Agriculture Committee on Feb. 13th, 2012

[Bob Zimmer, Conservative, Prince George—Peace River, BC]

What do you see as maybe the top five?

[Fred Gorrell]

Grains, and I think you're looking at canola, wheat, barley. I think you're looking at our pork, at our beef. Those are the ones with the large stats, but I'd also just emphasize that fruits and vegetables going between the United States and Canada are also a big part. Those are really the sectors we would be focused on, the primary products.

[Bob Zimmer, Conservative, Prince George—Peace River, BC]

As a follow-up to that question, what types of services are they interested in? You know we offer services as well in Canada. Are they interested in our services as well? If so, what services are they interested in?

[Fred Gorrell]

It could be, for example, when we trade in livestock genetics. It could be semen, embryos, or live cattle. Often, they are looking for service—that is, the expertise on artificial insemination or other.... So definitely that type of technical expertise that would go with the sale is often part of the package.

[Bob Zimmer, Conservative, Prince George—Peace River, BC]

Do you have any other examples other than cattle?

[Steve Tierney]

Generally speaking, if I may, our farming expertise and knowledge is world-renowned—our genetics, whether it's in the grain crops or livestock industry.

What's missing in a lot of these markets is the whole animal husbandry...rotational planting, dry land farming. So our low-tillage, zero-tillage agriculture processes are important knowledge. It's the whole gamut of how to get more productivity, whether it's the forage system going into animals.... We've done experiments in China that Mr. Gorrell has been key in. We're showing that a canola meal diet leads to an extra kilogram of milk per day. It's that kind of thing—it's the broad spectrum of expertise. That's what we have to offer in return for market access and it's why we're trying to build these integral relationships.

In a sense, they're looking for a turnkey package—the whole farm, the AI centre, the forage.

[Bob Zimmer, Conservative, Prince George—Peace River, BC]

I have another question for both of you.

I don't know if you can answer this, so just say if you can or can't. I wanted to know what the next high priorities are in terms of other nations that you're focused on. Can you say that to us? Could you list those as well?

Some of us know that, but for the benefit of the committee, can you say what those priorities are?

[Fred Gorrell]

Specifically for countries...actually, I did bring some copies of the market access report that was done by Minister Ritz and Minister Fast. I would leave that, if you people are interested in it, for the committee. I think it's interesting.

Our key markets, which we have reaffirmed with the industries.... I think that's a key point: every year we have an annual meeting where we meet with about 35 of the industry associations, and with the provincial and territorial representatives as well. I may forget one as I go through here, but very clearly you're looking at the Asian countries, Japan, China, Chinese Taipei, and you're looking at India, Russia, the EU, and the United States. Another large one is Mexico.

There is also a focus on a number of areas in Asia, for example, Indonesia. It would be one of our anchors, but we are looking in that whole geographic area. A big part of our focus will be the EU, but also the Asian countries in the coming year. That probably will continue into 2012-13.

[The Chair, Conservative, Larry Miller]

You have about a minute.

[Bob Zimmer, Conservative, Prince George—Peace River, BC]

Paul, I have a question for you.

Certainly, being more efficient as a department isn't a bad thing. Sometimes it makes us work better for the resources we have. I want you to comment on—for the sake of the committee again—how being more efficient affects our overall standard of safety in terms of the international way. Is that at risk with this leaner and meaner CFIA? Can you explain?

[Paul Mayers]

No. The approach the agency is taking is that as we look at how we do our business, the investment that has been made in inspection modernization.... The aim is to modernize how we do inspection, to take account of best practices elsewhere, and to innovate ourselves in terms of shifting from prescriptive towards more outcome-based, system-based approaches. The aim is to improve the outcomes rather than to see any reduction in terms of the safety outcomes for Canadians.

[The Chair, Conservative, Larry Miller]

Thank you very much.

With that, I'd like to thank all three of you for being here today, and I appreciate it.

To make the best of our time, if we could ask the witnesses to vacate as soon as possible—not to chase you away—and ask our other witnesses to please take the table as soon as they can....

Thanks again, gentlemen, for being here.

[The Chair, Conservative, Larry Miller]

I'd like to thank Mr. Wansbutter from Viterra and Ms. Sullivan from Canadian Agri-Food Trade Alliance. I always have a tough time with that; I'm used to the acronyms.

Ms. Sullivan, if you want to go ahead for 10 minutes or less, please do so.

[Kathleen Sullivan, Executive Director, Canadian Agri-Food Trade Alliance]

Thank you, Mr. Chair.

I have handed out a presentation, but I'm going to give a condensed version of it for your benefit.

Good afternoon. I'm Kathleen Sullivan, executive director of CAFTA, and I thank you for the opportunity to speak today about the importance of trade and market access for Canadian agrifood products.

Canada's agrifood sector depends on trade. We are the fourth-largest agriculture and agrifood exporter in the world. We currently export about $40 billion a year in agriculture and food products, and that's about half of all of our production. If we didn't have access to foreign markets, the structure and size of our domestic production and processing sectors would be radically impacted.

Agrifood exports are critical to the national, provincial, and rural economies across the country. Agriculture and food account for almost 10% of Canada's total merchandise trade. Across Canada, 210,000 farms are dependent on export markets. It is critical that we identify new trade opportunities for our agrifood products and that we protect existing and valuable export markets.

Trade must be a priority for this country, and as we look towards the future of agriculture policy in Canada, we can think that trade must be a major concern. For us, this includes three key priorities: first, continuing to seek opportunities to conclude a multilateral trade deal that will further liberalize agrifood trade; second, to actively and aggressively pursue meaningful bilateral and regional trade deals; and third, to address market access issues. I'll talk just very briefly about all three of those.

With respect to multilateral trade deals, around the world agriculture is subject to both domestic and trade policies that impact international prices and the flow of goods. These policies continue to create imbalances in trade and to establish trade patterns that are based on historical preferences or on bilateral trade deals rather than on natural competitive advantage. Only a multilateral trade deal, like that being negotiated through the WTO, can fully resolve these issues.

We recognize that the WTO is at an impasse right now. We do encourage the government, though, to continue to work with other WTO countries to try to breathe new life into those talks.

Second, bilateral and regional trade deals must be a priority. It is critical that Canada act aggressively and uncompromisingly to pursue our export interests around the globe. I have to say this government has put in place the most ambitious trade agenda this country has seen in a generation. We are now looking at the possibility of trade deals with lucrative markets that include the EU, India, South Korea, Japan, and the trans-Pacific partnership. These deals combined would increase agricultural exports significantly, but even more importantly, being left out of those deals, such as that with the TPP, for example, could have devastating consequences for our industry.

We strongly support the government's trade agenda and priorities, and we offer the following observations. First, it's critical that we prioritize our resources. Canada has world-class trade negotiators, but our resources are ultimately limited. We need to focus on FTAs that have the greatest potential to benefit our agriculture and food sectors and the economy overall.

Second, while our current trade agenda is impressive, we have yet to conclude a major trade deal since the NAFTA. It is imperative that we do so as soon as possible to demonstrate that we are serious about trade and that we have the resolve to conclude modern trade deals.

Third, our FTAs going forward have to be ambitious and comprehensive. Countries around the world are negotiating next-generation trade deals like the trans-Pacific partnership, deals that are broad in scope and substantive in depth and that address new and emerging issues.

Finally, FTAs have to go beyond tariffs. We need 21st century deals that address non-tariff barriers and that incorporate disciplines to ensure regulations and decisions that impact trade are based on science.

The final priority in a new agricultural policy framework needs to be market access. Regardless of our trade status with a country, market access issues continue to be a growing problem. Our trade relationships need to be stable, and decisions that impact trade need to be predictable, enforceable, and based on science. We strongly commend the government for establishing the Market Access Secretariat. Going forward we need to provide the secretariat with the appropriate resources and give it the authority necessary to manage issues across federal departments.

We also need to ensure that there is industry participation and expertise to work together with and to support the secretariat's activities, and we need to find longer-term solutions to some of the market access issues that continue to plague our industry. Trade is critical to Canada's agricultural producers and food processors. We welcome the government's strong approach to trade, and we, in particular, thank both Minister Ritz and Minister Fast for the efforts they have made to find new trade opportunities for our sector. We look forward to ensuring that trade is a key component of Canada's future agricultural policy framework.

With that, I look forward to your questions.

[The Chair, Conservative, Larry Miller]

Thank you very much.

Mr. Wansbutter.

[Richard Wansbutter, Vice-President, Government and Commercial Relations, Viterra]

Thank you, Mr. Miller.

Kathleen has covered off a number of the items. I'll try to accentuate some of those and give you a perspective from Viterra's vantage point.

I would like to thank you for this opportunity to address the standing committee to talk about Canada's development of Growing Forward 2 and about marketing and trade.

Canada's ability to access global agricultural markets is absolutely critical. World trade in agriculture and agrifood products continues to increase. A major source of growth is the increased demand for food, driven by population and income growth in emerging economies. For example, food imports in emerging economies such as China and India have grown by 300% between 1999 and 2008. As we see the forecasts, with world population to increase to 9 billion people by 2015, the demand for agricultural products and the need for trade will continue to rise.

Trade is extremely important to Viterra, a very proud Canadian company. We're headquartered in Canada, of course, and we have extensive operations across Canada, the United States, Australia, and New Zealand. We have a growing international presence. We have marketing offices in Japan, Singapore, China, Vietnam, Switzerland, Italy, the Ukraine, Germany, Spain, and India. We operate in three distinct businesses: grain handling and marketing, agriproducts, and feed and food processing.

In fiscal year 2011, Viterra exported approximately 15.3 million tonnes of grains and oilseeds and special crops; our food division processed approximately 1.3 million tonnes of malt, pasta, oats, and canola; and our feed division processed about 1 million tonnes of feed in Canada and about 700,000 to 800,000 tonnes of feed in the U.S.

The need for agricultural products is expanding, and the need for freer trade, easier trade, is absolutely essential. Notwithstanding the increases in demand for agricultural products, we face what appear to be ever-increasing tariff and non-tariff trade barriers. We face blackleg in canola in our shipments to China, salmonella in canola meal in our shipments to the United States, and we've had issues with Triffid flax in our flax shipments to the European Union.

Looking at tariffs, we face issues of differential tariffs on canola into China, with canola having 9% tariff, soybeans having 3%. We have limited access on low- and medium-quality milling wheat into Europe. We have a 30% applied tariff on canola and malt into India. And we see an over-quota tariff of 30% on malting barley into Korea. These are just a few examples of what we face as an industry on a day-to-day basis.

When we look at Growing Forward 2, and the development of a new policy, there are some key elements and considerations that we would put forward. I would like to note that our government has been instrumental in helping to resolve a number of our trade access issues, and I can speak from first-hand knowledge and first-hand impact. Of particular note is the creation of the Market Access Secretariat. We have relied upon them very heavily in resolving some of our trade issues. Certainly, the blackleg issue on canola into China was a huge one. We're a major exporter of canola into that market. We give credit where credit is due, and the Market Access Secretariat was on the ground almost immediately to address that issue.

While we continue to work with the Chinese on this blackleg issue, the Market Access Secretariat, along with support from the Minister of Agriculture and the Prime Minister, continues to ensure ongoing access to this market, and that's noted and appreciated.

On a go-forward basis, we would like to suggest or recommend that it's critical that the Market Access Secretariat be properly resourced and financed in the future. Trade issues will not abate, and I fear they will only increase, so we need the Market Access Secretariat to support the industry and protect the access we have.

Tariffs, export subsidies, and trade-distorting internal support programs are really best addressed through the resumption of negotiations and eventual conclusion of a World Trade Organization agreement. As has already been stated, we do recognize that those discussions have been in a hiatus, that some of our trading partners appear to lack the will to address these issues.

We feel that as with any policy, it needs to be emphasized that the best venue to address our tariff and subsidy and support program issues remains the WTO. Recognizing that the WTO is not likely to advance in the near future, we must continue to place our focus on addressing our agricultural trade issues through bilateral agreements. We've already mentioned a number of them. One of the most critical ones coming up under current negotiation is the EU. The government has announced interest in the trans-Pacific partnership, which we would certainly support. Scoping discussions, which we would certainly support, have been announced with regard to Ukraine as well as other countries, such as Japan.

Those bilateral agreements really are critical for our country as an exporting nation.

There needs to be continued advocacy for the development of rules and standards that lead to predictable science-based trade through participation in various forums such as the World Trade Organization, as well as the World Organisation for Animal Health, and Codex. Where appropriate, it is important to engage with other like-minded countries to resolve market access issues. What comes to mind on this one is a need for the development of a low-level presence policy to address the unintentional presence of products derived from biotechnology and non-GMO shipments. From our vantage point as an exporting company, this really is one of the most critical and pressing needs, as a low-level presence policy certainly can affect and address a lot of our issues in all our exported agricultural commodities. Again, we thank the government and we thank Minister Ritz for showing leadership on this file, for working with the various departments to advance a policy, and now to start engaging other countries in discussions in and around this. As I said, this truly is very critical to our industry.

I'll close with collaboration, which extends to close interaction with Canada's agricultural industry, and the industry, including producers, exporters, marketers, and processors, can provide useful insights when we deal with our federal counterparts on all the various issues, from a practical marketing point of view, and help provide up-to-date market intelligence to our government. I think it has already been mentioned that we certainly welcome and support the industry advisory group on market access and the value chain round tables.

I sit as co-chair with Fred Gorrell on the grains round table, and I believe these various round tables have proved to be of great benefit by providing a forum to discuss agricultural and agrifood market access issues. These initiatives should not only be maintained but expanded.

Those are my introductory comments. Thank you, and I look forward to the questions.

[The Chair, Conservative, Larry Miller]

Thank you very much.

We're moving to questions.

Mr. Allen, you have five minutes.

[Malcolm Allen, NDP, Welland, ON]

Thank you, Chair, and thank you both for being here.

Kathleen, maybe it's a typo, but help me with page 3 at your first bullet point, the last line. It talks about Canada-EU CETA, and Canada free trade. It says, “...if now signed could see us lose up to $1 billion...”. Should that say, “...if not signed...”?

[Kathleen Sullivan]

Yes, sorry. That happens when you work on a Sunday.

[Malcolm Allen, NDP, Welland, ON]

Reading the rest of it, I thought that has to be a “not”, not a “now”. It meant the opposite of what your paper said. So thanks.

Let me ask a question on the third bullet point. When we talk about ambitious and comprehensive...and other countries negotiating “next generation” trade deals such as TPP, could you give us a quick overview of what you mean by “next generation”? Are we engaged in next generation or are we still doing—my words, of course—older generation...?

[Kathleen Sullivan]

I think the Canada–EU free trade negotiations are really the best, and probably the only example we've seen of what I would consider to be a next-generation or 21st century trade deal in that they're incredibly broad. They cover every topic you could imagine—-labour mobility, investment, services, trade, and goods.

Trade deals used to focus traditionally on trade and goods. In that regard, they focused on market access; tariffs, quotas—very traditional things. But today, trade is about a lot more than just goods. It is about services, it is about investment, it is about labour mobility, and it goes far beyond tariffs to include non-tariff barriers—things that Richard has raised, such as low-level presence standards around the world for genetically modified material. How do we deal with ensuring that inspection standards are consistent from country to country? Non-tariff barriers, phytosanitary issues, have to be dealt with in these trade deals.

What we also have to do in these trade deals is find new and creative ways for dealing with emerging issues. In the past, what stopped us from trading was tariffs. Now what's stopping us from trading is non-tariff barriers—they've become new and more creative, and it's a different one every time. So we have to create mechanisms in our trade deals that anticipate new things that might come down the road in the future, that can deal with those and that also have really strong enforcement mechanisms attached to them.

Deals that are really broad and really deep are the next generation of trade deal we have to look at. Canada–EU is an excellent example. Even compared to NAFTA, it won't eclipse NAFTA economically, but in the range of topics covered, it's going to be a much broader deal than was ever anticipated in the North American Free Trade Agreement. In that sense, it's going to become the template for all trade deals that we negotiate.

Interestingly, it is also the most modern trade deal the Europeans have ever negotiated. It will become a benchmark for deals that both of our countries or regions negotiate going forward, but we have to finish it.

[Malcolm Allen, NDP, Welland, ON]

My next point is not finished: what we see at the end may not be what we envisioned at the beginning. That's the hypothetical. We'll wait to see what happens, because clearly the government will table it when it's done. My guess is that it'll be more comprehensive than what we've seen before.

There are an amazing number of ways to do non-tariff barriers. It reminds me of the sale of North American cars in Korea—an example of a non-tariff barrier is that your taxes are audited every year if you buy one. That's what happens to a Korean in South Korea who purchases a North American car in that country, but that's the auto sector.

When we talk about science-based—we bandy the term about, and it's my favourite term that folks use when they come here—it's always wonderful. It makes it sound as though we have lots of knowledge when we use it. I'm not saying that folks who use the term don't have knowledge; some don't, some do.

Based on that, what happens if you get into the multilaterals that Kathleen is talking about, rather than bilaterals, and the multilateral decision is based on science that we don't like? Now what? If the science becomes a matter of, “You know what, we don't want an LLP, and we don't want GM or GME or GMO”, whatever way we want to discuss that because that's the multilateral, what do we do next?

[Kathleen Sullivan]

There are international forums, whether it's the OIE or it's through the WTO or Codex, that establish standards for things like maximum residue levels. We don't have one for LLP, but we'd like to see one. Standards for BSE, for example, would be done through the OIE. Those are the appropriate forums to deal with this because those are science-based organizations. Then it becomes up to us as a country to work with those organizations to establish what we think are the appropriate standards.

Where it becomes a problem is when you have countries like Korea, for example, that don't abide by the OIE standard on BSE, and then we have to go to the WTO to challenge them.

What we don't want to see is a country-by-country decision on issues that are science-based. Science is science; it should be relatively consistent around the world, and we need to work through these international bodies to come up with an internationally agreed upon standard.

On LLP, for example—Richard can speak to this—on the low-level presence of genetically modified material, what we have right now is a hodge-podge around the world of some countries that accept a level of low-level presence, some that don't, and it frankly ties up our trade anywhere you turn.

These issues exist. As long as we have genetically modified materials in the world, which we do and they're growing, this is an issue that has to be dealt with. What we need to do is find some sort of international home that has a science background, where we can establish standards that are safe and that are credible, and then through that international body encourage its member countries to comply with the standards. Then we’d have recourse mechanisms. But right now we don't have that, and this is where we really need to focus our attention.

[The Chair, Conservative, Larry Miller]

Thank you very much.

Mr. Lemieux, for five minutes.

[Pierre Lemieux, Conservative, Glengarry—Prescott—Russell, ON]

Thank you, Chair.

I just wanted to follow up with Kathleen. You were basically saying that it's critical that Canada act aggressively and uncompromisingly to pursue its export interests around the globe. You were talking about bilateral and regional trade deals. I know you were also encouraging us to continue with the WTO, which we are doing, but as you know it's slow going. I think we really have put a focus on bilateral and regional deals, and we've been successful.

I would like to know, for you and your membership, is it good when Parliament—because they go in front of Parliament—passes these trade deals? Would you like to see more of this? Would your clients like to see more of this? Secondly, what kind of impact have these trade deals—the ones that have passed already—had on your clients?