Industry Committee on Oct. 17th, 2006

[The Chair, Conservative, James Rajotte]

Okay. That's seven minutes.

We'll go to Mr. Carrie.

[Colin Carrie, Conservative, Oshawa, ON]

Thank you very much, Mr. Chair.

I have three specific questions. Let me read them out, because I'd like you to answer them, if possible, in order.

One is a Health Canada issue. I had a private member's bill in the last session, Bill C-420. There were problems with the bill, but we had a compromise solution whereby they would change schedule A and subsections 3(1) and 3(2) of the Food and Drugs Act and modernize the regulation. It's been over a year and they still haven't come forward. I've been on the phone with them just up to last week. They're still not moving on it.

So I was wondering specifically who you are dealing with over there and whether you had some information I could ask for. I'm very curious about this, because I've been approached by natural health food producers, herb producers, food producers who are really concerned about trade issues with the United States and how this is going to affect their industry if we don't get it solved.

The second question is on free trade agreements. We're talking about markets overseas. We've had some concern here about Korean free trade, especially with some manufacturing—the auto industry, for example. How would you say a free trade agreement with Asian markets would...? Would they help? Would they hinder you? Do you have any impact studies on where this issue is? That's question number two.

The third one is, what did the previous government do to help fix the regulatory regime, what should we continue with, and are there more suggestions for where we could move ahead as a new government?

Thank you.

[Gemma Zecchini]

I'll try to answer those in order.

On Bill C-420 and its legacy, I'm not sure where it's at, but I know that our industry supported it.

At Health Canada we deal with officials at various levels, from the deputy minister, to the head of the food directorate, to the head of natural health products. As to who specifically is charged with this file at the moment, I'm not sure.

Do you know?

[Blake Johnston, Vice-President of Government Affairs, Food and Consumer Products of Canada]

I can answer that.

Janet Beauvais is the director general of the food directorate. She's responsible for the main regulatory asks that we've presented for Health Canada.

[Gemma Zecchini]

On your second question about free trade, the recent suspension of the Doha Round of the WTO is certainly disappointing to our industry. We're now faced with finding alternative means to advance market access and fulfill our global growth strategy as a country. Canada must rapidly pick up the pace in negotiating the new bilateral free trade agreements. Negotiating some of those with Asian trading partners would be a very good idea.

Your third question was, where did we get with previous governments on the whole issue of regulatory reform? That issue has always been on a distant back burner with governments generally. We had a bit of traction with the last government because of the External Advisory Committee on Smart Regulation report. This was a sort of confluence of the OECD coming out and saying Canada is a great place to do business. However, we're getting to the point now where Canada needs to look very closely at whether or not the regulatory frameworks it has set up, which in some cases are fifty or sixty years old, are actually hindering Canada's competitiveness. That was the OECD in 2004.

At that point the External Advisory Committee on Smart Regulation was set up, which was a non-partisan committee. They reported back with a fairly fulsome report calling for regulatory reform and an overhaul of regulatory framework. That's as far as we've gone.

[Colin Carrie, Conservative, Oshawa, ON]

There's been a lot of press on the Korean free trade agreement. Have you studied this type of agreement? How much benefit would it be to your industry to open up markets like that? Have you done an impact study?

[Gemma Zecchini]

We have not.

[Colin Carrie, Conservative, Oshawa, ON]

With the BSE issue and slaughterhouse capacity, have we seen a big increase in our capacity to process beef here?

[Gemma Zecchini]

That's not something I can speak to. It's not a big focus of my industry.

[Colin Carrie, Conservative, Oshawa, ON]

We've heard a lot about the cost of energy and how it affects manufacturing. How have rising or fluctuating energy costs affected the industries within the food manufacturing subsector?

[Gemma Zecchini]

Energy costs and commodity input costs have put significant upward pressure on prices. We've been hit by energy costs as well. Food processing is a fairly energy-intensive business. Whether it's actually in the plant or during distribution, the supply chain is fairly energy intensive.

[Colin Carrie, Conservative, Oshawa, ON]

We've heard a lot about skill shortages. In your sector how bad are the skill shortage issues?

[Gemma Zecchini]

At the professional staff level our biggest issue is attracting the best and brightest on the basis of whether this is a cutting-edge industry. When you're recruiting out of colleges and universities, that's very much top of mind.

If you go further down the supply chain, my colleagues in the grocery industry will tell you they have some very significant human resource challenges from both a recruitment and a retention perspective.

[The Chair, Conservative, James Rajotte]

Thank you.

We'll go to Mr. Masse, for six minutes.

[Brian Masse, NDP, Windsor West, ON]

Thank you, Mr. Chair.

Thank you for appearing today.

One of the things I want to touch upon is the Bioterrorism Act. How is that going to affect your members? This is a new unilateral imposition on Canadian companies shipping food products into the United States.

[Gemma Zecchini]

It's a good question. Depending on how it's handled, I think it has the potential of significantly slowing down shipments both to and from the U.S., which will have negative impacts, particularly when you're dealing with perishable food. So we are very concerned that whatever regime is ultimately brought on stream, we are not going to be unduly impacted in that regard.

[Brian Masse, NDP, Windsor West, ON]

Mr. Crête noted the spinach and carrot juice problems. We seem to just take this on the chin, so to speak, in terms of the introduction of these fees.

Has there been any analysis by your organization to find out how it's going to have an effect overall? I think we have to have a backup plan. The imposition of this is being done unilaterally, and if we're not successful in changing that or having a court appeal successful...and that's what is going to be necessary. We've seen court appeals dropped for, say, softwood lumber, so even if we do go to court, we would have a period of time to win that, and then it's whether we'd have the will to do it. So is there going to be an assessment by your organization in terms of the cost associated, in a detailed analysis?

[Gemma Zecchini]

I think closer to the time we'll probably look at a cost from the point of view of what it will take for manufacturers to implement and what the implications are going to be. I don't think we're at a stage yet where we know enough about it to actually work out the monetary implications.

[Brian Masse, NDP, Windsor West, ON]

That would be very helpful I think for us on this committee, because it's another cost that is associated, and I guess it goes to my next question. We know your industry hasn't been growing as large as other manufacturing industries, but where else is it growing? Is it growing in the United States? Is it growing in Mexico or in developing countries? Where is the industry growing in terms of food processing and management?

[Gemma Zecchini]

I think it's certainly growing a lot faster in the United States. It certainly is growing a lot faster in the EU, and I think we can probably take a lesson from the EU in the sense that because of the creation of the European Union--and that's not to suggest that everything they do is something we would want to emulate on all fours--they've had to look at all of their regulatory processes, but the actual act of creating this supranational body has required them to look at the things that work and the things that don't work, and particularly in the area of food. So I think in some ways they've definitely advanced farther ahead than where we are in the development of modern regulatory frameworks.

[Brian Masse, NDP, Windsor West, ON]

What concerns me--and it's specific to the Bioterrorism Act once again--is that you have American companies that have subsidiaries over here that choose the expansion of operations in the United States because they put up non-tariff barriers like that, which really result in decisions made to expand plants over here as opposed to here, because you not only have the fees associated with that, but it's also the anomaly of whether the product can actually get to the market.

Given that, has there been any work...and how is the association geared up to maybe, for example, take advantage of east-west trade in our country? Is there more work that can be done there, and is there something the government can do to help that? We do control those barriers that we have amongst our own provinces.

[Gemma Zecchini]

Let me just start by saying that when multinational companies, even if they are U.S.-based multinationals...the way the supply chain works in North America, it's a North American product mandate. So there are a number of U.S.-based companies that will produce a product line just in Canada, for the reason that we may have a competitive advantage, whether it's in logistics or whether it's in commodity input prices, or whatever the reason might be.

On your point about the Bioterrorism Act, I don't think we can assume that this will affect Canadian companies more than it will affect multinationals, because I think some of the multinationals will be significantly impacted by this.

[Brian Masse, NDP, Windsor West, ON]

I didn't mean to get into that. What's happening, though, in other jurisdictions like the auto industry, for example, is they're choosing to set up just in Michigan, not only just because of incentives but also because they're concerned about the shipments of their products across the border. So it's giving them an excuse to actually land the jobs that used to be expansion plants in our industries.

[Gemma Zecchini]

Right, because it's easier to serve a market of 30 million from their vantage point than to have a market of 30 million trying to service a market of 300 million in terms of shipment of goods.

I don't know whether those types of decisions have been made by my member companies as a result of the Bioterrorism Act. I can certainly endeavour to find out, and I certainly take your point that this is something that's worth exploring because the economic impacts are probably significant.

[Brian Masse, NDP, Windsor West, ON]

Is there anywhere we can get a listing of your members' associations and how many people they employ and the trend of the last few years? Your manufacturing has gone down a bit as compared to other sectors. Has employment collapsed as well a bit, or is it sustaining? I'm just curious in terms of your employment numbers.