Thank you very much, Mr. Chair.
Good afternoon, everyone.
With me today are Nadia Bouffard, Acting Senior Assistant Deputy Minister, Strategic Policy; John Campbell, Director, Aquaculture Policy and Regulatory Initiatives; and Tim Angus, Acting Director General of External Relations, International Trade and Market.
Thanks for your invitation to appear before you today. I really appreciate it. I understand that Mr. Steve Verheul, Canada's chief negotiator on CETA, and Ana Renart, Canada's deputy chief negotiator, appeared before you in November to speak to you about the negotiations for Canada's fish component of the Canada-EU comprehensive economic and trade agreement, CETA, and we're glad to be here today to discuss this important topic with you as well.
As you know, the government announced the agreement in principle with the European Union on the Canada-EU comprehensive economic and trade agreement negotiations on October 18. Although some technical issues remain to be worked out, all the key items have been resolved with the completion of the agreement in principle.
The agreement will provide Canada with preferential market access to the European Union's 500 million consumers and $17 trillion in annual economic activity. In fact, the joint study conducted with the EU prior to the outset of the negotiations, which is available on the Foreign Affairs, Trade and Development Canada website, concluded that an agreement could boost Canada's income by $12 billion annually and bilateral trade by 20% across all sectors. That's equal to creating about 80,000 jobs and increasing a family's annual income by $1,000. It's one of our more ambitious trade agreements. While the fisheries sector is only one component, the agreement will have significant benefits across the spectrum of all industries: fishing, seafood, aquaculture, and processing.
The benefit that the fish and seafood sector will derive from this agreement will depend, of course, on the ability of the industry to take advantage of the opportunities. The 20% figure outlined in the joint study should therefore be considered as a starting point in trying to assess what potential this agreement will have and what the benefits will be. I can say, however, that we export about 377 types of fish and seafood products to the EU, and tariffs on 360 of those will be eliminated upon the agreement's entering into force. That's expected by 2015.
The tariffs on the other 17 products will be phased out in the following three, five, or seven years, but it's not necessary to wait for those time periods before benefits accrue. If it's a three-year timeline, the tariffs will drop by one-third in the first year, two-thirds by the second, and a full drop by the third. The benefits will accrue quickly once the agreement is brought into force. The reductions and tariffs will translate into savings that can be either reinvested into businesses throughout the seafood value chain to make them more competitive and innovative, or if Canadian exporters pass these savings along to potential customers, it could help them to grow their share of the European market. I think you can appreciate that if you're adding up to 20% to your bottom line, that's a benefit for anybody with a value product that's subject to tariffs now.
We export about $409 million in fish and seafood to the EU each year, of which 95% of the export value is currently subject to tariffs. On average, Canadian firms paid $45 million annually in tariffs on exports of these products during 2008 to 2012, representing 11.4% of their export value. As I said, that's not even; some products are subject to tariffs at a lower rate, while some are subject to tariffs up to 20%.
Between 2008 and 2012, we exported $13 million in sockeye salmon to the European Union and paid almost three-quarters of a million dollars in tariffs. We're going to see some benefits to that portion of the industry at the time when it comes into force. T
he reductions will equate to $25.5 million for Atlantic Canada the first year the agreement enters into force. Nova Scotia and Newfoundland and Labrador together will account for 71% of tariff savings, rising to 73% once all tariffs are phased out, while Quebec will save almost $2 million annually. Other provinces, which together exported $10 million annually during this period, will realize additional earnings and savings in the range of $1 million.
When CETA comes into force, the tariff amounts on these products will immediately decrease by 69%, to an average of $13 million per year, with annual savings of $31 million. All of these figures are based on the current exports of Canadian fish and seafood products. They don't account for the increased opportunities that CETA will provide for new or additional Canadian fish and seafood products as they hit the European markets.
On rules of origin, CETA includes liberal rules of origin that are consistent with the current federal government policies and industry practices, and this will benefit Canadian business interests. Rules of origin define products that qualify as Canadian or European under an agreement. For Canada, benefits of tariff liberalization could be realized only if Canada could succeed in negotiating liberal rules of origin.
Rules of origin allow customs authorities to determine where a product originates, or is wholly obtained, so that they can apply the relevant tariff to the product as it enters the country. These rules specify how much production processing must occur in Canada or the EU for the product to be considered from, or originating in, one of the jurisdictions. If somebody's bringing in product from another source and does processing in Canada, these rules would be very important in determining if it qualifies as a product of Canada for the purposes of application of the tariffs.
In practice, these liberal product-specific rules of origin will allow Canada to import fish from a non-party, like the United States, and enable Canadian industry to process the fish for export to the European Union under preferential tariffs granted through CETA. How this benefits Canadian industry can be shown by two examples: British Columbia, which processes Alaskan sockeye salmon; and New Brunswick, which processes Maine lobsters.
What does CETA not do?
CETA doesn't change how we control port access or how we apply the Coastal Fisheries Protection Act. CETA will not trump that. We will still have the power and authority to require that vessels entering our waters do so under the authorities of the minister. The minister will have to grant a licence for them to operate in our waters, or to transit our waters to a Canadian port. That doesn't change what's going on right now with European vessels.
As to investment licensing policies under CETA, there is no change to the Canadian policy regarding issuance of fishing licences. In Canada right now, to receive a fishing licence, the company that receives the licence must be 51% owned by Canadians. We do not issue Canadian fishing licences to foreign-controlled harvest operations. That's a long-standing policy that goes back to the 1970s. It is designed to prevent foreign companies from gaining access to our natural resources, fishing resources, through the acquisition of companies that have substantial licence-holders. A foreign company could not buy up one of our offshore fishing enterprises and then fish those licences in Canada. That will not change.
Policy is not reflected in any laws. It's part of our long-standing practices. It derives from the powers of the Fisheries Act, under which the minister has discretion in who gets a licence. That power remains in place, so the minister's discretion on licensing harvesters will remain in place under CETA. It's consistent with our powers under UNCLOS as well.
CETA will not negatively affect the sustainability of our fisheries or aquaculture sectors. The European Union has been moving very strongly in the direction of ensuring sustainability within its own areas of responsibility, and is not anxious to enter into any kind of arrangement where their position could be compromised in any other locations. Certainly, Canada will not compromise the long-term sustainability of its resources.
More specific to fisheries, Canada and the EU have committed to further cooperation on environmental issues and regional fish management organizations. We share interests with respect to NAFO, ICCAT, and other regional fish management organizations. We are committed to working collaboratively.
I would say that's reflective of what we have been doing over the last number of years. Certainly in my time with NAFO it was a collaborative arrangement with the EU in terms of moving ahead on the conservation agenda.
Regarding CETA and the seal ban, the seal ban came into place before CETA. The opposition to the EU seal ban is continuing. The CETA does not compromise our position with respect to our challenging under the WTO that the seal ban by the EU is not consistent with international trade law.
While on November 25 the WTO announced its decision and confirmed that the EU ban is discriminatory and treats Canadian seal products unfairly, they did allow that infringement on our rights to proceed based on the public's concerns in the EU regarding seal harvesting. We are committed to now appealing that process and taking it to the next level.
With that, Mr. Chair, I'll turn it over to questions.
