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AGRI Committee Report

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GOVERNMENT RESPONSE TO THE SEVENTH REPORT OF THE STANDING COMMITTEE ON AGRICULTURE AND AGRI-FOOD, ENTITLED “YOUNG FARMERS: THE FUTURE OF AGRICULTURE”


Introduction

The Government of Canada is pleased to respond to the Seventh Report (the Report) of the House of Commons Standing Committee on Agriculture and Agri-Food (the Standing Committee) entitled “Young Farmers: The Future of Agriculture”. The Government agrees with the overall intent of the Report and shares the Standing Committee’s commitment to young and beginning farmers in the agricultural sector.

Young farmers are key to the revitalization of the sector. As the average age of a farmer is increasing (from 48 to 52 between 1996 and 2006), the sector’s capacity to attract and retain young farmers is an important challenge. Young and beginning farmers face specific challenges including high capital requirements, which have made entry into agriculture more difficult and less attractive to young people.

Despite these challenges, Canada must capitalize on the entrepreneurial spirit of young farmers entering the sector and their innovative ideas and new ways of doing business to achieve a prosperous and profitable future for the agricultural and agri-food sector. Communicating that the agricultural sector offers young people a variety of career opportunities is key to attracting new entrants to the sector.                 

Based on 2008 data, close to 8% of farms are young farmer enterprises (YFEs) and they perform better than other farms in Canada. More of them are in the medium to very large farm categories. They are well distributed across farm types, with slightly more operating hog, poultry and egg, and dairy farms, partly dispelling the myth that cost barriers in the poultry and egg and dairy industries prevent young farmers from entering.

In terms of financial performance, most YFEs, by farm type and size, earned higher gross revenues from their farm assets and had relatively higher profit margins than did other farms. They also reported higher farm employment income.

Recognizing the importance of young and beginning farmers, Agriculture and Agri-Food Canada (AAFC) has developed and implemented a "youth lens" in order to help develop and implement policies and programs that meet the needs of young and beginning farmers.

AAFC also hosted the first meeting of the National Future Farmers Network (NFFN), November 15 and 16, 2010, in Ottawa. The NFFN was created to support discussions around challenges facing young and beginning farmers and potential solutions and to act as a forum to strengthen partnership between young farmers and the Government and establish partnerships with other stakeholders.

AAFC has announced a series of virtual roundtables with young farmers which will provide an opportunity to continue the dialogue and to develop action plans on young farmers’ priorities including access to capital, skills and training, and farm transfers.

The Government has carefully reviewed the recommendations and opinions in the Standing Committee’s Report and welcomes the opportunity to respond to each recommendation and opinion individually. The Government Response will address each recommendation and opinion in full, but it bears emphasizing that these specific responses cannot capture all of the work that has been undertaken by the Government.


RECOMMENDATION 2.1

The Standing Committee recommends that Statistics Canada add as promptly as possible questions in the Census of Agriculture questionnaire that will enable the establishment of a profile of young farmers in Canada.

Government agrees with the intent of the recommendation to modify existing data collection and consideration could be part of the next round of consultation. The Government suggests that existing data sources regarding young farmers be more fully exploited before new data collection is considered. 

The Census of Agriculture and other sources at Statistics Canada currently provide data that can be used to produce profiles of young farmers in Canada.  For example, AAFC produced the bulletin “A Profile of Young Farmers in Canada” using a number of Statistics Canada data sources: the 2001 and 2006 Censuses of Agriculture, the Agriculture-Population Linkage Database and the annual Farm Financial Survey.  Statistics Canada also compiles databases each year pertaining to farms and farm operators by extracting information from tax files and in this way contributes to reducing and managing response burden.

Since 1971, the Agriculture-Population Linkage Database has been produced by combining the information from the Census of Agriculture and the long form of the Census of Population.  The databases are large and contain agricultural, socio-economic and demographic variables, making them rich and highly suitable sources for building and analyzing profiles of Canadian young farmers, including farm characteristics that can be cross-tabulated with education levels, occupations, individual and family income, etc. Following the changes to the 2011 Census of Population, Statistics Canada plans to produce a 2011 linkage database using the responses to both the 2011 Census of Agriculture and the new 2011 National Household Survey.

The questions to be included in the 2011 Census of Agriculture were published in the Canada Gazette in June 2010. Questionnaires for the 2011 Census of Agriculture were printed in October 2010 and mailed to certain agricultural operations beginning in November 2010.  Mailings to all agricultural operations will be completed by the beginning of May 2011. 

For every census, data users and stakeholders are consulted beginning approximately three and a half years prior to Census day and are asked to provide suggestions for changes or additions to questionnaire content. Content consultations for 2016 would normally begin in 2012.


RECOMMENDATION 2.2

The Standing Committee recommends that Agriculture and Agri-Food Canada review the eligibility criteria of the Canadian Agricultural Loans Act, including the six years of farming experience limit, in order to take into consideration the age of applicants.

Government does not find the need to review the eligibility criteria of the Canadian Agricultural Loans Act (CALA) at this time.

AAFC launched the CALA Program in June 2009 to replace and expand on the former Farm Improvement and Marketing Cooperatives Loans Act (FIMCLA). Specifically, the CALA expanded program eligibility to include beginning farm operations. A beginning farmer is defined as an applicant who has been declaring farm income or expenses for less than six years, which is generally considered to be the average time period for a farm to become established. From Royal Assent (June 18, 2009) to January 31, 2011, 335 loans have been registered to beginning farmers worth a total of $29.8 million.

Under the CALA, beginning farmers are eligible for financing of up to 90% of the purchase price or appraised value of the asset. Applicants who have been farming more than six years are established farmers who are eligible for financing of up to 80% of the purchase price or appraised value of the asset under the program. To help them start their farms, the 90% financing allows beginning farmers to provide only half the down payment for a loan, compared to what would be required for established farmers. Both of these financing limits tend to be more favourable than those offered under conventional lending practices.  The provisions of the Act will also be reviewed in 2014-15 as part of a mandatory 5-year review.


RECOMMENDATION 2.3

The Standing Committee recommends that Agriculture and Agri-Food Canada improve the Canadian Agricultural Loans Act or create new programs by adding tools similar to those available in provincial programs, such as interest rate rebates, in order to improve access to credit for new farmers.

The Government agrees with the recommendation to improve the Canadian Agricultural Loans Act (CALA) and has, in fact, recently amended the Act to improve access to credit for new farmers.

The CALA program is a financial loan guarantee program that gives farmers easier access to credit. Farmers access the CALA through their financial institution. When applying for a loan for a land purchase or an asset to be used in their farming operation, the loan can be registered under the CALA. Farmers can use these loans to establish, improve, and develop farms; while agricultural co-operatives may also access loans to process, distribute, or market the products of farming.

The CALA received Royal Assent in June 2009 replacing the Farm Improvement and Marketing Cooperative Loans Act, and the changes to the legislation and program were the result of national consultations held in 2006. Under the CALA, interest rates are capped so that favourable rates can be provided to the farm sector. The rate caps are:

  • the lender’s prime plus 1% for variable term loans; or

  • the lender’s comparable residential mortgage rate plus 1% for fixed term loans.

The lender, however, can offer lower rates. The CALA guarantee is intended to improve access to credit for beginning farmers as it provides additional security for a lending institution, but a prudent lending institution will also consider a borrower’s repayment ability as a major factor in its decision to issue a loan.

The provisions of the Act will be reviewed in 2014-15 as part of a mandatory 5-year review.

AAFC also offers the Advance Payments Program (APP) which is a federal guaranteed loan program that gives all eligible farmers easier access to credit through repayable cash advances on their marketable commodities. This improves cash flow throughout the production period allowing producers to meet their short-term financial obligations and still sell their products when markets are most favourable.


RECOMMENDATION 2.4

The Standing Committee recommends that Agriculture and Agri-Food Canada conduct an analysis of how the farm transfer savings plan recommended by the Fédération de la relève agricole du Québec could be designed and implemented, and that Agriculture and Agri-Food Canada report the outcome of this analysis to the Standing Committee within three months.

The Government of Canada already supports family farming businesses in their succession planning through the tax system. In particular, the Income Tax Act contains a number of measures that help farming businesses to accumulate capital for retirement and facilitate the intergenerational transfer of property principally used in a farming business.

The Lifetime Capital Gains Exemption (LCGE) on farming property is in part intended to help farmers save for their retirement.  A farmer can claim a LCGE of up to $750,000 on the disposition of eligible farm property or on the transfer of such property to a child.  The LCGE is applied on an individual basis so that each taxpayer is allowed an exemption up to the $750,000 limit. As a result, the amount can be doubled to $1.5 million if both the farmer and his or her spouse qualify for the exemption. Budget 2007 increased the LCGE limit to $750,000 from $500,000, the first increase since 1988.  In addition to this exemption, farmers are also entitled (as are other Canadians) to a separate exemption from tax on any gains realized on the disposition of their principal residences.

Farmers are also entitled to transfer certain types of farm property (i.e., farmland, depreciable property including buildings, and eligible capital property such as milk quotas) and shares in a family-farm corporation or interests in a family-farm partnership on a tax-deferred basis to their children (or grand-children or great-grand-children), thereby facilitating the transfer of farming businesses from one generation to the next. In addition, the LCGE may be used to reduce the tax on any capital gains arising from the transfer of eligible farm property (i.e., if the farm property is transferred for proceeds in excess of the adjusted cost base).

Farmers are also entitled to claim a capital gains reserve over a 10-year period where the proceeds of disposition have not been fully received and the property has been transferred to the farmer’s child.  The reserve allows farmers to average capital gains income and the corresponding tax liability over a maximum of 10 years.  A minimum of 10 per cent of the gain must be brought into income each year.  This is useful where the capital gains upon disposition exceed the available LCGE.

If a farmer is transferring his or her farm to a person for whom the farmer cannot use the 10-year capital gains reserve or intergenerational rollover (e.g., a nephew, niece, or unrelated person), then the farmer may claim a reserve over a 5-year period if the proceeds of disposition are not all receivable in the year of the sale.  Under the 5-year capital gains reserve, a minimum of 20 per cent of the gain must be brought into income each year.

Farmers can also benefit from the tax-preferred treatment of savings in Registered Retirement Savings Plans (RRSPs) and Tax-Free Savings Accounts (TFSAs).  The TFSA is the most significant advance in the tax treatment of personal savings since the introduction of RRSPs in 1957.  More than 4.8 million Canadians have opened a TFSA since they became available in January 2009, depositing more than $19 billion of savings. The TFSA is a flexible account for savings over Canadians’ lifetimes.  All Canadian residents age 18 or older are allowed to contribute up to $5,000 a year to a TFSA, even after they reach the age of 71 years and are required to convert RRSP savings into a retirement income vehicle.  To ensure that the annual contribution retains its real value in the future, the $5,000 limit is indexed to inflation in $500 increments.


RECOMMENDATION 2.5

The Standing Committee recommends that Agriculture and Agri-Food Canada offer to cooperate with the provinces, notably through the Council of Ministers of Education, Canada, in order to consider the possibility of including agricultural courses or introducing agricultural issues into existing programs or courses.

Government is already cooperating with provinces to consider the possibility of including agricultural courses or introducing agricultural issues into existing programs or courses.

Recognizing that investments in post-secondary education (PSE) are critical to economic growth and the future prosperity of all Canadians, the federal government provides substantial financial support to provinces and territories for PSE. The delivery of PSE, however, falls within the jurisdiction of the provincial governments. Therefore, it is the responsibility of the provinces to decide whether to enhance or introduce voluntary or mandatory agricultural courses in the school curriculums in their jurisdictions.

In 2010-11, the Government will have provided over $10.6 billion in federal support to Canadian students, institutions and researchers, and to the provincial and territorial governments, to help ensure a vibrant and accessible PSE system.  This includes approximately $7.2 billion in direct support and over $3.4 billion in earmarked funding to provincial and territorial governments.  Agricultural colleges and university faculties across Canada, as well as students and researchers, are benefiting from federal support which helps develop the agriculture, food and business knowledge and skills of young Canadians.

In addition, through the Sector Council Program, the Government of Canada works with the private sector to enhance adult workers’ skills through activities such as increasing employer investments in skills development and promoting workplace learning and training.  The Government of Canada supports sector councils in key sectors of the Canadian economy, including the Canadian Agricultural Human Resource Council (CAHRC) which was founded in 2007, and seeks to engage key industry players to identify and address human resources and labour market issues in a strategic and coordinated manner, in order to further develop the global competitiveness of the agricultural industry.  CAHRC’s Board of Directors is representative of the entire industry.  While CAHRC's work to date has not specifically targeted the needs of young farmers, the CAHRC does ensure that project committees incorporate the views of the next generation of agricultural producers.

Under the current federal-provincial-territorial policy framework agreement Growing Forward (GF), federal funding is provided to the provinces and territories for cost-shared business development (BD) programming. BD programming funds provincial and territorial activities related to agriculture business management practices and skills development and provides for enhanced participation by young or new entrants.  It is up to each province and territory to determine the type of BD programs it will offer, and how to deliver them.

In some provinces and territories, BD is funding “Agriculture in the Classroom” programs. These programs provide educational resources and information to primary and secondary schools to develop an awareness of agriculture, highlight the importance of agriculture to the economy and meet other objectives, such as developing informed consumers and promoting agriculture as a career choice.


RECOMMENDATION 2.6

The Standing Committee recommends that Agriculture and Agri-Food Canada, in collaboration with industry stakeholders and the provinces, encourage “buy local—buy Canadian” campaigns in order to promote local food consumption across the country. The Standing Committee also recommends that Agriculture and Agri-Food Canada launch a national campaign to promote the benefits that agriculture provides to Canada and Canadians.

The Government will continue to encourage “buy local – buy Canadian” campaigns to promote local food consumption across the country.

The federal government is focused on national efforts to increase general industry awareness and knowledge and facilitate consumer choice in the marketplace.  There are also a variety of initiatives at the provincial level which promote local food, including marketing programs. Stakeholders are also active through certification programs, promotional activities, coordination and networking. 

AAFC is working with industry stakeholders to develop and implement a domestic branding initiative, which will align with the Product of Canada labeling guidelines.  This initiative will complement existing provincial, regional and industry efforts promoting local/provincial/regional agri-food products.  It will help promote the strengths, advantages and attributes of Canadian food and agriculture to Canadian consumers and build on consumer willingness to buy Canadian. 

AAFC has completed an on-line shopping simulation study to replicate a real shopping experience. Furthermore, in early 2011, the department launched in-store pilots in Vancouver, Ottawa and Bay Roberts, Carbonear and Harbour Grace (located in Newfoundland and Labrador) to highlight Canadian food products. Throughout the stores, Canadian foods are identified through banners, on-shelf identifiers, on-product maple leaf stickers, and in-store and online retail flyers.  The goal of the pilots is to help consumers identify Canadian food products and encourage them to buy Canadian. Preliminary data from the pilots has shown increased sales of those products that are clearly identified as Canadian.

Promoting the many positive attributes of Canadian products is seen as a key benefit to industry and will help influence consumers to seek out and purchase Canadian food products, helping Canadian producers and processors improve their competitiveness in the domestic market, resulting in more profit for farmers. By promoting the attributes of Canadian agri-food products, AAFC is also helping to promote provincial, regional and local initiatives.

AAFC uses a variety of external communications activities and initiatives to promote the benefits agriculture provides to Canada and Canadians. Examples include:

Agriculture in the News: AAFC regional and headquarters communications staff proactively offer members of the media opportunities to speak directly to our Ministers, their representatives and AAFC staff – often departmental scientists – about the work being done at AAFC and its impact on the agricultural sector. Increasingly, these reports are appearing in mainstream media, as these issues increase in relevance to Canadians.

Agricultural Exhibits: AAFC’s exhibits program provides information to Canadians about the department’s programs and services, including the extensive agricultural research conducted by AAFC; the types of agricultural exports by Canadian producers; the scope and importance of the agriculture sector in each province; and more recently the department’s on-line Young and Beginning Farmers section of the AAFC website.

AAFC officials annually attend over 60 events in rural communities across Canada on behalf of the Government of Canada. These exhibits provide rural Canadians direct contact and access to a broad range of information, including agriculture, health and other government services. AAFC also attends 10 major urban exhibitions, one in each province. Last year, AAFC was present at the 2010 Winter Olympics in Vancouver. These events provide an opportunity for the Government to promote the quality, safety and variety of Canadian food and to connect urban Canadians with agriculture and life in rural communities. 

Special Agricultural Events for the Public: Agriculture in the City (AITC). These events strive to increase the awareness of urban consumers about where their food comes from, how it’s produced, and the science behind it.  In 2010, AITC events took place in Winnipeg, MB with over 25,000 people attending, and in Burnaby, BC where nearly 120,000 people took part in the activities.

Doors Open: AAFC also regularly hosts events at its 19 research centers, providing the public with an opportunity to see what goes on inside, to explore the fields and research plots where plants and crops are grown and science experiments happen, and to learn more about the innovative work of AAFC scientists and how it is relevant in their everyday lives.

Agricultural Announcements: AAFC’s Minister, Minister of State, and Parliamentary Secretaries, as well as members of Parliament, take part annually in approximately 200 public announcements and media events across the country highlighting initiatives, activities and government support for the agricultural sector and informing Canadians about the importance and the benefits of agriculture.

AAFC Web Presence, Videos and Publications: Through its website, videos and publications, AAFC regularly provides information to the public on the results and impact of the work being done by the department that is making a difference in the lives of Canadians.

These are just a few highlights of how AAFC is working to inform Canadians about the impact and issues associated with agriculture, in both rural communities and urban centres across the country.


RECOMMENDATION 3.1

The Standing Committee recommends that Agriculture and Agri-Food Canada, in cooperation with the provinces, make changes to AgriStability, AgriInvest, and AgriInsurance to specifically make them more responsive to agricultural industries in crisis and to better meet the needs of young and new farmers. The Standing Committee also recommends that Agriculture and Agri-Food Canada, along with its provincial counterparts, expand AgriInsurance to the livestock sector and that the design and protection provided for this sector could be similar to the cattle price insurance program in Alberta.

The current suite of Business Risk Management (BRM) programs launched in 2007 was designed to be more responsive to producers in crisis.  AgriStability includes an improved method of valuing inventories designed to be more responsive during periods of low prices, deeper negative margin coverage for producers facing back-to-back disasters, as well as targeted advances to get the money out quickly in disaster situations.  The suite also includes the AgriRecovery framework designed to facilitate the implementation of specific programming to assist producers to recover from disasters.  AgriRecovery responded to the unprecedented excess moisture and flooding experienced in the Prairies during the summer of 2010.  Since its inception, this new federal-provincial-territorial BRM suite has provided more than $6 billion in assistance to producers.

Although the current suite is designed to ensure new producers have access to the programs, young farmers are going to be heard through the “youth lens” during discussions on the future direction of programming. Currently, the programs allow access to new producers in the following manner:

  • AgriStability: The AgriStability program compares current year margins relative to historical margins.  In order to have beginning farmers become eligible for program support quickly, the program creates historical margins for them. The created historical margins are based on industry averages for the type of production. This provides an equal reference basis of support for beginning farmers consistent with the average farmer.  Where a new farmer assumes part or whole ownership of an existing farm, such as through an inheritance or intergenerational transfer, they may be able to use the same farm’s historical reference margins for their AgriStability program calculations.

  • The AgriStability program is based on annual financial and production records for the farm.  Consequently, program calculations can only be completed after the farm’s fiscal period has ended.  Although this results in a delay in delivering payments during periods of financial difficulty or crisis, beginning farmers are eligible to apply for interim and advance payments under the AgriStability program in the same manner as all farms.  The intent of interim and advance payments is to allow a portion of the AgriStability program payments to be available to producers within the same production year.

  • AgriInvest: The AgriInvest program is available to new farmers as soon as they begin producing and selling crops or livestock and reporting financial results for their farm. AgriInvest program support is based on the most recent year’s Allowable Net Sales.  Once a producer has started farming and has supplied this information to the AgriInvest program, they are eligible for program support (provided they then meet the other program eligibility requirements of opening an account, and making a deposit which is then matched by government).  Producers can make annual deposits to their AgriInvest account, and withdraw funds at any time.
  • AgriInsurance: Individual production insurance plans are designed, delivered and administered by provincial governments to meet the demand of producers within the province while respecting federal/provincial guidelines.  Generally, AgriInsurance requires historical production data in order to calculate a producer’s premium and level of coverage.  For beginning farmers without historical production data, provinces can use provincial production averages to estimate a new farmer’s production capacity until their actual data is available.  When appropriate, some provinces transfer the farm’s historical production data to the next generation.

The current agricultural policy framework, Growing Forward (GF), expires in 2013.  Federal, provincial, and territorial governments have begun work on its successor framework, Growing Forward 2 (GF2).  In conjunction with the provinces, the federal government has already started a multi-phased engagement process with the industry looking at the opportunities and challenges facing the sector and special engagement sessions will be organized with young and beginning farmers. GF2 provides an opportunity to examine policies and programs, including BRM and non-BRM areas, and their ability to position the industry for future success and young farmers are going to be heard through the "youth lens" during discussions on the future direction of programming. 

The ability of BRM programs (e.g., AgriStability, AgriInvest and AgriInsurance) to assist new producers will be an important consideration in discussions on the future direction of programming. Government supports the development of private sector tools as well as the extension of production insurance to the livestock sector.

Federal and provincial governments continue to work closely with industry and producer associations to implement and modify plans to best meet specific producer requirements, including expanding AgriInsurance plans to additional commodities and the livestock sector.  To date, production insurance coverage has been extended to several livestock sectors. Examples include bee over-wintering plans in Quebec and Alberta and a loss of butterfat protection plan in Quebec.

Industry-driven private sector insurance products have also been developed, such as the Avian Influenza Policies for poultry producers in Ontario and British Columbia.

In some cases, plans have not been developed for commodities because there is limited demand by producers as they are using other risk management strategies or there is a lack of available data on those commodities for developing an actuarially sound program.  It should be noted that evaluations on expanding product coverage must take into account Canada’s international trade obligations.

While AgriInsurance provides insurance against production losses, the federal government also recognizes the importance to the sector of effectively managing price fluctuations, and the ability of insurance mechanisms to provide timely and predictable responses. Alberta's producer-funded cattle price insurance program is one model which may provide these benefits to producers while limiting trade risks to the sector. The Government recognizes the importance of the need for insurance tools for the livestock sector and the Government will continue to support the development of private sector tools.


RECOMMENDATION 3.2

The Standing Committee recommends that Agriculture and Agri-Food Canada (AAFC) provide an action plan that will describe how the department will implement the  recommendations set out in Chapter 5 of the Auditor General of Canada report tabled in April 2010, and specifically how regional research will be integrated in its Science and Innovation Strategy. The Standing Committee also recommends that AAFC provide a formal response to the Standing Committee on the Farmers for Investment in Agriculture coalition proposal to restore the AAFC research budget to 1994 levels in constant dollars.

The Government has provided an action plan that describes how the department will implement the recommendations set out in Chapter 5 of the Auditor General of Canada report tabled in April 2010, and specifically how regional research will be integrated in its Science and Innovation Strategy. Research continues to be a priority including public good research and industry-led initiatives. Funding for AAFC research activities has increased by $73 million from $193 million in fiscal year 2005/06 to $266 million in fiscal year 2009/10. Annual budget allocations for research will take into consideration both the priority of research and the financial capacity of the department.

AAFC welcomed the audit conducted by the Office of the Auditor General (OAG) and viewed it as an opportunity to continue to improve the management of its science and innovation activities. AAFC concurred with the recommendations found in the OAG report and developed a comprehensive management response to each of the recommendations which were incorporated into the report tabled in April 2010.

AAFC’s Science and Innovation Action Plan 2009-13 details the implementation of actions responding to each of the recommendations found in the OAG report. These initiatives are underway using existing resources. The majority of the recommendations have been addressed, including developing and implementing:

  • Internal and external engagement strategies to better inform and engage staff and stakeholders;

  • A Collaboration Framework and Guidelines to support effective management of partnership activities;

  • An updated Human Resources Plan that addresses current and future human resource requirements; and

  • An Investment Plan to support future investment decisions and to regularly assess capital assets.

The remaining recommendation relates to performance measurement and progress which has been achieved by strengthening the performance measurement framework for 2010/11. Performance indicators and measurable targets have been identified and will be used going forward.

Agriculture, through its close relationship to the natural environment, is necessarily regionally focused and, as such, regional activities are a key driver for AAFC. AAFC’s extensive national network of nineteen research centres and over 2,000 scientific and technical staff provide expertise across a variety of science disciplines and eco-systems.  To provide a focal point for these activities, AAFC has launched the development of Research Centre Profiles that identify the activities undertaken at each centre to implement the Strategic Action Plan, delineate the key expected results which the centre will contribute to and deliver as well as propose an outlook for research to be conducted at the centre in the future. In parallel, AAFC has launched a series of regional workshops and a series of regional discussions (Regional Research Users Meetings – RRUMs) which aim to better connect users and performers of research.  The RRUM's are a vehicle to facilitate two way communications between regional stakeholders and the Research Centres.  The information gathered from these meetings will inform the Centre Profiles and thus allow the research centres to better address regional issues or priorities.  The Centre Profiles will provide staff and external stakeholders with a clear and common understanding of the direction and priorities of the centres, highlighting the contribution they make to national and regional priorities.

The Government of Canada has consistently demonstrated its commitment to science and innovation to support the development of Canada’s agricultural and agri-food sector. The Government of Canada is committed to building a sustainable national advantage based on science and technology (2007 Federal Science and Technology Strategy). This commitment is reflected in increasing investment into agricultural science and innovation activities at AAFC. Investments increased from $193 million in 2005/06 to $266 million in 2009/10, including a five year investment of $158.7 million in targeted science and innovation activities and partnerships under the current agricultural policy framework, Growing Forward (GF).

Targeted initiatives provided by GF represent a significant investment to support research and innovation activities enabling a more competitive and environmentally sustainable agriculture, agri-food and agri-based products sector. In addition to the $158.7 million for the Growing Canadian Agri-Innovation program under GF’s 5-year programming, the federal government is also investing:

  • $32.1 million for Sustainable Agriculture Environment Systems;

  • $45.9 million in Animal and Plant Health Research; and

  • $8.9 million to the Agricultural Regulatory Action Plan for science substantiation.

An additional $25.9 million was provided to upgrade research facilities through Canada’s Economic Action Plan for the Modernizing of Federal Laboratories.


RECOMMENDATION 3.3

The Standing Committee recommends that Agriculture and Agri-Food Canada, in consultation with stakeholders, set a goal to make the agricultural sector a major provider of energy by 2020 and work with the provinces to implement a program to assist the production of renewable energy from agricultural products and by-products.

The Government of Canada has already made major investments to ensure the agricultural sector is a major provider of renewable energy. The Canadian Renewable Fuels Strategy was launched in 2006 to provide programs to reduce emissions, diversify the country’s energy supply, and create new opportunities in agriculture. Canada’s renewable fuels strategy consists of four key elements:

  • A regulation to establish minimum biofuels content;

  • Programs to support farmer participation in the industry;

  • A production incentive to stimulate domestic production; and

  • Initiatives to support next generation technologies.

In September 2010, the Government of Canada finalized the Renewable Fuel Regulations that require an annual average renewable content of five per cent in the gasoline pool across Canada. These regulations came into effect starting on December 15, 2010. A proposed amendment to require an average of 2 per cent renewable content in diesel fuel and heating oil was published in the Canada Gazette, Part I on February 26, 2011 for a 60-day public comment period. The Government of Canada is proposing a coming into force date of July 1, 2011.

To encourage farmer participation in the biofuels industry the Government has initiated two programs: the $200 million ecoAgriculture Biofuels Capital Initiative (ecoABC) and the $20 million Biofuels Opportunities for Producers Initiative (BOPI). The ecoABC Initiative provides funding for the construction or expansion of biofuel production facilities conditional upon agricultural producer investment in the projects, and the use of agricultural feedstock to produce the biofuel. The BOPI was an initiative designed to help farmers and rural communities hire experts to assist in developing business proposals and feasibility and other studies necessary to create and expand biofuels production capacity by agricultural producers.

The ecoENERGY for Biofuels program provides up to $1.5 billion over nine years to encourage investment in the biofuels industry and to boost Canada’s annual production capacity to 2.5 billion litres. This initiative offers operating incentives to producers of renewable alternatives to gasoline and diesel based on production levels and other factors.

In addition, the Government has provided $500 million to Sustainable Development Technology Canada to invest in establishing large scale demonstration facilities for the production of next-generation renewable fuels, such as cellulosic ethanol made from agricultural residues and waste products.

Furthermore, the Government of Canada is encouraging the use of renewable energy sources in agriculture and agribusiness operations through the Farm Credit Canada Energy Loan. Available since March 1, 2010, the Energy Loan helps Canadian farmers who are considering the use of renewable energy sources in their business to purchase and install on-farm energy sources like biogas, geo-thermal, wind or solar power.


RECOMMENDATION 3.4

The Standing Committee recommends that Agriculture and Agri-Food Canada undertake a thorough analysis of the impact of the North American Free Trade Agreement (NAFTA) on the agricultural industry and report back to the Standing Committee.

AAFC recognizes the importance of the North American market and NAFTA and has already undertaken (or sponsored) several studies examining the effects of NAFTA on the structure and performance of the Canadian agriculture sector. 

The rapid expansion of trade and exports in the post-free trade agreement/NAFTA period has been a success and benefited the sector by securing access to our most important market and further integrated agri-food markets in North America. Our exports to the United States and Mexico could not have grown as rapidly as they did if NAFTA was not in place.

The following AAFC documents, which can also be found at http://www4.agr.gc.ca/AAFC-AAC/display-afficher.do?id=1177676316971&lang=eng, provide a comprehensive evaluation of NAFTA:

  • NAFTA: Outcomes, Challenges and Prospects (September 2009). This document provides an overview of NAFTA including more outcomes.

  • Economic Analysis of the Liberalization of the Red Meat Markets in the Pacific Region from 1988 to 2007 (July 2008).  One of the principle benefits to Canada has been for the red meat (cattle/beef, hog/pork) industries. This document evaluates the benefits of NAFTA taking account of the many other changes that have contributed to the growth of the red meat industries.

  • An Evaluation of Oilseed Trade Liberalization (July 1998). This document provides a similar analysis for the oilseed markets.

  • North American Integration in Agri-Food (March 2004). This document describes agri-food supply chain integration.

  • Effects of Agri-Food Exports on Farm Income (April 2000). This document completes the overall assessment by showing the link between increased agri-food trade and farm income.

The Government is committed to the on-going monitoring of this issue.


RECOMMENDATION 3.5

The Standing Committee reiterates that the government look into the level to which imported agricultural products do not meet the same standards required of Canadian producers and recommends that the government take the necessary steps to implement motion M-460.

Under Canada’s World Trade Organization obligations, imported products must be accorded the same treatment as domestic products.  Simply put, whether imported or domestically produced, all agricultural products sold or traded in Canada must meet the same strict Canadian standards.

The Canadian Food Inspection Agency (CFIA) undertakes several activities to verify that imported products meet Canadian standards.  Given the high volume of products which enter Canada, the CFIA adopts a risk-based approach to manage imported products. As appropriate and as permitted by legislation, the Agency utilizes pre-border, at border, or post-border control measures to verify compliance of imported articles with applicable regulatory requirements.

The Government of Canada agrees with the recommendation to implement motion M-460.  Motion M-460 states that the Government should ensure that production management tools available to Canadian farmers are similar to those of other national jurisdictions by considering equivalent scientific research and agricultural regulatory approval processes by Health Canada (HC) and the CFIA.

Production management tools are farm inputs that include a broad range of federally regulated agricultural products. Production management tools could include fertilizers, seeds, and veterinary biologics under the regulatory jurisdiction of the CFIA, and pesticides and veterinary drugs under the regulatory jurisdiction of the Pest Management Regulatory Agency (PMRA) and the Veterinary Drugs Directorate of HC, respectively.  AAFC’s Pest Management Centre also generates data and prepares submissions to the PMRA on behalf of Canadian growers for new and effective crop protection tools.

The Government recognizes that the global competitiveness of the agricultural sector is integral to Canada’s economy and that the availability of agricultural production tools is a key component to maintaining Canada’s competitive advantage.  In support of this, there are continuing efforts to identify and implement improvements to enhance access to production tools, without compromising the health and safety of Canadians.

This Government also agrees that international cooperation with Organization for Economic Co-operation and Development (OECD) member countries should continue in order to minimize the competitive disadvantage that producers may face due to access differences. Ongoing efforts have resulted in Canadian agricultural producers having improved access to new pesticides and veterinary drugs and reduced trade barriers for food products without compromising Canadian health and environmental protection standards.

Significant efforts have been made to align regulatory processes for the review of new pesticides with those of international partners. The OECD’s Global Joint Review Program is proving to be the preferred way of doing business, as most new agricultural pesticide products are being introduced through this process. This allows new pesticides submitted for review in the United States (U.S.) to be submitted for review in Canada at the same time.

In addition, HC continues to work with producers to identify those pesticides and uses in the U.S. that are not currently registered in Canada. In early 2009, HC, in collaboration with grower groups and registrants, created the Canadian Grower Priority Database, which identified these gaps and prioritized their needs by commodity to help inform registration decisions.

In an effort to decrease the duplication of work and approval times when reviewing veterinary drug submissions, HC is taking into consideration the work of other countries whenever possible.

Similarly, HC is working with international organizations, such as Codex Alimentarius, and International Cooperation on Harmonization of Technical Requirements for Registration of Veterinary Medicinal Products to promote the harmonization of technical requirements for veterinary drug registration. HC is also working with drug manufacturers to promote the same-time filing of submissions in the U.S. and Canada, which will allow Canadian producers to have access to veterinary drugs simultaneously with their American counterparts. HC is also modernizing the pre-market submission process for food products, including food additives and has implemented an aggressive backlog reduction exercise focused on pending regulatory amendments, which includes those for food additives.

The CFIA has already taken action to reduce undue regulatory burden and to streamline regulatory processes to support timely access to agricultural production tools for producers. The CFIA will continue to improve the regulatory process, as well as explore new ways of promoting access to agricultural production tools.  Significant efforts have been made to streamline the regulatory process and improve access to fertilizer products for farmers.  For example, the Agency has already implemented service standards, extended product registration period and eliminated the fertilizer submission backlog.  Additionally, the Agency is working on modernizing fertilizer/ supplement standards and definitions to achieve greater consistency with other regulatory jurisdictions (U.S. and European Union), and is re-assessing Service Delivery Standards to determine if further efficiencies can be gained throughout the file review process. For veterinary biologics, Canadian standards and regulatory processes have been harmonized with the U.S. such that most approved U.S. products require no additional studies or testing for licensure in Canada.  Further, a new, more flexible registration framework for new varieties of seed was recently implemented to reduce regulatory burden and improve timely access to new varieties.


RECOMMENDATION 3.6

The Standing Committee recommends that, with the view that monopolies have been detrimental to Canadian farmers, the government look into other models, including the U.S. model, that deal with competition and that allow the government to exert more power to break up, or otherwise manage, monopolies in the agricultural industry.

The Government agrees with the importance of a strong and effective competition policy regime.

In 2007, the Competition Policy Review Panel was established with the mandate to examine and report on the laws and policies that will underpin Canada’s continued economic growth. After extensive research and consultation, which included comparing our competition policy regime with that of other countries including the United States (U.S.), the Panel concluded in its final report that Canadian competition policies and institutions are largely in keeping with those of other major countries. Furthermore, it concluded that the Competition Act (the Act) is recognized internationally as both modern and flexible and, in the Panel’s view, is not an impediment to Canada’s overall competitiveness.

The Panel recommended that with some amendments to the Act, long-term improvements to Canada’s productivity could be made. In 2009, the Government responded to these recommendations with the most significant amendments to the Act in the past 20 years. These amendments were designed to increase the predictability, efficiency and effectiveness of the enforcement and administration of the Act. They included administrative monetary penalties associated with an abuse of dominance (abuse of monopoly power) and the introduction of a two-stage merger review process, more closely aligned with the approach used in the U.S.

The Government is of the view that monopolies do not allow for all economic opportunities for farmers. The Government will continue to work with Western Canadian grain farmers to ensure they are given the freedom to choose whether to sell their wheat or barley on the open market or through the Canadian Wheat Board.


RECOMMENDATION 3.7

The Standing Committee recommends that the Canadian Food Inspection Agency and the Pest Management Regulatory Agency continue harmonization efforts with the United States and other countries to reduce the competitive disadvantages faced by the Canadian agri-food sector and to ensure that Canadian farmers have timely access to the latest technologies, including veterinary drugs and pest management products.

The Government agrees with the importance to continue harmonization efforts with the United States (U.S.) and other countries to reduce the competitive disadvantages faced by the Canadian agri-food sector and to ensure that Canadian farmers have timely access to the latest technologies.

The development of internationally harmonized regulatory processes to expedite and streamline the Canadian regulatory approval process continues to be a key objective of the Government of Canada.  The Canadian Food Inspection Agency (CFIA) and Health Canada (HC) recognize that interdepartmental collaboration and international harmonization efforts are critical to achieving this goal.  These activities facilitate sharing best practices among departments and agencies and with trading partners to ensure consistently high standards of protection, and to reduce unnecessary regulatory differences between countries. 

The CFIA and HC are actively engaged in several international standard setting bodies in an effort to streamline and harmonize product approval processes and improve access to new and effective production management products.

The CFIA and HC will continue to improve their collaboration with each other and with the U.S. and other trading partners to harmonize approaches, standards and data sharing where possible.  This enhanced collaboration will result in improved access for farmers to safe, high quality, new and innovative agricultural production management tools.


RESPONSE TO RECOMMENDATIONS OF THE SUPPLEMENTARY REPORT BY THE CONSERVATIVE PARTY OF CANADA

RECOMMENDATION 1.0 (CONSERVATIVE)

That the Government of Canada, the Minister of Agriculture and Agri-Food, and the Minister of International Trade, continue their efforts to open international markets for Canadian agricultural products that will result in increased market access for young farmers.

The Government agrees with the recommendation to continue efforts to open international markets for Canadian agricultural products that will result in increased market access for young farmers.

The Government’s goal is to establish stable and secure agricultural trade with countries and it is committed to pursuing market opportunities through an aggressive regional and bilateral trade negotiations agenda. In that regard, the Ministers of Agriculture and Agri-Food and International Trade have undertaken missions to numerous markets, with the goals of removing restrictions against Canadian agricultural products and increasing market access for Canadian producers.

In response to a recommendation made by industry, a Market Access Secretariat was created to streamline government efforts with industry associations and provinces to aggressively and strategically maintain, regain and secure markets for Canadian agricultural exports. A strategic and sustained approach has been initiated with partners to ensure that efforts are synchronized, and to leverage established political, economic and commercial relationships, as well as to explore new linkages. To support this, the Market Access Secretariat, which comprises staff from both AAFC and the Canadian Food Inspection Agency, works closely with Foreign Affairs and International Trade Canada to provide a coordinated approach.

Canada has recently either implemented or concluded free trade agreements (FTA) with Peru, Colombia, the European Free Trade Association, Jordan, and Panama. In addition to the European Union, Canada is currently engaged in FTA negotiations with India, Korea, Singapore, the Central American countries (i.e., El Salvador, Guatemala, Honduras and Nicaragua), the Dominican Republic, the Caribbean Community (CARICOM), Ukraine and Morocco.

Through all of these efforts, and the Government’s strong support of key international organizations such as the World Trade Organization (WTO), and recognized standard-setting bodies such as the World Organisation for Animal Health, International Plant Protection Convention and Codex Alimentarius, it will continue to address tariff and non-tariff barriers in order to provide increased access for Canadian agricultural and agri-food products. The Government has used these fora to strongly defend Canada’s interests by, for example, requesting WTO panels for the United States’ country-of-origin labelling, and South Korea’s ban on Canadian beef.

AAFC continues to fund 35 Trade Commissioner positions in 19 missions abroad to provide advice and support to the industry’s exporting efforts. This takes the form of market development assistance, identification of trade leads and on-the-ground support to resolve market access irritants.  Foreign Affairs and International Trade also contributes substantially to developing and improving trade for the sector in 109 other markets through its Trade Commissioner Service.

RECOMMENDATION 2.0 (CONSERVATIVE)

That the Government of Canada proceed with Bill C-27 [An Act to amend the Canadian Wheat Board Act (Canadian Wheat Board Payments and Election Reform Act)] in the House of Commons.

Government recently proceeded with Bill C-27 and is therefore in agreement with the above recommendation.

On May 14, 2010, the Government of Canada introduced Bill C-27, Canadian Wheat Board Payments and Election Reform Act, in the House of Commons. The Bill would modernize the process of electing directors to the Canadian Wheat Board (CWB) and streamline the approval process for CWB pool account activities and payments to producers.

Bill C-27 was introduced and received first reading on May 14, 2010. This Bill would give a greater voice to producers who rely on the operations of the CWB for their livelihood by reforming voter eligibility rules. Producers of at least 40 tonnes of grain in the year of the election or in either of the previous two crop years would be eligible to cast a ballot in the election of directors. Under the CWB Act, grain includes wheat, barley, oats, rye, flaxseed, rapeseed and canola.

Bill C-27 would allow the Minister, with the concurrence of the Minister of Finance, to approve CWB pool account activities and payments and would remove the requirement for Governor in Council approval. This would reduce the process burden but still ensure a thorough analysis of payment levels, including those guaranteed by the Government to minimize the risk of deficits in the pool accounts.


RECOMMENDATION 3.0 (CONSERVATIVE)

That the Conservative Government continue its strong support for the supply management sector domestically and internationally.

Government supports continuing to firmly defend interests that are important to supply-managed industries in all international trade negotiations.

At the international level, Canada continues to firmly defend interests that are important to supply-managed industries in all international trade negotiations. At the same time, Canada also remains committed to further strengthening market access opportunities for Canadian agricultural exporters.

In support of supply-managed sectors, the Government took action under Article XXVIII of the General Agreement on Tariffs and Trade to establish a tariff quota on milk protein concentrates and Canada has operationalized the World Trade Organization Special Agriculture Safeguard to be available in cases of significant and sustained over-quota import surges.

RECOMMENDATION 4.0 (CONSERVATIVE)

That AAFC, CFIA, and Health Canada provide an annual report to the Standing Committee on the progress being made to implement M-460.

The Canadian Food Inspection Agency and Health Canada have committed to providing, on an annual basis, their respective Ministers with information on the status of approvals for production management tools, and lists of products approved and rejected. 

The Government agrees to present to the Standing Committee, upon request, relevant information from these documents in the context of providing the Standing Committee with an update on progress to meet the intent of M-460.


RECOMMENDATION 5.0 (CONSERVATIVE)

That the Government and the Minister of Agriculture and Agri-Food continue to stand up for strong Product of Canada labelling requirements.

Government agrees with the above recommendation and continues to stand up for strong Product of Canada labeling requirements.

The Government of Canada brought in the "Product of Canada" and "Made in Canada" guidelines to provide Canadians with the information they need to choose Canadian foods produced by our farmers and processors.  When the guidelines came into force on December 31, 2008, the Government committed to review the policy once it had been in place for a period of time.  In keeping with this commitment, between April and September 2010, the Government conducted various consultations, including on-line questionnaires, interviews, focus groups and roundtable discussions and public opinion research.  As part of the review, consumers and industry stakeholders were invited to share their views on the merits of exempting certain food ingredients, such as sugar, salt or vinegar, from the requirements for the "Product of Canada" claim and of removing qualifying statements from the "Made in Canada" claim.

Agriculture Agri-Food Canada (AAFC) has invested significantly in a Canada Brand strategy that has provided a unique, research-based platform for industry and government to use to differentiate Canadian food and agriculture in international markets based on attributes that the world expects from us.  The strategy is already in use around the world by Canadian stakeholders, which include producers, suppliers, manufacturers, trade commissioners and other government officials, to help expand the reach and profile Canadian food and agricultural products.  The “Canada Brand” initiative, which started in 2004, continues to grow and evolve and has been instrumental in helping maintain existing international markets and opening the doors to new ones.

The Government is reviewing the guidelines based on the feedback received and will determine in early 2011 whether any changes are required.

Consumers continue to express a strong desire to be able to identify Canadian products in the marketplace.  The Government of Canada remains committed to facilitating the ability of Canadians to select products produced and/or processed in Canada while providing appropriate flexibility to Canadian processors. To that end, in early 2011, AAFC launched in-store pilots in Vancouver, Ottawa and Bay Roberts, Carbonear and Harbour Grace (located in Newfoundland and Labrador) to highlight Canadian food products. Throughout the stores, Canadian foods are identified through banners, on-shelf identifiers, on-product maple leaf stickers, and in-store and online retail flyers.  The goal of the pilots is to help consumers identify Canadian food products and encourage them to buy Canadian. Preliminary data from the pilots has shown increased sales of those products that are clearly identified as Canadian.


RESPONSE TO RECOMMENDATIONS OF THE DISSENTING REPORT BY THE LIBERAL PARTY OF CANADA


RECOMMENDATION 1.0 (LIBERAL)

There is the need for the farm community to have a direct buy-in to take a stake in the ownership of the safety net programs which are required. What is required is for the federal government to begin with a ‘Clean Slate’ to the building of new safety net programming.


In furtherance of this recommendation, we call upon the federal government to hold hearings across Canada with farmers to review the adequacy and or inadequacy of the current suite of programs and to commit to adjusting those programs to meet the needs of the farm community.

The current agricultural policy framework, Growing Forward, expires in 2013.  Federal, provincial, and territorial governments have begun work on its successor framework, Growing Forward 2 (GF2), including forthcoming policy discussions on the future direction of programming under GF2. Beginning in May and June 2010, a broad, multi-phased engagement process was initiated with a series of 15 national and regional engagement sessions that were attended by over 400 farm leaders including young farmers’ organizations and other key value chain stakeholders.  The purpose was to promote discussion on the current state of the sector, review emerging global and domestic trends, and present a vision of what the industry may look like in 2020.  Issues related to Business Risk Management were also part of the discussions.

Over the next years, sectoral stakeholders will have many opportunities to review the effectiveness of current programs and to provide input to governments to inform the development of GF2.


RECOMMENDATION 2.0 (LIBERAL)

It is critical that the federal government take an aggressive stance with respect to defending our producers in the face of the massive subsidization and direct support in the U.S. and EU governments provide their producers. Either the federal government take direct action under the provisions of our trade agreements, or it undertakes to match, through new programming the support the U.S. and EU provides their producers.

The Government of Canada is actively engaged in international trade negotiations to achieve a more level playing field for our agricultural producers, processors and exporters; stands ready to exercise our rights under existing trade agreements; and continues to develop business risk management policies that meet the needs of producers and governments.

Canada is actively engaged in the World Trade Organization (WTO) agricultural negotiations, through which we are seeking to achieve a fairer and more level international playing field for our agricultural producers, processors and exporters. Our efforts to reach an ambitious result from the Doha Round include seeking the elimination of all forms of export subsidies and the substantial reduction of trade distorting domestic support, as well as real and significant market access improvements.

The Government is also working to advance Canada's commercial agriculture interests through an ambitious bilateral and regional trade agenda. Consistent with Advantage Canada and the Government of Canada's Global Commerce Strategy, this agenda complements and reinforces our efforts at the WTO and aims to further expand market access opportunities for Canadian agricultural producers, processors and exporters around the world.

Canada stands ready to exercise our rights under trade agreements to ensure that our trading partners obey the rules (as we have done in the case of hormone-treated beef in the EU, US Country-of-Origin Labelling, and beef in Korea).

Through the Canada-EU Comprehensive Economic and Trade Agreement negotiations, we are seeking a strong commitment from the EU to address the issue of export subsidies, which have been a longstanding concern for Canadian producers.

Regarding direct support that the U.S. and EU governments provide their producers, it is worth looking at the Producer Support Estimate (PSE), the measure of support most widely accepted internationally.  Since 2002, the PSE in Canada, as a percent of gross farm receipts, has been higher than in the U.S.  In 2009, the PSE in Canada was 20% compared to 10% in U.S.  Typically, the PSE in the European Union 27 (EU27) has always been higher than in Canada. In 2009 the PSE in EU27 was 24% compared to 20% in Canada.

The federal government is committed to Business Risk Management (BRM) policies that meet the needs of producers and governments. In 2007, federal, provincial and territorial governments introduced an improved suite of BRM programs to help producers effectively mitigate business risks related to their operations. The BRM program suite is intended to provide stabilization support to producers.  It is designed to minimize distortions in production and marketing decisions by producers so as not to hinder the adjustment needed to promote competitiveness and sustainability over the long-term.

BRM programs, such as AgriStability, are demand driven and program payments reflect the financial health of the overall sector. Since 2007 producers have benefited from over $6.0 billion in support through the federal-provincial-territorial BRM program suite.

The federal government continues to adhere to the principle that BRM programs should be designed so as not to leave Canada susceptible to trade action. Many sectors in Canadian agriculture are dependent on export markets. Complying with our international trade obligations, including respecting our trade-distorting spending limit under the WTO, helps minimize trade risks and maintain export market opportunities for Canadian agriculture.


RECOMMENDATION 3.0 (LIBERAL)

That the Standing Committee on Agriculture undertake a full review of the current federal governments negotiations on the Canada – EU Free Trade Agreement on an urgent basis and report its findings to the House.

The Government of Canada supports that the Standing Committee review and continue to monitor the Canada-EU Comprehensive Economic and Trade Agreement (CETA) negotiations and the implications for the agriculture sector. The Government welcomes the opportunity to provide updates to the Standing Committee and other committees on the status of the negotiations.

Canada and the EU launched negotiations for a Comprehensive Economic and Trade Agreement in 2009. Before commencing negotiations, the Government of Canada released a joint study with the EU on the costs and benefits of such an endeavour in October 2008, which shows significant potential benefits of enhancing our economic relations with our EU partners. Subsequently, the scope of a comprehensive economic agreement was defined in the “Joint Report on the European Union-Canada Scoping Exercise”, released in March 2009. This report outlines a broad negotiating agenda and provides a solid basis for Canada to pursue its key offensive interests, including market access for goods and services, investment disciplines, regulatory issues and enhanced labour mobility. As with all trade negotiations, a final agreement will undergo a full Parliamentary review before being ratified and implemented. To date, six rounds of negotiations have been completed.


RECOMMENDATION 4.0 (LIBERAL)

It is critical that the federal government state categorically its support for our supply management system based upon the three pillars of production management, predictable imports, and pricing mechanism each of which ensures quality food products and a reasonable return to producers and that it also declare its support for the Canadian Wheat Board (CWB) as it is currently constituted recognizing that it will be the farmers of western Canada affiliated with the CWB who will determine its future.

The Government of Canada strongly supports supply management.  Supply management is a business risk management program that dairy, poultry, egg and hatching egg producers have chosen as being the best course for them.  At the international level, Canada continues to firmly defend interests important to supply management in all international trade negotiations.

The Government of Canada believes that farmers are best positioned to make decisions about how to market their products. The Government understands that some farmers want the Canadian Wheat Board (CWB) to market their grain, but that other farmers want to modify the CWB’s current single-desk marketing authorities so that they have the flexibility to choose to whom they sell their grain.

A vote among prairie barley producers on the marketing system was conducted in February and March of 2007, with 62% voting in favour of change.


RECOMMENDATION 5.0 (LIBERAL)

That the federal government move toward implementing the following:

a) Healthy living, including an $80-million Buy Local Fund to promote farmers markets and home-grown foods, a $40-million Healthy Start program to help 250,000 low-income children access healthy foods, introducing progressive health labeling and tough standards on trans fats, and launching a Healthy Choices program to help Canadians make informed eating decisions.

The Government has made extensive progress and has already implemented mandatory nutrition labeling to decrease trans fat levels in Canadian foods.

The Government of Canada is committed to helping Canadians maintain and improve their health.  Healthy eating plays a critical role in promoting health and reducing the risk of nutrition-related chronic diseases.  Addressing issues related to food and nutrition is a complex challenge that will require a multi-sectoral, multi-level, long-term approach.  Cooperative action across sectors and at all levels of government is needed to promote healthy eating. The Government of Canada is committed to developing and promoting policies and programs that improve the health of Canadians and has a number of initiatives underway to support healthy eating. 

At their 2010 annual meeting, federal/provincial/territorial (FPT) Ministers of Health agreed to focus more attention on helping children, and all Canadians, lead healthier lives. The Ministers endorsed a Declaration on Prevention and Promotion and released a framework for action to curb childhood obesity entitled “Curbing Childhood Obesity: A Federal, Provincial and Territorial Framework for Action to Promote Healthy Weights”.  Through the Framework, FPT Ministers have agreed to make childhood obesity a collective priority, to champion this issue, and to coordinate work with many areas of Canadian society.

Canada's Health Ministers agreed to work together to curb obesity in children under the age of 18 by focusing on three key policy priorities:

  1. Making the environments where children live, learn and play more supportive of physical activity and healthy eating;

  2. Identifying the risk of obesity in children and addressing it early; and

  3. Increasing the availability and accessibility of nutritious foods and decreasing the marketing to children of foods and beverages that are high in fat, sugar and/or sodium.

The Government continues to develop and promote guidelines for healthy eating, including “Eating Well with Canada’s Food Guide”, to assist Canadians in their efforts to make healthy food choices. These guidelines underpin nutrition and health policies, standards, education programs and meal planning initiatives across the country and serve as a basis for a wide variety of nutrition initiatives. 

The Government is also continuing its efforts to facilitate Canadians’ understanding and use of the nutrition label.  In collaboration with Food and Consumer Products of Canada, the Government of Canada recently launched the Nutrition Facts Education Campaign. The campaign aims to increase Canadians’ understanding and use of the Nutrition Facts table to help them make informed food choices. It is a multi-faceted education campaign that uses various means to provide messages to consumers, including on food packages in the retail setting, national television and print advertising, the Health Canada (HC) Website and social media.

HC has pursued a multifaceted approach, including mandatory nutrition labelling, to decrease trans fat levels in Canadian foods. Canada was the first country to require the declaration of trans fat content on the labels of most pre-packaged foods with nutrition labelling regulations published January 1, 2003. Mandatory nutrition labelling, together with consumer education, was intended to result in consumers making food choices aimed at decreasing their intake of trans fat. This requirement to declare trans fat content was also intended in part, to act as an incentive for the food industry to decrease the trans fat content of foods.

A multi-stakeholder task force, named the Trans Fat Task Force, was established to develop concrete recommendations and strategies to effectively eliminate processed trans fat in Canadian foods. The final report by the Task Force entitled “TRANSforming the Food Supply” was released June 28, 2006, and included recommendations to limit the total amount of trans fat in foods by regulation. On June 20, 2007, HC announced its adoption of the Task Force’s recommended limits and gave industry two years to achieve these limits voluntarily. If significant progress had not been made within two years, HC would proceed to regulate. 

Overall, the results of HC’s monitoring program indicate that, through the voluntary approach, industry has made progress in reducing trans fat while not increasing saturated fats. Nevertheless, the results also show that there are some sectors that still face challenges. For example, some bakery products and unlabelled products remain high in trans fat. As a result, HC has concluded that while significant progress has been made through the voluntary approach, further reductions of trans fat levels are needed to fully meet the public health objectives and reduce the risk of coronary heart disease. Currently HC is analyzing the most effective way to achieve these objectives, which includes assessing how a regulatory approach would work.

As noted in the response to Recommendation 2.6, the federal government’s approach to “buy local” has focused on national efforts to increase awareness and knowledge of the agricultural and agri-food industry in general and to facilitate consumer choice in the marketplace.  One example is that in 2008 Agriculture and Agri-Food Canada provided funding to support the formation of Farmers’ Markets Canada, a national organization to represent the needs of farmers’ markets.  In addition, in early 2011, Agriculture and Agri-Food Canada launched in-store pilots in Vancouver, Ottawa and Bay Roberts, Carbonear and Harbour Grace (located in Newfoundland and Labrador) to highlight Canadian food products. Throughout the stores, Canadian foods are identified through banners, on-shelf identifiers, on-product maple leaf stickers, and in-store and online retail flyers.  The goal of the pilots is to help consumers identify Canadian food products and encourage them to buy Canadian. Preliminary data from the pilots has shown increased sales of those products that are clearly identified as Canadian.

b) Safe Food, by implementing all of the Weatherill report recommendations and investing $50 million in improving food inspections and ensuring imported foods meet our tough domestic standards.

The Government supports the Weatherill report recommendations.  In September 2009, the Government committed to act on all the recommendations of the Weatherill Report and invested $75 million in the food safety system, focusing on reducing food safety risks, enhancing surveillance and improving emergency response.

The Government of Canada considers food safety to be a top priority and is confident that its commitment to the continuous improvement of the food safety system will benefit Canadians from all walks of life, including all generations of Canadian farmers.

In response to the 2008 listeriosis outbreak, the Government of Canada immediately took a number of actions to reduce the risk posed by the possibility of similar outbreaks in the future.  This included engaging Ms. Sheila Weatherill to lead an independent investigation into the circumstances of the outbreak and to make recommendations to strengthen the food safety system.  Ms. Weatherill’s report was released in July 2009 and recognized that Canada’s food safety system is among the best in the world; however it also identified opportunites to improve the system and proposed 57 recommendations, for both government and the meat processing industry, to better protect Canadians.

In response, the Government announced an immediate investment of $75 million over three years and committed to act on each of these recommendations. Subsequently, Budget 2010 committed an additional $13 million annually for 2 years to the Canadian Food Inspection Agency (CFIA) to increase inspection capacity for meat and poultry processing facilities. These investments build on the Government's commitment to invest $489.4 million over five years beginning in 2008 for the Food and Consumer Safety Action Plan, which addresses, among other safety issues, the need to enhance federal oversight for imported and manufactured foods.

To date, the Government of Canada has made considerable progress in implementing Ms. Weatherill’s recommendations through a collaborative effort betweeen AAFC, the CFIA, Health Canada, and the Public Health Agency of Canada.  The food industry also has an important role to play in implementing the recommendations. To this end, the Government is working with all players in the food safety system to improve food safety for Canadians and has engaged the meat processing industry to facilitate the implementation of the recommendations aimed at the ready-to-eat meat sector.  Progress reports are regularly published and in Fall 2011, a final report will be shared with Canadians on the implementation of Ms. Weatherill’s recommendations, together with an assessment of their impact on Canada’s food safety systems. 

All food sold in Canada, whether domestic or imported, must comply with the Food and Drugs Act and regulations, and the Consumer Packaging and Labeling Act and regulations.  Importers must meet the same high standards that Canada has established for domestic food producers.  However, the food safety system requires sustained effort by both government and industry in response to globalization, complex supply chains, and the ever changing risk environment.  For its part, the Government will continue to improve its oversight of imported foods both now and in the future. 

As part of the Food and Consumer Safety Action Plan, the CFIA has implemented a number of measures that have enhanced controls over imported foods.  These include unannounced "border blitzes" by import surveillance teams, and increased testing of high risk foods being brought into Canada. The Agency has also established an integrated approach to forecast and prioritize annual inspection, sampling and testing activities.  This approach helps inspectors to target efforts where the risks are greater.

c) Sustainable farm incomes, with a Clean Slate Commitment to build practical, bankable farm programs in partnership with farmers and restore AgriFlex to offer regionally flexible programs that help meet the costs of production.

While the Government is committed to build practical, bankable farm programs, it does not support the recommendation to use AgriFlex for regional cost of production initiatives.

Since the current agricultural policy framework, Growing Forward (GF), expires in 2013, federal, provincial, and territorial governments have begun work on its successor framework, Growing Forward 2 (GF2).  Beginning in May and June 2010, a broad, multi-phased engagement process was initiated with a series of 15 national and regional engagement sessions that were attended by over 400 farm leaders including young farmers’ organizations and other key value -hain stakeholders.  The purpose was to promote discussion on the current state of the sector, review emerging global and domestic trends, and present a vision of what the industry may look like in 2020.  Issues related to Business Risk Management (BRM) were also part of the discussions.

AgriFlexibility, a five-year (2009-2014) $500 million fund to facilitate the implementation of new initiatives, both federally and in partnership with provinces, territories and industry, is designed to complement existing GF programs, and intended to improve competitiveness of the sector by funding non-BRM measures that:

  • help reduce the cost of production or improve environmental sustainability for the sector (e.g. the AgriProcessing Initiative which fosters the adoption of innovative and new-to-company manufacturing technologies and processes and/or the introduction of new products for agri-processing projects);

  • support value-chain innovation or sectoral adaptation; and

  • address emerging market opportunities and challenges for the sector.

Non-business risk management programs are best situated to help position the sector to be more competitive and profitable in the long-term.  Only non-BRM projects are eligible under AgriFlexibility.  In addition, new programming must be consistent with Canada’s international trade obligations and minimize the risk of countervail.

d) Environmental farmland stewardship, by strengthening Environmental Farm Plans, improving fertilizer and pesticide management, and rewarding farmers for their role in clean energy production and protecting wildlife habitat.

Government agrees with and has taken actions to strengthen environmental farm plans, improve fertilizer and pesticide management, and investigate ways to incent farmers for their role in clean energy production and protecting wildlife habitat.

The Government of Canada and Agriculture and Agri-Food Canada (AAFC) are committed to the current agricultural policy framework, Growing Forward (GF) and in partnership with the provinces of Canada, are supporting environmental farm plans, research and technical solutions for farmers.

Producer incentive programming under GF addresses environmental farmland stewardship through environmental farm plans and the implementation of various beneficial management practices to address issues such as fertilizer and pesticide management and the protection of wildlife habitat. This program suite is administered by the province and they have considerable flexibility to address provincial priorities with federal cost-shared funds.

The Government of Canada and AAFC through various grants and contributions programs are exploring new environmental policy approaches and programming options to clarify the role of the farmer and to improve reward mechanisms, both monetary and non-monetary, in key research areas such as clean energy production and the protection of wildlife habitat.

e) International leadership, to promote Canadian food internationally and expand Canada’s share of high-value export markets while also fostering food security in Africa and the world’s poorest nations.

The Government of Canada is actively promoting Canadian food internationally and continuously working to expand Canada’s share of high-value exports abroad.

For example, Agriculture Agri-Food Canada (AAFC) has invested significantly in a Canada Brand strategy that has provided a unique, research-based platform for industry and government to use to differentiate Canadian food and agriculture in international markets based on attributes that the world expects from us.  The strategy is already in use around the world by Canadian stakeholders, which include producers, suppliers, manufacturers, trade commissioners and other government officials, to help expand the reach and profile Canadian food and agriculture products.  The Canada Brand initiative, started in 2004, continues to grow and evolve and has been instrumental in helping maintain existing international markets and opening the doors to new ones.

AAFC also assists Canadian agricultural stakeholders to enter international markets through the AgriMarketing Program. This program works to equip industry, including small and medium enterprises, for success in global markets by enhancing their marketing capacity and the competitiveness of the Canadian agriculture, agri-food, fish and seafood sectors.  The program provides matching funding to industry and exporter associations for the development and implementation of international market strategies. It also leverages the Canada Brand by encouraging the development and use of the Canada Brand to better position Canadian agricultural exports. Lastly, the program helps facilitate Canada’s exports by assisting the various agriculture sectors in carrying out their industry-to-industry advocacy work internationally.

Promoting our agriculture, agri-food and agri-based products and expanding trade opportunities are important to Canada.  However, the Government of Canada also recognizes the importance of global food security, and takes its responsibilities in working to help ensure the poorest of our world become food secure very seriously.  Global food security is a major concern for the Government of Canada and is identified as one of five priorities of Canada’s international development assistance.

Undertaking actions to address food security requires actions on a number of fronts, and so, a coordinated, Government of Canada approach has been implemented to deal with this important issue.

AAFC plays a unique role in tandem with other government bodies. The Department has specific expertise to significantly engage in this area, focused on:

  • Increasing Market Opportunities and Trade Participation;

  • Extending and Adapting Agricultural Innovation; and,

  • Cultivating Agricultural Capacity.

On the development side of the equation, in response to rising global food insecurity in 2007-2008, the Canadian International Development Agency (CIDA) launched its Food Security Strategy on October 16, 2009.  CIDA’s Food Security Strategy focuses on three paths: sustainable agricultural development; food aid and nutrition; and research and development.  The Food Security Strategy will guide CIDA's programming to address food security in the world’s poorest nations, in Africa, in particular.

In addition, at the G8 Summit in L’Aquila, Italy, the Government of Canada announced a commitment of $1.18 billion over three years for sustainable agricultural development, which includes $600 million in additional resources.

CIDA programming in sustainable agricultural development focuses on countries where food security has been identified by national governments as a priority. Initiatives focus on building the capacity of small-scale farmers, particularly women; supporting national and regional agricultural and food security strategies and their implementation at all levels; and the strengthening of an enabling environment for sustainable rural development as well as the development of integrated value chains and the integration of the agricultural market while strengthening the accountability mechanisms in related government ministries and agencies.

CIDA is responsible for the Government of Canada's international assistance food security thematic priority. As part of its Aid Effectiveness Agenda, the Government of Canada announced in 2009 that it will be focusing 80 percent of bilateral resources in 20 countries of focus. These 20 countries were chosen based on their real needs, their capacity to benefit from aid, and their alignment with Canadian foreign policy priorities. Based on this, and with the goal of making Canada's international assistance more focused, more effective and more accountable, CIDA has focused a large amount of its bilateral programming for sustainable agricultural development in countries of focus located in sub-Saharan Africa, where the proportion of food insecure people in the world is the greatest. Concurrently, CIDA collaborates with the Department of Foreign Affairs and International Trade (DFAIT) and other Government of Canada departments to work through diplomatic and multilateral channels to promote global agreements and processes that address food security.


RECOMMENDATION 6.0 (LIBERAL)

That the federal government in cooperation with industry stakeholders and the provincial and territorial governments develop a policy and implement programs which seek to provide the educational infrastructure to assist in the development of a skilled labour force to address the needs of our primary agriculture producers on both a full and seasonal basis.

The Government of Canada will continue to cooperate with industry stakeholders and provincial and territorial governments to support the provision of the education infrastructure to assist in the development of a skilled labour force, addressing the needs of our primary agriculture producers on both a full and seasonal basis.

Recognizing that investments in a skilled and inclusive labour force are critical to economic growth and the future prosperity of all Canadians, the federal government provides substantial financial support to provinces and territories (PTs) for investments in post-secondary education (PSE) and labour market programming.

Specifically, PTs are responsible for the delivery of PSE, for which the Government of Canada is providing approximately $10.5 billion in support in 2010-11.  This includes $3.4 billion in support to provinces and territories for post-secondary education through the Canada Social Transfer (CST), which they can allocate according to their respective priorities, and an estimated $7.1 billion in federal support to individuals and their families, including direct spending and tax measures to help students and families save for and deal with the costs of education (e.g. Canada Student Loan Program, Canada Education Savings Grants, Registered Education Savings Plans, education, tuition and textbook tax credits) and to support research and related activities in post-secondary institutions.

The Government of Canada also provides approximately $2.5 billion per year to PTs to design and deliver their own labour market programming through the Labour Market Development Agreements (LMDA), and Labour Market Agreements (LMA).  These agreements allow PTs to tailor their programming to the specific needs of their labour markets, which could include the agricultural sector if identified as a priority.

Through the Knowledge Infrastructure Program (KIP), an initiative established as part of Canada’s Economic Action Plan, the Government of Canada is providing $2 billion for university and college infrastructure projects, including repair, maintenance and construction. Federal funding covers up to half of eligible project costs, with PTs and other partners providing the balance of funding.  Some projects funded under this program directly support skills development and research relevant to the agricultural sector.  For example, KIP is providing $2.9 million to support renewal at Olds College, including the upgrading of training facilities in the applied sciences of agriculture, horticulture, bio-fuels research, composting and land & water reclamation.  KIP funding of $2.55 million has been allocated to the development of Phase 2 of the University of Manitoba’s Smartpark, home to technology-based companies focused on biotechnology, agriculture and nutritional sciences. 

In addition to providing funding to PTs, the federal Government, through the Sector Council Program, works directly with the private sector to enhance adult workers’ skills by funding  activities such as increasing employer investments in skills development and promoting workplace learning and training.  Sector councils are arms-length demand-driven partnership-based organizations which bring together key stakeholders including employers, labour, educational institutions and governments to address key labour market and skills issues in a given sector. The Canadian Agricultural Human Resource Council (CAHRC), one of 34 sector councils, was founded in 2007 and seeks to engage key industry players to identify and address human resources and labour market issues in a strategic and coordinated manner, in order to further develop the global competitiveness of the agricultural industry.  Specifically, CAHRC recently created a comprehensive database, www.agritalent.ca, which lists all training programs offered by educational institutions and agricultural associations.  The CAHRC also works closely with the Association of Canadian Community Colleges (ACCC) and the Canadian Association of Diplomas in Agriculture (CADAP) to ensure that curriculum is updated and reflects the needs of employers in the industry.  While CAHRC's work to date has not specifically targeted the needs of young farmers, the Council does ensure that project committees incorporate the views of the next generation of agricultural producers.


RESPONSE TO RECOMMENDATIONS OF THE SUPPLEMENTARY REPORT BY THE BLOC QUEBECOIS


RECOMMENDATION 1.0 (BLOC)

That the allowable capital gains deduction for agricultural property be increased to $1,000,000 from $750,000, only for transactions in which a farm will remain in operation, in order to make it more advantageous to transfer a farm rather than dismantle it.

The current $750,000 Lifetime Capital Gains Exemption (LCGE) provides important support to farmers. 

The LCGE permits farmers to exempt a sizeable portion of capital gains realized on the transfer of a farming business.  A farmer can claim a LCGE of up to $750,000 on the disposition of eligible farm property or on the transfer of such property to a child.  The LCGE applies on an individual basis so that each taxpayer is allowed an exemption up to the $750,000 limit.  As a result, the amount can be doubled to $1.5 million if both the farmer and his or her spouse qualify for the exemption.  The LCGE limit, which applies to capital gains realized on the disposition of qualified farm and fishing property or qualified small business corporation shares, was recently increased to $750,000 from $500,000 in Budget 2007, the first increase since 1988. 

Farmers are also entitled to transfer certain types of farm property (i.e., farmland, depreciable property including buildings, and eligible capital property such as milk quotas) and shares in a family-farm corporation or interests in a family-farm partnership on a tax-deferred basis to their children (or grand-children or great-grand-children), thereby facilitating the transfer of farming businesses from one generation to the next.


RECOMMENDATION 2.0 (BLOC)

That the federal government extends application of the rules for rollovers to cover more than just parent-child transfers. The Bloc Québécois proposes extending application of these rules to all members of the immediate family under 40 years of age (brother and sister, nephew and niece, grandparents and grandchildren, etc.).

The intergenerational transfer, which allows for a tax deferral on the transfer of an eligible farming business to a child, recognizes the particular challenges faced by these businesses in the continued management of family farms and the importance of the next generation’s participation and involvement in their operation. 

For the purpose of the intergenerational transfer, a “child” is broadly defined to be a child, grandchild, or great-grandchild of an individual or of that individual’s spouse or common law partner.  The definition of “child” also includes persons who have been fully dependent on the individual before the person attained an age of 19 years.

The LCGE permits a farmer to exempt up to $750,000 of capital gains on the disposition of eligible farm property or on the transfer of such property to any individual, including siblings, nephews and nieces.  The LCGE applies on an individual basis so that each taxpayer is allowed an exemption up to the $750,000 limit.  As a result, the amount can be doubled to $1.5 million if both the farmer and his or her spouse qualify for the exemption.  Budget 2007 increased the LCGE limit to $750,000 from $500,000, the first increase since 1988.


RECOMMENDATION 3.0 (BLOC)

That a farm transfer savings plan be established enabling farmers to accumulate a tax-sheltered retirement fund. Governments could contribute to the fund in the same way as they contribute to registered education savings plans. This contribution would be conditional on the farm remaining in operation.

The Government of Canada already supports family farming businesses in their succession planning through the tax system.  In particular, the Income Tax Act contains a number of measures that help farming businesses to accumulate capital for retirement and facilitate the intergenerational transfer of property principally used in a farming business.

The Lifetime Capital Gains Exemption (LCGE) on farm property is in part intended to help farmers save for their retirement.  A farmer can claim a LCGE of up to $750,000 on the disposition of eligible farm property or on the transfer of such property to a child.  The LCGE is applied on an individual basis so that each taxpayer is allowed an exemption up to the $750,000 limit.  As a result, the amount can be doubled to $1.5 million if both the farmer and his or her spouse qualify for the exemption.  Budget 2007 increased the LCGE limit to $750,000 from $500,000, the first increase since 1988.  In addition to this exemption, farmers are also entitled (as are other Canadians) to a separate exemption from tax on any gains realized on the disposition of their principal residences.

Farmers are also entitled to transfer certain types of farm property (i.e., farmland, depreciable property including buildings, and eligible capital property such as milk quotas) and shares in a family-farm corporation or interests in a family-farm partnership on a tax-deferred basis to their children (or grand-children or great-grand-children), thereby facilitating the transfer of farming businesses from one generation to the next. In addition, the LCGE may be used to reduce the tax on any capital gains arising from the transfer of eligible farm property (i.e., if the farm property is transferred for proceeds in excess of the adjusted cost base).

Farmers are also entitled to claim a capital gains reserve over a 10-year period where the proceeds of disposition have not been fully received and the property has been transferred to the farmer’s child.  The reserve allows farmers to average capital gains income and the corresponding tax liability over a maximum of 10 years.  A minimum of 10 per cent of the gain must be brought into income each year.  This is useful where the capital gains upon disposition exceed the available LCGE.

If a farmer is transferring his or her farm to a person for whom the farmer cannot use the 10-year capital gains reserve or intergenerational rollover (e.g., a nephew, niece, or unrelated person), then the farmer may claim a reserve over a 5-year period if the proceeds of disposition are not all receivable in the year of the sale.  Under the 5-year capital gains reserve, a minimum of 20 per cent of the gain must be brought into income each year.

Farmers can also benefit from the tax-preferred treatment of savings in Registered Retirement Savings Plans (RRSPs) and Tax-Free Savings Accounts (TFSAs).  The TFSA is the most significant advance in the tax treatment of personal savings since the introduction of RRSPs in 1957.  More than 4.8 million Canadians have opened a TFSA since they became available in January 2009, depositing more than $19 billion of savings. The TFSA is a flexible account for savings over Canadians’ lifetimes.  All Canadian residents age 18 or older are allowed to contribute up to $5,000 a year to a TFSA, even after they reach the age of 71 years and are required to convert RRSP savings into a retirement income vehicle.  To ensure that the annual contribution retains its real value in the future, the $5,000 limit is indexed to inflation in $500 increments.


RECOMMENDATION 4.0 (BLOC)

That the home buyers’ plan be made more flexible to allow young famers to obtain, in whole or in part, a larger portion of a residence owned by a corporation and to use their RRSP to acquire an agricultural business.

Individuals are permitted to make limited tax-free RRSP withdrawals (with subsequent repayment) for two specific purposes:  first-time home purchases under the Home Buyers’ Plan (HBP) and education and training expenses under the Lifelong Learning Plan.  The HBP requires that amounts withdrawn be repaid in installments over a period not exceeding 15 years, or else individuals must include withdrawals in income over time, resulting in a tax liability. 

To ensure that the tax system continues to provide effective mechanisms to support saving and home ownership, Budget 2009 increased the HBP withdrawal limit to $25,000 from $20,000 for withdrawals made after January 27, 2009.  The increase will provide first-time home buyers with additional access to their Registered Retirement Savings Plan savings for the purchase or building of a home, including the purchase or construction of a residence situated on farm property.

To assist first-time home buyers with the costs associated with a home purchase, Budget 2009 also introduced a First-Time Home Buyers’ Tax Credit – a non-refundable income tax credit based on an amount of $5,000 for first-time home buyers who acquire a qualifying home after January 27, 2009.  For an eligible home buyer, the credit provides up to $750 in federal tax relief.


RECOMMENDATION 5.0 (BLOC)

That the federal government transfer a recurring envelope of funds to the Government of Quebec to support young farmers.

The current 5-year Growing Forward (GF) policy framework expires in Spring 2013 and funding arrangements under a successor framework will be developed in consultation and negotiation with federal, provincial and territorial (FPT) governments. Discussions on GF2 lean toward and will continue in the direction of flexibility with FPT governments in the development and delivery of programming.

Ensuring that Canadian farmers remain profitable and prosperous over the long-term is a priority for the Government of Canada.  AAFC is committed to working with farmers, industry representatives, provinces and territories (PTs) to develop effective programming that will help to meet this goal.

Over the past few years, AAFC has focused its efforts on the implementation of the GF framework, which was signed by FPT Ministers in July 2008. GF provided significant flexibility to PTs to develop and deliver programs that addressed local priorities while supporting outcomes agreed to by all parties; the PTs deliver non-Business Risk Management (BRM) programs under this framework, and submit claims for reimbursement by the federal government. GF’s Business Development (BD) programming funds PT activities related to agriculture business management practices and skills development, and provides for enhanced participation by young or new entrants. In Quebec, the BD programming funds the programme d'appui au développement des entreprises agricoles (PADEA) which aims to help agricultural producers to continue the development of an integrated management approach to their enterprise and to support sustainable and competitive agriculture. The program has been in force since April 1, 2009 and is set to end March 31, 2013. The PADEA promotes sustainable development of the agricultural sector by achieving measurable progress toward the improvement of financial situation, profitability, efficiency, as well as the diversification and transferability of agricultural enterprises; and helps with the promotion and adoption of best business management practices and with the access of advisory services. While the PADEA is not a program targeted to young farmers, Stream 3 of the program called "meilleures pratiques de gestion à la ferme" is intended for new entrants of less than 40 years old. Over 5 years, 900 000 dollars is dedicated to the Stream 3.

Under GF, on-going BRM programs are available to help producers effectively manage financial risks related to their business operations.  The current suite of BRM programs include AgriInvest, AgriStability,AgriRecovery and AgriInsurance.

 As part of Canada’s Economic Action Plan, the Government of Canada launched the Canadian Agricultural Loans Act (CALA) Program in 2009 to replace and expand on the former Farm Improvement and Marketing Cooperatives Loans Act. Under the CALA, the Government expanded program eligibility to include beginning farmers and a broader range of agricultural co-operatives, and increased loan limits up to $500,000. The CALA makes affordable credit more available to farmers, including beginning farmers and agricultural co-operatives, by the Government limiting the down payment required, capping the maximum interest rates and guaranteeing repayment of 95% of a net loss to the financial institution. Through the CALA, the Government of Canada is supporting the renewal of the agricultural sector and enabling co-operatives to better seize market opportunities.

The 5-year GF policy framework expires on March 31, 2013 and a successor framework Growing Forward 2 (GF2) is being planned for implementation on April 1, 2013. GF2 will represent an evolution of previous frameworks towards an adaptable and profitable sector.  At this time, no decisions have been taken as to the specific funding mechanisms for GF2.  The funding arrangements for GF2 will be developed in the course of consultations and negotiations among FPT governments.


RESPONSE TO RECOMMENDATIONS OF THE SUPPLEMENTARY REPORT BY THE NEW DEMOCRATIC PARTY OF CANADA


RECOMMENDATION 1.0 (NDP)

Examine the possibility of an interest-free loan program for the purchase of farmland to facilitate the ability of young farmers to start their own farms.

Compared to the interest rates in the 1980s and 1990s, the current low-interest rate environment does not create the same problems with beginning farmers’ ability to repay the debt needed to finance the purchase of farmland.  Many Canadians, including young farmers, are able to borrow funds through public and private financial institutions at the current low interest rates. In this respect, this Government and its agencies have taken steps to facilitate the ability of beginning farmers to access debt capital. 

As part of Canada’s Economic Action Plan, the Government of Canada launched the Canadian Agricultural Loans Act (CALA) Program in 2009 to replace and expand on the former Farm Improvement and Marketing Cooperatives Loans Act (FIMCLA). Under the CALA, beginning and existing farmers and agricultural cooperatives may be eligible for new loan guarantee limits of up to $500,000 for real property (land and buildings). Beginning farmers are now eligible to receive guaranteed loans for an amount up to 90% of the appraised value or purchase price of the asset, meaning only 10% is required for a down payment. 

Farm Credit Canada (FCC) offers a number of loan programs to facilitate young and beginning farmers entering the agricultural sector.  Loans such as the Transition Loan and the First Step Loan offer flexible options and features to help young farmers get their operations up and running.  Last year, 37% of loans were to young farmers (under 40 years of age). Between April 2005 and March 2009, FCC advanced 37,000 loans to young farmers for a total of more than $5 billion.

In addition, a number of provinces offer various financing options for the purchase of farmland. Interest-free loans are not without risks. For example, producers may not be able to repay the loan should the incentive be removed at a later date. Further, the incentive created by the interest-free program may encourage producers to purchase land at inflated prices because they are only required to make payments towards the principal.


RECOMMENDATION 2.0 (NDP)

Lower the size of asset requirements so that young farmers are not unduly hindered from participating in loan programs.

Government agrees with, and has in fact already satisfied this requirement under the Canadian Agricultural Loans Act (CALA) program.

Applicants under the CALA program can offer the assets they are purchasing under the program as security for the loans they receive, thus satisfying this requirement under the CALA while not unduly requiring beginning farmers to provide extensive assets.


RECOMMENDATION 3.0 (NDP)

Revise the criteria for intergenerational transfers to include family members other than just the farm owner’s children.

The intergenerational transfer, which allows for a tax deferral on the transfer of an eligible farming business to a child, recognizes the particular challenges faced by these businesses in the continued management of family farms and the importance of the next generation’s participation and involvement in their operation. 

For the purpose of the intergenerational transfer, a “child” is broadly defined to be a child, grandchild, or great-grandchild of an individual or of that individual’s spouse or common law partner.  The definition of “child” also includes persons who have been fully dependent on the individual before the person attained an age of 19 years.

The Lifetime Capital Gains Exemption (LCGE) permits a farmer to exempt up to $750,000 of capital gains on the disposition of eligible farm property or on the transfer of such property to any individual, including siblings, nephews and nieces.  The LCGE applies on an individual basis so that each taxpayer is allowed an exemption up to the $750,000 limit.  As a result, the amount can be doubled to $1.5 million if both the farmer and his or her spouse qualify for the exemption.  Budget 2007 increased the LCGE limit to $750,000 from $500,000, the first increase since 1988.


RECOMMENDATION 4.0 (NDP)

Revise the criteria for calculating capital gains on income tax returns so that: i) it is based on the economic value of the farm business and not on the market value and; ii) the capital gains exemption is increased.

The determination of capital gains according to the market value of the assets on the sale or transfer of a farming business is fair and consistent with the determination of capital gains for other assets.  Farmers may also shelter a significant amount of capital gains from taxation using the Lifetime Capital Gains Exemption (LCGE).

The LCGE provides important tax benefits to farmers.  A farmer can claim a LCGE of up to $750,000 on the disposition of eligible farm property or on the transfer of such property to a child.  The LCGE applies on an individual basis so that each taxpayer is allowed an exemption up to the $750,000 limit.  As a result, the amount can be doubled to $1.5 million if both the farmer and his or her spouse qualify for the exemption.  The LCGE limit was recently increased to $750,000 from $500,000 in Budget 2007, the first increase since 1988.


RECOMMENDATION 5.0 (NDP)

Increase staffing levels to provide more support and training for young farmers, (ie: dairy nutritionist).

The Government of Canada is committed to building a skilled and inclusive labour force through investment in training programs. However, increasing staff levels to provide more support and training to young farmers would not be appropriate as this is a decision required by the provinces since extension services and staff (e.g dairy, cattle, and horticultural specialists) fall within the jurisdiction of the provincial governments.

More than $4.5 billion in skills development programs is being invested in 2010-11, benefiting more than 1.5 million Canadians. Of this $4.5 billion, almost $1 billion stems from the Economic Action Plan to support workers most affected by the economic downturn. This money is helping Canadians to access skills development and training, to prepare them for the labour market of today and the future. 

As part of this funding, the Government of Canada provides approximately $2.5 billion per year to provinces and territories to design and deliver their own labour market programming through the Labour Market Development Agreements (LMDA), and Labour Market Agreements (LMA).  These agreements allow provinces and territories to tailor their programming to the specific needs of their labour markets.

Under the federal-provincial-territorial Growing Forward (GF) framework agreement, federal funding is provided to the provinces for cost-shared Business Development (BD) programming. The BD program funds provincial and territorial activities, including extension, related to agriculture business management practices and skills development and provides for enhanced participation by young or new entrants.

Under BD, Agriculture and Agri-Food Canada also provides financial support to national organizations that develop programs, tools and activities in support of young and beginning farmers. They include the Canadian Young Farmers’ Forum, the Canadian 4-H Council, the Canadian Farm Business Management Council, the Canadian Agricultural Safety Association and Canada’s Outstanding Young Farmers’ Program.


RECOMMENDATION 6.0 (NDP)

Implement a policy of giving preference to local farmers when purchasing food for federal institutions and that firm targets be established, ie: 20% by 2015.

Value (price) and quality form the primary purchase standards within established budget parameters for all procurement contracts. With the exception of fresh fruits and vegetables, 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 due to regulations and policies such as supply management.

Under the World Trade Organization and many regional trade agreements (e.g. the North American Free Trade Agreement) there are national treatment obligations which require that imports not be accorded less favourable treatment than domestic products.  This comes under the principle of National Treatment which means that imported and locally produced goods should be treated equally. 

These agreements also include commitments on specific government procurements by the federal government.  Most goods, including agri-food products, are included.  Thus federal departments and agencies must conduct procurement consistent with the terms of such agreements.


RECOMMENDATION 7.0 (NDP)

Revise the AgriStability program so that: i) the viability test is eliminated; ii) reference margins are calculated by using the best 3 of past 5 years and; iii) payment delivery is prompt and falls within the same crop year.

In conjunction with the provinces, the federal government will be engaging industry on potential directions and program options for the successor to the Growing Forward (GF) policy framework. The program options being tabled by industry will be considered in their ability to assist the industry in meeting the challenges and opportunities of the future. Although business risk management programming can assist in sustaining the industry during difficult times, it is important that programs allow market signals to pass through to producers to encourage adaptation to changing markets.


i. The viability test is eliminated.


Building on the Canadian Agricultural Income Stabilization program, changes were made to AgriStability to expand the negative margin coverage by allowing producers with negative reference margins to remain eligible for the program, provided two of the three years used in the calculation of their reference margins are positive.  This change allowed viable producers who faced significant difficulties over a number of years to remain eligible under the program.

The impacts of further relaxing the requirements for negative margin coverage on the long-term competitiveness of the industry will need to be fully evaluated in the context of the next generation of programming.  In considering this option in the past, many provincial jurisdictions raised concern that such an approach would mask market signals and hinder the adaptation needed to maintain competitiveness and promote profitability in the sector.


ii. Reference margins are calculated by using the best 3 of the past 5 years.


The methodology for calculating reference margins is based on the World Trade Organization’s Agreement on Agriculture.  By adhering to the specific criteria stipulated in the Agreement on Agriculture, this allows payments from the AgriStability disaster component for an income loss greater than 30% to be reported as non- or minimally trade-distorting.  In calculating reference margin averages, the Agreement on Agriculture allows for the use of a straight average from the preceding three years, or the “Olympic” average currently used, where the highest and lowest reference entries from the preceding five years are excluded.  Using the average of the three best reference years would require payments from the AgriStability disaster component to be notified as trade-distorting support and could put Canada in a vulnerable position for meeting international trade obligations.

During the development of AgriStability, producers indicated they would prefer a more stable reference margin that more closely tracked their five-year average.  Analysis indicates that the “Olympic” average methodology achieves this goal.


iii. Payment delivery is prompt and falls within the same crop year.


To maintain government accountability and ensure payments reflect a producer’s individual situation, AgriStability payments are calculated based on a producer’s tax information as reported to the Canada Revenue Agency, as well as additional information regarding their production, inventory, and accrual financial information.  Final payments can only be made once the production year is completed and forms are submitted by the producer.  While such programming is well suited to targeting the needs of individual producers, there are inherent delays. 

To help address these delays governments have implemented key features in the programs allowing producers faster access to assistance.  Interim payments allow producers the opportunity to provide their individual production information and receive a portion of their expected payment.  Administrations can also offer targeted advance payments to producers based on industry averages where there is a significant downturn in a specific sector.  In addition to these interim mechanisms, producers are encouraged to provide their information as soon as possible to ensure timely processing of their claim.


RECOMMENDATION 8.0 (NDP)

Implement a cost of production program that will place Canadian farmers on a level playing field with international competition.  (For example, in the tree fruit industry this could take the form of implementing a floor price that protects against dumping into our markets by the Americans).

The recommended approach would not be appropriate given that the implementation of cost of production-style business risk management (BRM) programming would raise serious trade risks for industry.  Many sectors are dependent on export markets, such as livestock and grains and oilseeds, and direct price-related support for many of these commodities could prompt anti-dumping and countervail action from major trading partners.  Moreover, cost of production-style BRM programming would likely be reported as trade-distorting support (i.e., “amber”) from a World Trade Organization perspective and would count against Canada’s “amber” support limit of $4.3 billion annually.


RECOMMENDATION 9.0 (NDP)

Ensure that no modifications are made to supply managed sectors or to state trading enterprises such as the Canadian Wheat Board when negotiating WTO or bilateral free trade agreements.

The Government of Canada strongly supports supply management and will continue to defend the interests which are important to these industries in all trade negotiations. Supply management is a business risk management program that dairy, poultry, egg and hatching egg producers have chosen as being the best course for them.

The Government of Canada continues to hold the view that decisions regarding the marketing structure of the Canadian Wheat Board (CWB)should be made domestically and not by our international trading partners. Our negotiating positions in trade negotiations reflect this view. The Government will continue to work with Western Canadian grain farmers to ensure they are given the freedom to choose whether to sell their wheat or barley on the open market or through the CWB.


RECOMMENDATION 10.0 (NDP)

Strengthen the role of the Canadian Wheat Board as the single desk seller of western grain and ensure that the decision making powers affecting its operation are firmly entrenched in farmers hands and cannot be subjected to unwanted political interference.

The Government understands that some farmers want the Canadian Wheat Board (CWB) to market their grain, but that other farmers want to modify the CWB’s current single-desk marketing authorities so that they have the flexibility to choose to whom they sell their grain.

The Federal Court of Appeal affirmed in January 2010 that the Governor in Council has the authority to direct the CWB.  This is consistent with a body created by legislation and wielding government powers in order to achieve objectives set out in the Canadian Wheat Board Act.


RECOMMENDATION 11.0 (NDP)

Undertake a process to examine supply management as a marketing strategy for other struggling commodity sectors such as the hog industry.

An examination of supply management as a marketing strategy for other commodity sectors would require a consensus within the industry as well as a formal proposal for the government to look at this. Although supply management for the pork and beef sectors has been raised as an issue by some groups in the past, the supply management system is usually found in sectors that primarily serve the domestic market. Since Canada has been a traditional net exporter of pork and beef, a supply management system might not attract broad support among producers as there would have to be considerable downsizing if production was to meet only Canadian demand with little or no exports.  A recent study realized by the George Morris Centre has determined that Canadian hog production would need to decrease by more than 60% to match domestic consumption.  A significant number of hog farmers would be put out of business as a consequence of such an adjustment.  The implications of this downsizing to up-stream business partners would be far-reaching and could also mean closure of specialized processing plants. 

In addition, Canada has obligations under the World Trade Organization and bilateral trade agreements (e.g. the North American Free Trade Agreement) that would impact whether supply management could be extended to other commodities in Canada.  The ability to control imports is also an important component and would be difficult to achieve through the use of trade barriers (e.g. tariffs) since current international trade agreements and negotiations have the objective of lowering these barriers over time. 


RECOMMENDATION 12.0 (NDP)

Undertake a thorough analysis of the North American Free Trade Agreement (NAFTA) and its overall effect on all groups of Canadian farmers and that the findings be reported back to this Committee no later than May 01, 2011.

AAFC recognizes the importance of the North American market and NAFTA and has already undertaken (or sponsored) several studies examining the effects of NAFTA on the structure and performance of Canadian agricultural sector.  The rapid expansion of trade and exports in the post-free trade agreement/NAFTA period has been a success.

The following AAFC documents, which can also be found at http://www4.agr.gc.ca/AAFC-AAC/display-afficher.do?id=1177676316971&lang=eng , provide a comprehensive evaluation of NAFTA:

  • “NAFTA: Outcomes, Challenges and Prospects” (September 2009). This document provides an overview of NAFTA including more outcomes.

  • “Economic Analysis of the Liberalization of the Red Meat Markets in the Pacific Region from 1988 to 2007” (July 2008).  One of the principle benefits to Canada has been for the red meat (cattle/beef, hog/pork) industries. This document evaluates the benefits of NAFTA taking account of the many other changes that have contributed to the growth of the red meat industries.

  • “An Evaluation of Oilseed Trade Liberalization” (July 1998). This document provides a similar analysis for the oilseed markets.

  • “North American Integration in Agri-Food” (March 2004). This document describes agri-food supply chain integration.

  • “Effects of Agri-Food Exports on Farm Income” (April 2000). This document completes the overall assessment by showing the link between increased agri-food trade and farm income.

The Government is committed to the on-going monitoring of this issue.


RECOMMENDATION 13.0 (NDP)

Negotiate a duty-free quota for the shipment of hormone-free beef to the EU similar to what the US has done; however, this should not come at the expense of supply managed commodities or the Canadian Wheat Board.

On November 23, 2010, the European Union (EU) published an Official Journal notification placing Canada on the third country list for access to an existing 20,000 tonne most-favoured nation (MFN) duty-free tariff rate quota (TRQ) for hormone-free beef.  This existing quota was opened on August 1, 2009 as result of a previous arrangement between the EU and United States (U.S.), as a result of the U.S. World Trade Organization (WTO) trade dispute against the EU on its ban on the import of beef from animals that have been administered growth-hormones. EU importers may now apply for permits to import Canadian beef under this duty-free quota.

Furthermore, the Government of Canada and the European Commission have finalized a Memorandum of Understanding (MOU) that should resolve Canada’s WTO trade dispute against the EU, similar to the EU-U.S. arrangement.

The MOU provides for an additional 3,200 tonnes (1,500 by July 2012 rising to 3,200 in August 2012) duty-free TRQ for hormone-free beef to be added to the existing MFN quota.  In return, once the MOU is signed, Canada will begin the process to remove the WTO authorized retaliatory surtax that has been in place since 1999 on certain EU agricultural imported products.


RECOMMENDATION 14.0 (NDP)

In addition to the recommendations presented in the Standing Committee’s earlier report entitled Competitiveness of Canadian Agriculture, the federal government should examine the huge price disparity in the beef sector as outlined by Mr. Ian Hutcheon of the Southern Interior Stockmen’s Association on page 28 of this report.

The following response provides an examination of the price disparity in the beef sector as outlined by Mr. Ian Hutcheon of the Southern Interior Stockmen’s Association on page 28 of the Standing Committee on Agriculture and Agri-Food, entitled “Young Farmers: the Future of Agriculture”.

The difference in the value of a calf sold at the farm level and value of beef sold at retail reflects a wide range of costs incurred as the calf moves through the beef supply chain.  These costs include those associated with feeding, slaughter, fabricating, cutting and packaging, distribution and marketing.

In comparing the retail price of beef versus a farm gate price for a calf, it should be noted that the data required to make an effective comparison is very limited.  For example, in 2009, a simple average of the five retail beef cut prices reported by Statistics Canada was approximately $5.83/per pound.  This price does not reflect the volume of a particular cut that was sold or the volume that was sold “on sale”.  In comparison, data from the AC Nielsen Company, which records actual retail sales data, shows a 2009 average price of $4.19/ per pound (Retail Margins, Canfax Research Service, Canadian Cattlemen’s Association, May 2010).

The entire beef animal is not sold at retail.  An average carcass represents 58% of the calf’s finished weight.  A further 25% of carcass weight is lost as a result of bone removal and trimming during the fabrication process.  In addition, a significant portion of the beef produced in Canada is sold into export or domestic food service markets.  The price of beef sold through these channels is not captured in the pricing information collected at retail.

Overall, while there are examples of increasing levels of concentration in the North American cattle feeding, slaughter, and distribution and retail sectors, the level of competition within the sectors remains intense.  For example, at the retail level, traditional companies such as Loblaws must now compete with new entrants in the Canadian food retailing sector such as Wal-Mart Supercentres, Shoppers Drug Mart and Canadian Tire.  These new firms are forcing existing retailers to adjust their marketing strategies.

The calf-to-retail beef price spread does not demonstrate that any one participant in the supply chain is profiting at the expense of another.  The prices and their differences (i.e. margins) do not automatically translate to profits.  However, unless all participants in the chain have an opportunity to be profitable, Canada’s beef industry will not grow.

Given this, the Government of Canada has undertaken a series of initiatives aimed at increasing producer returns.  This includes improving market access through bilateral and multilateral negotiations and increasing beef demand by supporting the market development activities of the Beef Information Centre, Canada Beef Export Federation and Canadian Beef Breeds Council.

The Government has also invested in the Beef Science Cluster to ensure producers have access to the research they require to succeed.  Through the establishment of national value chain roundtables, the Government of Canada has sought to address various competitiveness challenges by encouraging the adoption of practices and processes that improve the efficiency and adaptability of the entire supply chain.