Thank you, Mr. Chair.
Honourable members of the Standing Committee on Agriculture and Agri-Food, on behalf of the Canadian Produce Marketing Association, I would like to thank you for the opportunity to speak today on the topic of promoting domestic trade of agricultural and agrifood products by reducing interprovincial trade barriers.
The Canadian Produce Marketing Association, as you know, is a 90-year-old, not-for-profit trade association representing 800 companies within a supply chain that contributes $11.4 billion in real GDP. In 2013 it supported roughly 148,000 jobs in Canada. This economic activity supported the creation of $7.5 billion in primary household income and $2.9 billion in corporate profits, which in turn contributed directly to federal and provincial government revenues. ln total, the Conference Board of Canada calculated that the federal government balance was improved by $2.4 billion, and aggregate provincial balances by $1.1 billion, in 2013 due to the economic activity associated with Canada's produce sector.
The produce industry is a unique entity. This important economic engine is made up of rural, provincial, national, and multinational companies all working together to increase the consumption of fruit and vegetables in Canada. The foundation of Canada's fresh produce supply chain is made up of approximately 8,500 small, medium-, and large-sized farms that produce vegetables, fruit, and potatoes. As the committee is well aware, a portion of Canada's produce production is sold domestically, while a significant portion is destined for export. ln 2013 farm cash receipts equalled approximately $4.2 billion, with $2 billion being exported. There are many reasons for this high percentage of exports, including a higher value of return, easy market access, and a Canadian dollar fluctuation.
Promoting increased trade and sales within our own market is very important to the long-term viability of our industry and economy. The Conference Board calculated that if we lift the consumption of every Canadian aged two and over by one portion per day, this would add $3.1 billion to spending on fruits and vegetables. Additionally, this would permanently lift the GDP by $1.6 billion and create nearly 30,000 jobs. This along with export markets that can change quickly or close quickly are key reasons we need to promote domestic trade and reduce trade barriers.
As you know, section 121 of the Constitution states:
All Articles of the Growth, Produce, or Manufacture of any one of the Provinces shall, from and after the Union, be admitted free into each of the other Provinces.
The ability of the provinces to create customized policies and adopt different economic strategies is considered a strength of our federalist model. However, this has aIso created barriers that reduce opportunities for trade between the provinces. Indeed, sometimes different policies work against each other to negate the intended effects. Removing historical barriers is vital to encouraging increased domestic trade. Areas I'd like to focus on today include consistency of alignment of regulations, container size, and payment protection.
As we move forward to modernize regulations at a federal level, we need to recognize the importance of alignment of the provinces. Many provinces, and even municipalities, are creating food policies to support a growing demand for local food. In many cases, these policies contradict their purpose and actually hinder the sale and movement of domestically grown fruit and vegetables. Definitions of what constitutes local, either stated or implied, differ between programs and regions. The more restrictive these are, the more the domestic movement of food is impacted.
Perhaps the area that has the greatest potential to impact industry's domestic interprovincial competitiveness is the pending regulatory change at the federal level. While industry applauds the federal government for efforts to modernize food safety and labelling regulations, if provinces do not adopt or align the same regulations, there will be multiple regulatory requirements that any interprovincial shipper would need to meet. If we take the example of food safety audits, it is already daunting and extremely costly for industry to respond to various country and customer requirements. If the provinces don't align, the problem could grow exponentially.
As an aside, there should be no difference between the provinces, or between the provinces and the federal level, on what constitutes food safety. We request that the federal government continue to encourage the provinces and territories to commit to aligning their food safety regulations with the new food safety for Canadians regulations, when implemented.
Hand in hand with this is the need for the provinces and territories to commit to adopting common standards that support both domestic and international trade. As an example, I'd like to talk about the Canadian organic products regulations of 2009 for intraprovincial trade.
For interprovincial trade, companies must follow the federal organic regulations. This could create challenges if the regulations within the provinces are different, and could reduce the ability to trade organic product on a national scale. Another area of concern similar to the organic regulation is activity happening at a provincial area around stewardship programs. These programs are operating at provincial levels across the country, developed in a fragmented manner and not framed on a national scope addressing recycling programs throughout Canada. While important, they are adding tremendous cost to the industry based on the differences of application in each province. Although it is recognized that intraprovincial regulations are the purview of the provinces, industry requests that the federal government work diligently, including through the existing federal-provincial-territorial working groups, to strongly encourage alignment.
Other regulations, such as those related to plant health, should be reviewed in the context of risk impact and science to ensure that the regulations are still relevant, since industry needs to pay for inspections for some products moving between provinces. For example, apples from eastern Canada require an inspection of every load shipped to B.C. for a pest that may no longer be a threat. In addition, there is no ability for a portion of that produce shipment to be unloaded in another province on their route, such as Alberta or Manitoba. ln a market that works with highly perishable products with very tight margins, shippers try to find cost savings by sending product to multiple locations when travelling across the country. An example such as this adds costs to the supply chain and can impact consumer pricing and availability.
Standard container regulations, currently under review, are another area where movement between provinces is impacted based on the regulations around what constitutes a standard container. Many in industry believe these are antiquated and they in some instances negatively impact interprovincial movement of produce, specifically apples, potatoes, and blueberries. More consultation is necessary to determine a practical and modernized approach to a regulation that was created many years ago.
Inconsistency of regulatory application across Canada is another significant issue, one that can cause frustration for an entire supply chain. Industry continues to encourage federal regulators to ensure their front-line inspectors apply regulations consistently, regardless of the province in which an inspection is performed, so that the federal government itself does not inadvertently create barriers to trade through differing interpretation and enforcement of federal regulation in different regions.
ln closing, I would be remiss in not using the opportunity to remind the committee members of a key issue for the industry in Canada. This relates to protecting produce sellers when selling in Canada. As many of you are aware, the produce seller is not effectively protected under the current Bankruptcy and Insolvency Act. To effectively protect the industry, there is a responsibility and jurisdiction for both provincial and federal governments. The provinces need the federal government to take the lead before they are able to align with any new model to ensure produce sellers are protected when a company becomes insolvent or bankrupt. With the loss of preferential access to the United States' Perishable Agricultural Commodities Act and the corresponding rise of payment uncertainty for produce shipped to the U.S., some Canadian companies may be looking to increase their sales in the Canadian market. Ensuring payment protection and barrier-free access across the country will allow them to confidently find new customers for their products.
I understand that the committee has today received a summary document from Minister Ritz outlining an assessment of the feasibility for insurance and bonding for our sector. I would caution the committee to consider this document very carefully, as it excludes such important caveats as cost, sustainability, and added administrative burden or red tape to both industry and government. Interestingly, the list of risk management tools examined does not include the creation of a limited statutory deemed trust to protect produce sellers during bankruptcy. This no-cost approach is the industry's preferred solution and one we have been advocating for over the last 30 years.
Thank you again for the time, and I will entertain any questions.