Proceedings of the Standing Senate Committee on
Agriculture and Forestry
Issue No. 61 - Evidence - Meeting of February 21, 2019
OTTAWA, Thursday, February 21, 2019
The Standing Senate Committee on Agriculture and Forestry met this day at 8:04 a.m. to study how the value-added food sector can be more competitive in global markets; and to examine and report on issues relating to agriculture and forestry generally (topic: support and compensation for supply managed agricultural sectors in relation to the USMCA, CPTPP and CETA trade agreements).
Senator Diane F. Griffin (Chair) in the chair.
[English]
The Chair: Good morning, honourable senators. Welcome.
I’m Senator Diane Griffin from Prince Edward Island, chair of the committee. Before we hear from our witness, I would like to know if I could have agreement from you to allow photography during this morning’s session.
Hon. Senators: Agreed.
The Chair: Once Senator Mercer does his hair, we’re allowed to have photography. We have agreement. That’s wonderful.
I would like to start the meeting by asking the senators to introduce themselves.
Senator Doyle: Norman Doyle, Newfoundland and Labrador.
[Translation]
Senator Dagenais: Jean-Guy Dagenais from Quebec.
Senator Miville-Dechêne: Julie Miville-Dechêne from Quebec.
[English]
Senator R. Black: Robert Black, Ontario.
[Translation]
Senator Gagné: Raymonde Gagné from Manitoba.
[English]
Senator Mercer: Terry Mercer, Nova Scotia.
The Chair: For our first panel today, the committee is continuing its study on how the value-added food sector can be more competitive in global markets. We have the honour of having with us today, from the Canadian Federation of Agriculture, Mr. Ron Bonnett, President.
For the information of viewers, I’d like to indicate that this is indeed an honour, because it is Mr. Bonnett’s last week as president of the organization. He finishes his mandate at the end of the month. He has been President of the Canadian Federation of Agriculture since 2010, so he has been a major contributor. We’re very pleased to have you here today, sir.
The floor is yours.
Ron Bonnett, President, Canadian Federation of Agriculture: Thank you. It’s quite an honour to be presenting to the Senate on this last hurrah going through.
Good morning, and thank you for the opportunity to speak about the competitiveness of Canada’s value-added food sector. I know a number of you. A number of you may know the Canadian Federation of Agriculture, but we are Canada’s largest farm organization and represent about 200,000 farmers. The other thing that’s interesting is we have a lot of interaction with processors and retailers, so the whole supply chain actually looks at some of these issues, particularly with respect to value-added.
The Canadian agricultural sector relies on export markets for about 60 per cent of its agri-food output, and the government set a goal of $75 billion in export value by 2025. It’s interesting to note that Innovation, Science and Economic Development Canada, in their recently released report, have increased that to $85 billion.
Canada is always looking for access to new, more profit markets to agriculture through bilateral and multilateral trade negotiations. Much of the sector’s export success is predicated on establishing international trade agreements, but access alone does not ensure meaningful exports. While the focus of this committee is looking at export markets, we should not forget the domestic markets. The recent Agri-Food Table that I mentioned highlights the importance of domestic markets, and we must be sure to consider opportunities in that space as well.
That strategy table saw an opportunity to target $140 billion in domestic sales by 2025. This requires a commitment to improve branding and labelling of Canadian products, increase investments in domestic marketing, attract more risk capital and continue tackling interprovincial barriers.
To reach these lofty goals, value-added is required. It will not be done just with primary production.
Regarding exports, trade agreements enhance Canada’s market access, but this only benefits the sector if we’re able to make that access real. This requires identifying value-added markets in specific countries through a whole supply chain approach to get the appropriate infrastructure in place.
It’s also important to consider supply-managed industries’ robust value-added opportunities in export markets. While new market access can be beneficial on this front, it is difficult to do any sort of strategic planning around that when the unpredictability of market access concessions looms with every upcoming trade negotiation. Strong governmental support for Canada’s supply-managed industries is needed when pursuing trade agreements or any post-Brexit trade discussions with the U.K. Avoiding further concessions is critical for these sectors for strategic planning and realizing their potential, both domestically and abroad.
Non-tariff barriers to trade can be as limiting as tariffs. The European agreement is a prime example, creating significant opportunities for Canada’s beef sector, while constraints continue to limit the commercial viability of Canada’s beef trade to Europe. For example, the EU does not permit any microbial interventions used by Canada’s processors to meet North American regulatory requirements. Approval of these interventions can take years to attain, if ever.
As a result, a sufficient supply chain of EU-eligible cattle does not yet exist, and establishing this supply could take in excess of two years due to difficulties in identifying veterinarians capable of carrying these products to the EU market.
Similarly, we continue to hear that despite the terms of the agreement, the EU is creating technical barriers to trade through the administration of tariff-rate quotas, making it difficult to access new markets.
While industry is committed to realizing opportunities, this demonstrates the importance of proactively ensuring the right infrastructure is in place.
Regulatory harmonization is an issue that also needs to be addressed. With the United States, our largest trading partner, regulatory co-operation remains a priority. Despite continued work on this front, there are many achievable and beneficial opportunities for regulatory coordination. Things like duplication in meat certifications and inspections create undue delays and costs resulting in fewer dollars making it back to the producer.
CFA is pleased to see that the government prioritized export diversification through investments and Canada’s international presence and leadership in international forums. This support must continue to ensure responsive bilateral discussions to help address these barriers. We also need to focus on high-value markets and not bulk exports of low-density, low-value-added products.
Before moving into a market, we need to assess both the costs and the benefits. For example, we see continued pressure from markets around the world to meet varying traceability requirements, taking on significant costs in the process. We need to undertake research that is forward looking to ensure new markets present a true value add. We need to proactively address non-tariff barriers, and industry plays a key role in that. Once a supply chain is established and relationships have been developed, they often overcome political volatility, prevent further barriers and help address significant barriers to trade.
Continued support for on-the-ground market development both through the trade commissioner service and industry led trade missions are essential. We must leverage Canada’s investments in its international presence to identify what is working already and where to focus additional energy. As a prime example, the CFA embarked on a tour of the American states during the renegotiation of NAFTA to highlight common agricultural interest. Consular staff provided us with critical intelligence to support targeted efforts and establish key relationships with those colleagues to the south, and their support was incredible.
Long-term strategic trade needs to be the focus wherein government works hand-in-hand with industry to identify priority value-added markets supported by continued investments to enable fulfilment and overcome non-tariff barriers.
We also need to take a close look at regulatory barriers within Canada. For example, the hog sector faces regulatory barriers in building new barns, limiting supply and seeing Canadian producers actually invest in the United States while unable to capture new opportunities under the new Comprehensive and Progressive Trans-Pacific Partnership.
We support recent commitments on regulatory modernization and inclusion of competitiveness in regulatory mandates, but focus is needed on addressing domestic roadblocks that often extend across multiple orders of government. This is where provincial, federal and municipal governments have to be in alignment with the regulatory systems to make sure we can take advantage of opportunities. Volatility in markets is also limiting value-added investments. Farmers continue to indicate that the business risk management programs fail to address the volatility they’re experiencing.
Going back to the hog example, we’re seeing fewer private individual pork producers because they can’t manage that volatility in the marketplace, and that drives consolidation in the sector and leaves producers with limited options for processing and value-added, often leaving them beholden to downstream value chain players.
We strongly advocate for continued review of business risk management programs with industry at the table as partners in developing appropriate risk management tools to achieve our growth targets.
Finally, chronic labour shortages continue to constrain agri-food growth, with more than 59,000 vacancies in primary production alone expected to double by 2025.
Producers are already seeing an annual lost sales of $1.5 billion due to these labour shortages. To meet immediate and future needs, we need to increase the supply of available labour and improve the knowledge and skills of these workers. This is a massive challenge and requires a coordinated strategy bringing together stakeholders from across government, industry, immigration services and Canada’s educational systems. The Canadian Federation of Agriculture supports the Canadian Agriculture and Agri-food Action Plan and we call for its immediate adoption.
With that, I will close off my remarks and look forward to your questions.
The Chair: Thank you for your presentation. We have some senators lined up to ask questions.
Senator Doyle: Thank you for being here. You talked about labour shortage. I noticed in May of last year that the Canadian Federation of Agriculture hosted a round table with government to talk about the Canadian foreign farm workers program. Of course, foreign workers are used in the agri-food and harvesting and processing sector. What percentage of labour in these areas are done by foreign workers?
Mr. Bonnett: The last part?
Senator Doyle: What percentage of labour in those areas is done by foreign workers?
Mr. Bonnett: If you look at the agriculture sector, it depends on the industry. With most greenhouses and mushroom farms, about 20 per cent of their workforce would be immigrant labour, whether it be temporary or people who are applying for permanent residence.
I think sometimes what gets lost in the discussion is the fact that if we didn’t have that 20 per cent core group of people there, we would lose the 80 per cent of the Canadian jobs that are dependent on that. So it’s critical to have that in place.
You mentioned the round table. We had the Minister Agri-Food there. We had the Minister of Labour there and the Minister of Immigration as well. I think there needs to be a cross-departmental approach to deal with the whole labour issue. It’s about training for Canadians. It’s about looking at how you solve some of the temporary worker issues. But it’s also recognizing that we really need to take a look at immigration policies to make sure that the right skill set is identified for the workers that we need. Sometimes the provinces who identify the skill sets that are required are missing out on the skill sets that agriculture needs.
I think one of the unfortunate things is that agriculture workers, immigrant workers, are often identified as low-skilled. I bristle a little bit about that. They have specific skills. They’re different skills, but I would hate to be calling them low skills. It is putting them in a category where they’re not a priority.
Senator Doyle: Does the hiring process respond in a timely way to the needs of the agriculture sector, or could it use some improvement? Can you get these workers when you need them?
Mr. Bonnett: There definitely needs to be some improvement. We’ve seen some improvements in the last year or so. I think some of the application procedures were getting hamstrung, not only here in Canada but also in Mexico with some of the administrative processes that were put in place.
The one thing that has happened coming out of that round table that you mentioned is that we set up a working group with industry and government and cross ministries to take a look at how to resolve some of these issues and try to streamline the process.
Senator Doyle: Our notes indicate that firms with fewer than 100 employees make up 94 per cent of the Canadian food processing sector, but the larger firms account for nearly half of the value of processed exports. Could you talk a little bit about that? Why do we have, say, firms with fewer than 100 employees making up such a large portion of the food processing sector while the larger firms account for nearly half of the value?
Mr. Bonnett: I think it relates to some better marketing skills in some of the larger firms. They have the ability, possibly, to go after higher-value markets than the smaller farms do. I sometimes think we underestimate the capital and the investment it takes to market your product, especially in export markets. That would likely be one of the reasons that would explain why there is a difference between the small firms and the large firms. It’s just the resources they have to put in to going after high-value markets.
Senator Doyle: Thank you.
Senator Mercer: First of all, Ron, thank you for all of your support over the years that you’ve been in this position. You’ve been tireless, and you’ve been there every time we have called. I also want to make sure that senators and the public remember that on a number of occasions when we’ve released reports, not only were you supportive, you were in the room with us. That’s very important to continuing to build on that relationship with the federation. It’s a bit of a team sport here, and we need to continue to build that relationship. You have set a foundation for your successor that we’ll try to continue to build on. Thank you for that.
Senator Doyle did ask the question about the labour shortages. From your perspective, having been in this job for some time now, what problems would you like to see solved, perhaps, in five years and 10 years that would do something? During your mandate, something very important has happened in the country that I don’t know if the general public has noticed, but certainly those of us involved on the political side have noticed that in the last two or three budgets, the mandate letter that the Prime Minister gave to the Minister of Agriculture has played an important role in budgets. Agriculture, for all the years I’ve been here, is now a very major part of federal budgets, and the emphasis on growing agriculture, growing jobs at agriculture, growing exports are front and centre of the Government of Canada.
My real question is what is your five-year wish list and your 10-year wish list?
Mr. Bonnett: It’s always difficult to look ahead at a five-year wish list. You mentioned the attention agriculture has received in the last few years. I think we’re finally getting to the point that governments are starting to understand the economic importance of the agriculture sector.
We’ve often taken a second seat to manufacturing and other sectors, mainly because I don’t think there was a really good understanding of the cumulative impact of all of the investments on farms and in the value-added processing side. I think we’ve managed to catch the attention of a lot of politicians.
I think we need to expand that five years out, so the general public has a better understanding of that as well. Because when you have public support, you have political support. That’s one of the critical things we can do moving forward.
What I would look at is seeing how we can solidify market gains from some of the trade deals that have been signed. I mentioned we have CPTPP and CETA in place, and we’ve got the new USMCA, depending on who is calling it what.
I think there is potential opportunity. Figuring out a way to deal with some of the non-tariff barriers and the regulatory hurdles is critical going forward.
The final thing is continuing to build the trust of the Canadian public and the world public in the types of regulatory systems and the evidence-based decision making that Canada has in place to ensure high quality, safe food. We’re starting to see, especially in the social media presence, a lot of attacks on the agriculture sector. I think a lot of this is based on not having a really good understanding of what it is we do and how we do it.
If I look out five years, it’s one of those issues that I’d like to see if we could get a better handle on how to address that and maybe raise consumer awareness on some agricultural issues. Part of that stems from the fact that we just have a society now that is somewhat disconnected from primary agriculture.
Senator Mercer: You hit on an interesting subject that governments come and go but the influence of agriculture has grown through that. For example, the current government is very weak in rural Canada in the number of seats that they have in their caucus from rural Canada. But still there’s been this new emphasis on agriculture.
I think that’s a collective pat on the back for everyone who has been at this, as you have, for a number of years, educating urban politicians that there are good jobs out there in agriculture, and that’s why there’s the need for the continued support of rural Canada.
Mr. Bonnett: One of the comments I would make is you mentioned working back and forth in partnership with this committee. I think that’s been an important relationship. On a number of issues, we’ve managed to identify some core issues going forward. I think it’s important to have that dialogue back and forth and sit back from the political fray and have a discussion on what the real issues are that we’re facing and what approaches we can take, and what agriculture’s role is in addressing that. That can be everything from environmental issues to the carbon issue to some of the economic and labour issues that need to be visited.
I think there is a role for farm organizations and a role for this committee in helping highlight some of those benefits that agriculture can provide to the economy of Canadians as a whole.
Senator Mercer: Thank you.
Senator R. Black: A quick question, Ron. In your mind, is it feasible by 2025 to get to 75 or 85 internationally and 140 domestically? Is that a reasonable yet lofty goal that we might attain?
Mr. Bonnett: If you look at what we have achieved in the last few years, we might actually exceed these goals. If you look over the last few years, we’ve actually grown our exports and our domestic markets fairly substantially. I think, though, what we have to look at is what the limiting factors are. Labour would be one of the ones that would jump out right in front on limiting our ability to access those higher numbers.
Senator R. Black: We’ve certainly heard under another study that we’re doing that export markets for supply-managed products are minimal because of the nature of the supply management process. Is there opportunity going forward, in your mind, to increase those exports? Granted, there may be changes necessary.
Mr. Bonnett: Right now, the exports are regulated by quotas. It’s very difficult, depending on the supply-managed sector. Some of the poultry sectors have more back and forth trade than possibly the dairy sector does. So there are some opportunities that are likely going to be there.
As far as what happens in the future, I think a lot of that is still dependent on what markets do. Supply-managed sectors have been a very good tool for maintaining incomes on farms in Canada. If all of a sudden the world market price is way higher than the Canadian price, that would likely change the way people looked at the system. But throwing away something that is working just on a dream that the prices might go up, I don’t think you will see a lot of farmers jumping on that.
One of the things we need to be watching is what is happening on world markets long term. That’s where having intelligence on what’s taking place with markets will be critical in the future. But also related to the supply management side — that’s why I included in my remarks some comments about building the domestic capacity. If we have increased imports coming in, I think one of the challenges and strategies that we need to take is looking at how we can grow Canadian consumption of those supply management products, whether it be dairy or poultry, and see if we can keep those markets going.
I don’t think it’s either domestic or export. I think we have some sectors that are very concentrated on the export markets and the supply managed sectors have done very well with the domestic side.
When we’re looking at growth strategy, we have to look at both. I think we’re losing a great potential in the domestic market with some of the new ethnic groups that are coming into Canada that are eating different types of food than what we’re used to, and we have to look at how to supply some of these different tastes. I think there is opportunity there as well.
Senator R. Black: In our recommendations and report on this study, what would you propose we include as recommendations to overcome those non-tariff trade barriers that you spoke about and we’ve heard about?
Mr. Bonnett: I would think international engagement in discussions with regulatory bodies through the FAO, through some of the other international bodies because if you’re going to solve the regulatory problems, it can’t be done in isolation. I think it has to be done jointly. Likely, with the partnership we have with the U.S. and Mexico, that would be a good place to start to see if you could put a template together for what would work with the three countries and then start doing some selling around the world on some modelling.
Sometimes it’s better to start off small and see if you can get agreement on those issues and move ahead. Some of that work is now being done, but I think the increased presence in international standard-setting bodies is critical.
Senator Gagné: As you mentioned, the domestic market presents an opportunity for the agriculture and agri-food sector, and you mentioned in your presentation that the lack of regulatory consistency represents a major barrier to interprovincial trade. You gave the example of the hog industry and their challenges.
Would you have an example of another industry where we were successful in getting rid of interprovincial barriers?
Mr. Bonnett: I’m trying to think of an example where we were successful. I think we made some steps towards trying to get rid of barriers. There is a lot of discussion taking place now looking at different transportation regulations, which can cause a lot of difficulty. Truckers may make it to the Quebec border with a truck designed for Ontario standards and need to unhook one of the trailers to make double trips into Quebec.
The same works in the west with different standards, technical details that can drive extra costs into the business.
There is the whole issue of provincial meat inspection standards, varying from province to province. If you’re living on the Quebec border, you can’t ship products into Ontario and vice versa; you can’t ship products from Ontario into Quebec.
Taking a look at dealing with some of those types of interprovincial barriers would help, and it might go back to the question of some of the smaller firms that may not have federal licence and would be able to expand their capacity if there was compatibility of provincial regulations. Meat inspection would be one that comes to mind.
Senator Gagné: Then you have the international trade agreements, but also the regulations in place.
Mr. Bonnett: Yes.
Senator Gagné: How do you go about modernizing the Agreement on Internal Trade, but also having in mind the international trade agreements that we’re dealing with?
Mr. Bonnett: We can modernize our systems. I think we can look internationally to see where other countries have actually moved towards a modernized system. Some of the work that CFIA has done in the last couple of years moved us down the road where it’s outcome-based regulation as opposed to what they call prescriptive regulation. It used to be this: “This wall has to be here.” There was no reason why it was there, just that it was where the wall is supposed to be. It may or may not make any difference to the quality of the product coming out, but it is a shift of a mind set.
The other thing on the regulatory system is figuring out how to catch up with new technology. I have heard companies talking about using new packaging material that might do a better job of protecting products than what they have in place now. However, getting regulations approved to authorize that is somewhat cumbersome.
As we see new technologies develop, I think we’re going to need to have a regulatory system that is fairly quick on its feet to respond to those new technologies, because industry is always looking at ways to stream line costs and improve the quality of their product. But if they’re hamstrung by a regulatory system that doesn’t recognize that just because something is new, it doesn’t mean it’s worse, it might actually be better. And I think it’s having that response in the system so it can react very quickly.
Senator Gagné: Are you aware of any work being done on the modernization of the Agreement on Internal Trade?
Mr. Bonnett: Between the provinces?
Senator Gagné: Yes.
Mr. Bonnett: Discussions have taken place at the premiers’ levels. I’m not sure how much detailed discussion has taken place. I know it’s on the agenda, but it’s slow going too.
[Translation]
Senator Miville-Dechêne: Good morning. I’ll ask my question in French. You said that society seems somewhat disconnected from farmers and from what’s happening on the ground. On the other hand, after listening to your presentation, society and eating habits are changing. I’m thinking of Canada’s Food Guide, which recommends that we eat less meat and fewer dairy products. As the Canadian Federation of Agriculture, when you think about the future and developing domestic markets, how can you juggle — I know that you represent all farmers. However, major changes are taking place, and these changes are producing positive results. For example, newcomers are eating more eggs because this type of protein isn’t expensive, which is good. I didn’t know about this. In general, I haven’t heard you talk about the fact that supply management is under threat. In addition to the small yogurt container in Canada’s Food Guide, how do we proceed? In my view, these are very significant challenges. I don’t believe that you’ve addressed them. I’m concerned about these significant issues.
[English]
Mr. Bonnett: I think that gets into the discussion about trying to predict where the market trends are. You mentioned the growth in egg consumption. I was talking to some egg producers and one challenge in that industry is keeping pace with the demand. Having the ability to get your finger on the pulse of what’s happening is going to be critical going forward and that applies for both domestic markets and export markets.
If I look at another example where I think there’s potential for growth in the dairy sector, it’s in the specialized cheese market. Quebec has likely done more than any other province in trying to capitalize those niche high-value-added markets because by focusing on that, you actually displace some of the imported products coming through.
Senator Miville-Dechêne: As you know, those people are very critical of our agriculture system. In a sense, the cheese producers don’t feel they have a place. They feel that they are squeezed.
Mr. Bonnett: However, I would argue in some ways they may feel they are squeezed with our system, but they’re not thrown out completely to the wolves of the international market either. It works both ways.
I mentioned in my presentation the importance of a brand-in-Canada program. I think a brand in Canada works both on the domestic and the international side. If we can actually create a value in the Canadian brand, so that consumers, when they are looking to buy products and they see that as something preferential, I think it will influence buying decisions. Is it going to change the idea that price has to be competitive? No, it will still have to be competitive. All other things being equal, if we can do a good job of creating that value perception for Canadian products — and it’s not just for Canadian farmers, it’s for the processors, the transporters, everyone in that chain — that goes back to your initial comment about trying to figure out how to identify and respond to market trends as they emerge.
[Translation]
Senator Dagenais: Thank you for your presentation, Mr. Bonnett. By being here today, you should be able to provide what I’m going to call your will as the outgoing president of the organization. That said, I don’t want you dead. Given all that the government has done and hasn’t done to encourage the competitiveness of the industry, what two or three recommendations would you like our report to take into account to help farmers?
[English]
Mr. Bonnett: First of all, the labour issue is definitely going to have to be something in the report. I think concentrated market development and providing resources for consular offices on the international side is critical because you have to have that on-ground presence, particularly in export markets. The final thing would be that regulatory piece, making sure that we have a very responsive regulatory system domestically and at the same time we take a very active and lead role in trying to bring consistency to regulatory frameworks around the world.
[Translation]
Senator Dagenais: According to the witnesses who have appeared, the appeal of the south and the benefits provided by Americans across the border weaken some processing industries. What do you think about this and how can Canada resolve the situation?
[English]
Mr. Bonnett: Tax policy has been one of the big steps taken in the States. I think the latest fall statement, with accelerated capital cost allowance, is a good start. One of the things Canada has always had a problem with, which they don’t seem to have the same problem with in the States, is raising risk capital. I don’t know if Canadians are more conservative in their investments than the U.S. It seems there is more tolerance for risk in the U.S. in making investments. I think it’s an issue that we need to really look at.
On the farm side, we are well supported by groups like FCC, but once you get into the new stuff that is value added and a bit different and doesn’t fit the mould, raising that capital can become an issue. I think that’s one of the differences with the States.
We still have an ongoing discussion on the whole competitiveness side when we look south of the border with the subsidies they have in place. A good case on point, when I was touring in Wisconsin and talking to them about their milk industry, is that farmers there were losing money badly. However, the state of the Wisconsin still has a subsidy program in place to encourage the expansion of the dairy industry while they’re dumping millions of dollars’ worth of milk. We still have to compete with some of these subsidies in the U.S. We’ve seen it in the China dispute where the soybean producers are taking a loss and all of a sudden there’s billions of dollars going in place of it.
When looking at other jurisdictions, we have to look at all the different factors — taxes, subsidies, financial support, access to capital and regulatory frameworks. All of those things play a role in competitiveness, and I think all likely have to be addressed.
[Translation]
Senator Dagenais: In light of your comments on interprovincial trade, which isn’t always easy, do you think that companies here in Canada could sell their surpluses on the Canadian market? There are often similar foreign products, but these products are sold in Canada. I don’t know whether you fully understand my question. Some surpluses can’t be sold through interprovincial trade. However, we receive similar products, which are sold in Canada, but aren’t subject to interprovincial barriers. In my opinion, it’s sometimes more difficult to carry out trade between provinces, even for just wine and beer. I think that’s a shame. The government has work to do in this area. I see you smiling. I think that you agree with me.
[English]
Mr. Bonnett: I don’t think I can add anything to that. That has been stated a number of times. Sometimes we have more barriers between provinces than we do with international markets. I think that’s part the tradition of the federation. I know that the premiers have taken steps to move forward, but we think it’s a priority that needs to be addressed.
[Translation]
Senator Dagenais: Thank you, Mr. Bonnett. I’m sure that you still have a great deal to contribute to agriculture.
[English]
The Chair: I have a few questions. Some of them have already been asked. One of the items you mentioned was the long-term strategic trade and what’s needed in terms of market development where government will work hand in hand with industry to identify priority value-added markets. Has much progress been made on this to date?
Mr. Bonnett: There have been some examples. If we look at the Japanese market, the government has been very active in promoting Canadian sales there and making the linkages that are necessary. As I mentioned in the U.S., there is ongoing work being done to make those types of connections.
We need to start looking at some of the newer markets. Now that we’re part of the CPTPP, there is likely some opportunity in Vietnam. I know there is a lot of discussion about China and India as emerging markets. I think we need to be looking at those markets and be a bit cautious in making sure that they’re steady markets.
I spoke to people from New Zealand who aggressively went into China selling some of their milk products, and it worked for a little while until they developed their own capacity and then all of that market disappeared. I think having discussions — and this gets into the strategic approach — and looking at long-term investments rather than short-term gains. Bouncing from customer to customer can sometimes create some problems as well.
As I mentioned in Europe, we haven’t made the gains with CETA that we had expected, especially in the meat industry. I think there can be more work done there. Again, that is mainly dealing with some of those non-tariff trade barriers. The wild card in Europe right now is what happens with Brexit and how they divide that market up if Britain leaves.
There are a few areas like that where they can concentrate some of their efforts.
The Chair: Those are all great examples. Thank you.
I’m going to come back to the labour shortage. I’m sure there are various ways of solving this. It’s tough. Temporary foreign workers and immigrants have been a major stopgap in terms of the situation to date and will have to continue to be into the future. But for long-term sustainability, what can we do with our own Canadian market in terms of getting workers — the people here now — into the field?
Mr. Bonnett: All of us can do a better job of going into schools and letting students know about the opportunities there are in agriculture. If I look 20 years back in my agriculture career, there were a lot of people crying the blues about agriculture and the fact there was no opportunity in the sector. In some ways, maybe we created our own situation.
I’ve seen a shift in the last 10 years where there is more optimism. I’m seeing young people coming into the industry with a lot more training and education than what my generation had come into it. So there is a whole new generation coming in with a different look. We had the Canada’s Agricultural Day last week and I think there were 150 young people sitting in that room, so there is some enthusiasm starting to grow.
Part of the answer to the labour situation is encouraging more Canadian students to get involved in the agriculture sector. You mentioned the whole issue of immigration. I think changes can be made to the immigration system to speed up the number of people moving into rural communities. We were pleased to see the announcement on rural pilots for settling immigrants into the rural communities. There has been a tendency, when immigrants come in, for them to go into the major centres because the services are there. Figuring out how we ensure everything is in place to get people to move to rural communities is another piece.
The other thing on the labour side, which would be a sideline in the report, is to mention that the Seasonal Agricultural Worker Program in Canada is working very well, other than administrative issues. There are some administrative issues that have hamstrung getting people in on time. However, that program has been critical and not only for Canadian farms. One of the things that sometimes get missed is the benefit that program has provided to Mexico and the Caribbean countries.
I have had the opportunity to meet with some of the political leadership from those countries. They say the dollars that come in from Canada, from those workers, is the best development aid that could ever come into the country because those people are taking the dollars they earn and investing in their kids. They say the Canadian temporary seasonal worker program has created more doctors, lawyers and teachers in those countries than any other aid program because there is that personal value in it.
I think putting a good plug in looking at how to make sure that seasonal worker program stays intact and how you can ensure it is more responsive than it is, because there have been issues on timing with getting workers. Last year there were some issues doing that. Always monitoring how you can deliver those programs efficiently is critical.
The Chair: Terrific.
Senator Gagné: This is not a question, just one comment because I had put a note down to thank you and I didn’t even do that when I had the floor. So I wanted to thank you for your wise counsel and also for your contribution to the agriculture sector and to all of Canadians. Thank you so much.
Senator Mercer: I think that Ron has helped us focus on that we’ve made some good progress in the agriculture sector over the past number of years. Things are going in the right direction. Are we happy with the speed it is going? No. Are we happy that there are too many hoops that the sector has to jump through? No. But we are making progress.
You also brought in the issue that I think needs to be examined more closely, and that’s interprovincial trade, the opportunities that are there to increase the trade.
Over the past few weeks, I have been critical of the people in supply management not looking at the new trade agreements as an opportunity. Yes, there are some problems that they create for the sector, but there are opportunities in there and I think that some of the opportunities may not be international.
Some of those opportunities may be breaking down the provincial barriers to trade. You haven’t used this term either, but Canadians don’t talk about food security. Europeans talk about food security a lot because they had a lot of wars fought over their territory over the years, which means that for long or short periods of time, the food in their neighbours’ country wasn’t available to them, and they may not grow or be able to grow what they would buy from their neighbour.
Food security is an issue that we haven’t talked about because food security now is not necessarily how we respond to global conflicts, but it may be how we respond to someone attacking our products, and the quality and safety of our products. It’s not without imagination that someone could attack some of our very important products and then jeopardize our ability to feed ourselves. People have heard me talk on the 9.7 billion people that will be on this planet and no one has a plan to feed them. If we don’t have a plan to feed the 36 million Canadians, that’s a problem.
Because you worked internationally as well, have you heard anyone talking about the international problem of being able to feed the world?
Mr. Bonnett: That has been a topic of a lot of discussion. As you know, I was the founding president of the World Farmers’ Organization and it’s interesting the discussions you get in with developing countries and with them looking at their ability to feed themselves, and they have some huge challenges. An operating loan for a farmer in Zambia is 36 per cent interest to pay; I don’t know how they manage that. And access to transportation and resources is critical.
Food security in the developing world is a huge issue. There is a limited amount of discussion about that in Europe, but not as much.
One of the points I’d like to make is that sometimes we use that term “food security.” Sure, there is lots of food in Canada. However, we do have a number of Canadians that are food insecure, and it’s an affordability issue. That’s something that needs to be addressed.
If you get into northern communities or inner cities, a single mother raising kids in downtown Toronto, there is a real issue with affordability of food and it’s something separate from the agricultural issue. It’s a social issue that we need to deal with and I think if there is one comment I would make, it is that we have to be conscious of that. I made presentations to other Senate committees on that issue, and it becomes an issue of not so much that we need the increased agricultural production to meet that demand; it’s how we can make it so that they can afford to buy what’s produced. And I think that’s one of the issues, as Canadians, which we will have to look at.
Senator R. Black: Senator Mercer talked about the progress made and the successes over the last number of years. That’s due in large part, Ron, to your work over many years at the local, provincial and national levels. So on behalf of many here in Ontario, thank you very much.
The Chair: With that, I’d like to thank our panellist. It has been great to have you here, and I think it has already been mentioned that you supported this committee in its research many times over the years, including during the release of our recent report related to climate change and its impact on agriculture and forestry. Thank you for being with us today.
We have our second panel of the morning here with us today, and I would like to introduce them. First, we have Doug Forsyth, Director General, Market Access, who is with Global Affairs Canada. We have Tom Rosser, Assistant Deputy Minister in the Department of Agriculture and Agri-Food Canada, specifically for the Strategic Policy branch. We have Frédéric Seppey, also from the department, and he is Assistant Deputy Minister, Market and Industry Services Branch.
It’s my understanding that our next speaker will be Mr. Frédéric Seppey.
[Translation]
Frédéric Seppey, Assistant Deputy Minister, Market and Industry Services Branch, Agriculture and Agri-Food Canada: Thank you for the opportunity to speak to you briefly about our trade agreements and how they affect our dairy, poultry and egg industries. Given its mandate, Agriculture and Agri-Food Canada works in constant collaboration with the dairy, poultry and egg sectors to support the growth, competitiveness and sustainability of these sectors, in particular in terms of the regulatory environment, financial programs, trade, production, and animal welfare and health issues.
In recent years, Canada has concluded or implemented three landmark trade agreements for the Canadian agriculture sector and the Canadian economy as a whole. These agreements are the Canada-European Union Comprehensive and Economic Trade Agreement, or CETA; the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, or the CPTPP; and the Canada-United States-Mexico Agreement, or the new NAFTA. These trade agreements are critically important for the diverse economic opportunities and jobs they create across the Canadian economy. They help Canadian exports remain competitive in important markets in Europe, the Asia-Pacific region, and closer to home in North America.
[English]
Canada is the fifth-largest exporter and importer of agriculture and agri-food products. That’s based on data from 2017. We are the world’s top exporter of canola, flax, pulse crops and wild blueberries, and one of the top three exporters of wheat and pork.
As this committee knows, trade is very important to Canadian agriculture.
With over half of our agricultural fish and seafood production exported, the sustained growth and profitability of the Canadian agriculture sector relies heavily on export markets and on Canada’s continued competitiveness abroad.
CETA, our agreement with the European Union was provisionally implemented as of September 2017; CPTPP entered into force more recently on December 30, 2018; and CUSMA will replace the current NAFTA once Canada, the United States and Mexico have completed all ratification procedures. Under CETA, Canada benefits from more market access for its key agricultural export interests such as meats, grains and oilseeds, fruits and vegetables and processed foods. After CETA being in force for close to 18 months, our agriculture and seafood exports are up significantly for some key commodities such as fish and seafood, corn and pet foods.
The CPTPP has created the most dynamic trade blocks in the world. It covers the Asia-Pacific region and spans 11 markets that represents close to half a billion people and 13.5 per cent of the world’s GDP.
Lastly, CUSMA will modernize and secure our trade relationship with our largest trading partner for the future. When it is in force, it will strengthen our commercial relationship and provide the necessary stability and predictability for Canadian businesses and workers to thrive and prosper.
These are three of the biggest agreements and most commercially significant trade negotiations in Canadian history. These agreements cover markets of close to 1.5 billion people who are looking for the food Canadian farmers can produce.
But as this committee has recognized, as part of the balance of concessions to secure them, these grade agreements have had an impact on the dairy, poultry and egg industries in Canada which operate under supply management.
[Translation]
During the negotiations, we strove to mitigate these impacts as much as possible. Through the biggest free trade deals in Canada’s history, we’ve been able to preserve, protect and defend the three pillars of our supply management system. These pillars are production control, pricing mechanisms and import control. Specifically, under CETA, Canada agreed to provide the European Union with additional access for cheese through two new tariff quotas, which will be implemented over five years. Canada also provided duty-free treatment for milk protein substances from the European Union. No additional access for the European Union was provided for any other dairy, poultry or egg products.
Under the CPTPP, Canada established 20 annual quotas for goods originating from the different CPTPP members. Four quotas are for poultry and egg products, and the remaining 16 are for dairy products. In order to reach a final agreement on the Canada-United States-Mexico Agreement, Canada had to accept difficult commitments, especially for the Canadian dairy, poultry and egg sectors.
In these negotiations, Canada agreed, among other things, to provide incremental market access to the U.S. for dairy, poultry, and egg products in the form of volume-limited tariff rate quotas to be phased in over five years; to ensure the elimination of current milk classes 6 and 7 within six months of entry into force; and to establish an export charge on skim milk powder, milk protein concentrate, and infant formula if exports exceed certain thresholds.
Trade negotiations happen behind closed doors but don’t take place in a vacuum. Throughout these previously mentioned negotiations, we have constantly informed and consulted with stakeholders to ensure our approaches take into account their preoccupations and interests, particularly those of sectors governed by supply management.
Notably, over the course of negotiations in these three agreements, we worked closely with industry leaders and experts, many of whom joined us “on the ground” where the negotiating rounds were held so they could participate in regular consultation briefings.
The market access commitments made in securing these deals are volume-limited and do not go as far as our trading partners would have wanted. They preserve the supply management system in Canada.
We have appreciated the ongoing engagement of dairy, poultry and egg stakeholders, and all agriculture stakeholders, as we’ve undertaken these difficult negotiations. We have always worked and continue to work hard to advance interests of all Canadian agriculture and agri-food sectors, including those governed by supply management, at the negotiating tables in a balanced way.
As my colleague Tom Rosser will explain to you, we are continuing to work with these sectors to examine the impacts and options for compensation. Thank you.
[English]
The Chair: The floor is yours, Mr. Rosser.
Tom Rosser, Assistant Deputy Minister, Strategic Policy Branch, Agriculture and Agri-Food Canada: Thank you, Madam Chair, and good morning. I would like to thank the committee for offering Agriculture and Agri-Food Canada the opportunity to discuss support and compensation for the supply managed agriculture sectors in relation to CUSMA, CPTPP and CETA.
As Frédéric Seppey noted in his remarks, the department understands the tremendous opportunities that these agreements create for many segments of the agriculture and agri-food sectors, but we also appreciate the impacts that they may have on supply-managed sectors. To mitigate the impacts, the Government of Canada launched two programs in anticipation of the entry into force of CETA. The Government of Canada is additionally committed to collaborate with industry is to develop mitigation strategies to fully and fairly support farmers and processors to help them adjust to CPTPP and the CUSMA agreement.
Assessing the impact of recent trade deals is highly complicated and involves making a series of technical assumptions. Discussions with industry are ongoing and the department is sharing as much as possible with industry throughout the process in terms of the analysis that we have undertaken. These consultations are also for strategic discussions about the future of the industry.
In 2016, Canada and Europe agreed to CETA. At the time, the Government of Canada extensively consulted with industry on possible mitigation packages to help the dairy sector adjust to new market access commitments. Following the completion of these consultations, the minister announced an investment of $350 million and two separate programs were introduced: one for dairy farmers and one for processors.
[Translation]
For dairy producers, $250 million over five years was committed to the Dairy Farm Investment Program. This program provides targeted contributions to help Canadian dairy farmers update farm technologies and systems and improve productivity.
Phase 1 of the program launched in November 2017 and committed $129 million in contributions. Over 1,900 projects were funded, with an average of over $68,000 per project. Learning from past experiences and consultations with industry, the program underwent improvements, and phase 2 of the program just recently launched. Phase 2 further committed $98 million in contributions, and applications are currently being reviewed.
Additionally, for dairy processors, $100 million over four years was committed to the dairy processing investment fund. This program is helping dairy processors modernize their operations and, in turn, improve efficiency and productivity, as well as diversify their products to pursue new market opportunities.
[English]
Following the conclusion of CUSMA negotiations, the federal government created new working groups to develop strategies to maintain and support the supply-managed sectors in relation to CPTPP and CUSMA.
There were two working groups with dairy farmers and processors and one with poultry, egg farmers and processors. These groups are comprised of representatives to supply-managed sectors and federal government officials. The dairy mitigation working group is tasked with developing industry recommendations to fully and fairly compensate dairy farmers and processors to mitigate the short-term impacts of CPTPP and CUSMA. The first meeting was held on December 14, 2018, and additional meetings took place on January 11, 24 and 29.
Various impact analyses were presented to the working group — the complexity of the agreements, analytical approaches used and the number of years of adjustment for CPTPP and CUSMA are being considered.
We are still working through many of these considerations. The working group also had discussions with officials from AAFC’s programs branch concerning an update on program implementation and administrative issues and program impacts on producers and processors. Additionally, processors indicated the ability to import goods through acquiring tariff-rate quotas was of interest, and Global Affairs Canada was invited to the working groups to discuss these concerns.
Coming back to timing, the dairy mitigation working group is wrapping up, although there is a request from the industry to continue work on export thresholds and the elimination of class 7 once more details are known. Industries have outlined their perspective and types of programming they would like to see.
The dairy strategic working group is tasked with developing a vision to ensure the dairy sector is well positioned in the sustainable economy of the future and is attuned to emerging needs. This group is just getting under way. The department is working with industry leaders to develop a work plan for this group.
The poultry and egg working group is tasked with developing strategies to fully and fairly support farmers and processors in those sectors to help them adjust to the CPTPP and CUSMA agreements while taking into consideration the long-term viability of the sector.
The poultry and egg working groups met on December 19 and February 1 and engaged in a conference call in late January. Additional meetings have been agreed to with anticipated completion of their work by early spring.
The Government of Canada will review and respond to industry recommendations in due course. Discussions are ongoing, and we remain committed to consulting industry partners.
Again, Madam Chair, thank you for the opportunity to be here with you this morning.
The Chair: Thank you for your presentations. We have a number of senators already lined up to ask questions.
Senator Doyle: You mentioned a few moments ago that we now have access to a much bigger marketplace because of the various trade agreements that we have. CETA, of course, gives us access to a European market of over 500 million people, but Europe, as we’re all aware, also has a well established and often politically active agricultural sector. Have you been given any indication that the Europeans have ramped up in any way the number of non-tariff barriers to Canadian agri-food products? Is it a factor that you’re looking at and could be concerned with now, or is it proceeding as it should?
Mr. Seppey: Yes. That’s a very good question. I would not say that the level of non-tariff barriers in the European Union has increased. I would say that they remain the same. It’s a market that, for a number of reasons, poses a number of challenges. The Europeans would say, if you asked them the question about non-tariff barriers in Canada, they have their short list as well. It’s perhaps shorter than ours.
Definitely, in the context of the negotiations on CETA, we tried to address these issues. We negotiated a number of these elements, for example, more transparency on issues related to biotechnology. We always have challenges in terms of how they regulate products, like genetically modified organisms or issues related to animal health or food safety.
So we tried to codify some of these obligations, but whenever we negotiate a trade agreement, we have two main tasks after the conclusion of the negotiations. One is to make sure that opportunities created by negotiations are exploited by our exporters. Second, to ensure that whatever market access barriers remain or impede opportunities are being addressed through advocacy, diplomacy and bilateral consultations.
Senator Doyle: Some of the witnesses who came before the committee would like to see the Canadian agri-food sector have a greater role in developing measures and programs to deal with increased access now by our new trading partners. Is that kind of consultation growing and ongoing?
Mr. Seppey: We have. The testimony from Ron Bonnett before this panel is indicative of the very close relationship between Agriculture and Agri-food Canada and the government as a whole and the sector.
We have a number of mechanisms in place to have an ongoing dialogue. It is more than a consultation. It is not a one-way street where we get their views and we go and reflect. We often work as partners.
One illustration of this is in trade negotiations. For example, I mentioned that we had daily briefings and working sessions with the industry. I was referring especially to the supply-managed sector. When we negotiated, for example, the CPTPP, it would have been impossible to achieve the outcome we needed for our export-oriented sectors without the wide expertise of, for example, our pork sector. They know exactly the non-tariff barriers that exist in Japan. They have a level of understanding that goes beyond what our representatives in embassies or us as negotiators could have.
So we are constantly working with the sector on a range of issues. I’m focusing on trade, but Tom can speak to domestic policies as well. We work very closely with the sector on an ongoing basis to make sure that our policies reflect their interests to the best extent possible.
Senator Doyle: We also heard it mentioned that maybe we need to slow down the rate of negotiating new trade agreements — we would all hate to see that happen — so that we can maximize the positives and minimize the negatives and give us time to get adjusted to it. Hopefully that is not a consideration, or is it?
Mr. Seppey: In terms of our trade policy agenda, especially in agriculture and agri-food, one challenge we face is that Canada is trading with almost all the countries in the world. A lot of the trade relations are governed by the World Trade Organization. Because it involves 160 countries, rules have to be fairly basic, and they are not always as ambitious as is required to address our needs, especially in terms of our exports, because we’re the fifth-largest exporter of agriculture and agri-food products in the world.
After negotiating the CPTPP, CUSMA and CETA, and if we take into account the other agreements that we already have with other countries in the world, it covers a lot of the trade. But you still have 30 per cent of the world market for agriculture and agri-food products not covered by an agreement that Canada is a party to, like China. We are in negotiations with India, and the Association of Southeast Asian Nations, ASEAN.
Therefore, if other countries are competitors — Australia, when we talk about pork, for example, or in oilseeds — and are negotiating bilateral trade agreements, we cannot stay behind. Therefore, there is a bit of what I would call positive competition for free trade agreements that are one of the factors — not the only one — that guide us in defining our free trade agreements and negotiations agenda.
[Translation]
Senator Miville-Dechêne: Gentlemen, I represent Quebec. As you know, the dairy industry in Quebec is important, particularly for land use. In the wake of the agreement with the United States, I visited dairy farms that were affected by the famous Dairy Farm Investment Program. I have to tell you that no one had much positive to say about this mitigation measure, which is, in fact, rather unfair, since you have to be the first in line to say on the phone that you need money at such-and-such a time, at such-and-such a moment. They all did that. It’s a lottery. Only farms that intended to invest were favoured because they had to put money in as well. There was a strong sense of unfairness for this first program you created.
Frankly, I didn’t see any indication in your presentation that would allow us to say that things will go better next time. As part of these negotiations, will you make compensation that won’t just favour a few preferred farms big enough to make investments, and will allow all producers to have decent compensation, because that’s what has been promised politically?
Mr. Rosser: Yes, we are aware that phase 1 of the program related to the agreement with Europe caused some frustration. Phase 2 has just been launched. Changes have already been made to the allocation of funds because of the frustrations expressed regarding phase 1 of the program.
Senator Miville-Dechêne: The farmer has to have money to benefit from your program.
Mr. Rosser: It was to encourage investment. A working group has recently been established. Much time was spent discussing with industry representatives across the country about their priorities, their concerns, and to learn from their experience with the program so that measures can now be implemented to better address the sector’s priorities.
Senator Miville-Dechêne: What will the principles of these programs be? Tell us. Are we talking about universal restitution or targeting certain producers? What do you have in mind?
Mr. Rosser: One of the principles of our working group is to listen directly to industry representatives. They are invited to share their priorities with us regarding the allocation of compensation. Obviously, we want it to be fair for all the regions. We also want to make sure that the funds are accessible to small and large producers. As a starting point, much time was spent discussing with the industry about our experience with the current programs. Changes have already been made in phase 2 of the current program.
Senator Miville-Dechêne: Do you have a maximum financial envelope for granting these compensations? If so, which one?
Mr. Rosser: That’s another point that the working group is discussing to try to estimate the impact of these agreements on the industry. It’s a starting point for estimating what is fair and equitable. The analysis of the impact of free trade on sectors under supply management is complex. There are several analyses and scenarios. We’re talking about five separate sectors and two trade agreements. It’s complicated. I don’t have the exact number, but we are working closely with the industry to get the most accurate estimates possible.
Senator Miville-Dechêne: You understand that dairy producers feel that they have been sacrificed because of these agreements. You’re talking about farms, people who work 14 hours a day; these are probably difficult jobs. For the moment, everyone is trying to be hopeful, but I would like to be convinced that there is a political will — in your case, it isn’t political — but that there is a willingness in the machine to achieve fair compensation.
Mr. Rosser: As Mr. Seppey mentioned earlier, the department is working with the agricultural industry. The process that will be put in place in the coming months is truly unique. Four meetings have been held with the dairy industry, and several meetings have been held with the poultry industry. All day long, we discuss their concerns, their priorities to ensure that the compensation and mitigation measures we put in place best meet their priorities. It isn’t unusual to hold consultations, but it is really unique, in my opinion, that working groups are being set up to ensure that our mitigation measures are as focused as possible.
Senator Miville-Dechêne: Thank you. I’ve tortured you enough.
Senator Dagenais: I’ll continue along the same lines as my colleague Senator Miville-Dechêne. I’ve been a member of the agriculture committee for almost seven years. So my attention was drawn to the negotiations on the Canada-United States-Mexico Agreement. At the start of the year, I never miss listening to the U.S. President’s address to the nation. He looked triumphant when he said it was an excellent agreement for his country. As for Canada, he simply said that he would keep the agreements. I have the impression — and perhaps it’s a misperception — that we are losing out on these agreements. I would like to talk about the concessions that Canada has made to the United States, meaning what markets we have opened up to conclude this agreement. If we look at what the Americans have achieved, beyond the words we use in the texts, can you tell us what we will eventually find on our shelves that already exists here and will compete with our local products? We know very well that the dairy industry is heavily subsidized in the United States. Prices are competitive, which will put pressure on our markets. Do you have any figures to provide us with, and what influence will that have on our market?
Mr. Seppey: I think that saying that these negotiations were unique is an oxymoron. These were unusual negotiations because they were negotiated on the basis of an extremely open relationship. The Canada-U.S. agreement that was concluded in the 1980s was modernized or extended to Mexico under NAFTA in the early 1990s. In the agriculture and agri-food sector, the market is already extremely open. In the agricultural sector, negotiations very quickly focused on the few rare sectors where trade is less open. With regard to access to the Canadian market, it was essentially the dairy sector, because we have had commitments since the 1980s in the poultry sector. I believe you heard the explanation from the poultry and egg industry representatives earlier this week. On our side, we also had offensive objectives with regard to margarine and sugar. Although the market is very open in the meat sector, there are regulatory trade procedures, including cross-border trade in meat products, that leave something to be desired. Negotiations in the agricultural sector focused mainly on these issues. If you look through an agricultural lens, attention is focused on a few rare sectors when you look at an entire economic relationship that, in essence, can be summed up as a trade of more than $1 billion worth of goods and services that cross the border in both directions every day. From that point of view, it attracts the attention of our supply-managed sectors, which have had to make an extremely difficult contribution, as the senator mentioned earlier. This needs to be looked at in a broader way. Of course, it was a question of preserving the achievements of a relationship that is extremely rich and on which we are particularly dependent, perhaps less in the agricultural and food sector than in other sectors. Mr. Forsyth, do you have any comments?
[English]
Doug Forsyth, Director General, Market Access, Global Affairs Canada: I can certainly add to that. I think, as you rightly pointed out, it was a very unique negotiation, certainly something we had not experienced in our long and varied trade negotiation experience.
Nevertheless, as the United States is the most important trading partner that Canada has, it was important that we were active and engaged on this negotiation, and you saw it from the Prime Minister on down how important the negotiation was to Canada and obviously to Mexico as well.
As Frédéric Seppey noted, the agriculture sector was a very important point for the United States to improve their access on. But if you look at it from a broader perspective and the objectives Canada went into negotiations with — President Trump says a lot of things — I think Canada can be rightly proud of the negotiations and what we were able to achieve.
[Translation]
Senator Dagenais: Still, that’s the perception. The perception is still that supply management has been sacrificed. More generally, do you think that Canadian consumers will be offered American products at a better price than what we produce here? You have to cross the border to see that there are products that are quite cheap in the United States. Will this put pressure on the products we already have here? The Canadian consumer may benefit in this case.
Mr. Seppey: Given that trade is already extremely open, even in sectors related to supply management products, I don’t think you will see many products appear on the market. Obviously, once there are more opportunities, there will be more American cheeses. It’s clear that there is a tariff rate quota.
The tariff rate quota remains at a level that will have to be adjusted with the combination of the various trade agreements. Will new American cheeses appear on the market? It will depend on the importers in Canada and the Canadian merchants who will determine that. It’s important to keep in mind that, when we think about new products, we’re talking about the food processing field. The market in that sector is already completely open.
Mr. Rosser: One of the issues we’re looking at in the work we’re doing with the industry and the working groups is how market dynamics will change with these free-trade agreements. It’s fairly complicated. It depends on the rate of growth in demand in the domestic market and the quota allocations, for instance. Several scenarios are being developed to try to estimate the impact on the market, producers and consumers on the value chain for sectors under supply management.
[English]
Senator R. Black: I have a quick question. Based on the three agreements currently in place or under way, is there a willingness by government to enhance, build upon, add more money towards the branding Canada campaign and the work being done there?
Mr. Rosser: Certainly in the working group process, we spent a lot of time talking about potential impacts associated with the agreements in the industry in terms of markets and demand and dollars. But another important element of the conversation was a programmatic response to help mitigate those impacts. Again, work is still ongoing, but we have had extensive discussions about measures like support for branding campaigns, marketing campaigns, particularly when talking about supply management in the domestic context. We also had discussions about how taking advantage of increased market access through agreements like CUSMA could be part of a broader strategy to mitigate the impacts of market access concessions.
We are wanting to understand the priorities of the sector, the producers and processors and support for marketing in various forms has been part of the conversation.
Senator R. Black: Outside the supply managed sectors, obviously there is an interest and willingness to carry on as well?
Mr. Seppey: Definitely, yes. In fact, there is an initiative under the Canada 2020 foundation which aims to brand Canada in a way that goes beyond traditional branding. Traditionally, the concept of branding programs under both Global Affairs Canada and Agriculture and Agri-Food Canada is focused on market development policies. It represents a change. When Mr. Bonnett was here, he spoke about changing consumer preferences and changing patterns of consumption. When you talk to observers of the agriculture and agri-food sector, they feel we can do a better job in terms of branding ourselves. The features of our food safety system, the characteristics, and the closeness to the nature of our products are just a few examples.
In terms of practices under the theme of public trust both on the industry side and under initiatives such as Global Affairs Canada’s CanExport, collaborative work on branding can be done.
Senator R. Black: I know there is a visioning committee in the dairy side of things. Why wasn’t there a visioning committee on the poultry side of things?
Mr. Rosser: In terms of the membership, the terms of reference, the structure of the working group processes, it was really driven by consensus between the government and industry representatives around the table. And the structure on the dairy side reflected the preferences of the sector. The view was that, within the sector, the people who were best placed to do the strategic work weren’t necessarily the people best placed to do the work on mitigation. Whereas with the SM4s, or the poultry and egg sector, it was felt there was a degree of commonality so that the same people could be mandated to undertake both phases of the analysis.
Senator R. Black: Have they been mandated do so?
Mr. Rosser: Yes, they have.
[Translation]
Senator Gagné: Thank you for your presentations. In the context of the Dairy Farm Investment Program, you mentioned in your presentation that 1,900 projects had been funded, with an average of over $68,000 per project. Would you be able to give me some examples in order to give me an idea of the type of project that would be funded?
Mr. Rosser: Maybe we could share with the committee phase 1 of the program, its nature, but there were two segments. First of all, there was a target for larger investments, changes in the dairy system and, therefore, on farms. The other segment targeted more minor investments in farm operations. We wanted the program to be accessible to farms of various sizes and for projects where major investments were not being made, but which could still be eligible for the program.
Mr. Seppey: Just to round out the answer, the program has allowed some farms to invest in milking robots that become effective starting at about 100 cows. One robot can manage the milking of 70 cows. Some projects were of this type and others may have been more minor, but they involved developing expertise in managing the diet of the animals or improving their comfort, which can have an impact on productivity, for example, by adding floor mats. We are talking about an average of $68,000, but there were projects at different levels and they met the needs. In terms of numbers, there were many more requests than offers, but they met the diversity of needs, whether they were small or larger farms.
Senator Gagné: My second question also concerns the investment report for dairy farms. How are the amounts allocated to producers distributed across the country? I’m from Manitoba.
Mr. Rosser: I’ll start, but perhaps Mr. Seppey or Mr. Forsyth will want to comment as well. The program for producers was designed to ensure that the percentage of funding in the program corresponded to the production level of certain regions or provinces. If it isn’t perfectly fair in phase 1 of the program, we’ll make sure to compensate for the shortfall in phase 2.
Senator Gagné: What are the main lessons learned from the phase 1 application process?
Mr. Rosser: Frustrations had been expressed in phase 2 about the “first come, first served” principle with regard to the allocation of funds. Changes were made to this in phase 2. The working groups engaged in more in-depth discussions to try to learn further lessons and implement further mitigation measures with respect to the agreements with the United States, Mexico and the Trans-Pacific Partnership Agreement.
Mr. Seppey: To complement this, there were a number of changes, and work was done with producer representatives to quickly learn lessons. This started as soon as the first phase of the applications was closed, which was fairly clear-cut. This time, we are taking into account that not all producers are able to use online application systems. It can be done online or by phone. The number of people working at the call centre has been increased to answer questions before the deadline and beyond. It is a modified version of “first come, first served.” People submit an application. Second, there is a random selection process among those who applied before the deadline, which, in our opinion, allows for a more equitable approach to the distribution of funds. The principle that remains common to both phases is to ensure that this corresponds, as Mr. Rosser said, to the distribution of production quotas across the country.
Senator Miville-Dechêne: What do you mean by “random process”? Do you draw lots for those who will receive the subsidy? From a hat?
Mr. Seppey: I’m not on the programs side, but it’s a process where we are able to determine the deadline. Applications are received, and perhaps they exceed the available envelope. Then, there is a process for non-arbitrary selection of preliminary applications within that group.
Senator Miville-Dechêne: So it depends on the quality of the file. It’s not a random draw. Have I understood correctly?
Mr. Rosser: There are several principles of regional equity. This is important to us. Phase 2 of the program has funded 1,900 projects to date. We want to ensure that priority is given to producers who did not benefit from phase 1 of the program when assessing applications. We want to ensure that as many producers as possible can benefit from the advantages of this program.
Mr. Seppey: The first step in phase 2 of the program is to submit a very brief project synopsis, which is randomly arranged. Participants are then invited to submit more detailed proposals, which are evaluated based on the specific criteria of the program. I believe we will be able to provide the committee with a summary that describes these steps in a technical manner.
Senator Miville-Dechêne: You have synopses and that’s when you draw lots?
Mr. Seppey: Yes, but it isn’t the selection process. From that first step, we invite applicants to formulate —
Senator Miville-Dechêne: A number of applicants, fewer applicants than those who were first —
Mr. Seppey: Yes. Once the more detailed evaluation of the program is done, if there are still funds left, the list can be further reviewed.
Senator Miville-Dechêne: It’s this list that is drawn up randomly in terms of priorities.
Mr. Seppey: That’s the first list, yes. The aim is not to favour certain project categories in the first stage so that they are invited to submit more detailed proposals.
Senator Miville-Dechêne: Right. I understand.
Senator Gagné: Mr. Rosser, I believe you mentioned that the poultry and egg working group met on December 19 and February 1, and that you engaged in a conference call on January 24, and you said at the end, “The Government of Canada will review and respond to industry recommendations in due course.” Will that happen before the next election?
Mr. Rosser: It’s important for the industry that the recommendations be finalized as soon as possible. If I correctly recall the framework of reference for the poultry group, their deadline for completing their work is the end of March. The group wants to make its recommendations known to the government in early spring so that it can inform decision-making bodies within the government.
Senator Gagné: Thank you.
Senator Miville-Dechêne: I have a quick question. I understood that the dairy producers had completely wrapped up the consultations, that they were ready and that they were only waiting on the government. Is that correct?
Mr. Rosser: I didn’t say that they had finished their work —
Senator Miville-Dechêne: On compensation.
Mr. Rosser: They have finished the analyses, but they are of the opinion that some decisions in terms of helping class 7 can have an impact. Currently, it is impossible to determine what that means for the industry. It is difficult to know where the work of the mitigation group ends and the work of the strategic group begins. In our opinion, the two are directly linked. We would like to have the industry’s advice on the strategic questions in order to implement the best mitigation measures.
Senator Miville-Dechêne: Thank you.
Mr. Seppey: The Canada-United States-Mexico Agreement has two components dealing with the obligations. There is the classic factor, the market activity, and for the producers and ourselves, it is easier to determine the impacts. However, the agreement has less traditional factors, such as the elimination of classes 6 and 7 and requirements for the export of certain products such as infant formula, milk protein concentrates and skim milk powder. There are a lot of unknowns in terms of evaluating the impacts those factors may have. It’s not like the market activity, where you have a volume and can hypothesize that the quotas will be fully filled. With the other factors, it is much more difficult to determine the impact, which is why the producers want to consider the matter in depth.
Senator Miville-Dechêne: Legally, can compensation be paid before the agreement is ratified by the United States Congress?
Mr. Rosser: The government has offered compensation to mitigate the impacts of the agreement. We will see how it will all be put into place. It is difficult to determine the impact of the agreement with the United States before we know the date on which the agreement will be ratified.
Senator Miville-Dechêne: Thank you.
[English]
The Chair: That is a good point.
Not seeing any other hands up for questions, I’d like to thank our three panellists for being here today. There have been a lot of great questions. Thank you for your presentations.
Before we break, I’d like the committee to stay around. I want to have a very brief session regarding future meeting times. We can do that in camera.
(The committee continued in camera.)