On behalf of Food and Consumer Products of Canada and the member companies we represent, I would like to thank the Standing Committee on Agriculture and Agri-Food for the opportunity to provide input into the next agricultural policy framework.
FCPC is Canada's largest industry association, representing the companies that manufacture and distribute the majority of food, beverage, and consumer goods found on store shelves, restaurants, and in people's homes.
Our member companies provide an important market to farmers, investments in local infrastructure, and countless direct and indirect jobs that significantly contribute to the economic sustainability of Canadian communities. Our membership is truly national, providing high-quality jobs to both urban and rural Canadians in more than 170 federal ridings across the country.
Food manufacturers are in fact the largest employer in the manufacturing sector in Canada, with approximately 300,000 Canadians working in over 6,000 manufacturing facilities in every region of the country. Food manufacturing employs more than the automotive and aerospace industries combined.
There is enormous growth potential for our industry. According to the chair of the advisory council on economic growth, Mr. Dominic Barton, food is going to be one of the biggest businesses in the world. Mr. Barton believes that Canada has the potential to be a global leader in food production.
There are many reasons for food manufacturers in Canada to be optimistic. For the first time, food manufacturing was identified as a priority by the federal, provincial, and territorial agriculture and agri-food ministers at their annual meeting in July. Federal budget 2016 also recognized, for the first time, food manufacturing as a significant driver to the economy. The government's commitment to diversify and move Canada beyond our reliance on commodities toward growth in value-added production is significant. We are hopeful that this recognition will be reflected in the next agricultural policy framework.
However, we continue to face challenges, including a lack of recognition of the sector's importance and potential. Only about 5% of Agriculture and Agri-Food Canada's overall departmental spending is allocated to the food manufacturing sector. That's right: only 5%. It's even less in the current Growing Forward 2 framework. This means that the vast majority of all the department's funding in areas like research and programs, which are critical for our sector, exclude the food manufacturing industry.
According to the department's own statistics, investment in processing plants, advanced technologies, and R and D in food manufacturing facilities in Canada has not kept pace with our competitors. We also know that Canada is importing more processed food than we are exporting.
The food and beverage manufacturing sector requires additional focus and support in the next agricultural policy framework. Priorities for support include: one, capital investment and integration of new technology; two, innovation and research; and three, meaningful access to international markets.
On number one, capital investment and integration of advanced technologies, I want to direct the committee to a 2014 KPMG report called “Technology Readiness Assessment of Automation and Robotics in the Food and Beverage Processing Sector in Canada”. The findings of the report demonstrate that the Canadian food and beverage processors are lagging behind their competitors in Europe and the U.S. in the level of automation and robotics. Top barriers to that include cost.
This is a major challenge, because food manufacturers require modern equipment and facilities to be productive, innovative, and competitive in Canada and abroad. Other countries are fiercely competing for these investment dollars, and Canada needs to be in the game if we want to keep and grow value-added jobs here in the country.
We support the excellent work and recommendations of the food processing industry round table to create a unique investment fund for food manufacturers. The round table's proposal, seeking $500 million over five years for a food innovation fund, would provide incentives to modernize the footprint of our industry. We're also encouraged by the federal government's $160-million commitment to innovation through the agrifood value-added investment fund.
On number two, innovation and research are key to the competitiveness of Canadian food manufacturers. Industry investment in R and D in Canadian food manufacturing is low. We need to attract company-specific R and D into Canada, as they successfully do in the Netherlands. Publicly funded research is also critical. However, the vast majority of the current publicly funded research projects in the department exclude the food manufacturing sector.
We need investment in science-based projects to create competitive advantages and to help meet the changing needs of consumers in Canada and abroad. Research is needed on the product development and technology side. For example, consumers want food that stays fresher longer and transports well. They also want products with varying nutritional profiles and ingredients to suit their preferences. There is also a demand for smaller packages that produce less waste and can be recycled or composted. On the equipment side, why do we import almost all of our food manufacturing equipment from Europe? Why can't we do the cutting-edge research here in Canada to develop the technology to make food in a way that is more efficient, produces less waste, and uses less water and energy?
On number three, meaningful access to international markets, our trade deficit in processed foods speaks to the need for increased support for meaningful access to international markets. That's why trade deals, like the one recently signed with the European Union, are so important. The current funding framework is light, however, on helping companies sell their value-added products on the global market. More resources and a shift in focus are needed to benefit the entire value chain.
This all leads to the broader question of why Canada is lagging in capital investment and R and D. A contributing factor is that Canada can do a better job in making itself a country more attractive to investment. In the recent report by the advisory council on economic growth, it is noted that Canada's regulations are seen by investors as unwelcoming. This is also reflected in a recent report by Canadian Manufacturers & Exporters, which we partnered with them on, that found Canada's regulatory environment is becoming less supportive and more onerous compared to 2014 levels. In our industry, we continue to face antiquated regulations that make it difficult for our industry to innovate and compete. Updated regulations are urgently needed to encourage companies to manufacture in Canada, grow their operations, and introduce new innovative processes and products. The government's innovation and growth agenda are contingent on a modern regulatory framework.
While outdated regulations continue to pile up, we are now facing a whole new set of regulations and government intervention in our industry. While we applaud the government for a comprehensive whole-of-society approach to improving the health of Canadians, this unprecedented amount of change will require an unprecedented amount of investment and resources in an unprecedented time frame. The government's healthy eating strategy will change how we make our products, how we package our products, and how we market our products. This shifting landscape will transform the entire food manufacturing sector in Canada in a very short time frame, and it will cost money.
One of the labelling changes, the revised nutrition facts table, is estimated by Health Canada to cost more than $500 million. Importantly, this is money that is not spent on capital investment or R and D. Our industry is being asked to grow, invest, and innovate on the one hand, while on the other hand we're facing monumental changes that will impact every aspect of our operation.
It's also important that the food and beverage industry be included in the consultations on how our environment will be transformed in Canada, but industry has been excluded from the in-person consultations on Canada's food guide, which we see as a lost opportunity. While an online consultation is open to us, as well as to 30 million Canadians, the survey itself is leading, contains closed-end questions, and suggests that processed food does not play a role in a healthy diet. We are eager to contribute our knowledge and resources to help the government develop and promote a modern, science-based Canada food guide.
We ask that this committee look at funding for our industry in the next agricultural policy framework to help us transition to this new and unprecedented landscape. To create a more attractive place to invest, it's important that the government modernize existing regulations before adding new ones to the mix; conduct a comprehensive economic analysis of Health Canada's proposed changes, which includes looking at the impact not only on food manufacturers but also on consumers and farmers; and ensure a collaborative approach that includes consultations with all groups.
Canada has the potential to be a global leader in food manufacturing, and the work of this committee is extremely important. Thank you for this opportunity.