Special Committee on Cooperatives Committee on July 25th, 2012

[Rose Marie Gage, Chief Executive Officer, Ag Energy Co-operative Ltd.]

Thank you.

Dear committee chair and committee, sincerest thanks for the opportunity to share our thoughts regarding enhancing cooperatives and their support structures across Canada.

We are presenting a number of ideas that may be advantageous for future job creation and the growth of the Canadian economy by Canadians and for Canadians. Ag Energy's recommendations for your consideration are as follows.

First, recognize that cooperatives are a vital and viable means of business as a model for Canadians to supplement the existing definitions of business structures—for example, sole proprietor, partnership, joint venture, and so on.

Second, ensure that the federal cooperative corporations act is a flagship or leading-edge model for all provinces to use as a template for progressive improvements to the respective provincial co-op corporations acts and to ensure future viability, innovation, and competitive enhancements.

Third, reduce all forms of red tape in the processes that govern and support all cooperatives, irrespective of co-op type or industry served.

Fourth, eliminate all boundaries or hurdles for cooperatives in gaining access to capital financing, innovation centre support, government programming, and so on that are currently open to other businesses and excluded for co-ops. For example, create something akin to an affirmative action program or co-op equity program, with explicit guidelines, a positive outreach program and accessibility to all. The program should report tangible metrics that prove it is effective and provides benefit to the co-op sector. Another example is to modify existing programs that appear arbitrarily closed to co-ops due to a lack of understanding or a narrow scope by program custodians. Here, for example, I refer to angel investor matching programs by FedDev—with up to $1 million that can be raised—that are matched and provided by FedDev for accredited investors.

Fifth, consider supporting co-op ventures by requiring all, or at least many more, funding programs to include broader community benefit and community support among the funding criteria. While other entities could also meet such criteria, co-ops would be particularly well positioned precisely because they are community-based, locally owned enterprises. Many programs already do require applicants to demonstrate broader community benefits. Extending such criteria to more programs would truly provide a boost to cooperatives.

Sixth, move the co-op secretariat to Industry Canada or Service Canada to ensure wider representation for all cooperatives across all industries, while ensuring that all expertise is maintained or improved upon.

Seventh, create two advisory committees for the co-op secretariat that represent all provinces and territories and a wide variety of co-op industries. It is desirable that this be represented by the co-op sector and not government employed. It is suggested that one represent for-profit and the other not-for-profit, and report to an executive committee that is comprised of both.

Eighth, establish a web-enabled presence for co-ops with tools to assist growth and development, the ability to share successes and best practices, and a means to ensure continuous learning for the co-op community. This can have the look and feel of a co-op learning and sharing centre complete with resources and details, but without the expense of bricks and mortar of traditional centres or institutes.

Ninth, create a director or board development program that enhances or builds upon existing training material akin to the Institute of Corporate Directors, which will be funded from future user fees. Please ensure that this is an affordable model relative to the current ICD structure.

Tenth, enhance means to capitalize cooperatives, whether it is through tax credits, use of self-directed RRSPs, or other incentives as they create jobs and provide taxes to the communities that they support.

Eleventh, amend the Income Tax Act to clarify that co-ops may raise more than 10% of their member equity in the form of investments through self-directed RRSPs.

Twelfth, eliminate the sunset clause around the deferred preference shares that is in place for 2016, or extend it for another decade to lapse at 2026. This would further assist in the continued capitalization of cooperatives.

Thirteenth, consider extending tax deferred preference shares beyond the agricultural co-op sector so that all cooperatives are able to utilize this means of retaining member capital within the cooperative.

Fourteenth, create an entity similar to Sustainable Development Technology Canada that supports the commercialization of for-profit cooperatives. This can be focused around the for-profit co-op sector to bring broader benefits to communities. This organization could be governed and funded in a similar manner to the Sustainable Development Technology Canada entity. The federal government could provide the seed moneys for the original structure, and the board of governors or directors could come from various co-op corporations and reflect various industries. This would serve two purposes: one would be to ensure that profits and ownership are maintained within Canada; and two, it would assist the co-op movement to have a shared financing vehicle that would consider innovation and potential investment outreach internationally.

One behalf of the board, the staff, and the member of Ag Energy Co-operative, we thank you for your time and consideration today. We look forward to your questions and also to your report, and would welcome the potential improvements that you will make along the way as a result of this review today.

Thank you.

[The Chair, Conservative, Blake Richards]

Okay, great. Thank you.

We'll move now to the La Coop fédérée.

Monsieur Richard, you're making the presentation, so the floor is yours for the next 10 minutes.

[Denis Richard, President, La Coop fédérée]

Thank you, Mr. Chair.

I am going to give part of the presentation and my colleague, Jean-François Harel, the general secretary at La Coop fédérée, will give the other part.

First, I wish to thank the committee for inviting us and allowing us to share our point of view on the place of cooperatives in Canada.

To begin, I want to make it clear that we are not claiming to have a global or comprehensive vision of the issues and challenges faced by the cooperative sector in Canada. However, we hope that, in the short time that has been graciously given to us, we will be able to provide you with valuable insight into La Coop fédérée's place in the global sector of agricultural cooperatives.

I will now hand the floor over to Mr. Harel, who will give you an overview of the organization itself.

[Jean-François Harel, General Secretary, La Coop fédérée]

Good morning everyone.

La Coop fédérée is the second largest non-financial cooperative in Canada. We are a federation of agricultural and agri-food cooperatives that is 106 members strong, representing a total of nearly 90,000 members.

With total sales of more than $6 billion, La Coop fédérée and its network of affiliated cooperatives provide employment for nearly 16,000 Canadians in 4 Canadian provinces for the most part. Our activities are concentrated mainly in Quebec, New Brunswick and Ontario, but through our subsidiary, Olymel L.P., limited partnership, we are also active in Alberta and have sales offices in Japan and Australia.

The main industries in which La Coop fédérée and its affiliated cooperatives operate are farm input supplies and hardware materials and petroleum products distribution. La Coop fédérée is therefore the largest distributor of agricultural fertilizers in eastern Canada and one of the largest independent petroleum products distributors.

La Coop fédérée and a few of its member-cooperatives are also involved in the food processing industry, and several of our member-cooperatives are also present in the food distribution market. Through its subsidiary, Olymel L.P., La Coop fédérée is one of the largest pork and poultry processing companies in Canada and exports more than half a billion dollars of pork meat to over fifty countries worldwide.

La Coop fédérée is at the heart of an organizational model that brings together agricultural producers, citizen-consumers, food processing entities and distributors. I believe this provides us with a unique viewpoint on our sectors of activity.

How can the Canadian cooperative sector innovate to meet the needs of its members? By their very nature as cooperatives, La Coop fédérée and its network of affiliated cooperatives represent a natural partner for people who have their community’s development at heart. Deeply rooted throughout the Quebec countryside, eastern Ontario and New Brunswick, La Coop network has perfected a business model designed for communities on the brink of decline. This model allows them to maintain basic services for their fellow citizens.

These combination service-stations, hardware and convenience stores are now the modern equivalent of yesteryear’s general store. There are now more than 15 of these businesses currently in operation, providing the community with basic services, thus helping to stop the decline of these communities.

[The Chair, Conservative, Blake Richards]

Pardonnez-moi, the interpreters are having a little bit of difficulty keeping up, so could you just slow down a little bit.

[Jean-François Harel]

Too fast? Okay.

[The Chair, Conservative, Blake Richards]

Yes.

Thanks.

[Jean-François Harel]

I will take over.

We intend to continue developing this new formula wherever possible. As one of Canada’s largest employers, La Coop fédérée and its network of affiliated cooperatives are significant agents of economic development in rural areas. For nearly five years, La Coop network has been involved in a wide-ranging restructuring process named the “Chrysalide” project.

The process is intended to pool the production assets and agricultural services of participating cooperatives to ensure that they can operate as a single unified body. This new approach is very innovative in management terms since it paves the way for economies of scale and critical mass, which are usually generated by corporate mergers. The approach, however, preserves the community’s local involvement and feeling of belonging.

It should produce several tens of millions of dollars in recurrent savings that will benefit our members and, indirectly, each region’s economic status. Unsurprisingly, restructuring usually means closing businesses and job losses. The “Chrysalide” project does in fact include the closure of several establishments, but they will generally be replaced with other, more employment-generating activities.

In this respect, La Coop network has reiterated its commitment to sustainably developing its activities and to converting agricultural biomass into energy production. There are several pilot projects currently under way to produce bioenergy from agricultural biomass. And we have recently joined forces with a group of Manitoba researchers, Prairie Bio-Energy Inc., to market technologies they have developed and to create a division dedicated to producing and distributing energy from agricultural and forestry biomass.

In terms of innovation, La Coop fédérée is involved in numerous projects, particularly through its participation in Cooperative Research Farms, the largest privately owned livestock and poultry research network in North America, as well as its own research farms. We are also involved in an ethanol fuel cell project and are partners in the fractionation of agricultural biomass molecules to manufacture bio-products.

Keeping within the framework of its commitment to sustainable development, La Coop fédérée has partnered with the Association québécoise pour la maîtrise de l’énergie and other major players in the Quebec economy. Together, we are working on implementing a cooperative to collect carbon credits and allow Canadian businesses who wish to take part in this upcoming new carbon economy to benefit from economies of scale.

This project is the result of the commitment of La Coop network leadership in response to the Quebec government’s pledge regarding climate change. The network is readying itself to seize any opportunity that may arise in a future carbon market, as well as educating and preparing La Coop network regarding climate change and energy efficiency.

As part of its “Chrysalide” project, La Coop network also invested in a comprehensive program to modernize its information technology infrastructure. In doing so, there is additional pressure on telecommunications firms to modernize their own networks and introduce the latest technologies in rural areas. We are currently living in a knowledge-based economy, and delays in updating and upgrading communication technology infrastructures in rural areas are a huge impediment to their development.

La Coop fédérée believes that concerted action on the part of all major economic players in these rural areas, in combination with a dynamic financial incentive policy from both governments, would be required to accelerate the deployment of high-speed Internet and digital telephony throughout all of these regions.

For our part, La Coop network will have invested almost $30 million to modernize its computer and communications infrastructure over a 5-year period. All of these actions and projects are proof of the commitment of La Coop fédérée and La Coop network to the sustainable development of rural and peri-urban communities.

[Denis Richard]

Mr. Chair, what means are at the government’s disposal to provide added support and greater opportunities and visibility for Canadian cooperatives?

We believe that a healthy and balanced economy rests on three fundamental pillars: a dynamic and highly productive private sector; a competent and efficient public sector; and a social cooperative economic sector that allows for individual and group accountability and empowerment so individuals can satisfy their own needs.

Besides coaching its own network of affiliated cooperatives, La Coop fédérée plays an active role in developing the cooperative movement in Quebec through financial support for structuring activities. Those activities include the Montreal issue table on cooperatives and mutuals, and a support program for the implementation of new cooperatives, in partnership with the Quebec government.

However, the federal government also has a role to play in the development and implementation of cooperatives in Canada, as it does with private enterprise.

Reinstating a fund dedicated to establishing new cooperatives would be a step in the right direction. Transferring the Rural and Co-operatives Secretariat to Industry Canada could also be a positive initiative if it were supported by sufficient resources to ensure that it could fully perform its role. The department's development policies must encourage, or at the very least not discourage, the cooperative movement and ensure that it becomes a priority for the department going forward.

In order for the movement to develop efficiently, Canadian cooperatives must be adequately monitored. Moreover, cooperatives are a model of economic organization that is different from share-capital businesses. Therefore, a well-organized cooperatives secretariat would ensure that regulations and legislation are not adopted without consideration for their impact on the cooperative sector.

As it pertains specifically to our sector of activity, a recent OECD study confirmed that the proportion of total household spending by Canadian families on food is relatively low, as compared with that of other countries. The proportion is evaluated at 9% in Canada and 7% in the U.S., while in France it is estimated at 14%, and in China it is 35%. That shows that Canadians have a fairly efficient food system.

From the consumer’s point of view and despite recent price increases related to market hypervolatility, we can say with certainty that our agricultural and agri-food sectors are quite efficient.

However, the performance of our agricultural and agri-food sectors, which are at the core of regional economies, could significantly deteriorate if we persist in liberalizing the trade of agricultural foodstuffs without taking into consideration the unique features of this sector. Agriculture and food cannot just be bargaining chips in the liberalization of world trade.

As an agri-food cooperative, La Coop fédérée wants to make our position clear when it comes to the importance of agri-food in the Canadian economy. Agricultural cooperatives have a tremendous presence in this sector. In fact, cooperatives account for a significant share of the agri-food sector. You will be hearing more about the nomenclature over the next few days. We believe that the agri-food sector must remain partially regulated.

La Coop fédérée believes that liberalizing the trade of agricultural foodstuffs is desirable, but must be the subject of an explicit negotiation between all the countries that take into account the population’s food security and sovereignty issues.

[The Chair, Conservative, Blake Richards]

Excuse me. You've actually gone a little bit over time already, but I see that you're nearly finished. I'll just give you 20 to 30 seconds to wrap up very quickly.

[Denis Richard]

I will end with a point on the liberalization of agricultural trade. And that point is this: we cannot stress enough the importance of regulating that trade. To quote something Paul Krugman, the 2008 Nobel Prize winner in economics, said in addressing a forum:

We had a very serious outbreak of human suffering and political instability resulting from a really quite brief spike in the price of food. It was not an extended period; it was overtaken by events by the broad collapse of economic activity thanks to the financial crisis. Had it gone on any longer, it might have been much worse and all indications are that the food crisis of 2008 was a dress rehearsal for future crises and we better have some mechanisms in place to deal with these.

Thank you for having us and for listening to what La Coop fédérée has to say.

Of course, we would be pleased to answer any questions.

[The Chair, Conservative, Blake Richards]

Thank you, Mr. Richard and Mr. Harel for that presentation.

We will now move on to Hélène Simard of the Conseil québécois de la coopération et de la mutualité, for 10 minutes.

[Hélène Simard, Chief Executive Officer, Conseil québécois de la coopération et de la mutualité]

Thank you, Mr. Chair.

Ladies and gentlemen, members of the committee, I want to thank you for meeting with us today.

It is extremely important for all of Canada's regions that you have a clear understanding of where things stand and that we all support the creation of a tool that will help strengthen the economy and society.

The Conseil québécois de la coopération et de la mutualité brings together about 40 major cooperative and mutual organizations and associations throughout Quebec and Canada. We represent 3,300 cooperatives and mutuals across Quebec, which employ over 92,000 people and provide services to more than 8.8 million members. Together, these cooperatives generate $25 billion in revenues and hold assets estimated at over $173 billion. In 2009 alone, Quebec's cooperatives and mutuals paid out more than $800 million in dividends. When you know that 75% of operations take place in the regions, you realizes that this money goes back to our communities. It represents $85 million in donations, sponsorships and community involvement. That is the incredible power of cooperatives.

In Quebec, more than 30 provincial organizations from all sectors and the Quebec government have endorsed the Declaration on the International Year of Cooperatives. These organizations represent labour, management, economic development, environmental and academic groups, as well as municipal federations. They advocate the creation of conditions conducive to the development of coops and mutuals, tailored to their features and functions and respecting their autonomy. This vast backing clearly demonstrates the strong support of Quebec's socio-economic stakeholders. They recognize the roles that coops and mutuals play in social and economic development, and their ability to contribute to sustainable prosperity by meeting the public's social and economic needs.

A strong economy requires the same kind of diversity in business that occurs in nature. We are absolutely convinced that the Canadian economy will become stronger and contribute to national prosperity if we spur innovation by stimulating the growth of cooperatives in additional fields. Coops in new economic niches address growing needs of Canadians in urban and rural environments. Those needs include renewable energy, domestic assistance and home care, daycare, new immigrant integration, transportation, recreation and tourism, health care, community services, cultural industries and manufacturing industries.

Cooperatives are also an important means of ensuring the survival of businesses confronted by the absence of a younger workforce to replace leaders who are getting older. With a survival rate twice that of other businesses, coops constitute a strong incentive to stimulate and support such undertakings.

The largest coops are now reaping the benefits of globalization as they market Canadian products around the globe. Coops have become thriving economic hubs for thousands of Canadians across the nation. In 2008, some 63% of new coops in Canada were established in Quebec, as compared with 43% in 2004. What happened? Joint efforts by Quebec's cooperative movement and the Quebec government to support cooperatives in their various stages of development have boosted the coop survival rate. That is why the cooperative network must continue offering specialized services to coops as part of its effort to promote intercooperation and the development of viable and sustainable businesses.

This model for supporting cooperative development could indeed be implemented throughout Canada, by relying on relationships with provincial cooperative boards and their partners. The Cooperative Development Initiative was the first step in the right direction. In coordination with provincial measures, the initiative helped the cooperative movement innovate and grow stronger, while giving it leverage.

In Quebec, for that matter, all provincial program administrators sat on a committee overseen by the Conseil québécois de la coopération et de la mutualité to ensure coordination with CDI measures. Thanks to that mechanism, it was possible to avoid all the problems that can arise with program duplication. The stakeholders were able to consider all the projects, providing an efficient way of seeing the big picture.

The fact that cooperatives are owned by their members and that their shares cannot be traded, as with private corporations, is a critical issue in capitalizing coops. The cooperative business model with its “one member, one vote” principle promotes the ownership and control of cooperative businesses. Members, rather than outside investors, hold coop shares.

Coops also typically distribute their profits among their member-owners based on the size of their transactions, in other words, their transactional relationship, rather than the number of shares they hold. These differences make coops stronger: in periods of market fluctuation when the situation is not quite so rosy, coop members have a level of patience that shareholders subject to what we call quarterly tyranny do not. Every three months, shareholders can read about the company's performance in the paper and check whether share prices have gone up or down, and capital levels respond in kind. While coops are much more stable, they are less attractive to venture capital investors.

According to a report by Ernst & Young, globalization, consolidation, technology, environmental protection imperatives and increased competitiveness have boosted coops' capital requirements. They must acquire additional investments from their members to obtain the funds they need. Governmental policies promoting such capital inputs could have a decisive impact on the development of cooperatives, communities and regional economies.

Because Canadian tax laws fail to adequately consider their unique features, cooperatives have to deal with certain fiscal disparities. Take, for example, the flawed application of the integration principle, which has been mentioned already. The integration principle serves as the foundation of our tax system. The choice of legal structure through which taxpayers earn their revenue should have no impact on the amount of taxes they pay. Since cooperatives are not eligible to employ some of the existing integration mechanisms, tax inequities adversely affect cooperative members. Such factors may also deter investment in cooperatives. This is the case with capital dividends, taxation of investment income and taxation of revenue from a subsidiary.

This flaw results in major taxation inequities when it comes to capital gains, for instance. The maximum rate of additional taxation for a cooperative on capital gains is 21%. For investment income, it's 4%, and for income from a subsidiary, that rate is 15%. We have the study done by tax experts at the Mallette firm, which Ms. Gagné mentioned. It points to these exact problems. Given that 2012 is such a milestone year for our movement, we are using this opportunity to call on our governments to examine the situation and rectify these problems.

In addition, holding cooperative shares in an RRSP is turning into a very problematic issue. In the 2011 federal budget, the government made significant changes to the rules for holding cooperative shares in a registered plan. Now, a member of a cooperative is no longer allowed to hold over 10% of a cooperative's capital and is subject to heavy penalties, when it comes to RRSPs. This rule is designed to prevent the circulation of capital and the misuse of measures, situations that do not normally apply to cooperatives because the transfer of RRSP shares is not tied to the organization's decision-making authority. This legislation clearly illustrates the difficulty lawmakers and regulators have when it comes to taking into account cooperatives' unique features.

We have a few recommendations that I would like to call your attention to.

Firstly, we recommend that the government create an environment conducive to the development of cooperatives, tailored to their features and functions.

Secondly, we recommend that the government consider the specific nature of cooperatives in all of its programs, laws and initiatives for business, unless it has specific reasons not to do so. The Government of Quebec recently undertook such a commitment as part of its entrepreneurship strategy. I think the outcome would be very positive if the Government of Canada were to adopt a similar approach.

Thirdly, we are calling on the government to forge a partnership for developing cooperatives to support the creation of cooperative businesses throughout Canada.

Fourthly, we are asking the Canadian government to review the overall fiscal environment for cooperatives to reduce or eliminate inequitable taxation.

I didn't have enough time to go over it in detail, but I will end by underscoring the findings of the Ernst & Young study I referred to earlier. The report mentioned the implementation of a federal cooperative investment plan, similar to Quebec's. Our research shows that this would be an extremely lucrative measure in terms of federal government revenues. So it would not be an expenditure, but an investment.

Thank you.

[The Chair, Conservative, Blake Richards]

Thank you, Ms. Simard.

We'll now move to our first round of questioning, and first up we have Madame LeBlanc, for five minutes.

[Hélène LeBlanc, NDP, LaSalle—Émard, QC]

Thank you to all of our witnesses for their briefs.

You've given us a number of recommendations. You've done an excellent job of describing the situation. You've also put forward solutions and real examples of the contribution and innovation of the cooperative movement. You've risen to the challenges posed by the current climate. I think it's wonderful. I want to sincerely thank you for everything you're doing in that respect.

My background is in agronomy, so I am extremely interested in the agricultural side of things. I am also the industry critic, so the innovation that cooperative businesses have shown is also of interest to me.

Mr. Richard and Mr. Harel, you referred to some very innovative energy projects that La Coop fédérée was working on.

Have you been able to access federal R and D programs? Did those programs suit the needs of the cooperative movement?

[Denis Richard]

For many years, La Coop fédérée has been accessing federal government R and D programs. Sometimes we have to find roundabout ways of accessing some of those programs because cooperatives are not always directly eligible. What we often do is partner with other businesses in order to access programs.

As for the new energy initiatives, they nearly always involve partnerships. In terms of the use of biomass molecules to manufacture new products, the emerging trend is such that the research would be too expensive for La Coop fédérée to undertake on its own. While you might consider La Coop fédérée to be quite a big business because of its $6 billion in sales, it is too small to pursue this kind of research alone. So we have to work with partners. We work with other Canadian businesses that are not necessarily cooperatives.

It was mentioned earlier that Desjardins Group was a partner in the carbon area. And we have partners in Manitoba helping us with the combustion piece. In terms of developing the next generation of ethanol, we also have other partners who have been working in the field for a long time.

I will let Mr. Harel speak to the molecule project, since he knows more about the last consortium held with the businesses in the Eastern Townships.

[Jean-François Harel]

It's a partnership with Enercan. We often undertake this type of partnership because of our agricultural role. Basically, we are able to provide biomass, ensure the supply and develop dedicated plants. So the research consortium has an agronomic component. Because of that, the Industry Canada people are often interested in what we're doing.

[Hélène LeBlanc, NDP, LaSalle—Émard, QC]

Do you think the federal government should have a role in facilitating these kinds of partnerships?

[Jean-François Harel]

These are high-risk sectors, so frequently the problem is accessing dedicated funding. There are, however, existing provincial and federal programs. As for R and D tax credits, big businesses don't have much trouble when it comes to meeting program requirements. Where problems are more likely to crop up is in the agricultural area. What we have done is join forces with other institutions in Quebec to set up a group exclusively dedicated to farming, in order to help farmers, who in some cases are engaged in research and innovation. Unlike big business, they don't carry out basic research, but instead focus on practical aspects. They need just as much access to these credits as any other business or Canadian would.

[Hélène LeBlanc, NDP, LaSalle—Émard, QC]

Thank you.

Ms. Simard, you talked about the cooperative investment plan. If I'm not mistaken, you already proposed that measure to the federal government. What reaction did you get? Did anything positive come of it? Does the government have any interest in a plan of this kind?

[The Chair, Conservative, Blake Richards]

As you know, the time has expired. I will allow you to respond, but briefly.

[Hélène Simard]

Yes, presentations were given. A House of Commons committee examined the issue and all four parties unanimously resolved to support such a plan. We've even received Mr. Harper's backing as far as implementing a cooperative investment plan goes. We hope the Department of Finance will continue to pursue it and that the plan will eventually see the light of day.

[The Chair, Conservative, Blake Richards]

Thank you.

Now, we are moving on to Mr. Gourde for five minutes.

[Jacques Gourde, Conservative, Lotbinière—Chutes-de-la-Chaudière, QC]

Thank you, Mr. Chair.

I also want to thank all the witnesses for being here this morning. Your presentations were extremely informative.

My question is for the representatives from La Coop fédérée. You seem concerned about market hypervolatility. You went to the trouble of mentioning it in your closing remarks. Could you elaborate on that? Are you worried about what might happen?

Obviously, it can lead to an imbalance if grains start becoming too expensive, for instance. It could mean supply problems for La Coop fédérée's other lines of business, such as meat. That could happen if producers started to produce less meat. Could you please explain that in greater detail?

[Denis Richard]

The comment I made about price hypervolatility is not really a concern for La Coop fédérée. That is not a threat to us. I was referring to Canada, as a whole.

Agri-food is a more stable sector, particularly because of the cooperative presence. These are businesses that cannot make swift agreements or fall prey to hostile takeovers by foreign non-Canadian companies. Canada's agri-food sector represents a big chunk of the country's GDP, as compared with other countries around the world. The increasing financialization of the agri-food sector and price hypervolatility may, in the long run, mean higher food costs for Canadians.

The average Canadian spends 9% of their income on food. In China, that figure is 35%. In Europe, it's 15%. Along with the Americans, who spend 7% of their income on food, we have the lowest food costs in the world. There is a much greater likelihood of our food spending going up than that of the Chinese. For them, the global economy could bring down food costs. Canadians, however, are likely to see those costs go up.

What we are saying is that the government has to take a cautious approach to liberalizing the trade of agri-food products. Fostering world trade is important; not only is it necessary, but it also stimulates the economy. But agri-food trade does require a certain degree of regulation, so that Canadians do not lose the tremendous advantage of being able to spend just 9% of their income on food. Maintaining that 9% is key, or targeting the Americans' 7% might even be better. Keep in mind, though, that the Americans subsidize a large portion of their agri-food industry.

That was the final recommendation put forward by La Coop fédérée, a major agri-food player. We are advocating that the government exercise prudence in its policies going forward and that it endeavour to maintain or reduce Canadian's current proportion of food spending of 9%.