Agriculture Committee on Nov. 28th, 2013

[The Chair, Conservative, Bev Shipley]

I want to welcome everyone to the ninth meeting of the Standing Committee on Agriculture and Agri-Food. This is pursuant to Standing Order 108(2), a study of the Canada-European Union comprehensive economic and trade agreement, which everyone recognizes as CETA, and the effects of it on the Canadian agriculture sector.

Today we have some great witnesses in front of us on the first round. In the first hour we have the Canola Council of Canada, Jim Everson, vice-president, government relations; and the Canadian Canola Growers Association, Rick White, general manager.

We also have with us the Canadian Fertilizer Institute, Robert Godfrey, director, policy and government relations, and Clyde Graham, vice-president, strategy and alliance.

Witnesses, we welcome you to our committee. We'll start so that we keep on track.

We will open up with the Canola Council of Canada and the Canadian Canola Growers. I understand there will be a joint presentation. You have 10 minutes, please.

[Jim Everson, Vice-President, Government Relations, Canola Council of Canada]

Thank you very much for the welcome, Mr. Chair.

It's a pleasure to be here and share with you how the canola industry will benefit from the comprehensive economic and trade agreement with the European Union. It represents an opportunity to improve our market access and improve predictability around the regulation of biotechnology.

First, I'd like to explain a little bit about the Canola Council of Canada. The council is a value chain organization representing the entire canola sector in Canada: the 43,000 canola growers, the seed developers, the crushers who process seed into oil and meal for export, and the exporters who export canola that is processed at the destination. The Canola Council is the vehicle through which the industry comes together to set objectives and implement plans for the entire sector.

Here is little bit about the basic numbers of our industry. Canola returns the most income to farmers of any agricultural product in Canada. It contributes $19.3 billion to the Canadian economy annually and supports 249,000 jobs. Our industry has doubled production in the last 10 years. This year a record 16 million tonnes was grown by Canadian farmers. This expansion has brought with it a significant investment in rural communities.

For example, there's been more than $1.6 billion invested in crushing and processing capacity in the last six years, reflecting the confidence in the opportunity provided by the sector. Importantly, this income and economic impact is generated mostly as a result of international trade. Canola exported as seed oil and meal brought in approximately $9.6 billion from exports in 2012. To put this in context, Canada's overall agrifood and seafood exports were at $48 billion in 2012, so canola represents 20% of our export agriculture value. Since we export more than 85% of what we produce, we are very reliant on predictable access to markets, which is why agreements like CETA and others are important to the industry.

Our industry succeeds because we are competitive internationally. We've done best in markets free of tariff and non-tariff trade barriers. Government, through diplomacy and trade negotiations, has played, and continued to play, a big role in growing and maintaining our market access. Efforts by the Minister of International Trade, Mr. Fast, and the Minister of Agriculture are critical for the Canadian canola industry to continue prospering from international demand.

We can talk a little bit about what CETA means for canola. In a moment you'll hear Rick, who represents the canola growers, talk about the agreement from a producer point of view, but from an industry point of view, first, eliminating tariffs on canola oil will help us increase exports by up to $90 million. Eliminating tariffs on canola oil means that our canola crushers and oil exporters will have privileged access to Europe. This increased access is occurring at an opportune time, as we've made this significant investment in crushing capacity recently, mostly in western Canada.

We're already serving the European market, and tariff-free access on oil will allow us to ship more value-added product. Our canola oil is a valuable feedstock for EU biodiesel production, reducing greenhouse gas emissions by as much as 90% compared with conventional diesel. Now with a tariff-free environment, our industry is well positioned to serve a larger portion of the market.

Second, the CETA includes important provisions on biotechnology. The EU's regulatory system for biotechnology creates some risk for exporters and uncertainty for seed developers looking to introduce new seed traits. Biotechnology is a key to making Canadian canola growers competitive in world markets, but the EU's regulatory environment creates real barriers to trade and innovation. The CETA includes provisions for cooperation in the area of biotechnology. This is a significant accomplishment for our trade negotiators.

The CETA will enhance the existing forum for discussing issues around biotechnology and their impact on trade. This will help improve cooperation among regulators in the areas of science-based approval processes, low-level presence policies, and minimizing trade impacts of regulatory practices.

This is a long-term opportunity. Its success will really depend on how well the two governments work to arrive at solutions. We are hopeful that working groups' discussions on low-level presence policies will reduce the potential for low levels of approved biotechnology traits to cause trade disruption. This has the potential to significantly reduce risk for exporters and thereby increase returns to producers from this market.

Last, alongside the CETA, the government was able to secure a commitment for the efficient processing of canola trait applications. Canada's canola sector adheres to a market access policy to respect the regulatory requirements of our export markets. New genetically modified seed traits are not introduced to Canadian producers until they are approved in major export markets, including the EU. A commitment by the EU to process applications in a timely manner is important to facilitating innovation and bringing predictability to seed developers, as well as earlier inclusion of the technology for farmers.

In conclusion, I thank you for the opportunity to explain the benefits of the CETA. The canola industry supports the Government of Canada's sustained commitment to improve market access through ongoing negotiations. This includes seeking a multilateral solution through the WTO and working on the free trade agreements with Korea, Japan, the Trans-Pacific Partnership, increased engagement with China, and the implementation of a Canada-European trade agreement. These efforts have major benefits for the 249,000 people supported by the canola industry from coast to coast.

Thank you.

[The Chair, Conservative, Bev Shipley]

Mr. White.

[Rick White, General Manager, Canadian Canola Growers Association]

Thank you, Mr. Chairman, and good afternoon to members of the committee. Thank you for inviting me here to speak about the comprehensive economic and trade agreement with the EU.

The Canadian Canola Growers Association represents 43,000 canola growers here in Canada and is governed by a board of farmer directors representing the provinces from Ontario west to B.C.

One statistic I'd like to highlight is that canola is the highest-value agriculture commodity, contributing $8.2 billion to farm cash receipts last year. That's a pretty big number. Canola farmers rely on international markets. We export more than 85% of seed and canola products on an annual basis. Therefore, much of canola's current as well as future success is directly related to our ability to access and compete in global markets.

CETA is a significant opportunity for canola growers. Improved access to a market this large is impressive. The EU economy is worth $17 trillion. It represents one-sixth of global trade in goods and has a population of 500 million consumers with the financial means to buy our products. For Canadian canola, this agreement provides future market opportunities and a commitment to work through some of the market access barriers facing canola in the European market today.

Once this agreement is ratified, it will result in the immediate elimination of tariffs on canola oil, which could increase the exports of our oil to Europe by up to $90 million per year, year after year. That's about double what it is right now. This access will create new demand for farmers' canola seed, and support Canada's expanding crush capacity. Longer term, CETA will provide a more formal avenue to discuss long-standing issues farmers face with EU non-tariff trade barriers, particularly the regulations regarding genetically modified products, like canola.

The importance of establishing transparent and science-based regulatory policy cannot be overstated, and CETA represents an opportunity to advance access for biotech products in a meaningful way. In order to feed the world's growing population and at the same time ensure that Canadian canola growers remain profitable and contribute to the Canadian economy, farmers must continue to adopt new and innovative technologies. This includes new biotech traits that allow for increased production and various agronomic benefits.

In 2012, Canada had the fourth-largest area planted in biotech crops worldwide, with 97.5% of Canadian-grown canola planted with biotech varieties. Canola farmers quickly adopted the new technology, as it provides real economic benefits to their farms. Biotech canola has allowed for higher yields, more efficient weed control, and less reliance on crop inputs, while providing more opportunity for farmers to adopt no-till or minimum-till practices.

With respect to approval of new canola traits, we are especially encouraged that Canada was able to use the CETA negotiations to get an agreement with the EU on a parallel letter committing the EU to ensuring efficient processing of canola applications and their expeditious movement through the EU approval process. Speeding up this process will allow growers to take advantage of innovations, which will make us more competitive.

In order to fully capitalize on this agreement and export competitively, there will also need to be improvement in the Canadian regulatory process for exports of canola. We are pleased with the recent changes to the Canadian Grain Commission, but more is needed there if we are to remain competitive and capture the full benefit of freer trade.

Thank you for the opportunity to speak to this committee today. I look forward to taking your questions.

[The Chair, Conservative, Bev Shipley]

Thank you very much. Right on time; I appreciate that.

We'll now move to the Canadian Fertilizer Institute. I'm not sure if Mr. Godfrey or Mr. Graham is going to take it.

Mr. Godfrey, would you start, please.

[Robert Godfrey, Director, Policy and Government Relations, Canadian Fertilizer Institute]

Thank you, Mr. Chairman and members of the committee.

My name is Robert Godfrey and I am the director of policy and government relations for the Canadian Fertilizer Institute. With me today is Clyde Graham, CFI's vice-president of strategies and alliances.

I want to the thank the committee for inviting us here to speak about the Canada-European Union comprehensive economic and trade agreement and what it does for both our industry and our farming customers here in Canada.

CFI represents the basic manufacturers of nitrogen, phosphate, potash, and sulphur fertilizers, as well as the major wholesale and retail distributors in Canada. Our members produce over 25 million tonnes of fertilizer annually, over 75% of which is exported to over 60 countries around the world. Saskatchewan alone accounts for more than 30% of world potash production and 45% of the world potash trade. A recent report conducted by Natural Resources Canada cited potash as the number one valued mineral in Canada.

Canada is also home to a considerable amount of nitrogen production. The Canadian fertilizer industry is widely viewed as a world leader, and it depends upon the global markets for its success. The European Union represents one of the largest consumer markets in the world with 28 developed states and 500 million people. According to recent testimony to this committee by different farm groups, we understand this agreement could result in an additional $1.5 billion in new Canadian agrifood exports to the European Union.

CFI takes the view that what is good for farmers is good for us. If our farming customers are growing more crops and exporting more of their product at higher prices, they will need more inputs, including fertilizer. Canadian farm gate sales of fertilizer products last year reached a total of almost $3.5 billion. CETA will lead to growth in the farming community, and these benefits undoubtedly will be extended to the fertilizer industry.

As for fertilizer exports, today the Canadian fertilizer industry does not export a significant amount of product to Europe. We are talking about less than 1% of all fertilizer products exported annually. However, CETA opens the door to potential. History shows that free trade agreements are often the catalyst to business deals that were once seen as unfeasible.

CETA presented few issues for us. However, we did speak with officials in the Department of International Trade last year with regard to rules of origin. The officials worked with us and went to lengths to ensure that CETA works for us today and will work for us in the future. We were pleased that they reached out to us, and we hope this spirit of cooperation continues in future negotiations.

CETA is a rules-based agreement. CFI and our members plan to participate in the development of standards for fertilizers and soil conditioners on a technical committee inside the International Organization for Standardization. This technical committee will give Canada a platform to influence global standards on fertilizer products. These standards complement agreements such as CETA.

CFI and our members are strong supporters of the Canadian government's global commerce strategy. While Europe is an important market for our farming customers, our industry's focus is on Asia-Pacific and the Americas where potential growth for fertilizer sales is the highest. We are watching closely the discussions Canada is having with India. We were pleased to see the government removing sanctions in Myanmar, and we are excited about the opportunity this market presents. We have been monitoring the negotiations with Korea, negotiations which we hope move forward soon. We are following the Trans-Pacific Partnership negotiations as well. Markets such as Vietnam and Malaysia, to name a couple, present enormous growth potential for our industry. CFI is a member of the agriculture trade negotiations consultation group and receives regular updates from the government on these negotiations. We are excited for the potential they provide to our industry.

We encourage the government to continue its aggressive pursuit of free trade and encourage this committee to support this initiative. Canada is an exporting nation in which economic growth is tied to our competiveness and our ability to get quality goods to global markets. CETA presents opportunity and a new way of doing business. Our industry is excited for the future. We look forward to continuing with the government and this committee in any way we can to further the free trade agenda.

I want to thank the members of this committee for hearing our remarks today. We'll be pleased to take any questions.

[The Chair, Conservative, Bev Shipley]

Thank you, Mr. Godfrey.

Mr. Graham.

[Clyde Graham, Vice-President, Strategy and Alliances, Canadian Fertilizer Institute]

That's our presentation. We wanted to leave more time for questions.

[The Chair, Conservative, Bev Shipley]

You have, and we appreciate that very much.

We'll have the five-minute round starting with Mr. Allen, please.

[Malcolm Allen, NDP, Welland, ON]

Thank you, Chair.

Thank you, folks, for coming.

Mr. Everson, I have a couple of questions I might actually know the answer to, but I'd like to hear from you to see if my mind is thinking around the same thing.

In the piece you laid out in front of us today, you talk about $9.6 billion in exports of canola. It's a very large amount, obviously, and you've articulated that. Why is that so much larger than other sectors of agriculture? It's a wonderful product, and I'm not suggesting it's not, but what exactly is it that you do? Is it a value-added product and that's why it's high? Is it something else, or a combination? What exactly is that?

[Jim Everson]

I guess it is a combination of things.

There's a lot of demand for oilseeds worldwide. The demand is increasing. We work hard to ensure that we differentiate canola from other oils based on its health characteristics: the fact that it has no transfats, no cholesterol, and low saturated fats, and it has the good fats that are good for your body. A lot of the growth of the canola industry in world markets is because we've been able to differentiate it from other oils that have high saturated fats and not the same kind of health characteristics for a health-conscious consumer. Demand is up; that's one thing.

The second thing I'd point to is the investment that producers have made and that the seed industry has made. It's a system that provides returns for the investment that private sector seed developers are making in new seed varieties for the canola sector. I think that's helped improve the crop, improve yields, and improve weed management. It's made the farmer a more competitive farmer.

It's opening up investment by the farmer, by the exporters, and by the crushers in the industry, which is building more production to meet that demand.

[Malcolm Allen, NDP, Welland, ON]

There's a multitude of things, but clearly value-added is a major.... To be clear, around this committee we probably know, but just to put some of this on the record for the folks, you do actually export a lot of oil, not just the seeds. I don't want to leave people with the impression that somehow you're selling canola seed, as much as you are doing that, but you sell canola oil. You actually do have crushers in the Prairies. You talked about how you established that for rural communities and helped build an economy.

From those particular pieces, because value-added is obviously an important component to the economy and you pointed it out here, do you have any sense of...? It's not about using a crystal ball, because sometimes you have to forecast, but with this deal, do you have any sense of what those numbers might look like in the future? I know you had projections of what you see in the future. Now that this deal's on your horizon, has that changed the projection of how much perhaps gets planted?

I guess to Mr. White the question would be, depending on Mr. Everson's answer, if it's a positive one, do you see the ability to actually plant that number of acres, if indeed that's the amount we want to do? We've got a lot of acres planted as it is.

[Jim Everson]

We certainly see growth in terms of the oil market. That's where that investment in the processing capacity in western Canada is coming from. There's real opportunity there, and the industry is investing there.

Historically, we have been more export oriented, in terms of seed exports, but there's more and more value-added going into the Canadian market, and as a ratio of our overall exports, we are trending to higher levels of value-added exports—oil and meal as opposed to seed—going into the future. That's a positive thing from an economic development point of view and a jobs point of view for us.

Europe has not traditionally been an enormous market for us. Of $9.6 billion, we're talking about a market size of $180 million, so it's not substantial, but a trade agreement that provides for rules-based trade, where you can arbitrate disputes and so on, is always a good thing for our industry.

[Rick White]

To follow on your previous question, I mentioned in my presentation that canola is the highest value agricultural commodity, contributing $8.2 billion to farm cash receipts. That's the value of the seed. That's not value-added stuff. Jim's number was the value-added export, just to clarify that one.

Regarding being able to plant more, we're running around 18 million acres or so a year, 20 million, if we really push it. What really kicked up the production this year was the yield. The yield last year ran on average about 28 bushels an acre. This year it averaged 36.9 bushels an acre.

Again, that's productivity, not using more land, but more productivity out of the seed. Farmers are getting very good at growing this stuff, so we can grow more with less, or not much more.

[The Chair, Conservative, Bev Shipley]

Thank you very much for your comments.

I'll move to Mr. Lemieux for five minutes, please.

[Pierre Lemieux, Conservative, Glengarry—Prescott—Russell, ON]

Thank you, Chair.

Thank you to the witnesses for being here today.

Mr. Everson, I was following your words carefully. You had a great paragraph that government, through diplomacy and trade negotiations, has a big role to play in growing and maintaining our market access. You made reference to Minister Ritz and Minister Fast.

Given that yesterday Minister Fast was talking about using our embassy resources to promote trade between Canada and the countries in which our embassies are located, building upon what you said and building upon what Minister Fast was talking about yesterday, can you elaborate on the role that a Canadian embassy in Europe, for example, could play in promoting the sale of canola, which can grow stronger through CETA, with European countries, given that CETA will be coming into play?

[Jim Everson]

Sure, I'd be happy to.

The trade commissioner service and our trade officers in our foreign embassies are really critical to our export capabilities. With canola I would say that's less so from a marketing point of view, although there is some market development work that they assist with, but from a market access point of view, their work is really important.

In some of our major markets, like China, for example, the trade officers there are keeping an eye on new regulations that are coming along from China, helping us with issues that come up where we have to reach into the ministry of agriculture or the regulator in China to have questions resolved and try to resolve issues that might come up that are disrupting trade.

There is an agreement where Agriculture Canada has agriculture officers as part of the trade commissioner service in some of our major markets, and they are very attuned to agricultural issues. In those markets they are extremely helpful to us, and they really understand Canadian agriculture and our needs in these foreign markets. But just the overall trade commissioners, too, in those markets where there isn't a specific Agriculture Canada person, when we need to deal with an issue that's come up in that market, they're the first whom we go to and they understand the market and the government, and they can provide advice and direction to us on how we deal with it.

With Agriculture Canada, with the new market access secretariat, that has been a real focus on maintaining market access and growing market access. We've made a lot of use of the market access secretariat at Agriculture Canada with issues like resolving our challenges with blackleg in China. That is such a huge market and that's such a big issue for us. They've been on the ground right from the very beginning, looking for solutions with us, combining diplomacy with negotiations to try to find, in science and research, some solutions on that. Together with CFIA they've been a strong partner in keeping that market open for us.

[Pierre Lemieux, Conservative, Glengarry—Prescott—Russell, ON]

Thank you.

What you're saying is very legitimate in that when you have people on the ground who understand the local situation and have relationships with local governments, they can in fact use those opportunities to help our industry.

Let me ask the same question to the Fertilizer Institute. I myself think that Canada, using all of its resources to promote trade, only makes our economy stronger. It helps create jobs here in Canada, and it must be of great assistance to our businesses who are the employers of Canadians. On the fertilizer side, I wonder if you could perhaps make a few comments on that.

[Clyde Graham]

International trade is increasingly a team approach between government and the private sector. Certainly trying to gain market access is a struggle in certain areas, and the more we can work together to help other countries and their markets understand what we have to offer in Canada is a tremendous value. We would encourage the government to continue to provide those resources, particularly in areas of the developing world where the challenges are greater. Certainly in Europe there is perhaps not as much understanding of the value of products like canola and some of the fertilizers that are used here. Certainly the Government of Canada and its staff, the foreign service and the trade commissioners, can play a critical role in that.

[Pierre Lemieux, Conservative, Glengarry—Prescott—Russell, ON]

Very good. All right.

Thank you, Chair.

[The Chair, Conservative, Bev Shipley]

Thank you very much, Mr. Lemieux.

Now we'll go to Mr. Eyking.

[Mark Eyking, Liberal, Sydney—Victoria, NS]

Thank you, Mr. Chair.

Thank you to the guests for coming today.

I recently returned from the Prairies. I was doing an agriculture tour. Mother Nature's been good. The farmers, of course, did a good job and there's a good crop out there. The fertilizer business is good also, a world demand product. Some of the sectors are saying there's a shortage of labour out there for the agriculture industry and the fertilizer industry.

My questioning mostly deals with the rail. Both of you need the rail. You're both dealing with commodities that have to be exported.

Just today, two articles came out on the problems that are happening in the rail out west. One article is from the Leader-Post in Regina. It says that a bumper crop is unprecedented, but Statistics Canada says it's only 10% higher than usual. Then it goes on to say that port terminals are now competing with each other to use rail. The result is there are too many ships waiting for too long and that means farmers are getting less money. Farmers have now missed record high prices because of this.

In another article, it says that grain companies report a weekly shortfall of 1,000 to 2,000 cars with a backlog of 18,000 cars and rising.

Keystone Agricultural Producers president Mr. Chorney told Minister Ritz that the performance is not acceptable. There are guys who are going to be held up waiting for their grain to go. This is a big problem.

With both of your products being export products and needing rail, my question will be started on—and whoever wants to answer it.... Because there are also some farmers saying the demand.... Potash can be shipped all the time, so you guys use a certain amount of cars. Does there need to be an investigation or inquiry on the whole rail system, that it's not meeting the demand for fertilizer and grains and that we're kind of losing out on some of the international markets and the prices we should be getting?

[Rick White]

I'll take a stab at that first. It's a great question.

That is a critical link to getting products, whether it's fertilizer or canola, or any other commodity, out to our export markets. A well-functioning rail system is critical.

There has been some work done and some legislation passed in terms of providing better rail service by the railways, but I think what we're talking about this year is just a lack of overall capacity, not necessarily service. I know they're intricately linked, but there is only so much physically that we can move. We have one monster of a crop out there, unprecedented, to get through the system. It's going to take some time and there are going to be some backlogs. We only have so many physical rail tracks to actually use, so there are some infrastructure parameters that we can't get by with this large of a crop.

That's not to say that service is impeccable, because it's not. We have to utilize those resources as efficiently as we can. I think it's more of a capacity issue right at this point in time, as opposed to a service issue, but that's my point of view.

[Mark Eyking, Liberal, Sydney—Victoria, NS]

When this article states that they're short of 18,000 cars and rising, it's the capacity. There are just not enough cars for their grain?

[Rick White]

Well, again, it depends on which area you're talking about. I've heard of cars sitting on the sides, not efficiently being used. That is a problem. That's a service issue, in my view. There should be no cars sitting around, because there's lots of product to move. I would say that is an inefficient use of the scarce resources that we have to move this product. If there are things like that going on, then that could be looked at as to why.