Agriculture Committee on Nov. 15th, 2011

[The Chair, Conservative, Larry Miller]

We'll call our meeting to order.

We have Greg Meredith here from the Department of Agriculture.

Greg, thanks very much for being here.

Before we move into the presentation, I would like to remind the members of the following:

Particular attention has been paid to the questioning of public servants. The obligation of a witness to answer all questions put by the committee must be balanced against the role that public servants play in providing confidential advice to their Ministers. The role of the public servant has traditionally been viewed in relation to the implementation and administration of government policy, rather than the determination of what that policy should be. Consequently, public servants have been excused from commenting on the policy decisions made by the government.

With that, Greg, we'll turn it over to you for your presentation and opening remarks.

[Greg Meredith, Assistant Deputy Minister, Strategic Policy Branch, Department of Agriculture and Agri-Food]

Thank you, Mr. Chair.

If I may, Mr. Chair, I will begin my presentation in French.

Good afternoon. It is an honour to appear before you today.

I will be providing you with an overview of the federal position relating to the development of the new agricultural policy framework.

First, I would like to set the context for our views on future policy priorities. Perceptions persist of agriculture as a traditional industry rooted in the past, reliant on historical production processes, with very little change over time. As you well know, nothing is further from the truth.

Canadian agriculture is driven by tens of thousands of highly skilled entrepreneurs and risk-takers. Technology and innovation are critical to our competitive advantage. Some of Canada's major crops and exports did not even exist 30 years ago, as you know.

Markets are global. Consumer demand is volatile. Sophisticated retailers and processors are extremely demanding in terms of the quality and attributes of the demand of our processors.

The supply chain is a complex one, yet it still manages to deliver food with a predictability that few industrial sectors could match.

Trade is critical to this sector. As you know, Canada exported about 45% of our agricultural output last year, amounting to about $35 billion.

In terms of the state of the sector, average net income is increasing--it's increased every year since 2006--but global supply and demand conditions are changing and creating enormous opportunity and, at the same time, significant challenges.

I know you've heard from other witnesses about increasing food demand globally, rising incomes in developing markets, which bring along with them rising demand for higher value-added proteins and greater food in terms of dairy and other high value-added exports. Vast new opportunities in bio-economy are emerging, and at the same time, to fulfill those demands, producers have higher standards that they have to meet in order to get into the global supply chain.

Canada benefits from a wealth of natural resources, but natural resources alone will not be sufficient to guarantee future success. The sector requires, I think, a government partner that can help with innovation and create a business environment that allows producers and processors to prosper.

That's one reason why the policy frameworks that we put together in collaboration with FPT governments is so important. We've really managed to improve our relationships in collaboration with provinces over the last several years.

The first agricultural policy framework started in 2003 and was really a response to a situation where inter-regional competition and intergovernmental lack of policy alignment was producing poor results for producers and processors. The APF managed to address some of those.

When we moved into the first Growing Forward framework in 2008, the sector was still recovering from BSE. Livestock prices were still low. Grains and oilseeds prices were just starting to turn, and the sector was struggling a bit. The government at the time improved on the first framework by giving provinces greater flexibility to deal with local problems while addressing national outcomes and putting a much greater investment emphasis on innovation.

So GF2, the successor, hopefully will build on those successes. To do that, we have developed, as I can explain over the course of my testimony, the engagement strategy that we pursued.

The position we're at right now is that we've defined two significant and primary outcomes for GF2. One is competitiveness, which we define very simply as better market share domestically and internationally and a sector that's adaptable and sustainable. I'll explain later what we mean by those two terms. The key drivers for those outcomes will be innovation and what we call institutional infrastructure, which ranges from the policy, legal, and regulatory environment through to the physical infrastructure needed to carry product to market.

We've heard from stakeholders about the importance of innovation and the importance of ongoing R and D. We've heard from stakeholders about the importance of responding to new consumer demands, demands that deal with the provenance of their food, how it's made, where it came from, and how it's been processed. We've heard from industry about the need for collaboration across the supply chain. That's a very important development, where people from the farm gate and the input suppliers on the one hand, and people delivering food to the table, are recognizing the need to collaborate in order to succeed.

We've also heard a lot about the importance of attracting young entrants and new entrants to the business--in other words, making sure that this intergenerational transfer that we're going to see over the next few years can take place successfully. We've seen greater demands placed on producers for higher standards, higher than we've seen in the past with respect to quality, assurance of supply, safety, and other attributes, including environmental performance standards.

So we'll be dealing with all kinds of new factors as we move into this new environment.

The key milestones include releasing the St. Andrew's statements in July 2011, where ministers outlined the intent and policy outcomes of Growing Forward 2. That is very important. After the recent election of seven new provincial or territorial governments, the department can now move forward with developing the new framework.

I will stop there, Mr. Chair. I look forward to your questions.

I'll just leave my remarks there. I think the meat of the new framework will come out over the course of my testimony.

[The Chair, Conservative, Larry Miller]

Thank you very much, Greg.

We'll now move to Alex Atamanenko for five minutes.

[Alex Atamanenko, NDP, British Columbia Southern Interior, BC]

Thanks very much for taking time to be here, Greg.

There's been a growing concern regarding health, processing of food, the environment. The idea that we need some kind of a national food policy is being discussed across the country. I know that the Canadian Federation of Agriculture is seriously thinking about this. Both our parties here in the opposition have developed papers on this. I've done some consultations across Canada. We believe we need some kind of a Canadian food strategy with the various...the national farmers union, Christian farmers, the federation; everybody seems to be on board with some kind of policy.

I'm wondering, from your perspective is it doable? Have policy discussions been started in this regard? If so, is there a timeline or are consultations planned? Would there be a direction that it might take, balancing our food sovereignty and our trade obligations?

I'm just wondering if this has been discussed, and if so, maybe you could share some information with us.

[Greg Meredith]

That's a big, big question, but thank you, because it's an important one.

The government, during the campaign, had as part of its platform a national farm and food strategy, so that's become one of the minister's priorities. We are, as a department, very involved with the Canadian Federation of Agriculture process, which has been one of engagement and discussion for about a year in order to come up with the framework of a strategy.

We've also been a partner with the Conference Board of Canada, which is doing the same kind of thing with a number of what they call investors doing some basic foundational research on what the elements of a food policy would be.

The department has established an interdepartmental committee of deputy ministers that involves my deputy, whom many of you have met, as the chair. It engages CFIA as one of our portfolio partners and involves the health portfolio, so Health Canada and PHAC. We've also reached out to DFAIT and CIDA, because there are food security issues involved with developing a food policy.

So there's a concentration of bureaucratic effort at this point to do a few things, one of which is to put a framework around what food policy really means. The very first thing that everybody agrees on is the clear nexus between food and health. A lot of what was driving food policy at the very beginning was the connection to health budgets, primarily in provinces. If you can use healthy eating strategies to reduce chronic disease--diabetes, heart disease, cardiovascular problems--then you're further ahead than trying to treat those diseases. That kind of laid the groundwork for greater interest in a food policy.

You have a concentration of deputies looking at these kinds of issues and trying to decide where the best value lies in our efforts. The merging dimensions of a food policy that we see others coming up with include this food-health nexus, as well as the whole local eating movement, the movement towards greater attention to the carbon footprint of your food. A great deal more attention is being made to how we deal with food security problems, which have become much more prominent on the international stage recently because of food price spikes and volatility. So our first job, I think, is to put a frame around it and then get some policy direction from the government about where we go with the food policy.

The short answer to your question, Mr. Atamanenko, is yes, it is on the agenda, and we're looking very seriously at it.

[Alex Atamanenko, NDP, British Columbia Southern Interior, BC]

I guess it's too early, Mr. Meredith, to have a timeline on this, or is that...? How long would discussions be taking place within the government, and when would stakeholders, such as the Canadian Federation of Agriculture, for example, be pulled in?

[Greg Meredith]

We are engaged with the CFA already, but there is no timeline that I could share with you at this point.

[Alex Atamanenko, NDP, British Columbia Southern Interior, BC]

Thank you.

[The Chair, Conservative, Larry Miller]

Thank you very much.

We'll now move to Mr. Lemieux for five minutes.

[Pierre Lemieux, Conservative, Glengarry—Prescott—Russell, ON]

Thank you very much, Mr. Chair.

As you know, Mr. Meredith, as a committee we decided to look at Growing Forward, which is the large agricultural policy framework. We're in the middle of Growing Forward 1 now, and we see Growing Forward 2 rolling out in 2013. In a sense, we're dividing our work up into different categories. We just thought it might be confusing if we were bringing in one witness and peppering them with questions and then someone else with other questions. That would be very hard to put together a report.

This would be just one input from the committee. I'm wondering if you could brief the committee on the consultative process that the department goes through in evaluating the strengths and weaknesses of Growing Forward 1, and what process allows you to take the information you gather, and how you gather it, to work with Growing Forward 2 to ensure that the good ideas move forward and the other ideas do not.

[Greg Meredith]

As you know, “the other ideas do not” is harder. Saying no is the hard part.

In terms of history, one of the criticisms we got on the first agricultural policy framework was that there wasn't enough engagement. So in Growing Forward, we put considerable effort into that aspect. We're convinced that considerable engagement and discussion is important to validate the outcome and to have a credible set of policies and programs at the end of it.

In terms of the engagement process this time around, first of all, we started earlier so that we could make sure that we have programming in place for producers and processors by April 1, 2013.

The process we adopted was three phases. First was to consult on the state of the sector, to see if we could establish some consensus about what were the challenges and what were the opportunities in the environment. We took a lot of time to discuss the next ten years or so--out to 2020, roughly, which was almost ten years when we started.

That phase happened in 2010 and laid the groundwork for a snapshot of what we thought the industry would look like. We sent that out to the sector and then re-engaged in another phase, which was to say that given what we see in the world....

I could go into what we saw a little bit later, but I think you were asking about process.

[Pierre Lemieux, Conservative, Glengarry—Prescott—Russell, ON]

Yes, more about process right now.

[Greg Meredith]

Right.

Phase two, which we completed in the summer, looked at how a policy framework best responds to what we see in the environment. We had a certain perspective. People bought into it. That kind of led to the Saint Andrews statement, which was agreed to by ministers in July this summer, basically saying that the Saint Andrews statement captures phases one and two of the engagement process, lays out some of the key principles, and lays out the drivers and the outcomes that I mentioned to you in my opening remarks.

The next phase is to negotiate with provinces on just how we turn all that we've heard into policy and program choices, and then give producers and processors an opportunity, in phase three, to look at our ideas of what the priority should be and give us some feedback on that.

So it's a three-phase process. I think we talked to over 1,000 individuals face to face and 120 producer groups--

[Pierre Lemieux, Conservative, Glengarry—Prescott—Russell, ON]

What do you mean by a consultative process? Are these formal meetings or are these sort of where you're talking about another issue and you ask a question about Growing Forward? Or are they prepped to come in and brief you on Growing Forward 1 and Growing Forward 2?

[Greg Meredith]

It's more the latter. They comprised public meetings, some one-on-one. Producer groups would ask us to come in and give them the lay of the land. There were a lot of group meetings, sort of inter-sector meetings, and a lot of one-on-one meetings--us and a commodity group, or us together with a horizontal farm organization. It took a variety of tools and mechanisms.

One of the things we did differently this time was select in each province what the provincial officials perceived to be leading-edge farmers who were demonstrating significant innovation in the business models, agronomics, or technologies they were using. We engaged them directly in new ideas to make sure we weren't getting stuck in a rut and hearing the same voices all over again.

So there has been a variety of mechanisms. There was an online tool. I think we've covered the waterfront on both the producer and processor side, as well as with the civil society groups that we deliberately engaged. The engagement process has been very comprehensive. The proof of the pudding will be in the outcome: what we mange to give back to the sector in terms of what we heard; and then making sure that last phase is comprehensive so we have a good vetting of the policies and priorities we propose.

[The Chair, Conservative, Larry Miller]

Thank you, Mr. Lemieux.

We'll now move to Mr. Valeriote for five minutes.

[Frank Valeriote, Liberal, Guelph, ON]

Thank you for coming before this committee, Mr. Meredith. I think you'll find it a lot more welcoming than other committees you might have come before.

I've been watching Growing Forward 2. I read the Saint Andrews statement. I'm aware that in May and June of 2010, at least 400 stakeholders came together for your first phase of discussions on Growing Forward 2. Competitiveness and market growth were emphasized, along with innovation and infrastructure.

One of the key features in my riding is research and innovation. When I read the Saint Andrews statement, I noticed the word “commercialization” was used only once. Frankly, that kind of concerned me. I wrote the minister a letter, and I'm hoping for a response soon, if you could just take that under advisement.

More importantly, last year, in May of 2010, our committee actually made a recommendation--recommendation 3.5--that suggested developing a national commercialization expansion program and creating a national agrotechnology commercialization funding vehicle. The response from the government was that they recognized the value of flow-through shares and other tax-based approaches to improve early-stage capital access to non-revenue producing companies.

You know and I know--we all know around this table--about the lack of seed capital and venture capital in Canada. We heard that, I think, from Dave Smardon from Bioenterprise a year or so ago. It's a theme that has been repeated at this committee in the last number of meetings. I'm wondering the extent to which you have heard the same cry for help so that all our wonderful innovation doesn't go south, as a lot of it does.

In Guelph they're now making wheel wells out of non-food agricultural products for Volkswagens. This is one of many things we could be doing, but people just don't have the money to convert this innovation into jobs.

Can you tell me the degree of the discussion, and what, if anything, might the government be looking at with respect to flow-through shares and other tax-based approaches to incentivize these industries?

[Greg Meredith]

Well, I'll start with what we heard, which was 100% in alignment with what you've just described. But even broader, I would say that innovation is something almost everybody pointed to as the foundation for competitiveness. We don't want to compete solely on cost, in a rush to the bottom. We want to compete on the best agronomic practices, the best technologies, the newest products that are available.

A number of people, particularly in the higher value-added parts of the sector--the bio-industries, the bio-economy--and in areas of functional foods and nutraceuticals where there's a tremendous research risk and tremendous investment required, where the payoffs are huge but the risks are as well, pointed to this as a problem quite frequently.

They pointed to issues well beyond just financing, but I would accept your statement that there's a significant lack of venture capital writ large in the country. As I said in my opening remarks, I think the agriculture sector unfortunately still suffers, I think, from a lack of appreciation amongst the population and the investment community about how dynamic it is, how technology-intensive it is, and what kinds of returns you can get through investing in near-to-market or commercialization of new products and technologies.

The feedback we got was that we needed to look at not just capital and the tax treatment you're referring to, which would put us on the same footing as, say, the mining industry, but also to look at the investment climate. Are we sufficiently robust in terms of our IP protection, our regulatory environment, to approve these new products quickly, attract money into the sector, and to make sure the return is predictable and quick?

There's a whole range of issues associated with solving what this committee has heard is the “valley of death”. You get to that point where the technology is proven, it's a potentially marketable piece of technology or a new process, but getting it from the lab bench to the market is where you fail very often.

I would have to say that we haven't made any policy choices like a tax approach, but certainly what we've heard is very consistent with what you've described, and the sector is looking for solutions.

[The Chair, Conservative, Larry Miller]

Thank you very much.

I will now move to Mr. Hoback, for five minutes.

[Randy Hoback, Conservative, Prince Albert, SK]

Thank you, Chair.

Thank you, Mr. Meredith, for being here this afternoon.

It's kind of interesting; it's unique that we're actually going to develop a program without having the farm sector screaming and yelling for financial aid at one point or another. It seems like everybody else seems to be...in the farm sector is doing fairly well, and we're still moving forward with actually creating a program to help prevent the yelling and screaming and ad hoc payments coming in the future. I think it is something new for any government to actually be in this situation as we go forward and look at our next set of BRM programs.

One thing I was going to quiz you on and comment on is the trade aspect. Your department has been very involved in the trade file and very involved in opening up markets, and I thank you for working with the minister in doing that.

But I am curious about what we are doing to follow up on some of these trade deals as far as making sure that once the minister opens up a market, our farmers have an opportunity to take advantage of that market. What role are you serving there? Do you see that role changing as we move forward?

[Greg Meredith]

Well, the minister has made it a top priority to establish trade agreements so you have the framework of science-based rules to allow trade. He's invested an enormous amount of time and departmental effort to ensure that once the doors are opened they remain open.

There's been a trend, which I'm sure you've seen, towards what we would call probably politically motivated sanitary/phytosanitary barriers to trade, which really have nothing to do with science and much more to do with domestic politics. So the minister has been extremely aggressive in trying to keep those doors open over the last few years.

The department has a series of trade commissioners who are agriculture-specific around key markets in the world and who work with companies all the time to try to keep that trade flowing. The minister has been putting more emphasis on bringing companies with him and engaging with industry when he's involved in such things as the market access issues with China last year with blackleg and canola oil. The canola industry and the Canola Council were right there with us as a partner so that they can follow up once the doors are open. Likewise with flax and the temporary agreement with the EU, we have the flax industry working with us. When we had problems with the Mexicans and meal, the same process happened. It's a trilateral engagement often with the province, the commodity group, and the federal government.

That idea of opening a market, but then making sure that people can capitalize on it, is a core function of our international trade branch.

[Randy Hoback, Conservative, Prince Albert, SK]

When we look at associations like the pulse growers, for example--and we've thrown aid at them to help them develop the market as they go abroad--do you see the provinces pushing back on any of those types of programs? Do you see cooperation continuing as we go through with the next suite of programs to keep that encouraging? Or do you see anything structurally changing in how we go about doing that?

[Greg Meredith]

If anything, I think the collaboration is going to grow. As I mentioned somewhere in my remarks, the value chain is understanding the benefits of working together. Likewise, governments are understanding the benefits of working together. It has been a long learning cycle, but it's rarer now to see Alberta beef marketing itself as Alberta beef. It's generally Canadian beef.

You see greater collaboration among provinces to get out and present a brand to the world. You see a lot of cooperation within the FPT world on market access issues and new trade agreements. As you know, the provinces are right with us in the negotiation of CETA, for example.

I would see a lot more collaboration with industry and with governments over time because the real growth opportunity for the industry does lie abroad and generally not in our traditional markets. They are generally mature--western Europe, the United States--and the real growth is in the developing countries and the so-called BRIC countries, and Next Eleven, where the population growth is phenomenal. The income growth is matching that, so you have more people with more money to spend on food.

I think increasingly Canada will be looking abroad. I am hopeful, and I think I am correct in saying, that there will be more collaboration.

This is just a small commercial for our AgriMarketing program. We see that continuing. It is designed specifically to give industry the opportunity to develop their markets and to come back and do some extension work to inform producers what the market looks like, what qualities of products they're looking for, to make sure they're involved in trade and market development.

[Randy Hoback, Conservative, Prince Albert, SK]

The reason I ask refers back to my comment about agriculture being in fairly good shape right now in terms of at the farm gate. I am curious to know if we see the provincial governments wanting to maybe pull back and say, you know, farmers are doing good, so we don't need to necessarily throw all that support at them.

Are you sensing any of that at this point in time?

[Greg Meredith]

No. In fact, I think people are generally in the same space where you're coming from, that the opportunity is there, but it's not a bird in the hand. You have to go out and get it.

You do see provinces being very proactive and pushing the minister. You see Quebec, for example, pushing very hard for getting Korea moving, and you have provinces telling us we have to get in that Japanese market with our beef and pork products.

The collaboration is very strong. The provinces are very supportive of the market access secretariat. At this point, I don't see any pulling back. I see greater recognition of the opportunity and great understanding that it's now that we have to capitalize on it.