Thank you.
Mr. Chair and honourable members, I am pleased to appear before you this afternoon and to provide the insights I have to offer as an independent researcher focused on Canadian agriculture and food.
As a country we take great pride in our agri-food system and its performance. Our point of departure is a position of strength, and the flip side of the challenges that I will raise are opportunities for Canada. I would like to begin my remarks with this important acknowledgement.
I will touch briefly on a number of immediate and tangible challenges to food processing in Canada. These are the challenges of today, impacting the ability of food processing just to be retained in its current state. There are also forthcoming challenges only just beginning to be conceived. Increasingly, the full range of issues that we face in relation to food processing in Canada will not entail a stable solution in which we fix a problem, and the solution endures over time. The environment is more unstable, and maintaining solutions for food processing will require broader, ongoing effort.
Much of the data published by Statistics Canada dealing with capital stocks in food manufacturing was terminated in 2013. Increasingly, we are left to public announcements made by firms investing in new plants for information. That doesn't provide a consistent or satisfactory source of information on processing investment, infrastructure and capacity.
Scale in food processing in Canada faces a number of constraints. From the perspective of product brands and food marketing, Canada is a small market, yet from a geographic and product distribution standpoint, Canada is a very large area to serve and the need for product freshness and distribution can require multiple plants operating throughout the country at a relatively small scale.
The Canadian market is also fragmented provincially through provincial regulation in farm products marketing, under the interpretation of section 121 of the Constitution Act. In effect, the platform through which many processors purchase farm products for processing is provincial in structure, while their primary customers, grocery retail chains and food service distributors, operate at the national level.
The challenges of obtaining and retaining human resources for the needs of the agri-food sector are no doubt well known by the committee. This certainly extends into food processing. Where economics would have dictated that food processing plants be located in rural areas near supplies of farm products for processing, increasingly plants are locating closer to large urban centres as accessing the necessary workforce becomes the key consideration.
For some years now the trends and forecasts documented by Employment and Social Development Canada have pointed to trends in education and training oriented towards professional careers. This risks leaving our sector with a gap.
A recent and troubling development is the erosion of our global trading institutions and a shift toward bilateralism on behalf of large economies with the economic weight to use trade as leverage. Agri-food products are frequently drawn in as an instrument of retaliation in trade disputes, and the resulting injury drives the demand for agricultural support.
For example, the United States has had repeated and highly significant ad hoc farm subsidies in place dating from 2018. These support U.S. production, advantaging U.S. food processors. In addition, support also applies to food processing plant development. For example, in a recent announcement, municipal supports exceeding $1 million U.S. were given for development of a poultry processing plant located in Alabama.
There are also increasing technical challenges to exporting food. The pandemic has elevated these. For example, exports to China have recently become subject to inspections of packaging in food shipments for the COVID-19 virus. This has resulted in suspensions by China of exporters in a number of countries, including Canada. China has also invited countries to self-delist plants in which there have been cases of COVID-19 among employees; however, the process to get re-listed as an exporter to China is not clear. Delisting by China, under either mechanism, could be an overwhelming blow for a food processor leveraged into exports.
In the domestic market, food processors face a customer base of retailers and food service distributors that is highly concentrated. This, by itself, is a concern as the loss of a single retail account could be disastrous. Moreover, the supply chain relations between suppliers and grocery retailers is increasingly seen as fraught in Canada, with concerns regarding involuntary and arbitrary fees levied by retailers and processors, and requirements placed on processors that generally increase uncertainty and inefficiency in the supply chain. This topic occupied considerable discussion at the most recent federal-provincial agricultural ministers conference.
The process of constantly raising the bar on all aspects of food quality and safety and on facilitating innovation is in the interest of all. However, the public process and nature of regulation can undermine this if it is excessively cautious, onerous or creates uncertainty. Regulations need appropriate analysis, consultation and resources behind them, and excessive fees for regulatory approval can form a barrier to new product introductions.
Carbon taxes are recognized as the most efficient instrument for greenhouse gas mitigation; however, the financial magnitude of these costs on the food system are sobering. Without some rationalization about how these costs will be shared, the concern exists that they will end up being allocated by bargaining leverage in supply chains, with the costs rolling back to the food processing and primary production segments.
We are struggling to come to grips with how the economic adversity in Canada fragments itself across the segments of our society, but the effects appear worst in the prairie provinces whose economies are most closely tied to energy. There is a need to replace employment lost and restore economic growth in these provinces. One avenue for doing so is through agriculture and food, with food processing investment as a linchpin. My hope is that new economic development in Canadian food processing can proceed on the basis of competitiveness and efficiency, but this environment is ripe for dangerous provincial economic rivalry.
I have some recommendations.
Evidence-based policy development requires quality data. Improved collection of public statistics that deal with the capital stock for food processing in Canada, with the resources to analyze the data and interpret the results, is necessary.
Many of the challenges that I have identified boil down to inefficiencies in food supply chains. Understanding the causes, the costs of inefficiencies and who is affected can help bring about their resolution and relax barriers to investment in food processing.
Through investments in technology research and development, Canada can redouble its efforts to facilitate improvements in efficiency at smaller scales and address some of the issues with workforce in food processing.
Ongoing work is required on Canada's approaches to regulation of the food system and the provision of public resources to support regulation that is effective for all.
Export market access, and also access to imports, is fundamentally in the interest of food processors. Canada needs to continue its pressure to restore and expand the rules-based trading system. Equally, Canada should explore approaches to trade in processed foods that addresses broad priorities, notably climate change and the facilitation of processed foods featuring a reduced carbon footprint, with protective border measures based on the carbon footprint of the imports. Indeed, missing this point could lead Canada to falling behind.
Investments in food processing can be an important generator of regional economic development and form a portion of the solution for economic recovery. The federal government has a role to play in facilitating recovery through food processing investment, but in a coordinated manner that avoids the pitfalls of provincial rivalry.
Recognizing and addressing our constraints in food processing are critical in advancing the goals in the Barton report, and more fundamentally, having Canadian agri-food play the role that it can in economic development, enhancing food security, and being a resilient food supplier to the world.