Thank you very much, and thank you for the opportunity to present again today to the committee.
I'd like to note as well that we've made a formal submission in both official languages. That's been presented.
First, I have a few words about the Canadian Seed Trade Association. We represent about 130 member companies from across Canada, ranging from small farm-based operations to large multinational corporations. These organizations are involved in all aspects of plant breeding, marketing, distribution, production, and sale of over 50 different crop species and hundreds of varieties, including grains, oilseeds, forages, turf, vegetables, and flowers. CSTA's mission is to foster an environment that contributes to the success of our members and their customers.
I'd like to interject a word of thanks to the committee. I had a couple of opportunities to speak previously, particularly about the issue of KVD, and I'd just like to note that after six years of not having any new winter wheat varieties brought forth, we had three new ones registered this year, largely as a direct result of the removal of the KVD requirement. That is proof that the committee is doing some real things that are having real benefits out there in the industry.
We believe there is a very strong link between innovation and competitiveness. That was recognized by Agriculture and Agri-Food Canada as it began the process to develop this generation of the agriculture and agrifood policy. The document on innovation and competitiveness states it clearly. Productivity is no longer able to sustain Canada's comparative advantage. Innovation is the key to enhancing competitiveness and has the potential to improve the future of the sector while benefiting producers.
Innovation in agriculture starts with seed. We've heard some evidence of that already today from the canola and wheat growers. We believe that plant breeding and research has and continues to deliver benefits to farmers, processors, and consumers around the world. The CSTA submits that if we are to enhance and increase Canada's agricultural competitiveness, the creation of an environment that fosters innovation is critical.
Before I go on to talk about competitiveness, I want to take just a minute to address the issue of competition, as this was identified in the invitation to appear here today. Our sector is definitely highly competitive. There are close to 1,000 registered seed establishments across Canada involved in handling, distributing, processing, and selling seed. This is what we could describe as just about as close to perfect competition as we see in any industry where the price of the seed approaches the minimum cost of production.
Farmers have access to thousands of varieties of over 50 different crop types from which to choose, and literally hundreds of new products are introduced each year. We submit that even more could be introduced with an improved regulatory system.
We have full disclosure of product performance as well, which also increases the competitiveness of the industry, through official testing and official performance trials that are run across the country. This is published for growers as well. Given more flexible regulatory and intellectual property regimes, we believe our industry could be even more competitive internally.
The Canadian seed industry is also competitive from an international perspective. This is demonstrated by the importance of exports to our market sector. Fifteen per cent of the seed sold in Canada by value is exported. Canada consistently exports more seed than we import. In fact, over the past number of years Canada's trade surplus in seed has been steadily increasing from 4% in 2002 to over 40% in 2007.
The seed industry makes a very significant contribution to the Canadian economy overall as well. In 2007 it contributed a total of $3.95 billion, and our sector employed over 14,000 Canadians.
The private sector, which comprises the membership of the Canadian Seed Trade Association, makes a substantial contribution to the success of farmers. In fact, at 39% of total research and development investment, the private sector is now the largest single investor in plant breeding and research in Canada. That compares to Agriculture and Agri-Food Canada's A base, which makes up 21% of plant breeding and research, with provincial investment at 6% and check-offs at about 4%.
CSTA's members invested over $56 million in plant breeding in 2007, and that is 26% of their combined operating budget. They plan to almost double that investment to $106 million by 2012.
However, there is also a sub-story to tell here. In 2012, 96% of the private sector's investment will be in three crop kinds, those being, canola, corn, and soybeans. Investment in cereals, forages, and other crops will actually decline before 2012.
There is a direct link between the level of private sector investment and the regulatory and intellectual property environments—which obviously directly affect the use of certified seed.
First, regarding the regulatory environment, seed is one of the most regulated sectors in Canada. Before introducing new innovations for farmers, our industry can be faced with three different departments administering five different acts and the associated regulations. But let's look at one of the biggest problems we are currently facing, and that is variety registration.
For over 20 years, the seed industry has been working to modernize Canada's system of seed variety registration. The latest round of consultations has been ongoing for the last 10 years. The goal is now to make the system more flexible and to allow faster and more efficient registration of varieties for farmers. In June 2008, we thought we finally had some progress, when proposed regulatory changes for putting in place a three-part registration system were published in part 1 of the Canada Gazette. The comment period ended in August 2008, but we have heard nothing since then.
Even if we get this framework in place for a registration system, it won't mean that registration will be faster or more efficient. Other than a couple of minor crops, no crop kinds have been placed in their tiers, and that will take yet more regulatory change.
The three crop kinds in which private sector investment is high have been able to deal with this, either within or outside the system. Canola and soybean structures have a strong link to the value chain and as a result have been more willing to adapt within the system to streamline the registration process. Corn is not subject to variety registration, and other crops like non-oilseed soybeans are also not subject to variety registration. This has allowed these sectors to grow and return substantial premiums to farmers.
Conversely, forage crop kinds are still subject to all of the strict requirements of variety registration, often requiring a recommendation for registration from a recommending committee where one does not even exist. Investment in forage breeding and research by the private sector is now under 1% of the total sector's investment.
There are other cases where we can make it clear to you that the regulatory system our sector operates in is cumbersome and slow to adapt. Many of our members continue to struggle with the process of approval of novel foods and feeds. Approval systems for seed treatments need to be more closely linked, particularly with the United States, to ensure that our farmers are not at a competitive disadvantage.
The crops with the highest share of private sector R and D investment—canola, corn, and soybeans—share, among other things, an enhanced system of intellectual property protection. Canada is at a very strong disadvantage when it comes to most of our other crops. I can speak to this from firsthand experience, as general manager of SeCan, located here in Ottawa. We distribute the majority of the open-pollinated crop seed into cereals in western Canada. I can tell you that in four out of five of Canada's largest crops, we have little to no private sector investment.
Wheat, as we've heard from the wheat growers, is also declining as a result of this lack of investment, whereas canola, on the other hand, is increasing.
Another area where we see an opportunity to increase the use of certified seed is through the use of a certified seed tax incentive. This tax incentive would see the cost of seed on a farmer's tax return inflated by 155%, which would make them indifferent to the use of certified seed versus their own saved seed. We feel this would also be a tremendous step forward in enhancing competitiveness, by increasing the amount of private sector investment.
Thank you very much.