Agriculture Committee on May 1st, 2008

[The Chair, Conservative, James Bezan]

Thank you, Mr. McIntosh.

Mr. McIntosh, you mentioned the A.C. Nielsen panel track research that you've done. Would you be able to share those results with the committee, or send them in when you get a chance?

[Larry McIntosh]

Absolutely, we'd be happy to supply them.

[The Chair, Conservative, James Bezan]

That would help us with our study.

With that, we'll move to Professor Hobbs.

[Dr. Jill Hobbs, Professor and Department Head, Department of Bioresource Policy, Business and Economics, University of Saskatchewan]

Good morning, and thank you for your invitation to present this morning.

I'm a faculty member at the University of Saskatchewan. I'm an agricultural economist. My research area includes food supply chains, traceability, and the economics of food safety and quality, so I'll be speaking to you from this perspective.

In addressing the issue of “Product of Canada” claims on food products, l'd like to make three key points to you quickly here this morning. First, I'm going to put into perspective the purpose of a label: what does labelling do and what can it not do; I want to consider the implications of increasing the stringency of “Product of Canada” labelling; and then I want to stress the importance of considering the costs and the benefits of a change in “Product of Canada” labelling regulations.

Let's take my first point, the purpose of a label. Simply put, a label can provide information to consumers on the characteristics or attributes of a product. Many of these are what economists call “credence” attributes. What does that mean? Well, a “search” attribute is something that's evident to a consumer before purchase--the colour of a product. We don't need to label that, but in the case of credence attributes, without labelling, consumers can't identify that attribute even after they've purchased it, even after they consume it.

Clearly, country of origin is one of these credence attributes. So is production method, such as organic. We know that, increasingly, many consumers are interested in these credence attributes in food products. So there is a role for labelling to identify credence attributes to consumers.

Why do we then regulate some kinds of labelling? Usually it's to inform consumers about potential hazards—for example, requirements for labelling the presence of allergens—or to allow more informed healthy eating choices, such as requirements for standardized nutrition content labelling.

In those situations, we're basically saying, left to its own devices, the market may under-provide this information. Implicitly, therefore, we're also saying the benefits to society of having this information outweigh the cost to provide it. There is a rationale to regulate labelling.

There are also numerous examples of the private sector voluntarily identifying credence attributes in a food product label when there is a strong market incentive to do so from consumers. l've already provided the example of organic, and of course there are many others.

So where does “Product of Canada” labelling fit? l believe it would be a mistake to see this as a food safety issue. We deal with food safety through our food safety regulations and inspection system, not through labelling the country of origin. Simply knowing where the product comes from doesn't really tell the consumer anything about how that specific product was produced. It doesn't really tell the consumer anything about the safety of that specific product. So if there is a food safety concern, then deal with it through the food safety system and, if necessary, through increasing resources to the CFIA in conducting risk assessments and monitoring the safety of food imports.

In my opinion, labelling is simply too blunt an instrument to address food safety and food quality issues. We address these through other mechanisms. So if there is not a strong food safety or health rationale for “Product of Canada” labelling, why do we use origin labels? Well, clearly knowing where the food came from may be of value, in and of itself, to some—not necessarily all, but to some—consumers. So to the extent that consumers value this information, there is indeed a market incentive for the private sector to provide it.

This sounds fairly simple. The reality, of course, is much more complicated, and in particular, as you've been discussing in these committee hearings, determining what “Product of Canada” actually means.

That leads to my second point: what are the implications of increasing the stringency behind “Product of Canada” labelling? My third point is related: why is it important for a full cost-benefit analysis of any regulatory change?

It seems to me a really key question is, where do you draw the line? Currently it is drawn at 51% of the costs of the economic activity of the product. Perhaps it should be higher, and I think that's a very important conversation. I believe some people have suggested to you, in previous testimony, 75% or 80%. It seems to me the percentage, to some extent, is arbitrary, except that most people would probably agree that 100% is likely unobtainable or not economically feasible. So how do you determine the appropriate percentage of Canadian content or value?

We can only answer that question through research and analysis that takes into account the increased costs to the agricultural and food sector of a more stringent Canadian content rule versus the benefits to the consumers and to the agricultural sector as well. So let's take a look at those two things very quickly.

What would be the key costs? Primarily, it would be identifying and, if necessary, tracking and tracing Canadian food ingredients. This might be relatively simple for some products—apples, for example—but clearly the costs would quickly escalate for further processed food products with multiple ingredients.

Take frozen pizza as an example. Would a manufacturer have to show that the cheese was produced in Canada, or the salami, the tomatoes, mushrooms, peppers, the flour and margarine in the base, and so on? I think as you've heard before, that becomes more complicated.

Who would incur these costs? The onus or burden of proof will be on Canadian firms wishing to identify Canadian products. If the costs of doing so are too high because the rules become overly complex, it may become uneconomic to use voluntary “Product of Canada” labels. So, paradoxically, you could have less information, not more, available to consumers.

The point is that where you set the bar in terms of Canadian content and how much information you require are critically important decisions, and they require a thorough review of potential costs to the Canadian agricultural food sector.

How would any additional costs be distributed across the food sector? Would the food processing sector simply absorb these higher costs? I would argue that it would probably not. I think some of that cost burden would likely be pushed back to suppliers of raw agricultural products--farmers--in the form of lower bid prices for their products. Some of that cost burden would likely be pushed forward to consumers, resulting in higher food prices.

Clearly for those consumers who value the identity of the Canadian attribute and are willing to pay a little extra for this information, that might be okay. For other consumers who don't have strong preferences about that issue or, more importantly, don't have the means to pay higher food prices--consumers on lower incomes--this is going to be detrimental.

Again, it comes down to weighing the benefits and costs to society and the distribution of those benefits and costs across groups.

I talked a lot about costs. What would be the key benefits of increasing the stringency behind “Product of Canada” labelling? Clearly some consumers value this information, and the credibility of the current labelling rules has been called into question. There is considerable confusion, apparently, among consumers about what this label really means on a food product.

So providing clear information will benefit those consumers who value knowing that the product is Canadian and therefore would be willing to pay more for an assurance of origin. We can use economic analysis to measure the value of this attribute to consumers, just as we can for other credence attributes like organic, pesticide-free and so on, through so-called willingness-to-pay studies.

So measuring the benefits, I would argue, is equally as important as measuring the costs. Otherwise you're not going to fully account for the potential benefits of that labelling information.

We should remember that labelling information generates a benefit to consumers only if it's credible. So an important piece of this puzzle will be ensuring that “Product of Canada” or a voluntary “Grown in Canada” label is credible. Third-party verification is one way of enhancing the credibility of labelling information, so in the case of a voluntary “Grown in Canada” standard, I would expect that third-party verification would have an important role to play in that regard.

Credibility extends not only to knowing that a food product really is Canadian but to maintaining a strong food safety regulatory system and having effective private sector quality assurance programs, which will also be important in protecting the reputation of the “Product of Canada” label.

In closing, just to reiterate, “Product of Canada” labelling, in essence, should be a mechanism for identifying Canadian products to consumers who wish to make purchase decisions based on knowing where the product came from--no more and no less.

What a “Product of Canada” label does not do by itself is assure food safety. Our food safety standards and enforcement mechanisms should do that. So a decision to change the threshold or the rules of evidence to assure “Product of Canada” should take into consideration both the cost and the benefits to the agricultural and food sector and to society as a whole.

Thank you.

[The Chair, Conservative, James Bezan]

Thank you very much.

Ms. Fowlie, the floor is yours.

[Anne Fowlie, Executive Vice-President, Canadian Horticultural Council]

Good day and thank you.

The Canadian Horticultural Council is a national association that has been committed to promoting the interests of its members since 1922.

We are committed to advancing the growth and economic viability of horticulture by encouraging cooperation and understanding to build national consensus on key issues such as the one we're speaking about here today and bringing those positions to you.

Across Canada, the CHC's members are involved in the production, packing and processing of over 120 horticultural crops comprised of fruit, vegetables and herbs.

Members include provincial and national horticultural commodity organizations who represent over 25,000 producers in Canada, as well as allied and service organizations, provincial governments, and individual producers.

Horticulture is certainly one of the larger production sectors in Canada, with over $5 billion in cash receipts, and critical in many provinces. It's a major source of farm cash receipts in B.C. and P.E.I., and it accounts for more than one-half of crop receipts in provinces outside of the prairies.

There are other stats in the document you have before you, so in the interest of time I'll move on to a few other things, such as why we are here today. We're seeking clarity and truth in labelling and a means to recognize Canada's outstanding products.

We face an inability to know with certainty that we are purchasing and supporting our Canadian-grown products. We rely on a number of regulations administered by the Canadian Food Inspection Agency in order to engage in commerce. The regulations governing the definition of “Product of Canada” date back to the early 1970s, and, clearly, many are in agreement that there's a need to revisit and amend those regulations.

We and others have identified this as a priority for some time. However, it seems that it wasn't until attention was drawn about a year ago to incidents with pet food and some food safety incidents that we really witnessed a heightened and broader awareness of these concerns. These incidents truly served as a call to action. It is, indeed, now time to review criteria linked to “Product of Canada” labelling.

Furthermore, as many will recall, last fall, CBC's Marketplace presented an exposé on “Product of Canada”. While numerous examples were presented and consumers interviewed, perhaps one of the most revealing items was a jar of garlic bearing the name “Canada garlic” and was labelled “Product of Canada”, which upon further investigation was found to contain no Canadian garlic whatsoever.

While it's permitted under current regulations, the result is confusing for the general public, and it is certainly a disservice to Canadian producers. Consumers have a right to distinguish and support Canadian production, but must be in a position to do so. The present definition is obsolete and may be misleading as to the real origin of products identified with the designation.

As you have heard, under the current regulations there are definitions around content and so forth, and the result is a multitude of products containing imported raw material that may be labelled as “Product of Canada”, even though they may be simply processed and, in some instances, only packaged in Canada.

We believe and ask that the criteria for an item to bear the “Product of Canada” designation be amended such that the significant portion of the content of a product is indeed grown in Canada.

Canadian farmers proudly produce our fruit and vegetable crops using environmental farm plans, on-farm food safety programs, and a whole host of other federal, provincial, and municipal regulations. They must be recognized and rewarded for this.

Certainly, we recognize that there are differences when referring to a fresh product, as we've heard, such as an apple, a peach, or potatoes. Whether it be in bulk, bearing a sticker, or packaged, one is generally able to readily determine the origin. It can, however, be more of a challenge when it comes to processed products. Lack of clarity, confusion, and inconsistency are very much the norm.

I have brought a number of examples. I must preface my remarks by saying that we value tremendously our processors and certainly do not want to see disadvantages put upon them.

In the package you have there are three bottles of juice, two orange and one apple. Each is made by the same company, yet there are different labels. One indicates “Product of Canada” as well as “Prepared under licence”; the second, “Product of Canada”, no origin; the third, “Product of Canada” and “Prepared by”. Again, all three are made by the same company.

Some frozen juice indicates “Processed in Canada”. However, there's no reference to “Product of”. On some other juices, some cranberry cocktail, grape cocktail, there's no “Product of” designation whatsoever.

There are two cans of peas. They're from different companies; each one is selling the same product on the same shelf, yet they have completely different labels. One, the Del Monte, has “Product of Canada”, and the other has no designation other than simply “Prepared for”.

Here is some fruit cocktail. “Product of Canada” is how it's identified, yet the ingredients include pineapple. Here is a can of pear halves labelled “Product of U.S.A.”, which is fine; that's good. However, there is no “Prepared for” listed anywhere.

Here are diced tomatoes--“Product of Canada”--yet a can of tomato paste has no designation other than “Prepared under licence”.

Here are some whole white potatoes. They're prepared for a Manitoba company, but there's no packaging done there that we're aware of. Are the potatoes Canadian? Perhaps, but perhaps not.

Finally, here's a Campbell's soup label. There's certainly a name and address, as is required, but there's no “Prepared by”, “Processed by”, “Packaged by”, or “Product of”.

As I indicated, I acknowledge that we need and value and support our Canadian processors and have no desire to see them placed at a competitive disadvantage by changes that may come about. In fact, change must provide benefit to them as well, including opportunities to proudly distinguish premium Canadian products. We believe there are means to accomplish this.

The value our processors add to our sector, our rural economies, and indeed the Canadian economy in general must not be compromised. We value the innovation and diversification they bring to us. Certainly we collaborate with and work closely with the processors whenever possible.

All of this is integral to Canada's food security, both today and, even more importantly, for the future.

We do not want changes to result in reduced returns to processors, as was referred to here just a few minutes ago. Unfortunately, over the past two years we've witnessed the closure of a number of processing facilities.

In Quebec they included Kraft, avec les concombres, à Sainte-Thérèse; CanGro, which was previously Kraft, a bean plant in Chambly; and Smuckers Foods, a cucumber receiving and brining plant in Saint-Bonaventure, in March 2006. Of course, in Ontario just recently it was CanGro, the processing facility for peaches and pears in St. Davids.

Those are the most recent. Sadly, there have been many others, and we fear the company's plant, CanGro, which cans peas, sweet corn, and other vegetables in Ontario, could also close. Hopefully this will not be the case. We don't have any indication, but if we look at history, it is a cause for concern.

In terms of some of the suggestions that have been previously made and the reason you're studying this issue, we also refer to being able to make health claim statements. There's certainly a disadvantage to us here in Canada, and there are many healthy attributes to our products. We should be able to speak to these as well.

Again, in being able to identify Canadian products, no doubt we recall the phenomenal success of the “I am Canadian” beverage campaign a few years ago. Just imagine the possibilities of this type of recognition and the enthusiasm that could be translated to our own Canadian-grown agricultural products.

With that, I'll conclude my comments.

[The Chair, Conservative, James Bezan]

Thank you very much.

In the interest of time, we're going to stick to a five-minute round to make sure every party gets a chance to ask at least one question.

To kick it off, we have Mr. Boshcoff. You have the floor.

[Ken Boshcoff, Liberal, Thunder Bay—Rainy River, ON]

Thank you, Mr. Chairman.

Welcome. We're sorry for the delay.

If we're going to review the labelling conditions, should the study address not just the origin question, but should we also be doing the whole nutritional side of it in some way, such that people can understand qualitatively and quantitatively what is in the package?

I guess the question would be how we do that for fresh fruits and vegetables, products that might not be in cans or have labels—that type of thing—so that people can know. Is there a fear that if this begins at our level—that is, for these types of products—the restaurant community will have concerns that the same thing might happen to them, that people would want to know what's in that gravy and those french fries, and that type of thing?

The third question is, should all imports be subject to the same labelling requirements and be bilingual and be as stringently enforced as new applicants in Canada are for their labelling requirements?

The fourth thing, if we have time, is this. When there are misleading statements on labels, what should be the degree of penalty, and how do we enforce it, especially when, as Mr. Johnston mentioned, inconsistent enforcement exists right now?

Thank you.

[Blake Johnston]

On your first point, Canada has some of the most progressive food labelling rules in the world. The nutrition facts panel we have on food in Canada is only very recent; it came into place just a few years ago, and the rest of the world looks at it.

The health committee was looking at food labelling under their child obesity study not too long ago. They were looking at the United Kingdom and a stoplight or traffic light front-of-package label. During their review, they realized that the reason the British have this is that they don't have the nutrition facts panel we have in Canada, which gives the recommended daily percentage of intake of all the ingredients that are important.

I would say that on the issue of nutrition, Canada is a standard-bearer in terms of the information it provides consumers. That was really carefully tested, and it's in place for the vast majority of food products.

Concerning the subsection of the food group you raised, there were some logistical difficulties with some meat categories, and I believe some vegetable categories as well don't have the nutrition facts panel. I think at the time the government decided, or there was some consensus at that point, that the logistical difficulties of putting those on certain items—how do you put it on a head of broccoli, if you will—presented enough problems that they didn't do it at that stage. But the vast majority of products in the grocery store have that facts panel, which make us a world leader.

On your second point, there are two different issues: we're talking about nutrition labelling versus origin. They're very important to differentiate.

In my opinion, Health Canada is very good at what they're telling consumers about food on food labelling, and it's very carefully managed. They don't do anything half-cocked. They do efficacy studies on everything they do to make sure it's interpreted properly by the consumer, and it's very evidence-based and very good.

I think we really have to separate the two and see the difference between that and what we're talking about here, between the labelling of products as to origin and the labelling around nutrition and health and safety.

Concerning all imports playing by the same rule, that's something we've supported very much, mostly in the context recently of Bill C-51, which is the legislation the government has tabled to amend the Food and Drugs Act in relation to the import safety issue.

We're firm believers that imported products and importers need to comply with all the same rules as domestic producers and that the food industry needs to essentially own their value chain and be accountable for things they bring into the country. I think this legislation accounts for that by requiring importers to register with the federal government and be a bit more accountable than perhaps they are now.

On your final point, about misleading statements, I'm not certain about the administrative monetary penalties that are open to CFIA, but the Food and Drugs Act is a criminal statute, so it's my understanding that companies that are seen to be making these mistakes are open to criminal prosecution in some instances and fines in others.

Perhaps Joe could correct me on that one, if that's—

[The Chair, Conservative, James Bezan]

The time has expired.

Monsieur Bellavance, vous aurez cinq minutes, s'il vous plaît.

[André Bellavance, Bloc, Richmond—Arthabaska, QC]

Thank you.

I will try to leave a few minutes for my colleague Louis so that he can take part in the discussion.

First of all, I want to congratulate you, Ms. Fowlie, on your presentation. Not only is your submission very comprehensive, with photos and the like, but quite frankly, it will be very helpful to us as we go about our work. Your presentation was also very interactive. You even brought some products with you. This brings me to the following question.

You gave some excellent examples. To my mind, they are negative examples, but they clearly show that companies have created some confusion—whether it was deliberate or not—and that consumers are left wondering where the products on the grocery shelves actually come from. The reason is often very simple. Some companies do not want consumers to know. In other cases, they invoke existing legislation to say that a product is from Canada, as in the case of the pineapples that you spoke of earlier. Everyone knows that not many people grow pineapples in their garden. I am not personally aware of any farmers in Quebec or anywhere else in Canada who specialize in growing pineapples. And that is why we need to change the labelling legislation.

Committee members heard testimony from the Union des producteurs agricoles du Québec which believes that mandatory standards should be adopted. This brings me to my question. Most witnesses, including a few that we heard from this morning, have told us that they favour voluntary standards. The problem I have with voluntary standards is that we will once again end up with labels that do not say where the product originated. The company, processor or packager will not be required to specify product origin. So then, consumer will not know if the product they are buying comes from Canada or from somewhere else, for example, from China or from the United States. Certainly there is value added for the company that prints “Product of Canada” on its label. The consumer, however, will still be confused.

What are your thoughts on this subject?

[Anne Fowlie]

I agree with you. If we go with voluntary standards, then nothing will really change. We must all work together to come up with a mandatory labelling system that works.

[André Bellavance, Bloc, Richmond—Arthabaska, QC]

In your submission, you state that designations such as “Prepared for ” and “Imported for” should not be allowed. What types of designations would you like to see? How should products be labelled?

[Anne Fowlie]

The “Product of Canada” designation should be strictly reserved for products that were in fact produced in Canada.

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

Many governments and agencies have spoken out in favour of a vast North American market. For example, some have said that it is possible for cattle to be born in Mexico, raised in the United States and sold in Canada. Therefore, there should be no barriers as far as cattle farming is concerned. This question has been discussed at length, always within the context of free trade. How do you reconcile the fact that some people dream of a North American market while others advocate protectionism when it comes to the labelling of Canadian products? Would a comprehensive treaty respecting different products and food crops between the three countries not be a possible solution to this problem, at least in so far as the North American market is concerned?

[Anne Fowlie]

Markets are indeed very integrated, but I really do not think we need to adopt a labelling system for the North American market at his point in time, especially given the current situation. I really don't.

I would just like to mention too that as we heard in terms of monitoring—and this is an important part, if you're going to have something that's mandatory—one of the things I'm concerned about is that CFIA just published its annual report on priorities and plans covering the fiscal year 2008-09, which is on the Treasury Board website, and over the next three years, through to 2011, planned spending at CFIA is expected to be cut by $53.9 million, or just under 9%. Of this, food safety expenditures will represent cuts of just under $10 million in 2008-09, increasing to under $15 million for 2010-11, and human resources will drop by some 187 full-time equivalents over the coming three years.

I have a concern about that, particularly in the light of our talking about things that need to be done in monitoring. You've heard witnesses previously talking about a need for greater engagement by the Canada Border Services Agency where there are gaps and so forth.

I would just like to flag that as a concern.

[The Chair, Conservative, James Bezan]

Thank you very much. Your time has expired.

Mrs. Skelton.

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

Thank you very much.

I'm very sorry we couldn't have had this debate for the full two hours today. I know you've all come a long way.

We talk about clarity and truth in labelling. Professor Hobbs and Mr. Johnston, it sounds like you're fairly happy with what's happening right now in terms of what you see going on with, let's say, Bill C-51. Am I right in saying that?

[Blake Johnston]

Yes, definitely, because the principles in that bill are around a level playing field and accountability. I would caution, though, to follow up on Anne's point, that when we're talking about a lot of the issues that the committee has been looking at, in this study and others, that have to do with lack of enforcement by CFIA, if we're talking about changing a legislative framework but cutting resources to enforce that legislative framework, then there are some challenges there.

But generally, from a legislative perspective, if we're talking about making importers accountable and increasing safety, that's great for us, because consumer safety is number one. Our business is based on that. I work for branded manufacturers, so the safety of the product is number one.

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

Could you comment as well?

[Dr. Jill Hobbs]

The enforcement issue is a good point. That was my issue about distinction between a food safety issue.... If there is a food safety concern, then deal with it through those food safety mechanisms.

The credibility issue around labelling is I think a different question. If those labelling rules right now are confusing, then we need to look at that. But I think that's a different question.

[Blake Johnston]

Perhaps I can just follow up on that--very briefly, so that I don't eat into your time.

There's a movement afoot here in that consumers are interested in food, and labelling is top of mind. But parliamentarians need to remember that if you add additional labelling requirements for enforcement through various.... Mr. Atamanenko has a GMO labelling bill before the House, and you're looking at “Product of Canada” labelling. There are myriad examples, throughout private members' business, of MPs looking to change food labels.

Those all come with a cost, and they all lead into the opportunity cost for things that are going to help our sector innovate, as the government is trying to do. CFIA resources can only go so far, especially if their A-base resource is about to be cut, not raised. I'd just make that point.

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

Mr. McIntosh, can you comment on that? Do you have a comment?

[Larry McIntosh]

On the enforcement issue?

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

Well, on either. Are you happy with the way the labelling is right now, or would you like to see it...?