in Europe where bread would be eaten with butter and then they would salt it on top of that. It is certainly a different market, but I appreciate your comments and I will take those back.
[Translation]
The Deputy Chair: On that note, thank you so much, gentlemen, for your testimony. We hope you will send us any additional comments you may have.
I will ask the senators to remain, as we need a quorum to continue in camera.
(The committee continued in camera.)
(The committee resumed in public.)
The Deputy Chair: We are ready to receive a proposal to adopt. Senator Gagné, I believe you have something to propose.
Senator Gagné: I propose:
That a supplementary budget application for the committee’s study on how the value-added food sector can be more competitive in global markets, for $122,965, for the fiscal year ending March 31, 2019, be approved for submission to the Standing Committee on Internal Economy, Budgets and Administration.
The Deputy Chair: Are there any questions or objections? I think the response is unanimous. Thank you very much, senators.
(The committee adjourned.)