Agriculture Committee on Feb. 6th, 2012

[Dr. Derek Brewin]

I'm not really an expert in going through those regulation processes, but to me as an economist it makes absolute sense to do that, to harmonize with a huge market that is that close to you, a market that will have a lot of the same input needs and innovative needs. Both sides of the border are farming very similar things. I totally support it.

[LaVar Payne, Conservative, Medicine Hat, AB]

To me it makes good sense as well.

I was interested, Mr. Raizada, in some of your comments around the fertilizer industry, particularly about building facilities in Alberta and Saskatchewan.

[A Voice]

And in British Columbia too.

[LaVar Payne, Conservative, Medicine Hat, AB]

I forgot B.C. Yes, they do have a bit of gas over there as well, so....

[Voices]

Oh, oh!

[LaVar Payne, Conservative, Medicine Hat, AB]

Anyway, how do we encourage organizations to do that? I have a fairly major fertilizer company in my riding--Canadian Fertilizers Limited--and they always talk about expansion. You talked about the potash and so on; how do we encourage those organizations to build those facilities? As well, will they be able to market that product, not only here in Canada but in the U.S. and around the world?

[Dr. Manish N. Raizada]

We already have the potash industry as an example, right? We have something huge to build upon. One could take different tactics. One could build upon the potash industry and all the connections that already exist there. One could put in all the stuff that you would normally do to build an industry, such as tax breaks, etc., to help encourage that industry to come along.

The first thing, of course, is to bring the various stakeholders together and see what the bottleneck is that is preventing it from happening. To me it just makes logical sense to put these plants together. They don't have to be right next to oil processing facilities, but the agriculture, mining, and oil and natural gas sectors need to be integrated in a better way, so the first thing to do is bring these three stakeholders together at the table.

[LaVar Payne, Conservative, Medicine Hat, AB]

The other thing is that I noticed that a couple of presentations discussed the value chain in transportation. I'd like to get your comments, if anyone has any, on how we can better ensure that we get that value chain from the producer right through to shipping it across to our customers around the world.

Is there something we need to do to integrate those transportation systems to better help our agricultural sector?

[Dr. Derek Brewin]

I think the current revenue cap is a pretty flexible policy tool. We're worried about natural monopolies in railways, so we want to regulate them somewhat and monitor their costs, because they have the ability to price pretty harshly against competition. They could basically price against trucking as their only major competition, so it could really get out of hand. However, when they now have the flexibility of the revenue cap to charge for specific services that consumers want or to manage things in a certain way, I think that's actually a pretty good piece of regulation.

For that reason, I don't know that rail transportation is as serious a problem as other people think it is.

[Dr. James Rude]

I'd agree about the flexibility with respect to the revenue cap. From an economist's perspective, it gives you the best of both worlds. You can have monopolists acting as they do, but they are constrained in terms of the overall amount of money that they bring in, and they are able to respond to the market.

A lot of the supply chain interests really are driven by asset issues that are specific to individual firms. You have to be able to build up a system of trust between individual groups. I think that at least in terms of agriculture, that there has always been a lack of trust between the railroads and the primary producers. How you address that problem, I don't know. Maybe you buy part of CP; apparently it seems to be under a bit of strain right now from its shareholders.

A lot of what's involved in dealing with these issues is basically opening the lines of communication and creating the necessary conditions so that firms have the confidence and the credibility to deal with each other.

[Dr. Rickey Yada]

Changing the transportation system is a slow process. I think you have to talk about innovative ways of combining other technologies with transportation. My colleague Tim Durance has that company EnWave, which is a vacuum microwave facility. They dry down the product so that you're not shipping water; instead, you're shipping a very high-quality freeze-dried product. I think that will give you access to markets. We need to invest in those kinds of companies

[The Chair, Conservative, Larry Miller]

Thank you very much.

I'll move to Mr. Atamanenko for five minutes.

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

Thank you, to all of you, for being here to share your expertise with us.

Professor Rude, I'm going to address some of your concerns first.

You mentioned that the Canada-EU comprehensive economic and trade agreement. You said that the benefits for agriculture appear limited. I think that's disturbing for the Canadian agriculture sector.

We know, from the research I've done, that this is a comprehensive agreement. It touches sub-national governments. Pharmaceuticals have an investor rights clause similar to chapter 11 of NAFTA.

We have a tremendous local food procurement movement, and I know that, for example, the National Farmers Union is concerned that municipalities, universities, hospitals, and other institutions, which have collective buying power and feed millions of people every day, could be in jeopardy if we were to sign on to this agreement. In other words, because we wouldn't give a contract to a European company, they could then sue the particular hospital or university under what amounts to chapter 11. Right now there is preference to local suppliers, which is helping to improve our local food movement.

The other thing I'm trying to find out is whether there are some benefits for other agriculture sectors. I know, for example, that in the supply-managed sector there's concern because the EU wants increased access for cheese and industrial milk products. If that happens, it's possible that we would have to raise our quota or decrease our over-quota tariffs.

I see detriments to our supply-managed sector and also to the local food movement. Could you perhaps expand a bit on whether you see any benefits for agriculture?

[Dr. James Rude]

First let me express my views on local food.

Local food, at its extreme, becomes a form of protectionism. To a certain extent we had local food, if you go back to my parents' or grandparents' age; everything then was local.

I think we have to be awfully careful about just what we're promoting with respect to providing what the customer needs. If the attributes of local food are what people absolutely want, they will get it.

You are really talking more about a procurement issue. It's the same sort of agreement that we have under NAFTA, so the concern is that the preferential arrangements in procurement would be opened to the European Union.

I have a hard time seeing that go back to the local food movement. I can see it in the service sector and in other sectors, but I'm not convinced that hospitals procuring locally is that big an issue.

I see the benefits in the European accord in indirect things. We already have accords with respect to veterinary protocols and attempts to harmonize those things. I think we can get some of the fundamentals in place whereby you recognize equivalencies in regulations in standards. That's where the gains will occur.

We'll have some small gains on the edges in terms of increasing tariff rate quotas. I very much doubt if supply management will be touched, because there are other sensitive issues in the European Union.

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

I have about another minute or so. I have one other question.

You mention that Europeans continue to exclude GM products from their markets. We know alfalfa has been approved by Health Canada and Environment Canada and is on the verge of being released. Should we be doing a very thorough analysis of the market in Europe, for example, to see if alfalfa or its derivatives would be accepted?

As we do that, should we be putting a moratorium on the further introduction of alfalfa until we really get our heads around the fact that it will or will not be accepted in Europe?

[Dr. James Rude]

You're worried about another triffid.

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

Yes, exactly.

[Dr. James Rude]

A certain amount of caution has to take place.

I think the Europeans and the Japanese tend to be rather pragmatic. The Japanese will allow imports of canola oil because the modification resides in the meal, not in the oil, and they're willing to take it. I think the Europeans are gradually coming around and seeing that you do need modifications as the world markets become tighter, and with time they will become more liberal with respect to their imports of genetically modified organisms.

I agree that a bit of due diligence has to be done in terms of investigating just what potential roadblocks and segregation systems they could put up. I don't see alfalfa as something that will be nearly as hard to segregate as something as broadly produced as canola. If that's the case, you can take advantage of what Manitoba does with soybeans in terms of selling genetically modified soybeans into the European Union.

There are options whereby we probably still would be able to maintain the market.

[The Chair, Conservative, Larry Miller]

Thank you.

I'll move to Mr. Lobb for five minutes.

[Ben Lobb, Conservative, Huron—Bruce, ON]

Thanks.

The first question I want to ask is to Mr. Rude.

The last paragraph in your presentation says, “Ultimately it is firms and individuals that trade, not countries. All that governments can do is to establish the necessary conditions for trade.”

I'm going back to the hormones that are implanted in the beef industry, and we all know why beef producers do that. I was recently at the Huron—Bruce beef producers annual general meeting in my riding, and a young beef producer there talked about an opportunity beef farmers have: if they want to target that market, they can choose to produce beef that doesn't have hormones.

That's ultimately what we're talking about when we're talking about opportunities. It's not for the government to take somebody down one section; it's for the market to decide. I wonder if you want to build on some of the opportunities you see there.

[Dr. James Rude]

Let's deal with the hormone beef issue. The first thing you can do is follow the lead of the Americans in terms of trying to get some additional access with respect to the Hilton quota. The Hilton quota will allow imports of beef that has been verified as not having been treated with hormones.

If you are able to expand that market, then possibly individual firms can get in there, but in Alberta I've seen a number of cases of individual processors who made the leap to be able to access these markets, and it's a relatively risky thing.

The problem is not only that the market is exclusive to non-hormone-treated beef but also that the tariff line also includes bison, and the European Union, especially Germany, has a relatively large market for bison. If we could increase the size of the Hilton quota, that would increase the opportunity for people who want to actually produce non-hormone-treated beef and incur all of the necessary costs to segment it and make sure that the meat is identified as such. It would create opportunities for other sectors that aren't going to be hormone-treated at all, such as bison.

[Ben Lobb, Conservative, Huron—Bruce, ON]

Building on the idea of trade--and obviously the government has a pretty aggressive trade policy at this point in time--we had the Canada Pork International group here at our last committee meeting. They are a creation of the Canadian Pork Council and of the Canadian Meat Council. The person who was presenting on their behalf commented on something I think you touched upon about the veterinarian tickets or certification in different countries.

Moving forward in Growing Forward, does it make sense to look at a pocket of money that would continue to fund groups like theirs so that they can work with those countries to harmonize or expedite those certificates so that those agreements would be in place as those deals are triggered? What are your thoughts on speeding up that process?

[Dr. James Rude]

I agree. I think we've had a little bit of experience with some of the European Union policies with respect to pork as an additive. I'm not sure of the exact additive--ractopamine?--but I think there is potential. The people who are in the best place to determine just what's coming out in terms of the additives or the potential irritants are in the industry itself. If you provide some ability for them to communicate with their counterparts in other countries, it's in that sort of workaday world where a lot of things get solved.

If you go back to BSE in the States, a lot of work that took place was at a very low level through workaday world communication among ordinary bureaucrats and the industry on both sides of the border, and we were able to eventually get around that problem. I think if you provide resources that encourage those sorts of discussions, you have a better world.

[Ben Lobb, Conservative, Huron—Bruce, ON]

Mr. Raizada, I have a question for you.

In my riding there have been agriculture leaders for many years, whether for no-till drilling or in working with the University of Guelph for white bean development enhancement or for soy beans.

At this time, as we look at it, do you feel there's a pull position, meaning that industry is pulling your specialties and your specialization in development or enhancement, or is it a push from the university to industry? Where are we right now in that respect? Certainly the white bean industry has had a lot of success, so I think you'd call it pulling, but where do you see it right now, and where do you think it should be?

[Dr. Manish N. Raizada]

It's a good question.

I've seen it as both, but generally I've seen that the truly innovative stuff is trying to pull industry along. I'll give you a simple example in my area. As I mentioned to your colleague earlier, one way of trying to increase the amount of nitrogen that corn takes up is to alter the root system. Five years ago breeders at companies said that idea was a just waste of time. Now, three years later, and not necessarily because of our work--the world has changed, because fertilizer prices went through the roof a few years ago--they're saying it's a great idea.

My general sense is that academia and innovative farmers pull industry along, and not the other way around.