AGRI Committee Meeting

STANDING COMMITTEE ON AGRICULTURE AND AGRI-FOOD

COMITÉ PERMANENT DE L'AGRICULTURE ET DE L'AGROALIMENTAIRE

EVIDENCE

[Recorded by Electronic Apparatus]

Tuesday, May 5, 1998

• 0911

[English]

The Chairman (Mr. Joe McGuire (Egmont, Lib.)): I call the meeting to order. Good morning, ladies and gentlemen.

Pursuant to Standing Order 108(2), we are continuing our study of agricultural biotechnology. From our study we hope to learn more about what is coming down the pipeline in terms of agricultural biotechnology products and their likely impact on the future of agriculture.

The Government of Canada is also concerned about biotechnology opportunities and challenges, so it is updating its 1983 biotechnology strategy to make sure we are all aware of the new developments.

Last week we heard from Industry Canada about the consultations taking place across Canada on the strategy. The idea is to have some obvious guiding principles at the end of the process. One of the main issues being discussed concerns a public advisory body to facilitate public dialogue on issues surrounding biotechnology. So our study is very timely. We're hoping to have some useful input into the Government of Canada's consultative process.

With us this morning we have, from Ontario Agri-Food Technologies, Dr. Murray McLaughlin; from NEXIA, Jeff Turner; and from BIOTECanada, Joyce Groote and Rick Walter.

Good morning, people. We'll take your presentations and then go to the committee for questions. I take it you all have a presentation.

Joyce, do you want to begin?

Ms. Joyce Groote (President, BIOTECanada): Yes, thank you.

I'd first of all like to express thanks for giving us this opportunity to speak to you. I think a lot of our comments, even though they may not specifically deal with the CBS, or the Canadian biotech strategy, will deal with important things that need to be considered in the strategy. I'd like to talk a little bit about how we see biotechnology in Canada. That will be followed by Murray McLaughlin, then Rick Walter, and finally Jeff Turner.

First of all, I'd like to beg your patience. I got back from Australia just last night, at about midnight, and I'm suffering from the effects of sleep deprivation and caffeine excess. Please excuse any gaps you may see.

One really positive thing about it is that it gives me the luxury to take a look at Canada from the outside in instead of the inside out.

I'll tell you a little bit about why we were there. We had a Canadian mission and we were looking for partnerships in Australia. We were looking for research opportunities, opportunities with companies with complementarity. We were certainly looking at ways in which we could harmonize our regulatory system with theirs.

Right now they're looking at how they will set up that system. They're at the very beginnings of that process, so it gave us an opportunity to talk to them about the issues we're dealing with. As well, we look at doing this type of thing and talking to people about what we do in Canada as a way to increase our access to new markets. Those really were all the reasons we were there.

Through that process we recognized that we really have tremendous opportunity in Canada that we don't want to lose. We recognized how far Canada is ahead. We're recognized as a leader. That's why we were there. We're a leader in terms of agriculture, which we will be talking to you about, and in terms of how we've used biotechnology in the other sectors.

• 0915

It also demonstrated to me how well respected our regulatory system is. We are seen as a world-class, safe, international system around the world.

I think the third thing that really was brought home to me is how well we have embraced biotechnology in the agricultural sector in particular to our own economic benefit. That's not only to Canada as a whole, but also to Canadians. We've managed to keep that benefit at home.

The fourth thing it did for me was to re-emphasize the tremendous importance of balancing economic realities and dealing with the public dimension. I think the public dimension is a really important thing that now faces us. It's something that's being struggled with in the Canadian biotechnology strategy. I think there are ways through this. The question of how we do it becomes really important, not if we do it.

We're doing a number of things, of course, in our organization to deal with this public dimension. As an example, we are right now developing a code of conduct and a code of ethics. As well, a certain amount of work has happened in the country with social scientists looking at public opinion, and how we can deal with it. I'll deal with those four things.

Canada's leadership is one thing that to me was really remarkable in the Canadian biotech strategy meetings. I was involved in four of them across the country. It was intriguing that many individuals, including many industry individuals, did not recognize that we are a leader.

We are second in the world in terms of numbers of companies, numbers of products approved, and numbers of individuals employed, and yet Canada somehow doesn't make it on the map. They keep comparing the U.S. and the EU, but Canada is there. Canada is there when you compare it, in the EU, to the first-largest country, which is the U.K. The second one is Germany.

I personally was surprised at the Canadian ambivalence towards excellence and leadership. There is a real debate as to whether in fact we should be leaders. To me, the question is not whether we should be leaders—because we are leaders—but whether we can keep it.

The Chairman: Sounds very Canadian.

Ms. Joyce Groote: It does. It's phenomenal.

What we do see are some of the challenges we're facing. Germany, for example, which was really behind a number of years ago, is now committing billions of dollars to the use of this technology to help them be more competitive. In terms of the EU, we are starting to see challenges coming up through the WTO.

Quite frankly, we read a lot of these challenges as a way to keep Canada in check as they hurry to catch up.

Then there's Australia and the other nations that are working really hard. All of a sudden they're waking up, recognizing that biotechnology is something that can help them become more competitive. They're trying to figure out how they can capture that advantage. So we really don't have the luxury of slowing down. I think we have to work hard, because the race is on.

A number of products in Canada have been approved since 1983. Insulin was the first. Now we can boast of a huge number of products in agriculture and health, and diagnostics in some of the aquaculture areas.

On the issue of our regulatory system, I know in past presentations I have spoken a lot about this, but it's really clear to other governments in other countries, as they take a look at our system, that there have been some really fundamental things that we have done right.

We've taken the product and done risk orientation. The EU has not. We have been successful at getting products out. The EU has not. We've dealt with existing legislation in institutions, which has allowed us to keep moving very quickly and to use existing expertise. We've maintained that science-based focus and have always been able to answer the question of whether it's safe—not “Do we need it?” but “Is it safe?”

This system is working. I think it's working for industry because we have a predictable framework. If in Canada something is approved as safe, we know it sends a very strong message to the rest of the world that this is a good product. We have consumers' trust, and credibility. Certainly regulators have the authority to assess these products for their safety. We've really provided a model. Let me just tell you of one example.

• 0920

We're working with BIOTECanada and CIDA right now in a partnership. We're working to help Chile and Argentina get their regulatory framework in order. We really anticipate being able to do this in other countries, such as Australia, because this enables other countries to get their regulatory systems up to the level that we have and it opens new markets for us.

We're a small country; we can't afford to develop products for sale in Canada, as it will never pay. We need to make sure that we can always move to new markets, and of course we also have a responsibility to make sure that developing nations have access to what we know.

On the third point, economic benefits, Canada has really capitalized on biotechnology for the agriculture sector. In fact, this is much more so when compared to the U.S. and the EU. In fact, about 25% of the biotech industry in Canada is devoted to agriculture, whereas the U.S. has only 5% and the EU has 13%.

In fact, just two weeks ago, Steve Burrill, the financial guru, I suppose, in biotechnology venture capital, announced a $100-million fund. This is really the first fund we've ever seen focused on agricultural biotechnology. Obviously, the Canadian agricultural community hopes to take advantage of this fund. The other thing is that we've managed to keep the benefits, both financial and otherwise.

To give you an example, in Australia they are using seed multiplication for Bt cotton. I think this has been of limited economic advantage to many of the Australian producers, but we've managed to really reap the benefits because we then sell that seed to other countries around the world and keep the economic benefit for Canada. You really see the adoption rates in Canada excelling phenomenally.

Canola, as an example, in 1996, covered 350,000 acres for its production. In 1998, that went up to 6.5 million acres. Corn, in 1996, was grown on 21,000 acres. That increased in 1998 to 400,000 acres. So the farmers are really seeing this as something worthwhile. This really contrasts, I think, to how other countries are dealing with how to maintain their competitiveness.

A week ago, again when I was in Australia, there was a radio program. The pork producers were on there complaining that because the Canadian pork was of a much higher quality and lower price than Australia could possibly hope to produce, they wanted a ban on Canadian imports. That was their solution.

Our solution in Canada is to look at what we can do to make our markets more competitive. So we used biotechnology. I think that shows the really progressive mindset that we have here in this country.

The last thing on economics or benefits is just what Canadians themselves can gain an advantage from. Up to this point, we've really seen mostly what we would call the primary products, which are really products geared more to the producer, such as herbicide tolerance, insect tolerance, and that kind of thing. We're really moving now to the next generation of products, which are second- and third-generation products.

Rick Walter will speak a little bit more about that, but that's in the area of nutraceuticals and functional foods. We're really looking at products now from which consumers can take a a benefit.

The last thing I wanted to touch on was this really important question of balance. We certainly recognize in Canadian industry that the public dimension is important. We need to deal with social and ethical questions. We need to deal with the need for more information and communications. We recognize that absolutely. But we also need to make sure that as we deal with these issues we also balance that out with economic realities. We need to do so in a way that does not negate all these underpinnings that have made us successful in biotechnology.

We have a top-notch, science-based regulatory system. We need to maintain that, and always be able to ask the question: is it safe? Certainly we need to maintain some of the supportive policies we have for biotechnology from government for developers, producers, processors, and the financial community.

• 0925

We still face a lot of issues, but they're not unique to Canada. I really think that the public dimension and how we deal with it and how the Canadian biotechnology strategy deals with it is going to be based on communications. I think we're going to have to find a better way to integrate how we work together to coordinate and to partner. I think there's going to have a be a much greater level of commitment of resources, both personal and financial.

That's not only from the government; I think the industry will have to do that as well. I think we need to spend a lot more time identifying what information people need and who needs it. You can throw a lot of information out there, and it's a big black hole. Let's find out who is really looking for what.

Finally, this isn't done in a vacuum. There have been a tremendous amount of communication activities that have been going on for the last 10 years in Canada. I think we need to take a look now at those activities to try to figure out what we've done right and wrong, and figure out where the gaps are, learn from it, and move forward.

That's something that we would really like the Canadian biotechnology strategy to deal with as they work through with this public dimension. I think that will really solve or deal with the communications piece.

As far as social and ethical issues, I think the suggestion that there be an expert body that provides advice to ministers could be a very useful way of dealing with some of the more difficult issues. That's something that can clearly be separate from the regulatory system.

I would just like to say for the record that we certainly would like to be part of the CBS discussions as they move forward, but it's gotten off to a very shaky start. The process was far from perfect. We were involved at the very last minute on very short notice with very little time to prepare any thoughtful input for the process as a whole. The only way that we can be feel we can be partners is for the process to be much more well considered and to include us as it moves forward.

Those are really the statements I wish to make. We are leaders. I think we need to take pride in that in Canada and look for ways to maintain it. I think we need to take pride in the fact that we have a world-class regulatory system and that we managed to put all the right things in place to take advantage of biotechnology in Canada.

Finally, as we work through issues such as the Canadian biotechnology strategy, and other things such as the bio-safety protocol, we need to constantly keep in mind that need for balance.

Thank you very much.

The Chairman: Thank you, Joyce.

Dr. McLaughlin.

Dr. Murray McLaughlin (President, Ontario Agri-Food Technologies): I thought I would use the overhead, more to help me keep on track than for anything else. It's probably just to keep me on time and also make a few comments.

I apologize: the one overhead I didn't make copies of for you is this one here. It really is to just to give you the definition I use for biotechnology and the agricultural sector. It keeps it in position here.

Biotechnology, in the way I use it, is any technique that uses living organisms or substances from those organisms to make or modify a product, improve plants or animals, or develop micro-organisms for specific uses. That's the definition I've used since the late 1980s. It has worked well as far as helping to develop communities like Saskatoon and certainly some of the communities we're working with here in Ontario today.

Just to give some background of why we would want to even be thinking about biotechnology, consider this statement that comes from the Consultative Group on International Agricultural Research, which is a group that works very closely with a lot of international developing countries:

All possible tools that can help promote sustainable agriculture for food security must be marshalled. Biotechnology, safely deployed, could be a tremendous help in meeting the challenge of feeding an additional three billion human beings.

• 0930

I think that statement says a lot about what the future means and what the challenges are, because that really is something we have to keep in mind. Canada is a major developer of agricultural products and exporter of those products, and we have to continue to play that role on a global basis. As the red line indicates, we're looking at a population that by the year 2040 will be over 10 billion people. At that stage, it will probably level off in the world. But keep in mind that in 1950 we had 2.5 billion in the world, and today we have 5.8 billion.

We've seen a little bit more than a doubling of the population in the last 50 years, and we're going to double, from that 5.8 billion to 10 billion, in the next 40 years. So it's really a challenge to look at how you feed that many people with quality food and the expectations they're going to have.

Today we have about 800 million people who are malnourished or starving around the world, and the challenge is to be able to reduce that as this population grows. We certainly don't want to see that 800 million population, the malnourished people, double.

If we think that we're alone in biotechnology, this is a list of countries over the last 10 years that have had research trials in transgenic crops. There have been 45 countries that have been doing research in this area. So even though Canada is a world leader in this area, we're certainly not alone in looking at how we can utilize this technology to improve our agricultural production.

Just to give you a bit of a flavour for one segment, the seed industry, this gives you an idea of the projection on seeds. In the year 2000, we're looking at $2 billion in seed sales globally, $6 billion in 2005, and in 2010, which is basically 12 years from now, $20 billion in seed sales. So that's a tremendous increase in the sale of seed. And Canada is a major producer of seed in a lot of crops, so we have an opportunity to capitalize on that kind of market opportunity for our agricultural area.

What we're seeing here and what we're talking about is we've gone through a number of eras, as we all know, the mechanization.... I shouldn't say we've gone through them. We're still in those eras, mechanization and agri-chemicals, and now we're seeing biotechnology as a third wave of technology that will help us in improving agriculture production.

We continue to see tremendous changes in mechanization. Probably one of the biggest changes I've seen in western Canada started at about the late eighties, or late seventies but carried through into the eighties. It was the development of the air seeder mechanization. It totally changed agriculture production on the prairies in about a 10-year timespan. In 1980 it was a novelty to see an air seeder; in 1990 it was a novelty not to see an air seeder in a field out there. That helped tremendously in soil conservation and so on.

We continue to see improvement in the area of agri-chemicals, and biotechnology on top of that is the next expectation for improving production to help us to feed that population we talked about earlier. Keep in mind that to feed that population the projections are we will need three to four times the food production we have today by the year 2040, because as incomes go up the food demand goes up. So it's not just doubling food production; it's increasing food production three to four times.

I'm not going to spend a lot of time on these issues, but I want to at least touch on them. Joyce has talked about a number of them here already, the issues in the Canadian agricultural biotech area, and these issues are an issue I listed probably in 1990. They're not in any particular priority here, and today it's a matter of what level the issues are.

If I look at the regulatory area, as Joyce says, Canada has an excellent regulatory system. We always have to be looking at how we can fine-tune and improve it, and make it more efficient, but on a global basis we're well respected for the system that we have. We're envied by a lot of countries out there, and a lot of countries now, as Joyce mentioned, are starting to look at how they can work with us to develop a system that would be similar. I think that's great, because it will be a system based on sound science, and that's the way regulations should be developed.

As for public awareness, again, Joyce talked about that area. Over the last 10 years we've had a lot of development in public awareness, and it's an area that's continuing to develop. Again, with the new Canadian biotech strategy, it's an area they can help develop as well, hopefully.

Looking at the financing side, financing as far as helping move technology from the research bench into commercialization is a real challenge in this country, although we're starting to see some changes.

• 0935

Joyce had commented about Steven Burrill, and I talked to Steven as well when I was in Australia. It's interesting that three of us in this room were in Australia for the last two weeks. But I did come back a couple of days earlier because I had some other meetings here.

The financing fee.... Steven Burrill raised $100 million to have a global biotech fund specifically for agriculture. This is the first fund that's focused on that area. Most of his efforts or most of that fund will go into the genomics area in agriculture. Keep in mind, what I find interesting is that we keep talking about the Europeans and how they're lagging behind everybody else, but $75 million of that $100 million came from Europe. Big multinationals are putting money into this because they see the importance of this on a global basis in the future.

He is able to raise that kind of money for agriculture, and I think that is just the tip of the iceberg. I think we'll see a number of funds start to develop in the near future, and I know there's a lot of discussion here in Canada on putting some funds in place for agriculture.

Research support is something this group needs to keep very close in mind. We've had an excellent research base in this country. We've been gradually eroding that by reducing. As we got our budgets under control we were forced into that, but as we get our budgets under control we have to recognize that we have to put money into basic research. One of the things that will happen if we don't is that we'll start losing our competitive edge.

I believe some of you people visited Saskatoon. That's really what built Saskatoon, that ability to have this strong research base. The only reason companies set up a base in Saskatoon was because of the ability to tap into that research ability. If that disappears, there's no other reason for them to stay in Saskatoon. That would be the same here in Guelph, or anywhere else in the country. We have to have a research base that will help encourage companies to stay here and develop their technology and move it through to commercialization.

Intellectual property is an area we're going to hear more and more about over the next year, as we talk about putting patents around living organisms and so on. This is a critical component that we have to get our head around here in Canada, how we fit into the rest of the world in that area of intellectual property.

As for the human resource area, it's just the needs that are going to be out there in the future. There's going to be a lot of need around the area of education, and I think the university structure is starting to address that area. Again, I'm not going into a lot of detail in these. Hopefully we can get into some questions around some of them.

Anytime you have issues, of course, there are always benefits. I'm not going to spend a lot of time on these either, rather just touch on these.

The improved production certainly is a key component that we're seeing right now in some of the biotechnology ability. There are healthier animals through better animal vaccines, better feed quality and so on, just improved quality of feed.

Managed exports and viable agricultural industries.... I'll touch on managed exports just to let you know what I mean by that. When I talk about managed exports, it means that we in Canada, being major exporters, if we can go to a country like Japan and talk to them about what their exact needs are, we can design the products to meet those needs.

It's not a biotechnology example, but in Ontario the soybean growers worked with the buyers in Japan for soybean seed specifically for tofu. They came back and sat down with our research people, the Japanese came in and sat down, and the seed producers. Between Agriculture Canada, the research groups and the Japanese, we developed varieties specifically designed for the tofu market. That all of a sudden gave us the ability to contract and get premium prices on those particular varieties, because they weren't going into the standard oilseed varieties but they were specifically designed for and contracted with those Japanese companies. That's been a significant benefit to some growers in Ontario.

On viable agricultural industries, my point is that basically biotechnology is here, and if we want to have a viable industry in the future we have to look at how we make sure that biotechnology is part of that industry.

Another point I would like to make is that my business is agriculture, or agriculture and food. Biotechnology is a set of tools from science to help us do it better. That's really what it is. The business we're in is agriculture. If we're in a business, any time we're looking at that business we always have to look at how can we add value. I'm really interested in adding value to agriculture, and today I see biotechnology as the science that's going to help us do that. It will help us have a viable agricultural industry and will help us add value to it.

• 0940

I made a decision not to talk about specific products because I think we're just starting to see the tip of the iceberg. Agronomic traits, which Joyce commented on, are what we're starting to see now, but we're going to see things in food processing, health and nutrition, chemicals and polymers, and biofuels as we move into the next century. That will be an ongoing process of improving products and improved technologies. Within the next five to ten years almost every crop out there will be a crop that's developed using the science of biotechnology.

I did want to briefly—and this is probably a very confusing slide that I'm showing you now—talk about the gaps and the access to capital. The idea stage is number one. Then you move into your proof-of-concept stage, which is where IRAP and number of other vehicles will fund it, and then you move into the stage where you get the corporate investment seed capital.

You can get a bit of angel funding, but then you usually hit a sand trap there. In Canada, we've really had a problem with moving from that proof of concept into the early stage venture capital funds. There's a gap in there, and it varies, depending on the project, as to just where that gap might be, but to get that seed capital to move the technology from proof of concept into a reality is still a challenge in this country.

I think it's changing. I think there's more interest today in looking at how we can put some venture funds together, but it is an issue that we have to consider, I think. Again, that may be something that the biotech strategy should be looking at as it goes forward.

I just wanted to touch briefly on the role of the government. I think R and D support, as I mentioned, is critical. They have to look at how they support that at the basic research and applied research stages. We can't overlook the basic research because that's critical for future products, not just in biotechnology, but with respect to the next technologies coming behind biotechnology and what they are and how we make sure we have expertise in those areas as well.

With respect to dissemination of information, again, I think that's a piece that the governments can help us with, particularly if they look at how they build that into the strategy. As for regulation and intellectual property, I think that's self-explanatory. I think there is a financing role as well, not a granting role but a financing role, and I think we have some of that in this country. The R and D tax credits are a key component of that, and we have to make sure that we continue to keep the R and D tax credits in place for new technologies. And if there are ways in which we can make that better, let's look at how we can do it.

I use this last overhead all the time and if anybody has heard me talk before they've seen this, but it shows that competitors will eventually and inevitably overtake any nation that stops improving and innovating. Biotechnology is basically a vehicle to help us improve and innovate in the agricultural sector. We have to keep that in mind. That's really what it is.

If I had a simple message to give you, it would be that I think we have to keep in mind that the consumer is looking for healthier, safer and more nutritious food, developed with more sustainable production systems. I believe that's the role that biotechnology can give us: it can ensure that we have quality and it will give us healthier, safer, more nutritious food and a better sustainable production method. I think that's part of what we have to keep in mind as we look at how this technology unfolds in this country.

Thank you.

The Chairman: Thank you, Dr. McLaughlin.

We have two more presentations. Would you like to make your presentations now rather than having us go to questions? It's up to you.

Ms. Joyce Groote: It may be useful for the flow to just get a sense of all the different aspects here and then we can all answer questions at the end, if that's okay with you.

The Chairman: We have to be out of here by 11 a.m. because there's another committee coming in. Can you keep your presentations concise so that we can go to questions?

Mr. Rick Walter (Vice-President, BIOTECanada): Thank you. I'm the vice-president of BIOTECanada. I also can assure you that my presentation will be shorter than the others. I too am just returning from Australia, and it's almost midnight there.

• 0945

Today I thought I would run through a concept with you that is related to nutraceuticals and functional foods. This is an area we have been asked to at least provide some comments on. The area we'll be presenting on today is the overlap between, or the integration of, the more traditional functional food areas of agriculture and the health care environment. Those two sectors cross, and where they cross there's some significant biotechnology involvement. That's one of the reasons we're presenting a piece on this.

First of all, I want to walk through some of the definitions with you so you can better understand what I'm talking about. There's a whole raft of definitions that are used, such as functional foods or nutraceuticals, as well as others such as dietary supplements, food ingredients, mineral supplements, novel foods, probiotics, herbs and botanicals. There's a huge range of different definitions.

However, I thought I would just focus on two of those areas. The first is functional food, and I would define that to be a conventional food that is demonstrated to have some physiological benefit. The second area is nutraceuticals, and that tends to be the products that are isolated or purified from other plants or foods and are sold in medicinal forms. The functional food would look very much like a regular food but it might be modified to show some kind of health benefit. A nutraceutical would be something that comes in a capsule form or some kind of purified form, liquid or otherwise.

The reason BIOTECanada has become involved is because of a number of different opportunities we have identified. First of all, the nutraceutical and functional food areas were provided by a very fragmented community lacking leadership, and the industry itself had not yet really come to terms with the definitions or even the approach for regulatory pathways. Some wanted no restriction at all in the food and food products they were manufacturing, and others wanted significantly stronger regulatory oversight so they could provide documented evidence to show efficacy of their products.

We also recognized the future of nutraceuticals lies at least in part in biotechnology, and in fact the two are integrally linked because we believe some of the second generation food biotechnology products specifically lie in the area of nutraceuticals and functional foods. I'll give you some examples of those.

The third thing is that regulation and communications are pivotal issues facing the nutraceuticals industry, and BIOTECanada is familiar with those certain areas since we have provided a significant role in both the regulation and communication activities for the biotechnology community.

To undertake our activities in that area, we have just completed the development of a series of company profiles or organizational profiles for the top 50 organizations in Canada that are involved in nutraceuticals and functional food technologies. We've provided each of you with a copy of those. We've also just completed a series of workshops across the country, drawing together industry research, academia and government people to discuss the major issues facing the community.

Some of the items we actually talk about in nutraceuticals and functional foods vary from dietary fibre items such as oat bran, which I'm sure you've all heard of related to reducing the risk of colon cancer or reducing cholesterol, to other items that include herbs such as ginseng and echinacea, which you see often in the health food stores, and vitamins C and E, which are antioxidants. They may be called beta-carotene depending on what your definition is, which reduces heart disease and lowers cholesterol levels. Another option is lycopene, which is a component of tomatoes that is shown to reduce certain types of cancer. So those are the kinds of products we're talking about in general.

We also want to provide you with an economic overview. Obviously, it's difficult in an industry such as this, with its widely varying definitions, to really get strong estimates of what the international sales might be. Although these estimates vary widely, I believe the market size right now is around $50 billion U.S. a year. The expectation of that to increase exponentially is really quite remarkable. In about 10 years or so they expect that to rise from today's $50 billion to $500 billion. Canada is a very strong international player in that community, mostly with a focus on research and development, especially with the plant community.

It's interesting to see some of the rapid growth in the industry. We are watching the five largest firms in the United States that are involved in nutraceuticals, and their stock prices rose, over the last year alone, between 65% and 98%. In fact, only one of them was 65%; the rest were in the 90% range. Not bad for a return of investment.

• 0950

Mr. Larry McCormick (Hastings—Frontenac—Lennox and Addington, Lib.): It could be bad.

Mr. Rick Walter: It could be bad, yes, because we don't know where it's going yet.

That kind of growth certainly can't be sustained, but it still shows there is significant growth in the community. Interestingly enough, though, when you look at the Canadian companies, there's been virtually no growth over the past year. It's been dead flat.

Another item that is also of interest is that the U.S. giant retailers like Wal-Mart have decided to enter this realm of nutraceuticals in a big way. They have taken on their own lines of nutraceuticals and products of that nature. In fact, Wal-Mart decided at the end of last year to increase its linear shelf space by a factor of four in a single year, and that's the first time they've ever increased their shelf space by more than a factor of one for any individual product line.

Also, if we look at the demands, the recent Angus Reid poll showed that 42% of Canadians consistently use alternative health practices. Obviously this is in part because patients are taking greater responsibility for their own health, and I think they also want more personal control over the health of themselves, including increasing their fitness levels, but also much greater dietary control.

Another interesting item is that 56% of Canadians, which is spectacular, have used nutraceuticals at least once in their life—56%. So that is a gigantic market opportunity.

However, there are some problems here on the horizon. Canada is at a real competitive disadvantage in that health claims are not allowed on the labels of nutraceutical products in this country, whereas they are allowed in both the U.S. and Japan. In those two areas, the drug approval hurdles that exist in Canada are not really required.

Products are available to Canadian consumers via both direct mail and electronic commerce. As well, the foreign products are available on Canadian retail shelves, although there is no difference from the Canadian products for their labelling requirements. And interestingly, Canadian firms are selling internationally a significant amount of their product line, whereas they have almost no Canadian domestic market.

We believe there is a wonderful opportunity for nutraceuticals and functional foods in this country, recognizing that we have a strong knowledge and research base, a very strong consumer appetite for these products, and that there are Canadian companies that exist and are ready to move into the marketplace. To achieve that, what we have to do is develop a much better or more appropriate regulatory pathway, balancing safety with the concept of market availability.

We believe that nutraceuticals can be a significant economic engine of growth for this nation and that they will work in concert with the biotechnology community to develop that economic engine.

Thank you.

The Chairman: Thank you. That 56% you mentioned, do they know they're taking nutraceuticals?

Mr. Rick Walter: Yes, they do know they're taking them. They're purchased mostly from health stores and alternate food stores.

The Chairman: Dr. Turner.

Dr. Jeff Turner (Transgenic Animals, Farmer and Goat Breeder (Quebec), NEXIA Biotechnology): Thank you very much. I have some overheads, but I believe you have a copy of them in front of you, and that will form the details of the text I'll speak to. I understand we're taking a little longer than we had anticipated, so I'll keep my comments brief.

I started Canada's first transgenic animal company five years ago. The company's name is NEXIA Biotechnology, and it's based in Montreal. We are in the business of genetically modifying livestock animals, particularly dairy animals, to produce recombinant human proteins and other molecules, as well as the types of molecules that you would recognize as ergonomic traits, such as increased milk productivity, increased amount of protein in the milk—the basic components of cheese, for example.

I'll restrict my comments to the production of pharmaceuticals. This is in direct relationship to what Murray was discussing about increasing the value of Canadian agricultural exports.

Currently a litre of milk in Canada could be sold by the farmer for about 54¢. The types of products we are developing in our genetically engineered goats would sell, in contrast to 53¢ a litre, for about $20,000 a litre. So it's worth milking these goats.

Genetically modified goats and cattle, etc., have the generic name of transgenic animals. The regulatory environment I'll come back to. As far as the products of transgenics, these are just starting to move through the clinical trial process.

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It is unfortunate that none of these products are in clinical trials in Canada. We have two in the United States. These are for life-saving drugs. The ones I mention in the package here are Antithromben III to treat cardiovascular disease, and Alpha1-antitrypsin to treat emphysema.

The reason there is such an intense amount of research and capital moving into this area is because the markets are very large. There is in excess of $9 billion or $10 billion worth of products being sold today in this area. Basically these are about 40 biotech products, and an additional 280 such products are coming up.

I'm sitting here today and I'm very pleased that I'm in Canada. Canada has a very rational regulatory environment with regard to these types of molecules. The products, in this particular case human therapeutics, are going to be derived from the milk of these animals.

I have to make it very clear that the milk from these genetically modified animals will in no way move into the general milk supply. These are very separate. In these cases, agricultural animals are used to produce pharmaceutical molecules that are then extracted from the milk.

Basically these are being treated as normal biologics by the regulatory process, and that's a very rational thing to do. These are safe products, and they're being dealt with in an appropriate way with existing regulations.

With regard to the source, as I mentioned, the transgenic goats are being housed or will be housed in our facilities in St-Télesphore, Quebec. We have been informed by Health Canada and the CFIA that the regulatory assessments will not be necessary at this point. The reason for that is that NEXIA has world-class containment facilities for the genetics.

I have to tell you today that it is very different as far as controlling the genetics with regard to a goat versus a sunflower or a rainbow trout. Indeed, we have a number of containment conditions that we have brought to bear in Canada's first transgenic animal facility, and I've labelled those within my document.

We talk a lot about and need to be concerned about issues of animal welfare and animal care. NEXIA is very much involved with this. We're a voluntary member of the CCAC. We follow the regulations regarding transgenic animals that were published by the CCAC in 1997. Again, we have a very proactive regulatory group.

There are some issues that challenge companies like my own. The first is the Canadian patent law with regard to genetically modified organisms, particularly animals. As you're all aware, a variety of groups are working in this area. Canada has no intellectual property protection with regard to domesticated animals in the transgenic area. This will have a direct and very negative implication as far as product development and job creation in Canada in this area. In the past, we've seen it in Europe, and we've definitely seen job creation go to other jurisdictions.

Specifically with regard to our company, we are looking at some of the importation regulations that are causing difficulties for us. We are caught in an unusual paradox because of the types of products we work in. On one hand, we're an agricultural company. We know a lot about goats, we know a lot about milking goats. On the other hand, we're making therapeutic molecules, and these two clash.

An example I would give revolves around two diseases. One disease you're probably all familiar with would be the transmissible spongiform encephalopathy, or mad cow disease in cows, or scrapie in sheep. If we're thinking about making a pharmaceutical, we clearly do not want to follow the road of a variety of other types of situations and put people at risk. We want to have an animal that is guaranteed certified free of these diseases.

There's only one place on the planet where you can find such animals today, and that's in New Zealand, as far as goats go. That's on one hand. Indeed then we would like to be able to go through, and NEXIA has actually purchased some New Zealand goat genetics, because of the fact that it is scrapie-certified.

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The challenge we have, though, is that on the agricultural side, bringing goats from New Zealand to Canada has certain restrictions. We have some unique Canadian regulations regarding a parasite that we in Canada feel is very significant, in a very negative way, to some of our game species, wildlife. In particular, the name of this organism is E. cervi and affects red-tailed deer.

We're caught in a little bit of a paradox. We want to be able to produce drugs that will be free of prions and at the same time we have difficulty bringing those animals in. The only place in the world we could get those animals is from New Zealand, and we're facing those issues.

To the credit of the regulatory agencies involved, we've been working very actively to remove some of these issues and challenges. For us to be able to deal with that, the answer is to be able to have a first-rate facility and phenomenal standard operating procedures, and indeed our company has been able to achieve that.

Again, you probably have a very poor picture of what our facilities look like. If you're looking at Canada's first transgenic animal facility, you probably have a lot of black on your overhead. I can tell you, it's much prettier in real life.

The Chairman: You need a mirror to read it.

Dr. Jeff Turner: Oh, you can read it?

The Chairman: No, we can't read it. We need a mirror to read it.

Dr. Jeff Turner: It's backwards. Well, I didn't.... We'll say no one's perfect in Ottawa. These xeroxes were made here this morning. We can get a proper one made for you, or you can read it in the mirror.

I would like to welcome any and all of you to visit our facility. It is an historic facility in the history of Canada, in that this is one of only three or four facilities of its kind in the world. We really feel we can provide leadership in this way.

Thank you.

The Chairman: Thank you all very much for your presentations. We only have an hour for questions, so we'll go directly to Mr. Hoeppner.

Mr. Jake E. Hoeppner (Portage—Lisgar, Ref.): Thank you, Mr. Chairman.

Welcome, ladies and gentlemen. It has been an interesting morning, as it was the other day.

When we look at all the biotechnology in Canada, we're probably number two in the world, and the Europeans are way behind us. Is that because of their environmentalists giving them a lot of static or a lot of interference?

The other thing you were saying, Ms. Groote, is that 25% of our research is in biotechnology. We've heard before this committee from other witnesses, last year I think it was, that Canada was way behind in allocating dollars for research. Is it because we're only a fraction of what the U.S. and Europeans are in general R and D that 25% of it is in technology?

Those are the questions I'd like to ask personally.

Ms. Joyce Groote: Regarding that 25%, that referred to the number of companies involved in agriculture versus the total number of companies involved in biotechnology. All companies involved in biotechnology, whether they be pharmaceutical, agricultural, environmental—you name it—25% of them are involved in agriculture. That's what that was for. It was not for R and D per se.

In terms of the EU and why they're behind, I think the public dimension has been relatively recent. They have a much more complicated system by which to regulate these products. They've also decided to go to something that is much more process-based. In other words, they have legislation there for biotechnology, period. It means the legislation needs to ask the right questions, whether it's a virus, an animal, a plant, you name it. That makes it very difficult for them to manage that process. But in Canada, if it's a seed or a plant, it is regulated under the Seeds Act. If it's a virus or something for a pharmaceutical, it would be regulated through Health Canada.

Mr. Jake Hoeppner: I started farming in the 1950s, and every decade we were told there's a new revolution, the farmers will get more money, Utopia is just over the hill. Now I hear that again, that maybe by the year 2040 we'll have 10 billion people and agriculture will finally get paid for what they produce.

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I've travelled some in the world, and I've seen changes in agriculture in Europe. As you know, the Ukraine used to be the breadbasket of the world. Today it hardly produces enough for its own. But I've travelled through Russia, right into Siberia, and I've seen the potential there to raise food. I know the Europeans, especially Germany, are pouring billions of dollars in there to re-establish the food industry. Isn't that going to somehow slow down your demand for biotechnology to increase production? I think they can do it cheaper with the resources they have than with all the high tech.

Dr. Murray McLaughlin: I would say that you may be partially right, in that certainly the Ukraine and those countries are going to come back into world production where they're going to be exporting in the future. That's going to be much needed, because we are going to have to not double but triple or quadruple production, and we're going to need all the technology we can.

I would also suggest that those countries will be using biotechnology as they develop these new areas, because they all do have a very strong science base. Interestingly, a lot of these scientists from Russia are now coming into Canada and the United States and getting very good support in the labs they're in.

My feeling is the more production we have the better. I think the other side of that is that we have to keep in mind we are world leaders today and we want to remain world leaders. We don't want to start falling behind.

Actually, I read in the Globe and Mail this morning about the midwest in the United States, the number of wheat growers going out of business because of the price of grain and the drought they're heading into this spring.

Mr. Sarkis Assadourian (Brampton Centre, Lib.): They don't have boards?

Dr. Murray McLaughlin: No. I'm not saying whether with boards you're right or wrong, but the point there is that it's tools like biotechnology that will help keep some of these people in business.

For instance, think if we could increase the drought-tolerance of some of these crops, like wheat. That would certainly help us tremendously on the prairies in some years. Biotechnology will help us do that, and that's what will keep us on the leading edge.

Farmers are not necessarily going to make more money out of biotechnology, but they will stay in business because of biotechnology.

Mr. Jake Hoeppner: We could probably argue a bit on that.

Getting back to the American farmers going broke, you know what they are getting as a green plan, about $45 an acre subsidy from their government, and they're still going broke. Then you know what kind of shape Canadian farmers are in.

I've just seen a study done by two professors for the Royal Bank, and I think one conglomerate from Asia, on the issue of setting up bigger hog production plants in Manitoba. They pointed out that Manitoba and Saskatchewan have the lowest feed prices in the world, but our costs are higher than the United States because of the dollar, because most of our imported machinery comes from the U.S., plus a lot of our input costs.

Where are we going to find a balance that biotechnology will really be our saviour, as you might say, that we can stay in production? It's pretty grim out there.

Dr. Murray McLaughlin: I think a good point on that, Jake, is you made the comment that we're importing a lot of our inputs today: machinery, chemicals, and all of this. Unfortunately, we didn't have systems in place that got us producing those products in this country and exporting them out. We imported them in, and that drove our cost up because of the dollar difference right now.

Right now, with biotechnology, we have the ability to make sure that we have the production of that technology in this country and become exporters of the technology rather than importers. That will help our bottom line.

Mr. Jake Hoeppner: I have another question. Do I have some time left, Mr. Chairman?

The Chairman: Yes. One more question.

Ms. Joyce Groote: If I could make one other point on that, I think it's important also to recognize that we're not selling biotechnology as the Utopia per se. Biotechnology is a tool, and I think it's one of the many tools we need to start looking at in terms of how we can make our different sectors more competitive. So I don't think we're trying to sell it as the shining light ahead per se. I think it's just an important tool to consider.

The Chairman: When we were in Saskatoon, what was going to happen was that there would be more farmers growing more specific crops on the prairies. Instead of a depopulation trend, more people would stay on the land and be diversifying and all this kind of good stuff, and their central aim was to support the producer. We're getting a different story here. There are no promises here.

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Ms. Joyce Groote: I can't argue from the context that was given.

Dr. Murray McLaughlin: I'd like to make a quick comment on that, since I'm the guy who started the Saskatoon situation, I suppose, a number of years ago.

I would say what they're really talking about there is the diversification of the prairies and the movement into value-added, which is a big change in what we've seen in the last five years out there. That's what's going to save a lot of farmers, because they're going to move away from growing wheat and go into being much more diversified. Biotechnology is one of the vehicles to help them do that.

Mr. Jake Hoeppner: So the wheat board is going to be gone anyhow, whether we like it or not?

Mr. Larry McCormick: That's up to the farmers. Farmers control their own future in Canada.

Dr. Murray McLaughlin: Unless the wheat board wants to accept biotech.

[Translation]

Ms. Hélène Alarie (Louis-Hébert, BQ): Mr. Chairman, I have a comment to make. I would very much appreciate receiving texts in French when we have witnesses. Mr. Turner says he is going to send me his texts. It doesn't matter for the others; I have the translations.

Last week, one speaker began his talk by saying there were two peoples in the world who would survive: the Chinese because they are more numerous and French-speaking Quebeckers because they are so stubborn. So please provide us with texts in French.

My question is this. You talk about regulation and certification, but there's one thing I never hear about and that very much intrigues me, and that is scientific espionage. This troubles me because I visit laboratories and I get the impression you can enter certain laboratories quite easily. Last night, I read a newspaper article that stated that, in some countries, there is an international joke: you don't invest in research and development; you just go to Canada to get all the information you need. I would like you to comment on that. Please.

[English]

Dr. Jeff Turner: Yes. Thank you very much.

First I'll make an apology to the committee. Being a Quebec-based company, it's with some embarrassment that I was unable to provide a full translation for the group. The reason for this is not that we do not work in French and English, but rather the lateness of my invitation to this committee. A greater preparation time would have indeed provided that information for you, and such a text will be forthcoming, sent to the committee head. So I apologize for that.

With regard to espionage, that's something we take very seriously, both at our R and D facilities that are currently in Spar Aerospace on the West Island of Montreal and at our production facilities in western Quebec. In all of our facilities, you require card access to get in. It's a locked facility. Around-the-clock surveillance is maintained.

With regard to our farms, etc., the facilities are really designed to keep the animals in and keep animals that would be carrying disease out, but they also serve very well as ways of preventing other people from coming in and working with that. That's the predominant way we protect things.

Obviously intellectual property is useful for countries that recognize the rule of intellectual property and in places where Canadian companies would actually seek intellectual property protection. In many countries of the world, Canadian companies would not seek intellectual property protection. In those jurisdictions, you're absolutely correct, a foreign jurisdiction could simply read our patents, follow the teachings in them, and benefit their people accordingly. They could not, however, penetrate into other larger significant markets or our domestic markets.

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Dr. Murray McLaughlin: I'll just make one quick comment on that as well. A key piece of that for a group such as Jeff's is they have that capability of protecting their property. We have to encourage our universities that do science to make sure they go through the right process to get patents on technology before they start publishing, because a lot of times we lose technologies in this country because we'll publish on the research basis without even considering filing for patents. If we're spending taxpayer dollars to get this research done in universities and government labs, let's make sure the patents are looked after before we publish articles on this good science.

[Translation]

Ms. Hélène Alarie: This isn't an obsession with me, but I've read a number of articles stating that companies can invest a great deal in a project and suddenly, as you say, results are disclosed without intellectual ownership of that research being protected. In the end, it's as though you'd worked for nothing. The article I read last night was another wake-up call on this subject because I knew I would be meeting you this morning.

My other question concerns nutriceuticals. What can bring about better regulation for this type of product? I have visited facilities and was surprised to see that, in a country as regulated as ours, you can market echinacea-based products or products based on all other kinds of plants so easily. We sell pills with suggestive names that indicate whether they're for sleeping or waking up. You've just arrived from Australia; perhaps you need some to wake up. But it starts and stops there. There's nothing else. I couldn't get over it. These are small companies. I pitied them when I got there, but I pitied myself when I left. They are doing several millions dollars in business and they are not regulated.

[English]

Mr. Rick Walter: Perhaps I can at least start to respond to your statement rather than a specific question.

The concept of regulation in the area of nutriceuticals is a very complex one. I'll give you an example, citing a fairly traditional nutriceutical called vitamin C, or ascorbic acid.

If you were to use that specific product in a component of a fruit juice, for example—it comes naturally in orange juice—that would be considered in our regulatory scheme as a food and would require no regulation for it. There would be no regulatory hurdles to have that on the market.

If, however, you identified it as a vitamin source, so you look at your can of apple juice and it says “Vitamin C added” on it, then that has to be regulated as a dietary supplement, because you are using it as a vitamin source.

If you use the same ascorbic acid to clean medical equipment, such as scalpels and so on, that would be considered a medical device here in Canada and it would have to be regulated as a medical device.

If you used it and suggested that your ascorbic acid was going to be used in this food to prevent cancer, then that would be considered a functional food and would be regulated under the new Food and Drugs Act. If it were used as a food preservative, say in something such as strawberry jam, then that would be considered a food additive and would fall under a different set of regulations. And if you suggested it was to be used to treat a gum disease, then that would be handled as a specific drug, and Health Canada would use that under the Food and Drugs Act.

What I'm suggesting here is that the same product has a very convoluted regulatory system, depending on its use.

In some cases an item, say echinacea, for example, which is probably the largest-used herb now in the country, could be manufactured by a very small company that has no interest in getting a regulatory approval for it; they simply put forward that product with no claims at all on the label and everybody just assumes it's a good thing for them and they take it.

On the other hand, there are companies that actually adhere to these various regulatory requirements because they want to state something on that label. They want to tell you it's used for this application or that application, and to do that, they have to go through the regulatory hurdles. The regulatory hurdles are dependent on its ultimate use.

It's a very complex area, and we just hope there is going to be some recognition that there has to be greater discussion and an outcome soon about how these products should be handled in a regulatory process.

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Ms. Joyce Groote: Could I also add something? Another layer of uncertainty is that the public as well is asking for varying degrees of regulation, from none to extensive. There are folks who have been using things such as ginseng and different kinds of things they can buy in the health food stores, and they want to continue to have access to those. They feel they're taking responsibility for their own health, and they don't want that legislated. They want very quick access to those products, whereas other folks are saying “Hang on a second, I want to make sure it's safe and somebody has taken a look at it.” There's a difficulty there as well in terms of who in the public wants what regulated. The industry itself is also somewhat ambivalent as to how extensive the regulations should be.

So you have to take into account that the public is not really coming at this in a homogeneous sense, and neither is the industry. As Rick pointed out, how do you regulate it and under what legislation? It makes it a very difficult issue to work your way through.

The Chairman: I thank you very much.

I know you have been in Australia, so maybe you didn't read yesterday's Citizen on the front page where it said a spud a day keeps doctors away. You can immunize people through eating genetically altered potatoes. This is supposed to be a boon for diarrhea in the third world. There's a major article on it.

They're also growing corn to deliver cancer drugs. Apparently this stuff works. You can become immunized by eating a vegetable if it's genetically altered. This was developed at Cornell University.

How would Canada, in this regulatory system, become a part of this process or access this technology?

Dr. Jeff Turner: I can answer part of that. If it is Cornell University—this relates to an earlier question about intellectual property—it is a fairly sophisticated university, so it probably has intellectual property protection on this. So if a Canadian company wanted to access that, it would probably license that technology from Cornell.

In this particular case, the gene for a viral protein would have been introduced into a plant and the plant would produce that viral protein. It would probably be treated like a drug, even though it was being produced within a biologic. It's a very novel way.

We in the G-7 tend to think of a lot of viral diseases as something we can get around. The reason we can get around viral diseases is because we've all been inoculated as youngsters. For the majority of people in the world, inoculation against very common viral diseases is unknown. This could provide a very effective way of delivering these types of vaccines to developing countries.

Ms. Joyce Groote: There's an environmental side to that as well, where CFIS would have to take a look at that potato or that particular crop being grown in the environment. My suspicion is there would be restrictions placed on how that crop could be grown, so it would be confined and not allowed to mingle with other more traditional crops.

The Chairman: So it's going to create some problems too.

Ms. Joyce Groote: No, I think you would definitely be looking at making sure you could grow it in a contained or confined way.

The Chairman: Okay. Mr. Assadourian and then Mr. McCormick.

Mr. Sarkis Assadourian: Thank you very much.

A few times today you used the word “patent”. Are you happy with Bill C-91 the way it is? Does it give you enough protection? If it doesn't, which area do you think we should improve?

Second, a few times in the past few years I've seen documentaries on TV about growing vegetables in a water tank. They put the chemicals in the water and said this will be the thing of the future. They could take it to the desert and feed the people there, no problem. I want to know what happened to that. What's your expectation of that technology?

Third, I don't know what kind of relationship you have with CIDA to export the technology overseas to poor countries so they can feed themselves by using Canadian technology. Are you involved in any such program now?

Ms. Joyce Groote: I'll answer your first question on Bill C-91 about whether we are happy. This certainly was an interesting made-in-Canada kind of solution. We feel at least we're harmonized, in terms of having 20 years of patent protection. We feel we have sufficient time, although it's pretty tight, for making a return on investment.

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One area where we're not harmonized and that we would still like to see an answer to or see addressed in Canada is the whole area of patent term restoration or extension. What that really means is that if extra time is taken in the regulatory process to evaluate the safety of a drug, in other countries they give up to an extra five years on the patent life. We don't have that capability in Canada and that sort of extra protection is something we would like to see so they could get the return.

Otherwise, I think the linkage regulations that tie the notice of compliance with the termination of a patent life are reasonable and offer advantages to both the generics and the brand industries in Canada.

Mr. Rick Walter: If I may also comment, you should recognize that Bill C-91 is applicable only to pharmaceuticals; it doesn't touch the area of agriculture, unless it is related to the pharmaceutical production in plants, for example.

With respect to intellectual property protection, in Canada we have very little intellectual property protection from patents for higher life forms, and that's one area that I believe you'll be seeing back in Parliament relatively soon, within the next few years certainly—I hope—in order to determine what Canadians consider to be a viable role for patent protection within higher life forms. Second, Canada does have plant breeder's rights protection on a number of varieties of plants so there is some level of intellectual property protection, although not through the Patent Act.

In relation to the vegetables and hydroponics area—you were talking about the hydroponics applications—you will see hydroponic applications in every one of your grocery stores these days. A lot of the small lettuces and carrots and those kinds of things that are available at your grocery store are now grown through hydroponics. That's a fairly consistent growing practice now.

On your last question relating to CIDA, I guess you're talking about technology export to the developing nations. In fact, biotechnology is very heavily involved in all of the agricultural applications for CIDA and for IDRC as well. We know that Canada is involved in a whole series of technology transfer activities through CIDA for aquaculture-related activities as well as vaccine production through bananas to protect small children against diarrhea. Also, the IDRC is involved in agricultural and environmental applications in technology transfer to developing nations.

By the way, BIOTECanada has just been hired by CIDA to act as the focal point for biosafety work in trying to develop regulations for improving biosafety in Chile and Argentina. We'll be very active in that area over the next 18 months. We've also been involved in the last four years with Cuba, Colombia, Argentina, Chile and Mexico in developing all areas of agricultural and environmental biotechnology. That has been an ongoing program and we have permanent staff members dedicated specifically to working with those countries.

Mr. Sarkis Assadourian: If I may come back with a second question about the water, what was the word you used?

Mr. Rick Walter: Hydroponics.

Mr. Sarkis Assadourian: Hydroponics. Why can't we export that technology to other countries?

Dr. Murray McLaughlin: In Canada, it's primarily used for, as Rick mentioned, things like lettuce that you can grow year-round in greenhouses. It's just too expensive a technology. You will find it in countries like Japan and Singapore and maybe a bit in Hong Kong where they have sufficient funds to pay for this kind of production, but it is an expensive system right now. Also, you still need access to water.

The Chairman: Thank you very much.

Is Mrs. Ur taking your—

Mr. Larry McCormick: Yes. On a point of order, Mr. Chair, I have some questions I would dearly like to ask of each witness, but we have a delegation next door from Italy, and I guess I have to go and brag there at HRD about our great biotech in Canada. I'll give my time to my colleague, who also serves on the Standing Committee on Health, and that ties in quite well. Thank you.

The Chairman: Thank you, Larry.

Rose-Marie.

Mrs. Rose-Marie Ur (Lambton—Kent—Middlesex, Lib.): Thank you, Mr. Chair. I apologize for being late. There are all kinds of committee meetings going on at the same time today.

I am on the health committee. We're studying herbal products, and it certainly is interesting—and I'm a user as well—and there's a great debate about what Canadians want. They certainly want the accessibility to the products they've been using, but then we have the other gamut, as you stated earlier, and they want to have some kind of identification to make sure that what we are buying is actually what we are buying.

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You may have answered this, but who decides on the priorities or the topics to be studied for a particular product? Is there a master list you look at when you're looking at biotech? Does each person decide which area they're going to invest in? Who comes up with that, and how is it prioritized?

Mr. Rick Walter: Actually, there are two points of view. The first is the company's point of view, or industry's. Those decisions are handled by senior management, obviously. They make decisions based on what they consider to be the best return on investment. They look at their capabilities and their expertise and then they drive the research and development agenda based on that and the market opportunities.

Mrs. Rose-Marie Ur: So it's investment, not necessarily what's good for producing better quantities of food or whatever.

Mr. Rick Walter: I think most companies would say they are looking for a return on investment. I think that's the bottom line. They're looking to make money, one way or another.

Admittedly, they're also doing a lot of public good work. So there is a balance there. But they are expecting a return on every dollar invested, for sure.

Mrs. Rose-Marie Ur: That's reasonable to expect, of course.

Mr. Rick Walter: I would certainly hope so.

Dr. Murray McLaughlin: I think the other thing is that if you don't meet the needs of the consumer, you're not going to get that return on your investment.

Mrs. Rose-Marie Ur: Going on further from that, I guess, are the needs of the public and the information going back to the public. It's probably been discussed here in terms of the rBST. There certainly has not been information back to the public on that particular subject. When flags went up around here, all of a sudden people were very hesitant.

I think that has really been a kick in the knee for many Canadians in terms of where biotechnology is going. I don't think public information was well documented or well presented, and we're having difficulties now in selling biotech to some people because of that type of incident.

What is your viewpoint on that?

Mr. Rick Walter: I have a couple of things. Before we get on to that question, though, there was a second component to your last question with regard to public research that provides information for the public good.

The decisions made on that tend to be driven by individual researchers and a group of peers at the funding agencies or the funding councils, such as the Medical Research Council and the Natural Sciences and Engineering Research Council, those types of organizations. So there's peer review for those.

The Chairman: Dr. Turner, you have a comment.

Dr. Jeff Turner: Yes, specifically on the issue of somatotropin. I think the major challenge there in terms of consumer acceptance was the fact that the consumer was not benefiting materially.

Speaking from the industrial sector, you asked how products are chosen. The number one driving force in our company is whether it's needed, whether the public wants it. If the public needs it and the public wants it, that's a very strong draw for us.

The second criterion is whether we have the expertise. The third is whether the intellectual property is available so that we can either do it and prevent others from doing it or indeed not infringe on someone else's patents.

So in the case of rBST, the consumer did not get a significantly better quality. The milk was the milk. There was no material change there.

The types of modifications Murray was talking about, with the seed crops and the types of modifications we're dealing with, are going to very materially benefit the consumer, in very clear and very significant ways.

Ms. Joyce Groote: Perhaps I can comment as well.

The rBST issue was a really tough one. It was one of the first visible ones that came out. The communications were difficult, because it was still under review. Actually, the company was in a situation where because it was under review, it couldn't supply much information. So it was in one of those catch-22 situations.

I also would like to suggest that we have moved on from there. We have approximately 33 products now that have been developed using biotechnology, from canola to flax to potatoes to tomatoes. In fact, chymosin has been in cheese since 1990.

So I do think we've moved on from rBST, but I do take your point that we haven't done enough to communicate. We have been working on trying to identify target audiences. Who needs information? What kind do they need? How do we get it to them? Who will they believe? There are all kinds of questions like that. We're looking now at ways to improve getting that type of information out to members of the public looking for it.

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Mrs. Rose-Marie Ur: And, as you say, the transparency is so vital. If it's seen that it's not being done in a wide-open way then people come to the wrong conclusions.

As I said to the earlier group last week on biotech—and I wasn't being flippant when I was speaking on this—it's hard to sell biotech, whether it be health reasons, nutrition, or animal. But I think you have to find a product that everyone can relate to, and it's not so much on an animal change or a plant change as to something that is not really detrimental to a person or to an animal. If you come up with that kind of idea first, and have it quite open and have it there to present, I think you will be able to sell a greater number of people on biotechnology and then bring it in through the back door. You're certainly more versed on this than I am, that you have to come with something fairly simple and do a major change that's beneficial to the general public and then I think biotech is easier to bring in to everyone.

Ms. Joyce Groote: And if I could comment on that, I think your comments are dead on.

We have found that you don't sell the science. It's very complicated, and how it's applied becomes very different from product to product or area to area. We have found that it's much easier to talk to people about real products and the final product and how it relates to them. But we're also learning as we go too, and I'm hoping we are now getting into a generation where we can start to apply some of those things we've learned.

Mrs. Rose-Marie Ur: On that I think it's exactly right where they had said universities and whatever, but I think you should even go further and get into the elementary schools. The young children are certainly a lot more receptive to new ways of thinking and to taking it home to their parents. That's another avenue where we can introduce biotech with probably a fairly good result.

Dr. Jeff Turner: I think your point's absolutely correct. In the discussions we have with elementary school children—I have three of my own—they see things extremely clearly. Does it taste better? Is it going to prevent me from getting sick? Is it going to make me well or is it going to make me sick? If we could follow those basic attributes, we'd do very well.

Mrs. Rose-Marie Ur: For sure.

The Chairman: Thank you very much.

Mr. Borotsik, Mr. Hoeppner, then Mr. Bonwick.

Mr. Rick Borotsik (Brandon—Souris, PC): Thank you, Mr. Chairman.

First of all.... He left, unfortunately. We were talking about hydroponics. There is a huge hydroponic industry in Manitoba, in Winnipeg in particular, and they grow marijuana quite successfully, I understand. However, they're trying to shut it down, I think. They've been fairly successful. It's not necessarily technology that we want to export, I don't think.

A voice: It wasn't in Brandon?

Mr. Rick Borotsik: No, it was in Winnipeg, I said. In Brandon we don't do things like that.

Joyce, you'd talked about public dimension and I wanted to talk about that, and I think Rose-Marie touched on it. First of all, I want to tell you that I'm a fan of biotech. I have no question and no doubt in my mind that the future lies in biotech in a lot of ways, particularly in agriculture. But in saying that, there is a lot of public skepticism out there.

Jeff, you had said if the public wants it and the public needs it, then we're going to be able to accommodate them. That's not necessarily true. I don't think the public necessarily knows what they want and what they need. I'm not so sure they need a bigger tomato, even if it's juicier.

It's public dimension. It's education, I suppose, more than anything. We talked about the rBST. It took off on a whole different direction because of the negatives that were associated with that, although perhaps there aren't as many negatives as there really are.

But there are a number of organizations and groups out there who are not fans of biotech. I don't have to tell you that. I'm sure you've run into that brick wall many times.

The educational process is very important. I believe that very sincerely. But how do you diffuse the misinformation that's always out there by these organizations with respect to a lot of the good issues you're coming up with in biotech? How do you diffuse that? What's your check and balance to be able to get your message out, Joyce, with respect to the good aspects of biotech as opposed to what's happening in the industry that's being bad?

Ms. Joyce Groote: That's a really tough question to answer.

Mr. Rick Borotsik: That's why I asked it. That's why you get the big bucks. I've seen your list. Obviously you're making big bucks here.

Ms. Joyce Groote: How to deal with misinformation. A lot of the people who are opposed to biotechnology also have an extra tool that we do not have, and that is they can apply emotion, raw emotion, which is not something we can do. And risk communicators will tell you that for every negative piece of information you need three pieces of positive information to counter or neutralize it.

So we know a lot of these things, and what we try to do is be as proactive as possible in getting information about what we're doing. I think we're doing a better job of it now. And who we're giving the information to are folks like the consumers' associations, nutritionists, dietitians, doctors. We're really starting to target different groups the public would go to for information, so that they can give that factual information.

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Mr. Rick Borotsik: A true story. Is there any benefit or merit in disparaging legislation, legislation that would stop the disparaging comments from these types of organizations and groups?

Ms. Joyce Groote: You know something? I think a lot of these groups play a role as well. I look at them as our conscience check. I do think they ask really good questions, and if we can't answer those questions then perhaps we need to rethink what we're doing. I do believe we can give solid answers to those questions, and that makes us feel a whole lot better, because if we can answer them, I think it helps to build our trust and credibility as well.

For the average consumer—and what the surveys tell us—the bottom line for a lot of these products is whether they're safe. We can answer that because, again, we can go back to the regulatory system, and that's why that regulatory system is so fundamental to this industry.

Mr. Rick Borotsik: I have a question to Jeff. You're right; I don't think at $23,000 a litre you're going to have a major impact on domestic markets of goat milk, okay? I think they're pretty safe there.

You had indicated that there was no intellectual property protection on domestic animals. I think that's the term you used. Could you expand on that, and if there isn't any intellectual property protection on that, is there anything in the works now, and what is the status if there is?

Dr. Jeff Turner: My point was really a subset of generally genetically modified higher life forms.

Specifically, my company works on domesticated animals, particularly dairy animals, and currently in Canada we are unable to patent such an animal. We can trademark the name; in fact, NEXIA has a trademarked dwarf goat about this tall, called the “BELE goat”, for “breed early/lactate early”. So that's fine, to be able to do that. If we genetically alter this animal to produce a life-saving therapeutic, we can't then seek intellectual property protection to cover our development costs based on that.

Mr. Rick Borotsik: Is there anything in the works now?

Dr. Jeff Turner: Yes, it has been ongoing for some time. It's mostly generating around the Harvard onco-mouse. This is a curious little mouse.

It's a highly charged emotional issue, and it's not very positive right now in Canada, unlike other countries. But the question is, does that impact us unduly? It certainly does impact us in a very negative way. But one finds ways around it.

For example, the gene of interest that we put into these animals is patentable. The method of producing transgenic animals is patentable, so it's not a situation that it can't be done or it can't be protected; it's just very difficult to protect in our particular—

Mr. Rick Borotsik: I have one other question, if I can, to Rick, with the nutraceuticals. You have indicated, and it's true, that where in fact there is a product that comes in from other countries that can make some health claims—and you've seen them on the shelves—in Canada, you can't make those health claims unless you go through all of the protocols and all of the licensing requirements through the FDA. Should that regulation be changed?

We talk about safety, obviously, and what people want to know is safety. If you make health claims, then you have to be able to prove those health claims.

Are you saying, first of all, there's unfair competition with having some products come in and make those health claims that haven't been licensed? How do you see that changing in our industry here in Canada? And I'd like to have your views as to which is the best way to go on that.

Mr. Rick Walter: First, as a point of clarification, on the store shelves, the retail shelves, whether they come from Canada or offshore, they do not have any health claims on the labels. It's only that you can get those through mail order catalogues and through electronic commerce, which do have those labels on.

However, I think what we have to do is recognize that this is a rapidly expanding area and a lot of difficult decisions have to be made. But I believe Canada should at least be competitive with the leaders of the world, and I think we have an incredible opportunity to be the best in the world in the regulatory process.

If we were able to convince the health and agriculture departments to actually become the best in the world and put resources into determining what the best outcomes are, both for ensuring human health and safety as well as market access, and how to develop a regulatory process that bounced those two, then I think we could become truly a world leader.

We're starting it. There's the advisory panel on natural health products. There is an expert advisory committee, as well as the Standing Committee on Health, who are all looking now at those very specific issues.

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I think there are going to have to be some negotiations with industry, consumer groups, and some of the cultural components of our society who want access to these products.

The Chairman: Thank you very much.

Mr. Hoeppner.

Mr. Jake Hoeppner: I want to go back to the issue of the farmer and how much he's going to be involved in this. I'm wondering—this is from Dr. Turner—how many of these goats that can give us milk at a rate of $20,000 a litre will farmers be able to have or possess.

Dr. Jeff Turner: You ask a very important question. If you're looking at large-scale agricultural modifications, the impact of animals manufacturing therapeutics will be fairly modest. That's because—this is to put something in context for you—for many of the top biologicals, 10 or 20 goats could provide the world's supply of that material. Those 10 or 20 goats would be producing molecules worth about $500 million, and you could carry the material out in your briefcase. So this is of a very high value and low volume.

I feel biotechnology will impact positively in Canadian agriculture, particularly in the dairy sector, on our ability to increase, for example, the percentage of casein in milk. This will effect, for those who adopt that type of technology, a huge efficiency advantage in producing milk that would be suitable for cheese manufacturing.

I think we were looking at two bookends. One end is where my company is. The other end is the broader technology in terms of bringing increased productivity of basic agronomic traits to dairy animals. That's ongoing now in other places in the world. Technology will give, to those using it, an insurmountable technological advantage.

Mr. Jake Hoeppner: So you envision something like the PMU business in some of these inventions or in biotechnology in that same fashion? You know what PMU is about? That's been a very beneficial thing to some areas, but there's also a limit to it.

Dr. Jeff Turner: Oh, clearly.

Mr. Rick Borotsik: I don't know if you're aware, Mr. Chairman, but the only plant in the world is located in Brandon, Manitoba, for premarine and estrogen. I just had to throw that in. It's the only plant in the world.

Dr. Jeff Turner: That would be analogous to the types of work we're doing, but the actual breadth of the technology will penetrate into general agronomic traits in the dairy industry. It would confer on the Canadian dairy sector an insurmountable advantage.

Mr. Jake Hoeppner: I see another conflict here probably arising—maybe it isn't a conflict—between the nutraceuticals and the pharmaceuticals. I think I get the most letters on the nutraceuticals such that they don't want more regulation. They're fed up with government regulation.

How are you two industries going to stay apart? To me, it looks like there will be a bank merger between these types or you'll kill each other.

Mr. Rick Walter: If I may, I don't believe that the two are necessarily separated, and I don't think they have to be separated. Biotechnology is a single technology, or a series of technologies, used across a wide variety of industries and industrial sectors. So biotechnology will be used in the nutraceutical and functional food area the way it's being used in agriculture and a whole variety of sectors, including aquaculture, environment, health care, etc.

I believe that, as a tool, it's going to be used specifically as what it is—a tool—for increased competitive opportunities for the various industrial sectors. It will provide diversification, for sure.

One example is horseradish peroxidase. Interestingly enough, this is also in Manitoba. A new plant was manufactured and they started providing the opportunity to grow horseradish and then draw horseradish peroxidase from that, which was both a biotech product as well as a nutraceutical product. It is really only a tool rather than a sector in industry with which we can compete with somebody else.

The Chairman: We have to go to Mr. Bonwick.

Mr. Paul Bonwick (Simcoe—Grey, Lib.): My question is directed toward Mr. Walter. It has to do with some of your comments. I'm just a member of the government who would certainly be interested in cleaning up any duplication or triplication in bureaucracies or regulatory levels that might be controlling substances.

You used vitamin C as an example. The variety or complexity of regulatory levels and governing acts that oversee one particular substance and your statements would lead me to believe that it's maybe too complex or too involved and that there are too many regulatory bodies covering one substance. Yet as I look through it, I would see that this is exactly how I would want it set up.

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Maybe you could build on that, and then I just have a small supplementary on that as well.

Mr. Rick Walter: What I was trying to point out was that it's a very complex area, both from a regulatory point of view as well as an industrial point of view. It would be very unlikely for any single company, except for perhaps one of the large multinationals, to apply the concept of vitamin C to such a wide variety of applications.

They would normally focus on one or two of those individual applications. It might a vitamin source, food preservative, or cancer treatment, but not all three. So the regulatory system, because it's product-based, likely would cover most of those issues the way that a normal-thinking, everyday person would like to see them covered.

I believe there are some gaps, admittedly, especially as new products come onto the market. That's where the nutraceutical area starts to come in, because with the traditional concept of it being a food or a drug, there's now a grey area between those two, so we're now going to have to deal with those regulatory issues.

Mr. Paul Bonwick: I just see that as one way the government could certainly assist the industry.

Because of the constraints on our time, I might ask you to put in some of those suggestions whereby you see ways the government might be able to help in cleaning up or adding to the regulatory provisions that are in place presently to assist the industry. Please send them through the chair and follow up on those.

Mr. Rick Walter: We'll certainly do that. We'll also provide them, by the way, to the Standing Committee on Health.

The Chairman: I'll go back to a point that Dr. McLaughlin made earlier on the R and D and the tax benefit being a good thing. We were in Saskatoon and we were talking to John Cross, who I imagine you all know. He's the president of Philom Bios. He said that while discovery research qualifies for a tax credit, field-scale research does not. Then he said that this type of research is more costly.

Do you think this should be a recommendation to government, that they extend the tax credits or the tax benefits to field research, and not just the discovery stage?

Dr. Murray McLaughlin: I think that's certainly an area they should at least take a look at. It's a matter of what stage John Cross is talking about. Certainly there's a need for field research to qualify for R and D tax credits at certain stages. But then you move from research and development into truly demonstration sites. Demonstration sites are really marketing sites. So there's a border there somewhere at which you have to decide which side you fall on. I'm not sure whether that's what John is referring to in his comments. But I know some field trial work does qualify for R and D tax credits.

The Chairman: He was looking at field work outside of the country also.

Dr. Murray McLaughlin: Outside of the country, there are no qualifications, because this is to benefit Canada.

The Chairman: Right. But this could benefit Canada if it were able to apply to another country, such as Mexico, or whatever.

Dr. Murray McLaughlin: Yes, and I've had a lot of discussion with the seed companies, because all of our seed companies do two years of research in one year by going to Australia or Chile or somewhere in the winter months and then coming back to Canada. What they do in those countries that will benefit Canada does not qualify for R and D tax credits.

Now it's something that some of the companies would like to see a benefit with, but we have to decide how big a benefit that is to Canada. It may be something we should address in the R and D tax credits in maybe a slightly different way.

The Chairman: Then going back for a moment to the intellectual property aspect. There was some concern that large companies, multinationals, could control a lot of the seed sources. I see in the agriculture press clippings here that Monsanto has concerns about their genetically engineered seeds. It says that farmers can only use them once or face the consequences. It goes on to say that Monsanto will get tough. It has hired private detectives to check allegations of seed-saving, and they have sued a few farmers.

So you're going to get this: the more seed that's developed that's genetically engineered, then there's the fact that these companies—most of them are going to be large ones, because they're the ones who are developing them—are going to be controlling the seed source, and they're going to make it difficult.

Farmers can now propagate their own seed from natural sources, but with anything that's genetically altered, a pretty tight rein will be kept on it and it's going to be another hardship on farmers.

We do represent farmers here on this committee. We're looking at what they are getting into or what we're getting them into by this type of a very stringent application of the law.

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Dr. Murray McLaughlin: I can comment briefly on that, and others may want to.

As I look at this, it is part of the intellectual property. The companies do own the rights to that through some development work, and they've spent millions of dollars to develop it. So they have to recoup their investment.

From the farmer perspective, if there's not a benefit to the bottom line, he's not going to buy that product to start with. For most farmers, the general feeling is that with most of this technology, be it herbicide tolerance or the insect tolerance such as the Bt corn, the return to the farmer will probably be somewhere in the vicinity of $10 to $20 an acre, depending on how big a problem he has. That's not a large return, but it's above and beyond his additional investment that he may have to make.

Our benefit here in Canada is that we are developing a lot of these seeds here, we have the companies investing money here, and we'll capture some of that total investment here in the country. In Australia, when we were down there, the Australians were saying the cotton growers have really swung over to Bt corn, but they've lost $100 million in investment outside the country because the seed is developed outside and has to be brought in, even though the farmers do make more money by buying that seed.

So there are two ways of looking at it, but there has to be certainly a benefit to the bottom line of the farmer. There's no other reason he would want to buy that technology.

The Chairman: Joyce, do you want to...?

Ms. Joyce Groote: No, I don't think I would add anything to what Murray had to say. We really have been seeing the producers benefit from this technology or, as Murray said, they wouldn't be buying it. I believe Margaret Gadsby was talking last week, and just from their products, they've seen farmers being able to have a tremendous economic advantage to using their particular crops.

The Chairman: Thank you very much.

Are there any other questions? We have three minutes left.

Mr. Jake Hoeppner: I have a short question.

The Chairman: Okay, Jake.

Mr. Jake Hoeppner: I always had a lot of respect for the former agriculture minister, Eugene Whelan, and I want to read you a quote. The first time he was before this committee as a witness, this is what he said:

We've moved from a democratic, corporate, capitalist system to an undemocratic, corporate, tsarist system where only a few people control things.

Aren't we going in that direction with all this biotechnology, where the seed is controlled, the chemicals are controlled, and the farmer becomes a hostage to big corporations and will just get barely enough so he can survive?

Dr. Murray McLaughlin: I don't think we are moving in that direction to the degree you're talking about, Jake. What we're seeing is a very big change in agriculture over the next 10 years, and either we're a part of it or we're out of the business. We have to look at how we capture the key components of that business for the Canadian agricultural community, including our farmers.

Mr. Jake Hoeppner: So do you take the concerns of farmers into account when you make some of these decisions?

Dr. Murray McLaughlin: I sure do.

Mr. Jake Hoeppner: Good to hear it.

Ms. Joyce Groote: Can I just add one more point to that? This change, this evolution, is happening whether biotechnology is there or not. It's still happening. Biotechnology is not contributing; it's not making this happen.

The Chairman: Thank you all very much.

Maybe we'll take you up, Dr. Turner, on your invitation to go down to see your NEXIA plant there. It sounds like a very interesting operation.

Dr. Jeff Turner: You're certainly very welcome to do so. It's appropriate to see where the change is happening, and this is certainly one of the places where it is.

The Chairman: Thank you all very much.

The meeting is adjourned.