Agriculture Committee on March 20th, 2023

[Franco Terrazzano]

I understand that everyone in this room really cares about the environment, including our panel members who are not in this room. We heard the Saskatchewan panel member who represents the ag industry there talk about how farmers really care about the environment and how they want to continue to innovate and invest in technology to help the environment.

I just don't think that hammering farmers with thousands of dollars in higher taxes is really a good way to help the environment. If we take more money away from farmers, who are just trying to survive and put food on our table, then they will have less money to reinvest in their operations and new capital.

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

Thank you very much, Mr. Terrazzano.

Mr. Lee, you made several arguments that the grocers' profits were not inordinate, and the committee members want to believe that.

I'll repeat the questions we asked the industry leaders at the previous meeting. The committee has no information and is looking at raw numbers. As a university professor, you have more in‑depth knowledge than we do. Our job is to conduct a study on the issue. However, we don't have access to the data, so we've asked these executives to provide the Competition Bureau with the detailed numbers they can't release to the public. That way, we'll have access to the data and we'll be able to conduct a serious study. Do you feel that's a reasonable request?

The Competition Bureau can't currently compel someone to give them information. Do you believe we should increase its powers so that it can get that information?

[Dr. Ian Lee]

Well, remember that all publicly traded companies, meaning those listed on the Toronto Stock Exchange or the New York Nasdaq, are required by law—and have been for decades—to disclose and provide audited public statements to the public.

I was on there this morning and looking at the audited annual reports of all three companies—Loblaws, Metro and Sobeys—for 2021 and 2022. The data is there. It's as clear as day. Net profit margin is not some mystical magical number. It's one of the core numbers used when one evaluates companies from one industry to the next, along with gross profit margin and the return on investment capital. These numbers are not secret.

When I said they're low, well, they just empirically are. There's the net profit margin, for example, of food processors, wholesalers, and it's in the teens for food processors. Banks, pharmaceuticals.... An industry—

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

Mr. Lee, I'm sorry to interrupt you, but I'd like to make a clarification with respect to profit margins. In response to questions from committee members, the witnesses told us that it was pharmacy sales that drove profits.

You're right, the financial statements are public, but I'm talking about breaking down the data. We're not asking that they be released to hamper competition, only that they be shared with the Competition Bureau. All I want to know is whether you think that request is reasonable.

[Dr. Ian Lee]

I'm not sure. The Competition Bureau looks to determine if an industry is too concentrated as opposed to fragmented. Those are the two terms. A fragmented industry is where you have many competitors. With regard to the grocery industry—and I just looked up that data again this morning—there are over 20,000 establishments in Canada according to StatsCan. Compare that to telecom, where there are three.

Now that's a concentrated industry. That's oligopolistic. However, in grocery retailing, there are thousands of companies. It's not just those big three that we talk about. There are Whole Foods, Costco, Walmart and so forth, so there's a great amount of competition.

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

Mr. Lee—

[The Chair, Liberal, Kody Blois]

I'm sorry, Mr. Perron, but your time is up. Thank you for your questions.

Mr. MacGregor, you have the floor for six minutes.

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

Thank you very much, Mr. Chair, and thank you to our witnesses for helping guide our committee through this study.

I think I would like to start my line of questioning with the Canadian Taxpayers Federation. I want to expand a little on Ms. Taylor Roy's last number of points.

One of our witnesses in a previous panel was Jim Stanford, who provided our committee with some helpful graphs. I know your position on carbon pricing. I think that's no secret to anyone who has read your briefs on this. However, he was presenting data that showed that since 2019, oil and gas extraction has seen its net profits go up by over 1000%. Petroleum refining has seen its profits, since 2019, go up by 40%.

I understand your position on carbon pricing, but do you not think it's a bit of a disservice to Canadians if you're focusing only on carbon pricing and not talking about how those other net profits, those massive increases, are also affecting our farmers and what families are paying at the pump? Do you not owe it to Canadians to maybe broaden your narrative to talk a little more wholeheartedly about some of those other factors and how they're causing families a lot of pain at the pump and at the grocery store?

[Franco Terrazzano]

My question, to properly answer yours, is this: What would you be recommending? When I hear that type of questioning, the first thing that comes to mind is a new tax. I have never heard of a new tax that will make groceries more affordable. In fact, tax increases make everything more expensive.

I'm very concerned whenever I hear that type of questioning. Of course, I've spoken to the person you mentioned before. We reject a tax hike. We categorically reject tax hikes. We don't see the problem today as Canadians not paying enough tax.

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

Let me hold you there on that point. You're not in favour of our going after large profitable corporations. That's fine. Does the Canadian Taxpayers Federation have any position on the fact that in 2021, corporations paid $31 billion less in tax than they should have? Do you not have any opinion on how that gap in revenue is passed down to working families, forcing them to shoulder more of the burden?

[Franco Terrazzano]

To that I would answer that the number one thing you have to stop doing is handing big corporations big buckets of cash. Stop the corporate welfare. What we have seen, unfortunately, especially from the pandemic, is taxes raised on families who can't afford it, who may have lost their jobs, taken pay cuts, maybe even lost their small businesses. Now you have families who are struggling to afford the price of groceries, and we continue to see taxes go up and more announcements of the government handing buckets of cash to big corporations. We are categorically against that corporate welfare.

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

Corporate welfare.... I'm glad that we can agree on that point. I think that's a good point to end this line of questioning on, so I appreciate that.

Mr. Boxall, I'd like to turn to you. Thank you for appearing before our committee and providing the view from Saskatchewan. I appreciate the emphasis you placed on the grocery code of conduct, the need for that accountability and transparency.

Can you elaborate a little? We have heard from other producers and processors, but I'd also like to get your point of view. We know the grocery sector in Canada is quite concentrated, with roughly 80% of the market dominated by only five companies. You emphasized the fact that farmers are price-takers, that you don't have a lot of leeway because of your input costs. I think a lot of them are also influenced by the high fuel prices mentioned in the line of questioning I just had with the Canadian Taxpayers Federation.

Have you seen specific examples of the dominance in the grocery sector? How have grocers used that to unfairly influence their dealings with you and with other producers?

[Ian Boxall]

Hearing stories about unfair trade when we have produce shipped to the big grocers, and the penalties that are paid for timely delivery, and all of that stuff, has been an issue. We just want to ensure that....The grocery code of conduct will get us there. It doesn't matter if you're a ma-and-pa grocery store in a small town in Saskatchewan or one of the big three in the city. We're all on the same playing field.

It's the ability to have access and transparency around what the penalties are for delivery issues, or where we are when it comes to the delivery of food from producers and wholesalers. It works only when you're delivering the food product, which farmers don't. We just produce the natural ingredients, like from my farm. You then get to greenhouses, and some of those other ones. They need to ensure they have transparency around all the “what if”s they could face.

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

Do you get quite a shock when you go into a grocery store? You know what you've been selling your products for, and then you see the markup.

[Ian Boxall]

I do. That's why we're going to do this research into the farmer's share of the food dollar. I do get a shock.

I don't blame it solely on the carbon tax, but the carbon tax does have an effect on almost every link in the supply chain. As we know in Canada, if it's on a grocery store shelf, it was brought in by a train or truck, which has a carbon tax.

Do I blame all of it on that? No. Our input costs are huge right now on fertilizers, fuels and chemicals. The margins those guys are making are ridiculous as well. It's not the only reason, but it is one.

[The Chair, Liberal, Kody Blois]

Thank you, Mr. Boxall and Mr. MacGregor.

Colleagues, we're pushing our limits on time again. In the interests of trying to make sure we are respectful of our folks here driving the meeting, we'll shoot for about three to three and a half minutes for the Conservatives and the Liberals. It will be a minute and a half to two minutes again for the Bloc and NDP. That way, we'll get a second round.

Mr. Lehoux, you have the floor for three and a half minutes.

[Richard Lehoux, Conservative, Beauce, QC]

Thank you, Mr. Chair.

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

This is directed at all three witnesses. We just spoke about the code of conduct. Do you think the code is really important? When we talk about implementing it, many people bring up the fact that it's voluntary. Do you feel it's a good idea for it to be voluntary? Would it still be worthwhile? Should it be mandatory instead?

[Dr. Ian Lee]

Yes. I have dealt with this question in my classes, as you can imagine. I don't think you should be regulating that. If we want to drive down prices, we know the answer. We've known it for 300 years. You introduce more competition. More firms drive down prices. A smaller number of firms allows prices and margins to be pushed up.

Secondly, in terms of the code of conduct, I'm not advocating that anybody act unethically. I've been dealing with business for 40 years. I don't know anybody in the corporate world who comes to work and says, “I'm here to exploit and hurt some employees.”

[Richard Lehoux, Conservative, Beauce, QC]

Thank you, Mr. Lee.

Mr. Boxall, do you believe the code of conduct should be mandatory or voluntary?

[Ian Boxall]

It can be voluntary, and they can sign on. Let's educate Canadians on what the code of conduct could do for them. I guess at that point I will decide which grocer I will shop from. Which one is going to treat the suppliers appropriately?

[Richard Lehoux, Conservative, Beauce, QC]

Thank you, Mr. Boxall.

[Franco Terrazzano]

If you want, I can take a slice of humble pie. I can't really add any more to what has already been said.

[Richard Lehoux, Conservative, Beauce, QC]

Thank you.

We've talked a great deal about carbon pricing, and you support Bill C‑234, Mr. Terrazzano.

We've often been told in the House of Commons that it doesn't apply, especially to Quebec. On the contrary, I think it has a direct impact, because we have our own tax system in Quebec. When we purchase products like propane or natural gas, we add a surtax.

Do you feel it will be a lose-lose situation for Quebec because we're going to be taxed twice?

[Franco Terrazzano]

We certainly support the piece of legislation that would remove the carbon tax on farm propane and natural gas.

Specifically, about your question regarding Quebec, I'm not sure I have a great answer for you today. I'm happy to follow up and discuss that. I do know, however, that fuel taxes in Quebec are particularly harmful.

[The Chair, Liberal, Kody Blois]

You have 30 seconds left, Mr. Lehoux.