Thank you, Mr. Chairman.
Dairy Farmers of Canada welcomes the opportunity to participate in the committee's study on the Canada-European comprehensive economic trade agreement and the effects of it on the Canadian agriculture sector.
Certainly l don't have to introduce DFC, as we have had the pleasure of appearing before this committee on a number of different occasions. However, l want to highlight that DFC leads generic dairy market development in Canada with an annual marketing budget of $80 million, which is collected from dairy farms across Canada.
The domestic cheese market has been a priority market segment for dairy farmers, with an annual strategic investment totalling $30 million dedicated to developing this market across Canada. This investment both sustains and grows the category. Studies have proven that without this yearly $30 million investment, market share would rapidly erode.
With your indulgence, Mr. Chair, I would like to repeat that. The domestic cheese market has been a priority market segment, with a yearly strategic investment totalling $30 million dedicated to developing this market across Canada. This investment sustains and grows the category. Studies have proven that without this yearly $30 million investment, market share would rapidly erode.
We are proud of the dairy sector contribution to the Canadian economy. We consider ourselves job sustainers, providing stability in the economy and supporting our rural economies. In fact, the Canadian dairy sector increased its number of Canadian jobs from 2009 to 2011 to just over 218,000. It should be noted that the Canadian dairy industry also contributes annually more than $3 billion in local, provincial, and federal taxes.
Along with fellow Canadian dairy farmers, I reacted strongly to the news of the excessive access that was given to the European Union, in particular in the fine cheese segment of the Canadian cheese market. The access granted to the EU will have major impacts on the Canadian dairy industry, much more significant than what is being reported. Allow me to explain.
The EU receives an additional tariff-free access of 18,500 tonnes—16,000 tonnes of “high-quality” cheeses, which is a term used by the EU; 1,700 tonnes of “industrial” cheeses; and 800 tonnes under the existing TRQ. This is over and above the already 13,471 tonnes the EU already has under the Canadian cheese TRQ.
This gives them an additional exclusive access of 32% of the current fine cheese market in Canada, over and above the existing generous access. The EU access will then total 31,971 tonnes, or 7.5% of the Canadian cheese market. Imports from all countries move from 5% to 9% of total Canadian cheese market.
The loss to dairy farmers is real. The additional access is equivalent to a 2.25% cut in farm quota, representing a farm income loss of nearly $150 million a year. To put that into perspective, the projected loss from the additional access given to the EU is the equivalent of the entire milk production of Nova Scotia.
In total, the estimated impact to dairy farmers and cheese makers is the loss of the domestic market valued at $300 million annually.
As you well know, supply management rests on three fundamental pillars: production management, predictable imports, and farm pricing. The ability to predict imports is critical considering that dairy farmers discipline production to ensure that domestic demand is met without creating unnecessary surpluses.
The new increased access to the EU into the Canadian cheese market and importation of MPIs, or milk protein isolates, will require predictable planning to ensure that they do not disrupt the domestic market planning and delivery of milk commitments to Canadian processing plants that employ Canadians in communities across our country.
While we have tabled a more detailed brief, l would like to address some of the anticipated negative impacts on the Canadian dairy sector as a result of the CETA deal. All of these could result in unpredictable imports into the Canadian dairy sector if left unattended.
First, the deal creates new categories of import quotas for industrial cheese versus “quality” cheese, which remains undefined.
Second, there will be a lack of predictability on what will be imported. Based on the current level of imports from the EU and the significant portion that is fine cheese, the impact, depending on the cheese that may come into the Canadian market, is anywhere from 15% to 30%.
Third, the removal of the application to the EU of the over-quota tariff on milk protein isolate is eliminating the action taken by the federal government in 2007 to control the imports of such products through article XVIII.
The protection to be afforded by the EU on geographical indicators and their dairy products should be available within this country. That is effective enforcement and protection of our own standard of identity for dairy products, which is now non-existent.
I would also like to put into context the notion that Canada now has unfettered access to the EU cheese market. In the early 2000s, a WTO panel ruled that any export from Canada sold below domestic price is considered subsidized. Canada has also granted the EU GIs on five popular cheese varieties, further disadvantaging any Canadian exports to the EU. This puts Canadian milk and dairy products at a price disadvantage.
Mr. Chair, DFC is trying to work with the government to ensure that there is no impact on Canadian dairy farmers and cheese makers. In spite of all the negative emotion amongst Canadian farmers resulting from the CETA agreement, l, as president, along with the DFC leadership, am intent on engaging in constructive dialogue with government to mitigate the negative impact to our industry.
In conclusion, l ask that you take into consideration these potential negative impacts on the Canadian dairy sector, a sector that with three reinforced pillars can remain strong, stable, and good for Canada.
Thank you.