Finance Committee on Sept. 28th, 2022

[Dr. Sylvain Charlebois]

It's a fair question. You see, both B.C. and Quebec have had a carbon tax for a very long time, and we've never seen any anomalies when it comes to food prices in both provinces in over a decade. That's why, whenever someone tells me that the carbon tax is a problem for food affordability, it's hard to see any evidence right now. But, as I said, $170 a metric ton is a different conversation.

[Yvan Baker, Liberal, Etobicoke Centre, ON]

Yes, that's what I understand. I can understand why it's worthy of study, but I hear you saying there's no evidence of it impacting food prices yet.

[Dr. Sylvain Charlebois]

I am supportive of measures to mitigate climate change, for sure. I think the carbon tax is an important policy. At the same time, we need to evaluate exactly how Canadians are impacted at the grocery store.

[Yvan Baker, Liberal, Etobicoke Centre, ON]

You went where I was going to go with the next question, Mr. Charlebois.

What would you say is the impact of the climate crisis on the cost of food? Have you analyzed that, or do you have any thoughts on that?

[Dr. Sylvain Charlebois]

Again, it's a fair question. I wish I had numbers to show you.

Obviously, climate change has an impact on agriculture every single year. Every year, we publish “Canada's Food Price Report”. Our next report, our 13th edition, is coming out on December 7. Climate change is the wild card. It's always difficult to predict, but, obviously, climate change will always push prices higher, depending on the category.

This year, we're looking at a very dry Europe and a very dry Asia, as well. We're faring better this year compared to last year, but you never know. The southern part of the U.S. is also quite dry. Today, we see Ian devastating Florida, and we buy a lot of food from Florida, especially citrus. That may actually have an impact on prices over the next few months.

[Yvan Baker, Liberal, Etobicoke Centre, ON]

I have only about 30 seconds left, and I realize you don't have specific numbers, but what would be the impact on food prices, in the long term, if we didn't fight the climate crisis?

[The Chair, Liberal, Peter Fonseca]

Give a very short answer, please.

[Dr. Sylvain Charlebois]

Essentially, we need a coefficient to evaluate how climate change is impacting the price of food. As I said, we need to take control of the supply chain domestically so we can be less vulnerable to these issues.

[The Chair, Liberal, Peter Fonseca]

Thank you, MP Baker and MP Chatel.

We're now moving to the Bloc and MP Ste-Marie for five and a half minutes.

[Gabriel Ste-Marie, Bloc, Joliette, QC]

Thank you, Mr. Chair.

Thank you for participating in today's meeting, Ms. Yalnizyan, Mr. Charlebois and Mr. Ross. All of your comments have been very insightful.

My questions are for Mr. Charlebois.

I quite appreciated your comments back in the spring. I'd like to get an update since you know so much about the international context. I'd like to hear more about the impact the weather has had in recent months. You shared a lot of information with my fellow member Mr. Baker, and I found it quite troubling.

I would nevertheless like an update on the issue. Specifically, what impact could the war in Ukraine have on a possible food shortage and rising food prices?

In addition, has there been any improvement on the supply chain side, or are the problems the same as they were in the spring? Can we see it in the food market?

I'd also like you to comment on how the weather has impacted crops. Are developing countries still expected to face food shortages and possible malnutrition? Do you pay attention to how the UN World Food Programme operates? How is it faring?

Basically, I'd like an overview of where things stand and an update on what's happened since the spring.

[Dr. Sylvain Charlebois]

The war in Ukraine is still impacting our markets, although less so than when we last met. Soaring prices peaked on May 17, and prices have been dropping since but are expected to climb again. The situation in Europe and Asia will cause shortages.

To answer your first question, I would say that Ukraine's agricultural production dropped by nearly 50%. Normally, the country produces enough to feed almost 400 million people around the world each year. The sanctions against Russia and Ukraine are affecting wheat production, which represents 25% of exports. Wheat accounts for roughly 15% of the calories consumed planet-wide. Those shortages will have to be addressed. Over the next few months, North Africa and the Middle East will experience famine.

Your second question had to do with developing countries. As for the UN program, this week in Rome, we submitted a report clearly showing that the number of people in the world who will unfortunately face famine is expected to rise. It's due to the economy, as well as to the fact that there will be less food for those people. It's doesn't look good at all.

I forgot your third question.

[Gabriel Ste-Marie, Bloc, Joliette, QC]

In the spring, supply chains were plagued by problems. Where do things stand now?

[Dr. Sylvain Charlebois]

Things are improving. On the container front, marine transport costs are down 40% to 50% from the spring, so marine supply chains are more efficient. Land-based supply chains are less costly and more efficient because of more predictable market conditions, which are the result of greater certainty around public health measures. That's really helping ground transportation right now.

[Gabriel Ste-Marie, Bloc, Joliette, QC]

Thank you.

The Bank of Canada, like the U.S. Federal Reserve, is increasing interest rates to combat inflation. In our previous panel, we had a representative from the Union des producteurs agricoles, and he said the agricultural sector was dealing with significant debt, especially young farmers.

Do you think we should be concerned about the rise in interest rates to combat inflation and the impact on the agri-food sector, which is home to significant capital investments and, by extension, large loans?

[Dr. Sylvain Charlebois]

Every sector of the economy is affected in the same way, including agriculture. Agriculture needs investment, and that's a risk that has to be taken, unfortunately. There's no doubt that interest rates are going to affect how farmers assess and manage risk. I think that's a good sign, one that shows that farmers are investing in their farms, as Mr. Caron mentioned. More and more, that is what's necessary.

[Gabriel Ste-Marie, Bloc, Joliette, QC]

Thank you.

I have one last question.

In your opening statement, you talked about the importance of buying local, and as an example, you cited Quebec. You also said that a stronger processing sector was needed.

Could you give us some examples to illustrate that? What things can be done?

How can the government better support those efforts?

[Dr. Sylvain Charlebois]

A stronger processing sector is absolutely necessary. We don't do a lot of processing. We export a huge amount of raw materials, and that makes us more vulnerable. We need a food self-sufficiency policy, like the one Quebec has. Quebec puts a lot more energy into processing. The Quebec government provides loan guarantees, as in the case of the Kraft Heinz company. That's a good example. The company got out of the Canadian market and shut down its plant in Leamington in 2013, but now it's back, with production facilities in Montreal.

Nestlé and Roquette made investments in Winnipeg. We are seeing some shift towards Canada, but we need to be a lot more proactive in order to control the supply chain.

[Gabriel Ste-Marie, Bloc, Joliette, QC]

Thank you, Mr. Charlebois.

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. Ste‑Marie.

Now to close off this meeting and this round will be the NDP and MP Blaikie for five-plus minutes.

[Daniel Blaikie, NDP, Elmwood—Transcona, MB]

Thank you very much to all our witnesses. I'm sorry we don't have more time, because I think there's a lot we could glean from the insight of our witnesses, so I'm going to try to pack in as much as I can.

Ms. Yalnizyan, we've heard a little bit about different kinds of income support packages in the context of inflation and what effect they may or may not have in accelerating inflation. What we haven't talked a lot about are some of the provincial plans.

Here in Manitoba, a family with an income of $175,000 or less, which I don't think meets any definition of a low-income family, will be receiving between $200 and $250 per child. We saw in Saskatchewan that Premier Moe promised $500 per household. We've seen gas tax cuts in Ontario and Alberta.

We haven't heard a lot of criticism in Ottawa about those things, but we have heard a lot of criticism about the NDP's proposal for doubling the GST rebate, for the Canada housing benefit and for assisting with the cost of things like dental and child care.

I wonder if you could comment on those differences of approach and give your opinion as an economist in terms of which approach would be most likely to add to inflation, if indeed any of them would.

[Armine Yalnizyan]

Thank you for the question.

I'm very struck by the degree of inconsistency in the criticisms in regard to carbon taxes being inflationary and yet things like giving $500 per household not being inflationary. It boggles the mind. The IMF literally said yesterday to the U.K.—which provided a tax cut package that was extremely large, in recent memory, and was not targeted, giving those at the top far more money than those at the bottom—that it was not only inflationary but it would accelerate existing income inequalities. There you have it.

I'm not as good an economist as the IMF, the International Monetary Fund, and I cede my criticisms of broad-based tax cuts to the assessment by the International Monetary Fund that it would be like pouring gasoline on an inflationary fire to have broad-based tax cuts—whether you're cutting the carbon tax, whether you're cutting gas taxes at the pump, or whether you're just throwing money at people, like “Moe bucks” circulating through the system.

Yet, I can see how, when government coffers are inflated because of inflation itself, the temptation would be very strong to see jurisdictions like Ontario and Alberta, which flipped over from deficit to surplus within a matter of weeks, cut taxes broadly and put money in your pocket to deal with this. We need to target the resources.

To your point, Mr. Blaikie, the idea that you have been able to work with the Liberals to increase the GST credit and to increase the housing benefit at least one time—to target these measures—is something that economists around the world are saying is the smartest thing to do if you're going to provide any help at all, and you really should when it means that more people are going to go hungry.

[Daniel Blaikie, NDP, Elmwood—Transcona, MB]

Thank you very much.

I understand that you do have an article where you talk about the issue of food prices. I want to ask Monsieur Charlebois my next question, but I wonder if you might be willing to table that with the committee.

[Armine Yalnizyan]

Sure.

[Daniel Blaikie, NDP, Elmwood—Transcona, MB]

Thank you.

Monsieur Charlebois, you said earlier that you think Canada needs a much better.... In fact, if I could put words in your mouth, we need any food strategy at all. It seems to me that we don't really have any kind of meaningful public policy—at least, not something we could call a strategy—when it comes to food. You talked about needing to emphasize more processing here at home. I'm wondering if you can speak to what that looks like.

Often, debates around food policy in Canada are dominated by discussion of international trade agreements. Usually, the thrust there, even by producers, is to liberalize trade, to have less of a presence of public policy in the sector, and to try to deregulate international markets and expand access based on fewer rules overall and therefore less direction in terms of what kind of work would be done in Canada: for instance, value-added processing versus initial production of food resources.

How do you think Canada, which for such a long time under Liberal and Conservative governments has really pushed a free trade agenda on food, could bring us into a space where we have a meaningful national food strategy?

[Dr. Sylvain Charlebois]

The first thing is that we need to stop flying in the dark. We need data. Right now, a lot of people are saying all sorts of things without really any data.

I had the pleasure of working in Europe and in the U.S., where getting data is much easier than it is in Canada. In Canada, we rely heavily on Statistics Canada, which needs an overhaul. When it comes to the CPI report, when it comes to understanding inflation and when it comes to understanding trends, Statistics Canada is not well resourced—clearly. That would be my starting point for better food policy.

Second, I would say that we kind of have a committee already created to come up with a food policy or food autonomy strategy for Canada. We have a food policy council, which was appointed more than two years ago, and we haven't heard anything from the council at all in more than two years. I certainly would go there and set up some sort of process that would lead to a policy of some sort. Right now, there's nothing.

Third, if I may, interprovincial barriers are killing smaller markets. We need to address this issue as soon as possible. Right now, it's impossible for, say, companies in P.E.I. or Nova Scotia to have a shot at doing well, which really generates more poverty in rural Canada. That's one thing that we need to address in that policy as soon as possible.