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AGRI Committee Report

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Government Response to the Third Report of the Standing Committee on Agriculture and Agri-Food: "The Investigation and the Governement Response Following the Discovery of a Single Case of Bovine Spongiform Encephalopathy"

Introduction

The Government of Canada is pleased to respond to the Third Report of the House of Commons Standing Committee on Agriculture and Agri-Food entitled "The Investigation and the Government Response Following the Discovery of A single Case of Bovine Spongiform Encephalopathy." The Government agrees with the spirit of the report, sharing the Committee's unwavering commitment to protecting the safety of Canadians and helping to ensure the viability of the Canadian cattle industry.

Following the confirmation of BSE in Canada in May, 2003, the Government implemented new regulatory measures to protect the health of Canadians, including the removal of specified risk materials (SRM) from the human food supply, and enhancing BSE surveillance efforts and cattle identification systems. The Government also continues to actively consider additional measures, and decisions to implement these measures will be based on a determination of their appropriateness after consultation with provinces and industry.

The Government of Canada has worked with its provincial and territorial counterparts and industry to develop national programs to assist the sector until such time as it regains access to export markets. To date, the two levels of government have committed up to $720 million for these national programs, cost-shared on a 60:40 basis. The Government of Canada also announced on March 22, 2004 that a further $680 million will be provided directly to cattle producers to help them with cash flow difficulties during this period of uncertainty, and $250 million to Canadian agricultural producers, including cattle producers, as transitional support until new Business Risk Management programming is fully implemented later this year. The Government will continue to monitor the situation facing the sector, and may consider additional programming to address specific needs.

Canada's priority continues to be regaining access to international markets, and the U.S., Mexican and a number of other markets are now open for boneless beef and other products. The U.S. has recently re-opened the comment period on its proposed rule for the importation from BSE minimal risk countries such as Canada for an additional 30 days, and is asking for comments on removing the age restriction for beef products. Canada has also placed a senior veterinary official in Japan to work with Asian markets on technical issues with the ultimate objective of setting the stage for renewed negotiations to restore trade. The Government will continue to negotiate with trading partners to assure them that Canada has the necessary BSE control measures in place with a view to regaining international market access for Canadian cattle and beef.

The actions taken by the Government address a number of the recommendations outlined in the Standing Committee's report. The following is a comprehensive list of the Government's response to these recommendations.

RECOMMENDATION 1

The Standing Committee recommends that measures to ensure that Specified Risk Materials are not included in animal feed be implemented, enforced and audited for compliance.

In response to the discovery of BSE, in July 2003 the Government implemented the single most effective measure to protect human health by prohibiting bovine specified risk materials (SRM) from the human food supply. SRM are the tissues that may contain BSE infectivity in diseased cattle.

Prior to the detection of BSE in Canada, import controls intended to prevent the entry of BSE into the country were Canada's primary line of defence against the transmission of the disease to the domestic herd. The 1997 ban on feeding ruminant animal protein to other ruminants, originally introduced as a secondary line of defence, is now the key to preventing further spread of BSE in the Canadian cattle population.

At present, the Government is examining a number of options to enhance Canada's existing animal feed controls, and the removal of SRM from all animal feed is under active consideration. Extensive consultations continue with the scientific community, international trading partners (particularly the U.S. and Mexico), the provinces and industry to ensure that any adjustments to the current feed ban are appropriate, defensible and properly implemented.

RECOMMENDATION 2

The Standing Committee recommends that the federal government work, in cooperation with the CFIA, the industry and provinces, to enhance the existing Canadian Cattle Identification Program by establishing a comprehensive and cost-effective national traceability system, as rapidly as possible.

The Canadian Cattle Identification Agency (CCIA) is an industry-led organization that was established to develop the Canadian Cattle Identification Program, currently used in Canada for cattle and other bovine species. The CCIA is currently evolving into the Canadian Livestock Identification Agency and will be expanding identification services to include all livestock species.

The CFIA's epidemiological investigation into the Canadian case of BSE demonstrated the utility of the Canadian Cattle Identification Program, but highlighted the need for further enhancements if Canada is to meet growing domestic and international expectations surrounding traceability.

On January 9, 2004, the Minister of Agriculture and Agri-Food announced funding for enhanced cattle identification and tracking and tracing. The investment will support increased enforcement activities associated with the existing cattle ID system, and accelerate the development of a more comprehensive cattle ID program using new technologies. In addition, discussions will be undertaken with trading partners to explore the possible integration of approaches internationally. The Government will work in close consultation with provincial, territorial, industry and U.S. officials during the implementation of these new measures.

RECOMMENDATION 3

The Standing Committee recommends the establishment of an industry/government task force that would focus specifically on the trade issues involved in the full restoration of export markets for livestock and its related meat products.

The Government of Canada supports the Standing Committee's recommendation on the need for an industry/government task force focussed on the trade issues with BSE.

Government-industry working groups on U.S. Market Access and International Market Access, established by the Beef Value Chain Roundtable have served this function since they were formed in May 2003. These working groups have played an important role through the development of priorities and strategies aimed at the full restoration of export markets, contributing to the success enjoyed to date.

The Beef Value Chain Roundtable, chaired by an industry leader, has served as an invaluable forum for government and industry to share information and work together to respond to the numerous challenges resulting from the discovery of BSE. Through their participation in the roundtable, federal and provincial governments and representatives from across the industry collaborate to develop and promote strategies to address issues that impact on the sector's future market success. Roundtable participation has been expanded to include representation from industry sectors affected by BSE, including the dairy, pork and rendering industries.

RECOMMENDATION 4

The Standing Committee recommends that the livestock industry and Parliament be kept informed on a regular basis of diplomatic efforts and trade missions conducted to improve Canada's livestock trade situation.

The Canadian beef and livestock industry has been provided with frequent updates on diplomatic efforts and trade missions by way of direct communication with the Minister of Agriculture and Agri-Food and with officials, and through processes such as the Beef Value Chain Roundtable. Key industry participants on the U.S. Market Access and International Market Access Working Groups are briefed by senior officials of Agriculture and Agri-Food Canada (AAFC), the Canadian Food Inspection Agency (CFIA), and the Department of International Trade on a regular basis.

Industry representatives have participated directly in missions to key markets aimed at re-opening borders to Canadian beef and cattle, including senior level delegations to Mexico, Japan, South Korea, China, Hong Kong, Macau and Taiwan, as well as Minister-led missions to Japan, South Korea and the U.S. The Minister and officials have also maintained regular contact with their provincial counterparts to share information on trade issues.

Parliament has been kept informed of trade advocacy efforts through the Minister's appearances before the Commons Standing Committee on Agriculture and Agri-Food and the Senate Standing Committee on Agriculture and Forestry, and in responses to questions raised in Parliament. Senior officials have also appeared before both Parliamentary Committees, and have provided detailed information on activities undertaken to date. The Minister and officials will continue to provide updates to the Committees on Canada's efforts to regain international market access.

RECOMMENDATION 5

In order to ensure that the increased costs resulting from changes made to inspection, rendering practices and traceability systems are not borne solely by livestock producers, the Standing Committee recommends that the Minister of Agriculture and Agri-Food increase the budget of the Canadian Food Inspection Agency.

Furthermore, the Committee recommends that the Minister name an auditor to ensure that any additional costs be kept to a minimum and shared equitably among all stakeholders in the livestock sector.

The Government's first priority in responding to the discovery of BSE in Canada remains the protection of human health and animal health. The government is sensitive to the incremental costs that additional BSE control measures may impose on the beef industry. It has engaged the provinces and industry stakeholders, including members of the Beef Value Chain Round Table, during the development of all new regulatory initiatives. There has been a concerted effort to identify and address the potential impacts on industry of new measures and to ensure that no individual component of the industry bears a disproportionate share of any associated costs.

The Government of Canada has provided additional funding to the CFIA and AAFC to carry out their respective responsibilities in relation to BSE. Specifically, $125.2 million has been allocated to support the removal of specified risk materials from food, increased BSE testing and surveillance, enhanced cattle identification, and new requirements for export certification.

RECOMMENDATION 6

The Standing Committee recommends a compensation plan for a culling program, which would include dairy cows, that should be conducted according to an attrition rate that would allow the industry to better balance supply and demand.

Furthermore, since such a program will require the development of meat products with greater value added, the Committee recommends that the government support the industry through special assistance fund for the development of new market opportunities.

On November 21, 2003, the Government announced a national Cull Animal Program (CAP), supported by new federal funding of up to $120 million, in order to help Canadian beef and dairy producers deal with older animals that need to be culled from herds. The Government has offered to cost-share the program with provinces on a 60:40 basis, bringing potential total funding to $200 million. The CAP covers a fixed percentage (16 percent for dairy cows and 8 percent for beef cows) of an individual producer 's cattle over 30 months of age as of September 1, 2003, reflecting the demand for manufacturing quality beef and available slaughter capacity in Canada. In February 2004, the requirement for proof of sale for slaughter was removed from the program to ensure that funds flow more quickly to producers, providing additional cash flow until the border opens to live cattle. Under the revised program parameters, producers will receive $320 for each eligible animal (assuming full provincial participation).

It is anticipated that beef from these animals could be absorbed by the domestic market. In order to support the development of new markets for beef from these animals, a further $1.5 million has been made available to the Beef Information Centre. In addition, staff from Agriculture and Agri-Food Canada's research community, in collaboration with provincial and university-based colleagues, have prepared a research program designed to maximize the use of commercial quality beef.

RECOMMENDATION 7

The Standing Committee recommends that the Competition Bureau conduct an investigation into the pricing of beef at the processing and retail levels. To this end, the Committee Chair and five other members will send an official written request to the Bureau.

The Competition Bureau has responded directly to the Standing Committee, indicating that its review of information does not provide grounds to start an inquiry at this time. The Competition Act does not provide the Bureau with the authority to conduct research or general inquiries into an industry. Under the current legislation, an inquiry is launched only to investigate a business or individual that has contravened the Act or is about to do so. More specifically, the Commissioner of Competition is required to conduct an inquiry whenever there is reason to believe that an offence under the Act has been or is about to be committed, or that grounds exist for the making of an order by the Competition Tribunal.

The Bureau's review of the information available – including the Committee Report, the minutes of the August 11th Committee hearings when pricing issues were extensively discussed, and all other evidence available to date – suggests that the pricing patterns in the Canadian beef market are the result of significant structural, and possibly temporary, changes in the market caused by the finding of BSE in Canada, and more recently in the United States, rather than behaviour that is contrary to the Act. Therefore, at this time, the Bureau is not in a position to initiate an inquiry into this matter. However, the Bureau will consider any additional information brought to its attention that may point to a breach of the Act.