Thank you, Mr. Chairman.
I was just going to say that it's perhaps not my role to comment on the motion.
But perhaps I can provide additional information and answer questions that may help us to understand the implications of the motion.
Mr. Chairman, over the past few weeks, the committee has heard from several witnesses during its study of the new Nutrition North Canada Program.
Mr. Jamie Tibbetts, director general of Devolution and Territorial Relations, and I are pleased to join you once again to answer any additional questions you may have about the program.
We would also like to provide information that may be helpful in clarifying some issues or matters that have been raised by witnesses during the previous meetings.
One of the key what I will call misconceptions about the new program is that we will lose the economies of scale and the negotiating power of Canada Post and that this will trigger increases in shipping costs and, ultimately,in food prices.
Based on the volumes that northern retailers and southern suppliers ship to the north, this does not appear to be the case. The reality is that with the exception of the work that is carried out under the food mail program, Canada Post is not in the freight business; it is in the business of shipping mail and small parcels.
On the other hand, major retailers, which account for about 90% of the stores in the north where people buy basic groceries, already ship very large volumes of freight. Consequently, this volume gives them greater bargaining power than Canada Post when it comes to negotiating rates for this type of cargo.
To that extent, we did an analysis of the shipping rates Canada Post has negotiated with airlines versus the rates major retailers pay to ship their freight. The results of this analysis are presented on the table that was distributed.
I believe it's available in both languages.
There are 69 fully eligible communities in which at least one major retailer operates. In 54 of these 69 communities, the rate the retailer negotiated is lower than the rate Canada Post is able to obtain.
The weight of perishable foods shipped to these 54 communities under the food mail program represents 91% of the total weight shipped to the 69 communities mentioned above. Canada Post's rate is lower in only 14 communities that represent 8% of the total volume. The shipping rate is the same for both Canada Post and the retailers in one community--Norman Wells, in the Northwest Territories--which represents about 1% of the volume.
On average, we have determined that Canada Post pays about 36¢ per kilogram more than what retailers pay to ship to eligible communities. When you extrapolate that over the total program, this represents an extra cost of over $7 million per year for the program. These are funds that are not available to reduce the price of nutritious food for northern consumers or to invest in health promotion and nutrition education activities.
In addition to the larger volumes and stronger incentives, the new model gives retailers and suppliers the flexibility to seek cost-effective and innovative solutions that will help make nutritious food more accessible.
The new model affords the department greater flexibility to respond on a timely basis to the concerns of northern consumers and stakeholders. There is greater leeway to make necessary adjustments to improve the program on an on-going basis.
Such an example was recently brought to our attention with respect to Quebec North Shore communities that only use the program for three months of the year, when there is no regular marine service. In this case, the communities were to be eligible for a nominal subsidy because the weight shipped to them fell under the program's minimum threshold.
However, given the seasonal usage of the Food Mail Program in these communities, their shipments should have been annualized. Based on this information, it was determined that the communities of Harrington Harbour, La Tabatière and Tête-à-Ia-Baleine will be eligible for a full subsidy as of April 1, 2011.
Also, as noted during our November 15 appearance before this committee, the department on December 1 released the subsidy rate schedule for communities. These rates were developed by each community and make it possible to allocate the program budget fairly and equitably.
This schedule was developed using a comparative analysis of actual market shipping costs by community and estimates of the weights of eligible goods that are projected to be shipped to each community under Nutrition North Canada.
These rates are introductory and, as updated information on shipping costs and food prices becomes available, they may be adjusted prior to April 1, and periodically thereafter, to ensure that eligible communities are treated fairly and equitably.
These are two examples where the program's flexibility allows us to respond more quickly to make necessary adjustments when new information is brought to our attention. While staying within the program's national scope and authorities, we anticipate that this program model will allow for ongoing improvements. The external advisory board, now composed of seven northerners following the announcement on November 25, will also help keep this program responsive to the needs of residents of isolated northern communities.
On the other hand, the food mail program in place since the 1960s provided little flexibility or incentive for innovation, leading to ever-increasing costs. Nutrition North Canada offers a more cost-effective and flexible model that will enhance accountability and transparency in ways that cannot be addressed within the current food mail model.
It has been suggested that the implementation of Nutrition North Canada be postponed by one year. In addition to delaying the expected benefits of the new program, such a delay could have significant negative impacts on northerners, stakeholders, and the costs for Canadian taxpayers.
Northerners could feel the sharpest impact of the proposed delay if we find ourselves in a position on April 1, 2011, where we are unable to offer any subsidy program. Based on the May 21 announcement of the Nutrition North Canada program, Canada Post is already transitioning out of the food mail program.
It's our understanding that Canada Post is winding down its current contracts with the air carriers that ship food mail and does not anticipate having such contracts in place come April 1. It is also working to reassign the existing employees who had helped carry out the program.
I cannot speak for the crown corporation, but we believe that revisiting the decision to implement Nutrition North Canada as scheduled could be very expensive and in fact might not even be possible. Moreover, supply chain stakeholders, from food suppliers to air carriers and retailers, have begun to make alternative arrangements to adjust to the new program model. A decision to delay implementation could translate into financial losses for many of these stakeholders, which could potentially trigger legal actions against the crown.
To conclude, Mr. Chairman, what the committee heard during its study was not unlike what officials heard from stakeholders during the review of the Food Mail Program. There were divergent opinions and views, often contradictory, on the best way to support northerners' access to healthy, perishable food. As the committee's work helps to illustrate, these views are often shaped by corresponding financial interests, those of airlines, retailers, wholesalers or other supply chain stakeholders. Clearly, businesses have a right to pursue their best interests and a legitimate role in influencing public policy to their advantage.
But in the midst of this discussion, officials sought to present objective information focused on the program's core objective to make nutritious food more accessible for the residents of isolated northern communities.
Thank you.
Thank you.
And, of course, we're here to take your questions.
