International Trade Committee on May 31st, 2012

[Wayne Easter, Liberal, Malpeque, PE]

Mr. Townsend, you said we're at a disadvantage with Argentina and China in terms of twice and three times, respectively, the—

[The Chair, Conservative, Rob Merrifield]

I'm not going to allow it, if you're going to extend your question.

[Wayne Easter, Liberal, Malpeque, PE]

You're not?

[The Chair, Conservative, Rob Merrifield]

Not if you're going to extend it.

[Wayne Easter, Liberal, Malpeque, PE]

I'm not. I'm just asking a question.

[The Chair, Conservative, Rob Merrifield]

Okay, a very quick answer.

[Wayne Easter, Liberal, Malpeque, PE]

Mr. Townsend, you said we're at a disadvantage with Argentina and China on movement of honey into Japan. Can you expand on that just a bit? I need a quick answer, the chair is getting impatient.

[Lee Townsend]

I'll answer very quickly. The reason we're at a disadvantage against China and Argentina entering Japan is the fact of the price difference, and the fact that Canadian honey can be blended with cheaper Chinese and Argentinian honey so that 25.5% tariff we currently face—China and Argentina also face it—doesn't persuade the Japanese buyers to look at high-end honey as much as they do the lower-end honey.

So it's a common trait in North America as well to take high-price honey, blend it with low-price honey, and sell it for comparable prices. That's where I was coming from about the disadvantage.

[The Chair, Conservative, Rob Merrifield]

Thank you.

Mr. Shory, the floor is yours.

[Devinder Shory, Conservative, Calgary Northeast, AB]

Thank you, Mr. Chair, and my thanks to the witnesses for coming here.

We have a long-term, complementary trade relationship with Japan that has been working very well. In our committee, we heard that once the EPA is signed between Canada and Japan, it will definitely increase trade opportunities for food products. Mr. de Kemp, you made a comment that the Japanese are not only consumers but also our partners. Mr. Townsend, you said that 90% of the honey consumed in Japan is delivered from my home province of Alberta.

I have two questions, and I'd like each of you to comment. First, how do you see the opportunities being expanded when you are already there and trade is working very well? Second, we all know about our potential membership in TPP. Should we abandon this EPA and wait for our TPP membership outcome?

[Phil de Kemp]

We have partnerships right now with Japanese brewers like Sapporo, with whom we're developing a barley variety for their exclusive use. We have a couple of different companies—Rahr Malting and Prairie Malt—participating in that. They spend an awful lot of time, effort, and money developing certain variations that offer a branding opportunity for them back in their own country.

The opportunity for additional exports, by the time we start to talk to negotiators, will have a lot to do with quotas. Their barley producers first have to take 90,000 to 100,000 tonnes of their own domestic market. Whatever's left gets allocated between us, the Belgians, the French, and perhaps others. Without telling tales out of school about the negotiating authority, there might be a way to tell them not to allocate 40% of that 100,000 tonnes to us if they really value our product, but rather to work it out with some of the countries they don't have an EPA with. That will drive a significant amount of business to them, particularly because of the capacity issues we have now in Calgary and Saskatoon.

The TPP is absolutely huge as a defensive measure to use if we aren't accepted into the partnership. If Canada wasn't and Japan was, all bets would be off in a lot of agricultural commodities. I think some members here have heard this from us, as well as from beef, pork, and canola producers. It's great that we have this with Japan right now. We are about exporting our product and expanding into the growth markets of the Pacific Rim. TPP would be absolutely huge for our industry. If there's a way to do both, great.

[Devinder Shory, Conservative, Calgary Northeast, AB]

Mr. Newman.

[Paul Newman]

Yes.

[Devinder Shory, Conservative, Calgary Northeast, AB]

Can you make a comment?

[Paul Newman]

I would agree that it's a good defensive approach to pursue an EPA in case Canada is not successful in joining the TPP initiative.

[Devinder Shory, Conservative, Calgary Northeast, AB]

Do you think that this EPA would offer your industry any expanded opportunities?

[Paul Newman]

We're pursuing expansion now. We're dealing with significant underlying trends in Japan, like demographics. I think some success in areas like preferential purchasing could safeguard some of our markets. I think this would probably be the biggest advantage.

[Devinder Shory, Conservative, Calgary Northeast, AB]

What about you, Mr. Townsend?

[Lee Townsend]

Well, in regard to the EPA or TPP discussion, I fully agree with the previous two speakers and their comments. That directly relates to our industry as well.

But regarding the potential growth for our product in Japan, the disaster that occurred last year in Japan really brought honey to the forefront, as it is a non-perishable food product. There are a lot of opportunities there for Canadian honey because of its high quality.

The value-added industry in Japan is amazing. I've been there numerous times, and I've never seen honey packaged here or anywhere else in the world, as I have seen it there. They like our honeys because of the colour, the taste, and the food safety standards. It fits in perfectly with their wedding products and with their value-added products.

Those are two aspects where we can easily see double the growth for the next five to 10 years on our product over there.

[The Chair, Conservative, Rob Merrifield]

Thank you very much.

Madame Papillon.

[Annick Papillon, NDP, Québec, QC]

Thank you very much.

My first question is to the Canadian Honey Council. Mr. Townsend, I want to know if some of your beekeeper members are from Quebec. Do they export to Japan?

[Lee Townsend]

Yes, there are. We do have members located in Quebec, and there is some Quebec honey exported to Japan. The reason that most of the honey exported to Japan comes from Alberta is the fact that 40% of the honey produced in Canada comes from Alberta. Most of the registered producers with the Canadian Food Inspection Agency are in Alberta as well, and that's required to be able to export out of Canada.

That's the reason most of the honey going to Japan is from Alberta, but there is some honey from Quebec going to Japan.

[Annick Papillon, NDP, Québec, QC]

Are there any economic issues related to transportation that affect eastern producers more than western producers? Are there advantages or disadvantages?

[Lee Townsend]

I would say there are definite disadvantages to being in eastern Canada, just for the transportation costs. My understanding is that ocean freight from eastern Canada to Tokyo, compared to western Canada to Tokyo, is close to double the cost. There's definitely an economic disadvantage.

[Annick Papillon, NDP, Québec, QC]

Thank you.

Do you have any concerns about our standards? Japanese regulation is becoming tighter while ours is sometimes getting weaker. Do you have concerns about

sanitary things, and....