EVIDENCE

[Recorded by Electronic Apparatus]

Thursday, November 7, 1996

.0907

[English]

The Chairman: I call the meeting to order and welcome everyone here this morning. Sorry I'm late, ladies and gentlemen, but we will get started.

We are continuing our discussion of Bill C-60, the Canadian Food Inspection Agency Act. Our first presenters and witnesses this morning are from the Professional Institute of the Public Service of Canada. I would ask the spokesperson to introduce everyone at the table and proceed.

Just so we know what our time line is, we do have three presentations this morning and we have the room for two hours, so we will split our time accordingly.

Go ahead.

Mr. Steve Hindle (President, Professional Institute of the Public Service of Canada): Thank you, Mr. Chairman. I'm Steve Hindle, the president of the Professional Institute of the Public Service of Canada.

With me are Dr. Murray Gordon, who is co-chair of the institute's transition team for the Food Inspection Agency as well as a veterinarian with the health of animals branch; Dr. John McDonald, who is a research scientist with Agriculture and the chair of our transition team; John Nelligan of Nelligan Power, who is the institute's legal counsel, and he will be presenting the second half of the brief we have today; Steve Whellner, also counsel with Nelligan Power; Blair Stannard, who is a vice-president of the Professional Institute; and Don Trenholm, who is also a vice-president of the Professional Institute and a member of our transition team.

Thank you, Mr. Chairman and members of the committee, for the opportunity to address you. We have a brief, which I believe you've all been given. It comes in two parts. I will be addressing the first part on the alternative service delivery concept in the Food Inspection Agency itself and then John Nelligan will talk about employee rights and labour relations.

Before I begin I should point out the institute is the largest union representing professionals in the federal public service, including about 1,500 veterinarians, biologists, agriculture scientists and other specialists who work in inspection and related services for food, animal and plant health. These are people who will be affected by the creation of the agency.

The concept of alternative service delivery and how it relates to food inspection has been followed closely by the institute. It's of great interest to us in terms of the devolution of services from the federal public service to other forms of delivering the service.

We have also prepared a paper called ``Alternative Service Delivery: Snake Oil or Antidote?'', which we will be handing out afterwards. It explores some of the relevant issues surrounding alternative service delivery as a concept itself.

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Our basic concern is whether alternative service delivery solutions are the best answer to problems in specific areas of government. We believe when problems are identified, governments should consider whether they can be resolved through internal changes before embarking on radical reforms in service delivery.

While Treasury Board has laid out the criteria for adoption or consideration of alternative service delivery, it has not clearly shown how the criteria should be applied. An ASD solution may be justified in some cases, and the institute is on record as not being opposed to ASD in all forms. We believe, however, that it has to be demonstrated prior to the introduction of legislation that the alternative form of delivery is better. In essence, it shouldn't be embraced purely on the grounds of ideology.

The new Food Inspection Agency will be responsible for assuring safe food for Canadians as well as facilitating billions of dollars worth of agrifood, forestry and fisheries exports. In the case of the agency, we've been unable to find evidence supporting the government's contention that food safety can be maintained while costs are reduced by $44 million within a $300 million budget. Is there really $44 million in duplication between the current government departments, or was this number pulled out of a hat? We would ask the committee members to inquire closely in regard to this.

How much of the savings will be achieved through reduction of personnel and short-term expediency? How can the public be assured that the health and prosperity of Canadians will not be compromised by the proposed reductions in staff or other resources?

This is not just an academic concern. Most of us are familiar with the events in the United Kingdom and the outbreak of mad cow disease. The government in Britain hesitated to react and then tried to ignore the outbreak, with a rather devastating effect on the beef industry in the United Kingdom. We would hope such an occurrence is not on the horizon for Canada.

We have no evidence to suggest it is. However, considering the United Kingdom's penchant for alternative service delivery and devolution of public services and what happened there, this is being noted as a warning to the Government of Canada for not just this form of alternative service delivery but others that may come afterwards.

The structure outlined in Bill C-60 leaves many questions unanswered. The government has concluded that the most efficient way to manage food inspection services is through a new agency established under the banner of ASD, but it's difficult to discern how effective the new agency will be and to whom it will be accountable.

The proposed legislation first designates a minister who will be accountable to Parliament for the new agency and its direction. The bill allows the minister to delegate any power except that of making regulations, but it is silent as to how this will work in practice.

There is to be an advisory board of stakeholders to advise the minister whenever the minister sees fit, but no provision is made for a board of directors to oversee the agency's operations or strategy. It's interesting to note that employees are not mentioned as potential stakeholders.

The standards for food safety, nutrition and public health are to remain with the Ministry of Health and will therefore be segregated from the new agency. In the case of food inspection, this separation of policy from implementation means there is no guarantee that the lessons learned from food inspection operations will be applied to the maintenance or improvement of food safety standards.

The Minister of Health is also made responsible for assessing the effectiveness of the agency's work with respect to food safety. Again, this further blurs the line of accountability.

Clause 6 of the bill designates the president of the new agency as its chief executive officer, with powers to supervise and direct its work and its staff. This officer also has the power to appoint employees of the agency, and that's an issue we'll return to in the second part of the brief.

It seems the new agency will be part of government when it suits the minister or when there are questions in the House of Commons. At other times it will be independently run by a president or chief executive officer, subject only to occasional input from an advisory board and periodic assessment by the Minister of Health.

The responsible minister's powers to direct the agency seem to conflict with the authority of the president-chief executive officer. It seems budgetary control will remain with the Treasury Board and fee-setting will depend on the minister, because it involves regulations.

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So what's really going on here? Will the agency have any real autonomy, or is its main purpose to create new avenues for contracting out and reducing staff in the public service? Are the accountability issues we've outlined here a precedent for future alternative service delivery agencies, or will the government step back and clarify who will be responsible for what?

The Professional Institute accepts that there is a case to be made for consolidating food inspection activity in one area of government. As a matter of fact, this is already occurring. We are not yet convinced that the case has been made for this new kind of hybrid agency, which is half in and half out of the government structure.

We are concerned for our members, who it would appear will have the worst of both worlds when it comes to labour relations jurisdiction. We are equally concerned about the implications for Canadian consumers, food producers and exporters of creating an agency without a clear understanding of how it will operate, and how food safety standards will be maintained.

So we have five particular questions, to which we think the committee should pay attention.

What advantages does the proposed agency offer over consolidation of food inspection services in Agriculture or another department of government?

How did the government calculate that the new agency will save $44 million per year, and how will this be achieved without undermining food safety standards and putting Canada's huge exports of food, forestry and fishery products at risk?

Under the new agency structure, who will actually be in charge: the responsible minister, the president or chief executive officer, or Parliament?

Will the chief executive officer account to Parliament for the use of taxpayers' money, or will the minister do that?

Will Parliament have any ability to oversee the operations of the food inspection agency, and will the agency establish its budget independently, or will it be subject to review and possible roll-backs from the minister or Treasury Board?

Those are the main concerns about the setting up of the food inspection agency as an agency.

I'm going to now pass to John Nelligan to address the employee rights and labour relations issues.

Mr. John Nelligan (Legal Counsel, Professional Institute of the Public Service of Canada): Thank you very much. I am speaking here today not about any political issue, but basically about a technical issue that in our opinion has been overlooked by the drafters of this legislation. That relates to the rights of the employees who are being moved, not from the public sector to the private sector, but somewhere in between. They're in limbo, so in effect they are being denied rights either as public servants or as private employees.

Historically this goes back to the way the public service was created. Happily we all, including myself, are too young to remember the graft and patronage that used to exist in the public service. The Public Service Commission was created for the very purpose of eliminating patronage, nepotism, and all the things you can find in many government public services. I wouldn't say it's been entirely successful, but the philosophy is there, and the machinery is there to see that we have an honest, impartial public service.

How did they do that? They set up the Public Service Employment Act and its predecessors. They set up a Public Service Commission, and through it there is a machinery to hire, control the management of, and fire employees. That was long before we had unions, long before we had collective bargaining, and that was in place.

Then about 30 years ago we got into the question of collective bargaining, and a new act was passed, the Public Service Staff Relations Act, which dealt with collective bargaining. But because we already had a machinery for the fair control of employees, the bargaining powers given to these new unions was different from that in the private sector. They didn't need all these powers, and of course they also wanted to have the government with a certain amount of managerial control the unions couldn't interfere with.

I have given you copies of some of the relevant sections of the Public Service Staff Relations Act. You will see, for instance, that section 7 says that

Nothing in this Act shall be construed to affect the right or authority of the employer to determine the organization of the Public Service and to assign duties to and classify positions therein.

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Fair enough. Now, that is something that normally is managerial powers, but it goes beyond that where you're talking about assigning duties and classifying positions.

The Chairman: Excuse me. Just as a point of clarification, sir, you referred to section 7. In the handout with your brief, there is a two-page document entitled ``Public Service Staff Relations Act''. Is that what you're referring to?

Mr. Nelligan: That's right.

The Chairman: If so, I don't see a section 7. I see sections 69, 92 and 2, but nothing there has a seven in front of it.

Mr. Nelligan: All right, that was brought to my attention yesterday, and a new set was supposed to be distributed this morning.

The Chairman: Do we have them here, Mr. Clerk?

Mr. Nelligan: I'm sorry. Apparently your copy didn't get to you.

The Chairman: Okay, I have it now. Does everybody have them? Sorry to interrupt.

Mr. Nelligan: That's all right. I'm grateful to you.

Now, really the critical clause in the Public Service Staff Relations Act is section 69 because that deals with arbitral awards. In the end this is the only power; if the employer and the employees cannot agree on a bargaining agreement, then you have to obtain an arbitral award.

It is expressly set out in paragraph 69(3)(a) - you have it in front of you - that no arbitral award can deal with ``the organization of the Public Service or the assignment of duties to, and classification of, positions''.

Then there is a whole series of things in paragraph 69(3)(b), and these are the ones we're concerned about:

standards, procedures or processes governing the appointment, appraisal, promotion, demotion, deployment, lay-off or termination of employment, other than by way of disciplinary action

Now, that's in there because this is all done by the Public Service Commission. But we are going to be in a problem because of what is happening. The new act says very baldly that the chief executive officer shall have the power of hiring employees.

The moment we say that, we take all these employees out from under the protection of the Public Service Employment Act, where all these things set out in paragraph 69(3)(b) are set out. So there is no way now for these employees, through their bargaining agent or otherwise, to protect the rights they had when they were ordinary public servants.

What has happened as a result? Unlike private sector employees, they can't bargain about assignment of duties. They can't bargain about appointments, appraisals, promotions or probationary employees - all those things - and they can't use the machinery of the Public Service Employment Act to get the remedies there.

The second aspect is under grievances. I may say that whatever you may think of unions and their powers to bargain collectively, to me one of the most effective pieces of machinery for happy relations in industrial history is the introduction of a grievance procedure where the little problems that bother everybody from day to day are resolved in a formal fashion. That is the grievance procedure going to arbitration.

Subsection 92(1) of the Public Service Staff Relations Act deals with grievances. It says that where an employee has presented a grievance with respect to certain matters and the grievance has not been dealt with to the satisfaction of the employee they may refer the matter to adjudication.

Unfortunately, we would now fall under paragraph 92(1)(c), and the only thing the employees of this new agency will be able to grieve is disciplinary action resulting in termination of employment, suspension or a financial penalty. As a result, they won't be able to appeal appointments, lay-offs, or promotions. When there is a competition for a position, they won't be able to grieve it, no matter how unfairly it seems to them the promotion was made. Harassment investigations are all available to public servants now, but not to these people, because they no longer have access to the Public Service Employment Act.

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I really feel that all these things have simply been done inadvertently. Our problem is that this is apparently the beginning of a trend. There is a tendency now for government to spin off these agencies. The time to correct these technical errors is now, before we get these people into a problem.

There have been minor problems already, and it has happened to other agencies. When it was spun off, for instance, CSIS ran into this problem. Several grievances have come up where the grievance of the employee has been denied not on its merits but because it didn't involve a financial penalty or a dismissal.

We're simply proposing that the new bill should be amended to ensure that the applications of section 7 and subsection 69(3) don't apply to this agency. The bargaining agents will be able to bargain about these matters; that now normally goes through the Public Service Employment Act.

Similarly, the provisions with respect to grievances being restricted to financial penalties should be removed so that these employees should be entitled to the same rights of referring grievances to adjudication, as any other private sector employee.

Once this bill is through, we're concerned that subsequent bills will follow the same format. If they do, then we are going to have many thousands of employees suffering the same problems. I don't think it's necessary. I don't think it serves anyone's particular purpose to see that they're denied those rights. I'm simply suggesting that the act be amended so that the machinery they have now for redress is reincorporated properly in their rights under this agency.

Thank you very much.

The Chairman: Mr. Nelligan, just before I go to Mr. Landry, I have a couple of questions. Just so I'm clear on clause 12 of the bill, is the agency a separate employer under the Public Service Staff Relations Act -

Mr. Nelligan: Yes.

The Chairman: - which includes all the sections in the separate sheet you gave us this morning?

Mr. Nelligan: Yes, and which denies rights we would have found under the Public Service Employment Act, which only applies to people who are appointed by the Public Service Commission.

Mr. Easter (Malpeque): Can you run that by me again?

The Chairman: You people deal with this all the time. We don't deal with these -

Mr. Nelligan: I realize that, and -

The Chairman: There's a public service act, an employment act, and there's the -

Mr. Nelligan: All right. The Public Service Employment Act is the thing most people were familiar with. It's the Public Service Commission; when you applied for a job, you had to have a competition under that act. There were appointments.

Similarly, if there's to be a promotion in a department they post the appointment on the board and they have a competition. And then if you think you have been unfairly dealt with you can appeal the results of that competition. All that is done under the Public Service Employment Act. But that act only applies to people who have been appointed by the Public Service Commission. Once you get those magic words that the chief executive officer is now the person who appoints, that act is closed off.

Then we go to the bargaining act, which was something for unions. Of course this came in later. So now the unions are told, sorry, you can't take this fellow's grievance to arbitration because he can do it under the Public Service Employment Act. And now our answer is sorry, we lost it. We weren't appointed by the commission, and therefore we can't go to the commission for redress. That's our problem.

So I'm showing you that the only statute we can now look to is the one I gave you, the Public Service Staff Relations Act. It says no, you can't do certain things. The reasons for saying no are now gone. I'm simply saying make sure that we aren't penalized by it.

Have I helped at all?

The Chairman: I think so. But don't ask me to go to court on it this afternoon.

Voices: Oh, oh!

The Chairman: We're not done yet either. Monsieur Landry.

[Translation]

Mr. Landry (Lotbinière): Mr. Chairman, I'd like to thank the representatives of the Professional Institute of the Public Service of Canada.

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Ever since I've been involved in Bill C-60, I've spoken on several occasions of public servants for whom I'm still asking whether there will be problems to solve regarding the entire staff. I heard many times that there would not be any problems. Indeed, it seems that there would be some harmonization. But you know that the word ``harmonization'' is a very big word when applied to collective agreements. I was told there would be no problems because those who will retire will have two years of job security.

Here is my first question. Right now, when you file a grievance, what is the waiting period for arbitration in the public service?

[English]

Mr. Nelligan: Well, that is not a concern. The times for grievances...there's a whole mechanism of dates where you go from one level to another. That is not a problem, because we can still do that. Machinery is still there.

The problem is that we might want to grieve a number of things. For instance, with all due respect, I don't know who the CEO is going to be, but let's say he appoints his sister-in-law as the new head of the cattle inspection agency in Saskatoon and we don't like that and we think we have a qualified PhD who could do it better. We can't appeal that now, because it would have come under a different act. It wasn't a financial penalty to the man who lost. So that's the part we're concerned about.

We can still grieve. If, for instance, one of the employees is fired, if he is docked three days' pay, we can still do that. And these are the things we normally get before the Public Service Staff Relations Board.

We're concerned about these other things. Harassment on the job is not there. None of these things are there. It wouldn't be a financial penalty. So we're concerned that this is the kind of grievance that will be barred to us.

For instance, there are the ones I've already seen in CSIS. They were concerned about someone being transferred from Regina to Ottawa, and they said, sorry, we can't hear your grievance, because it didn't involve a financial penalty. They were still going to pay your salary in Ottawa. And yet normally you would have been able to go to the Public Service Commission and say this is unfair, I am entitled to stay where I am, and so on. That's the problem we're concerned about here.

[Translation]

Mr. Landry: If the bill is passed and that you retain your union rights and privileges, will you have better relations with the new agency?

[English]

Mr. Nelligan: Well, you see, I'm sure we'll get along with whomever is appointed. He's going to want to work with us, but there are going to be problems. There are always problems.

Now when we have a problem we can go to the Public Service Staff Relations Board on some things and to the Public Service Commission on other things. We're simply saying that when the problems now arise, we can't go to the Public Service Commission any more. We only can go to the board, and the board will say to us, sorry, you may have a good argument, but it doesn't involve a financial penalty, so we can't listen to you. That's our problem.

[Translation]

Mr. Landry: How many jobs does your union estimated will be lost when this new bill is passed?

[English]

Mr. Hindle: I expect there will be very few job losses on the transfer to the new agency. They need the people to do the food inspection; there's no doubt about that. So that's not the real concern. The concern is about things we cannot bargain for at the table and on which we can't enter into an agreement collectively, and this is true for the inspection agency as well. They will not be able to enter into an agreement on some issues, such as staffing or lay-off, that are currently covered under the employment act.

And the difficulty is that when they move to the new agency, the employment act will no longer apply. There will be no mechanism in place, and there will be no authority for the union or the employer, the inspection agency, to enter into an agreement to make arrangements so that those issues can be addressed. They will be precluded from doing that because of section 7 and subsection 69(3) of the Public Service Staff Relations Act.

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[Translation]

Mr. Landry: We can therefore say that this new legislation is a step backwards for your union.

[English]

Mr. Hindle: It's definitely a setback for labour relations with the new employer.

[Translation]

Mr. Landry: All right. Thank you.

[English]

Mr. Nelligan: If I may say so, it's not a setback for the unions, because the unions never had this power. It's a setback for the individual employees. As the only voice they have, the union has to bring this to your attention.

The Chairman: Before I go to Mr. Easter.... I think I'm learning as we go along. When you referred to going to the commission, the commission deals with the Public Service Employment Act?

A witness: Right.

The Chairman: When you refer to going to the board, that refers to the Public Service Staff Relations Act?

A witness: That's right.

The Chairman: Because we're talking about acts, boards, commissions, etc.

Mr. Nelligan: Of course.

The Chairman: That helps clarify, when you refer to different groups, which act it's under.

Mr. Iftody (Provencher): Remember we're members of Parliament.

Voices: Oh, oh.

The Chairman: You left yourself wide open, Mr. Iftody.

Voices: Oh, oh!

The Chairman: I don't know whether they want to respond to that or not.

Mr. Easter.

Mr. Easter: Thanks, Mr. Chairman.

Welcome. On the surface it seems to me you do have a legitimate concern relative to these various acts.

I would ask, Mr. Chairman, that the research staff provide us with a briefing and a copy of the acts so that we can get our heads around that.

Both presenters talked about the structure, and said that we're dealing with a hybrid agency here, half in and half out.... Mr. Nelligan, you said that there is a tendency for the government to spin off these agencies, and therefore they had to be corrected.

Before I get that far, I want to talk about the principle or the philosophy of spinning off these agencies. I may be one of a few, but I'm certainly one who doesn't believe that the government should be getting out of governing. It comes down certainly to how these things are managed, who's accountable, and who's responsible.

What's your view? I mean, we're not going as far as privatization. As you say, we have something, a hybrid, half in between. What's your view on that, or do you have one?

I will admit that I'm increasingly concerned about this. Either you govern or you don't. Either you govern or you privatize. Let's make some decisions here. That's my philosophy. But what's your view? I mean, what are your thoughts on where we're going?

Mr. Hindle: I would say that a lot of it depends on exactly which agency you're talking about. In this case, it looks like they will be privatizing the delivery of the service, the food inspection itself. These people will be neither in the public service nor in the private sector, yet they will be very much driven by cost recovery and user fees. And if that's not privatization by a different name, I'm not sure what it is.

John, would you like to add to that?

Dr. John McDonald (Chair, Food Inspection Agency Transition Team, Professional Institute of the Public Service of Canada): I think what is being contemplated is that some aspects of the delivery will be delivered by the private sector. For example, in the case of laboratories there's a significant effort to privatize that aspect.

Mr. Hindle: In general, the institute's philosophy is that alternative service delivery deserves an opportunity, or deserves a look, but you have to take a look at it in terms that make sense. If the idea is to deliver a different service outside the public service, then compare that cost of delivering it outside to what that different service would cost inside the public service.

And you do have to take a look at governance issues as well. It's very easy to say that we're going to separate the regulatory function and the monitoring of private industry from the setting of policy or standards in regard to that regulatory function. But in reality, when you separate them, you lose the connection between the people who are making the policy and understand the policy and the people who are actually doing the monitoring.

The missing link is the understanding of exactly what's involved in regulating an industry, and allowing the experience of actually doing the regulating to have an influence over the policy, either in terms of changing policy to allow for changing conditions within the industry, or changing the mechanism of doing the monitoring to allow for implementation of the policy the government wants.

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I think it's very clear that this government, as previous governments, wants to reduce the size of the public service. The institute is not going to say that the House of Commons and Parliament do not have the right to do that. You have that right. As a matter of fact, you have the responsibility to ensure that the public service is managed in an efficient and fair fashion. But at the same time, you have a responsibility to ensure that Canadian taxpayers get good service for the money they pay in taxes. I think it's very dangerous to start down the road of devolving governance on a federal level without a real examination of the issues that are involved with it on a case-by-case basis.

Unfortunately, what seems to be happening is the adoption of an ideology from other countries - and some of it has been successful, and there are probably successful cases within Canada, as well. But it's being done for ideological purposes, and it is not being done in order to provide better service to Canadians at a cheaper cost.

Mr. Easter: Still on structure, Mr. Chairman, could this operation, the Canadian inspection agency, be run by an assistant deputy minister instead of a chief executive officer in charge? I believe that ties it somewhat closer to government. I mean, by going with the agency president approach, are you in fact potentially putting a buffer between the minister or the government and the people doing the service in the public?

Mr. Hindle: That is one of our main concerns. It's our opinion that the consolidation of food inspection could have been done within the public service, and it can still be done and delivered within the public service, either through the Department of Agriculture and Agri-Food, or through another department. But it does not make sense to us that it was necessary to deliver food inspection by devolving it from the public service per se and creating the food inspection agency.

Mr. Easter: Part of the strategy behind moving away from that, behind combining the departments.... I mean, from my perspective, out there now, if you go into a meat plant, there is a considerable amount of duplication. You have the province, you have the feds, you have Health, you have Agriculture and Agri-Food Canada, you name it.

Certainly the theory behind putting together this one agency is to cut out duplication and make savings in that area, and not affect the service to the customer in any way. Basically you should make it more efficient. That's the philosophy behind this. I may differ in terms of where we're going with the agency, but I agree with the philosophy, in terms of trying to do it more efficiently, and making it less complicated to the person or the industry you're serving.

At the beginning you did raise some questions on the numbers of employees, the services provided, etc. We've raised those questions as well. We haven't any answers to them. I'm wondering if you've any more to add, in terms of.... You basically said that you don't believe those savings can be obtained. Am I correct in saying that? Why do you feel that way?

Mr. Murray Gordon (Co-Chair, Food Inspection Agency Transition Team, Professional Institute of the Public Service of Canada): If I could just add a point, without trying to be partial to one side or another, I would like to say that there is a significant public policy question about privatization of government and regulatory functions.

This has been studied academically quite a bit. For example, a few years ago Professor Stanbury at the University of British Columbia looked at this whole question. He came to the conclusion that when you privatize a government regulatory function, in order for the government to be assured that there are no conflict-of-interest problems and that the quality is maintained you have to set up a mechanism to monitor those private companies. This is what we referred to as the audit-and-accreditation approach to private laboratories.

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Well, it's been estimated - and these are his figures, but I think they're reasonable - that in fact when you have to set up this monitoring mechanism, you actually add a 20% overhead cost. The question is, who's going to bear that cost? We're going to a user cost-recovery basis already. What we're doing, in effect, is adding another 20% on top of that cost recovery, which is presumably going to have to be borne by the industry.

Mr. Hindle: To follow up as well, there's no argument from this side that the consolidation of food inspection has efficiencies in it. We've seen no evidence to show that the $44 million they're suggesting they're going to save is real, or exactly how that's going to come about. If anything, we agree that consolidation of food inspection makes sense. We're talking about the method of doing it, and that's where our concern is.

There is one other thing, Mr. Chairman. An option you might want to look at is the Canadian Commercial Corporation legislation, which has a crown corporation reporting to a minister, rather than directly to Parliament. I think there was a question about the mechanisms there as well. So that's another example.

The Chairman: Okay, thank you. Mr. Hermanson.

Mr. Hermanson (Kindersley - Lloydminster): Thank you, Mr. Chairman, and good morning, gentlemen. That was very interesting testimony again this morning.

I too am not extremely familiar with labour legislation and the public service sector and exactly how the acts relate to your position within the public service. I'm on a family farm where my negotiations are with my spouse and my kids, and that's a handful for me. But it almost looks like maybe you need -

The Chairman: Do you have an appeal board, Mr. Hermanson?

Mr. Hermanson: Yes, I have an appeal board of one.

Voices: Oh, oh.

Mr. Hermanson: It almost looks like while we're talking about some amalgamation here in the food inspection service of the government, perhaps there needs to be some kind of amalgamation of labour legislation in your roles as well.

You're saying that the employees of the public service are left in limbo under this legislation, and if that's the case, I certainly think it needs to be fixed. You need to know where you stand, what you have, and what acts you fall under, and I would support that. It needs to be clear.

Then I want to get more into the act itself, and you said you want to know who is in charge. I think that was an excellent question. We dealt with that yesterday with the witnesses from the food industry.

They discussed this advisory board, and suggested the advisory board shouldn't be an advisory board, but should be a board, to which the CEO is accountable, and then this board should be accountable to the minister. I almost see you maybe moving the other way. I'm just wondering if you disagree with their position, or whether you feel at least that would clearly delineate responsibility, and be an environment in which the public service employees could function well.

Mr. Hindle: I think the essence of our argument is that food inspection should remain within the public service, accountable through a minister to Parliament. It's as simple as that.

Mr. Hermanson: You used the mad cow thing as a rationale for that argument. I'm not extremely familiar with what happened in Britain, but it almost seems to me that the government was a big part of the problem there, not recognizing that they had a problem, or trying to cover up a problem because it became too political. They were too close to food inspection. So I challenge your argument that somehow the further food inspection gets away from hands-on government control, the less safe our food is likely to be.

The other example I would bring to your attention is that a number of years ago we had the tainted tuna scandal in Canada, where a federal minister - a Conservative minister - was trying to protect his reputation and his government's reputation, rather than letting the food inspectors do their job and call a spade a spade.

Don't you see the danger of a minister being too involved in food inspection, that they may not be objective and not let you people, who do your job very well, do it effectively?

Mr. Hindle: You've raised two points. First, one of the problems with BSE, or mad cow disease, in the United Kingdom was the impact that deregulation had on the government's response to that particular problem. This occurred after they had deregulated the industry, and they didn't have as much control.

I would put it to you that exactly the opposite will happen. If a minister is responsible and if food inspection remains within the Public Service, responsible to a minister, the minister is far more accountable for things such as mad cow disease than if it is deregulated, or pushed out into the grey sector of the larger public sector, not in the public service.

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Getting to the tainted tuna scandal, I would put it to you that this was more a function of the person who was involved, and not the system that was involved. I think it is important to remember the fact that the person was accountable to Parliament for what went on.

Perhaps I'll bring up another one. Perhaps we all remember what happened when there were a number of deaths in this country due to a mussel crisis from Prince Edward Island. I put it to you that you might want to take a look at the government's response to that, and how well the public service responded to finding out exactly what was going on, where the mussels were coming from, and how they were being contaminated, a situation that was causing such a scare among the Canadian public.

And I'll put it to you again that if you deregulate that function, you put it further away from the government, you will have a far worse response than you got when the mussels hit the market.

Mr. Hermanson: Okay, thank you. I also sense you feel that the way the legislation now stands, there's more of a chance we could be moving backwards as far as patronage appointments, nepotism and that sort of thing occurring. We know there's still the Liberal family compact, and that is a concern of ours. Can you go into a little more detail as to how this legislation should be tightened up to make sure that hiring is done on the basis of merit and tenure, rather than on connections with people in high places?

Mr. Hindle: I think the two recommendations we make at the end of our brief would address that. One of them would allow the parties, the food inspection agency and the unions of the employees working for it to bargain on matters such as staffing, appointments, lay-offs, etc. That would provide access to the grievance process or an appeal process. The other mechanism is to leave these people under the employment act, which already provides those safeguards.

Mr. Hermanson: Do you recommend both of these, or one or the other? Again, I'm not familiar enough with the legislation to know exactly what you're telling me here.

Mr. Hindle: Our preference is that food inspection remain in the public service, and that the employees remain under the staff relations act and the employment act.

Failing that, if this legislation goes ahead, and it's seen necessary to create the food inspection agency, then I think the two amendments we recommend would significantly address the cause of our concern.

Mr. Hermanson: Thank you.

Mr. Nelligan: If I might just say something on the question of patronage, patronage is not always political. There's something we call nepotism, which comes in too. In a small agency, if you don't have this machinery in place, you suddenly find that the boss's brother-in-law gets the job instead of someone else. So it's not just political patronage we're concerned about. It's just favouritism, and we need machinery to protect ourselves.

Mr. Hermanson: Thank you.

The Chairman: I just have a question before I go to Mr. Hermanson. Not that we have to, but I just found out that we do have the room for a little past eleven, so if we do go a little past that....

You folks aren't going to be there at eleven, because we have other witnesses.

Voices: Oh, oh.

The Chairman: There is just a question I want to ask, and then Monsieur Chrétien has another question.

We've had other witnesses who have been very adamant with us that providing - if I can use the overall term - the inspection of the Canadian food system would be cheaper if it were done by industry themselves. If I hear you correctly, I think you people are saying very clearly that it would be cheaper if it were done by the public service. Maybe it's unfair when there's only one of those witnesses here to say who's right. Would you make further comments on that?

Mr. Hindle: I think there are efficiencies to be had by consolidating food inspection within the public service. And as has been stated before, that may well include inspection currently within the jurisdiction of, or currently carried out by, the provinces.

There's no doubt there is duplication. We would put it to you that there are efficiencies by doing it within government. Even more important than efficiencies and the cost of providing the service is the ability of Parliament to ensure that it has actual control over the food inspection system in this country. That's an assurance an awful lot of Canadians would like to hear and have.

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Dr. McDonald: One of the opportunities is that private industry will be more likely to pick up the delivery of services in areas where there's a high volume. In areas of the country where the volume or demand for a particular service is less intensive or more sporadic, it would be less beneficial or less profitable for private industry to pick that up.

The alternative left is that in order to ensure that all Canadian producers have access to inspection services they require either to sell or to export their commodities, the agency will have to find some method of assuring that everyone has equitable access. If, for geographical or other reasons, it's not being provided by the private sector in certain areas of the country, the agency will hopefully provide that service. So it will find itself in a position where it is only providing service in the most expensive situations.

The other related aspect is that in order to authorize or enable individuals, either through designation, accreditation, or whatever the process, to provide a service, there is a requirement to ensure that these individuals are qualified in the first place. A decision hasn't been taken on how or where that process will fit into the cost-recovery elements. But in working in an area in which I've had a fair amount of involvement, with respect to accreditation of veterinarians throughout the country who are involved in the testing of livestock going out of the country, primarily to the U.S...particularly in the remote areas where the volume is not high, they perceive this as a service to their clientele.

In our recent discussions with both the Canadian veterinary medical association and the provincial licensing bodies for the individual provincial licensing associations, their comment has been that if the process of being accredited becomes too expensive or is a burden, and they are in a position where they can't recover costs, they have no alternative but not to deliver the service.

So there are certainly situations where alternative services are working well, and will work well, but it has to be looked at on an individual basis. All criteria, including the ramifications of the change, have to be looked at very closely beforehand.

The Chairman: Thank you. Monsieur Chrétien.

[Translation]

Mr. Chrétien (Frontenac): When we started looking at Bill C-60 and that we were told with great fanfare that there would be potential savings of $44 million on a budget of some $300 million, we were led to believe that we could achieve savings of 15% due to the elimination of duplication of various expenditures that could be pooled by two or three departments.

Of course, at first glance, we could not come out against savings of 15%, especially these days! But you put your finger on the problem earlier when you expressed serious doubt about food inspection, especially fish. This could have serious repercussions for the health of Canadians.

Can we do the same thing with 15% less? If this was a realistic option, I would ask our government why it waited until January 1st, 1997 to proceed with the 15% cut when they've been cutting everywhere for a long time.

You are the second important group that I hear protesting vehemently against Bill C-60, and I'm glad.

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Mr. Nelligan, in your preamble you said that the public service used to be a bastion of patronage. Despite my youth, I remember very well that in my region, when there was a change in government, you didn't even wait for the letter. You brought the key to the grader to the parish organizer and he was the first to go. That was done automatically.

But in those days, we had a public service that was worth what it was worth. Today, I think that we have an excellent public service, and I thank you for that. I also thank the executives in today's public service.

Of course, for some, this creates some upheaval. With regard to Bill C-60, some within my caucus think it's an excellent idea to save $44 million and are asking me how I can possibly be against that.

This is when I told them about the irritants, notably clause 13. According to this provision, the governor in council shall appoint a president and an executive vice-president for an indeterminate period, six days, six months, six weeks or a year. After that, the president and the vice-president appoint the staff. This is dangerous, extremely dangerous, because it will add to this level of the organization an advisory board of not more than 12 members who will also be appointed.

This irritant frightens me so much that I didn't have too much trouble getting my caucus to help me prepare a series of amendments to Bill C-60.

You spoke of patronage and nepotism, and quite rightly so. In 1997, on the eve of the next millennium, the situation is serious when we are questioning things openly, as we are doing this morning. This is serious. Appointments were made recently by the government. Yesterday, I got a list of appointments of returning officers. It's the former MP, a defeated candidate, the brother-in-law of the MP, etc. They're not incompetent because they are Liberals, but this is irritating. This time, they are Liberals, but it was the same thing under the Conservatives. It wasn't much better!

You may say that I can talk all I want, but I will never hold office in Ottawa, in fact, that allows me to speak more freely. You broached this subject earlier with a great deal of fear, and I think you're absolutely right.

There are certainly other irritants, but I would like to hear your views. Please be aware that you have at least two months left before the bill comes into force. So let's not run scared. The Vice-President has surely been appointed, although I don't know him. The Executive Vice-President, the Vice-President and the members of the Advisory Board, as my colleagues pointed out, have certainly all been appointed and surely already know their role.

I would like to hear your comments. The group that appeared yesterday afternoon and that represented a coalition of 25 different groups, including consumers, processors, and so forth, also expressed many fears.

I will close by saying that clause 13 scares me enormously, and I'm asking you once again if we can do better or at least provide the same service if we reduce the budget by 15 per cent.

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[English]

Mr. Hindle: We still think that is a possibility, Mr. Chrétien. I would also like to say thank you for one of your early comments on the recognition of the excellence of the public service. I think one of the things that's been lacking over the last few years is recognition from members of Parliament for exactly what it is they get from the employees in the public service.

I think that is one of the main reasons for us being here today. We want to have an open discussion on what the government is doing, raise questions for which, quite frankly, we do not have the answers. We are willing to express our opinion. One of our opinions is that this can be done just as efficiently within the public service as outside the public service in terms of cost; and certainly it's much better situated within the public service under the control of Parliament than outside with less assurance as to who exactly is controlling it.

I think this goes to the whole issue of alternative service delivery, that there has to be an open dialogue on what exactly the government is trying to achieve by the alternate means of delivering the service. We're perfectly willing to participate in the discussions on it, to bring to bear our expertise on the issue, whether it's in the labour relations field or whether it's from the members we represent who are the professionals within the public service who know what's going on within a significant number of programs in the public service. They are very knowledgeable about the way the public service is structured and are quite willing to offer opinions and thoughts in terms of making the public service more efficient while continuing to deliver high-quality service to the Canadian public. So thank you.

[Translation]

Mr. Chrétien: Right now...

[English]

The Chairman: Briefly, Mr. Chrétien.

[Translation]

Mr. Chrétien: I'll come back at the next turn because this may be quite long.

[English]

The Chairman: Mr. Easter, for a point of clarification that you said would be brief, and then we will go to Mr. Hoeppner.

Mr. Easter: As you know, there's a pest management review agency being considered as well. Are you familiar with that? I'm wondering if that is the same approach as this one. You mentioned the Canadian Commercial Corporation, which operates differently from this one within the realm of government. I'm wondering if there are other examples. What about the Canadian Wheat Board, which is, as Jake knows, a very efficient agency? Or are there other agencies in the realm of government that can compare, which we can look at for examples?

Mr. Hindle: I think the main point of comparison would be those other agencies that are also separate employers, maybe not so much crown corporations like Canada Post, but separate employers such as the National Energy Board or the National Film Board, where we have the same labour relations and employee rights problems now as would be created by the new Food Inspection Agency.

So far, separate employers covers about 18,000 or 19,000 former public service or quasi-public-service employees; so those are the people who are currently in limbo.

In terms of the proposals in the last budget for the Food Inspection Agency, the Revenue Canada border service, and the parks agency, we are looking at upwards of 50,000 public service employees going into these separate employers. That's a significant number of people to put in a situation where they have really no more protection for the current mechanisms they have under the employment act. I think it's a serious thing to consider. The Food Inspection Agency happened to be the one for which we got to address the issue first, but it will come up as other agencies come up.

We didn't take a really strong look at all the other agencies that are out there as possibilities. We looked at the ones we're most familiar with, such as the National Energy Board and the National Film Board. I have to note that this isn't really a new concept; it's been discussed off and on for upwards of 15 years. So it's been a long time coming perhaps, and the concept is there. NAV CANADA was recently privatized. That took over ten years to actually complete, and that initiative actually came from within the employee complement working in the air navigation system. It's quite different.

So there are a number of separate employers you can compare it to, and you can question which one works better, but I think if you look at all the separate employers that would be similar to this, you will see there are problems. The Office of the Superintendent of Financial Institutions has similar problems where redress is to the court system, which is expensive both for the union representing the employees and for the agency and the government. I don't think that's really what we want.

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The Chairman: Thank you.

Mr. Hoeppner is the last questioner. I'd ask you to keep your questions and answers as brief as possible because we do have other witnesses.

Mr. Hoeppner (Lisgar - Marquette): I'd like to point out, Mr. Chairman, to these gentlemen that if they want anybody to tell them about efficiency, look at Prince Edward Island with four MPs. You can see what efficiency does.

I was interested in the $44 million that is going to be saved in 1998-99. How can you project so far ahead that there are going to be savings then and not now?

Mr. Hindle: I can't answer that question. That's the question we're raising as well: where's the $44 million in savings coming from, and does it take into consideration the additional burden on Health Canada as the monitoring agency?

Mr. Hoeppner: How are we supposed to accept that as opposition MPs and believe everything that's in this bill? That's why I questioned the bill all through its existence.

Another question I have is.... We've seen the special crops industries in western Canada being developed by small players. We are now regulating them out of business because the big players want to get into the system. What about the small food-processing plants in Manitoba, about which we heard the other day that they will probably not be able to pave their parking lots and similar situations that are demanded by federal regulations?

The harmonization for inspection between provinces and the federal government is so far apart in the cost and so much more inefficient, I think, as far as federal guidelines are concerned. How are you going to keep the industry going?

Mr. Hindle: That's not a question we're here to answer. I think it is an important question to be answered, but -

Mr. Hoeppner: It's related to this bill.

Mr. Hindle: - I believe it is a question for the people who will be running the Food Inspection Agency. How will they address that concern? How will they address the concerns we have raised? If I had the answer, would you believe me? I'm not here representing the Food Inspection Agency.

The Chairman: I thought you were from the government and here to help.

Mr. Hindle: You believe that too, do you?

Mr. Hoeppner: That brings me to a very important point, and this is on what's happening in the grain inspection services. I get complaints continually from the grain inspection people that we have layer after layer of bureaucracy. We don't have anybody left to handle the pail and shovel to do the actual work. This is what I see happening with privatizing the actual inspection services - that this is where the cuts are going to be done. They're not going to be done in the bureaucracy, and that worries me. Tell me how we can avoid that.

Mr. Hindle: I think the best way to avoid it in the private company is to leave the service in the public service and restructure it so it is far more efficient and far less bureaucratic. I think it's quite possible to do that. I think the employees who deliver the service are more than willing to help make that a fact.

Mr. Hoeppner: I think that's the only way we can make it more efficient, because if we're going to have two systems, one privatized that is going to do the actual work and the other layers of bureaucracy trying to set the guidelines, I think we'll fail desperately and do more harm then good. That's where I think you people have to give strong representation to this government and come up with some projections or guidelines on how to do it.

Mr. Hindle: Thank you for the advice.

The Chairman: Thank you very much, gentlemen. I don't usually sum up, and I'm not attempting to do that, but your main point, not your only point, today I understand is in reference to clause 12.

Mr. Hindle: The protection of the employees who are moving to the new inspection agency.

The Chairman: Clause 12 is the one that says ``The Agency is a separate employer under the Public Service Staff Relations Act.'' Your discussion went around that; it's not your only point, but it's your main point.

Mr. Hindle: I think you have the main point.

The Chairman: Thank you very much, gentlemen.

Mr. Chrétien: Mr. Chairman....

The Chairman: Be very brief, Mr. Chrétien. We have other witnesses. You have about 60 seconds maximum, and I have the gavel, remember.

[Translation]

Mr. Chrétien: Earlier, I asked you if it would be possible to conduct food inspections with the same level of safety with a cutback of 15% representing $44 million. If I understood you correctly, you answered in the affirmative.

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In rereading the brief, in French, the second paragraph of page 2, I note the following:

In the case of the FIA, we have been unable to find evidence supporting the government's contention that food safety can be maintained while costs are reduced by $44 million within a $300 million budget.

Is there really $44 million dollars' worth of overlap between the current departments, or is this pure speculation?

I want to know if I understood correctly that despite this cut of $44 million, Canadians can be assured of proper inspection of all food.

[English]

Mr. Hindle: We are of the opinion that there is money to be saved from the consolidation of food inspection services while leaving it within the public service. We are not convinced you can do it if you move it outside of the public service. I think the mechanisms are in place within the public service to ensure that it happens.

The Chairman: I think that's a very concise answer again.

Thank you very much, gentlemen, for your contribution today. We'll continue our discussions.

Our next witnesses are from the Canadian Poultry and Egg Processors Council and the Canadian Meat Council. Is it one joint presentation or two? Would you gentlemen have any objection if we had them one after the other and then we went to discussion?

We welcome Mr. Bob Anderson, president and CEO of the Canadian Poultry and Egg Processors Council, and Mr. Robert Weaver from the Canadian Meat Council, to the table.

I remind the committee that we do have the room after 11 o'clock, so I want to make sure that we have as full a discussion as necessary within a reasonable time line.

Mr. Weaver.

Mr. Robert Weaver (General Manager, Canadian Meat Council): Good morning,Mr. Vanclief, and to the other members of the Standing Committee on Agriculture and Agri-Food and also to all of the people who are here listening today.

I'm here as the general manager of the Canadian Meat Council, and my friend here is Mr. Bob Anderson, who is the head of the Canadian Poultry and Egg Processors Council. Obviously, we don't belong to the same trade association. We work together quite often when we have interests in common, but we both speak separately for our own trade association.

We'd like to thank you for the opportunity to come here today to make this representation on Bill C-60. I'd also like to tell you that we appreciate the consultative and communicative way the food production inspection branch works with us and the agency inspection people on the creation of the agency and Bill C-60 as well.

I've submitted a document to you. It's available both en français et en anglais. I hope you have it, because the first thing I'd like to do is direct your attention to page 3, in the middle, where we have made a summary of the food production inspection branch activities. These aren't necessarily priorities, but this is where the resources are directed right now and these are in order of the amount of resources directed to those activities. The first one is meat hygiene. This is composed of both red meat and poultry meat, as the highest amount of attention given for the food inspection system. The second is animal health and plant protection. The others are fresh fruit and vegetables, seeds and pesticides, and the seventh is poultry and eggs. This poultry and egg does not include poultry meat; it's hatcheries and eggs, and things like that. There are also dairy, processed fruits and vegetables, feed, fertilizer and other. I bring this to your attention because I'm going to refer to it a little later on when we start talking about setting up an advisory board or having representation on the Canadian inspection system.

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When the new agency was first proposed, the Canadian Meat Council had three major concerns we expressed. Incidentally, the agency people have responded to each of these three concerns we have. The first one is that we thought the agency should report to the Minister of Agriculture and Agri-Food. In the case of what minister the agency should answer to, we received the response that it would report to the Minister of Agriculture and Agri-Food. We're very concerned about this; it's what we want to see happen. We don't see it spelled out quite that way in Bill C-60, so we still have this concern.

Second, there should be no new user fees, or no increases in user fees; the existing user fees are already impairing the competitiveness of the red meat industry. Red meat trades freely across the Canadian and American borders with no tariff protection. If a retail store or anyone wanting to purchase red meat in the city of Ottawa for some reason doesn't want to buy Canadian meat, he can simply call up anyplace in the United States through distributors and he can buy red meat with no tariffs to protect the Canadians. I'd like you to try to remember that, because this is one of the big differences between the red meat industry and many of the other agri-food commodities in Canada.

The agency responded to this concern that there would be no new user fees in year one of the agency between April 1, 1997, and March 30, 1998. We appreciated this response very much, but there seems to be a mix-up or a conflict in what's actually being done and what's being said, because we were consulting with the food production inspection branch and the business alignment people as recently as last week on another set of user fees that are to be instigated on April 1, 1997.

In the case of the red meat sector, they amount to about $2.4 million more for the main part of it. I won't go into the detail of the four categories of user fees, but the main part of it is for laboratory testing costs. So we ask you to see if you can straighten that out. Are we not going to have any new user fees in the first year of the agency's operation, or are we going to have more user fees in the form of this $2.4 million to the red meat sector? Mr. Anderson will describe what's going on with the poultry sector as well.

Our third main concern is that we found it difficult to perceive how the creation of a third government agency could actually decrease the costs, but we've been assured that there will be $44 million in savings during the second year of the operation. I don't have all of the detail of how that's going to be done. I haven't been involved in the study of it, but we're assured that this is to take place and we would be very interested to see more detail on how that will take place.

I'd like to comment briefly on the Canadian Meat Council's intent with regard to the Canadian Food Inspection Agency. We intend to work hard with the people, and support the agency and cooperate with it as we always have with the food production inspection branch. Our relationship is not very political, not one of lobbying with the food production inspection branch. It's more one of detail and working very hard together every day.

The success and the well-being of the agri-food sector we know depends on many links in the chain. The Canadian Meat Council is one of them, and the food production inspection branch and the inspection system in the new agency we know is another one, because we have a great deal at stake in terms of international trade.

I would now like to specifically refer to a number of items in Bill C-60, because we did study the document and evaluate it, and we made a number of recordings of concerns here.

First of all, there should be no more user fees after the first year of operation of the agency. We should concentrate on cost reduction and streamlining as required alternatives. Our experience has shown it's possible to reduce costs by doing this to a satisfactory level that's required by the Government of Canada.

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Next, the document should specify that the agency should report to the Minister of Agriculture and Agri-Food. That's the ministry that has the knowledgeable, trained, experienced people to be able to handle such things as food inspections. They're used to it and they're trained. They're the ones you can have the greatest faith in to carry out such duties.

I could mention that the Canadian Meat Council took part in a regulatory review with the government starting around 1992 and 1993. We made a number of recommendations for simplication of the system. Fortunately, the government heard those concerns and acted on them. This has helped our operations and the responsiveness of the goverment a great deal.

We used to have to do a great deal of work with Consumer and Corporate Affairs. Our details and concerns were removed from that area. We used to go to Industry Canada as well. The concerns for the red meat industry were transferred to Agriculture Canada. So on issues of health and safety and inspection, we now deal with Agriculture and Agri-Food Canada and Health Canada. The system has been simplified and streamlined and it's much easier and much more responsive, so we thank you for doing that.

On this next matter, there was a great deal of discussion with the previous group that was here. The president and executive vice-president, we believe, should not be political appointments. We think political appointments in this area would not be expected to contribute to the overall performance of the agency.

The organization is supposed to be concerned with science and health and safety. Political appointments at the level of president and executive vice-president remind us of the system that's in the United States, where the secretary and administrator of the department are appointed on a political basis.

At times, when the government changes from one party to the other, the intent changes too, and we feel it disturbs the inspection system and the industry. We would recommend that this be done a different way.

On the subject of the advisory board, we believe the members should be selected on the basis of the inspection activity, not simply agricultural activity. That's why I pointed out to you on the third page where the emphasis is for the inspection system. We should pay attention to that when the advisory board representation is determined. The Canadian Meat Council would request representation on that board.

Next, we believe you should give consideration to regulation review during the agency's first three years of operation, to assemble all of these regulations pertaining to food inspection in the nine different acts into one legislative document. In fact, the nine legislative documents are actually eleven if you include food and drug and packaging and labelling. It's quite unwieldy to handle.

I have been involved a great deal in labelling regulations recently, because this is an area that's also under consideration from a number of different points of view, but I won't go into that because we're here to talk about Bill C-60. I requested copies of the documents that would outline regulations having to do with labelling. They come from a great variety of sources. Simply on labelling, the pile is eight to ten inches thick. What I'm mentioning here would be a very great undertaking, but we think it should be addressed during the first two or three years.

Submitting a business plan every five years, as is described in the Bill C-60 proposal, we think is somewhat outdated. Five years is too long. The business environment, international environment and inspection environment are changing so quickly that the long term in our industry these days seems to be about a year and a quarter, while the short term is probably two or three months. So we think it should be done more often than every five years.

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The Canadian Meat Council, for example, works according to a business plan. We submit it every year but things change so fast that it's difficult to keep it up to date. But we feel that five years is too long. We think the business plan and the annual reports should be shared with the industry partners.

The consultation process should provide opportunity for industry input, cost reduction and streamlining in order to improve efficiency and productivity according to the cost recovery policy of the Government of Canada, as published by the Treasury Board of Canada. And I was very careful with the wording of this one because the Canadian Meat Council and the red meat sector went through the consultations on cost recovery and user fees without the advantage of having this cost-recovery policy specified. We were the first to be involved with cost recovery, and we wish this had been developed before we got involved in that, not after.

The Canadian Meat Council represents over 90% of the federally inspected red meat produced in the country, and it represents over 85% of all of the red meat produced in the country. It's a trade association that accounts for more than 32,000 jobs directly. It's business in 1995 was $9.5 billion, and exports were in the area of $2.25 billion. So we're extremely interested in international trade, and some of the things I'm going to say in the next few minutes will explain why.

The food production and inspection branch is involved in those aspects of international trade completely and totally. They support the industry and it's necessary to ensure that this continues into the future. We would not have been able to amass exports of $2.25 billion without the help of Agriculture Canada.

We think Bill C-60 and the creation of the agency presents an opportunity to upgrade food safety and wholesomeness for the whole country. It has the potential to improve the competitiveness of the Canadian supply for international trade, and there's also an opportunity to fill in some of the gaps in the food inspection system - Mr. Easter referred to them a few minutes ago - that have needed to be filled in for a long time, but the playing field should be level for all of the participants.

I want to talk about another development that is extremely important and has moved to one of the highest priorities for our industry during the last few months, and that's this question of HACCP, or hazard analysis critical control point. Canadian Meat Council members have been working on HACCP programs for a number of years, but I'd like to reiterate that the Canadian Meat Council requested that the government make HACCP programs mandatory for federally inspected red meat plants. We've done that in writing and we've done it verbally for two and a half years. We don't object to that, we support it, and we wish you had done that. Things would be much easier for us now if that had actually taken place.

The U.S. pathogen reduction legislation was announced by President Clinton on July 25. That was the day the clock started ticking for when plants would have to have HACCP installed, up and running and approved by someone, who we think would be the Department of Agriculture in the United States or in other countries exporting to the United States. When this legislation was passed, the guidelines set out depended on the total number of employees working in your plant. Large plants were 500 employees and over, and they were to have HACCP programs on January 1, 1998. The clock started ticking on July 25, so three or four months of that have gone by, and we have about 14 months left to accomplish that. Because of the size of the plants, we thought that meant you would need to have maybe a dozen of them for red meat qualified, approved and certified by January 1998.

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It turned out that the regulations have another interpretation in the United States, or there's another detail in there specifying that any plant from a foreign country that exports meat into the United States, where the product goes to a company in the United States that has over 500 employees, also must have HACCP programs approved by January 1, 1998, not 1999 as originally thought. This would include almost all Canadian Meat Council members. So we're looking at 46 companies, about 75 plants - perhaps 60 of them would need to have up-and-running HACCP programs and have them approved by a year and two months from now.

The Canadian inspection system is going to be fully concerned with HACCP. They're working with us on it through the food safety enhancement program to develop an approval or certification system for these different plants at the very time the agency is being created, and it must not stop. We have more than $2.25 billion of pork and beef exports to be concerned about here, and this process has to be worked out.

So thank you for letting me express the concerns of the Canadian Meat Council. In general, the Canadian Meat Council provides industry support for creating the Canadian Food Inspection Agency, with the concerns we've noted in this document.

The Chairman: Thank you, Mr. Weaver.

Mr. Anderson.

Mr. Bob Anderson (President and Chief Executive Officer, Canadian Poultry and Egg Processors Council): Thank you, Mr. Vanclief. It's a pleasure to be back here before you once again. On behalf of our member companies and staff, we'd like to thank you for the opportunity to be here this morning.

As Bob Weaver indicated, there has been extensive consultation with the industry on the development of the proposed Canadian Food Inspection Agency. It's my guess that the views of our council are pretty well known to most senior officials within Agriculture Canada, but it's not often that we get the chance to talk to people on the political side of the spectrum, so we're happy to be here this morning.

Our council is a national trade association representing the interests of more than 170 Canadian poultry processors, egg processors and hatcheries. In addition, our membership includes over 50 national and international partners that have joined us as associate members. We represent some of the largest agri-food corporations in Canada, and our member companies process approximately 90% of Canada's chicken, turkey, eggs and hatching eggs. This economic activity generates in excess of $4 billion in retail sales, and to accomplish this our members have invested over $1.5 billion in plant and equipment, and directly employ more than 17,000 Canadian workers.

As Bob indicated, meat hygiene ranks number one in terms of inspection expenditures by Agriculture Canada. In fact, some $118.5 million are devoted to meat inspection activities, of which 40% or about $47 million relates to poultry. Also, substantial expenditures are involved with inspection programs for table eggs, further-processed eggs and hatcheries, which are also represented by our council.

At this time our members also contribute about $3 million or in excess of 10% of the total dollars generated by user fees -

The Chairman: Bob, could you just slow up in reading it? It's difficult when you haven't been able to provide a handout for the numbers to get.... The translators do an incredible job. I wish I had even 1% of their talent.

Mr. Anderson: Let me go back over that paragraph and I'll do it more slowly.

The Chairman: Yes, please.

Mr. Anderson: Meat hygiene represents about $118.5 million of a total Ag Canada budget of $300 million. Of that $118.5 million, poultry is about 40% and red meat 60%. The 40% that we represent is some $47 million in meat inspection costs. Beyond that there are other costs for table eggs, processed eggs and hatcheries that are involved with our council.

So the activities of the proposed new agencies are far from academic to our members. Our members live with Ag Canada inspectors in their plants every single day. Some of our larger members are now contributing hundreds of thousands of dollars in user fees to cost recovery each year, and believe me, this got their attention. If it was the government's intention to try to get their attention, you got it big time.

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Our council has given its conditional support to the creation of the new agency because we view it as a vehicle with the potential to deliver the services that are required in a more cost effective and efficient manner, in a more market-responsive and expert fashion than perhaps occurs today. To achieve this potential, however, will require a thorough understanding of other heavily impacted industries such as red meat and fisheries.

Our members support the need for government to reduce their expenditures and to control the deficit. The cost savings, which are estimated to be some $44 million a year - that wasn't our calculation, we are accepting it based on calculations presumably done by the government. We can see the opportunity for cost reduction within the creation of the new agency. We're aware that Agriculture and Agri-Food Canada's share of this $44 million is about $33 million, and we view it as imperative that the $33 million coming from the existing Agriculture and Agri-Food Canada, or the $44 million in total, comes from the reduction and elimination of costs rather than from new user fees.

Our council's policy regarding user fees has been consistent and clear. First, we agree that the government should examine all programs to determine if they're necessary, and where they aren't, scrap them. Where they are necessary and obviously confer private benefit - I'm thinking of such things as import and export inspections and things of that sort - we have not objected to full cost recovery for those types of services, provided they're delivered in a cost efficient manner.

Where this thing gets tricky or where the lines get blurred, however, is when within an element of a service provided by government, and this is particularly true of food inspection.... When there are arguments about private good versus public good, it is impossible to arrive at an agreement as to where public good starts and stops, or where private good starts and stops. The argument just goes around and around. There are as many opinions about it as there are people in this room.

We do know that user fees for inspection services in the United States are zero. I'll repeat that - zero. We have members that are paying $300,000 to $400,000 a year in user fees for inspection services.

In our view, then, the problem is really not one of public good versus private good, it's a matter of international competitiveness. So we take the position that there should be no further user fees. As everybody in this room probably knows, we think they're already too damn high.

Our council will do two things relative to cost recovery for inspection services in the future. First, we will continue to oppose increases. Second and maybe more important, we will work with the government to drive costs from the inspection systems. In this connection, our council is involved with the following activities:

First, we agree the existing table egg inspection system needs to be reexamined and revised. In this connection the table egg members of our council have agreed to put up $25,000 of their own money to fund half of the cost of a $50,000 study on the complete table egg inspection system. A contract was recently awarded to Price Waterhouse to conduct this study, and it's now under way. My guess is that it will result in a substantial reduction in the cost of inspections for eggs.

Second, we are participating heavily in a re-examination of the poultry meat inspection system. Perhaps you've heard about the modernized poultry inspection project, which is intended to examine the requirements to move to a science-based inspection system. This will heavily utilize HACCP and we believe will result in a more effective and lower-cost system. Our guess is that project will take approximately two years to complete. It's under way now, and different subcommittees are meeting and reporting to steering committees and all stakeholder committees.

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I'm going to take a couple of minutes and review with you some specific beliefs we have relative to Bill C-60, which we feel should come to your attention.

1. We agree the agency CEO should report to the Minister of Agriculture and that Bill C-60 must be crystal clear in this respect.

2. We agree there should be no budget cuts or new cost-recovery initiatives in year one of the new agency. Give it time to develop its business plan and get functioning. But we're concerned that the door has been left open for new cost-recovery initiatives in the government's fiscal year beginning April 1998. This must not be allowed, because of the competitive thing we were talking about.

3. We insist that the focus within the agency be on cost reduction as a means of eliminating the overlap of services previously provided by various government departments; in other words, the elimination of duplication and the refinement and improvement of inspection system delivery and mechanisms. Also, and extremely important, as mentioned, there must be no new cost-recovery initiatives that transfer the burden of inspection services to the industry partners, because you're simply making us less competitive with our U.S. counterparts.

4. The CEO and the executive vice-president of the new agency must be business people with direct experience in the food industry, not political appointees. Their understanding of industry problems and inspection services will be critical to the success of the new agency.

5. The advisory board members, in a similar vein, must be people with extensive knowledge of the food industry, and they should be selected from those industry sectors that really utilize or are impacted by the inspection services of the agency, rather than from peripheral industries, which rarely, if ever, see a government inspector.

I was at a session not too long ago, and I listened to this guy go on and on about how horrible food inspection was; he never sees a government inspector. There are certain industries that deal extensively with government inspection. We're one of them, red meat is one of them, fisheries is one of them. If you make jelly beans or if you make soda crackers and you never see a government inspector, I'm sure you will have an academic interest in all of this, but you aren't really impacted by it in the way that civil service unions are, our industries are, etc.

6. We believe association executives such as Mr. Weaver and I can effectively represent industry sectors on the advisory board. They are knowledgeable regarding inspection matters, they are objective because they represent their entire industry, and they tend to be more available than industry member CEOs. In this connection, we have formally requested of Agriculture Canada that I represent our council on the advisory board, and your support for this request would be appreciated.

7. We agree that the new agency should give high priority to reviewing the existing legislation and regulations that exist for various food activities. Bob touched on it and I don't need to add anything particular to what he said, but the consolidation into a so-called single food act, if this could be accomplished, would be of significant benefit.

8. The new agency should consult extensively with industry members to seek their advice for methods to improve service, reduce costs, and change methods of doing business. Specific sectoral knowledge will be beneficial and essential.

9. The business plans of the agency or the Auditor General's reports regarding the agency should be shared with industry members for their input and their advice.

10. We support the move to generally accepted accounting principles, so-called GAAP, which is a necessary step to monitoring the activities of the agency in a business-like manner. The arithmetic that is conventionally used in government is unlike the arithmetic we learned in Hastings County, so we applaud that move.

11. The new agency will result in inspectors from agriculture, health, and fisheries being used in a variety of food processing establishments. This has the potential to decrease the expertise of inspectors in poultry plants. In our view it will be essential to provide thorough cross-sectoral training of these people, and we should examine the desirability of formalizing this training and recognizing the completion of the training by way of a formal certification process.

In conclusion, we live in a changing world, which is becoming increasingly competitive, not less competitive. Canadians, I believe, have a high level of confidence in the safety and the wholesomeness of Canadian food products, and nothing relative to this new agency should diminish that level of confidence and safety. However, as many of us have to do in our own businesses and perhaps many of you have to do at home with your own businesses, people are looking at ways of doing things better, more efficiently, at lower cost, and more competitively. In this vein our council gives its full support to working with the government through the creation of the new agency, and we would urge members of your committee to do likewise.

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Thank you.

The Chairman: Thank you very much, Mr. Anderson. Just before I go to Mr. Easter,Mr. Chrétien, and Mr. Hoeppner, I have a question.

Yesterday we had a brief presented to us by the Food and Consumer Products Manufacturers of Canada, of which I believe you are a member. Your organization is the Canadian Poultry and Egg Processors Council. I don't believe the list includes the Meat Council. Some of the comments you made today are a little different. Do you wish to comment?

Mr. Anderson: You have the benefit of having seen the report you're talking about. I haven't seen it yet, but I heard about it this morning. There was a slip-up between their office and our office, so I can't comment because I haven't seen what they have said. I am here representing the views of our council.

The Chairman: Thank you.

I don't want to put you on the spot, but I do want to ask you this question because I asked it to the last witnesses and I know you were in the room. There seems to be a debate among different witnesses on how we can best provide for continued safety in the inspection system in Canada, whether the private sector can best do it, the industry itself, or the public sector, as is done at the present time. No matter how it's done we want to get all the efficiencies with the same or, if possible, even better results from the health and safety aspect. Do you have any comments on which way you think it could be the most successfully done?

Mr. Anderson: My guess is it's an evolutionary thing. We probably all know the history of meat inspection and why we have government involvement in meat inspection. As the industry changes and there's more and more use of branded products and there are larger companies, those companies don't want to jeopardize those brands by deliberately selling tainted meat or unsafe products. They are as concerned as the government, I think, about the quality of the products they sell. As for the major customers in the country, if you think the government's tough, try to sell to McDonald's. It's true people laugh about so-called junk food at McDonald's, but there is not a tougher customer in Canada than McDonald's in terms of the specifications for food bought for their restaurants.

When the day comes that Canadian consumers have the confidence that no government inspection or government overseeing is required, it may evolve to that point. It already exists with many other food products, where virtually no inspection is provided by a government. When will meat get there? I don't know.

The Chairman: Does anybody wish to comment?

Mr. Weaver: Speaking for the Canadian Meat Council, we're here to talk about Bill C-60. There is a proposal before the House. You've already had the first hearings on it. The opposition members gave their comments during the first round. We're here generally to say that we support the creation of this agency.

If we are to talk about the privatization of the whole food inspection branch as an alternative to this, I think it's kind of an untimely point at which to bring it up. We would be prepared to discuss it and work on it, but it would be a huge undertaking. We have been involved in such developments during the past two years, for example, with the privatization of hog or pork and beef grading, which started on April 1, 1996, and is up and running now. We're familiar with that type of process, but I don't think we're here to make any judgments about whether the system should be privatized or there should be an agency. We're really only here to talk about the agency at this point.

The Chairman: Thank you, Mr. Weaver.

Mr. Easter.

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Mr. Easter: Thank you, Mr. Chairman.

Mr. Weaver made the point on Bill C-60, but I would love to ask why, when beef prices are the lowest they've been in forty years to producers, they haven't come down a dime in the stores. Maybe you can think about that.

Mr. Weaver: I don't want to think about it. I'd like to answer it right now.

The Chairman: Mr. Easter, you really didn't think he'd wait to answer it, did you?

Mr. Weaver: I'd like to respond because I totally disagree with what you said. Beef prices have come down. All you have to do is take a walk around a grocery store to see that. Traditionally, or at least during my lifetime, beef has been one of the most expensive cuts of protein available, followed by pork, and then by poultry. At the moment I think it's reversed. You can see that just by visiting a grocery store.

The Chairman: We're trying to get back to Bill C-60. Now we've got the red meat saying the poultry meat is more expensive than they are, and I don't know whether they want to get into that.

Go ahead, Mr. Easter.

Mr. Easter: Both of you have mentioned, as have others, that the chief executive officer must report to the Minister of Agriculture. Maybe I'm wrong on this assumption, but I've been under the assumption that the chief executive officer does through clauses 4 and 23. If that is not spelled out in the bill, it ought to be. You both mentioned it. Could you elaborate on it a little further, please?

Mr. Weaver: We agree with what you said, but page 2 of Bill C-60 -

Mr. Easter: Page 2, clause 4...it doesn't say specifically what you're asking, it says ``responsible for''. Are you suggesting that it needs to be clearer?

Mr. Weaver: It says ``the Governor in Council may designate as Minister for the purposes of this Act''. That's one of our major concerns. We want it to be the ``Minister of Agriculture''.

Mr. Easter: Okay, that clears it up for me. That's fine.

The Chairman: It does not state definitely the Minister of Agriculture.

Mr. Easter: All right.

There's another area that you brought up in your brief on page 3, bottom of the page, point 2, on user fees. A lot of concern is being expressed about user fees, and it's wide-ranging. We've got concerns within the government, I think, just as much as you have. How do you ensure that we're not inflating a bureaucracy to create jobs through user fees and that kind of thing? It doesn't matter whether it's a government bureaucracy, a supply management board bureaucracy, or any other. They do take on a life of their own and we know that. So how do you ensure that there are no fees in there that ought not to be there?

There was a presentation, I believe, the day before yesterday in which the individual suggested this, and I'll run it by you. He suggested that the Auditor General be required to provide an annual report of the cost-effectiveness on three points: 1) the cost of service; 2) the percentage allocation of that cost, which is the point that Mr. Anderson made, public good versus private good, and it would be quite a struggle to figure that out; and 3) the comparative costs, if possible, of services in other countries. Would that move us any distance to getting at this question of legitimate user fees?

Mr. Anderson: If I can help you, when this agency was first discussed, the buzz that went around was that it would be a vehicle for 100% cost recovery, that this was the government's intention. We have been assured everywhere we go that this is not the government's intention.

As for the comparative figures you're talking about, ours compared with those of other countries, I'm sure the red meat industry has studied it as carefully as the egg industry has, as the dairy industry and the jelly bean industry and the whatever industry have. Certainly we have in the poultry industry. That's where it becomes problematical: it doesn't exist in isolation. So for this government to start generating new and higher and higher user fees - you can't do that without impacting competitiveness; and that's where the rubber hits the road, if you will.

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So we've consistently made that point that if the United States didn't exist, or if there was no red meat nor poultry that came into Canada, I guess it wouldn't matter. The user fees would just wind up in the price of the product, and when you went to the store to buy chicken or whatever, it would be that much more. That's the way the world works. All of these costs get passed on in the selling price of the product.

I don't know if I'm answering your question, but that's the nature of the problem.

Mr. Weaver: In terms of cost-effectiveness, I think you might be referring to the willingness of the industry to come forward with the funds for any particular service of any government department, along the lines of if they come forward with the funds and the service is used, then it's a valuable service perhaps, but if they don't, then maybe the service isn't necessary.

In our particular case, we've been able to work with the food production inspection branch very, very carefully throughout the whole cost-recovery process, to the point of analysing and evaluating the whole inspection system in detail, and we've found that to be very, very useful. But you'd have to be careful to make sure that the various industries were able to respond and have a voice in what user fees were offered or demanded and what services were offered, and this should always be maintained.

If it isn't, you get into a system where the services are guarded and they just issue user fees for them, and the industry will have no influence over what is done in their particular sector. That's why we brought up this point on the cost-recovery policy of the Government of Canada very strongly.

Mr. Easter: I agree with you both. My concern is, do we have in this bill, and in other regimes within the government, the checks and balances to ensure cost recovery, which can be a form of taxation on the users, doesn't get away on us? It potentially can.

You're absolutely right on the United States. I wasn't aware that it's zero in terms of inspection services in the United States. I do have a supplementary question on that point. Is there any move that you're aware of in the United States for them to impose cost recovery in inspection services?

Mr. Weaver: We've been told throughout the cost-recovery round of consultations that the United States would be imposing user fees next year. This was started in 1993, and this has been said every year. Every year they provide the budget that's necessary to operate the U.S. Department of Agriculture, and they just did it again for 1997 and 1998. They have appropriated the necessary budget that was requested, with no more user fees being imposed.

Mr. Easter, I checked that very question with the president of the American Meat Institute, and he told me that they propose these new user fees every single year and every single year they get rejected.

Mr. Easter: I wonder if you might be able - not now, but by way of a letter - to table some of that information with us in terms of the fees. I guess we can find them by other means, but this is certainly a discussion within government in terms of our ability to compete if we're imposing fees on our industry that are not being imposed on our major competitors. Any kind of documentary evidence you have that you can provide to us would be certainly useful in terms of our discussions with cabinet and with ministers. So I'd appreciate it if you would provide that.

On the last question I have, your working relationship with FPI is obviously pretty good. Ours on the political side is as well. If there's a problem at a plant or whatever, we can usually talk to Art Olson, or somebody, and get the information quickly. I worry if we'll be able to do the same thing with an agency.

I agree entirely with the intent of this bill, that it will get rid of duplication of services, and so on, and eliminate some costs. But by removing it a little bit from government, will you as an industry and we in the political side be able to have the same kind of contact and discussions that we currently have? Do you have any thoughts in that area?

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Mr. Weaver: We place a great value on our present relationship with the food production and inspection branch. As I mentioned before, we work with them very closely every single day. They consult with us, and we cooperate with them.

The Canadian Meat Council is a trade association, but some people call us a lobbyist. I often think that the lobbying and the questions and the referrals go more in the other direction than they do from us to the food production and inspection branch. We are very concerned about keeping that relationship, and that's why we want this agency to answer up through the Department of Agriculture and Agri-Food.

Mr. Easter: Thanks, Mr. Chair, for the moment.

Mr. Anderson: If I could just add to that, it's the same thing in terms of our council; it's a daily kind of contact. I can't imagine a new CEO of the agency or the new executive vice-president not talking to us. We're their biggest clients. It just wouldn't make sense that they wouldn't talk to us or talk to you.

The Chairman: Okay. Just before I turn to Mr. Chrétien, Mr. Easter has raised a good point, and I have to agree with him. We seem to have contradictions at different times on the definition of cost recovery in Canada versus the United States, versus Australia and some other countries, some of our competitors out there. On that issue I think we are going to need to very quickly get everybody around the table, so that we're all singing and talking about the same sheet from the same book.

We don't have time to get into that now, and I'm not saying this personally or to your organization, Mr. Anderson. I've heard you people saying that. I've questioned that, and I'm told no, it isn't, because the United States collects money here and there and all over the place. So what is the definition of cost recovery? We need to get to that, and I hope we can in response to what's come up here. I have a document here in front of me this morning that says something somewhat different, so....

Mr. Weaver: Can I make one comment on to that?

The Chairman: Yes, and then to Mr. Anderson.

Mr. Weaver: In the red meat sector, the user fees in the United States were always described as being derived through animal or livestock grading, and still are. They don't have user fees in the other six service areas we were talking about when we negotiated or consulted with the government about user fees. So they don't have the user fees that we have in those areas. Plus, the red meat sector privatized hog and cattle grading. So those fees are borne totally by the industry now, completely separate from the government. In the United States that's the area that they -

The Chairman: But the consumer pays for them somehow. The consumer.... As Bob said, there's one person who pays in the end.

Mr. Anderson.

Mr. Anderson: I share your frustration, Lyle, because the trick in terms of the government figures - the calculations come out of Ag Canada on this - is that they're not comparing apples to apples. The Canadian industry, at least in poultry, is not structured like the U.S. industry, in that there is, to my knowledge, no Canadian plant that runs on a three-shift basis seven days a week. The U.S. does.

A big part of the U.S. recovery is for overtime. Ag Canada also recovers for overtime, but the recovery is much lower because of the fact that Canadian plants - even the major Canadian plants - tend to run two shifts five days, not three shifts seven days. It's a huge difference.

The recovery that Bob's talking about, in grading.... Grading is voluntary in the U.S., and you pay. Grading is voluntary in Canada, and you pay. The amount of dollars collected for grading in Canada gets dumped into this equation and a it's a huge amount that gets dumped in from the U.S.

They say the bottom line on these figures is that the U.S. recovery and the Canadian recovery is about the same. They're trying to make a comparison that is not valid. Without pursuing the thing here more this morning, we would be delighted to one more time - do you want it to come to you? - present to the government our view of these comparisons.

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The Chairman: Thank you very much.

[Translation]

Mr. Chrétien: Before we talk about cost recovery, I would like to express certain comments and, Mr. Weaver, I would like you to explain how this was arrived at.

Three weeks ago, I took part in two auctions. I was surrounded by agricultural producers. I myself produce beef cattle and I sell calves in the fall.

At the first auction this fall, I noted that farmers were only receiving 40 or 50% of the production cost per head. As a matter of fact, Mr. Easter was saying that this is the lowest price it's been in 60 years. I wouldn't go so far as to say 60 years, but I would say 25 years. In any event, I'd like to point out that retailers have certainly not reduced prices in the same proportion.

At the second auction, I was with about ten farmers looking at animals go by and four heads of cattle went by that were quite visibly affected seriously by disease or old age. They were in very bad shape and were sold at a very low cost, of course.

We all wondered what would be done with these animals. What do you think? You know as I do that there are two to three buyers that buy anything that's for sale. Where will these four heads of sick cattle end up? I wouldn't even feed that meat to my dog. Where does it go? I'll get back to that later.

[English]

Mr. Weaver: The first question was on the veal prices and why they were so low. At the present time there's a surplus of cattle and beef pretty well on the whole continent. The United States is experiencing the same surpluses as we are in Canada. There's a clearing-out period reducing the herds of cattle in the country.

This is being carried out right now. It has been explained that this is the reason for a surplus of beef at the present time, which we expect to continue perhaps for another year. After that, we believe the supply and demand situation will level out better and the prices will be increased. I hope that will answer your question.

We've also frequently discussed this with the Canadian Cattlemen's Association. They can give you a much better explanation of the cattle cycles, as they call them, and what's going on here with regard to the economics of red meat.

As far as the diseased cattle go, all of the federally inspected plants have cattle inspected when they come into the plant. They're all looked at by veterinarians. If there's anything wrong with them, they do a more careful examination. If cattle are diseased or rejected because, for example, they have antibiotic residues, they're simply rejected in a federally inspected plant. They're not permitted to be used in the supply of meat for human consumption. This goes on constantly where you have a federal inspection.

You might ask that question with regard to a provincial inspection or to a plant where there is no inspection at all. This is the reason why we would like to see a level playing field with all the meat supply federally inspected across the country. We think with the agency there is a possibility of achieving a more complete level system of food inspection across the entire country. We would be in favour of seeing that done.

We know what it's like when there's a problem with meat. The question is always brought back to the federal government people in the food production inspection branch. It's always brought back to the members of the federally inspected meat packer plants, when that product may not necessarily have come from their plants at all.

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[Translation]

Mr. Chrétien: I'd like to get back to cost recovery and user fees. Through the interpreter, I heard you say that in some cases the user fee could be in the order of $3 000 or $4 000. I think that the fee should be higher than that for a large slaughter house.

[English]

Mr. Anderson: It's $300,000 or $400,000.

[Translation]

Mr. Chrétien: Well, that's completely different.

Last winter, in the Saint-Jean-sur-le-Richelieu area, I met a veterinarian who is also an inspector in a chicken slaughter house. Although he was not familiar with Bill C-60, he was already aware that Ottawa was preparing major changes to food inspection. He explained how this worked right now, and I would like to check whether I understood the procedure correctly.

The veterinarian is paid by the slaughter house to inspect meat or poultry. I asked him clearly if the slaughter house paid his salary and he answered in the affirmative. I then asked if it ever happened that someone winks at him so that he doesn't look at things too closely, or if he was even told to go and have a longer coffee break than usual.

I explained to him that I was thinking of those four or five cows that had been sold at a low price because they were undoubtedly sick and I wanted to know whether it was possible to do this. If that kind of situation is possible, is it dangerous? It's exactly the same as road construction, when the inspector that must make sure that plans and specifications have been followed leaves the site just when they are spreading low grade asphalt. Is this type of situation possible and if so, doesn't it lead to problem?

[English]

Mr. Anderson: The government inspectors are paid by the government, not by the plant operator. The plant operator receives a charge from the government for inspection services by way of an invoice, but we have nothing to do with the direct payment of salaries to government inspectors.

The question of whether some unscrupulous practices occur while the government inspector is having a coffee or in the washroom.... Quebec is a great example right now, because in effect there are two major groups left in the poultry industry. There are some smaller companies, but the Flamingo and the Dorchester groups, both of which are very large co-ops, have a tremendous amount at stake in terms of the value of their brand names and the value of their customer relationships.

I know the senior executives in both of those companies very well. I can't imagine either of them suggesting that this kind of cost-cutting activity should occur. There's just too much at stake in terms of the damage that could occur from getting caught. It wouldn't make sense.

I don't know if I'm answering your question. My point is that our members and I'm sure the members of the Canadian Meat Council are also more concerned about the quality of the product than what exists in the government standards. There's no advantage in trying to beat those standards.

[Translation]

Mr. Chrétien: Thank you, Mr. Anderson. You've enlightened me a great deal by telling us how these costs are paid. You're the one who mentioned those companies not me. In fact, they're probably the only two companies in existence in Quebec.

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Therefore, with regard to the recovery of these user fees. the inspectors are paid by the federal government and they are part of the public service. We heard the representative earlier. Is every dollar recovered from the slaughter house?

[English]

Mr. Anderson: For inspection?

Mr. Chrétien: Yes.

Mr. Anderson: No, that's a relatively small percentage today - about 15%, I believe, in the case of inspection. It can be as high as 100% in the case of certain specific activities like export certification. So it depends on the activity.

There are various categories in which they have cost recovery, some of which are at 100%, but inspection is about 15% in terms of the cost of total inspection activities. It's the biggest bill, by far, in terms of the numbers of dollars, because that's where all the cost is.

[Translation]

Mr. Chrétien: Fifteen per cent. This morning, I also learned through your testimony that in the United States, they recover zero. That's quite a revelation.

So, it's 15% for export and 100% for cost recovery. Could that 15%, which represents a significant payroll of some $300 000 to $400 000, have a major impact on your red meat or egg exports, in your case, and could that have a major influence on your exports to the United States under free trade as we have it now?

[English]

The Chairman: Go ahead, Mr. Weaver.

Mr. Weaver: I should remember all of the total dollar figures that are gained through each of these different services. Exports are charged at the rate of $12 per certificate. On April 1, 1997, that's one of the four fees that are supposed to increase in the first year of the inspection agency. It's going up to $15, and the cost recovery figure is in the area of 15% to 20%. I don't remember the exact percentage.

It's a very significant amount of dollars, because there are thousands of them every year. As I mentioned before, the red meat sector exports in the area of $2.25 billion of red meat. That figure in 1996 has increased dramatically for both pork and beef.

In this particular area of user fees we object the most in terms of the principle. We don't think that taxing exports is a very clever thing for the country to do, especially at a time when the whole agricultural community is joining together to try to increase the value of exports to $20 billion in the year 2000. The red meat sector plays a very important role for those exports.

Our export level is second, as far as the agri-food commodities go, to grains and oilseeds. If you put grains and oilseeds together, they are the biggest. We think that taxing an export of an agri-food commodity like this doesn't make any sense at all, to put it mildly.

The Chairman: You can have one brief question, Mr. Chrétien.

[Translation]

Mr. Chrétien: In your brief, which is very well presented, for which I thank you and congratulate you, you stated at point 2 which refers to support provided to the agency, that there should not be an increase in user fees.

At a time when the Finance minister wants to recover more and more costs by using the principle of user pay, you say here that there should not be an increase. And on the next page, under the heading ``Concerns with Bill C-60 document'', you state:

There should be no more user fees after the first year of operation of the agency.

Are you serious when you suggest that there should not be any more user fees? First you say there should be no increase and then you say that there shouldn't be any fees whatsoever.

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Is all this serious or is it just wishful thinking?

[English]

Mr. Weaver: I know that may sound somewhat confusing, but it has to do with the different commitments the government has made to us about user fees.

We were told that in the first year of the operation of the agency there would be no new user fees, but as I mentioned, we have four categories that are being increased on April 1, 1997, which is exactly the same date the agency is supposed to come into operation. So we'd like the committee to check and find out what's going on there. How come we are being told there will be no new user fees in the first year of operation when we have $2.4 million of them coming in at that particular time?

In the second year of the operation of the agency, that's the year -

[Translation]

Mr. Chrétien: You're referring to $2.4 billion in user fees?

Mr. Weaver: Million, not billion.

Mr. Chrétien: I have one last question, Mr. Chairman.

[English]

The Chairman: No, Mr. Chrétien, we have to go on.

Mr. Hoeppner.

Mr. Hoeppner: Thank you, Mr. Chairman.

I appreciate you gentlemen coming before us today. It was a good presentation.

I'll start with Mr. Weaver and the issue of HACCP. You're having to implement that process now. Who pays for it? Do you pick up that cost, or is that done by the food inspection service?

Mr. Weaver: At the moment the private industries are paying the total cost. There was a commitment of the government to supply $11 million to finance the creation and installation of HACCP programs, but there appears to be a delay in getting out the announcement about having that approved and who it will go to. In the meantime we have no time left to wait.

Mr. Hoeppner: That's very important, isn't it, because you're are a net exporter of red meats by a whopping percentage?

Mr. Weaver: Yes.

Mr. Hoeppner: The other thing I wanted to ask you, Mr. Weaver, is how did we ever get into the position of having nine acts for the food inspection service industry?

Mr. Weaver: Well, you've been around as long as I have.

Mr. Hoeppner: I've only been here three years, so I'm new at this. I was astounded when I saw there are nine acts you have to deal with. How can you do it?

Mr. Weaver: It's complicated and difficult in every area. We have the same concern you do, and we would support straightening that out. That's why we made the recommendation here that it should be rationalized.

Mr. Hoeppner: There must be tremendous duplication. Is that right? Or isn't there duplication?

Mr. Weaver: There is, and it makes it more difficult to deal with a particular issue when you have to go from act to act to find out what the rules are and who you have to consult.

Mr. Hoeppner: I would just like to give you a little bit of advice here. I see you've paid $2.4 million already in red meat inspection services this year, or is that the coming year?

Mr. Weaver: That's the amount of the additional user fees that are coming in on April 1, 1997. It's in addition to approximately another $9 million.

Mr. Hoeppner: I just have a little suggestion for you. If your presentation hadn't had a red book cover, maybe it would have helped.

Some hon. members: Oh, oh!

Mr. Weaver: I didn't even think of that.

Mr. Hoeppner: I just thought I'd throw that in for a bit of humour.

Mr. Anderson, I really appreciated your comment on the zero inspection fees in the U.S. As well as Mr. Easter, I'd like to have that confirmed. For that reason, it's tremendously important that we do harmonize our service charges, because we do compete with each other.

You say you would like to have industry represented on the advisory board. What do you mean by ``industry''?

Mr. Anderson: Not solely industry, but some industry representatives. I'm sure the unions we heard from this morning would have an interest in being there and the consumers would have an interest in being there, but there needs to be representation from the primary users of the inspection services. Those primary users are red meat, poultry meat and fisheries.

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Art Olson told me one time that 175 people have their hands up for 12 seats on that board, but of those 175 people, how many represent organizations that are truly affected by what this new agency is going to do? That's my point.

Mr. Hoeppner: Yes, that's why I was going to stress that somewhat more. With the direct competition of U.S. red meats and some poultry - poultry isn't quite as competitive, I don't think, as red meats - usually if you have to compete, you have to cut your costs somewhere, and if you can't do it on the inspection services, it probably comes off the product from the primary producer.

Would you agree that primary producers should sit on this advisory board?

Mr. Anderson: Yes, in the context of live price, I suppose. In terms of the actual impact of inspection services, they aren't affected in the same way that processors, unions and so on are, but I don't have any objection to them being there.

Mr. Hoeppner: Doesn't it come out of the producers' pockets, though, when you have to compete?

Mr. Anderson: Well, some of our members say a hell of a lot of it comes out of their pockets. It comes out of somebody's pocket; that's for sure.

Mr. Hoeppner: I always say this in the grain trade. No matter whether an elevator is built or a grain car is bought, in the end the farmer pays for it, because you don't create money to put up those services. It comes from the products you handle, right?

Mr. Anderson: It's not that simple, but yes.

Mr. Weaver: We work with the primary producers, especially livestock, constantly. They're our friends, and we regard them as an extremely important chain in this agrifood process. If we let down, we let them down. If they let down, they let us down. The inspection system we see as one of those very important links here.

Unfortunately there's a very large number of agricultural commodity sectors, far more than 12. You could fill a whole advisory committee with primary producers if you wanted to, but we think the people who are actually involved in the inspection should be represented strongly here.

Mr. Hoeppner: I don't disagree.

I always have an argument with Mr. Kancs, the president of the Grain Handlers' Union in Vancouver, and I ask him this question: How long do you need your union when you don't have farmers any more? That goes back to the basic agriculture industry. When you don't have the producers, once you start importing the raw product, you won't be competing very long, will you?

Mr. Weaver: No.

Mr. Hoeppner: That's why I wanted to bring this out. I feel very strongly that some of the producer organizations should be represented on this advisory board when you have other industries represented.

The Chairman: Thank you, Mr. Hoeppner.

Mr. Culbert says he has a very brief question. Go ahead, Harold.

Mr. Culbert (Carleton - Charlotte): Thank you, Chairman.

Good morning, gentlemen. Indeed I have a couple of quick questions.

You mentioned the importance of the value of exports and our goal to reach $20 billion by the turn of the century, which is a challenge for all of us, but we're going to meet it. How important are good inspections and the criteria for those in us meeting those export quotas we want to meet, reaching $20 billion, and I might say, beyond the year 2000, substantially more than that?

Secondly, with the new agency, it being under one roof or one umbrella, whether it be Agriculture, Health or Fisheries, obviously we have a number of concerns in areas such as red meat. We want to be assured of the expertise. I can tell you, from sitting on the fisheries committee, we want to be assured that we have expertise in the fisheries.

Do you not see an opportunity, over a period of time, where cross-training can be available and indeed those inspectors can be valuable components of a number of jurisdictions rather than one specific area?

Finally, I appreciate your concern on the cost recovery system, but I have one question. If cost recovery were not included in there, who would pay? Am I to assume the taxpayer would pay 100% in order to supplement, if there's not a cost-recovery system?

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Mr. Weaver: On the question of the inspection system and the ability to export, yes, I did explain that exports are extremely important to our sector, and they are increasing at quite a rapid rate. It presents a wonderful opportunity for the country in general, including livestock producers as well as the red meat business.

New markets have developed, especially in the Pacific Rim, where some of the developing countries are now simply becoming richer. When they do that, they switch their food supply over to more meat and more protein when they can afford it. There are tremendous opportunities there. We talked about this several years ago with the standing committee, and now it's actually developing that way.

The United States has recognized this, and for the first time, I think, in the history of their country, they're actually having positive trade balances for beef and pork. But one thing they're doing is taking live animals from Canada - hogs and cattle - converting them into beef and pork and exporting them, as well as shipping the meat back into Canada, which is something we don't particularly like to see.

The inspection system is extremely important. The federal people are the ones who go around the world and meet with their counterparts in other inspection agencies for these other countries. They help us to set the standards and see that things are set up here to qualify to be able to ship to those other countries.

In addition, we have a great deal of help from international trade through the embassies and trade depots in these various countries, and because of that, the inspection system cannot be permitted to fall apart or degrade. It's essential.

As to the agency expertise and the opportunity to create some overlap of training, I can't comment very strongly on that. Perhaps there will be in future years, and perhaps that will lead to some efficiencies as well. What we'll have to do is get over the hurdle of getting the agency created and getting people trained and deployed with clear direction so they know what they're supposed to do. Possibly after a number of years, in the early stages of setting up the agency, we can address this matter of further training and capacity to inspect numerous agricultural commodities as well as fish.

On cost recovery, you asked if the industry doesn't pay, who pays? This system was just created, starting April 1, 1995. There's no question it affects the competitiveness of the industry. This particular red meat industry, as I told you, has $9.5 billion in total sales. It operates on something like a 1% margin level, which brings you down from $9.5 billion to $95 million. User fees, at the rate of something like $9 million, going up to $11 million or $12 million, represent between 10% and 15% of the sales margin earnings of the whole industry.

This is like having a tax of between 10% and 15% put on your industry, but it's worse than a tax, because when you're taxed, depending on whether your business does well or poorly, the tax level fluctuates. It's the same with your income tax. As you earn more money, you're taxed higher. As you earn less, you're taxed less. But when you have user fees, they don't go up and down like that, except with the degree of inspection that's required. They're more or less rock-hard, almost like a fixed cost that sits there, and you pay it even when you're going bankrupt. This is a very special feature of user fees that we don't like.

Mr. Anderson.

Mr. Anderson: I'd just like to add a couple things.

In terms of the importance of inspection systems that have international credibility and your question about exports, you're perhaps aware that earlier this year Russia cut off the United States on poultry exports from the United States to Russia because of inspection problems. Canada was not cut off. Canada enjoys very high credibility internationally, in part because of our inspection systems. So yes, they're extremely important.

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Under cross-training, one of the things I think will happen is as the industry evolves - and not just the red meat and poultry industries, but fisheries, etc. - to more HACCP-based, science-based inspection systems, the kind of activity performed by inspectors going into food establishments will change and become more of an audit type of function. It will become more and more feasible for people to inspect in a different number of commodities. So I would be optimistic that that kind of cross-training and elevation of training can occur and there can be rationalization.

I couldn't agree with Bob more that the issue of who pays under cost recovery is a competitive issue. Again, if we were an island, we could do whatever we wanted, but we're not an island.

Mr. Culbert: As a final comment, I just wanted to say I think the cover on your presentation is excellent and proper.

Some hon. members: Oh, oh!

The Chairman: Thank you very much, gentlemen.

I want to thank the committee members and everyone for staying. We certainly have gone over the usual time. Thank goodness the room was not booked following us, at 11 o'clock.

I thank everyone for their participation.

Mr. Anderson, you listed a number of points at the end. I hope in the very near future you can get those to the clerk.

Mr. Weaver, you had some specific points, and they're in your presentation, but ifMr. Anderson could give us a summation of those points, we'd appreciate it so we can follow through.

Thank you very much. The meeting is adjourned.

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