More Investment Needed in Value-Added Ag: CAPI

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More Investment Needed in Value-Added Ag: CAPI

new report from the Canadian Agri-Food Policy Institute says Canada needs more investment in the value-added sector if it wants to achieve export growth targets, as well as be resilient during trade disruptions.

The report, released March 3, said even though the value-added sector has garnered a trade surplus, it isn’t slated to reach its export share target of 5.2 percent by 2027.

CAPI said fairer market access, better tax incentives and investment in technology and infrastructure would help the country achieve the target.

Through analysis, CAPI determined Canadian exports would have to grow at a compound annual rate of 5.9 percent annually to meet the target, with the assumption there would be no growth in world exports.

But if world exports grew by 2.9 percent (as they did between 2008 and 2018), then Canada would have to grow its share by 9.1 percent to meet the target, it said.

“We’re making it pretty clear it’s a tremendous task, but because it’s a huge task, that doesn’t mean we can ignore it,” said Ted Bilyea, who peer-reviewed the report and is a former chair with CAPI.

CAPI’s recommendations to government include speeding up regulatory approvals, eliminating red tape and encouraging innovation.

It wants government to review the current tax system, simplifying and modernizing it to put Canada at a competitive advantage.

As well, it should address and prevent current labour shortages in the agriculture industry by making temporary foreign worker legislation more effective and by investing in skills development for Canadian workers.

Investments in transportation, infrastructure and telecommunications are also needed, it said, adding trade representatives must ensure international trade is governed by fair and science-based rules.

Bilyea said while these changes are necessary, the country will also have to change its thought process about value-added agriculture.

It’ll require heavy lifting, he said, as well as prioritization.

For industry, CAPI said it wants it to invest in the workforce, innovation and new technologies. It should also scale up to compete with larger competitors.

This includes investments to fill labour shortages, more research and development funding, collaboration with supply chain partners, and the adoption of strategies to help mitigate against unforeseen market events.

Strong support may be needed now more than ever, CAPI suggested, because global competition is mounting and unforeseen events, like the novel coronavirus (COVID-19), are disrupting markets.

Bilyea said the virus shows that food security matters. Even though Canada exports lots of agricultural commodities, how does it fare in terms of turning those goods into ready-to-eat products domestically?

“You can have a genuine food security problem even if you are the largest commodity exporter in the world,” he said. “You have to process the stuff.”

Bilyea said he believes the virus will only cause short-term disruptions.

Canada needs to play its cards right, he said, in order to take advantage of the changing trade landscape.

Trade deficits can easily happen in the value-added sector, he added, pointing to CAPI figures that show it had a $1.1 billion deficit in 2015, but bounced to a surplus of $2.7 billion in 2018.

Deficits are more apparent in the further-processed food products category, where the trade deficit was $8.1 billion in 2015 and $7.2 billion in 2018. Much improvement can be had for further processed goods, CAPI noted.

“It’s better than it was; we’ve improved it, but it wouldn’t take much to drop the whole thing,” Bilyea said. “We have to be very conscious. We can’t do things in Canada that in any way endanger that, and we need to be cautious with the trade agreements we have.”

The federal government has been delving into the value-added space, committing $950 million for the Innovation Superclusters Program.

Protein Industries Canada, which hopes to expand the potential of plant-based proteins in common agricultural crops, will receive a portion of those funds.

Bilyea said these efforts are headed in the right direction, noting that a separate cluster that deals with technology will complement value-added agriculture.

CAPI’s report said the value-added industry is a bit slower at adopting newer technologies. Adoption will need to increase for it to be competitive.

“We need to come out with new ways of processing, and ways processing can be done with less energy. It would be a big piece of the puzzle,” Bilyea said. “Using fewer ingredients, providing that cleaner panel on the label, would also help. Consumers are very aware; they read the labels.”