International Trade Committee on May 12th, 2016

[The Chair, Liberal, Mark Eyking]

We're going to start our third panel this morning and continue our dialogue on the TPP.

Welcome, folks.

For this panel we have the Ontario Greenhouse Vegetable Growers, the Lambton Federation of Agriculture, and the Windsor-Essex Economic Development Corporation.

This is the sixth province we've visited, and we've got four more left, and the territories, for our dialogue on the TPP. We're also having many meetings in Ottawas besides, dealing with softwood lumber and the European agreement. Also, we're open to the public sending their thoughts through emails to our clerk here, and we're going to be putting them in our final report. Later this morning we're going to have an open mike, which we're looking forward to.

Without further ado, we're going to start with five minutes for each group, the first being the Ontario Greenhouse Vegetable Growers, and Mr. Gilvesy.

[George Gilvesy, Chair, Ontario Greenhouse Vegetable Growers]

Thank you, Mr. Chairman.

It's nice to see a lot of old friends in the room.

My name is George Gilvesy, and as chair of the Ontario Greenhouse Vegetable Growers, I'd like to express my appreciation for the opportunity to address you today.

Many people are surprised to learn that Canadian farmers are a dominant force in the North American fresh produce industry. This dominance extends from eastern Canada down to the southern U.S.A., principally east of the Mississippi, but Ontario greenhouse vegetable products can be found in all the lower 48 states.

Last year, Ontario greenhouse vegetable farmers exported 247 million kilograms, totalling $652 million, a 63% increase in value over the past five years. To put this into context, this month we expect to send the equivalent of 2,000 tractor-trailer loads of fresh cucumbers, tomatoes, and peppers across the border to the United States. This produce was grown in over 2,700 acres of hydroponic greenhouses, primarily located in southwestern Ontario, and reflects a surging expansion in our production capacity.

For the month of May we estimate that our greenhouse vegetable farmers will be harvesting a full truckload every 10 minutes. Each acre of greenhouse that is constructed represents at least a three-quarter to a million-dollar investment that replaces 10 to 20 acres of open-field production. Last year our farmers constructed an additional 150 acres of greenhouses, and this is a decade-long trend that shows no signs of slowing down. In the last five years, Mr. Chairman, our members have spent the equivalent of a new automobile factory in the province of Ontario. I think that's an outstanding number by individual entrepreneurs for us to recognize.

Our growers and marketers are extremely innovative and aggressive, an attribute necessary to effectively manage this growing production volume. We've developed new products, packaging, and customers throughout North America, and effectively compete within the produce industry's open trade environment. The ongoing construction of the Gordie Howe International Bridge is key to maintaining time-sensitive access to this vital fresh market.

The key objective of the OGVG is to diversify its export market beyond North America. We are in support of trade, in particular to the pan-Pacific region, and our world-class food safety traceability and production systems allow us to provide a unique and desired product in new markets accessible through trade agreements like the TPP.

Access to new markets alone, however, is not sufficient. The federal government can help our greenhouse farmers extend the North American dominance in new international markets by providing resources and expertise to help develop these opportunities. Of particular importance, we support the government's efforts to quickly lower phytosanitary regulatory trade barriers from Canadian fresh vegetables. Providing access is the first step towards developing new markets. The perishable nature of fresh produce also requires investing in resources and personnel in destination countries to ensure operational barriers to entry, such as inspection delays and clearances, do not impede our ability to provide these markets with the high-quality product they expect. Unlike other agriculture commodities, our product cannot sit in customs for a week while paperwork is being evaluated or inspection tests are performed.

Canadian fresh produce will remain excluded from Asian markets unless we can negotiate and enforce rapid clearance into destination markets. Greenhouse cucumbers, as an example, are not like canola oil or frozen pork. Every minute counts, and having the trade personnel and agreements necessary to enable rapid clearance is absolutely vital.

Accessible trade tools such as the Brand Canada initiative are a necessity when developing and maintaining new markets. OGVG strongly encourages the federal government to ensure that our local and international trade staff have the resources and support necessary to help us effectively market Canadian products internationally.

Ontario Greenhouse Vegetable Growers advocate for fair trade in all markets, domestic and international, both existing and proposed. Ontario greenhouse farmers need the right trade processes supported by the right trade remedies to maintain market discipline and give our producers the chance to succeed.

Open access to new markets, as well as continued maintenance of existing markets, is vital to the future of greenhouse vegetable farmers. Part of this initiative must be a resolution to current trade irritants, which dangerously expose our farmers to market access risks. So while it's very good to pursue these new market agreements, we have to make sure that we're maintaining the ones we've got.

One example of a current trade irritant—

[The Chair, Liberal, Mark Eyking]

Could you wrap it up in the last half minute.

[George Gilvesy]

One example of a current trade irritant would be the lack of reciprocity between the Perishable Agricultural Commodities Act in the United States and its requirement for a similar level of protection in Canada for their exporters. This ongoing irritant unnecessarily threatens our close trading relationship and should be dealt with as quickly as possible.

Another example would be the lack of an effective and cooperative North American perimeter strategy on invasive pests and diseases.

The Ontario Greenhouse Vegetable Growers are excited by the opportunity presented by the TPP and hopes to work closely with the government. We are proud farmers, proud of our farms and our products, and wholeheartedly invite each and every one of the panel to come and visit us for a personal tour at any time.

Thank you.

[The Chair, Liberal, Mark Eyking]

Thank you, sir, for your presentation.

We're going to move over to the Lambton Federation of Agriculture.

Gentlemen, for five minutes. Go ahead.

[Kevin Forbes, Member and Past President, Lambton Federation of Agriculture]

Thank you, Mr. Chair, members of the committee and staff for taking your time and allowing us to speak today.

I'm Kevin Forbes, the past-president of the Lambton Federation of Agriculture. I am currently operating our family farm, which is a 200 cow dairy.

The Lambton Federation of Agriculture represents over 1,200 farm families across a very diverse array of industries, from cash crop, beef, pork, dairy and poultry, to dairy goat, sheep, alpacas, fruit orchards, vegetable crops, vineyards, wineries, greenhouse production, and maple syrup.

First off, we would like to congratulate politicians, the negotiators, and staff for all of the hard work over the past decade to bring the TPP to fruition. This has the potential to be a monumental trade deal for Canada. With all of the agriculture speakers today, we are going to try not to be redundant.

The TPP has potential to benefit industries such as beef, pork, and some of the grains and oilseed sectors by gaining access to, most specifically, Japan and Vietnam. There is also some small potential for the sugar beet industry as it tries to develop itself within Canada, which Gary will talk about in a minute.

Unfortunately, as with all trade deals, not every industry was able to make gains. The supply managed sector did have to make sacrifices to make the deal successful. We feel that negotiators did an excellent job in mitigating the losses to supply management. That being said, we've been proud so far as an industry not to have to accept direct payment from the government, and we'd like to keep it that way going forward.

However, the truth now will be how the government helps farmers mitigate the concessions made to their industries. In an October 5, 2015, press release, it stated that it government would provide an income guarantee program over the next 15 years. There is also a quota value guarantee program, a processor modernization program, and a market development initiative.

It is incredibly important for the government to step up and follow through with these programs. The two most important ones are the income guarantee and the processor modernization programs.

For the dairy industry, it is a vital time for processor investment. There are many aging dryers in Canada for processing skim milk, and they aren't going to last forever. There is currently over $200 million dollars of product coming into Canada tariff free because our processors can't even produce this—and the product is diafiltered milk.

An investment in one plant in Ontario and one plant in the west would help alleviate the stress in our system and would also be enough to cause a quota increase itself, which would help almost eliminate the impacts of the concessions of the TPP. The side benefit of investing in processors is the windfall of jobs that can come into the economy, and not just for the benefit of farmers.

For poultry producers, they accept the concessions that were made but are looking for government to stop the current fraudulent practices, including importers being able to import unlimited quantities of chicken by simply adding sauce or other ingredients, by importing spent fowl and falsely declaring it at as chicken, and allowing companies to substitute high-valued import cuts with low-valued domestic cuts.

In summary, the LFA is generally in support of the TPP agreement and we look forward to its being ratified in the future.

Gary does have something to add to that.

[The Chair, Liberal, Mark Eyking]

All right.

[Gary Martin, Director, Lambton Federation of Agriculture]

Hi. I'm Gary Martin from southern Lambton County. I'm part of a farm there that's been in operation for 150 years as of last year.

I'll give you a bit of the history of our farm. Back in the fifties, my grandfather and father used to grow sugar beets. We still have some of the wagons kicking around the farm today. As for the history of the sugar beet industry, sugar beets had been grown locally well before 1900 and were processed in Michigan. In 1901 sugar processing plants were built in Wallaceburg, Dresden, Kitchener, and Wiarton. Further consolidations after those plants were built resulted in one company processing beet sugar until 1967, all the way from 1920. When cheap imported cane sugar took over, they stopped producing sugar from sugar beets.

Where are we today?

The U.S. has a protected sugar industry and bans sugar imports. The local producers today in Canada are allowed to export beets to Michigan, where they're further processed in Michigan. Beet farmers in Lambton County and Chatham-Kent are excited that the TPP will again allow for local sugar processing, with U.S. accepting imports. However, on further inspection, it appears that the TPP falls short in guaranteeing the increased market access to the United States that would allow for the investment and processing in Canada.

The main problem of predicting market viability for sugar is that sugar happens to be the most distorted traded agricultural product worldwide, with domestic exports and trade-distorting policies across the world, while Canadian processors cannot benefit from these policies.

Thank you.

[The Chair, Liberal, Mark Eyking]

Thank you.

We're going to move on to our last panel here, from the WindsorEssex Economic Development Corporation, Mr. Naidu.

Go ahead, sir.

[Rakesh Naidu, Interim Chief Executive Officer, WindsorEssex Economic Development Corporation]

Thank you, Mr. Chair, and honourable members, and a warm welcome from the Windsor-Essex region on behalf of all of us here. I also want to thank the MP for Essex, Tracey Ramsay, for the invitation. I'm delighted to be here.

Thank you for the opportunity to join you here today and share with you some of our views and perspectives on the significant impact of the Trans-Pacific Partnership on the region, but specifically on the automobile manufacturing sector, which is a key sector in our region.

As the leading economic development agency in Windsor and Essex county region, we are responsible for advancing economic development to grow and sustain prosperity in the region. Windsor-Essex is the manufacturing heartland of Ontario, and it is directly next to the busiest international crossing and trade corridor in North America, right in our front yard. We have serious concerns about provisions within the trade deal that would have a significant impact on automotive manufacturing not only here, but in south-western Ontario—and, for that matter, Ontario and the rest of Canada.

The Windsor-Essex region is a place that knows international trade. Just a few metres from us is the international bridge and the crossing. You can see trucks fly by on both sides. Every day, one-third of the total trade between U.S. and Canada crosses through this border, representing close to $500 million of goods daily. This is a place that thrives on international trade, and thrived because of NAFTA, and we know what international trade can do. We are all for international trade and we are all for free trade, as long as it is fair, and as long as it is on a level playing field.

We are an export-oriented economy. We import and we export, all the time, every day. In fact, we have 900 manufacturing companies in the region, and 90% of those export. We understand international trade and have benefited from it. Windsor-Essex proudly hosts two prominent OEMs, FCA Canada, the largest employer in the region with the greatest influence on our supply chain, and home of the renowned Windsor assembly plant; and Ford Motor Company's Essex engine plant. In addition, the Windsor-Essex region boasts an industry profile of more than 1,000 manufacturers and $3.3 billion in annual GDP in manufacturing, which is about 20% of the region's total. We have 90 plus auto and parts manufacturers, and in excess of 250 machine tool and dye and mould manufacturers, the largest cluster in North America. By the numbers, this represents almost 18,000 to 20,000 indirect jobs for our regional supply chain.

A TPP agreement must offer a level playing field for all. We're deeply concerned about the failure of the trade deal to align with our U.S. counterparts regarding the phasing out of tariffs, which was 6.1% earlier. As we know, the U.S. will be phasing it out in 25 years versus Canada, which is phasing it out in five years. This clearly places us in a further non-competitive situation, in addition to the existing lack of aggressive investment incentives, including increasing electricity and labour costs and the regulatory burden, and the challenges these present when competing with low-cost jurisdictions and automotive clusters in the southern United States.

Furthermore, the healthy Ontario auto industry clustered in southwestern Ontario is home to five OEMs, original equipment manufacturers, and over 10 assembly operations. We all know that there are ripple jobs in the supply chain. For every job in the OEMs, there are seven jobs that are created in supply chains, so this is a significant employment creator in the region.

Lately the industries are undergoing a major transformation because of new CAFE requirements—corporate average fuel economy requirements—and the technologies, such as added-value manufacturing, lightweighting, and autonomous and connected cars. This has resulted in increased pressure on our OEMs and suppliers to allocate additional resources to meet this new standard and stay current with the technological advancements. This is the reality.

The health of our OEMs is critical to all suppliers, the majority of which are SMEs. These small and medium-sized companies are headquartered here and are a single entity, without the benefit of an international footprint or resources to create a subsidiary. Any trade deal that places our OEMs at a disadvantage will cause a significant ripple effect on our SMEs and impose great risks to the directly associated jobs in the supply chain. SMEs are a significant part of manufacturing here, and the health of our OEMs is critical to all suppliers. Funding alone will not mitigate the proposed structural changes in TPP.

We stay closely connected to and in consultation with our industry associations. Our auto suppliers from the tool, die, and mould sector in Windsor have raised concerns surrounding the 35% content rules, which is down from 60% as it exists in NAFTA for automotive components—

[The Chair, Liberal, Mark Eyking]

Excuse me, sir. Would you wrap it up there?

[Rakesh Naidu]

—which is even lower than the 40% minimum content requirement for the key components such as engines and transmissions.

We agree with the assessment and concerns of that APMA SMEs within the manufacturing sector that do not have the depth to compete with larger tier 1 companies, and are at grave risk of losing jobs. The diminished percentage content will create a significant vulnerability, placing them at a competitive disadvantage straight across the globe.

We need the Canadian auto sector to achieve the same terms as the U.S. This is vital to maintaining our highly integrated auto sectors and the survival of the SMEs.

We ask that you consider all the aforementioned vulnerabilities, the regional disparities, the domestic policies, and negotiate a deal that is fair and free and open for all.

Thank you.

[The Chair, Liberal, Mark Eyking]

Thank you to all the panellists for their submissions.

We're going to start the questioning, and the Conservatives have the first five minutes. We'll start with Mr. Van Kesteren for five minutes.

[Dave Van Kesteren, Conservative, Chatham-Kent—Leamington, ON]

Thank you all for being here. We certainly would love to have visited the greenhouses, George. And believe me, we talked about it. It was a matter of time. I make that offer to any one of my colleagues repeatedly. It's something to behold and see, the largest collection of greenhouses under glass in North America, and an industry that's continuing to grow.

We're centring more on agriculture at this panel, although Mr. Naidu has reminded us of the challenges that we have with manufacturing. I'm going to spend a little more time on agriculture.

Since we were first elected in 2006, the greenhouse industry has had some challenges, there's no question. You and I have had many conversations, but I think it's safe to say that across the board the industry has seen some gains, and those gains, I would dare say, have been the result of good markets. You mentioned the importance of that bridge and how important it was to build, which you and I talked about, and the importance of the American market of 320 million people, who just consume a fraction of what Canadians do, which in turn is a fraction of what Europeans consume.

Maybe you could talk about the potential for growth and the reason that good trade agreements have to be in place and enforced in order for that to become a reality and us to continue to grow.

[George Gilvesy]

In those agreements you have to establish fail-safe positions sometimes. I would digress a bit to the U.S. one, because you've touched on our growth success in the U.S.

Our most recent growth took place with a dollar at par. One would question how that could have happened. I would have to say that it happened on the backs of some very hard-working growers who put out a world-class product and world-class services. At the end of the day, even with a dollar at par, we had a tremendous amount of growth.

The other thing, though, was a lot of that growth was based on the backbone of having the PACA regime in America that guaranteed that those growers were going to get paid for the product they grew. That cannot go understated.

Any good agreement or any good commercial environment must ensure the ability to be paid for what you produce. I think that goes for whatever commodity you're going with, whether it's TVs, nuts and bolts, or perishables like we do. We don't have that privilege in Canada. We don't have that assurance. We need those tools. We need those fail-safes.

To go back to your question, the fundamentals of how these agreements are structured are critical for the long-term sustainability and success of those programs.

[Dave Van Kesteren, Conservative, Chatham-Kent—Leamington, ON]

Of course, the government promised at the last election that they would pass that PACA agreement. So we need to put their feet to the fire and make sure this becomes a reality.

As a southern Ontario boy, I've watched farming and have been part of farming to some degree, too. This has been a theme that we've heard out west, about how important the commodity sector is. In this area, I think my recollection is correct that we're the largest corn producers in Ontario. I'm talking about Kent County, but we might as well talk about the area. I think we're second-largest in wheat, if not the top; in soybeans, likewise, I think we're number one; as well as in a number of others. But on those three commodities, how important is it for you to open up new markets, say, in the non genetically modified soybeans in the Japanese market? Do you see potential for growth there, Kevin?

[Kevin Forbes]

I guess any time you're dealing with a market the size of Asia or the trans-Pacific there's tremendous opportunity. As we know, grains and oilseeds travel very easily across oceans. Especially when you look at the conglomerate of counties within southwestern Ontario, which is a kind of breadbasket or heartland with soil and heat units that grow very diverse brands and types of grains and oilseeds, I believe there's tremendous potential.

[The Vice-Chair, Conservative, Randy Hoback]

You have 10 seconds.

[Dave Van Kesteren, Conservative, Chatham-Kent—Leamington, ON]

Just very quickly, Randy and I had a conversation about farmers and innovation.

George, you talked about the Dutch. How is the greenhouse industry working with innovation?

[The Vice-Chair, Conservative, Randy Hoback]

Can you answer in two seconds, George?

[George Gilvesy]

Yes: very well.

[Voices]

Oh, oh!

[The Vice-Chair, Conservative, Randy Hoback]

Mr. Peterson.

[Kyle Peterson, Liberal, Newmarket—Aurora, ON]

Thank you, gentlemen, for being here and for your informative presentations. We do appreciate it.

I have a few questions, and I'll start with you, Kevin. You mentioned supply management. I think you mentioned that if you had your way, you wouldn't have to accept any government compensation, or you would prefer not to. What sectors do you represent that are supply managed right now?

[Kevin Forbes]

Specifically I'm a dairy farmer. I have some speaking notes on the poultry industry, but my expertise, or whatever amount I have, is in the dairy industry.