International Trade Committee on June 5th, 2013

[The Chair, Conservative, Rob Merrifield]

Thank you very much. I will call the meeting to order. We want to thank our witnesses for coming forward. We're continuing our study on the Trans-Pacific Partnership and the benefits that are there for Canada. We have Rick White, the general manager of the Canadian Canola Growers Association with us today, and Jim Everson, the vice-president of government relations from the Canola Council of Canada.

We want to thank you for coming in. I know we have a little bit of an abbreviated time slot here, but we'll try to make the best of it. I'm not sure which one of you wants to go first.

Rick, go ahead. The floor is yours.

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

Thank you, Mr. Chairman, and good afternoon to members of this committee. Thank you for inviting me here today to speak about the Trans-Pacific Partnership or TPP.

The TPP is a significant opportunity for the canola industry and canola growers to gain access to a growing trading region. Equally important, it is an opportunity to establish science-based policies that deal with non-tariff trade barriers amongst a block of countries. Specifically, this includes low-level presence, or LLP; maximum residue level tolerances, also known as MRLs; and approved processes for biotech crops.

Canola is an incredibly important economic and agronomic contributor to 43,000 canola farms that span this country. CCGA represents these 43,000 canola growers and is governed by a board of farmer directors representing the provinces from Ontario, west to B.C. Canola is a Canadian success story, increasing from marginal production in the early 1980s to becoming the number one cash crop in the country, now contributing $15.4 billion to the Canadian economy annually. Over 14 million tonnes were produced in the last crop year alone and the industry has set a goal to increase production to 15 million tonnes by the year 2015. That goal may even be surpassed this year, two years early.

The canola industry is highly trade-dependent, exporting 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. With a large and ever-increasing population, the Asia-Pacific region continues to grow in economic importance and is a priority market for Canadian canola products. CCGA believes that establishing free and open trade with the TPP member countries will provide a significant opportunity to the canola industry and canola growers. Together, TPP countries represent 51% of Canada's agrifood exports. For the Canadian canola industry, this represents $2.9 billion in canola exports.

For a TPP agreement to really provide benefits to Canadian canola growers, it must address both tariff and non-tariff barriers to trade. In terms of tariffs, Canadian canola products currently face tariff issues in two of the TPP countries: Vietnam and Japan. This results in canola being less competitive in comparison to other oils such as palm, sunflower, and soy, and puts Canadian farmers at a competitive disadvantage. In addition, Japan and Vietnam have higher tariff rates on oil versus seed in order to protect their domestic processing industries.

This type of policy reduces the growth potential of Canada's value-added industry and its positive economic impact. For example, the tariff on canola oil in Japan can be as high as 20% versus a 0% tariff applied to seed. CCGA would like to see this market distortion eliminated by zeroing out the oil tariff.

Beyond reducing or eliminating tariffs, a TPP agreement must also deal with several non-tariff trade barriers. Non-tariff trade barriers have the potential to significantly disrupt trade and therefore directly affect the competitiveness and profitability of Canadian canola farmers. Canadian farmers are some of the most technologically advanced in the world, but non-science-based trade barriers limit the ability of growers to use and profit from technology. The ability to access and adopt new technology is vitally important to Canadian canola growers' ability to compete.

TPP negotiations represent a significant opportunity to establish enforceable and transparent trade policy that is aligned across a block of nations in the areas of LLP, MRLs, and biotech approvals. The importance of establishing transparent and science-based policy in these areas cannot be overstated. Yet TPP negotiations currently represent Canada's best opportunity to advance these issues in a very meaningful way.

In order to feed the world's growing population and at the same time ensure Canadian canola growers remain profitable and contribute to the Canadian economy, farmers must continue to adopt new and innovative technologies. This includes new crop protection products as well as new biotech traits. Crop protection products, which include herbicides, fungicides, and insecticides, are critically important tools in a farmer's production toolbox. They allow farmers to produce more per acre by helping to control yield-robbing weeds, diseases, and insects. Advancements in science are continually facilitating the introduction of new crop protection products that are more targeted, less expensive, easier to apply, or offer a different mode of action that aids in the effort to reduce weed resistance.

However, our trade rules are not set up to facilitate undisrupted trade with the ongoing introduction of new crop protection products. Importing countries can take years to establish legal tolerances for residue levels and often countries have near-zero tolerances for residues of products they have not yet approved themselves. To be clear, though, once a product is approved and an MRL is established in an exporting country, it becomes an issue of regulatory alignment, and is not a health and safety issue at that point. A TPP agreement should support cooperation in setting scientific, risk-based MRLs, thereby encouraging alignment between trading partners.

Another significant non-tariff trade barrier affecting canola growers is the approval of biotech traits. Every country is responsible for the regulatory approval of new genetically modified events. Unfortunately, the lack of consistency, and in many cases, lengthy approval processes, often results in non-tariff trade barriers that delay access to new technology, or in some cases, create disincentives to adopting new technology.

Through the TPP process, CCGA would like to see a commitment by the member countries to make regulatory system improvements that provide a clear and predictable approval process for canola and other events. In addition, this regulatory renewal should ensure a timely and synchronized introduction of new crop genetics to prevent non-tariff trade barriers and trade disruptions. This would require TPP countries to work towards synchronized approvals of new biotech crops as well as mutual recognition of scientific risk assessments.

In addition, with an ever-increasing number of genetically modified crops being grown around the world, there is the risk that the unintentional presence of genetically modified materials, which are approved in the country of export but not yet approved in the country of import, could disrupt trade, similar to the situation that arose with Triffid flax in Europe. It is very important that countries around the world adopt a consistent LLP policy to prevent this type of disruption to trade. As you are aware, the Government of Canada is currently developing a domestic LLP policy that would be applied to unapproved events found in shipments to Canada. CCGA fully supports the Government of Canada in these efforts.

The TPP is a prime opportunity to pursue the discussions around LLP, with the goal of putting in place an LLP policy that is consistent across all TPP member states, to help prevent future trade disruptions that will directly impact the competitiveness of Canadian canola farmers. In closing, I would like to make a brief comment on the Canada-Japan bilateral trade negotiations.

Although Japan is set to join the TPP negotiations this summer, CCGA believes it is still in our competitive interests to continue to aggressively pursue a bilateral trade agreement with Japan. Japan is a very important and consistent market for Canadian canola. They were one of our first, and continue to be one of our longest-standing international customers for canola seed.

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

[The Chair, Conservative, Rob Merrifield]

We all look forward to questioning you, but before that, we'll give the floor to Mr. Everson.

The floor is yours.

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

Thank you very much.

Rick has done a really excellent job of covering a lot of the ground, so I'll try to cut back on my presentation, because we are entirely in sync—the Canola Council and the Canola Growers Association—in terms of the policy issues that Rick worked through there.

Good afternoon. I represent the Canola Council of Canada.

I will just make a brief mention of the council. It is a value chain organization that represents the entire canola sector in Canada, so the same 43,000 growers that Rick represents are part of the Canola Council of Canada, as well as the seed developers, the crushers who process the seed into oil and meal, and the exporters who export canola as a grain for processing at its destination. The Canola Council is a vehicle through which the industry comes together to set objectives and implement plans for the entire sector.

Canola returns the highest value to farmers of any crop in Canada. The industry supports 228,000 jobs, and as Rick mentioned, contributes $15.4 billion to the Canadian economy annually. Our industry has doubled production in the last 10 years. This expansion has brought with it significant investment in rural communities. For example, there has been more than $1.6 billion spent in crushing and processing capacity over the last six years, reflecting the confidence in the opportunity provided by the sector.

Importantly, this income and this economic impact are generated mostly from international trade. More than 85% of the canola we produce in Canada is exported as seed, oil, or meal, bringing in close to $10 billion from exports in 2012. Our industry provides a heart-healthy canola oil and a high-quality animal feed protein to the markets that want it the most.

Our industry succeeds because we are competitive internationally. We've done best in markets that are free of tariffs and non-tariff barriers, where we can compete evenly. Government, through diplomacy and trade negotiations, has a very big role to play in growing and maintaining market access. The government's support of international trade and market access for canola and other agricultural commodities is welcomed by our sector.

Getting the most value from international markets by removing trade barriers means more economic growth, more jobs, and more prosperity for communities across Canada. This is what the TPP offers our industry—more value from international markets by eliminating tariffs and by making trade more predictable with science-based regulation.

I'll talk for just for a moment on trade. Our primary focus in the TPP would be to eliminate any tariffs that remain for canola seed, oil, and meal. Tariffs tax our exports and make them more expensive for consumers in the importing country. It's important to the canola industry that canola is competitive with other oil seeds and that tariffs for oil and meal—value-added products—are not higher than for seed. Eliminating tariffs is the base for a strong canola in export markets. Major markets for canola in the U.S., Mexico, and Japan have all developed in zero-tariff environments.

Japan, for example, has been a long-term and valued customer for canola seed. Our exporters have tariff-free access and can compete with other oil seeds. The result has been that canola has a very high market share in Japan. More than 40% of all vegetable oil consumed in Japan is canola oil, but as Rick mentioned earlier, we've shipped practically no oil to Japan because of restrictive tariffs, and this means that the economic activity that I was talking about earlier, with the new investment in Canada in crushing facilities associated with value-added processing, happens in Japan and not in Canada. The TPP provides an opportunity to address tariff escalation in some countries.

I was also going to speak about a number of the same issues related to non-tariff trade barriers that Rick spoke to. These include low-level presence policies for accessing markets, guaranteed access to markets in a world where there are more and more GM—genetically modified—products, and maximum residue levels. But Rick has outlined those pretty clearly, so I think that perhaps I'll skip that and just come to the conclusion.

I would just reinforce that access to international markets without trade barriers is critical to the canola industry. Canada's participation in free trade negotiations with 11 trade partners is very welcome. We call on the committee to recommend that our Canadian negotiators seek an agreement that eliminates tariffs on canola and canola products. That includes enforceable sanitary and phytosanitary commitments, and commitments to facilitate trade in the areas of crop protection products and biotechnology.

With that, I look forward to questions, Mr. Chairman.

[The Chair, Conservative, Rob Merrifield]

Thank you very much. I appreciate that.

We'll now move to the questions and answers. I believe we'll start with Mr. Davies.

Mr. Davies, go ahead.

[Don Davies, NDP, Vancouver Kingsway, BC]

Thank you, Mr. Chairman.

Thanks to both witnesses for being with us today and sharing their knowledge and expertise.

At the outset, I just want to say, on behalf of the official opposition, how proud we are of the canola industry in this country. I think it's been an enormous success. It's been an increasing source of our export strength. I want to commend you and the members you represent for the fine work you do and the contribution to our economy.

I want to start with some general issues around the transparency of these negotiations, which has been an issue. Many of us feel that the TPP is not being conducted with the kind of transparency and accountability that we'd like to see in negotiations. I know there are similar issues in the United States, where some 600, I guess, private interests are allowed to see the text and get information about the Americans' TPP negotiations, but Congress and the rest of the American public are not. A similar issue I think exists, at least from our side of the House, in Canada.

Have either of your organizations received briefings from DFAIT or been asked for your input into the TPP talks?

[Rick White]

From the perspective of the Canadian canola growers, yes, we've had input, direct to DFAIT and negotiators, on what canola growers would like to see out of this deal. Some of the material that I went through today is the same message that went to the negotiators.

So yes, we've had very good access to them.

[Don Davies, NDP, Vancouver Kingsway, BC]

Thanks.

And at the Canada Council...?

[Jim Everson]

Yes, we've been briefed by the government, and have provided our brief to them.

[Don Davies, NDP, Vancouver Kingsway, BC]

Were your organizations required to sign confidentiality agreements?

[Rick White]

I personally have signed a confidentiality agreement to talk to the negotiators in a more negotiating-strategic discussion, but again, the messaging is clear. They know what we need, and so we're there in an advisory capacity to help them understand what it may mean to us.

But I have signed a confidentiality agreement on some of the finer details.

[Don Davies, NDP, Vancouver Kingsway, BC]

Mr. Everson, has the Canola Council of Canada signed a confidentiality agreement?

[Jim Everson]

I have on behalf of the Canola Council of Canada, yes.

[Don Davies, NDP, Vancouver Kingsway, BC]

Okay.

The U.S. Congressional Research Service pointed out in April of 2013 that one of Australia's TPP negotiating objectives, supported by New Zealand, is to secure discipline over other TPP countries' use of export subsidies, official export credits, and food aid in support of their agricultural sectors.

Are any of those areas things that the Canadian canola sector has at risk in these negotiations? Do you receive any official export credits, food aid, or export subsidies that might be the target of, say, aggressive action by Australia and New Zealand?

[Jim Everson]

No, not that I know of. It would certainly be a general policy goal of the Canola Council to eliminate export subsidies that would disrupt trade in canola in other markets.

[Don Davies, NDP, Vancouver Kingsway, BC]

Okay.

Labelling has been an issue, I know, in terms of accessing the European market for canola products. Are there any issues with labelling? Particularly, are any countries taking a position that Canadian canola products would have to be labelled in terms of their GMO designation? Is that an issue that will arise in the TPP, to your knowledge?

[Rick White]

Not to my knowledge, but again, it's not a topic that has come up. To my knowledge, I don't believe it's under discussion.

[Don Davies, NDP, Vancouver Kingsway, BC]

Mr. Everson?

[Jim Everson]

The same answer.

[Don Davies, NDP, Vancouver Kingsway, BC]

Okay.

We know that the numbers in TPP are changing. There are 11 countries, soon to be 12, including Canada. Canada already has free trade deals with four of the current TPP members, the United States, Chile, Peru, and Mexico, and we are negotiating with Japan.

Some of the figures we've seen indicate that, leaving Japan out for a moment, the other six countries—Australia, New Zealand, Malaysia, Singapore, Brunei, and Vietnam—account for less than 1% of Canada's exports. Do you see, in terms of that 1% export share, room for growth with respect to those countries in terms of increasing exports from the canola sector?

[Jim Everson]

What's really important about having 12 countries all negotiating in this way is the potential for having to set precedents in terms of advancing good trade policy and good treaties. So it's about tariffs, but it's also about the number of issues on the non-tariff side that Rick articulated in his opening statement, and the opportunity to have a trade bloc.

This is more challenging than a bilateral environment, where you're just negotiating with one country. If you're negotiating with 12 countries, particularly in TPP, where a number of those countries are major grain importing or exporting nations, and you're able to look at those issues that inhibit trade—both importing and exporting of grain products—in the family of countries and make some decisions that make the regulatory environment more coherent, more transparent, and more open to understanding for business for both importers and exporters, then there is some real value in that in terms of developing new trade policy in the future.

[Don Davies, NDP, Vancouver Kingsway, BC]

Of the four countries I mentioned that we do have agreements with—U.S., Mexico, Chile, and Peru—do we have any trade barriers or tariff issues with any of them or are things settled from a trade perspective? Am I correct in assuming that the trade barriers on canola products are already eliminated, or is there work to be done with those four countries to increase access? Or do we have that access at all?

[Jim Everson]

By and large, we have a really good trade environment with those countries. Mexico and the United States are major markets of our canola, and as I said in my opening statement, a good reason for their being major markets is that it's a tariff-free environment and there's a relatively good approach to dealing with issues that come up from time to time. Those might not be tariff issues but non-tariff challenges, where we're able to sit down and talk through those issues in the context of existing trade agreements.

[The Chair, Conservative, Rob Merrifield]

Thank you very much.

Mr. Shory, you have seven minutes.

[Devinder Shory, Conservative, Calgary Northeast, AB]

Thank you, Mr. Chair.

Thank you, witnesses, for being here and sharing your experience and expectations with the committee.

The TPP partnership is a significant opportunity for the canola industry to increase trade in the Asia-Pacific.

Mr. White, how significant is the percentage of canola exports to TPP member countries currently, and what member countries of the TPP currently import the most canola?