Agriculture Committee on Nov. 15th, 2016

[The Chair, Liberal, Pat Finnigan]

Welcome, everyone.

We are moving on with our agricultural policy framework, or APF, study.

Yes, Mr. Anderson.

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

I'll try not to take too much time here, but I would like to make a suggestion.

I think we have agreement around the table that if we can, next week, we take one hour of our hearings, perhaps on Tuesday, to hear from the ranchers in Alberta who have been impacted by the tuberculosis case that has been discovered there. It would be just to hear some of the impact, what they're hearing, and what they're being expected to do over the next few months as well.

I'm wondering if there's agreement from the committee that we could have a one-hour hearing on that.

[The Chair, Liberal, Pat Finnigan]

Is everyone in agreement?

[Some hon. members]

Agreed.

[The Chair, Liberal, Pat Finnigan]

Okay. Everybody agrees to that. So then on the 22nd—

[Bev Shipley, Conservative, Lambton—Kent—Middlesex, ON]

On the 22nd we'll do a briefing by the ranchers regarding the tuberculosis case.

[The Chair, Liberal, Pat Finnigan]

Okay.

And you can get in touch with...as far as who will be appearing.

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

Okay. Yes. I want to thank the committee for their co-operation.

[The Chair, Liberal, Pat Finnigan]

Thank you, Mr. Anderson.

To get back to this morning's business, I want to welcome, from Food and Consumer Products, Carla Ventin, vice-president of federal government affairs; and from the Canadian Council of Food Processors, Sylvie Cloutier, chair, and François Couture, senior adviser, innovation.

Welcome.

We will start with a 10-minute statement from Ms. Ventin for up to 10 minutes.

The floor is yours. Thank you.

[Carla Ventin, Vice-President, Federal Government Affairs, Food and Consumer Products of Canada]

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.

[The Chair, Liberal, Pat Finnigan]

Thank you, Ms. Ventin.

Next we will hear from the Canadian Council of Food Processors.

Ms. Cloutier, you have ten minutes.

[Sylvie Cloutier, Chair, Canadian Council of Food Processors]

Thank you, Mr. Chair and members of the committee, for inviting us to appear today. My name is Sylvie Cloutier. I am the CEO of the Quebec Food Processors Council and the chair of the Canadian Council of Food Processors. I am here today with François Couture, a senior adviser and expert in food innovation.

The Canadian Council of Food Processors, CCFP, is an alliance of all provincial food processors associations, and represents collectively over 1,500 Canadian companies from all regions of Canada, ranging from small independently and privately owned companies to larger public businesses.

The food and beverage industry is the most important manufacturing sector in Canada and in many provinces. The sector employs 300,000 Canadians across the country, making it the largest employer in the Canadian manufacturing sector. It has over $90 billion in shipments annually.

If you don't mind, Mr. Chair, I will continue this presentation in French.

The food processing industry is the primary client of Canadian agricultural producers. For example, in Quebec, the food manufacturing sector buys and processes more than 70% of the province's agricultural production. The food industry adds value to agricultural products, creates jobs, generates revenue and contributes significantly to society.

The industry is facing challenges such as opening up markets, increasingly fierce competition, food integrity, major regulatory changes, the ability to respond to consumer demands and to health and other trends, while ensuring our companies' ability to innovate.

In addition, the financial pressure on our food companies, coupled with the precarious state of some, reduces their ability to compete, innovate and grow.

As you may have heard by now, there will be between 9 and 10 billion mouths to feed on the planet by 2050. Canada already has the enviable reputation of being the breadbasket of the world, but how are we going to maintain that reputation and to position ourselves as a world leader to meet multiple demands? Canada must quickly adopt a vision and an action plan, and the government has an important role in mobilizing and supporting its food industry.

It is clear that the food processing sector has not yet received its fair share of funding under the current program, Growing Forward 2. The food processing sector is overwhelmingly under-represented, with barely 5% of the overall spending earmarked for programs, research and innovation. This shortcoming needs to be addressed with the new five-year policy framework and the government must be fair to its largest manufacturing sector in Canada by investing in innovation, research and development, new technologies, equipment, market access, acquisition of strategic information and so on.

A massive investment in the food processing industry would help develop the sector, as well as maintain the added value and the jobs in Canada.

We support the major policies outlined in the Calgary statement, specifically those related to markets and trade, science, research and innovation, and the processing of value-added agricultural and agri-food products.

In fact, investments to keep our companies competitive and help them bring their products to market are essential. Promoting Canada's reputation abroad for the quality and safety of our products is important, but it is not as important as government support for companies' development activities such as equipment upgrades, access to strategic information on new markets, access to skilled labour, or access to capital to fund infrastructure projects.

We believe that priority must be given to research and innovation. With the opening of markets, innovation is a key component of the sector's competitive advantage. Research and innovation stimulate the productivity and competitiveness of the agri-food sector and will secure the industry's growth and sustainability. That's the way to go if we want to be a global leader and if we want to provide value-added products to the world. Continued funding in science, research and innovation from the private and public sectors to foster a culture of innovation within our businesses is essential.

SMEs in the Canadian agri-food sector with fewer than 500 employees represent 99% of our businesses, 85% of our jobs, 45% of our research and development expenditures, and 49% of our shipments.

We are all aware of the importance of SMEs and the role they play in economic growth, or in the GDP, in the number of facilities and in terms of employment across Canada.

We have seen a decline in R and D investment in agri-food SMEs. We rank 22nd among the OECD countries in terms of corporate spending on research and development in all sectors.

Yet, the role of innovation in the agri-food sector is essential for people's quality of life. We believe that effective solutions need to be developed quickly, taking advantage of the networks that connect agriculture, food, health and environment with the concerns of society.

SMEs in Canada are struggling to find the tools they need to innovate and compete better with other companies globally and in Canada. They need help to have a variety of platforms, tools, resources, networks and levers for open and collaborative innovation.

The government needs to strengthen the agri-food sector's capacity to respond to emerging sector challenges and priorities by improving knowledge transfer activities while encouraging continued industry leadership.

Thank you for your time.

[The Chair, Liberal, Pat Finnigan]

Thank you, Ms. Cloutier.

We will now move on to the questions.

Mr. Shipley, you can start.

[Bev Shipley, Conservative, Lambton—Kent—Middlesex, ON]

Thank you very much.

Thank you, witnesses. It's great to have you here as we discuss the next Growing Forward.

Ms. Ventin and Ms. Cloutier, I'll start with a question for both of you. Funding initiatives seem to be a significant part of the presentations, either in the processing part or the consumer products in terms of moving forward with those. Your industries are both large, with a lot of companies and large employers. One of the things that has come up—you will maybe have heard this from your organizations—is labour shortage. You're going to have innovation and you're going to be able to move forward and you're going to grow the markets and you're going to grow in terms of the processing. Can you talk to us a little bit about what your thoughts are on how we would move forward? Or perhaps you could talk to us about labour shortage issues you may be experiencing in your organizations, and about how we might consider, during the Growing Forward 3, some remedies for that.

[Carla Ventin]

Yes, labour shortages are definitely a challenge, both skilled and unskilled. For example, we need folks to be able to take the peas from the field and flash-freeze them within a couple of hours. If the peas stay in the truck for more than two or three hours, they're spoiled and they have to be thrown away. It's timely labour. You can't have people not showing up. This is a real challenge, and it's a challenge across the country.

The second thing is that skilled labour is also a big challenge. In that KPMG report I referenced on automation and robotics, what I found interesting there was that it was not only the cost of the adoption of this technology for Canadian food manufacturers; it was also finding the right people with the skills to be able to integrate that technology. You don't get technology from off the shelf. It has to be re-engineered and integrated, and we need those skills.

[Sylvie Cloutier]

I would just add that in the temporary foreign worker program, as you probably know, all manufacturing sectors were excluded. Right now we do have in the fields some workers on the production side but they cannot work on the food processor side, and they work hand in hand, so when harvest time comes, we don't have enough employees on the food processor side. We need to exclude food processing from this—

[Bev Shipley, Conservative, Lambton—Kent—Middlesex, ON]

I'm going to run out of time, but I want to follow through on this.

I'm meeting with some folks afterwards, and I think, through Going Forward 3, we have to integrate some way of talking to our young people about the availability of skilled trades in the agriculture industry. I'm hoping that at some phase in this Growing Forward 3 we have something about the promotion of jobs for skilled workers. We're going to have to deal with the unskilled through the temporary foreign worker program or the seasonal, but these skilled trades are out there, and people don't think of agriculture as being one of those.

Do you see that as an opportunity, and how can we put this, how can we advertise, how can we instill into our young people through our education system the availability and the opportunities for our young people in those skilled trades in agriculture?

[Sylvie Cloutier]

With regard to agriculture and agrifood, as you probably know, we have lots of very good jobs in the food processors industry. In some provinces, you have initiatives right now to promote the agriculture and agrifood sectors, but we do need to have a Canadian strategy on valorization.

[Bev Shipley, Conservative, Lambton—Kent—Middlesex, ON]

Do you see yourselves as part of that?

[Sylvie Cloutier]

For sure.

[Bev Shipley, Conservative, Lambton—Kent—Middlesex, ON]

Ms. Ventin?

[Carla Ventin]

Absolutely; when you have engineers in Canada studying, they don't think engineers are required on a food manufacturing facility to operate the highly automated and robotic technology that is necessary and will become more necessary if we want to stay in business.

[Bev Shipley, Conservative, Lambton—Kent—Middlesex, ON]

One of the things you mentioned, Ms. Ventin, in your presentation is the funding, and we're talking about Agriculture and Agri-Food Canada here.

To both of you, do you see the funding initiatives not only with Ag Canada but also Industry Canada? Are you making the same sorts of presentations or appeals to that body?

[Carla Ventin]

Sure. As we both said in our presentations, only about 5% of Agriculture and Agri-Food Canada's funding is for food manufacturers. We always deal with Industry Canada, ISED, as well, and we have seen significant improvement, especially since the deputy minister from Agriculture and Agri-Food Canada, John Knubley, moved over to that department and started talking about the importance of food manufacturing. However, the challenge we have is that they always send us back to the Department of Agriculture and Agri-Food and say, well, that's your home department. It's our home department, but we're getting less than 5% share of the funding.

[Bev Shipley, Conservative, Lambton—Kent—Middlesex, ON]

What kind of a formula would you be looking at in terms of the needed funding?