AGRI Committee Report

GOVERNMENT RESPONSE TO THE FOURTEENTH REPORT OF THE STANDING COMMITTEE ON AGRICULTURE AND AGRI-FOOD

“Fact-finding mission on Canada’s new agriculture and agri-food policy”

INTRODUCTION

Recommendation 1

The members of the Standing Committee recommend that the vision for the next generation of agriculture and agri-food policy must place more emphasis on farmers and on primary agricultural production.

Response

The Government recognizes the critical role producers play in the production of food and other agri-products. The Government also recognizes that the efforts of the entire value chain (input suppliers, producers, processors, retailers, food service providers, and others) come together to deliver products to consumers at home and around the world, and generate economic benefits for Canadians. In keeping with this, the Growing Forward vision statement, which was recently agreed upon by FPT Ministers, is targeted at all players across the sector and the aim is for them to work together with governments to achieve it.

The vision statement in Growing Forward also reflects discussions with stakeholders across the country as part of intense public consultations.  The federal government has worked closely with provincial and territorial governments, given the concurrent nature of this work under the Constitution, in developing this common vision for the next generation of agriculture and agri-food policy. All governments agreed in principle to Growing Forward.

Recommendation 2

The Standing Committee acknowledges the competence and professionalism of the employees of Agriculture and Agri-Food Canada and the agencies associated with the federal agriculture portfolio, but is concerned about a general decline in expertise with respect to agricultural policy development and a certain lack of background knowledge on the part of officials regarding daily farm activities.  The Standing Committee recommends the immediate development of a revitalization plan for Agriculture and Agri-Food Canada, including partnerships with the provinces, their universities (sic) provincial colleges, to promote recruitment and education in agricultural programs.  Furthermore, the Standing Committee recommends that the Department take advantage of the expanding National Area of Selection for its recruitment.

Response

The Department has embarked on a number of initiatives and partnerships to renew Agriculture and Agri-Food Canada’s workforce, to build partnerships with agricultural institutions and provinces, and to promote the value of agriculture and agri-food to Canadians.  These include: post-secondary recruitment and student employment programs; relationships with provincial and territorial governments, universities and industry institutions; and marketing the value and role of the agriculture and agri-food industry.

In 2006/2007, AAFC launched a post-secondary recruitment program to renew its workforce and promote the range of career options at the Department and the benefits of a career at AAFC.   AAFC is also one of the top employers of summer students across the federal government and has departmental programs for science research assistants, members of employment equity groups and a special program for Aboriginal students.  AAFC will continue its recruitment efforts by further building its relationships with career centers and faculties at post-secondary institutions as well as exploring various media to attract post-secondary students and graduates to pursue careers in agriculture.

Since April 2, 2007, all officer-level jobs in the Government that are open to external applicants have been advertised using a National Area of Selection, to better enable departments like AAFC to attract and appoint the right person to the right job.  The Department is also considering an “AAFC Alumni Program” to retain corporate knowledge from departing AAFC employees at the management level.  This input from experienced professionals will contribute to the ongoing research, policy and program development necessary for successful development in the agriculture and agri-food sector.

AAFC has also invested in domestic Agricultural Policy Research Networks (APRNs) that fund policy research at Canadian Universities.  Investments in the APRNs help build communities of experts that are able to respond to emerging policy issues for which the Department does not have the internal capacity.  They provide critical outreach services to the agriculture sector.  Graduate students also receive funding through the networks to do agricultural policy research, which complements AAFC’s external recruitment initiative to bring university graduates into the Department.

AAFC and its portfolio partners recognize the importance of a knowledgeable, professional workforce and will continue to seek out new ways to better meet the needs of the Canadian public it serves.

Recommendation 3

The Standing Committee recommends that Agriculture and Agri-Food Canada reinstate the annual Outlook Conference for agriculture, which enables the Minister and Department officials to present and explain evolving policies and agricultural programs, and to present market projections.

Response

The Government agrees with the Standing Committee regarding the importance of regular and timely presentation and explanation of agricultural policies and programs and market projections by the Minister and Departmental officials. However, the Outlook Conferences provided only a limited venue for this communication, being held only once a year.

A number of industry-led, national commodity conferences, such as Grain Vision and the national conventions held by the cattle, dairy and hog industries, to which the Minister and senior officials are invited to speak, provide additional opportunities for the presentation and explanation of policies, programs, and market outlook. Conferences, seminars, and workshops, such as the AAFC-sponsored National Symposium on Ecological Goods and Services held in Winnipeg in 2006 and the National Conference on the Bioeconomy held in Ottawa by the BIOCAP Canada Foundation, also offer suitable venues for the Minister and senior department officials to explain agricultural policies and programs.

For the past three years the Minister and senior officials have also had the chance to interact and discuss policies, programs and the vision for the sector with industry stakeholders at national fora and workshops organized by the Canadian Agricultural Policy Institute (CAPI). CAPI was established at arms-length from government, specifically to provide a neutral forum for promoting dialogue and fostering debate among primary producers, food industry, academics and government on agricultural policy making in Canada.

The “Value Chain Roundtables” developed under the APF provide strategic and interactive fora for sharing this information, facilitating the two way communication process demanded by the sector’s stakeholders. AAFC is committed to the proactive approach that characterized its consultation with provincial/territorial governments and stakeholders during the development of Growing Forward.

The Department provides market projections through a number of reports available on its website. The Bi-Weekly Bulletin provides situation and outlook information for the grains, oilseeds and special crops industry throughout the year. The Farm Income Forecast, which is developed jointly by federal and provincial analysts with Statistics Canada, monitors the health of the sector and is published bi-annually on the AAFC website.

Recommendation 4

In order to maintain close ties with the federal Minister of Agriculture and Agri-Food, the Standing Committee recommends that the federal government establish a National Advisory Committee on farm policy development and programs, comprising representatives of all national farm organizations.

Response

The complexity and differing structures of agriculture across commodities and regions makes it difficult to form a single advisory committee that could provide learned counsel on farm policy development.

AAFC maintains close ties with national farming organizations and regularly consults with industry and producers on farm policy development and programs. This past winter, AAFC, jointly with its provincial and territorial counterparts, consulted extensively with stakeholders and the Canadian public to develop the next generation of agriculture and agri-food policy. Through public consultations, written submissions as well as an online consultation, Canadians have the opportunity to provide input and advice on how to best ensure a competitive and profitable agriculture sector for years to come. AAFC will continue to consult with industry and stakeholders, not only in finalizing Growing Forward, but also on opportunities and issues that will arise in the future.

Improved consultative approaches are being used to seek the advice and input of the industry in the development of the new suite of Business Risk Management (BRM) programs. AAFC is working with the provinces and territories to develop a new committee with an expanded role from the current National CAIS Committee (NCC) in light of FPT Ministers’ agreement to implement a new BRM suite of programs; the continued use of task teams involving producer representatives as well as national level industry roundtables; and, the BRM suite of programs being included in consultations to support development of the next generation of agriculture and agri-food policy are examples of this new approach.

Recommendation 5

The Standing Committee recommends that the federal government defend Canada's trade interests aggressively by being firm and dynamic in enforcing international agreements and facilitating market opportunities. Further, the Committee recommends that the government establish a quick-response team for trade issues that negatively affect farmers.

Response

As a major importer and exporter of agriculture and agri-food products, Canada has a significant interest in ensuring that fair and effective rules govern international agricultural trade, and that international agreements are respected by our trading partners.

The Government recognizes the importance of vigilance and of appropriate monitoring and surveillance measures and initiatives to ensure compliance with international trade agreements. The Government actively works bilaterally with trading partners to resolve trade irritants that affect agricultural products. Recourse to dispute settlement processes through the World Trade Organization (WTO) remains an important policy tool and option for Canada, in those cases where, in Canada’s view, trading partners fail to abide by their obligations.

In this regard, for example, on June 20, 2007, Canada officially requested the establishment of a WTO panel on the total level of U.S. trade distorting agricultural support. Requesting a panel also reinforces and complements Canada's efforts in the WTO Doha negotiations towards reducing and disciplining U.S. agricultural subsidies.

AAFC continues to work in close cooperation with Foreign Affairs and International Trade Canada (FAITC), and other government departments and agencies, in order to ensure the effective enforcement of international agreements through the WTO Committee on Agriculture and many other fora. For example, the Canadian Food Inspection Agency (CFIA) leads Canada’s participation at the WTO Committee on Sanitary and Phytosanitary Measures, in close collaboration with AAFC, FAITC, and Health Canada. The Committee is a key forum for addressing bilateral and multilateral trade issues affecting agricultural and food products.

AAFC maintains a regular dialogue with the Canadian agriculture and agri-food industry with respect to trade policy issues and irritants which are of concern to the industry, and which could warrant the need for further analysis or a response by the Government of Canada. Core interdepartmental teams already exist to address trade issues in a number of areas including technical barriers, sanitary and phytosanitary issues, and trade disputes. These core teams are supplemented based on expertise requirements. The Government also engages with industry forums, such as value chain roundtables, as a means of consulting with stakeholders and informing policy direction.

Over the last year, the Government has successfully addressed many industry concerns, including country-specific issues, such as pea exports to China, and cross-cutting issues, such as increased beef access in numerous export markets. For example, on June 29, 2007, Taiwan resumed imports of Canadian beef, which represented about $20 million, and Canada’s 5th largest beef export market, before the discovery of BSE.

In addition to working through key international institutions such as the WTO to defend Canada’s trade interests when necessary, Canada also takes an active role in working through other organizations in support of strengthening international rules to ensure market access for Canadian farmers. Canada’s successes in this regard include our integral role at the World Organization for Animal Health (OIE) in updating the Terrestrial Animal Health Code chapter on BSE and the related risk classification system.

Recommendation 6

The Standing Committee recommends that the government explore market development opportunities more intensively through bilateral trade agreements, while continuing multilateral trade negotiations.

Response

Canada is actively engaged in the World Trade Organization (WTO) agriculture negotiations. Through these multilateral trade negotiations, Canada is seeking to achieve a fairer, more open and more level international playing field for agricultural producers and processors. At the WTO, Canada is continuing to press for an ambitious result from the Doha Round, and in particular for the elimination of all forms of export subsidies, the substantial reduction of trade distorting domestic support, and real and significant market access improvements.

While Canada is committed to the WTO and has a major stake in the multilateral trading system, the Government also recognizes the fundamental importance of pursuing an active regional and bilateral trade agenda to advance Canada’s commercial interests. Canada already has in place numerous free trade agreements (FTAs), such as the North American Free Trade Agreement, as well as free trade agreements with Costa Rica, Chile and Israel. In April 2007, Canada announced the conclusion of its newest free trade agreement with the European Free Trade Association (Iceland, Norway, Switzerland and Liechtenstein), which will bring new opportunities for agricultural exporters.

The Government remains committed to further advancing Canada’s regional and bilateral trade agenda for the benefit of Canadian agriculture. Following on the Government’s commitment in Advantage Canada, the Global Commerce Strategy (the Government’s international economic framework) outlines greater use of our suite of policy tools, including FTAs, to enhance market access for Canadian firms, including those in the agriculture and agri-food sector. In this regard, Canada is currently engaged in free trade negotiations with the Republic of Korea, the Central America Four (El Salvador, Guatemala, Honduras and Nicaragua), Singapore, Colombia and Peru, and the Dominican Republic. The Government has also recently announced the launch of the Canada-Caribbean Community (CARICOM) free trade negotiations.

As the Government advances Canada’s objectives at the WTO, and through regional and bilateral trade initiatives, AAFC will continue to work closely with FAITC and other relevant departments and agencies, as well as with the provinces and territories, and the full range of Canada’s agriculture and agri-food industry stakeholders, to ensure that Canada’s agricultural interests are reflected in Canada’s negotiating objectives and strategies.

Recommendation 7

While remaining sensitive to the fact that agriculture education and awareness programs for the public are primarily the responsibility of the provinces, the Standing Committee recommends that the federal government financially assist market promotion initiatives introduced by farmers, such as “Buy Local” or “Buy Domestic” campaigns, which can be a powerful and useful vehicle for public information.

Response

The Government agrees that there is opportunity for Canadian agricultural producers and food manufacturers to more fully exploit the potential for their products in the Canadian domestic market. Throughout the consultations which led to Growing Forward, Canadian agricultural producers and food processors have expressed concerns regarding their ability to maintain and grow the domestic market for their products and have requested that industry and governments work together to further develop this market.

Understanding consumers and their preferences is a key tool in developing and executing promotional programs. In concert with the provinces, consumer research has been undertaken to understand Canadian preferences regarding Canadian agriculture and food products. This information will be made widely available for use by the industry as it develops its strategies.

In entering the Growing Forward negotiations among federal, provincial and territorial governments, potential participation by governments in enhancing domestic marketing opportunities will be explored. The federal government recognizes the provincial role in direct consumer promotion and education within their provinces, as well as a broader opportunity for Canadian-wide activities, such as developing their marketing competencies and capacity. These issues will be reviewed in Growing Forward discussions.

Recommendation 8

The Standing Committee recommends that farmers’ strategies to market products internationally be increasingly supported by various federal departments.

Response

The Government agrees that federal support for farmers’ international marketing strategies is key to ensuring that the agriculture and agri-food sector is equipped to seize market opportunities. AAFC, in cooperation with other federal partners such as CFIA and Foreign Affairs and International Trade Canada (FAITC), provides strategic infrastructure and tools to assist primary producers in achieving international market success. For example, the Government of Canada recently put in place new regulations for organic products which will provide access for organic producers to domestic and international markets.

AAFC, in collaboration with industry, provinces and territories, and other federal government departments, have developed a Branding Strategy for the Food and Agriculture Sector. By providing a focus for improvements in the industry and leveraging the already positive reputation of Canada abroad, the strategy aims to support the success of the industry in global markets.

The Canadian Agriculture and Food International (CAFI) Program is cost shared with over 35 industry associations and alliances, many of which represent the interests of producers directly, including the Canola Council of Canada, the Canadian Livestock Genetics Association and Pulse Canada. The Program’s objective is to deliver on long-term international strategies and short-term projects to gain and expand international recognition for Canada and enhance market opportunities for Canadian agriculture and food products, by building on Canada’s reputation as a provider of high-quality, safe and innovative agriculture, agri-food, beverage and seafood products. It is designed to ensure that Canada is well positioned to succeed in international markets and to respond to increasing consumer demands and global competition.

Value Chain Roundtables for the beef, pork, seafood, special crops, cereal grains, oilseeds, organic and horticulture sectors integrate all stages of the value chain in collaboration with federal and provincial governments to serve as a hub for development of industry-led strategies. These strategies guide government efforts to support industry (including producers) in international markets by addressing issues such as regulatory responsiveness, branding, the importance of quality and traceability to market success, and technical trade issues/foreign regulatory requirements.

The Government will continue to support farmers’ strategies to market products internationally and build on the Global Commerce Strategy, committed to in the Advantage Canada initiative and announced in Budget 2007. Specific measures include: enabling development of marketing competencies among producers; providing market information and support; undertaking brand research and policy development; developing key national quality standards; delivering exporter preparedness activities; working to influence technical issues and standards; undertaking multilateral and bilateral advocacy and trade negotiations, and engaging in trade litigation.

Recommendation 9

The Standing Committee finds it unfortunate that, under current regulations, the “Product of Canada” and “Made in Canada” designations may mislead consumers when imported agricultural ingredients are used in the manufacture of value added food products. The Committee recommends that the government immediately review its labelling legislation and regulations with the goal of implementing a minimum 51% domestic agri-food content rule that would provide better protection for the integrity of the “Product of Canada” designation.

Response

The Government of Canada is actively working to clarify requirements related to statements on food labels which imply that the food is of Canadian origin. As part of this work, the Government of Canada will be taking steps to determine whether its “Made in Canada”/"Product of Canada" labelling policy continues to provide Canadians with information to support consumer choice.

The examination of Canada’s existing policy will take into consideration our international trade rights and obligations under the WTO. As part of its multilateral commitments, Canada has agreed to ensure that its regulatory practices are in line with rules established by Members in the Agreement on Technical Barriers to Trade. This means that regulations should not create unnecessary obstacles to trade, nor should they be more trade restrictive than necessary to achieve a legitimate objective. A legitimate objective is defined at the national level and can include measures put in place to protect human health and safety, animal or plant health and the environment and consumer protection.

Recommendation 10

In support of initiatives to promote and increase awareness of Canadian agricultural products, the Standing Committee recommends that the federal government implement a strategy where Canadian food products are used in its institutional agri-food products procurement.

Response

Currently, no preference is given to domestically produced agri-food products used in federal government institutions, the exception being some agri-food products produced by inmates for institutional feeding through the Correctional Services Canada’s CORCAN program. Value (price) and quality form the primary purchase standards within established budget parameters for all procurement contracts.

With the exception of fresh fruits and vegetable which are not available year-round because of our climate, most fresh products (red meat, dairy products, eggs and poultry) purchased for use in Canadian government institutions are already of domestic origin in many instances because of regulations and policies, such as supply management.

Canada is currently a member of two agreements that contain specific commitments relating to government procurement: the WTO Agreement on Government Procurement and the North American Free Trade Agreement (NAFTA), Chapter 10. A similar Chapter that has been negotiated with Chile is forthcoming, and there are other ongoing negotiations. These agreements include commitments on specific government procurements by the federal government. Most agri-food products, and indeed most goods, are covered by these agreements. As a result, federal departments and agencies covered by the agreements shall not discriminate against agri-food products from our trading partners, as would be the case with any policy requiring preferential treatment for domestic suppliers.

Recommendation 11

The Standing Committee urges the government to adopt a policy to encourage retail chains to allow greater shelf space for local Canadian agri-food products with the objective of increasing the minimum space allowed for franchise owners from 5% to 15%.

Response

The Government notes that the establishment of franchise legislation and regulation is a provincial jurisdiction. Currently franchise legislation exists in four provinces: Alberta, Ontario, New Brunswick and Prince Edward Island. It is understood that current franchise legislation is not specific in terms of the restrictions or requirements that may be contained in franchise agreements, such as minimum space allowed for franchise store owners to carry local Canadian agri-food products. In any event, the Government remains committed to monitoring and addressing any anti-competitive behaviour within the food retail sector. Whenever possible, market forces should be relied on to the greatest extent feasible. Regulation should be resorted to only when necessary and in the least intrusive manner.

The issue of promotion of Canadian agriculture and agri-food products in the domestic market was brought to the Government’s attention by stakeholders during the recent consultations which led to Growing Forward. The Government is interested in strengthening federal, provincial, territorial and stakeholder collaboration in this area to promote the growth of Canadian grown and processed agri-food products in the domestic market.

Recommendation 12

The Standing Committee supports the comprehensive review of Canada’s competition policy announced in Budget 2007. However, in view of the high degree of concentration at some levels of the agri-food chain, the Committee recommends that:

(1) the government decriminalize the discriminatory and predatory pricing provisions in the Act in order that these practices receive a full hearing on their likely economic effects and that such a case will be assessed by the Competition Tribunal with a civil burden of proof, which has a lower threshold than the criminal burden of proof; and

(2) the government introduce a general administrative monetary penalty (AMP) provision for abuse of dominance in any industry, which would encourage businesses in most industries to comply with the Competition Act.

Response

The Government is committed to strengthening and improving the Competition Act, and, as noted by the Committee in its Report, has recently announced the creation of a Competition Policy Review Panel.

The Panel will review key elements of Canada's competition and investment policies to ensure that they are working effectively. The Panel's core mandate is to review two key pieces of Canadian legislation, the Competition Act and the Investment Canada Act. The Panel will receive submissions from interested parties and seek public input, consult to gather information, and conduct focused research to support its work. The Panel will report to the Minister of Industry, on behalf of the Government of Canada, by June 30, 2008 with concrete recommendations to further enhance competition in Canada. Once this process is completed, decisions will be made as to what, if any, amendments to the Competition Act are necessary.

Recommendation 13

On the basis of the evidence it heard, the Standing Committee noted that there is considerable support for the approach to business risk management programs being proposed by the federal, provincial and territorial governments. Like farmers, the Committee is firmly committed to the general principles of program predictability, responsiveness, bankability and flexibility. With regard to flexibility, the Standing Committee recommends that the federal government ensure a fair balance amongst provinces and between the various types of production.

Response

One of the overarching principles of the Growing Forward framework states that policies and programs will treat producers equitably across commodities and regions. The Growing Forward framework, providing a fair balance amongst provinces and between the various types of production. AAFC, in conjunction with PT governments, have developed principles for the Growing Forward framework also includes principles that would be applied when considering PT programming flexibility. The principles include: meeting the objectives of the framework, trade consistency, transparency, equitable treatment for producers; and meeting agreed-on accountability standards. Any program considered under the framework would have to be agreed-upon bilaterally.

Recommendation 14

The Standing Committee recommends that the federal government carefully examine the potential ramifications of business risk management programs to ensure that negative impacts, such as penalizing diversification or inhibiting value added activities, are minimized.

Response

The government has developed four programs for farm income support forming the new suite of Business Risk Management: AgriInvest, AgriStability, AgriInsurance and AgriRecovery.

AgriInvest is a savings account program for producers that provides flexible coverage for small income declines and supports investments that help mitigate risks or improve market income. AgriStability is a margin-based program that provides income support when a producer experiences larger income losses. AgriInsurance includes existing production insurance and other insurance products, and will expand to include other commodities. AgriRecovery is a disaster relief framework that provides rapid assistance when disasters hit producers, to fill gaps not covered by existing government programming.

Collectively these programs provide a balanced approach in support of farm income. The end result is that producers, regardless of whether they have diversified and/or have value added activities, can participate.

Recommendation 15

The Standing Committee recommends that the federal government consider a national compensation program for disasters as a main pillar for farm risk management and, therefore, that it be funded adequately to be able to meet any contingency. The Committee also recommends that this program allow provincial flexibility to address various disasters.

Response

FPT governments have been working over the past year to develop AgriRecovery, a disaster relief assistance framework that is separate from income stabilization programming. The framework will provide rapid assistance when disasters hit producers, to fill gaps not covered by existing government programming.

The intent of the framework is to help producers quickly resume business operations after a disaster by providing assistance for short-term actions to minimize and contain the impacts of the disaster on producers. The framework also allows for regional flexibility in providing a response.

Recommendation 16

The Standing Committee would like to reiterate a recommendation included in its June 2002 report and recommend permanent, minimum and statutory funding for a $1 billion federal contingency fund. The latter would be available to the Minister for a rapid response in the event of a prolonged extraordinary disaster to allow farmers to reestablish their production capacity.

Response

Time and again, the Federal Government has demonstrated that it will respond to emergency situations in a timely and effective manner. Recent examples of actions by the Government to enable farmers to recover form these situations include the responses to disease, such as BSE, Golden Nematode, and Avian Influenza, as well as excessive moisture and flooding.

AAFC is committed to developing a new disaster relief framework, AgriRecovery, which will focus on extraordinary events. The framework and committed funding would be available to the Minister for a rapid response to the vast majority of agricultural disasters, allowing farmers to quickly resume production. This disaster framework, in combination with other programs in the new suite of BRM programming, as well as the new policy framework which will result from Growing Forward, will ensure responsive and comprehensive coverage for producers.

Recommendation 17

The Standing Committee recommends that a strengthened production insurance program that addresses the specific needs of various types of farm production be developed in close cooperation with stakeholders in each of the farm sectors. Furthermore, the Committee urges the federal government to be receptive to innovative ideas, such as the self-directed production insurance plan put forward by the horticultural sector.

Response

The federal government is committed to ensuring the horticulture sector has access to ongoing and meaningful production loss protection. A Production Insurance (PI) Task Team of industry representatives and federal and provincial government officials have completed an examination of PI to determine the improvements that should be made to better satisfy the needs of the horticulture sector. The Task Team proposed, and Ministers of Agriculture agreed, that an acreage loss insurance model be adopted across Canada for the horticulture sector. This model has been successful in addressing horticulture sector’s production loss protection needs in some provinces.

The Government is of the view that producer consultation regarding the design and implementation of new PI plans is essential and their involvement will ensure that new plans meet their needs. To this end, federal and provincial officials met with representatives of the horticulture sector on December 14, 2006, to review and thoroughly explain the acreage loss insurance plans available in some provinces. As a result of the collaborative effort between industry and government, PI coverage was extended to an additional 45 horticultural crops in Ontario for the 2007 crop year. In addition, the Government is working with provinces and territories to extend production insurance to the livestock sector.

The Government is aware of the demands to reinstate federal contributions to the Self-directed Risk Management (SDRM) program and the proposed Self-directed Production Insurance (SDPI) program in Ontario. However, under the Agricultural Policy Framework, all governments agreed that federal contributions to province-specific initiatives like SDRM would cease at the end of the 2005-06 fiscal year.

Recommendation 18

The Standing Committee recommends that the federal government immediately establish a NISA-type shared contribution program.

Response

In June 2007, Ministers of Agriculture from across Canada announced AgriInvest, a contributory-style producer savings account program, as a part of the new BRM suite. The program will be cost-shared and will replace the top tier of AgriStability (the income stabilization element of the BRM suite). Governments will match producer contributions to savings accounts, on a 50:50 basis up to a limit.

The savings accounts will improve timeliness, bankability and predictability of assistance to farmers. In addition, the accounts provide flexible coverage for small income declines and support investments that help mitigate risks or improve market outcomes. The program includes a $600 million kick-start to the accounts and, provided certain conditions are met, an ongoing $100 million annually to producers to address cost of production pressures.

Recommendation 19

While recognizing that provinces and territories have reason to establish companion programs, the Standing Committee recommends that a national strategy for agriculture programs be developed respecting provincial and territorial areas of jurisdiction, and in response to needs and priorities of the provinces and territories.

Response

The recently announced Growing Forward will form the basis of an action plan for the future of Canada’s agriculture, agri-food and agri-based products sector to be negotiated by FPT governments. Growing Forward provides a comprehensive national strategy for agriculture programs, which respects provincial and territorial areas of jurisdiction and responds to their needs and priorities. FPT governments will enter into new implementation agreements assuring that such an approach is applied.

The Federal Government is of the opinion that funding companion-style programs puts Canada at risk of increased countervailing duties and could potentially distort production and marketing decisions. The Federal Government is also mindful of the potential this may have to discriminate against other sectors and commodities.

Recommendation 20

The Standing Committee recommends that the federal government recognize that supply management and its three pillars — producer pricing, import controls and production discipline — is inherently a business risk management program in Canada.

Response

The Government accepts this recommendation and the FPT Ministers of Agriculture recognize this in Growing Forward, which states that:

“The supply management system is a risk management program consisting of three pillars:

Recommendation 21

The Standing Committee recommends that:

1. the governments provide the legislative support necessary for farmer-run orderly marketing agency's (sic) to continue to work effectively on farmers’ behalf in the area business risk management; and
2. the government negotiate at the WTO to ensure that supply management is maintained and that state trading enterprises be allowed as a marketing tool.

Response

The Government notes the distinction between supply management and State Trading Enterprises. While supply management applies nationally and is strongly supported by affected producers, the Canadian Wheat Board (CWB) is region specific and significant numbers of producers subject to the CWB would prefer to have marketing choice.

(1) The Canadian Dairy Commission Act, the Farm Products Agencies Act, and the Agricultural Products Marketing Act provide the legislative support necessary for farmer-run marketing agencies to continue to work effectively on farmers’ behalf. Collectively, these Acts enable farmer-run agencies to be involved in production, promotion, research and marketing.

(2) Canada is participating actively in the WTO agriculture negotiations and is seeking the best possible result from the negotiations for Canada’s entire agriculture sector, which includes both export-oriented and supply managed industries. In the face of intensive pressure, the Government is aggressively defending interests that are important to the supply managed industries in the agriculture negotiations.

The Government remains committed to finding a way to allow western Canadian farmers to sell their wheat and barley to any foreign or domestic buyer, including the CWB. The Government recognizes the right of the provinces to establish orderly marketing structures as a tool.

As WTO Members work toward a successful and ambitious outcome from the Doha Round, Canada will continue to consult closely with the provinces and territories and the full range of Canada’s agriculture and agri-food industry stakeholders with regard to Canada’s approach to the negotiations.

Recommendation 22

On the premise that bioproducts and innovations in the agrifood chain cannot be developed without agriculture, the Standing Committee recommends that primary production research be defined more precisely in the Science and Innovation Strategy, that there be a specific component devoted explicitly to primary production research, and that it obtain its fair share of funding.

Response

AAFC’s Science and Innovation (S&I) Strategy defined seven priorities of national importance related to food safety and quality, science and innovation, and environmental health, taking into consideration a clear set of expectations expressed by producers, processors, and other stakeholders. As the S&I Strategy is updated, the Department will be considering the appropriate balance of our activities in partnership with producers, processors, and other stakeholders across the full innovation spectrum to ensure on-going competitiveness of the sector.

Primary producers benefit from research in sustainable production systems conducted at AAFC research centres located across the country. Research in the areas of plant breeding and crop genetic enhancement, and in the development of sustainable plant and animal production systems are ensuring that the primary Canadian agricultural sector remains competitive and forms an integral component in the development of bioproducts and other innovations in the agri-food value chain.

The Government is committed to reviewing and improving our science Research and Innovation programs to better serve primary producers and the entire Agri-Food industry.

Recommendation 23

The Standing Committee recommends that scientists at Agriculture and Agri-Food Canada and its agencies be freed from administrative duties that take up too much of their time and energy, so that they can spend their time on what they do best: applied research. The Standing Committee also recommends that research projects be streamlined.

Response

The Department agrees with these concerns and as a result, recently made changes to streamline the administrative processes involving research projects, as well as completing the staffing of management and administrative positions, which reduces the administrative burden on other staff in the department, including scientists, and improves accountability for results. Additionally, Branch governance has been re-aligned to streamline resource allocations and improve day-to-day transactions and decision-making at the local level. The new research proposal peer evaluation process implemented last year has been improved for this year, reducing some of the administrative burden on scientists submitting proposals. This process also provides researchers with multi-year budget allocations to enable better science planning over the timeframe of the research project.

For the small complement of CFIA scientists that focus on regulatory research, it is recognized that scientific research and advice constitute an important aspect of their responsibilities. The CFIA has instituted a number of processes to streamline research proposals and reporting to ensure that its scientists’ time can be maximized.

Recommendation 24

Primary producers require to be better informed about research development, and consequently the Standing Committee recommends the establishment of a one-stop access to information about innovation and market opportunities.

Response

The Government accepts this recommendation and is committed to providing responsive programs and services that support producers to pursue innovation and market opportunities. The Government has announced $500 million in investments in ecoAgriculture initiatives, which are being made over the next five years to assist farmers and rural communities for new market opportunities in the agricultural bio-products sector. AAFC is also committed to improving client access on programs and services across the internet, over the phone and in our regional offices.

Recommendation 25

The Standing Committee recommends that the National Farmed Animal Health Strategy (NFAHS) itself be a pillar in Canada’s new agriculture and agri-food policy, while respecting provincial and territorial areas of jurisdiction.

Response

Animal health remains a significant concern for both the agriculture sector and governments alike. Animal health complements food safety and food security, and is a key consideration in policy and program efforts designed to support primary agriculture in Canada and promote the health of Canadians.

Recognizing that responsibilities to address animal health issues cut across the federal organizational mandates, as well as federal, provincial and territorial government authority, CFIA and AAFC have been working with provincial and territorial counterparts to identify opportunities to strengthen the capacity of the agri-food sector to manage animal health-related risks. In particular, the CFIA is leading the development of a comprehensive National Animal Health Strategy (NAHS) in which farmed animals are a key dimension. The NAHS will contribute to achieving the policy outcomes set out in Growing Forward.

AAFC, along with its provincial counterparts also sought input from stakeholders regarding animal health via consultations for the next generation of agriculture policy. The Government also supports animal health through its business risk management programs, as well as through the development and adoption of on-farm biosecurity measures, national traceability systems and system management tools, such as surveillance.

Recommendation 26

The Standing Committee again recommends that the federal government review, in consultation with the livestock and poultry industry, the Health of Animals Act in order to strengthen compensation mechanisms in the event that farm animals are destroyed.

Response

In November 2006 CFIA proposed changes to the amount of compensation paid to owners of animals ordered destroyed for disease control purposes. The proposed changes were developed following extensive consultation with industry and government stakeholders. The changes are designed to better reflect the market value of animals. The new maximum amounts of compensation payable under the Health of Animals Act (HAA) for animals ordered destroyed due to disease was published in the Canada Gazette, Part II on August 8, 2007 and are currently in force. This allows the Agency to use the newly promulgated compensation levels for market value of animals when required. Compensation amounts have increased in some animal categories. For example, compensation for registered pure-bred cattle, which was limited to $2,500 per animal, has been increased to a maximum of $8,000. Consistent methodology was used to determine values across all animal categories.

In addition, programs in the new suite of BRM programming including AgriInvest, AgriStability and AgriRecovery, will be available to fill gaps and provide assistance for related income losses.

Recommendation 27

The federal biofuel strategy has enormous development potential that could, however, affect the competitiveness of the livestock industry throughout Canada. The Standing Committee therefore recommends that the federal government immediately conduct a comprehensive analysis on the development of biofuel by-products feedstuff for livestock and poultry, and that the analysis be tabled in the House of Commons.

Response

The Government agrees that the federal biofuel strategy has enormous potential for rural diversification and the competitiveness of the sector. For example, the increased supply of by-products such as Dried Distiller’s Grain with Solubles (DDGS) will provide both the livestock and poultry sectors with additional feed sources that are high in protein. This will help to offset the impact that the increase in world production of biofuels will have on feed grain prices.

The federal government is currently conducting comprehensive analyses into how the increasing supply of DDGS, and other by-products, will affect the profitability of both the biofuels industry and the livestock sector. The future competitiveness of both sectors is highly dependent on how the market for DDGS develops as it provides an important revenue source for ethanol producers and a competitively priced feed for livestock producers. Research is also continuing in Canada, Europe and United States on the incorporation of DDGS into livestock and poultry diets in greater proportions. Preliminary results have shown great promise in developing feeding technologies that will be able to incorporate greater quantities of DDGS that will come onto the market as ethanol production expands. Research and analysis related to biofuels, by-product markets and the use of DDGS in livestock rations will be made available to the public.

Recommendation 28

As the demand for feedstuff in Canada and the United States usually goes in tandem, it is difficult for our country to influence their price. In order to relieve pressure on the demand for animal feed, the Standing Committee recommends that the federal government, in conjunction with the biofuels industry, give priority to research into biodiesel production and the development of non-feed inputs, such as switchgrass and cellulosic fiber, for ethanol production.

Response

In response to the changing landscape created by federal regulation requiring renewable fuels such as ethanol and biodiesel, the Government has funded several programs to help the Canadian biofuel and related bioproducts industries develop. These include the ecoAgriculture Biofuels Capital Initiative, the Biofuel Opportunities for Producers Initiative, the biofuels production under the Co-operative Development Initiative, the Agri-Opportunities Program and Agricultural Bioproducts Innovation Program.

The federal government committed an additional $2 billion over seven years, in Budget 2007, to support the production of renewable fuels. This included $500 million in funding which was made available to Sustainable Development Technology Canada (SDTC) to invest with the private sector for establishing large demonstration-scale facilities producing next-generation renewable fuels using non-traditional feedstocks such as lignocellulosic materials (including agricultural residues) and non-conventional conversion technologies.

With specific reference to research, the Agricultural Bioproducts Innovation Program will strengthen the capacity of Canadian science providers and industry through the creation of networks for research, technology development, and commercialization of agricultural bioproducts and bioprocesses. These include the development of renewable liquid transportation fuels and other forms of bioenergy, the use of a range of crops and agricultural wastes as feedstocks, the use of co-products as livestock feed, and the production of a variety of new biobased products.

It should be noted, however, that research and development of alternative feedstocks for biofuels production is only one option to relieve pressure on the competing demands for feed grains.

Additional options include animal nutrition research on alternative feed rations, which would assist livestock producers to adopt alternative feeds based on prices for different feed grains, forage crops and other biomass sources suitable for use as livestock feed.

Recommendation 29

The Standing Committee recommends that Agriculture and Agri-Food Canada conduct an analysis of the opportunities offered to agriculture if the targets were 5% and 10% for biodiesel, and 10% and 20% for ethanol.

Response

AAFC has already conducted an economic analysis on the effect of a 5% ethanol and 2% biodiesel mandate. The analysis examined the regional economic and environmental impact on the Canadian agricultural sector, which has been shared with other federal departments, provincial governments and industry. The results from the 5% ethanol and 2% biodiesel analysis will be published in a report being written by a FPT Working Group on Economic Analysis co-chaired by AAFC and Alberta Agriculture, Food and Rural Development. The analysis that has been done to date has focused on current technologies and short-term effects. Further analysis will be undertaken to examine the potential effect of new technology, research that may give a better idea of the impacts in the medium to long term.

As the broader bioeconomy grows, farmers may find additional opportunities that go beyond biofuel feedstock production. The environmental analysis of the biofuels strategy is ongoing. AAFC is currently using its modeling capacity to look at the environmental effects on the agriculture sector. As the analysis proceeds, the effect of the biofuels industry expansion on sustainability will be further explored.

Understanding the agricultural implications and opportunities associated with moving towards higher blend levels is important. There is also a need to explore the consequences of higher blend levels along the production chain. Issues such as environmental benefits, distribution infrastructure, and end use, including the ability of vehicles to use higher blend levels; manufacturers’ warranties; and impact on fuel distributors, are being considered to effectively assess the policy implications.

Recommendation 30

Although the increase in the capital gains exemption to $750,000 was well received, the Standing Committee recommends that it be further increased to $1 million. The Standing Committee also recommends that the federal government look at various financial and fiscal instruments that could be helpful to young farmers in their first years of farming such as investment tax credit, interest assistance, capital insurance program, start up financing, a farm transfer savings plan, allowing RRSP funds to be used for the purchase of a farm, and the transfer of targeted financing to the provinces to encourage young people to go into farming.

Response

The Government recognizes the vital role that farmers play in the social and economic well being of our nation. In this regard, the current tax system provides a number of other special tax measures for farmers, in particular:

• Farmers may transfer eligible farm property to their children on a tax-deferred basis through an intergenerational rollover.
• Farmers may elect to report income and expenses on a cash basis rather than on an accrual basis and are exempt from making quarterly tax instalments.
• Farmers do not have to pay the Goods and Services Tax on many of their inputs, including feed, bulk grains and seeds, pesticides, bulk fertilizer, and major farm machinery and equipment.

In addition, Budget 2007 announced an increase in the lifetime capital gains exemption (LCGE) to $750,000 from $500,000, the first time the limit has been increased since 1988. This will further increase the rewards of investing in farming. For example, where a couple owns a farm, up to $1.5 million in capital gains will be exempt from tax.

These measures, along with other special tax rules, constitute a significant level of tax support to help young farmers.

Initiatives outside of the tax system also provide benefits to young farmers. For example, Farm Credit Canada (FCC) plays an important role in this regard. In 2006/07, $1.255 billion of FCC loans were approved to borrowers under the age of 40 years, which accounted for 35.1% of the year's approvals. In addition, FCC provides a loan product targeted specifically for young farmers. In Growing Forward, FPT Ministers committed to creating a profitable environment in the sector that attracts new and young entrants.

Recommendation 31

The Standing Committee recommends that the federal government promote programs available to young farmers on a regular basis. In addition, the Committee recommends that the federal government be innovative in its partnerships with the provinces in providing funding to colleges and universities with agricultural programs.

Response

The Government recognizes the importance to young and beginning farmers of having accurate, timely, and accessible information on the availability of government programs. To that end, the Government will continue to work with its national partners, such as the Canadian Farm Business Management Council, the Canadian Young Farmers' Forum, and others to help young and beginning farmers learn about government programs consistent with their business needs.

The Government also recognizes that men and women who choose agriculture as a career should have access to training in best management practices, including the training referenced by the witnesses quoted in the Committee’s report. The government is aware that many institutions play a role in the provision of such training, including the colleges and universities singled out in the Committee's recommendation. Consequently, the government will continue working not just with the colleges and universities and their associations, but with the provinces and other partners, to explore innovative ways, including funding options, of encouraging the supply of farm business management programs, and to facilitate their use by the next generation of Canadian farmers.

Recommendation 32

The Standing Committee recognizes the progress accomplished by the Pest Management Regulatory Agency and appreciates the semi-annual meetings aimed at reviewing the Agency’s work. However, the Standing Committee recommends that, in the context of the next generation of agriculture and agri-food policy, the PMRA publish a status report on the level of its services.

Response

The Government agrees with the Standing Committee on Agriculture and Agri-Food that publishing a status report on the level of services provided by Health Canada’s Pest Management Regulatory Agency (PMRA) would be useful in the context of the agriculture and agri-food policy.

It is proposed that the status report will outline the current level of service and show recent trends. Namely, it will provide a summary of the semi-annual reports that the PMRA has been providing to the Standing Committee, as well as detail specific information related to: the number of new active ingredients registered from the “technology gap” list; harmonization activities, such as international joint reviews and the number of NAFTA-labelled registrations; the number of Grower Requested Own Use (GROU) products available; and other initiatives aimed at the agricultural sector.

Recommendation 33

Because efficient transport of agricultural goods is a key factor in market development, the Standing Committee recommends that the federal government conduct an in-depth review of the rail transport regulatory framework and make the necessary changes so that it is compatible with the requirements of the new agricultural and agri-food policy designed to achieve prosperity for the agri-food chain as a whole. Furthermore, the Committee recommends that the federal government conduct a specific level of services review.

Response

Bill C-58, An Act to amend the Canada Transportation Act (railway transportation), was tabled on May 30, 2007 following extensive consultations with shippers and railways on the rail transport regulatory framework dating back to the statutory review of the Canada Transportation Act that was completed in 2001. Bill C-58 amends the rail freight provisions of the Canada Transportation Act and, in particular, strengthens the shipper protection provisions that address the potential abuse of market power by the railways. When the Bill was tabled, the Government also announced that it would conduct a review of railway service to commence within 30 days after the Bill is passed. Shippers and the railways will be consulted on the scope and terms of reference for the review. The Bill received its second reading on June 14, 2007 and was referred to the Committee on Transport, Infrastructure, and Communities. However, when Parliament was prorogued on September 14, 2007, the Bill died on the Order Paper. The measures included in Bill C-58 have received strong support from sector stakeholders, including grain shippers, and remain a key objective for the Government. The Government will seek to reinstate the Bill.

Bill C-11, An Act to amend the Canada Transportation Act and the Railway Safety Act and to make consequential amendments to other Acts, which received Royal Assent on June 22, 2007, amended other provisions of the Canada Transportation Act and contained a provision requiring a statutory review of the Act to commence within eight years. Transport Canada officials will monitor the effectiveness of the Act and may make recommendations to commence the statutory review at an earlier date or to proceed with a targeted review of selected provisions, if warranted.

Recommendation 34

In consideration of environmental farm plans, the Standing Committee believes that farmers must be compensated for the environmental benefits that they generate in their communities. The Committee recommends that the federal government recognize this stewardship role in the new agricultural policy. Furthermore, in cases where the market might not take farmers' best management practices into consideration, the Committee recommends that the federal government contribute to a federal-provincial cost-shared compensation program.

Response

A Federal/Provincial working group has been tasked with exploring policy options for enhancement of Ecological Goods and Services (EG&S) at the farm level. Eight pilot projects across Canada are analyzing various EG&S policy options. A cost/benefit analysis of various EG&S policy options is also being undertaken. The evaluation of options takes into account the Government’s focus on greater accountability as well as a desire to have meaningful and measurable targets of environmental stewardship. Options under investigation include acreage payments, credit trading and other market based instruments. Results of both these processes are expected to contribute to new agricultural policy.

Recommendation 35

As the trend in the agricultural policies of producing countries is toward supporting environmental programs, the Standing Committee recommends that Canada's agricultural policy include a voluntary program, under which private agricultural land could be used as a tool for conserving and developing environmental resources. Since such a program will benefit all Canadians, the Committee also recommends that the governments provide financial support targeted to farmers for their land stewardship role.

Response

Governments have been administering voluntary agri-environmental programming which provides financial support to farmers for stewardship for a number of years. Examples of this include the National Farm Stewardship Program (NFSP), which provides technical and financial assistance to implement on-farm action plans, and Greencover Canada, which aims to improve grassland-management practices, protect water quality, reduce greenhouse-gas emissions, and enhance biodiversity and wildlife habitat. These programs, and others, are being considered to deliver environmental benefits in the context of Growing Forward.

Recommendation 36

As farmers frequently told the Standing Committee: The time for consultation must now become a time for action. The Committee therefore recommends that the federal government take action, in a concerted and informed manner, and focus on primary agriculture now. Furthermore, the Standing Committee recommends that a national food policy be put in place to guarantee a safe, viable and plentiful food supply to ensure a long-term food security, with the understanding that such a policy will respect provincial and territorial areas of jurisdiction.

Response

As indicated in the response to Recommendation 1, governments recognize the critical role of primary agriculture. It is also recognized that food policy in Canada operates in a complex multi-jurisdictional context, involving federal, provincial and municipal authorities, with responsibilities divided among a number of departments and regulatory bodies. Private sector initiatives also have a major impact on food policy, as industry seeks to continually meet the needs of consumers in Canada and abroad.

Policies include both mandatory controls, such as government regulation and enforcement, and voluntary systems, such as on-farm food safety programs, which work together to ensure the safety of the Canadian food supply. Additionally, a broad range of government and industry programs and initiatives are in place in the areas of food quality, animal, plant and fish health and protection, health promotion and disease prevention, all of which contribute to a safe, viable and plentiful food supply.

This system has served Canada well. There is a long history of cooperation between government departments and a variety of forums and mechanisms have emerged over the years to deal with horizontal or cross-cutting issues that may be under the jurisdiction of more than one department or government.

The Government, however, recognizes the need to be ever-vigilant in addressing the needs of primary agriculture and will continue to focus on how producers can gain greater profitability from an innovative marketplace and a value-added supply chain.

GOVERNMENT RESPONSE TO THE CONSERVATIVE MINORITY REPORT OF THE STANDING COMMITTEE ON AGRICULTURE AND AGRI-FOOD: “FACT-FINDING MISSION ON CANADA’S NEW AGRICULTURE AND AGRI-FOOD POLICY”

The Government appreciates the input from the Government Members issued through the Minority Report. The Government is committed to continued review and design of better agricultural programming. The Government is also committed to ongoing improvement of the tax system for all Canadians, including farmers.

The government recognizes the dissenting opinion of Government Members held with respect to Recommendation 21. The Government remains committed to finding a way to allow western Canadian farmers to sell their wheat and barley to any foreign or domestic buyer, including the Canadian Wheat Board.

October 2007