Thank you very much, honourable members of the committee, and guests.
The Canadian Sugar lnstitute represents Canadian refined sugar producers, with three cane sugar refineries in Vancouver, Toronto, and Montreal, and a sugar beet processing plant in Taber, Alberta. The industry is a capital-intensive, value-added industry, and is historically based on the refining of raw cane sugar at major ports.
Sugar beet production and processing have proved to be competitive inland and remain so in the prairie market. Today, about 90% of Canada's sugar is from refined cane sugar and 10% is from our domestic sugar beet production and processing.
The industry has rationalized as a result of competitive pressures, given a very uneven international trade environment, but has aIso invested to improve the efficiency and competitiveness of existing operations. The industry has added further value through investments in two further processing facilities in Ontario and those plants produce products such as iced tea mixes, drink mixes, cocoa mixes, gelatine mixes, and so on. Most of those products are exported to the U.S. under quotas and face restrictions there. The industry is aIso highly dependent on further processing. So the food processing customer base in Canada is essential, given that 80% of Canada's sugar is sold to that sector.
The CSI supports government initiatives that will result in commercially meaningful export opportunities and that address the trade distortions of Canada's trading partners. The Canadian refined sugar market is not growing, so the only mechanism to enhance investment and jobs is through exports. The CETA represents the only significant agreement since the NAFTA that will create new opportunities to strengthen Canada's sugar and further processing food sectors.
This is very important for Canada, because major sugar users, those food processors that produce products such as confectionery and bakery products, preserved fruits, and so on, account for $18 billion in revenues, $5 billion in exports, and 63,000 Canadian jobs. Canada's sugar and sugar-using food sectors are mutually dependent. Our industry depends on food customers for the majority of our sales and in turn the food processing sector depends on a local supply of high quality, competitively priced sugar. Free trade agreements such as the CETA are of particular value because the target is a developed, high-value market and the FTA benefits the full value chain. The outcome of the CETA will benefit Canadian beet and cane sugar, sugar-containing products, and further processed food products.
Canada's sugar and food processing sectors are highly dependent on the U.S. market today. Unfortunately, the NAFTA did not liberalize sugar trade between Canada and the U.S., so we still face restrictions for sugar and sugar-containing products, the U.S. quotas. The growth in trade with the United States was substantive under the NAFTA, particularly for processed food products; they're our customers. Unfortunately, with the improvement in the Canadian dollar, and other factors such as higher input costs and energy costs, we've seen a levelling out in exports to the U.S. market, as well as an increase in imports from the U.S.
The CETA is a critical new opportunity to diversify our markets and strengthen that strong linkage between Canada's sugar and food processing sectors.
While the Canadian refined sugar industry is exposed to world market conditions—we don't have domestic subsidies and high tariffs—markets outside of Canada remain highly distorted due to government intervention. Our largest trading partners, the U.S., Mexico, and the EU, continue to maintain sugar programs that generate surplus production, given their high domestic support and import protection. For example, notwithstanding the attempts to reform the European sugar program, its surpluses have returned to historic levels. These surpluses continue to pose a threat to open markets such as ours and we recognize that a multilateral solution will be necessary to address this problem.
The CETA doesn't address this trade imbalance, but it does provide new access into a market that has historically provided zero access for our industry, in particular, sugar and sugar-containing products, and has limited access for food processors that we supply. For sugar itself, the EU tariff under the CETA will be phased out for originating Canadian beet sugar in Alberta. Over the long run, this will provide an important benefit to Canadian sugar beet producers and beet processing in that province.
For our Canadian refined cane sugar, the bulk of what the industry produces, it will not benefit directly from the agreement, given the European Union restrictive rules of origin. However, negotiators were successful in achieving new quotas for sugar-containing products made with Canadian refined sugar.
There will be a new 30,000-tonne quota for these sugar-containing products that are produced in the facilities in Ontario, and that will grow to about 52,000 tonnes over 15 years.
There is also new access to the EU for sugar and chocolate confectionery and other processed foods that use sugar. That will also benefit our industry, because we will potentially sell more sugar to those customers who will export to the EU. Again because of restrictive rules of origin, the CETA includes a new 10,000-tonne quota for chocolate and sugar confectionery and a 35,000-tonne quota for other processed foods such as baked foods, cereals, mixes and doughs, etc. We estimate that after full implementation, new access for Canadian sugar, sugar-containing products, and the sugar in processed foods will result in an additional $100 million in sales. These new opportunities are essential to restoring capacity utilization in a very capital-intensive sugar industry.
Since 2004, our industry has experienced a 150,000-tonne or approximately 12% decline in production reflecting the decline in exports to the U.S. and increase in imports from the U.S. of processed products containing sugar. New exports to Europe will benefit our industry and help restore some of that capacity utilization by increasing demand for sugar as an input. Overall, capacity utilization is essential to lowering production costs and improving overall competitiveness. In the long run, that will help maintain a prosperous industry and hopefully attract more investment in food processing in Canada.
The CSI congratulates the government on its success in negotiating the CETA. The CETA does not eliminate the EU trade-distorting sugar program and the negative impact that can have on our market; however, the continued threat of that program can be addressed only in the multilateral context. Nevertheless, the CETA is an important offset to that trade imbalance, and CSI welcomes the government's commitment to the industry through agreements such as this. The government must, however, also remain vigilant to ensure that those negotiated benefits are secured and fully realized through administrative mechanisms and any market development activities that can support finding those customers in Europe. It's also essential that those benefits not be undermined through other trade negotiations such as the U.S.-EU negotiations that are under way. We will continue to work closely with Canadian officials to ensure that our industry fully benefits from the opportunities that have been created.
We also believe that this agreement sets the stage for Canada's ambition in other trade negotiations such as the Trans-Pacific Partnership, which is the most important opportunity on our horizon, given its regional nature and comprehensive goals. By the common set of rules among 12 countries, the TPP has the potential to enable the cumulation of inputs within the region, including refined cane and beet sugar, and to promote supply chain growth through to final food processing in Canada.
The Canadian Sugar Institute and its members applaud the ongoing efforts of the government to widen our commercial relationships and to build on the strength of our Canada-U.S. relationship, to widen that and diversify markets.
We see the CETA as a very positive development in a highly restricted global sugar market. We are also heartened to hear about some of the renewed commitment to the World Trade Organization and potential future negotiations, which over the long term provide the best prospects for multilateral reform of global sugar policies.
Thank you.
