Finance Committee on Oct. 1st, 2018

[Arnold Croken]

That's true. I'd have to admit that we're, by and large, responsible for that. I think that as an association, we've done a great job on promoting what we can do, what we are doing and what our challenges are. That's part of the initiative behind getting the upgraded Gardner Pinfold report, and we're looking forward to sitting down with some people, perhaps in Ottawa, to have some conversations around that. It comes back to a lot of the areas that were touched on here. There are challenges, but challenges are also an opportunity.

[The Chair, Liberal, Wayne Easter]

I know that on the airport side, we did make the changes there so that the small airports could qualify.

Ms. Alleslev.

[Leona Alleslev]

I want to follow up on that. I'm not 100% clear on the ask. Can you run it by me one more time?

[Arnold Croken]

I'm probably not the right one to be selling this for our group, because there's work being done on it as we speak. We had simply looked at the capital assistance program that was put in place for the small airports, the private airports. The way that model was structured—that was a federal model that was put together—seemed to us to really apply to the shipping industry as well. We're simply asking for consideration to look at something similar to that, that would allow us to go....

For example, we were talking about it earlier, and some others as well. In our ports, we are faced with dredging. If we don't dredge this fall, we will probably lose shipments next year. We started the process in February, and last Friday we finally received an email saying, “Your application is now complete. We'll take another 90 days to decide whether you can go forward or not.”

[Leona Alleslev]

Give me a feel for your capital deficit versus what could be sustainable from your operating revenues. From what I've heard, you have a deficit in operating revenue. You've made significant inroads in reducing that deficit, but it's still a relatively significant deficit.

Who is funding that deficit right now, and what is it as a percentage of your overall? How bad is that capital...? The reason I ask is that, for you and for that port.... Also, I would guess that probably you're not the only port in that scenario, so if we were looking at this as a budget recommendation, it wouldn't be for one port. It would be for a class of ports, if I understand you correctly.

[Arnold Croken]

You're correct.

I'll try to make this simple so that you can understand it.

[Leona Alleslev]

Yes, I'm slow.

[Arnold Croken]

We're probably one port out of the group in the region here that's doing okay. That's, by and large, because of the divestiture agreement that we negotiated with Transport Canada. When I mention our dredging this fall, we already have that covered. We've built that into the divestiture of the port.

Some of the other ports, the ones that should be sitting here with me, actually paid the federal government to buy their port. No cash came with the transfer. Bayside, New Brunswick, is a great example of that. It's shipping a tremendous amount of product in and out, coming from the north and from their own mining pits and fish product coming from the north. They have no budget to turn to, to say, “We need to invest in our sheet seawall. It's going to cost us a million and a half dollars.” They don't have the luxury of saying, “We did negotiate that in our divestiture. We're already covered.”

They're the ones that are really desperate, and it's for them that I'm speaking, I guess, when I bring that up. We always said that the last few ports that were divested were able to argue, “You're not setting a precedent here.” In my mind, we had a better deal than most of the other ports did.

[Leona Alleslev]

Who funds your deficit?

[Arnold Croken]

In our operation, we've been able to fund our deficit through interest earned on our investments as part of the the 25-year deal. The cash that came with the divestiture is now in our hands for 25 years. The interest we earn on that becomes our revenue stream to offset the deficits.

We were one of the last ones to divest, so we're in much better shape than most of them are.

[Leona Alleslev]

Thank you very much.

Mr. Ghiz, I have two things to ask you.

One is on 5G. We have an issue with accessibility to the Internet in this country anyway, so could you give us a feel for this 5G, whether it's going to be across Canada or whether it's going to be for the haves and the have-nots, as Internet access currently is. Do you see that being part of the game-changer?

[Robert Ghiz]

I do see it as being part of the game-changer. When I talk about the evolution of it, if you look at where we are now with our 4G LTE, I talk about 98.5% or 99% of Canadians, according to the CRTC.

[Leona Alleslev]

I'm struggling with that.

[Robert Ghiz]

I know. I struggle with it too, and at the beginning, I didn't believe it. It's part of the CRTC's numbers. Just to put it in perspective, in terms of where we were in 2011, the number was 45%. So the number is increasing as more investments are being made, and all governments are investing and going into remote rural areas. However, even when you factor in that number, you still say that if there's 1% to 1.5%, you're still looking at 400,000, perhaps 500,000, across Canada who you, as elected officials, hear from about not having access to those networks.

[Leona Alleslev]

If we're going to decrease or increase the capital cost allowance and, therefore, bring down government revenue—obviously—have you done any research to see whether or not the increase in investment will offset the decrease in the revenue as a result of the higher CCA, and will that be distributed or a benefit to a greater part of the country?

[Robert Ghiz]

When we asked for the Accenture report to be done, coming from a small rural province, I said that I wanted to make sure that this will be factored in for what's going to happen with agriculture, in our rural communities, in our fisheries, in all the other communities out there. The number that they came out with, which is the $26 billion that needs to be invested for us to get up, factors in all of Canada.

Now you're also going to have better connectivity with your fixed wireless, your home Internet Wi-Fi where you're hooked up. Having 5G will actually allow that to be much faster as well, and it will help out in some of those communities.

[Leona Alleslev]

Was it part of the study that the loss of tax revenue would be offset by the increase of the investment and, therefore, the increase in generated taxes, etc., from that revenue?

[Robert Ghiz]

I don't know if they factored in what happens with the government revenue, but if I were on the government side.... I always look at things and ask what happens if you don't do it. If you don't do it, you're going to lose out on those incremental taxes that are going to come in. Sometimes by lowering tax, your tax revenue goes up. Sometimes you see taxes go up and revenue actually goes down.

[The Chair, Liberal, Wayne Easter]

Okay.

We'll go to Mr. Fergus.

[Greg Fergus, Liberal, Hull—Aylmer, QC]

First, I would like to thank all the witnesses for their presentations.

My questions are specifically for Mr. Campbell and Mr. Phelan.

Mr. Phelan, it is truly remarkable how much the leadership of the National Farmers Union has improved from 25 years ago, when Mr. Easter was the president.

[Voices]

Oh, oh!

[Greg Fergus, Liberal, Hull—Aylmer, QC]

Seriously, though, I am an MP from Quebec. My colleagues from Quebec and I are committed to our dairy producers and to supply management. I know how important an issue this is. I have no problem dealing with criticism, if you have any, but I have some very specific questions about this, if I may.

During the CPTPP negotiations, Canada had offered 3.25% of its dairy market to the countries party to that agreement. When Canada negotiated that agreement, the United States was part of it. Canada had decided at that time to compensate dairy farmers for the loss of that market share to foreign countries. Clearly, the United States would benefit from that 3.25% of the market. New Zealand would not really import Canadian dairy products.

The U.S. withdrew from this agreement. We have negotiated a new free trade agreement with the U.S., under which they will have access to just over 3.5% of the Canadian dairy market.

Have things really changed since the CPTPP?

[Douglas Campbell]

The compensation package that you talk about under CETA—I forget now how many millions or what it was. The idea behind the compensation—or you would think, anyway—would be to compensate all producers across the country. However, it was diversified into the technology of improving the industry. Basically, they gave money to help produce more milk and to get paid whatever for it.

In the end, not all farmers across Canada got that. There would be a very small percentage of Canadian farmers who would have gotten any compensation under the CETA. It was unfortunate that our officials saw fit to take the compensation because that put a price on supply management, from here on out. We gave away 3.5% of our market to allow 17,000 tonnes of cheese or whatnot to come into the country. By approving the compensation, it put a price tag on the supply management, showing that it was up for sale.

Every time that there is a new trade agreement with supply management, the problem is that supply management gets used as a bargaining chip when it comes to something else. I think part of our problem is that our politicians or our bureaucrats who are doing these trade agreements look at our dairy system as an industry, rather than as a benefit to rural Canada. They think that taking 3% out of an industry is not going to affect anybody, when it affects everybody, in fact. It affects all farmers in rural Canada because, if we have less of our own domestic market to supply our milk, that means it gets pushed into another class, which means a reduction in the blend price to us as dairy farmers.

What we're saying is that the dairy industry has gone as far as it can go with being hit. Our cost of production—our formula, which is one of the parts of supply management—is to a point where it is basically break-even or less. A while back, figures were given to me that 50% of the milk being produced in Canada is only being produced at the cost of production, or a little better, by 38% of the farmers. When you take this round of negotiations and take away another 3% or 3.5% of our market, where is that going to put us as dairy producers?

The processing industry might be okay, but as individual farmers who are trying to meet our cost of production, as more of our domestic milk gets put into different classes of milk, it's going to reduce our blend price. That reduces the price to us, which takes it to a point....

You're asking the question about what has changed with the industry. As farmers, the only way that we're going to survive in the industry is if there's...you can't call it compensation because under supply management, you're not supposed to be able to do that. But without some kind of a subsidy to farmers, there is going to be no dairy industry. In the end, it's the consumer who's going to feel the effect of that because, if you look at the States, the consumer pays twice for the product. They pay once in taxes, when it comes to government funding, and then again, when they buy the product.

[The Chair, Liberal, Wayne Easter]

We're going to have to cut it there.

I have a couple of questions.

Mr. Lawless, you basically said that the government should consider a policy change that directs scientific staff to work directly with the end-users. I do understand that's happening a lot with your group, but how do you see putting that policy in place? Exactly what do you mean?

[Andrew Lawless]

I'll give a brief background of our group. We're 13 farms within Prince Edward Island. We're very fortunate to have a great coordinator, John Phillips, behind us, and Andrea McKenna as well, who is our executive director. Within our group, we work very closely with researchers at the federal level who are from across Atlantic Canada.

We all know that with climate change, whether we're potato farmers, dairy farmers or what have you, we're being forced to become more efficient because our margins are shrinking. Research has to be done to make us more efficient and progressive.

When the research is done, there is a gap before it gets translated to the producers. Within our organization, the researchers are working directly on our farms. They're coming out to the farms and setting up trials. They're addressing the needs within the industry, which is huge.

I think the policy would promote researchers being at the farm level and working with our associations.