Agriculture Committee on May 9th, 2016

[Ron Lemaire]

The payment protection issue is extremely complex. We've already heard from Innovation, Science and Economic Development on the complexity of the BIA and an unwillingness to open the BIA because of the complexity of the BIA unto itself. One issue is the challenge relative to the bankruptcy act in the past.

There has been a lot of movement in the last five years due to the work we've seen with the regulatory co-operation council and a greater understanding of the complexity of the issue and the division between the insolvency component, the dispute resolution component, and the destination inspection component. In the past, all three were mixed together. That tended to confuse similar systems. As we heard earlier, can you implement this all in Canada? Well, it's not quite the same as what we have in the U.S. Our bankruptcy rules are different and our models are different. There was always a challenge when we started to do identical programming.

Where we are today is very different from where we were in the past, relative to now having the DRC and the dispute resolution mechanism similar to the dispute mechanism under PACA in the U.S. We each have reciprocal DIS programs, as Ms. Fowlie mentioned. The stopgap here is insolvency. The key that you will see when DRC presents on Wednesday is that the insolvency tool that's being presented does not have to sit under the BIA. The insolvency tool will and can stand alone. It's a stand-alone piece of legislation, and it can talk to the insolvency component only. When a company becomes insolvent at a federal level, that takes away the provincial issue, and the DRC can then be involved.

[Francis Drouin, Liberal, Glengarry—Prescott—Russell, ON]

So it does require a legislative change—

[The Chair, Liberal, Pat Finnigan]

That's two minutes.

[Francis Drouin, Liberal, Glengarry—Prescott—Russell, ON]

Sorry. If it's two minutes, I'm up.

[Voices]

Oh, oh!

[The Chair, Liberal, Pat Finnigan]

Monsieur Breton.

[Pierre Breton, Liberal, Shefford, QC]

Thank you very much, Mr. Chair.

I would like to thank the witnesses here today.

I agree with you. We are in the process of establishing mechanisms and solutions, especially since it is often the smallest companies that are suffer from the lack of protection mechanisms.

You made the following recommendation: “that the federal government create and implement a limited statutory deemed trust [...] ”

Can you please give us some more information about this recommendation?

[Ron Lemaire]

I'll share a quick statement with Anne and George.

The recommendation will be framed in the Cuming bill that will be available on Wednesday and provided to the committee. The DRC will be able to walk through the details of the bill at that time and the technical aspects.

Just quickly, is it changes to the legislation? We're looking at a new piece of legislation, a different approach from what we've seen in the past, that is a viable solution.

[Anne Fowlie]

I agree. I think there will be a good discussion on Wednesday. I certainly plan to be here to listen to the discussion, because this is something very near and dear to me.

We're here in this room today in 2016, and we all have an opportunity to contribute to a way forward. I purposely alluded to Agriculture and Agri-Food Canada's Pest Management Centre. Some of you, certainly, have heard for many years about all the issues around pesticides and so on and so forth. We never thought that we would get the Pest Management Centre, but at that time, the time was right to do so. We are the beneficiaries of it and will be in perpetuity.

It's the same thing with the establishment of the dispute resolution corporation. That was the foundation for the destination inspection service, as well as other things.

Again, it's the moment in time when there really is an opportunity to do something on this.

[George Gilvesy]

I might make one additional comment.

That alludes to a question asked in the previous testimony about what options might work. You're looking at what is the path forward. I think we have to look at the narrowness of what options may be acceptable to our largest trading partner here, which is the United States of America. Albeit this is a made-in-Canada solution, it ultimately has to meet the test of what will meet that trading obligation.

[Pierre Breton, Liberal, Shefford, QC]

Thank you.

[The Chair, Liberal, Pat Finnigan]

Thank you, Mr. Breton.

Mr. Warkentin, you have six minutes.

[Chris Warkentin, Conservative, Grande Prairie—Mackenzie, AB]

Thank you so much.

I want to get to exactly that point. We've heard again and again that the United States has said that while they changed the provision in 2014, if we had a PACA-like system in Canada they would immediately work with us to rectify the preferential treatment. Who in the United States has promised this?

It seems almost impossible these days to get a promise from anybody in the U.S. that would be a guarantee that anything could be delivered there. I've always just taken it for granted that somebody has guaranteed us this. Who is it?

[Anne Fowlie]

The letter to the then-minister of agriculture advising of the change subsequent to the telephone notification does indicate that at such time as we are able to put something together, they will revisit it. It's administrative. They don't need to make any legislative changes. It was administrative to remove the preferred access, and it will be administrative to restore it.

[Chris Warkentin, Conservative, Grande Prairie—Mackenzie, AB]

So no politician would be involved in this process.

[Anne Fowlie]

That's correct.

[Chris Warkentin, Conservative, Grande Prairie—Mackenzie, AB]

It's simply a decision that's been made by an administrative body. That seems odd to me. I've not seen that. I don't think that in Canada we operate that way, and I certainly know that there are far more politics being played south of the border. Could you circulate that letter to us? I think it would be helpful in terms of tracking down who we might speak to in the United States.

The second point on this is that they have to know that whatever we come up with, it might be similar to what they have, but it won't be identical, because obviously we have provisions of bankruptcy and insolvency that are different in terms of jurisdictional complications.

Did they specifically state what elements must be included in a change in the provisions to allow whoever needs to make the decision to change the decision back? Did they actually specify what elements needed to be included in that and what didn't need to be? Or have you sent them what you think should be the solution and they have approved it, such that, yes, in fact, if that were implemented, they would reverse the decision?

[Anne Fowlie]

I don't recall the exact text, but it does speak to comparability. Also, in the regulatory co-operation council, in the first iteration in the action items, the action plan, there is text that also speaks to a comparable mechanism.

[Chris Warkentin, Conservative, Grande Prairie—Mackenzie, AB]

Earlier, you heard me questioning the officials. They didn't have an answer specifically with regard to what the cost might be for producers if these new provisions were included and what the impact would be of the changes that the banks might make. Obviously, the cost for financing might be going up.

Have you talked to the banks at all with regard to this? The people who are usually hardest hit when there's a change in the way the banks operate are the small guys. The most difficult time for any small business to get financing is when they're small, when they're getting started. It seems to me that any change that would negatively impact the ability to access capital would be felt, and it would be hardest felt by those people who are the smallest. They seem to be the ones who we are most interested in protecting in this case.

Has there been any assessment of or any discussion with regard to these changes and how they might impact the ability for small guys to get access to capital?

[George Gilvesy]

It's a good question. This is only my interpretation so it's quite anecdotal, but the banks have taken a position of principle on this and they aren't going to defer to anyone if they don't have to. Their position is one that's very simple to understand.

Who is the biggest beneficiary from having a stable sector to lend to? It's the banks. The U.S. process turned the wild west into a stable environment, and hence, one would assume you would have the same thing here and the cost to growers would not go up.

[Chris Warkentin, Conservative, Grande Prairie—Mackenzie, AB]

I would assume the same, and that's why I am wondering if you couldn't get the banks or somebody within the banking sector to analyze the change in the landscape. Obviously that would satisfy some who are concerned about the impacts it might have on the ability to access capital.

[Anne Fowlie]

Mr. Gilvesy is correct. Certainly from our understanding of what we have here in the U.S., the Canadian Bankers Association has a standing policy from which they would not be prepared to deviate. Research that has been done in the U.S. over time shows—because again, they have a long history on this—that at the time PACA was created, the banks remained silent, which was deemed a positive, and over time, speaking with different groups, overall PACA has had a net positive effect for both growers and packers in the produce industry as well as for bankers financing the sectors.

[Chris Warkentin, Conservative, Grande Prairie—Mackenzie, AB]

You're confirming my suspicion that this would be the case. We need to be able to supply that information to the officials, because they seem to be questioning those numbers. That seems to be the greatest area of reluctance as it relates to the interprovincial issue.

[Anne Fowlie]

PACA provided extra security to banks focused on production lending in that it allowed growers priority in recovering any unpaid accounts from buyers, therefore strengthening growers' balance sheets.

[Chris Warkentin, Conservative, Grande Prairie—Mackenzie, AB]

Ron, you wanted to jump in there.