Agriculture Committee on Feb. 17th, 2015

[The Chair, Conservative, Bev Shipley]

Good afternoon, ladies, gentlemen, and witnesses.

We're back from the break. We are studying, as you know, the promotion of domestic trade in agriculture and agrifood products by reducing interprovincial barriers. The discussion has been around some of the concerns and barriers that we have within our country interprovincially.

Today, as our first witnesses, we have department heads with us.

I welcome all of you.

From the Department of Agriculture and Agri-Food, we have Greg Meredith, assistant deputy minister of the strategic policy branch, and also Frédéric Seppey, chief agriculture negotiator and director general, trade agreements and negotiations directorate, market and industry services branch.

Do they actually get that all on one plaque?

With the CFIA is Paul Mayers, vice-president of policy and programs.

Thank you for coming.

For each of you, we have 10 minutes in terms of presentation. Who is going to start?

Mr. Seppey.

[Frédéric Seppey, Chief Agriculture Negotiator and Director General, Trade Agreements and Negotiations Directorate, Market and Industry Services Branch, Department of Agriculture and Agri-Food]

Thank you very much, Mr. Chair.

Good afternoon, everyone. I am pleased to be here this afternoon to discuss an important issue impacting the agriculture sector that you will be examining in further detail. I will be speaking to you this afternoon about the trade in agriculture and agrifood products within Canada for internal trade.

A better integrated internal market supports a competitive and innovative agricultural sector, in addition to reducing costs of production and increasing productivity. It is a natural complement to Canada's intense involvement in international trade.

Trade flows between provinces are very important and have been growing in recent years. In 2011, the latest figures we have available, total interprovincial trade reached $716 billion. Of this trade, interprovincial trade of agriculture and agrifood products represented $82 billion in 2011, or 11%. Interprovincial trade of food and non-alcoholic beverages represented the largest share of interprovincial trade in agriculture and agrifood products at $64 billion, or 78%.

The fact that agriculture is a shared jurisdiction plays an important role when examining internal trade in agricultural and agri-food products.

The federal government is responsible for interprovincial and international trade, while provinces are responsible for production and internal marketing of agricultural and agri-food products. For example, certain products like meat must meet the federal regulations in order to be traded between provinces or internationally. If those products do not meet the federal regulations, they can only be sold within the province where they are produced, as long as they meet that province's standards.

Similarly, on food safety in general, the federal government is responsible for national regulations that apply to interprovincial and international trade, while provinces can have their own complementary provincial regulations. My colleague from the Canadian Food Inspection Agency will provide more details on this issue in his presentation.

It is in this context that the government has established a number of mechanisms to ensure close cooperation and coordination of efforts with provinces and territories on issues of interest to the agricultural and agri-food sectors.

The internal trade of agricultural and agri-food products is largely governed by the Agreement on Internal Trade, or AIT, which came into effect on July 1, 1995.

Overall, trade in agriculture is subject to the general rules set out in the AIT, such as reciprocal non-discrimination, no obstacles—that is, provisions requiring that parties to the agreement not create obstacles to internal trade—and transparency.

A more robust agricultural chapter of the AIT was negotiated between the federal and provincial governments beginning in 2008 and came into effect on November 8, 2010. This revised agricultural chapter ensures that technical measures adopted by federal and provincial governments do not restrict interprovincial trade more than is necessary to achieve legitimate objectives, such as the protection of human, animal, or plant life or health.

While the AIT has marked major progress towards fully liberalized interprovincial trade, a number of measures that impede the free flow of goods across interprovincial borders continue to exist. These include regulatory differences, inconsistent standards, and restrictions on the free movement of goods.

With the conclusion of recent trade negotiations with Korea and the European Union, for example, there is a perception that internal trade is lagging behind international trade liberalization and that Canada's market should be open internally as it is to our external trading partners. As a result, in June 2014 the Government of Canada called for the modernization of the Agreement on Internal Trade through an announcement by the Minister of Industry. In addition, at the August 2014 Council of the Federation meeting, provincial premiers committed to renew the Agreement on Internal Trade with the goal of concluding negotiations with the federal government by March 2016.

At the federal level, the process to renew the Agreement on Internal Trade will be a whole-of-government initiative led by Industry Canada.

As the department providing leadership in the growth and development of a competitive, innovative, and sustainable Canadian agriculture and agrifood sector, Agriculture and Agri-Food Canada strongly supports this process. Agriculture and Agri-Food Canada, along with other federal government departments and agencies, is currently working with Industry Canada to develop the government's approach for a modernized and ambitious Agreement on Internal Trade.

It is important to point out that most of the levers to facilitate internal trade belong to provinces and territories. The federal government has few policy, legal, or regulatory mechanisms at its disposal that can affect internal trade relative to the provinces and territories.

Agriculture and Agri-Food Canada is strongly supportive of the joint federal, provincial, and territorial efforts to address internal trade measures in the context of further enhancing Canada's agricultural competitiveness domestically and internationally, as well as strengthening Canada's internal market. Addressing measures inhibiting internal trade can contribute to creating the right environment to increase exports, stimulate innovation, and enhance competitiveness.

Thank you very much, Mr. Chair.

[The Chair, Conservative, Bev Shipley]

Thank you very much, Mr. Seppey.

Mr. Mayers, you have ten minutes.

[Paul Mayers, Vice-President, Policy and Programs, Canadian Food Inspection Agency]

Thank you very much, Mr. Chairman.

Thank you for having the Canadian Food Inspection Agency appear today to share our perspective on reducing interprovincial trade barriers in the agrifood sector. The CFIA is a science-based regulatory agency. Our mandate is to safeguard food, animals, and plants, which in turn enhances the health and well-being of Canada's people, environment, and economy.

One part of our mandate—one that firmly supports Government of Canada priorities—is to protect consumers through a fair and effective food, animal and plant regulatory regime that supports competitive domestic and international markets. And while the Canadian Food Inspection Agency does not facilitate trade in our regulatory role, we do support market access. This includes our domestic market.

The legislative authorities governing the production and sale of food in Canada are shared by federal, provincial, and territorial governments. When it comes to food safety, all levels of government, and consumers for that matter, have an important role to play. The federal government is responsible for maintaining the safety and quality of the Canadian food supply under the Food and Drugs Act and its regulations. The federal government also administers, under its trade and commerce powers, the Canada Agricultural Products Act, Fish Inspection Act, and Meat Inspection Act. In turn, each of these acts has supporting regulations that cover dairy, egg, maple, honey, fresh fruits and vegetables, meat, and fish. In order to be eligible for interprovincial trade, all products covered by these acts and regulations must meet the obligations that are outlined in the appropriate legislation.

ln addition to the federal rule set, provinces may have their own rules and regulations for foods made and sold within their jurisdiction. This provincial power comes from their authority to regulate local trade. Taken together, these rules serve to ensure that Canada's food supply is among the safest in the world.

The CFIA appreciates that the federal, provincial and territorial rule set can sometimes impact the ability of some companies to trade food interprovincially.

In some cases, conflicting federal, provincial and territorial requirements and standards make it difficult for food producers to market the same product in different markets.

In other cases, the requirement for certain types of operations to be federally registered, federally licenced and/or federally inspected is viewed as a potential barrier to more active interprovincial trade.

The agency recognizes the importance of interprovincial trade and the need to facilitate it to the utmost possible. This is why the agency has done significant work in seeking to simplify and streamline its regulations and encourage harmonization of FPT rules.

The CFIA has worked, and continues to work, with partners and stakeholders to find ways to improve the overall situation and enable more manufacturers to sell more food across provincial and territorial borders. Through the FPT process, the CFIA has worked with provinces and territories to identify and modernize a number of outdated federal rules and standards and eliminate red-tape barriers. An example of this approach was the meat pilot project launched in 2010. Through this collaborative and consultative process, the CFIA took advantage of industry's adoption of the hazard analysis and critical control point food safety controls and replaced a number of limiting and prescriptive meat hygiene rules and regulations with more flexible, outcome-based rules.

The CFIA is consolidating federal food regulations under a single umbrella, under the Safe Food for Canadians Act. This provides a unique opportunity for further streamlining and simplifying food regulations.

The Safe Food for Canadians Act, when it is fully in force, will bring into effect new outcome-based regulations that will allow for a more consistent approach to strengthening food inspection in Canada. Outcome-based regulations will make it considerably easier for companies operating within a province or territory to sell in other provinces.

By moving to outcome-based regulations that also reflect international standards, we are setting the stage for something that industry and food safety associations have long requested: greater harmonization of federal, provincial, and territorial food safety requirements. We have been consulting extensively on the development of new Safe Food for Canadians regulations and we are currently reflecting on the considerable feedback that was received.

Another example of innovation in this context being explored through the incorporation by reference provisions of the Safe Food for Canadians Act would be to allow the Canadian Beef Grading Agency to maintain Canada's beef grading standards. The Canadian Beef Grading Agency currently conducts grading activities within Canada. Empowering them to manage the standards will enable them to continually improve the standards and update them in real time as new technological advances permit.

Such consultations are an important part of the Canadian Food Inspection Agency's transformation as we modernize the way we do business. Modernizing and better aligning to streamline regulations and standards is important to help boost competitiveness for producers.

As an example, the 2014 budget contained commitments to modernize beer standards and to develop a plan to modernize food standards more generally under the food and drug regulations. Producers in the food industry have raised issues with some standards being duplicative, outdated, and not meeting the needs of consumers and industry.

In some cases, removing out-of-date standards would allow better competition, consumer choice, and adaptation to new technologies. Some food sectors, such as maple syrup, have already made great progress when it comes to regulatory reform. In these cases, progress was made because of extensive industry consultations and consensus building.

Mr. Chair, as I have said from the beginning, the Canadian Food Inspection Agency sees better aligning requirements and regulations as key to reducing interprovincial barriers. Streamlining in this way will help cut red tape, which will in turn boost competitiveness and growth. The Safe Food for Canadians Act presents great opportunity in this regard.

Federal efforts to move to more outcome-based regulations, as we are pursuing at the Canadian Food Inspection Agency, will facilitate opportunities for provincial requirements to be better aligned with the federal system.

When it comes to standards and regulations, the CFIA is committed to working and consulting with producers both big and small to determine the best way forward. We look forward to continued work with the various levels of government on this issue to improve the competitiveness of Canada's economy.

Thank you.

[The Chair, Conservative, Bev Shipley]

Thank you very much, Mr. Mayers.

Go ahead, Mr. Meredith.

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

Mr. Chair, I'll cede my time to the chair.

[The Chair, Conservative, Bev Shipley]

Thank you.

[An hon. member]

You have 10 minutes.

[Some hon. members]

Oh, oh!

[The Chair, Conservative, Bev Shipley]

Thank you very much.

We're going to start our rounds with Madam Brosseau, please, for five minutes.

[Ruth Ellen Brosseau, NDP, Berthier—Maskinongé, QC]

Thank you, Chair.

I'd like to thank the witnesses for their presentations.

I will start with a more general question.

Can you give us some specific examples of interprovincial trade barriers?

Since this is the Standing Committee on Agriculture and Agri-Food, I would like you to tell us what types of production are most affected by the negative impacts of those tariff barriers in the agricultural industry. Which sectors should we ask to send representatives to participate in this study?

[Frédéric Seppey]

Thank you for your question. I will answer it in French.

My answer has two parts. For starters, certain measures constitute explicit barriers or impediments to trade, but the federal and provincial governments can do a number of things to improve trade, without really dealing with those barriers.

Existing measures that restrict the free trade of goods are concentrated in certain sectors. Interprovincial trade of alcoholic beverages—such as wine and beer—is traditionally subject to a number of constraints. Both federal and provincial measures were impeding this trade.

However, as my colleague from the agency mentioned, under two legislative initiatives—the first was adopted in 2012, and the second was put forward more recently as part of An Act to implement certain provisions of the budget tabled in Parliament on February 11, 2014 and other measures—the federal provisions that restricted interprovincial trade of alcoholic beverages were largely removed. But for those new measures to be fully effective and liberalize trade, they would have to be accompanied by equivalent provincial measures. In some provinces, including British Columbia, measures have been adopted to liberalize that type of trade. However, a number of other measures established in other provinces are still restricting the personal exemption limit for importing alcoholic beverages into a province. That's one example I wanted to bring up.

Something else that can be not so much an explicit barrier, but more of an impediment is, as my colleague from the agency mentioned, the difference in regulations that apply to red meat processing. As I was saying in my presentation, in order to be able to engage in interprovincial trade, an establishment must be federally registered. But the federal government's requirements are different from those set out in provinces such as Ontario or Quebec. Some establishments cannot meet the federal standards. As a result, since they are only provincially registered, they cannot participate in interprovincial trade. That's another example.

More general and more ambitious rules under the Agreement on Internal Trade, which has been in effect since 1995—and I would like to bring up the government's initiative to modernize that agreement—would probably help greatly improve interprovincial trade. The approach that has been favoured since 1995 by that agreement is to have a positive list. The agreement applies as long as provinces and the federal government have established a list of measures that are covered, while general rules apply in our international agreements, with some exceptions. That's what is referred to as a negative list. That structural change in the agreement on domestic trade would go a long way toward promoting greater liberalization of trade for all products, but it would be especially beneficial when it comes to agriculture and agri-food products.

[Ruth Ellen Brosseau, NDP, Berthier—Maskinongé, QC]

You mentioned red meat. There are slaughterhouses in Quebec, but many producers send their animals elsewhere for processing. Do you know how much it costs on average for a slaughterhouse to transition from an establishment recognized by a province to an establishment approved by the federal government? What is the average cost of that transition?

[Paul Mayers]

In fact, the meat hygiene pilot had as one of its objectives to better understand the difference between provincial and federal requirements. While they aren't absolute assessments in terms of the numbers, it was clear that particularly for small and medium enterprises, the cost of meeting the federal requirements under a highly prescriptive model, which would involve not just adjustments to how they do their business, but in some cases adjustments to their physical plant for delivery.... We had requirements under the meat inspection regulations that were prescriptive to the point of very detailed requirements on what your walls were made of, the type of lighting you had, even as far as—it's the example we often use—the distance that the drain had to be from the door. Clearly, if your establishment, producing meat within a provincially registered context, didn't have the drain at the right distance from the door, that was a major infrastructure change.

So the costs vary quite dramatically. That's why we can't put an absolute number, but it was clear that this was a barrier. By shifting to a more outcome-based requirement, for example, instead of requiring where the drain is, requiring that there be no standing water, it would enable more facilities to make the adjustment to federal registration if they chose, without having to make significant infrastructure investment.

[The Chair, Conservative, Bev Shipley]

Thank you very much.

Now we'll move to Mr. Keddy for five minutes.

[Gerald Keddy, Conservative, South Shore—St. Margaret's, NS]

Thank you, Mr. Chairman.

Welcome, witnesses. This is an extremely interesting discussion. I just want to pick up where Ms. Brosseau left off, specifically with regard to CFIA and some of those types of examples moving from prescriptive outcomes to outcome-based rules. So literally the position of the drain in the floor could be a requirement that prevents a provincially licensed butcher shop or meat-packing plant from being federally licensed.

[Paul Mayers]

Yes.

[Gerald Keddy, Conservative, South Shore—St. Margaret's, NS]

You gave the example of standing water, but there's nothing untoward here: there would be no other hygienic problems; there would be nothing about the meat. The meat would be deemed safe to be eaten in that province or in that area. How could we go that far astray?

[Paul Mayers]

We have to remember that several of the regulatory frameworks were put in place quite a long time ago. Indeed the old meat inspection regulations were older than I am, and I'm not quite a spring chicken. That was exactly why we undertook this working collaboration with the provinces. When those rules came into effect originally, they in essence sought to codify a set of rules that could provide assurance of safety. They were successful in that regard. The problem was that they basically dictated that everybody had to do it the same way. Regulatory practice has now evolved more towards telling someone the result they have to deliver and setting for them the frame within which they have to deliver it. That's the benefit of the hazard analysis and critical control points system. Let's think about what can introduce hazards, and what steps you can take to control them as opposed to the government dictating that there's only one way to control them. In the drain example, we're not saying that having standing water in a plant doesn't represent a risk. It absolutely does, because there's more potential for it to be splashed onto the product. The point is that the drain being in one particular position on the floor has no magic to it, especially if that's not where your standing water is.

[Gerald Keddy, Conservative, South Shore—St. Margaret's, NS]

The important part would be that it's sanitized at the end of the day and that the bacteria count is down in that part.

[Paul Mayers]

Exactly.

[Gerald Keddy, Conservative, South Shore—St. Margaret's, NS]

For all three of you gentlemen, we do have a limitation on time here. I'm going to ask each of you to very quickly give three examples of internal trade barriers in your area that we should be looking at. We can flesh those barriers out ourselves and get more witnesses in here and then try to produce a report on them. Can each of you give me three examples of where we can do a better job at reducing interprovincial trade barriers?

[The Chair, Conservative, Bev Shipley]

We'll give Mr. Meredith a chance to start.

[Paul Mayers]

Thank you, Mr. Chair.

[The Chair, Conservative, Bev Shipley]

I'll give you back part of your ten minutes.