International Trade Committee on Aug. 3rd, 2016

[Voices]

Oh, oh!

[The Chair, Liberal, Mark Eyking]

I don't know about your committees, but this is what we do.

We'll start with our list, and it begins with the Conservatives.

Mr. Ritz, you have five minutes.

[Gerry Ritz, Conservative, Battlefords—Lloydminster, SK]

Thank you, Mr. Chair.

Thank you, gentlemen, for your presentations and making yourselves available today.

It's always a concern or problem for processors and producers out there when governments.... This is a multi-jurisdictional oversight and implementation, and it really is problematic. I saw the ball being tossed back and forth a couple of times there in your presentations. These anti-circumvention measures are a real irritant, and have been for quite some time.

Mr. Seppey, you talked about Agriculture heading up a working group. That was structured some years ago. We have been looking at this over that time frame. Again, we're to the point where this is expediting, getting larger. You made that point with spent fowl. We seem to be the recipient of 110% of U.S. production, so there's a lot of chicken sneaking in here that shouldn't be a part of that program at all. It comes down to the job that government is doing or not doing at the border to make sure that these don't grow any further, that they actually start to be pushed back to some extent.

They're stretching guidelines. I won't go so far as to say that people are cheating, but they're certainly stretching the guidelines. The original mandate of the duty deferral program, which I think someone said started in 1996, really didn't pertain to food at all. There is a separate program under dairy and chicken where those come in as processed items and go out again, but that's a stand-alone program. When you look at the changes that have happened, the ability now to have things like diafiltered milk.... It gets around some of the tariffs and duties because it really doesn't fit in all the agreements. It's a brand new product.

There are things that need to be put in place. Whether Finance leads it or CBSA really doesn't lead the program, it's up to somebody to point out the problems. I know that mandate letters have gone out to ministers and so on in this new government. What kind of plan and timeline have you been structured to come up with to address these types of anti-circumvention measures?

[Frédéric Seppey]

Thank you, Mr. Ritz.

I'll start with the interdepartmental process on spent fowl and then turn to my colleagues at Finance and CBSA to address the aspect of your question dealing with the DRP.

You're absolutely right that there are a number of issues that were raised by the poultry sector over time, which we have discussed. We have worked over the years very closely with the poultry sector—chicken and turkey—on a number of issues that were of interest to it. Initially, we were discussing a lot the question of the classification of specially defined mixtures—

[Gerry Ritz, Conservative, Battlefords—Lloydminster, SK]

Sauce packs.

[Frédéric Seppey]

Yes, among other things, that part of it. This was the focus in the early years, but with the evolution of trade, the issue of spent fowl has been growing and growing over time. As you pointed out, given that this is multi-jurisdictional, early on we all worked on good intelligence, or we tried as much as possible. Indeed, we are very coordinated in our efforts despite the fact that various elements of policy fall under different departments. Our interdepartmental efforts have been ongoing over the last few years.

With respect to spent fowl, the issue is quite complex because there's a long-standing trade in spent fowl that is absolutely legitimate to go into processing. I think the Chicken Farmers of Canada made that point clear in its previous testimony before this committee. It accepts that there's a traditional, long-standing trade in spent fowl that is legitimate. The challenge is how we differentiate between the legitimate trade in spent fowl and the risk of circumvention.

The main problem that we face is that, first of all, spent fowl cannot be visually distinguished from broiler meat, so we have to find other ways. Physically, it looks pretty much the same in a pack where you have broiler meat or spent fowl, so this is why we are trying to look at innovative ways of addressing this issue.

We're looking at two main options, and the first is certification. The United States Department of Agriculture has a voluntary program of certification, and we are discussing with the United States to see how we can make use of that program.

The second element, and I made reference to it in my remarks, is whether we can try to see if we can use DNA testing to distinguish between spent fowl and broiler meat in spot checks. You can imagine that, if you use a DNA test, it has to be robust, it has to be thoroughly tested. This is exactly what we're discussing with colleagues at CBSA and Agriculture and Agri-Food Canada, how we can make use of that.

[Gerry Ritz, Conservative, Battlefords—Lloydminster, SK]

Okay. You outlined a plan, but—

[The Chair, Liberal, Mark Eyking]

Your time's up, sir.

[Gerry Ritz, Conservative, Battlefords—Lloydminster, SK]

—what about the timelines?

[The Chair, Liberal, Mark Eyking]

Okay, thank you, Mr. Ritz.

We're going to move over to Madame Lapointe for five minutes. Go ahead.

[Linda Lapointe, Liberal, Rivière-des-Mille-Îles, QC]

Thank you, Mr. Chair.

I'd like to thank the witnesses for joining us on this lovely summer morning.

I'm going to talk mainly about diafiltered milk.

I represent the riding of Rivière-des-Mille-Îles, in the Lower Laurentians. It's not that the chicken issue doesn't affect us, just that the dairy issue affects us a bit more. The fact that some people are trying to circumvent the rules isn't looked upon favourably.

You said earlier how important it was that the government continue to work with industry, both provincially and federally, on the diafiltered milk issue.

Could you comment on what Canada's industry players have done in terms of innovating and modernizing?

[Frédéric Seppey]

The Dairy Farmers of Canada and the provincial associations have put some initiatives in place. One major initiative, proAction, seeks to improve on-farm practices, educate farmers on the importance of those practices, and, by extension, the public. It actually starts on the farm and continues throughout the chain of production.

We also have a five-year federal-provincial policy framework for Canada's agricultural and agrifood sector, called Growing Forward, which will continue until 2018. A new five-year policy framework will then be introduced. Through this policy framework, governments have supported initiatives developed by the dairy sector, especially within innovation clusters. Quite a few programs are under way. I don't have the figures with me, but the department would be glad to provide the committee with that information. A number of investments have been made to support sector initiatives focused on innovation.

Further to specific initiatives and his ministerial mandate, the Minister of Agriculture and Agri-Food was tasked with delivering a program to develop value-added agricultural and agrifood products. In terms of facilitating innovation, then, that part of the program will be especially important for both dairy producers and processors. Those are some examples.

[Linda Lapointe, Liberal, Rivière-des-Mille-Îles, QC]

You mentioned the improvement of on-farm practices through the proAction initiative.

Do you view that as one of the solutions in the years to come?

[Frédéric Seppey]

Absolutely.

A number of solutions exist, particularly when it comes to sector governance. Earlier, I mentioned the three key pillars of supply management: production control, producer price control, and import control. Given the challenges facing the sector, domestically and internationally, it is looking at mechanisms that would allow for a better pricing structure. The efforts by the industry, from both producers and processors, towards reforming the pricing structure, inputs, and their permitted use in dairy manufacturing are all important pieces of the solution.

Innovation throughout the value chain, from production to processing, is another piece of the solution, one that can strengthen the sector's economic prosperity in the medium and long terms.

[Linda Lapointe, Liberal, Rivière-des-Mille-Îles, QC]

Thank you.

Since the Liberals have been in power, since October, then, what measures has the government taken to support agricultural industries, including dairy producers?

[Frédéric Seppey]

Budget 2016 set out a number of initiatives that are under way, including an investment in rural connectivity aimed at improving rural communities' ability to use different tools. I think the government also wanted to take stock of the outcome of the Trans-Pacific Partnership negotiations, as part of its consultation process. The Minister of Agriculture and Agri-Food, the Minister of International Trade, and their parliamentary secretaries criss-crossed the country to gauge where stakeholders stood.

I should mention that, as far as trade agreements and agriculture are concerned, Canada exports more than half of its agricultural products, so the new international market access opportunities are very significant. That was a major element, at least in my area of responsibility, given the government's desire to proceed as quickly as possible with the implementation of the Canada–European Union Comprehensive Economic and Trade Agreement. The idea was to consult the sector on measures that would help those negatively impacted by the agreement—meaning, in this case, cheesemaking and dairy sector stakeholders—adapt to the market access granted under the agreement. Also in mind was the eventual implementation of the Trans-Pacific Partnership agreement, in terms of hearing what stakeholders thought, what the issues were, and how they would be able to benefit.

[Linda Lapointe, Liberal, Rivière-des-Mille-Îles, QC]

Thank you very much.

[The Chair, Liberal, Mark Eyking]

Thank you, Madame Lapointe.

We're going to move over to the NDP now. Madame Brosseau, go ahead for five minutes.

[Ruth Ellen Brosseau, NDP, Berthier—Maskinongé, QC]

Thank you, Chair.

I would just like to thank my colleague, Randy Hoback, and the Conservatives for coming forward with this study. I think we all know how important it is and I appreciate the fact that it didn't take us long to agree to go forward with this study.

I don't think diafiltered milk has ever been as hot a topic as during this last session of Parliament. Everyone is aware of this unfortunate problem, which has been going on for years. The spent fowl issue has also been going on for quite a while now, inflicting significant economic losses on producers.

I am honoured to represent a vibrant rural riding that is home to many supply-managed producers. Many of them have come to me about the challenges they face because of the diafiltered milk and spent fowl issues, saying they are at the end of their rope. Every week, we see farmers who are getting ready to shut down their operations out of desperation.

This week, La Terre de chez nous published an article on a 47-year-old dairy farmer in Saint-Augustin who was closing his farm and selling off his cows because of the problems stemming from diafiltered milk, among other things. He may have also had concerns about other trade agreements. What a sad situation.

I think every party has raised the issue. We've debated it in the House. The government promised to look into the issue and take swift action. Protests in support of those producers have been held here, on the Hill. Several thousand people even showed up on the Hill with their cows in tow to demand help from the government.

My question is for the finance department official.

Are you able to put a number on the economic losses the dairy and poultry industries are experiencing? Could you also tell me whether the situation is having an economic impact on Canadian consumers?

[Dean Beyea]

I think it's an interesting question. We haven't done that. We've certainly seen representations that are all over the map, but we are trying to assess the impact. Obviously, we would rely on the expertise of the Department of Agriculture for something like that.

[The Chair, Liberal, Mark Eyking]

Go ahead, Mr. Seppey.

[Frédéric Seppey]

I have something I'd like to add, if I may.

As the member mentioned, the state of dairy producers' incomes is an issue the industry is concerned about, as are all government stakeholders.

Falling incomes, however, are not solely the product of the diafiltered milk issue. It's one factor, but others have come into play in recent years. As you know, global dairy prices are at a historic low, so dairy producers all over the world are dealing with the same income-related issues.

The second consideration stems from how our system is structured. I'm referring to the fact that the demand for fats determines production value and is therefore creating a structural surplus of non-fat solids. In order to get rid of their milk, producers have to sell it under a class system that generates lower revenues. So that's another thing that factors into the equation.

The third factor is the drop in the prices set by the Canadian Dairy Commission early last year. In fact, the commission dropped prices in February 2015. An initial increase was introduced in February 2016 and will be followed by another on September 1, 2016. That won't completely fix the income problem, but it will eventually help mitigate the losses. As you can see, then, a number of factors come into play. That's why we are considering the full range of solutions to address the issue at a broader level. Measures can be taken to address the diafiltered milk issue, and steps are being taken by producers and processors to address pricing structure.

Other programs are also in the works. The consultations held in recent months gave government officials and policy-makers ideas on possible programs to help the sector cope in both domestic and international markets.

[The Chair, Liberal, Mark Eyking]

Welcome to the trade committee. We keep our times tight here.

We're going to move over to the Liberals now.

Madam Ludwig, you have five minutes.

[Karen Ludwig, Liberal, New Brunswick Southwest, NB]

Thank you.

Thank you all so much for coming in. It's a beautiful, sunny day outside and we'll be back to it this afternoon.

I represent a New Brunswick riding, New Brunswick Southwest. It literally is as geographic as it sounds. It's the southwestern portion of the province, and we also have a fair number of dairy farmers close to Apohaqui, in the Sussex area, and chicken farmers.

My question is for Mr. Lawton first. How have the imported quantities of chicken and dairy changed over the last year?

[Alexander Lawton]

I believe when it comes to total quantities of imported chicken and dairy products, my colleague from Agriculture may be better placed to speak.