Good afternoon, Mr. Chair and members of the committee.
Thank you for the invitation today to discuss dairy processors' views on our country's food processing capacity.
I'm the board chair of the Dairy Processors Association of Canada, as well as the president and CEO of Gay Lea Foods Co-operative. With me today is Mathieu Frigon, president and CEO of the Dairy Processors Association of Canada.
Dairy processing is the second-largest food processing industry in Canada. It contributes more than $18 billion annually to the country's GDP, supports the milk production of over 10,000 Canadian dairy farms and employs almost 25,000 Canadians in 471 facilities across this country.
For dairy processors there are two key areas where improvements could support renewal of Canada's dairy processing industry to restore investments and spur growth. The first is addressing the impacts of dairy market access granted under CETA, CPTPP and CUSMA through the development of a dairy processor compensation program. The second is addressing the unfair treatment of suppliers by Canada's largest grocery retailers through the creation of a grocery code of conduct.
As we have previously discussed with this committee, the dairy market access granted by trade agreements like CETA, CPTPP and CUSMA has created a climate of uncertainty, which has disincentivized investment and innovation in Canada's dairy processing capacity. At full implementation, access granted under these agreements will represent about 10% of the Canadian market or about $300 million in annual losses to net margin. This is the equivalent to Canada losing 15 to 20 medium-sized cheese makers. In addition, CUSMA will restrict our exports of certain dairy ingredients. Since the conclusion of CETA negotiations in 2013, dairy processing is the only food processing industry exhibiting negative GDP growth among the top 10 food processing industries on which data is collected by Statistics Canada, and trade agreements have a lot to do with that.
The Canadian government has made repeated promises of full and fair compensation for supply-managed sectors. Last week, significant compensation for dairy farmers began to roll out. Our industry is still waiting for any sign of the government's intention to announce compensation to dairy processors for their losses.
Supporting production at the farm but not taking action to support processing capacity is a failure to acknowledge that supply management is a system. Its long-term viability requires both its farming and processing industries to be healthy and growing.
A dairy processor compensation program is necessary to ensure that we continue investing in our future in the face of growing imports and that Canadian-made products customers want are available in the future. A compensation program, including tools like non-repayable contributions for investments and refundable tax credits, could improve competitiveness and support investments in processing capacity and modernization.
Compensation to processors should be viewed as not simply a support or a handout, but an investment in domestic processing capacity, Canadian jobs and economic growth.
I'll now turn it over to Mathieu.