Question Period Note: Compensation for Processors of Supply-Managed Products

How will the Government of Canada compensate processors of dairy, poultry, and egg products for impacts of recent trade agreements?

FIRST RESPONSE:

1. Our message is clear – the Government of Canada strongly supports supply management and has delivered on its commitment to provide full and fair compensation to processors of supply-managed commodities for the impacts of CETA and the CPTPP.

2. Through Budget 2021, the Government announced that
   $292.5 million would be provided over seven years to dairy, poultry, and egg processors to help them adapt to CETA and the CPTPP through a processor investment fund, which will support private investment in processing plants.

3. This funding is in addition to the $100 million that the Government provided through the Dairy Processing Investment Fund. It also builds on the
   $2.7 billion that has been made available since 2016 to compensate eligible dairy, poultry, and egg farmers as a result of CETA and the CPTPP.

RESPONSIVE ON TIMING OF CANADA-UNITED STATES-MEXICO AGREEMENT COMPENSATION

1. The Government of Canada is committed to full and fair compensation with respect to the Canada-United States-Mexico Agreement, and it will work with representatives of the supply-managed sectors in determining that compensation.

RESPONSIVE ON TIMING OF PROGRAM LAUNCH

1. The Processor Investment Fund is expected to start accepting applications later this fiscal year.

RESPONSIVE ON FUNDING AVAILABLE TO SMEs

1. As noted in Budget 2021, the Processor Investment Fund will aim to provide more advantageous terms to small and medium processors relative to larger, more dominant firms.

BACKGROUND:

The Comprehensive Economic and Trade Agreement (CETA) came into force on September 21, 2017, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) came into force on December 30, 2018, and the Canada-United States-Mexico Agreement (CUSMA) entered into force on July 1, 2020. The trade agreements offer significant opportunities for the Canadian agriculture and
agri-food sector, while creating some challenges due to new market access for supply-managed dairy products.

As the main buyers of domestic supply-managed commodities (e.g. raw milk, poultry, and eggs), processors of supply-managed commodities are directly impacted by the market access commitments made through these new trade agreements. This is because an increase in the volume of imported dairy, poultry, and egg products under these agreements is expected to replace domestic production, which in turn decreases processors’ production levels and impacts their overall profitability. Some processors are able to partially offset this impact through Tariff Rate Quota (TRQ) allocation – which essentially allows them to use imported dairy, poultry, and egg products, which they can generally obtain at a price that is lower than the domestic price. However, not all processors have access to TRQs.

The Dairy Processing Investment Fund (DPIF), which was launched in August 2017, was established to provide funding to dairy processors for investments that will improve productivity and competitiveness and help them prepare to market changes resulting from CETA. As of April 2021, more than 105 projects were approved for funding under the DPIF.

Following the signing of CUSMA in late 2018, the Government has created working groups with representatives from supply-managed industries. The Dairy Mitigation Working Group and the Poultry and Egg Working Group have concluded, and their recommendations were shared with the Minister of Agriculture and Agri-Food.
Through the 2019 and 2020 Speech from the Throne, the Government reiterated its commitment to provide full and fair compensation to supply-managed sectors, including dairy, poultry, and egg processors, for the impacts of recent trade agreements.

Current Status:

Through Budget 2021, the Government announced $292.5 million over seven years, starting in 2021-22, for a processor investment fund to support private investment in processing plants. According to the Budget’s GBA+ assessment, the Processor Investment Fund will provide advantageous terms to small and medium enterprises relative to large firms to mitigate, but not eliminate, the risk of primarily supporting already dominant firms.

The Processor Investment Fund is expected to begin accepting applications during the course of the current fiscal year with payments expected to start in the next fiscal year (i.e. 2022-23).

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