International Trade Committee on Feb. 3rd, 2014

[The Chair, Conservative, Rob Merrifield]

We'd like to call the meeting to order.

In this session, we have two presenters with us.

From Farm House Natural Cheeses, we have Debra Amrein-Boyes, president.

Thank you for being with us.

We also have with us Mr. Sven Freybe, president, from Freybe Gourmet Foods.

Thank you very much for being here.

We will start with you, Debra. The floor is yours.

[Debra Amrein-Boyes, President, Farm House Natural Cheeses]

Thank you for inviting me.

I come from a small family farm in the Fraser Valley. We make cheese on the farm, so it's farmstead cheese-making. I know that with the announcement of CETA there was a lot of furor in the dairy sector, and I'm not about to really elucidate on that. I'm just here to give my perspective.

I grew up on a prairie farm in Saskatchewan. In 1803 my ancestors moved from Scotland to Quebec and bashed out a farm in the wilderness on the north shore of the Ottawa River. In 1907 my grandfather and his brothers came west on the train. They got off in Regina, went by horse and cart a couple of hundred miles north, and bashed out another farm in the prairie wilderness. So I'm a pioneer. I come from a pioneer family. This summer we celebrated 100 years—it's actually more than 100 years—of our family's farm in Saskatchewan. My parents are still there.

The difficult or disappointing part is that it's very difficult to hand on farms to the next generation in the landscape we live in, as in the global landscape. It's hard to make a living in agriculture. Many of you may have grown up on your grandpa's farm or have visited, and you know that things are always changing.

We look at the spirit of Canada and.... I'm just speaking off the cuff. I don't have notes, so it's not very political and it's not very technical, but I—

[The Chair, Conservative, Rob Merrifield]

Never apologize for that.

[Debra Amrein-Boyes]

Good. Thank you.

I lived in Europe for 10 years. I'm also a Swiss citizen. I married a Swiss and lived there. I lived in the Swiss Alps. I learned to make cheese there. When I became widowed I moved back to Canada.

There are a few things that I learned through that. I learned that Canada is not on the radar of most people in the world. I travelled around the world, and I remember standing in line once on a Greek island to buy a ticket to go on a boat. Someone asked me where I was from, and I said, “Canada”, and he said, “Oh Canada. Canada is so banal.” I thought, little did he know it's such a wonderful place where everyone wants to be. We live the life that everyone really wants. We're so blessed in this country, because we're allowed to be pioneers and we're allowed to explore and to create and to grow. Living in Switzerland, I learned that if I wanted to be a farm-set cheese-maker, it's just so difficult. Everything's so nuts. So we have that opportunity.

I think it's a wonderful opportunity for people like myself and my family. We have a small family farm. As I said, several years ago when our kids left home and therefore most of our labour left home, we had to make a decision as to what we would do. My husband was an immigrant from England who started farming. He came in the 1970s with $75 in his pocket and worked his way to own a farm. This is possible in Canada, which is wonderful. There's that pioneer spirit. We're a country of many immigrants and wonderful blends of cultures. We're so blessed in that way. We had to make a decision. Do we sell out? Do we expand taking on more debt? Do we diversify? You come to that point where you have to do something.

We're within the supply-managed sector of dairy. The circumstances at the time were difficult in the sense that there was a response to consumer demand among the processors for lower butterfat in milk. It was difficult to make ends meet because there had to be some changes in the product. That also spurred on our decision to look into diversification. We felt supported along the way by the infrastructure, the systems. That's where we are.

We built the business up diversifying into cheese-making. We use the milk of our own cows. We changed our situation around so that we are not conventional dairy farmers anymore. What we found is that it's a very different perspective from the supply-managed farm that we were before, in the sense that we're in direct contact with the consumer now. We directly hear from our customers what they want. We directly respond to their demands, because we have to market our own products. What we have found is that hands-down the consumer wants to support local.

I was at a conference a couple of days ago on non-GMO. There was a survey done by Ipsos Reid at the behest of an organization from the Prairies. The one statistic that I brought along is that when it comes to the claims on packaging or products that have the highest motivational factors for purchasing, number one by a long shot is local. People want local products first and they want transparency.

I'm not afraid of CETA because I believe that in our situation as a small business we're close to the ground. We know and forge relationships with our consumers, with our customers. They know us. My husband delivers cheese to the city. He has his little cap on, and people see him on the street and recognize him. They want that connection.

All of you have to admit that you wish you could live on a small family farm. You really want that. My dad told me once that life is about relationships, and that we're living the life that everyone really wants. That's encouraging because there's a lot of work behind it, as you all probably can guess, or know.

We know our consumers. We know our customers. We know what they want and we can respond to that.

The agreement isn't finalized, but I know the numbers that are being tossed around are that there is going to be x amount of fine cheese or European cheese allowed in addition to what's already allowed into the Canadian market.

I believe—I could be wrong, because I haven't studied a lot of the numbers—that it averages out to be about a pound of cheese per person in Canada. A pound of cheese is something the size of this number seven we see here, and once you've eaten that pound of cheese, you still have a lot of time left in that year, so I'm thinking that the local cheese-makers are the ones who will actually draw you to them. Yes, that's what I think.

I believe that Canada is a wonderful place, with every opportunity, and also that we can make cheese just as fine as all those Swiss who think they're so great. I'm Swiss, too, so I can say that. As for the French, my youngest daughter graduated from McGill and is in southern France right now studying French. She was going to make something for a little get-together. It was a German pretzel thing that she was going to bake for a little potluck. One of the French girls said, “Oh, those poor Canadians, always trying to do things that other people do better.”

[Voices]

Oh, oh!

[Debra Amrein-Boyes]

My daughter phoned me. She was so distraught, and I said, “Just tell her that Canada is a wonderful blend of every culture and we do everything well.”

I'm not worried about competing with the European cheese. I've eaten some terrible cheese in France, and I've eaten some wonderful cheese in Switzerland even though the Swiss need to understand that cheddar is a wonderful cheese. It really is. In the fall, when you really want a McIntosh apple and a piece of cheddar, and you live in Europe, you can't get it. You really want it, but they ask, “Why would you want that?” Cheddar is a wonderful thing.

So I think it's time that Europeans found out about us. I also think that expanding the market in this way is one way to allow agricultural families to stay on the farm, because it is difficult. We're now in the process of transitioning our farm to one of our daughters and her husband—she's just made the big decision this week to give notice at her real job—and we feel confident that we can expand the business and also that we have consumers who want good-quality local food.

Forging relationships with local communities and helping to build the local community, that's what we do. I have only eight staff in my little creamery. We process about 1,500 litres of milk a day. We could say that's seven days a week. That's cow and goat; we added both because there's consumer demand, which is good for us. We can add what the consumer wants. We can look at ways of expanding that. I think that will guarantee the grandchildren on the farm, and I think this can be a century family farm again one day.

As far as agricultural products go, I really want to support the.... I always say that if we're getting all our food from China, or Mexico, or wherever, and one day there's a political crisis, or a geographical, geological, or whatever crisis, can Canadians, because of that and because of economics, end up starving when we can produce everything we need and the world needs?

I grew up on the Prairies, like I said. I remember in the sixties seeing pictures of those mounds of wheat on the docks in India—remember that?—and that was Canadian wheat. We were so proud to feed the world, and now.... Sorry. I love being a Canadian farmer. I think we are grassroots. I think what we have to do and offer and the fact that we have the opportunity to expand our markets....

We're only provincially licensed at this point in time, but I think that's something the federal government can work on: taking down those barriers between provinces. We have demand for our cheese all across Canada, so let's do it.

[The Chair, Conservative, Rob Merrifield]

Thank you very much.

I personally relate so well to your story, in a way, in that I grew up on a dairy farm and we had a processing plant, and we made all the products as well.

[Debra Amrein-Boyes]

And you escaped.

[Voices]

Oh, oh!

[The Chair, Conservative, Rob Merrifield]

Yes, that's right. I went into politics. It was a pathetic thing. Don't do that.

[Debra Amrein-Boyes]

Don't worry.

[The Chair, Conservative, Rob Merrifield]

Canada needs more of you. I love the optimism and the opportunity that you see. It's great.

We'll now move to you, Sven. The floor is yours.

[Sven Freybe, President, Freybe Gourmet Foods]

Perfect. That's lovely. You will find some interesting similarities with what I'd like to say.

Unfortunately, I did prepare notes, so I will have to stick with them probably.

As mentioned, my name is Sven Freybe. I'm the CEO of Freybe Gourmet Foods. I'm the third generation in Canada, and the sixth overall within our family to be involved in the business. Similar to what Debra just stated, we had to make one of those decisions, as she put it, in this past year. We decided to sell our family business as opposed to trying to continue it, so I can offer some interesting perspectives behind that as well.

We manufacture products like air-dried salamis, pâtés, sausages. Pretty much everything we do has its roots in products coming from Europe, specifically Germany. Some of what we make remains very traditional. Other things are tweaked to fit the North American palate.

I am very thankful for the opportunity to come to speak to you today. Similar to what was mentioned, what I'm very passionate about is innovation within this country and why, in my opinion, CETA provides for excellent value and is a great step forward for our industry and country. It really should be the catalyst for us to be able to accelerate future trade deals.

I'm sure you are all quite well versed in statistics. I won't take too long on it, but Canada's meat-processing industry has an annual revenue of about $24 billion, $4.4 billion of which is for export. We're the largest manufacturing component in the country's food processing sector. In B.C., the food manufacturing sector, which is made up of small to larger businesses, is now the province's largest manufacturing sector with over $7.6 million in revenue.

As I mentioned, there are three areas in which CETA is of significant benefit to us. The first is around industry support. The second is the responsibility we have to consumers. Third is based on the growth opportunities that it provides. I'll just mention some of the numbers.

The reality is that ours is an industry of very high risk versus low reward, one that faces quite a disproportionate set of challenges, from food safety areas such as listeria and E. coli, animal health, mad cow, and now the PED virus, which has just come into Canada, to severe cost fluctuations with respect to fuel, grain, transport, land costs, as well as quite fixed perceptions, for example, around the safety of the meat itself. A CDC study put forward that twice as many instances of outbreaks of food-borne illnesses were to be attributed to lettuce in salads as opposed to meat products, yet the stigma within the marketplace is that meat is the dangerous product.

Trade agreements provide us with the necessary industry support to open up lucrative new markets, to increase the returns that we as manufacturers or as industry have, and to allow us to reinvest that within our marketplaces.

CETA is one of these agreements. The EU is the world's largest import market for agricultural and food commodities. According to the Canadian Meat Council, of which I was a board member for the last two years, CETA represents a potential export increase of over $1 billion in revenue, compared to an average over the past three years of $54 million. The significance of this magnitude of increase to our industry cannot be overstated because it really does allow for some stability within the otherwise rough waters, and it allows us to put forward reinvestment.

To contrast this with some of the delay in concluding the South Korean free trade agreement, since the signing of the U.S.-South Korea free trade agreement, Canadian agriculture and food exports to this market have decreased from $1.1 billion in 2011 by almost $800 million, or 72% in the past two years.

Our industry does require support. The fact that with CETA we have a signed agreement before the Americans do is a huge opportunity for us to get a larger footprint in the EU marketplace.

In our industry—I'm talking from a five years' perspective—the benefit of CETA is primarily for fresh meat producers and limited to producers such as ourselves. In fact, it will serve to increase the competition in our segment. My perspective on it, to be clear, is that as long as access is fair and balanced, where we're not giving up market rights to receive little in return, and likewise for subsidies—don't muddy the water—this is a very good thing as it allows for increased choice and selection as well as better pricing to Canadian consumers.

This leads me to the responsibility that I believe we have to our consumers. It is my responsibility to build and run a successful business that has a strong reputation built on great products, which differentiate from others and provide excellent value, in order to initiate repeat business. If any other company, whether from Canada or Europe or elsewhere, is able to do that better than me, they should. It is really the consumer who wins in that circumstance.

This forces me and our business to look deeper into our vision and to understand to reinvest in ways that allow for our growth and for our continued success.

We as a country often discuss the productivity gap. In my opinion, in order to become better, to become more efficient, we cannot be afraid of competition. I believe that we must embrace it. We have to learn from it, and we have to change as required.

As an example from outside of our industry, and Debra touched upon this briefly, CETA allows for more dairy product into our country. This is obviously my opinion, but actions that weaken our supply management system are in some ways a very significant positive step as they allow for greater competition and choice, and ultimately the consumer benefits. I'll touch upon that in a few minutes.

However, CETA really can build the Freybe business in two key ways. It's based on innovation and partnerships. To provide some perspective, Aldi, a chain that started in Germany and which I have quite a bit of respect for from a strategic perspective, is the third largest grocery chain in Germany. They have over 4,100 domestic stores all based in a marketplace that's less than half the size of British Columbia. European manufacturing systems are set up to supply this huge and demanding marketplace. It's something that they've achieved over the last 10 to 20 years, as these stores have taken over the market that's there. In order to feed that beast, they require extreme automation, streamlining, and consolidation.

The Canadian marketplace, which really is small in comparison, is not attractive enough to them in order to create unique innovative products for our marketplace. They're not able to customize for us what we can customize for our marketplace. As a domestic producer, this is where we're always in the best position in order to innovate and design products that meet our needs better than what they're able to provide.

To be clear, Europe is not a target market for Freybe. It makes very little sense for us to manufacture German products in Canada just to send them back to Germany. Germany has the lowest food basket costs within the EU and it's extremely competitive. However, my focus and responsibility is to develop great innovation processes that allow me to borrow ideas from Europe and make them a better fit for North America.

We are, however, in a great position to utilize CETA to create partnerships. That's the part that excites me quite a bit. While I mentioned our market is generally too fragmented for them to allow for these small and unique items, it's perfect for them to sell a focused portfolio of products, products that they are great at and able to manufacture in large volumes and are unique to this marketplace perhaps. In the past six months we've begun relationships with at least two companies within the German marketplace to really understand how we can work together, either by having them manufacture products for us within Germany and we sell them here, or we just sell products here on their behalf. The value for them is that we provide the knowledge and the expertise on the ground here, and we provide for them the gateway to the U.S. marketplace. This becomes a win-win for both of us in that these partnerships allow us to provide a greater choice to the marketplace, but it allows us to grow, and that's quite critical.

Ultimately Canada is a nation of exporters. It's in our DNA. In order to secure our future growth, it's my opinion that we have to do all we can to cut down any barriers that prevent competition and innovation.

CETA for me is a big win and now that the delicate task of years of details is under way, we need to solidly set our sights on what is probably the next big deal for us, especially in this marketplace, which is the Trans-Pacific Partnership. The U.S.A. is already quite a bit ahead of us in this venture in developing the framework and the conditions for the TPP. I believe that Canada must be a very vocal contributor, not afraid to stand its ground. We must be a very vocal contributor. We appreciate and require the continued support, as with CETA, from the Canadian negotiators that were able to ensure a commercially viable program moving forward.

As businesses, we're not allowed to stand still. We require a trade mandate that grows with us, that opens doors and provides us with growth opportunities.

Briefly, I have a few words of caution. As mentioned, trade negotiations have to be balanced and fair and cannot allow for any one-sided access into a marketplace. There are numerous examples within the meat industry, and I'm assuming within the food industry, of differences in such things as food labelling laws, naming regulations, as well as food safety limits and regulations in place. These details are very critical, as what may appear to many people to be a minor difference could in fact be quite a significant cost and therefore a market benefit.

One example comes from labelling. Dual-language labelling is obviously mandatory in Canada for both products manufactured here and those imported into the marketplace. However, the reality is that this is not enforced in the market as can be seen in the case of numerous U.S. products that utilize English words only that potentially have phrases such as “all natural”, which we may or may not be prevented from using.

The point is that the cost of producing and maintaining a dual-language labelling system is significant and real. So in an industry such as ours with tight margins, those who don't have this requirement have a price advantage over us. I have one last “ask”, which is that I strongly urge the government to be cautious with respect to trademarks and geographical indications. There's no reciprocity in CETA as it relates to generic and trademark GIs.

I want to ensure that European-origin products cannot be marked as superior to Canadian products simply due to their origin. Freybe has won over 600 medals, more than 425 of them gold, over the last 40 years in sausage-making competitions in Germany. So these are the Olympics of the sausage-making world. That shows that what we manufacture is on par with the best of the best in Europe. We've been using names such as “Black Forest ham” and “ Thuringia bratwurst”, which is where we come from in Germany, for years. We believe it would be wrong to make Canadian consumers feel that just because something is coming from a German region as opposed to a Canadian one that it is superior.

Thank you very much for your time.

[The Chair, Conservative, Rob Merrifield]

Thank you.

Actually I feel proud to be a Canadian and to have great champions who can compete internationally here testifying before the committee. That's great.

We will move to our questions and answers.

Madam Liu, the floor is yours.

[Laurin Liu, NDP, Rivière-des-Mille-Îles, QC]

Thank you for your testimony.

Debra Amrein-Boyes, I'm lucky enough to live in a riding in Quebec near Oka, where we produce Oka cheese. So I definitely understand the benefits of having a rich sector of artisanal and local cheese producers. I think we should do everything in our power to make sure that you thrive and that you do your best in Canada.

My first question for you is about your access to European markets. We know that unfettered access is limited to dairy exports that are considered to be unsubsidized, but we know that in early 2000 a WTO panel ruled that any export from Canada that was sold below domestic price was considered to be subsidized. So in fact with the prohibitions on using export subsidies in the EU, Canada wouldn't actually be in a position to benefit from the opening of the EU dairy market. Is that something you see from your side as well?

[Debra Amrein-Boyes]

As I underlined before, I believe that Canadians want to buy local. As you mentioned, there is a lot of concern among artisan cheese-makers that they'll have too much competition from imported European cheeses. Rather than focusing our attention on being able to export into the European market, I think it's more valuable for small Canadian artisan cheese-makers to have support from the infrastructure of local government and the Canadian system to help them continue on.

Our farm is a licensed producer of milk, and that has to go through the supply-managed system, which is fine. I'm a processor. We have two companies on our farm. My husband is the farmer, and I'm the cheese-maker. So we do both. We work together, but it's the processor who's selling the milk. So if we understand that the processor—whether it's the small artisan cheese-maker or a larger processor—is the one actually putting the product in front of the consumer, then if there's support for the processor as well as increased awareness of the value of agri-tourism for those who are interested in going out to the farms to actually explore what the Canadian farmers are doing, I think there would be increased support for Canadian farms. Even the small producers have to jump through the same hoops as the big ones. We have to have the same level of sanitation, the small level of food safety, the same hazard plans. We have to have sampling and testing of our products in the lab just as the big ones do, but we don't have the margins that the larger ones have.

We in our little town of Agassiz pioneered the circle farm tour program that has now spread across the Fraser Valley. It's extremely valuable. It brings people out to the farm. So our direct sales to consumers are very valuable.

[Laurin Liu, NDP, Rivière-des-Mille-Îles, QC]

I definitely agree with you on that point. I also agree with you on the point that we should do everything we can to encourage the purchasing of local cheeses and encourage our local cheese industry. What CETA would actually do is it would give the EU an additional exclusive access of 32% of the current fine cheese market in Canada above and beyond existing generous access. So this would actually, I feel, penalize small artisan cheese-makers such as yourself and the ones near my riding and across the country. We know that exporting European countries often have fewer, much larger companies due to the climate and other costs, transportation and social costs. The cost of producing and processing milk in Canada is higher, as you might know.

It seems like Canada would actually be at a disadvantage in this considering what's included in CETA at the moment. We also know that consumers might not even see lower prices in buying European cheeses as the vast majority of European Union cheeses already come into Canada with little or no tariffs. So it wouldn't be a good thing for producers like yourself, but consumers also wouldn't see any benefits in this deal. I wonder if that's something that you're concerned about as well.

[Debra Amrein-Boyes]

Once again it's the consumer who's buying the product. If they're encouraged to buy one product over another, or if they're allowed to do comparisons and Canada's Canadian cheeses come out on top of the comparison, or if there's a lot of work done to support local and to encourage people to buy local I think that.... I mean I know in cheese shops, there's one I just heard about this morning in Calgary, people go in and there are 70 or 80 different kinds of European cheeses and the customer said, “But don't you have any local cheese? We want to support local.” So if that's supported then the threat of incoming European cheeses isn't as great because it's the consumer really who chooses.

[Laurin Liu, NDP, Rivière-des-Mille-Îles, QC]

My next question will be for Mr. Freybe. I would like to know what the tariffs that you currently face are.

[Sven Freybe]

Zero. Currently there are none.

[Laurin Liu, NDP, Rivière-des-Mille-Îles, QC]

So after CETA those tariffs wouldn't change.

[Sven Freybe]

In our segment there's no change. There's a change to fresh meat being exported to Europe in terms of the allotment, and there are some minor ones in terms of canned meats and such with import duties that will be dropped. In our case it doesn't impact our business.

[Laurin Liu, NDP, Rivière-des-Mille-Îles, QC]

Do you have an estimation or a forecast of how many jobs you'll be creating from CETA?

[Sven Freybe]

It would probably be quite speculative in nature. The food industry has relatively flat growth, which is part of its strength as well at times. It provides for stability. So it's very difficult for me to be able to say how much would come specifically from CETA.

[Laurin Liu, NDP, Rivière-des-Mille-Îles, QC]

The same question to Ms. Amrein-Boyes. Do you have an idea of how many jobs will be created from CETA?