Agriculture Committee on May 1st, 2008

[The Chair, Conservative, James Bezan]

Mr. Lauzon, do you want to answer the question as to whether or not there was a commitment?

[Guy Lauzon, Conservative, Stormont—Dundas—South Glengarry, ON]

It's not my understanding that there was a commitment made, not according to my information. I know there are ongoing discussions; they've met many times. I think Mr. Preston was part of some of those meetings, as was Minister Finley. There are a lot of consultations going on, and both the industry and the minister have said they are getting closer. They're moving forward. That's the feedback I've had from the minister.

[The Chair, Conservative, James Bezan]

Thank you.

Go ahead, Mr. Easter.

[Wayne Easter, Liberal, Malpeque, PE]

Thank you, Mr. Chair, and I apologize to the witnesses. We're into this discussion today because we had a fire alarm last week at the last of the meeting. We apologize for that, but this is an important issue too.

On the amendment--and I find it questionable, but I accept your decision, Mr. Chair--the key part of this resolution is, in my view, consistent with the most recent proposal that is being submitted, which is the exit strategy that was agreed to by the tobacco industry and, from everything I've heard, committed to by the government, at least in internal meetings.

Larry, you can waffle and you can wiggle all you like, but the government broke its word, and I'll tell you that in the 2004 election, when Bob Speller made a commitment to a tobacco reduction strategy and lost the election, the following government, of which I was parliamentary secretary, kept its word and implemented that tobacco reduction strategy. What we have now is a situation in which Minister Finley, as an MP, made a commitment with the full authority of the current government, and they broke their word.

In terms of the task force, Joe, we wish you well with the task force, but that task force can still roll out. If you have the exit strategy that we're currently proposing, that task force can still work. What we're saying here is a commitment to the producers so they know where they stand.

It's the same thing, Mr. Chair, we ended up doing in the area of Quebec where they had a nematode problem; basically, a strategy was put in place to assist that community. What has happened in the tobacco industry is that there's no potential for this industry in this country any more. Their equipments, their facilities, their whole life's work has gone down the drain. Every investment they have made in equipment and buildings is now.... Where are they going to sell it and get any money?

Those people, first and foremost, need a commitment from the federal government. We believe they committed to that and broke their word.

That needs to occur. It can occur right now; it is a $400 million package, but it's 60-40, and it should just happen.

This amendment, in my view, jeopardizes what has been basically agreed to by the industry. It was a compromise on their part; they were first in here asking for, I believe, $1 billion. You can correct me if I'm wrong. They're now down to a federal government commitment of about 60% of the $400 million. I think that's within reason. I understand Ontario would be onside.

So I oppose the amendment so that we will revert back to the original motion and the government can get on and pay the money it committed.

[The Chair, Conservative, James Bezan]

I have four people on the speakers list. We've been debating this now for half an hour, and some of you are getting up for the second and third time on this issue. I am going to ask that you guys keep your comments focused.

We'll go to Mr. Lauzon.

[Guy Lauzon, Conservative, Stormont—Dundas—South Glengarry, ON]

I still want to speak to the fact that this is a multi-faceted problem that requires a multi-faceted approach. These are communities. Not only the farmers are in transition; so are the communities. The communities are in transition, and other businesses within those communities that depended on the tobacco farmers are in transition. To try to address this problem through just one approach, it seems to me, is not taking note of the total strategy. So I'm strongly suggesting that we use a multi-faceted approach.

We have communities in transition. We have to help these farmers transition to other employment. As Wayne said, the future for the industry is very dismal, so we have to transition these farmers, these implement dealers, the businesses, and the communities. We have to help them transition to a profitable situation.

[The Chair, Conservative, James Bezan]

I have Mr. Preston.

[Joe Preston, Conservative, Elgin—Middlesex—London, ON]

Very quickly, I agree with what Mr. Lauzon has said. Wayne has his version of what's happened in the past. If, indeed, his previous government solved the problem, I don't know why we're sitting here talking about it still. So I have some difficulty suggesting that the solution is already there, Wayne. It's not, and it needs to be pretty soon.

I represent a riding that includes the town of Aylmer, Ontario. Aylmer was one of the last places where Imperial Tobacco made cigarettes. They left town. They went to Mexico. They still buy some small amount of Canadian tobacco to ship to Mexico to make those cigarettes, but that was the industry in the town of Aylmer. That's what there was.

To lay this only on the producer.... I recognize that my friends and neighbours who still grow tobacco have problems too. I'm not discounting them at all, but I have a whole community here whose problem is that it was the only industry in the community: they made cigarettes. You can certainly talk about anti-tobacco strategy all you want, and they may have been the devil reincarnate for making cigarettes in this day, but that was the industry in town.

We need to look at all facets of the problem and all the pieces of a solution. I know the solution lies in the manufacturers, in the Province of Ontario, and in the tobacco board itself, whose only job is to market tobacco. They've become the standard-bearer for this exit strategy, but their job is marketing. It's in their title: the Ontario Flue-Cured Tobacco Growers' Marketing Board.

There are still places in this world where people smoke cigarettes. We have great farmers who can grow tobacco. Let's start selling more of it. That's part of the solution too. It needs to be there.

Then there's the federal government and the provincial government. I'm working, as I said, with the mayors on economic development for that area. We'll do the other piece. We'll work on the economic piece. We need to work for a solution for producers. But it's not one person. It's not just the federal government. It's all of us.

[The Chair, Conservative, James Bezan]

Go ahead, Mrs. Skelton.

[Carol Skelton, Conservative, Saskatoon—Rosetown—Biggar, SK]

I'll pass.

[The Chair, Conservative, James Bezan]

You're going to pass?

[Carol Skelton, Conservative, Saskatoon—Rosetown—Biggar, SK]

When you were talking, yes, I was going to use the word “transition” instead of “exit”.

[The Chair, Conservative, James Bezan]

We'll go to Monsieur Plamondon.

[Louis Plamondon, Bloc, Bas-Richelieu—Nicolet—Bécancour, QC]

Mr. Chairman, I have the feeling that the government is trying to shirk its responsibilities and buy some time with this amendment. It is delighting in the fact that it has done nothing for the past 27 months. I think the government should be setting an example. Instead of arguing that this is a complex problem and that everyone must be on side, it should be leading by example. Let the government make the first move and others will follow. It can expect partners to act a certain way once it has actually followed through on the commitments it made during the election campaign.

[The Chair, Conservative, James Bezan]

Are there any other speakers?

We're going to call the question on the amendment, which is to the main motion. I think everybody understands it. Do I need to reread it?

It inserts after “tobacco producers” the words, “and to continue to work with all partners to find a workable way forward for tobacco growers, manufacturers, communities, and the federal and provincial governments”. It deletes everything after “producers” in the main motion.

We're voting on the amendment.

(Amendment negatived)

[The Chair, Conservative, James Bezan]

The amendment is defeated.

Is there further debate on the main motion?

Go ahead, Mr. Easter.

[Wayne Easter, Liberal, Malpeque, PE]

I move an amendment to the main motion, that it be reported to the House.

[The Chair, Conservative, James Bezan]

I'll accept the amendment.

(Amendment agreed to)

[The Chair, Conservative, James Bezan]

Mr. St. Amand, on the main motion as amended.

[Lloyd St. Amand, Liberal, Brant, ON]

I would ask for a recorded vote on the main motion.

[The Chair, Conservative, James Bezan]

Is there any further debate on the main motion as amended? We will have a recorded vote.

(Motion agreed to: yeas 7; nays 4) [See Minutes of Proceedings]

[The Chair, Conservative, James Bezan]

Now we're on to other business. I want to thank the witnesses for their patience as we went through this business.

I welcome to the table, from the Food and Consumer Products of Canada, Blake Johnston, vice-president of government affairs; from the Canadian Produce Marketing Association, Larry McIntosh, chair of the board of directors, and Dan Dempster, president. From the University of Saskatchewan, we have Professor Jill Hobbs, head of the Department of Bioresource Policy, Business and Economics. And from the Canadian Horticultural Council, we have Anne Fowlie, executive vice-president.

I welcome you all here. In the interest of time, we would appreciate it if you could keep your comments as brief as possible. We are very much interested in what you have to say about our study on “Product of Canada” labelling.

With that, I'll turn it over to you, Mr. Johnston. You have the floor.

[Blake Johnston, Vice-President of Government Affairs, Food and Consumer Products of Canada]

Thanks very much, Mr. Chairman and members of the committee. It's a great pleasure to be here today. I thank you for inviting us to appear.

Food and Consumer Products of Canada is the national industry association that represents the manufacturers of food, beverage, and consumer products in Canada. Our members range from small, independently and privately owned companies to large, global multinationals, all of which manufacture and distribute in Canada.

Just some quick stats on our industry. In 2005, the food processing industry in Canada employed 291,000 Canadians. We're the largest employer in the manufacturing sector. Manufacturing is often discussed in terms of steel or auto or other sectors because some of those productions are local, but we're a national industry and we employ a lot more people, and sometimes that's forgotten. It's worth noting that we generate $24 billion of GDP annually and operate just under 6,700 facilities across the country. That's 2002 data. Most importantly, perhaps, to members of this committee, our members purchase 43% of Canada's agricultural output.

We've reviewed with great interest the transcripts of previous hearings the committee has held on this issue and have noted the strong degree of consensus that the rules around the usage of “Product of Canada” need to be clarified. However, the committee has clearly got its work cut out for it, as we've also noticed there isn't a strong degree of consensus around what needs to be done to clarify those rules.

By way of background, FCPC has long lobbied for additional resources for CFIA enforcement. One of the most common concerns expressed by our member companies relates to an uneven playing field created by inconsistent enforcement of existing rules and regulations. This common theme has been expressed by a number of witnesses who have appeared before you during your review of “Product of Canada” labelling. We have serious concerns when consumers feel they're being misled by labelling rules, especially rules that the committee has heard have been in place for close to 20 years and were introduced by government, not industry.

Food processors in Canada are prohibited from making false or misleading statements by two separate pieces of legislation: subsection 7(1) of the Consumer Packaging and Labelling Act and subsection 5(1) of the Food and Drugs Act.

As members know, enforcement responsibility for the food aspect of the Consumer Packaging and Labelling Act was transferred from Industry Canada to the CFIA upon its creation in 1997. The CFIA then produced a 200-page guide to food labelling, which includes the policy reference we are discussing today as it relates to food being eligible to carry the term “Product of Canada”.

Just to paraphrase briefly, to be eligible to make this statement on our label, food products must meet two conditions: the last substantial transformation of the good must have occurred in Canada, and at least 51% of the total direct costs of producing or manufacturing the goods are Canadian.

The last substantial transformation concept is widely used internationally and probably should not be changed. However, if the 51% rule has been shown to be confusing to consumers and the committee sees fit to recommend that percentage be raised higher, FCPC would not object.

It is our understanding that the government has committed to an in-depth consultation as part of the food and consumer safety action plan--I believe I have the name right; that's the plan the Prime Minister announced before Christmas, and the subsequent legislation was just tabled at the beginning of this month. The government has committed to consultation on ways to address concerns related to “Product of Canada” on food labels. We think that's the right way to go, because, as I will provide some examples momentarily, food labelling is fairly complicated, and seemingly simple changes can have wide-ranging and often counterintuitive results. Having all stakeholders at the table to troubleshoot proposed changes can only improve the net result, from our perspective.

I think this is a message the committee has often heard from a wide range of stakeholders. I noted with interest the testimony of Mel Fruitman of the Consumers' Association of Canada, who noted the difference between products with one or two ingredients, when it comes to “Product of Canada”, and multiple-ingredient products. He also stressed the importance of defining the goal when making changes to the rules and pointed to the difference between a consumer information and product safety goal and a market development and economic goal for Canadian producers.

As I mentioned, FCPC would not object should this committee or the government see fit to raise the percentage value of Canadian content to qualify for “Product of Canada”. However, we would note that state-of-the-art processing, handling, and packaging that our members do when they make products does represent a significant value-add, in terms of the safety, quality, and nutritional value of the products, but also, as I mentioned at the outset, in terms of the employment and spinoff benefits for the country. I think you've heard from a number of witnesses around the importance of retaining food processing jobs in Canada, especially when dollar parity gives us less of an economic advantage than we enjoyed previously.

Any changes to the rules need to allow for some acknowledgement of the value the processors add. This is especially true in an era when the focus on product safety and integrity is top of mind and resulting regulations are expected to increase costs for food processors.

Product safety is number one for our members, obviously, and we're happy to comply with any and all new rules and regulations. But the value added that we make should not be totally excluded from acknowledgement.

That said, it should also be noted that much of the concern the committee has heard results from confusing quality standard descriptions with country of origin descriptions. For example, the pears from China are designated “Canada Choice”. Grading terms like “Canada No. 1”, “Canada Fancy”, etc., are not without value. They allow consumers to compare prices of similar grades and quality of products.

As I mentioned earlier, the issue of the use of “Product of Canada” mostly applies to single-ingredient products or ones with a handful of ingredients. I noticed the Horticultural Council has a number of examples there, and they mostly have single or a couple of ingredients. But the large portion of my FCPC membership makes multi-ingredient products, like frozen entrees, pizzas, canned soups, or what have you, and don't use “Product of Canada” on their labels.

As the committee has heard from numerous witnesses, the rules around food labelling are very prescriptive and are often different for various food categories.

Here are three quick examples. For fish, paragraph 6(2)(c) of the fish inspection regulations requires the name of country of origin to be clearly identified on any label of any fish or fish product imported into Canada. But understandably, this rule presents challenges for CFIA. If a fish is caught in international waters, filleted in China, substantially transformed into a frozen fish entree in Canada, with fish being one of multiple ingredients, how should this product be labelled?

For meat, all meat labels in Canada require pre-approval by CFIA before they are approved for the marketplace. In the instance of meat products, CFIA has to sign off on the label prior to it even being used, so enforcement is less of an issue with meat than it is with other commodities.

For honey—I heard this mentioned previously by a witness around the labelling of imported honey—only honey that is pure honey and that is produced in a federally registered establishment for interprovincial or export trade is covered by the honey regulations. These regulations have no requirement for country of origin. However, the grade of domestic honey reads “Canada No. 1”, whereas imported honey would read only “Grade No. 1”. Blended honey, which is the vast majority of honey these days, is required to carry the tag, “A blend of Canadian and”—the name of the country whose honey it's blended with—“honey”, and the sources must be named in descending order of their production.

When the honey is an ingredient in a multi-ingredient product, however, the consumer would not know the origin of the honey. And I revert back to my earlier testimony about the complexities in labelling the country of origin of the food product, with 30 ingredients, in this day and age.

To summarize, there have been a number of suggestions made by various witnesses and MPs about the possible improvements to clear up confusion. We're open to these suggestions and will work with the committee and with the government during the upcoming consultations to ensure good public policy results.

We certainly agree that any changes should be voluntary in nature. I think the committee has heard about voluntary versus mandatory and some of the challenges there.

If Canadian producers want to pursue a “Grown in Canada” label, which I believe the Federation of Agriculture has raised with the committee, we'd support that fully.

As mentioned previously, if the committee decides to recommend that the government increase the percentage to qualify for “Product of Canada”, we would support that as well, provided the percentage allowed for some acknowledgement of the value added by Canada's food processors. We just need to ensure the changes recommended serve to educate the consumer and not create any confusion.

Thank you.

[The Chair, Conservative, James Bezan]

Thank you, Mr. Johnston.

Mr. McIntosh.

[Larry McIntosh, Chair of the Board of Directors, Canadian Produce Marketing Association]

Thank you.

The Canadian Produce Marketing Association, or CPMA, is an 83- year-old Canadian trade association. It represents a vertically integrated supply chain from farm gate to retail and food service. Our members include domestic and foreign companies selling and marketing fresh fruit and vegetables in Canada, so we'll be speaking about the fresh market.

Our organization has more than 675 members, including 409 Canadian members.

CPMA is aware of the requests from consumer groups, various agricultural organizations, and individual producers of both fresh and processing for changes and greater clarity in the “Product of Canada” regulations for foods produced in Canada.

The CPMA agrees that Canadian consumers are entitled to have accurate information allowing them to identify Canadian products or products grown in Canada and that these products should actually be Canadian in content. The challenge is that the issue is extremely complicated and crosses over multiple federal and provincial jurisdictions and regulations.

To fully understand the cost implications for an already strained fruit and vegetable industry, the reality of application and enforcement, and the implications for fresh produce, both domestic and imported, we must look at four core aspects within the value chain: one, bulk; two, single-package commodities; three, mixed salads and produce blends for fresh-cut fruits and vegetables; and four, the consumer.

Relative to the identification of fresh fruits and vegetables sold in bulk at retail—loose apples, string beans, Brussels sprouts—some provinces have provincial regulations that require imported, fresh produce to be properly identified as to the country of origin. If no foreign country is identified on the retail bulk displays, this implies that the product is Canadian. This allows for the use of “Product of Canada”, and also, as an example, for “Product of Ontario” or “Product of Quebec”.

The retail identification requirements for bulk produce fall under provincial jurisdiction. An initial review has identified four provinces with these requirements: Quebec, British Columbia, Ontario, and New Brunswick. If changes need to be made to meet a desired outcome for “Product of Canada” for bulk product, this would require provincial legislative and regulatory supports.

CPMA's position related to “Product of Canada” labelling on bulk produce at retail is that if new changes are indeed desired, this should be pursued provincially with those provinces without a legislative regulatory base. Where changes to the current provincial requirements might be required, this should be pursued with the provinces involved.

Additionally, if “Product of Canada” were to become mandatory, it might negate the use of provincial identification. However, one would need to examine this with each province and its current legislation and regulations. Relative to complaints regarding accuracy and compliance, this is an enforcement issue that would need to be assessed.

For single-commodity packaged produce, there are federal regulations that stipulate that product origin be properly identified. If imported, whether packaged outside of Canada or repackaged in Canada, it must have the foreign country of origin. If the product is domestic and has the address of the packer, there is no current requirement that “Product of Canada” be used. This allows for the product to be called, as an example, “Product of Canada” or “Product of Ontario”. For products that use the “Canada Grade” prefix--currently 32 different commodities--the “Product of Canada” is not required, as it is understood.

The question must be asked, do we require more information or is the issue consumer education? The CPMA position related to “Product of Canada” labelling on packaged single commodities is that any new requirement stipulating that “Product of Canada” be identified could (1) eliminate the flexibility for domestic producers to identify their specific province of production and (2) add to an additionally complex labelling system. If this is to be considered, then there should be a proviso that allows for “Product of Canada” or the provincial designation.

In addition, there are periodic problems in the fresh produce industry where firms have imported product and then repackaged it and called it “Product of Canada”. This is an enforcement issue, not a regulatory issue. This can happen innocently or intentionally. The CPMA suggests the use of the administrative monetary penalty system regulations to address this issue. However, it is our view that the fines are insufficient to act as an economic deterrent for intentional fraud activities. Heavier fines should be in place for repeat offenders and for violations of safety and security regulations. For serious violations, where appropriate, it is our view that punitive action, such as suspension of the firm's CFIA licence or DRC membership, should be entertained.

Fresh-cut vegetables and fruit and mixed commodities like pre-packaged salads are another matter. They fall under the fresh fruit and vegetable labelling regulations.

Currently in Canada, the regulations allow for the following.

If there are multiple products from different countries, then each country must be identified on the package.

For single commodity mixes, such as peppers, the type of pepper and country must both be listed. The challenge under this regulation begins when you have three peppers in a package from three different countries being repackaged in Canada. The Canadian packer must identify the red pepper from, let's say, Holland, the yellow pepper from Canada, and the green pepper from Mexico.

For mixed leafy green salads, only the countries of origin are required.

Once again, CPMA feels that the requirements are already provided for under the fresh fruit and vegetable regulations. Prior to any change, they should be reviewed to determine any deficiencies or shortfalls. As with any change, it is important to ensure that Canada not proceed to identify new regulations that would create an impediment to our exports or add costs to the industry through an increase in the inventory of packaging materials. This is especially true for Canadian operations that also export, particularly to the United States.

For fresh-cut food, most of the inputs into the products are imported. A requirement to list all the individual countries in a multiple listing—particularly given the rapid and constant seasonal change in source countries—will create a significant problem.

A possible solution for these multiple commodity products is the use of a “Packed in Canada” description. Having said that, we need to be cognizant and look at identification criteria under various trade agreements. As an example, Canada has negotiated tariff-free access to the United States for “Product of Canada”...and caution must be taken not to negatively impact this business with changes to “Product of Canada”....

Finally, there is the consumer. Many consumer groups ask that packages be labelled correctly and provide the necessary information to make a complex purchasing decision. For fresh produce, CPMA has conducted A.C. Nielsen panel track research of over 7,800 Canadian consumers. The findings show that the number one and number two influencing factors nationally in choosing which fruit and vegetables to buy at retail outlets were quality to 88% of respondents and price to 77%; followed by health benefits to 39%; locally grown produce to 36%; and organic produce to 10%.

Quality and price still drive consumer buying patterns. Consequently, it seems that while product identification is of interest to Canadians as a marketing tool to support domestic producers, it is not the primary decision factor for the majority of Canadians. The data released show that various elements influence consumers in making their produce buying decision and that “Product of Canada” is only one of them.

Interestingly, this study was done in January 2008, several months after concerns arose with some products from China—none identified or associated with fresh produce, but which became a focus of public debate on the safety of produce because of those concerns.

In summary, the CPMA appreciates the opportunity to appear before the Standing Committee on Agriculture and Agri-Food on this important subject of “Product of Canada” labelling. This is a complicated issue in today's world of commerce and changing food composition.

We wish the committee well in their deliberations, and we conclude with a simple request, that the government consult with our association as it moves ahead. CPMA would like to ensure that any changes to the current regulatory environment achieve their objectives without a negative impact upon the sector, from grower and shipper to retailer and consumer.

Thank you.