Good morning, everybody, on this fine, fresh, not-Monday morning. It's Tuesday.
Welcome to meeting 149 of the Standing Committee on Industry, Science and Technology. We are continuing our study on the impacts of Canada’s regulatory structure on small business.
Today we have two panels with us.
The first panel is from the Department of Industry. We have Frances McRae, assistant deputy minister, small business and marketplace services; Stephen Fertuck, senior director, portfolio and intergovernmental engagement secretariat; and Darcy DeMarsico, director, industry sector, economic strategy tables bureau.
From the Department of Foreign Affairs, Trade and Development, we have Matthew Smith, director, technical barriers and regulations.
I believe that only the Department of Industry has a presentation, and we'll get into questions from there.
Thank you very much for coming.
We're going to start with Frances McRae.
You have seven minutes.
Thank you for inviting us to appear today.
We're really pleased to be here before the committee to discuss the impacts of Canada’s regulatory structure on small business.
My colleagues and I are here to answer your questions primarily, so what I have to say will be quite short.
I'd like to begin by speaking about the importance of small businesses in Canada. As you may know, small businesses are the backbone of our economy and vital contributors to growth. Let me clarify that, according to Statistics Canada, small businesses are firms that have fewer than 100 employees, while medium-sized businesses have between 100 and 499 employees. There are over one million small and medium-sized businesses in Canada, and they make up 98% of all Canadian businesses. Moreover, 11.4% of small businesses export goods and services. As a whole, the sector employs over eight million Canadians and generates 42% of the private sector gross domestic product.
I will turn to the responsibilities of our department and our role in supporting small businesses, which range from very small, main street shops that provide us with service and high-quality products locally, to high-growth firms that create many jobs across Canada. They innovate and pioneer new technologies, products and services. This is a wide range of companies.
Our department, ISED, or Innovation, Science and Economic Development, plays a vital role in strengthening Canada's economic competitiveness. We work with Canadians in all areas of the economy to improve conditions for investment, enhance Canada's innovation performance, increase Canada's share of global trade and build a fair, efficient and competitive marketplace.
Our department has frequent interactions with members of the business community who have reinforced with us that a strong regulatory environment is a critical platform for helping businesses to compete and expand. In fact, our department recently published a report from Canada's economic strategy tables, which Darcy could tell you more about. It's a new model for industry-government collaboration that underscored the urgency for Canada to improve conditions for competitiveness, innovation, trade and investment in today's global economy.
One of the economic strategy tables' most significant priorities was the call for Canada to develop an agile regulatory system that ranks within the top quartile globally, and that's conducive to innovation, creates public trust and attracts investment. We know that our regulatory system has to be able to keep pace with advances in technology and innovation and reduce regulatory burden while continuing to protect the health, security and safety of Canadians and the environment.
A number of recommendations came from the economic strategy tables. One is to establish a charter on regulatory agility with built-in reviews and accounting for the cumulative impact of regulations and competitiveness. Other recommendations include establishing an innovative and competitive regulations council for high-growth sectors, and establishing pilot projects to keep innovation going, supported by a hub to develop and share best practices.
In the 2018 fall economic statement, these recommendations were cited as a rationale for the creation of a dedicated external advisory committee on regulatory competitiveness and a centre for regulatory innovation. In fact, economic strategy table members that we collaborated with were quoted to make the case for why this was needed.
It is important for me to touch on our own department's specific role on the broader regulatory system.
ISED and its portfolio entities have important regulatory functions. We cover over 50 acts and over 100 sets of regulations related to areas such as bankruptcy, consumer affairs, copyright, investment, patents, telecommunications, and weights and measures. As a department, we're committed to taking steps to ensure efficient and effective federal regulations. We actively seek to ensure that our regulatory approaches remain flexible to allow innovation to thrive.
You have heard from the Treasury Board Secretariat. Our department has been working very closely with the Treasury Board Secretariat as they develop their plans to deliver on the initiatives announced in the the 2018 fall economic statement that I mentioned.
Another key initiative being undertaken by the Treasury Board Secretariat is the development of an e-regulation system. The system is an online platform to encourage Canadians to participate in regulatory development in order to improve the transparency and efficiency of the process. This is in addition to the new cabinet directive on regulation, which was announced in fall 2018. All regulations will now undergo a small business lens analysis. This approach is different from the approaches that we've seen in the past. It will help reduce the regulatory burden on small businesses, increase transparency and create a more predictable regulatory system.
We firmly believe that the initiatives led by the Treasury Board Secretariat and that we're working on with them are well placed to strengthen Canada's regulatory framework while addressing rules, requirements and processes that are outdated and unduly burdensome for businesses.
I should also add that other federal government departments and agencies are also working to transform their service delivery into a more modern, timely and integrated experience for business. This is important when we talk about reducing burden for small businesses, especially those small businesses that are not the kinds of businesses that would have a legal department or an accountant full time and would have to do this work themselves.
With Canada Revenue Agency improving client services related to telephone services, digital services and information technology infrastructure, Employment and Social Development Canada is modernizing its service delivery beginning with employment insurance. Public Services and Procurement Canada's efforts to transform the way it serves small business through a new electronic procurement platform will help small businesses and entrepreneurs better access opportunities to work for government.
There are a number of things that our department is also leading to reduce the burden for small businesses. I'll touch on those briefly and then we can turn to some questions.
We know that digital services for businesses making them client-centric really help introduce operational efficiencies not just for businesses but also for us as a government. We are working on communicating better, explaining and streamlining our processes and services in a different way.
One of the things that I wanted to point out to you is the new platform that we have for small businesses called Innovation Canada. That platform actually enables entrepreneurs to be matched with the right programs and services not just from the federal government but also from other governments in provinces and territories.
We're also making it easier to register a company through registration in our multi-jurisdictional registry access system. Right now, if you operate a company in British Columbia and you want to expand into Alberta, you have to register separately in Alberta through the registrar of corporations in Alberta. What we're working on with the provinces and territories is a system that will allow the information in any of the registries to be leveraged by the other registries.
That work is under way. That will also allow for robust business searches across the registries. It will streamline extra-provincial corporate registration and reporting. You may be aware that this is one of the top 10 irritants that the Canadian Federation of Independent Business talks about: multiple corporate registries.
We're also working on making it easier to protect intellectual property which is very important for small businesses as they look into exporting. You may be aware that Minister announced an intellectual property strategy last year to do that.
In closing, we're committed to making the Canadian regulatory system more agile, transparent and responsive so that small businesses across the country have the resources and support they need to grow. That said, we understand that we must make additional progress.
We welcome your insights and advice as the committee does its work.
I'm pleased to be here today. I'll start by talking about the mandate of Global Affairs Canada and the relationship between our free trade agreements and regulations. This issue is relevant to the topic of the meeting.
In terms of the type of work we do in the department in my area related to trade negotiations and regulation, we have a number of initiatives as part of our free trade negotiation and our trade agreement negotiation strategies. We try to complement those improvements in access to markets that are achieved through the reduction of tariffs to make sure that regulatory barriers don't present obstacles that are insurmountable for our businesses in order for them to then take advantage of these new markets.
There's a dedicated series of units within the department that work full time on that sort of issue, on non-tariff barriers to trade, and as part of our free trade agreements we have a chapter on technical barriers to trade. That is essentially referring to those types of regulations that can have high compliance costs or that can in fact form a complete barrier to entry to a market for Canadian business.
We also negotiate chapters in more recent agreements, which we call good regulatory practice chapters, and those are to set out the types of rules and procedures that we find are common here in Canada and are built into the cabinet directive on regulation, which, as Ms. McRae just mentioned, was updated in the fall of 2018. This is to try to bring that kind of discipline in regulatory development and new regulation-making to our major trading partners.
In the case of large trading partners, such as the European Union, we in fact have in our trade agreements like the CETA formal arrangements on co-operation between regulatory authorities. That is designed to ensure that as new regulations are developed that are going to be important for trade between us and our partners, they can be done together and with a view to trying to avoid unnecessary differences.
That's the type of framework that we try to put in place to help to complement the reductions in tariffs.
I guess I'll take a crack at that and then maybe see if we have any comments from the interdepartmental perspective.
You're right. Our mandate as a department is innovation. It's promoting economic development.
I would say that, overall, the regulatory process is one in which we do work together. I mentioned the cabinet directive on regulation earlier, and I think this is really important. The department at Treasury Board Secretariat just renewed and revised the cabinet directive on regulation, and that cabinet directive really applies to every single department that regulates, every single organization that regulates.
It used to be that if you were a regulator and you assessed the impact on small businesses of a regulation to be less than $1 million, you would not have to do a small business assessment, essentially, if you had less than $1 million of economic impact.
That has changed. The new directive requires every single regulation to go through a small business assessment, so it doesn't matter, that dollar value. It can be zero dollar value. I think this is really important in ensuring that the signal is sent that it's critical that the impact on businesses be assessed, whether they're small businesses or large businesses.
If you look at the data, Canada has chronically low levels of business investment. I don't think it's entirely due to regulation, but obviously, that's one critical element of it. If we're going to increase prosperity for Canadians, I think one critical component of doing that is streamlining regulation. One of the things I would suggest the department needs to look at is doing an analysis of provincial and municipal regulations. I don't see how we can achieve a lighter regulatory burden while still achieving health and safety outcomes unless we know what the provinces and the municipalities are doing; otherwise, you have a situation where the left and right hands don't know what they're doing.
When you look at the levels of business investment we have in this country, we're somewhere around 10% of GDP on a non-residential basis. That's much lower than our major economic competitors south of the border and across the Atlantic. I think this is critically important for us to improve our competitiveness.
The thing that sticks in my mind about how ridiculous some of these regulations are is an incident with the National Capital Commission. Several years ago, two young children wanted to set up a lemonade stand and got slapped with a massive bureaucracy that wanted them to pay $1,500 for a permit. It created a huge outcry. What was so ridiculous about the whole situation was that, after the controversy, the NCC came forward with a new rule that, yes, allowed them to set up a lemonade stand, but it was subject to a plethora of conditions. It had to have bilingual signage. They had to report the revenues to the NCC. There was an indemnification clause. There were size restrictions and adherence to provincial health and safety regulations.
My kids live in Wellington County. They set up a lemonade stand and we didn't have to go through any of that. Nobody died because they drank my kids' lemonade. This happened in recent years; this wasn't 15 years ago.
We've been through a lot of this stuff in the last 15 years, yet we continue to slip in the rankings. We don't have the sense of where provincial and federal regulations are. One of the results is low levels of business investment and a sense that Canada can't attract business investment and can't get the economy moving.
As Ms. McRae was mentioning, the trade commissioner service is well positioned to work directly with Canadian businesses that are interested in getting into other markets.
A lot of the concerns that are reported back to the department from clients are that, indeed, finding access to customers and matching with demand is a big part of gaining access to the markets, and so is overcoming some of the basic things you would always expect when dealing with shipping and customs clearance. There's a great deal of direct service you can get, and the trade commissioner service is free to Canadian clients who are able to work with it to get into a lot of different markets.
It's a very good time, as you mentioned, with all of this new access to markets opening up through the trade agreements. From a regulatory perspective, we have set up rules to try to create a predictable framework for business from a regulatory perspective, so that when our big trading partners are developing new rules that could have an impact on Canada, we've had them agree—whether it's CUSMA, CETA or CPTPP—to a set of rules that says they need to give an opportunity for Canadian businesses and the Canadian government to participate in the development of any new rules, so that we can provide our perspective on how they can be less impactful and less of an obstacle at an early stage. There are transparency requirements to make sure that they provide drafts of any new rules that would affect Canadian trade well in advance of the rule coming into place.
Even once the rule is finalized, our modern trade agreements require that at least six months, if not more time, is available from when the new rule has been finalized to the time it would actually have impact, so that there's time for businesses to be able to adjust to that change.
Thank you, Mr. Chair. Thank you, all, for being here.
I want to focus on the sharing of information between platforms. I'm thinking of BizPaL. When you're setting up a business, it will tell you which regulations you need to meet. Depending on how you answer questions, it will give you more forms for provincial, municipal or federal regulations.
I met with one of our businesses in Guelph this past week. He gave me a list of 17 federal regulations that he has to meet in Canada, plus two that he has to meet when he's exporting to the United States.
I'm just putting it on the table. When are these regulations due? Is it annually on March 1, annually on March 2, annually on June 1, annually on December 31, annually on the anniversary of issue or every six months? If you knew that it was the regulation system and you knew that on April 30, just to pick a date, all your regulations were going to be due, rather than having to go through your files to say, “Oh, it's March 1, so I have to set up this regulation....”
Why not look at something like BizPaL, where everything is in one place? You only answer the question once. You give your business licence number. It will fill in all the fields for your business name, location and the standard information that any form is going to ask. Is it possible to look at sharing data across regulations, like regulation 490 on one form and regulation 833 on another? Is there a way of sharing information across regulations, as well as harmonizing the dates that regulations are due for small business, to make it easier for them to do their reporting?
You make a very important point.
Really what's happened is these regulations have been developed all on their own under different pieces of legislation that all came into force at different times. That's where we have all the different dates.
The question was asked earlier about how many regulations we have. While we don't have the federal, provincial and territorial numbers, we know that we have 400 acts with 2,600 regulations in them.
One of the things you may have heard about when you were talking to the Treasury Board Secretariat is that the new cabinet directive has a number of elements. One of them will require departments to regularly review the stock of their regulations. We believe this is very, very important for precisely these reasons. This has to be done with the Treasury Board Secretariat coordinating it, because if a department reviews its own stock and doesn't see a link to another department's regulation, or there's an industry that maybe has a lot of different requirements from different departments, that wouldn't be good. The whole idea is to get much more holistic about how we look at these things.
With regard to your question around pre-filled fields and sharing of information, again, some of the legislation we have in place doesn't allow for the sharing of information between departments. This is the idea that when we talk about a centre for innovation within government, we hope to be able to understand how we can make it much more business-centric and client-centric.
As I mentioned about the dates, because they've all come into force under different pieces of legislation, the cleaning up of the legislation under the annual regulatory modernization bill will hopefully start to tackle some of those anomalies.
We're back. Thank you, everybody, for making that a quick transition.
For the second panel, we have with us, from the Canadian Cattlemen's Association, John Masswohl, director, government and international relations, and Brady Stadnicki, policy analyst.
We have, from Silver Valley Farms, Ray Biln, general manager, all the way from Maple Ridge, British Columbia. I know that place.
From the Canadian Seed Trade Association, we have Dave Carey, executive director.
Thank you everybody for being here today.
I have to point out that we have technical difficulties. Mr. Biln is on an actual land line —yes, we have those—so there won't be a video portion.
We're going to start off with the Canadian Cattlemen's Association.
John Masswohl, you have up to seven minutes.
Thank you very much, Mr. Chairman. We appreciate the invitation to provide input into the committee's study.
The Canadian beef production sector is comprised of 60,000 beef farms, ranches and feedlots and is a major economic driver with a significant multiplier effect in the Canadian economy. In 2017, the beef cattle industry generated $8.9 billion in farm cash receipts and contributed $17.2 billion to the Canadian GDP. A 2011 study found that every job in the beef sector yields another 3.56 jobs elsewhere in the economy, and for every dollar of income received by workers and farm owners, another $2.08 is created elsewhere.
Agriculture and food manufacturing represents one of Canada's biggest global economic opportunities. World population growth estimates will require a 70% increase in global food production by the year 2050. We are eager to capitalize on this opportunity and exceed Canada's target of $75 billion in agri-food exports by 2025.
For the Canadian beef industry to be competitive, it's necessary to have a regulatory system that supports the industry, encourages innovation and efficiency and doesn't add unnecessary costs.
I want to outline four principles that we see as necessary for good regulation.
First, we seek a risk-based, scientific regulatory system. In achieving the mandate to ensure public health and food safety, protect animal health and welfare and sustain the environment, we believe that government regulations must be based on appropriate management of real risks and an accurate analysis of the costs and benefits of the regulations.
Canada must maintain a science-based approach to regulatory decision-making to provide industry with a predictable, credible, consistent and transparent regulatory environment. Recent regulatory proposals in Canada have included potential changes that our industry believes are not rooted in scientific evidence. A couple of examples of those would be Health Canada's proposal for front-of-package labelling regulations and at CFIA the proposed amendments to the health of animals regulations, or humane transport regulations as they're sometimes called.
Second, the government should pursue flexible outcome-based regulations. We encourage an examination of how regulatory approaches can be made outcome-based. This is important not only to ensure that we achieve best results but also to support new and more efficient approaches to achieving regulatory objectives. An outcome-based approach will require a significant mindset shift as well as additional training for current regulators.
Another priority for the beef sector is ensuring that service standards are based on the speed of commerce. In one recent case where we sought guidance, regulators advised that we would have a decision in 100 days. That's far too long a service standard, maybe about 95 days too long, and becomes a serious impediment to our capability to service new market opportunities.
Third, the government should ensure that regulations enhance competitiveness and support innovative products and inputs. It's imperative that Canada's beef industry have access to competitively priced inputs and that the business environment in Canada support the development of new innovative inputs. This is particularly important as Canada is a relatively small market, which can in itself be a disincentive for companies to pursue commerce in Canada and register new products. Some of the things we're thinking of, which Dave might also go into, are registering new plant varieties and new veterinary medicines. Even packaging materials need to be approved.
Regulatory oversight and delivery is also a vital input for the food production sector. We can't sell meat without the regulatory oversight. The ongoing fee review at CFIA, which looks to achieve complete cost recovery, does not have a view to economic growth or competitive regulation. This needs to be reconciled, and the role of government and taxpayers in building a competitive economy must prevail over simplified approaches like cost recovery.
Like many areas of the Canadian economy, growth in the beef industry is afflicted by a shortage of skilled labour. It's a constant challenge to find employees who not only have the skills attuned to the needs of the agriculture and processing sectors but also want to work and live in rural Canada. We ask that the government strategically address national labour shortages and ensure a strong labour supply by implementing the Canadian agriculture and agri-food workforce action plan. The action plan includes changes to make the temporary foreign worker and immigration processes more efficient and to facilitate permanent immigration status.
The fourth principle involves international harmonization and equivalency. We encourage an ongoing effort to increase the extent to which Canadian regulations are harmonized or deemed equivalent with other jurisdictions. Harmonization should continue to be pursued to the greatest extent possible by establishing international standards and encouraging adherence to such standards. We recognize that it's not always possible or practical to achieve full harmonization, and in such instances, we should be focusing on recognizing the equivalency of outcomes.
We applaud initiatives such as Beyond the Border and the Regulatory Cooperation Council, and we remain hopeful that positive outcomes can be achieved for the beef sector. As we open new trade agreements, there remains much scope to pursue similar initiatives with other trading partners, as well.
That's my fairly high-level overview of the general direction we would like to take with the regulatory structure. I'd be glad to take questions and focus on specific areas.
Good morning. Thank you for the invitation to talk with the committee. I am speaking on behalf of myself and our company, Silver Valley Farms.
I will start with a little background on our company. My grandfather and father started our operation. We have been growing berries in Maple Ridge-Pitt Meadows, British Columbia, since 1981. Our business has grown from 21 acres, including both blueberries and strawberries, to 525 acres of blueberries and 20 acres of strawberries today.
We expanded our operations into marketing and exporting of fresh berries in 2004. We started marketing and exporting frozen berries in 2010. We currently market and distribute our Canadian products into the domestic market, into the U.S. and also into various Asian markets. We also sell a small amount into the U.K. market.
We strongly believe that the federal and provincial governments can play a positive role in helping businesses like ours compete in the global market. I will mention a few areas where we feel the government can support Canadian agribusinesses to increase their global market presence and their global competitiveness.
The first area is to harmonize scientific data requirements for pesticide registration with countries with which we have a free trade agreement. Crop protection tools are a critical element of producing food, whether we are practising organic or conventional farming. Changes in the environment are constantly having an impact and the challenges are faced by producers nationwide. For the safety of Canadians, we agree that the Pest Management Regulatory Agency needs to maintain sovereignty over final decisions. However, we should work with other countries to streamline decision-making. If the countries with which we have an FTA worked together using the same data requirements from pesticide manufacturers, this could help reduce the time and cost for all countries to review and decide on different regulations and maximum residue limits. Each country could work with the same data. Then we could make decisions for our respective countries based on our own standards, taking into account different domestic variables. We have done similar harmonizing with our U.S. partners, but we should now include other regions with which we have signed free trade agreements.
The second area where we feel we need progress is protection, like the Perishable Agricultural Commodities Act, PACA, in the U.S. Two House of Commons standing committees—the agriculture and agri-food committee and the finance committee—have recommended a move towards a PACA-like system, yet we still do not have a program in place. The absence of a reciprocal financial protection tool continues to be a trade irritant with our largest trading partner, the United States.
Canadian produce growers and exporters do not have the protection offered their American counterparts under the Perishable Agricultural Commodities Act. Establishment of a PACA-like financial protection mechanism would provide similar protection in Canada to both Canadian and foreign produce shippers. American officials have repeatedly confirmed that access for Canadians to PACA in the U.S.A. would be reinstated once Americans have access to similar coverage in Canada.
Dealing with perishable food products is very risky. For small businesses, a PACA-like system would allow us to take that risk more confidently when exporting to the U.S.A.
The third area is continued market development assistance and trade commissioner office investments. I'm thankful for the vision in pursuit of FTAs globally where it makes economic and geopolitical strategic sense. We need continued support to open up markets in Asia that were not included in the CPTPP and other global markets as well.
Furthermore, we need continued investment in trade commissioner offices globally. Having an FTA is a major accomplishment and takes a lot of hard work over years of negotiations. However, for small businesses to take advantage of those FTAs, trade commissioner offices require adequate resources and direction to connect Canadian businesses with market players in each of the countries.
I've witnessed how our business and those of our domestic competitors were, and continue to be, assisted by trade commissioner offices globally. I've also seen times when trade commissioner offices were underinvested in and, as a result, impacted Canadian businesses' access to market intelligence and contact in a market with a newly signed FTA.
The fourth area is for the CFIA to increase its defence of the Canadian food chain. With new FTAs, opportunities to export Canadian products to global markets increase. In addition, opportunities to import products into Canada grow as well. There are many differences globally on the definition of what constitutes food safety. Canadian producers are held to a very high standard by domestic standards and regulations. The CFIA should be given the direction and resources needed to ensure that all products imported into Canada also meet those same standards for what we produce here.
The fifth area where we feel that government can continue support of agri-food business is in investment in higher education and skills development. Agriculture is a growing and dynamic sector of the global economy. If the Canadian government continues to value the food industry, more needs to be done to build higher education programs and skills that the domestic food industry can count on for growth. Companies are having to rely on foreign nationals to fill their food technology vacancies and for management of their food operations, farm practices operations, food safety programs, and information technology research and development. Domestic education and training programs have not been producing these key people who are required for the agri-food industry in the numbers needed to support growth.
Last, I feel the government can support industry by staying ahead of the curve. Markets are changing. Climate is changing. Consumers are changing. Geopolitics have not been this uncertain in decades. Our government and private businesses need to work together in a much more unified manner to remain globally competitive. There needs to be constant dialogue to discuss those challenges, and decisions will need to be made in a much more timely manner than we have been accustomed to in the past.
Thank you, Mr. Chair. That concludes my opening statement.
Thank you, Mr. Chair. On behalf of our members, I appreciate the opportunity to be here.
I'll start by saying that I echo a lot of what both John and Ray have said here this morning.
CSTA is a not-for-profit association made up of more than 130 company members engaged in all aspects of seed from research and development to production, processing and domestic and international sales. The seed industry contributes $6 billion a year to the Canadian economy and employs more than 60,000 Canadians, with exports of more than $600 million. Our members also do approximately $171 million in domestic research and development annually.
Our members range from small family-owned companies to large multinational firms operating in over 50 different crop kinds. By developing high-quality seeds, our members supply Canada and the world with the material used to produce food, feed, fuel and fibre. This is why seed is so important. Seed is the start of it all, the first link in the agri-food value chain. It's the microchip that powers the now close to $111 billion annual agricultural industry. It is where the innovation is delivered.
However, innovation requires investment, and to secure investment, Canada needs to be an attractive place to do business. Cumbersome regulations can curb or discourage investment in innovation, especially for smaller enterprises, and the majority of our members would be considered SMEs, small and medium-sized enterprises. That said, we applaud the committee for undertaking this important study.
In much the same vein as John, I'd break our members' major barriers to innovation into three categories: an intellectual property system that encourages investment, which we call value creation; a clear path to market for the commercialization of new plant varieties, which we call plant breeding innovation; and continued access to crop protection products, essentially protecting the seed once it is planted in the ground.
On average, it takes seven to 10 years and millions of dollars to develop just one cereal variety. We're pleased to see the ongoing Agriculture and Agri-food Canada and Canadian Food Inspection Agency consultation on the plant breeders' rights regulations. Proposed amendments would ensure the long-term sustainability of both public and private breeding. This is value creation with a robust intellectual property system.
The current regulatory system for plant-breeding innovation, known as the plants with novel traits system, lacks clarity and service standards and is excessively expensive for smaller and medium-sized companies. There are multiple stages for the pre-market assessment of new plant varieties, and these are managed by two different departments within CFIA and another within Health Canada. The complexity and length of the pre-market submission process increase the cost and administrative burden on small organizations. Plant breeders need a clear regulatory path to market to bring their innovations forward.
Canada's globally unique PNT, plants with novel traits, system has served us well for the past 25 years, but in future, it will curtail crop innovation if enhancements are not made. The case-by-case approach used to determine which new varieties are subject to pre-market assessments causes great uncertainty for the plant-breeding community. They cannot be sure if their products require approvals, and if they do, how much it will cost, what data they will need and how much additional time it will take to do field research and obtain the necessary approvals.
A recent study of Canadian plant breeders done by the University of Saskatchewan indicates that nearly half change or scale back the research and development activities in Canada to avoid falling under the Canadian PNT regulations. Moreover, 20% of varieties regulated in Canada are not regulated anywhere else in the world.
The advent of new breeding methods, such as gene editing, will amplify this problem. There are examples of products being commercialized in the U.S. or elsewhere where regulatory regimes for plant-breeding innovation are clear. We are pleased to see that Minister has tasked an industry-government technical working group to discuss how the PNT system is delivered and how it can be improved. CSTA does have a seat on that committee.
Given Canada's reputation for high-quality agricultural products, we should be championing and encouraging the adoption of the newest tools that will drive innovation in seed and grains. Tools like gene editing can bring new varieties to the market faster and at lower costs than ever before. Providing a clear regulatory market will allow us to continue to invest in new plant varieties. This will also encourage smaller enterprises to engage in plant breeding. This in turn will enhance competition in the marketplace and ultimately increase the choices available to farmers to produce for the world.
Last, once the seed is in the ground, farmers need access to the best chemistry to ensure that every seed planted results in a successful harvest. On this subject, we echo the comments of our partners, the Canadian Canola Growers Association, who stated that, while the health of Canadians and the environment must remain paramount, evaluations of pesticides should consider the economic impacts they will have on farmers and small businesses. Changes to the Pest Management Regulatory Agency of Health Canada are needed, and we are pleased to see that consultations on the subject are also under way.
Thank you for the opportunity, and I welcome any questions.
Absolutely. As I mentioned, we represent the whole spectrum, but of our 130 members, I'd say over 100 would be considered small to medium-sized enterprises.
I think the biggest area in which it causes issues is the one I talked about, involving the system for Canada's plants with novel traits. Even if you're not using biotechnology or GMO or whatever you want to call it—we represent organic, conventional, and biotech, all three—even conventionally bred plants, as Ray was speaking to, can be subject to Canada's plants with novel traits system.
What we've seen is that some companies that don't have regulatory affairs teams based in Ottawa.... Our largest companies certainly do, here in Ottawa, or they are based out of Calgary. When they're doing their own innovation in-house, they set their own parameters. They innovate to a certain level, because they feel that if they innovate above that level, they're going to be subject to a pre-assessment from the CFIA and Health Canada.
They often come to us or our partners at CropLife Canada. What we've actually seen of late is that our small or medium-sized companies are actually going to our large multinationals to get their feedback on whether they feel they would be regulated.
The biggest thing is a clear path to market so that a company that employs 12 in Morden, Manitoba, can know what the requirement is to bring a new variety forward.
Thanks for the question.
PMRA is currently in the latter stages of re-evaluating the three classes of neonicotinoids that are registered here in Canada. It's part of their statutory requirement to do so, which we support. We also have concerns, though, that if the European Union bans a product using a hazard-based assessment, it sparks a special review in Canada. Now, each of those three neonicotinoids are undergoing three different reviews at the same time.
Our default position is that the PMRA is the only body that's really capable of making these decisions. It is a very specific science. Either you're working for a crop protection company or you're working at PMRA, or perhaps a university in Canada. It's a very specialized area. We do think that interprovincial trade barriers are a significant issue. We always remind our provincial counterparts that there is in fact a Canadian Free Trade Agreement.
Currently in Ontario, there are the class 12 pesticides. Small seed companies and farmers can use neonicotinoids, but it requires a mountain of paperwork and reporting to get that done. Quebec has introduced a 3A pesticide classification, which is arguably more onerous than Ontario's.
What we see is that the way farmers operate in Manitoba, Alberta and Saskatchewan means that they are at a competitive advantage against farmers operating in Ontario and Quebec, and it's not based on science. There have certainly been a number of interventions from interest groups in Ontario and Quebec, but the Ontario government is looking at the class 12 regulations, I believe, as part of their red tape reductions. It is a concern when the cost of doing business changes from province to province. We believe that all decisions on pesticides should be made federally by Health Canada's PMRA.
Thank you, witnesses, for being here.
I'm going to start with Mr. Biln, so that we can get him involved in the conversation. You mentioned something that I think is really important.
I was in Brussels for the Brexit discussions. First, we were in London and then in Brussels. The thought from the trade commission there was that CETA was failing Canadians. We've actually had a growth in European deficits, with regard to trade since signing CETA, with most of the blame laid on, I guess, companies not taking advantage of the opportunity. That was the message coming out and that it was especially small and medium-sized businesses. They were experiencing or at least trying to advocate for more connections to get Canadians involved in that trading relationship.
You've touched on it, but can you maybe explain a little bit what support you get? Have you received any support to actually access the European markets, since we've signed CETA?
Yes. I do know the product you are referring to. I think the PMRA and the Environmental Protection Agency have different mandates as far as the regulatory process goes. When anyone's using a regulated chemical, the key thing is that they follow the label. The label will indicate, for example, that if you're spraying, not to do it during windy times, or not do it during this and that. That is an issue, but a lot of that comes down to the individual stewardship on each farm or if it's an operator that's being licensed.
I have seen a presentation from the U.S. on some of the drift and things like that. In Canada, we haven't seen those same types of issues. In our organization, one of the key things is that we see a big benefit from using seed treatments, where the seed is treated with a small amount of pesticide and then planted, which reduces the need for those foliar broadcast sprays.
There can be issues if you do have something that's herbicide tolerant. For example, when a soybean is tolerant for a certain herbicide and then someone sprays something that's of a different chemistry, that could have an impact.
We don't normally see it in Canada. Farmers are typically good neighbours. For the most part they communicate with one another. There are also some initiatives, like a new pollinator app that essentially allows sprayers to communicate with beekeepers to say they're going to be spraying their field. If there are hives in the area, they can communicate anonymously through an app. It's something that could happen, but we haven't seen it happen in Canada.
Again, it's up to the individual farmers to follow the label as prescribed by PMRA.
I think it's a really important issue that the committee is studying, but I'm skeptical about the government's announced plans for regulatory reform. I think it's an important issue, because we're slipping in global competitiveness rankings, business investment in Canada is plummeting and the regulatory burden on Canadian business is increasing. We now rank lower in the charts for regulatory burden, somewhere in the mid- to high-30s now out of 140-plus countries.
I'm skeptical too because we've had these initiatives over many years, and they never seem to go anywhere. I remember the smart regulation initiative of 2004. Then we had the Harper-Obama establishment of the Regulatory Cooperation Council, to which you referred, and then the more recent cabinet directive, in the fall economic update announcements, on regulatory reform.
On the ground, however, I hear quite the opposite. I hear from the cattlemen that they're very concerned about the upcoming CFIA regulations on transport of cattle and about front-of-package labelling. I consistently hear from seed producers about the barriers to innovation and also about the whole concern about use of seeds linked to biocides and the like, an area in which you have federal and provincial regulations now causing real challenges for grains and oilseeds farmers in the country, particularly in Ontario.
I'd be interested to hear from the Canadian Cattlemen's Association about these challenges. We've had this Regulatory Cooperation Council, and one of the express purposes for which it was established was to come forward with consistent package labelling standards.
We seem to be going down divergent paths now, so that's one issue I'd like to hear about. This whole thing was created expressly to not go down that path.
The other thing the council was supposed to do was come up with consistent grading standards for both Canada and the United States so that we wouldn't have different nomenclature for grading south of the border and north of the border. It was also supposed to come out with standard package sizing so that processors could ship product both north and south.
What's happening on those three things: labelling, packaging and nomenclature?
I agree with you that there have been many initiatives over the years. We've always been supportive of the initiatives, and when something is renamed we will continue to be supportive of their continuing to try.
You gave a good list, and we've always had a good long list of issues under those initiatives. Probably our biggest one is trying to eliminate the reinspection of meat that is exported to the United States. The challenge, I would say, is not a lack of trying on the part of the Canadian regulators. I think they do a good job of trying to get it, but on every one of these issues there is somebody who doesn't want to change, often on the U.S. side.
For example, concerning the issue of reinspecting meat at the border, that is done at a place called an I-house. These I-houses are independently owned by entrepreneurs. The entrepreneurs who own the I-houses have a vested interest in the inefficiency continuing. They lobby hard to make sure the rule isn't changed.
On issues such as meat grading, there are elements in the United States who see being able to use the USDA grade as a protectionist effort. It is just a measure of the quality: Is it prime? Is it choice? Is it select? They have viewed it in the United States as being almost their intellectual property. It means that it's U.S. product, and they have fought hard to keep that.
We lose value thereby. The packers will tell you that the American consumer does not know what Canada prime or Canada AAA means. If it shows up in a U.S. store, even if Canada AAA is equivalent to USDA choice, the American consumer doesn't know what it means and will devalue that product. It is frustrating.
As I said, we remain positive. We'll keep pitching and at some point we'll able to make progress on these things, but it is frustrating.