Agriculture Committee on Feb. 2nd, 2021

[The Chair, Liberal, Pat Finnigan]

Thank you, Mrs. Bessette.

I'll now give the floor to Mr. Perron for six minutes.

[Yves Perron, Bloc, Berthier—Maskinongé, QC]

Thank you very much, Mr. Chair.

I'd also like to thank the witnesses for being with us.

I'll begin with the representatives of the Dairy Processors Association of Canada.

I'd like to come back to compensation. You said that you've been promised compensation for the 10% market access provided under the Canada-European Union Comprehensive Economic and Trade Agreement, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, and the Canada-United States-Mexico Agreement, but that you haven't yet received compensation.

Have you had discussions with the government? Have you established amounts with them? Has there been any progress or has nothing been done?

[Mathieu Frigon]

We've had discussions, but it's been some time. We've been made several promises. The last promise is the one in the Minister's mandate letter. That said, in recent weeks, we haven't had any discussions specifically about compensation.

[Yves Perron, Bloc, Berthier—Maskinongé, QC]

Could you explain the harmful effect of insecurity this has had on the sector?

Our current study is aimed at increasing processing capacity. I have the impression, though, that the opposite is happening in your sector.

[Mathieu Frigon]

That's absolutely right: it creates a lot of uncertainty. We often talk about this access to 10% of the market, but we talk less about the impact of these agreements on the remaining 90% of the market. What CETA has shown us is that cheese imports have had an impact on the overall price structure of the market. This has therefore affected margins in 100% of the market, not just the portion of the market affected by the new access agreements. It really had an overall effect.

As we said in our introduction, we aren't proud of this, but since 2013, not only are we the worst performing food processing industry, but we're also the only one to have had negative GDP growth. Why has this been the case since 2013? It was in 2013 that an agreement with Europe was announced. Since then, it has been far from fun for dairy processing. The figures show it; the figures don't lie.

[Yves Perron, Bloc, Berthier—Maskinongé, QC]

Are you afraid of being left behind and not being compensated? Are the commitments clear and firm?

[Mathieu Frigon]

The commitments are clear and firm, but we're still waiting. As you know, two announcements have been made to producers: one in late summer 2019 and another just before the holidays. Each time, we were hopeful because the promises were very clear. However, so far we have waited in vain.

[Yves Perron, Bloc, Berthier—Maskinongé, QC]

If you were compensated as promised, it would help you to innovate and make technological improvements, which is what we are studying. Am I wrong in saying that? You're asking for tax credits and an innovation program, right?

[Mathieu Frigon]

Yes.

I'll let Mr. Barrett provide more details.

[Yves Perron, Bloc, Berthier—Maskinongé, QC]

Thank you.

[Michael Barrett]

Yes, and to answer your question, the concept of the support of the compensation is so that we can reinvest and reinvent our industry to be able to face a new market reality. With restricted exports on products that have been an important growth element, being able to reinvent ourselves is an important criterion in being able to balance this industry out. You can't continue to be able to support producers without understanding that you need somewhere to process it.

Again, we don't oppose any producer compensation. I'm a co-op. We do not oppose that. However, we are looking for some equity, because the modernization of our industry has to be able to take place, and the reinvention of our industry has to take place because we have to be able to adjust to a new market and global reality of where we can compete and where we can't anymore, based upon the trade restrictions that are now imposed under the trade agreements.

[Yves Perron, Bloc, Berthier—Maskinongé, QC]

Thank you, Mr. Barrett.

Could you now tell me about the code of conduct for the food industry to address retailer concentration? You stressed that by saying that it was a basic recommendation.

If the working committee is unable to come up with a code, what would be the impact on you and your industry?

[Michael Barrett]

Certainly there is an initiative going forward and a number of associations that are getting together. There is a committee, co-chaired by the Minister of Agriculture, that is also going forward with that.

I can only put it into the recent context of Walmart and Loblaws, where there was a unilateral ask for 1.25%. This is the dairy industry; this is the food industry where margins are tight. Therefore, there is an incredible impact that will have. This isn't the first ask. Our members will talk about multiple asks that have occurred over the last decade. I've been in this industry for 20 years. It is just a series of asks.

What that would allow us to do is to have predictability when you make an investment. You can make an investment today, and to your question, you can have a restriction on the pricing that you're going to be able to get and then you get squeezed between the producers—again, which we support—and the retailers.

[The Chair, Liberal, Pat Finnigan]

Thank you, Mr. Barrett.

Thank you, Mr. Perron.

Now we'll go to Mr. MacGregor for six minutes.

[Alistair MacGregor, NDP, Cowichan—Malahat—Langford, BC]

Thank you, Chair, and thank you to our witnesses for providing this testimony to our committee. It's sincerely appreciated.

Mr. Barrett and Monsieur Frigon, I'll start with you.

Would you take a little more time to expand on why this code of conduct is important? I know that the seven minutes you have for your opening statement can run out pretty quickly, so is there anything else you want to add to that?

[Michael Barrett]

I'll start, and then I'll let Mathieu finish.

I didn't get to all the comments, and I appreciate this very much.

First of all, we are not asking for something that has not been established in other countries. As I mentioned in the brief that was submitted, the U.K., Australia and Norway also have working codes of conduct that are voluntary.

Indeed, if you read the U.K. report, the yearly report that the auditor puts out, it is actually serving consumers, retailers and processors well. What they've seen is a net decrease in food pricing within the marketplace.

What it will allow us to do as a processor is to not get sidelined or tripped up by an arbitrary decision.

I want to put it into context. If one of our retailers decides that they need a new warehouse computer system, they have levied those costs against us. They have levied their costs against modernization of the redesign of their stores. Where do processors go to be able to recover that? We cannot go right back to the individuals who are levying that. It has created such an uncertainty that the concept of being able to invest for innovation is grinding to a halt and we need processing in Canada to support our producers.

I'll turn it over to....

I'm sorry.

[Alistair MacGregor, NDP, Cowichan—Malahat—Langford, BC]

I was just going to say that when I put my consumer hat on and am walking through the grocery store, I don't exactly realize what it takes for a dairy product or any product to be in that high visibility area and the hidden costs.

I was going through the website of the Competition Bureau. They talk in their section about market dominance, when it becomes abuse of dominance. You talked about the big five controlling 80% of the retail market here in Canada. When I start looking at what qualifies as abuse of dominance....

You're not directly in competition with the retailers, but the punitive fines that they're levying and they're constantly asking for more....

You talked a little bit about the role the federal government can play vis-à-vis the provinces. Is there anything more that we as a committee can be pushing the federal government to do?

[Michael Barrett]

We recognize that the responsibility for such a code of conduct would rest with the provinces. We understand that. We appreciate that there is a federal initiative, a joint committee, going forward, but although there may not be the legislative ability to intervene, there is a moral obligation, and I think it is perhaps from this that encouragement of this idea could possibly come: the desire to support an equal playing field, to ensure that there's competition and that consumers are served in this country. Perhaps that is where the federal government can play this role.

This is about consumers, about the ability to choose equally and equitably when you walk down the aisle. It's not about how many dollars are passed into pockets to determine what goes on a shelf and what doesn't. We all have to compete. We understand that. We're prepared for it. We just want equity in the competition.

[Alistair MacGregor, NDP, Cowichan—Malahat—Langford, BC]

Mr. Frigon, did you have anything to add?

[Mathieu Frigon]

Yes. When we look at the U.K. experience, it's quite interesting. Back in 2013, when their own competition bureau made a report—and that was the report that led to the implementation of a code—the report talked about protecting consumers. The report said that ultimately, consumers will bear the costs of lower investment and lower innovation among food processors. That was the main justification for the implementation of the U.K. code.

It's interesting that the U.K. code is subject to a statutory review every three years. The latest was published last year, and no stakeholders, from farmers to consumers, are complaining about the code. It's almost, I would say, unheard of. You have a government piece of regulation about which basically all stakeholders say, “We like it.”

That presents an opportunity definitely for Canada to both protect consumers and enhance the entire food value chain.

[Alistair MacGregor, NDP, Cowichan—Malahat—Langford, BC]

If this is allowed to continue, I imagine it's going to be quite detrimental to our country's food security: having smaller processors being squeezed out of offering their unique dairy products in a popular vendor and retail space.

I appreciate both of your contributions to our study.

This about wraps up my time, so I turn it over to you, Mr. Chair.

[The Chair, Liberal, Pat Finnigan]

Thank you, Mr. MacGregor.

Now we'll go to the five-minute round.

Mr. Lehoux, you have five minutes.

[Richard Lehoux, Conservative, Beauce, QC]

Thank you, Mr. Chair.

I'd like to thank the witnesses for being with us this afternoon.

My first question is for Mr. Barrett or Mr. Frigon.

You've already had discussions on two of the agreements signed in the past. In the Minister's mandate letter, there was talk of moving forward on the compensation file, but nothing was proposed under CUSMA, either.

[Mathieu Frigon]

Yes, we've seen the mandate letter, but nothing more concrete has been proposed.

[Richard Lehoux, Conservative, Beauce, QC]

Beyond words, no action has been taken.

What form of compensation do you think would be appropriate? You said earlier that it wasn't about having a cheque. With respect to automation and equipment replacement for all processors, have you proposed any solutions to the Minister or the department?