Agriculture Committee on Nov. 28th, 2013

[Robert Godfrey]

There are 60 different countries in the world that we're exporting to. The largest buyer would be the United States. They buy an awful pile of our nitrogen production. Also, there's a considerable amount of potash that goes to markets like India, China, and Malaysia, and all throughout the Middle East. They're going to an awful lot of developing countries in Southeast Asia and Asia.

[Ruth Ellen Brosseau, NDP, Berthier—Maskinongé, QC]

I guess as with all trade agreements, you have winners and people or sectors that are really going to benefit, and others that aren't. All the witnesses who have come to our committee, except for dairy, seem to have said this is a great opportunity, and they are really looking forward to seizing this market.

I was just wondering if you could explain what kind of strategy you have in place to access more exports to the EU.

[Robert Godfrey]

CFI is a trade association, so we represent 46 different member companies. I can't speak to individual strategies for individual companies, but I can say that out of the total of all our exports, only 1% of it annually goes to the European Union, so there is great growth potential. I know that any of our manufacturing companies, like Agrium, Mosaic, PotashCorp, or Yara, which is actually based in Europe, are all looking at this market as we go forward in the future in terms of what potential it might present to our industry.

[Ruth Ellen Brosseau, NDP, Berthier—Maskinongé, QC]

Do you see anything as a non-tariff barrier, any kind of problems? You said you've worked that out.

[Robert Godfrey]

There are zero tariffs on any fertilizer that's going in there currently. The only issue that we potentially had was on rules of origin, if we were sourcing.... Some of our fertilizers are actually blends of different fertilizer products, so we were looking at where we were sourcing that and whether or not, if we sourced from certain countries to a certain percentage, it would be eligible for most favoured nation. From what we understand, we are within those guidelines. The department made sure that the terms of the agreement match what our members were looking for.

[Ruth Ellen Brosseau, NDP, Berthier—Maskinongé, QC]

Do I have more time?

[The Chair, Conservative, Bev Shipley]

You have another minute and a half, actually.

[Ruth Ellen Brosseau, NDP, Berthier—Maskinongé, QC]

Perfect. I'll ask a question to the Canola Council of Canada.

In your brief, it was stated that the EU's regulatory system for biotechnology creates risks for exporters and creates uncertainty for seed developers looking to introduce new seed traits. In questioning by Randy Hoback, you said you were very involved all along the way in these negotiations. I was just wondering if you could maybe elaborate or comment more on this working group, about the confidence you have in resolving these issues on biotechnology with the European Union.

[Jim Everson]

Yes, it's a really important issue for us.

As I was explaining earlier, if there's a new seed trait that one of our seed developers produces for canola that provides new agronomic benefits to the producer, we can't commercialize those in Canada until we have approval in the countries that we ship to, including the European Union. The European Union has a system that takes a very long time to approve these products. It's partly a science-based system, but it's partly a non-science-based system, a kind of political decision-making process.

What we've asked in these discussions is that we ensure that this process moves efficiently so we are not holding back technology that makes our Canadian farmers more competitive on the basis of a regulatory procedure that's not science-based in the European Union. What the agreement does is it sets up a dialogue, a consultation body, that is subservient to the trade rules committee of the free trade agreement, so it reports to the people who oversee the overall implementation of the free trade agreement.

It's really important to point out that we're not asking for a change to the standards of safety or efficacy that are in place in Europe. We are not watering down their regulations in any way. We are simply asking that the applications that we make for the approval of these products move through the system effectively, and they have a yes or no answer in a faster fashion than we have now so that our farmers are not held back from getting this technology. These companies are spending millions of dollars producing these new technologies that are helpful to our farmers, and we want them implemented as quickly as possible. The deal will help us do that.

[The Chair, Conservative, Bev Shipley]

Thank you very much.

We'll go to Mr. Harris for five minutes, please.

[Dick Harris, Conservative, Cariboo—Prince George, BC]

Thank you, Mr. Chair.

Gentlemen, thank you for expressing your view on the benefits of this agreement. I think it's going to be a real boon to Canada and to producers in all sectors in the country.

I want to take the liberty to skip to the other side of the country for a minute because, being from B.C., we're much closer to the Asian market than we are to the European market. I want to ask Mr. Everson or Mr. White three questions regarding trade with China. I'll give you the questions first.

First of all, what is the current value of canola seed or oil trade with China? Second, of the main products exported to China currently, which product, if any, is most exported? Third, and this is important, you mentioned some regulations disrupting trade with China. Could I get a thumbnail sketch of what kinds of regulations, what area of regulations, you would like to see in a better position so that we could increase trade with China?

[Jim Everson]

Thank you very much for the question.

The Asian markets are all important. We're more and more in demand in Asian markets as their economies grow and their middle class has more income, and so on. I think that growth in China and other Asian markets is really important to our future.

We sell all of our products to China. We sell seed, oil, and meal to China, but most substantially seed. We are doing more sales now in oil and meal and those higher value-added products, which is a good thing. I'd say that in 2012 our sales to China would be close to $3 billion when you combine seed, oil, and meal.

In terms of regulatory issues, a number of issues in our relationship with China are a challenge. We have an issue around blackleg in our seed, which is a disease in Canadian canola. They are concerned that this disease will be transferred from our canola crop into their rapeseed crop. They are large producers of rapeseed in China too. We're working very closely with their regulator and their policy-makers to ensure we can put in place mitigation efforts so that we don't have that issue. That has been an issue that has caused disruption in our trade and uncertainty for our traders.

Currently, there's a challenge in getting some of these GM traits approved in China. Just as we were saying about the European situation, China is a factor there too. It takes a long time to get new traits approved in China. We're working with the Chinese on how we can improve that process. It's an ongoing effort. We are more reliant on that market, and it's a market where there are some market access challenges.

Our recommendation to the committee is that we need a lot of engagement with China. We're pleased to see that the ministers are there on a regular basis and that we're engaging with the Chinese government at the highest level.

At Agriculture Canada, we have three separate committees that are working with China. That's really important for us in terms of technical engagement. The more engagement we have, the more understanding we have with the Chinese market. It's important for us.

[Dick Harris, Conservative, Cariboo—Prince George, BC]

On these regulations, if they get looked after, do you currently see a big demand from China and also their anticipation that they hope to get rid of these regulations, that they hope to get these regulations looked after? Are they ready to buy your products in the same way that they're buying everything else that can go in there easily?

[Jim Everson]

I think demand from China is growing. We have a very high-quality product, so I think we have the chemistry there to make growth work into that market. As I say, I think it takes a real engagement and cooperation to make sure that from their point of view, they have security of supply from Canada, and that from our point of view, we have predictability for our exports.

[Dick Harris, Conservative, Cariboo—Prince George, BC]

The disease wouldn't be an issue in the oil and meal exports.

[Jim Everson]

No.

[Dick Harris, Conservative, Cariboo—Prince George, BC]

It's just in the seeds.

[Jim Everson]

That's correct, on blackleg. Yes.

[Dick Harris, Conservative, Cariboo—Prince George, BC]

Okay.

[The Chair, Conservative, Bev Shipley]

Thank you very much, Mr. Harris.

We're awfully close, so I'd like to move now to Madame Raynault.

You have five minutes, please.

[Francine Raynault, NDP, Joliette, QC]

Thank you, Mr. Chair.

My thanks to the witnesses for being here.

Mr. Everson, in your presentation, you say the following:

We are 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 European biodiesel production, reducing greenhouse gas emissions by 90% compared to conventional diesel.

I assume that canola production will increase. I assume that we are going to be growing more. When the product is delivered to Europe, will it be used to make more biodiesel or to feed people? What percentage of the additional canola crop will be sent to Europe to make biodiesel?

[Jim Everson]

In Europe we see growth in the biodiesel sector. To the extent that we can enter that market, it is largely into the biodiesel market.

The Europeans are the largest producers of rapeseed, or canola, in the world. They serve their own market for the food industry pretty much on their own.

There is in Europe an ambitious policy to increase renewable fuels in their transportation fuels. They have a target of making biofuels 10% of their transportation fuels, so there's a market opportunity there for biofuels, and canola makes an excellent biodiesel. It is, from our point of view currently, an insubstantial amount of our overall exports, negligible really in terms of our current exports to international markets. We export very little that goes to the biodiesel market. By far the majority of canola is exported for food.

[Francine Raynault, NDP, Joliette, QC]

Last week, we had barley producers here. They told us that the main opportunity for their crop was going to be for cattle feed.

Are there similar issues in your sector? In other words, do the economic benefits of CETA for your industry depend on the ability of another sector to benefit from the agreement?

[Jim Everson]

Mostly through this agreement and through the other agreements that we hope the government can negotiate, we're looking for the ability to sell seed and oil for the most part.

Meal for animals is important in the sense that when you crush canola seed you get oil and meal. If you sell to the oil market, that's the high-value market, but you have this byproduct that is meal. To the extent that we can improve the value proposition for the meal, we create more demand for the overall product.

Does that answer your question?

[Francine Raynault, NDP, Joliette, QC]

Yes, thank you.

There is a fertilizer company in my constituency that is doing very well. It is called Agro-100; perhaps you know it. They use products from industrial recycling in their formulas. I do not know exactly what they use.

In your opinion, what kind of fertilizer will benefit most from trade with the European Union, and why?