Agriculture Committee on Nov. 19th, 2013

[André Roy]

I could add that the difference with the actual market, if we produce for value-added product, value-added beef, which is different from the one we usually produce...we have to get an agreement because this beef takes at least 20 months before being ready to sell in Europe. Before starting production for the EU you can be sure the producer will get an agreement on the price in order to accept to produce.

It's not like the situation whereby the producer is producing beef and tries to sell. Before starting we would have to agree. It's a value-added product and they already know that because in the provinces, even in Quebec, some producers make hormone-free beef and they have to negotiate because it's not the same price.

[The Chair, Conservative, Bev Shipley]

Thank you, Mr. Harris.

We have three minutes.

Mr. Caron.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Thank you very much. I have a little less time than the others, but we are getting towards the end.

Mr. Fitzgerald, I have a quick question. Something in what you said intrigued me. You said that using ractopamine is not really a problem any more after the free trade agreement was signed. Could you tell me why it is no longer a problem?

[Darcy Fitzgerald]

To my knowledge, mostly in eastern Canada as well, the use of ractopamine was mostly because we were competing with U.S. products. In the last year we've had some trade difficulties, primarily with Russia and the ban of that substance being used in their marketplace. So we've gone into a full program certification for our producers that goes back to feed mills and everybody involved in the production of pork to ensure that we don't have ractopamine in our system.

That's one fewer challenge that would be presented to us from the EU as well. So we're getting a very limited number of opportunities to be challenged.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Thank you very much.

I asked the question, actually, because last year, an article appeared in Quebec—I am not sure if it came out across the country—where a veterinarian working with pork producers estimated that 10% of his clients were still using ractopamine.

[Darcy Fitzgerald]

Yes. In western Canada, especially Alberta, B.C., and I believe all of Saskatchewan, we aren't using it now.

The interesting thing is the substance itself has never posed health threats or a food safety issue. But we do have one that may come across our border called carbadox, that we are not allowed to use in Canada, but it is a product that our American cousins are allowed to use. That product freely comes across our border, and someone might want to look into that one day.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Do beef producers use ractopamine? It can be used with cattle too.

[Bryan Walton]

Yes. I just want to also make a statement here.

It's presented that hormones are bad or somehow creating a health problem for consumers. That is not the issue. We have no problem with producers producing a product with a given production technology if it expands a category. But if that is used and juxtaposed against, we'll call it, conventional beef in a negative way, we have a problem with that. If the beef category is expanded through the use of proven technology, that's fine. We're okay with alternatives. But don't do it in a negative way.

[The Chair, Conservative, Bev Shipley]

Thank you, Mr. Caron, for taking a shorter time.

I want to thank Mr. Walton, Mr. Roy, and Mr. Fitzgerald for being witnesses on these hearings. They're important and your input was well taken and well presented.

We'll break for a couple of minutes while those witnesses leave and the next two come on, please.

[The Chair, Conservative, Bev Shipley]

We'd like to get rolling, folks. Thank you very much.

On the CETA and its effects on Canadian agriculture, in this second part of our meeting, I want to welcome to the committee Jean-Guy Vincent, chair, and Martin Rice, executive director, from the Canadian Pork Council. Also, from the Canadian Restaurant and Foodservices Association, we have Susan Senecal, chair of the board of directors and the chief marketing officer for A&W Food Services of Canada Inc., and Garth Whyte, president and chief executive officer of the Canadian Restaurant and Foodservices Association.

I'm going to move first to the Canadian Pork Council.

You have 10 minutes for opening remarks, please.

[Jean-Guy Vincent, Chair, Canadian Pork Council]

I will alternate between English and French in my presentation.

Good afternoon. My name is Jean-Guy Vincent. I am a hog producer from Sainte-Séraphine, in the Bois-Francs region of Quebec, near Drummondville. I am chair of the Canadian Pork Council. I am accompanied by Martin Rice, the council's Executive Director.

First, I would like to thank the members of the House of Commons Standing Committee on Agriculture and Agri-Food for inviting us today to discuss the comprehensive economic and trade agreement between Canada and the European Union.

The Canadian Pork Council serves as the national voice for hog producers in Canada. A federation of nine provincial pork industry associations, our organization's purpose is to play a leadership role in achieving and maintaining a dynamic and prosperous Canadian pork sector. Canadian producers recognize the importance of trade and welcome the Canadian government's efforts to expand economic ties with the European Union through this comprehensive economic partnership agreement.

Our sector depends on exports. Two thirds of the hogs raised in Canada are exported, either live or as processed products. These exports stimulate the growth of the pork industry in Canada. The strong global demand for Canadian pork has led to an increase in the value and the volume we export to an increasing number of countries around the world. The strength of the market and the opportunities for the Canadian pork industry have grown as a result and have added value for the entire hog carcass.

In recent years, our industry has faced major challenges related to its ability to compete on the international market. These have included the strength of the Canadian dollar, the price of grain, which has reached unprecedented heights, and the slowing of the world economy. However, we must not lose sight of the long-term interests of the Canadian pork industry. The global economy will continue to evolve and we cannot afford to neglect or interrupt our efforts to improve our access to markets for reasons that are purely political.

I would like to add that the industry has turned a corner over the past several months due to lower feed costs and a stable hog price. These two conditions have allowed current producers to establish a margin and stabilize the producer and production base in our industry. Producers are reinvesting in their barns and managing their debt.

We appreciate the government's determination to follow through and complete the deal with the EU. This deal is good for the hog sector, and it is in the best interests of Canada and the EU to sign.

Pork is a key component of the Canadian agrifood sector and provincial economies. Canada's pork industry is made up of more than 7,000 farms with cash receipts of $4 billion. Hog producers account for 8% of total farm cash receipts and are the fifth-largest source of farm income in Canada.

A study prepared by the George Morris Centre confirms that Canadian hog and pork production and exports are a major contribution to the Canadian economy. Based on Statistics Canada data, the report found the following economic impact of pork exports: 45,000 jobs at the processing, farming, and other supplier levels; $2 million in wages and salaries; $380 million in taxes, both income- and product-related; a gross domestic product contribution of $3.5 billion; and the economic development associated with hog production and exporting pork contributes $9.28 billion to the Canadian economy.

Increased market access allows our industry to choose where a specific meat cut will be shipped in order to get the best price. For example, Canadians like to eat ribs so much that ribs are one of the only cuts of meat that are not exported. We consume what we produce and import ribs from the EU and the United States to meet demand.

Since rib sales alone will not cover the costs of production, our industry looks to export markets to support the value chain. Canada is a globally competitive and successful producer and exporter of pork and pork products. Our industry understands that the key factor to sustaining our success is the ability to access a wide variety of markets. We support the CETA, and believe that the EU and Canadian markets complement each other.

We import pork ribs, and our industry sees an opportunity to ship ham and other like pork cuts to the EU. Global demand for Canadian pork has resulted in increased value and volumes going to a broader base of consumer countries. This has increased the market leverage and opportunities for the Canadian pork industry. It has provided the opportunity to generate added value to the whole carcass.

Our industry has had a European presence for over 15 years through SIAL, a Paris trade show, and Anuga, an agrifood fair in Cologne, Germany. Anuga is noted as being the largest in the world, with approximately 6,660 exhibitors and 160,000 visitors from some 100 countries. The deal has not even been signed and Canadian companies have noticed an increase in the number of visitors from the EU who are stopping at the Canadian pork exhibit.

The Canadian Pork Council has followed with great interest the progress in the work that began at the 2008 Canada-European Union summit, work to explore the possibility of forming an economic partnership. Given that there are around 500 million people in the European Union, the majority of whom consider pork to be their favourite meat, their meat of choice, we believe very strongly that this agreement will allow us to export more pork to the lucrative European market. This will benefit Canadian pork producers and processors, as well as provincial economies across the country.

Regionally, the pork industry can be found all over the country. This agreement will help all regions of Canada to keep current jobs and to create others. The potential of the European Union market is still unexplored. Europe is the only major pork-consuming area of the world to which Canada currently does not have full access.

Hindered by very high tariffs and restrictive administrative rules on imports, Canadian pork exports to the European Union came to only 415 tonnes in 2011, while, at the same time, the total of Canadian pork exports reached 1.1 million tonnes. The approximately 500 million people living in the European Union's 28 member countries consume more than 20 million tonnes of pork per year. That is almost 30 times the Canadian consumption. Despite that figure, pork imports to the European Union come to only 0.2% of their national consumption. By comparison, with our market wide open to pork products, Canada imports more than 200,000 tonnes of pork each year. That is almost one third of our national consumption.

We must point out that as we move forward, we are counting on the ongoing support and coordinated effort from the Ag Canada market access secretariat for its offers and CFIA. For livestock producers, the CETA is a positive step. But it is necessary for the government to properly coordinate efforts, aggressively explore trade opportunities, and assist our sector in developing measures to increase exports to the market.

The CETA represents a great opportunity for Canada. This deal also represents the first time in a long time that Canada is ahead of its major competitors in signing a new agreement. The new zero tariff access for pork, immediate free access to the EU for processed pork products, and much improved quota administration rules provide unique access for Canada and an advantage over U.S. exports until a deal is worked out between the U.S. and the EU. The potential is seen for hams and, to a lesser extent, shoulders. This should also help to boost the entire carcass value.

[The Chair, Conservative, Bev Shipley]

I have to bring that to a halt and let the questions maybe pick up what was left.

We're well over time. I want to have as much time for our members to ask questions.

I want to go to Mr. White or Madame Senecal, whoever wants to speak first.

[Susan Senecal, Chief Marketing Officer, A & W Foodservices of Canada Inc., Chair of the Board of Directors , Canadian Restaurant and Foodservices Association]

I'm Susan Senecal. I have the honour of chairing the Canadian Restaurant and Foodservices Association, along with my colleague Garth Whyte, who is the president and CEO.

Good afternoon, everyone.

We want to give you the Canadian restaurant perspective on CETA. Thank you very much for the opportunity to present this afternoon.

The Canadian Restaurant and Foodservices Association, which I will call CRFA for simplicity, represents a $65-billion industry. We spend $23 billion on food and beverage purchases every year. To give you some notion of it, that's over $900 million in poultry, as well as $2.7 billion in dairy. These are considerably large purchases. We have 30,000 members, and that includes chain restaurants, independent restaurants, chefs, and so on. We employ 1.1 million Canadians, and a further 300,000 indirectly. Many of those jobs, in fact the majority of them, are in the agricultural sector.

We are here today to discuss the CETA. We understand that once confirmed this trade agreement will eliminate thousands of tariffs, encourage foreign investment, promote movement of labour, and, in short, give Canada unprecedented access to the $17-trillion EU economy. That sounds like good news. But with the detailed negotiations still under way for the next couple of years, it's hard to say at the moment how all of the details of the agreement will affect the restaurant industry, its benefits, or potentially any issues that may arise with the implementation.

At the very least, we can certainly speculate that the CETA will allow Canadian restaurateurs to offer our guests a greater range of European food products, some for the first time, which should generate interest and build on the impact we have on the economy. I can also say without any hesitation that CRFA is in favour of allowing market forces to drive what food products and what prices are available on the market. We believe in customer demand; we live with it every day.

Until recently, market forces were maybe not as visible, but certainly today with the advancement of technology and the prevalence of free trade agreements, tariff walls and protected domestic markets are relics of a bygone age. This is a global environment. Nations are focusing their economic efforts on sectors where they have natural competitive advantage. We see that as a continuing economic trend that will be good for all economies.

In our agriculture business, 90%—over 210,000 farmers—already operate without protection of tariffs walls and earn their living through open global competition, with great results, either in exporting their products or selling domestically. Judging by their considerable export success, European sales of Canadian agricultural products, such as grains and canola, should quickly develop further once the tariffs are removed.

Other than the CETA, of course, Canada is exploring other trade deals, notably with the Pacific Rim countries. We see these nations also offering great opportunity, with a growing middle class and rising disposable incomes. That's all driving rapid inclusion of higher protein sources in the diet, such as meat. Unfortunately, as we see from the charts I have enclosed in the presentation, Canada's exports have not been keeping up with the rising global demand, and that's an impact of supply management. In regard to our supply management system, we expect the impact of the CETA to be felt most in our agricultural sector.

I'm going to turn things over to Garth to continue with our opening remarks.

[Garth Whyte, President and Chief Executive Officer, Canadian Restaurant and Foodservices Association]

Thanks, Susan.

We state this because supply management is becoming a system under increasing strain, suffering a growing number of end runs which threaten its continued relevance.

Overseas there is the rise of new, lower cost centres of production, such as Thailand and Brazil, in the case of chicken, that can better compete on the world markets. Here at home, increased amounts of supply management products imported to Canada in the form of pizza kits, spent fowl, or even milk are potentially substituting Canadian production. In our own industry, supply-managed products, not meeting the commercial requirements of our members, lead them to seek alternative menu opportunities.

We were just presenting to the Canadian Dairy Commission a couple of hours ago and we had a great conversation. We're finding that dairy is being priced off our menu.

Canada, through consumers and our industry, pays a high price for farm product produced under supply management rules. Domestic prices across the board are high relative to U.S. and other world prices. These sectors, meanwhile, are stagnant in terms of their economic growth and output.

In regard to agricultural supply management, what seemed like a good idea when these systems were established half a century ago has less relevance today and the system is much less effective. As part of a swiftly changing world, one in which government has stepped back and allowed industry and open markets to manage themselves and to decide supply and demand, price and quality, we believe it's time to modernize Canada's farm supply management system.

As one of the country's largest buyers of agricultural products, we have a vested interest in the continued success of Canadian farm products, and we want our country's agriculture sector to be economically strong. We also want to continue to be the source of thousands of jobs in the sector. An important reason for our position is that many of our members prefer to source their product locally. For reasons of freshness and logistics efficiency, all things being equal, they would choose the Canadian product every time over an import alternative.

We believe it's time to encourage in Canadian farmers a renewed sense of competition, innovation, and desire for economic growth, as well as an incentive to better respond to evolving market demand and consumer preference in our industry, as well as others, and to seize our share of the new export markets. We would urge government and the farm community involved to move to swiftly modernize supply management and begin the transition of these agriculture industries to operate on a more rational economic basis.

In the final analysis, we believe Canada has little choice but to do this. Protracted delay will only cause lost export opportunities, increased import substitution in our domestic market, and continued high prices for Canadian consumers and our members alike.

Canada and our individual farmers will find it increasingly difficult in the future to shelter behind those tariff walls that remain high. Butter is almost 300%; dairy is 250%. The value proposition represented by products from ever-developing and efficient overseas competitors will ensure their way into our domestic market. We're seeing it now. The best defence for all segments of the Canadian agricultural sector will be a robust offence.

There is little time to waste. Just as it's difficult for our farm producers to increasingly compete in our own domestic market versus imported product, our ability to compete in international markets is likely constrained by the cost and price structure created by the current supply management system. Canada is the last country in the world with supply management governing production in several of its major agricultural sectors. Countries that have abolished the system have typically done so in a transitional fashion. We are not saying to abolish supply management. We're saying we have to make some changes.

Federal officials are already reported as saying they will work with provincial governments on a compensation program for dairy farmers, for instance, should this group suffer financial loss from the CETA trade arrangement. This measure is prudent, but it could be the latest of a number of stopgap measures intended to preserve the integrity of supply management and plug the numerous emerging gaps that, over time, will make an already complex system even more so. Administrative burden and costs can only rise.

As representatives of an industry in which fierce competition among market players is the norm and a hallmark of the game, we advocate that the government focus on financial and business opportunities that the CETA will offer the broader Canadian economy, as well as the majority of Canadian farmers who already operate without the protection of tariff walls, and use this event as the catalyst for a serious reappraisal of the continued value of our supply management system.

Thank you, Mr. Chair.

[The Chair, Conservative, Bev Shipley]

Thank you very much, presenters.

We'll go to our first round, for five minutes, starting with Madame Brosseau.

[Ruth Ellen Brosseau, NDP, Berthier—Maskinongé, QC]

Thank you, Mr. Chair.

My thanks again to our guests for their testimony. This is a really important topic.

I have a few questions for the Canadian Pork Council representatives.

In Berthier—Maskinongé, the riding I represent, there are a lot of pork producers. In the regional municipality of Maskinongé, we have ATRAHAN, a major pork processor in the region. The company wins a lot of awards year after year. It processes about 1 million hogs per year and exports them to 50 countries.

Can you give us some more details about the positive benefits of the agreement with the European Union? Do you believe that the Canadian pork industry will face non-tariff barriers?

[Jean-Guy Vincent]

I feel that it will give a number of Canadian processors an opportunity to export to Europe. In Quebec at the moment, two companies are able to export their products, one of which is located in your area. I feel that this agreement with the European Union will really provide an opportunity for Canadian producers and processors to export their products to a market that is more stable than some that they have access to today.

In terms of tariffs, I will let Martin speak on that. He can explain in a little more detail the difference between today's tariffs and the fact that this agreement will be free from the tariffs that the industry has to deal with today.

[Martin Rice, Executive Director, Canadian Pork Council]

Very quickly, the current tariff situation on exports to Europe is 20% to 30%, effectively ad valorem tariffs, which is far too high a tariff for us to get any product into Europe. There are significant issues of having to get licenses and put deposits down that are going to be cleared away by having the quota administration moved to another department of the European Commission. This is what has happened in all their free trade agreements, with Chile, with Mexico. What it becomes then is a first-come-first-served system, the way Canada's quota system works. Canada's import quota system is quite transparent and it is basically, in most cases, first-come-first-served.

That's what will really change the game for us, that we can have access on those terms.

[Ruth Ellen Brosseau, NDP, Berthier—Maskinongé, QC]

Here in Canada, agriculture is done in a certain way and it is done differently in Europe. They have no GMOs over there and animals are treated differently.

Do you think that our producers will have to make changes and investments that will cost a lot of money? As you once said at a cocktail party—

we see the light at the end of the tunnel.

We agree that this is good news for the pork industry.

Could you just tell us about the difference between pork production in Canada and in Europe and whether, in your opinion, Canada is going to have to make changes?

[Jean-Guy Vincent]

On the whole, there will certainly be changes that we will have to make. The industry will also need help to be able to adapt to the new rules that the two parties will establish.

In terms of whether we can export our products right away, I know that, across the country, regardless of the province, producers and processors have the flexibility they need to adapt. Some producers are already operating to European standards.

There are so-called niche markets. In recent years, Canadian producers have made changes so that they are ready for the new competition. The difficulties that we have gone through in the last five or six years have made us competitive whether we liked it or not. Canadian producers and processors alike are ready to export their products to a number of countries around the world, including the countries of the European Union.

[The Chair, Conservative, Bev Shipley]

Thank you very much for your questions.

We'll go now to Mr. Lemieux for five minutes.

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

Thank you, Chair.

Thank you for being here today.

I want to follow up on the pork side. There is a wonderful opportunity here to move pork into Europe. I'm wondering if you could, perhaps, explain to the committee how the market here in Canada is going to exploit this opportunity to its maximum potential, particularly in terms of establishing Canada brand. Can you share with us some of the things that have worked in other countries? For example, in Asian countries where pork is sold, what is it that you do to encourage people in other countries to buy Canadian pork?

[Jean-Guy Vincent]

I feel that Canadian producers have quite an astonishing ability to adapt. We export to 100 countries.

One hundred is....

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

Reasonable.

[Jean-Guy Vincent]

That means that producers and processors have to adapt in 100 different ways. By comparison, the European market is a stable one. We were talking about ractopamine. Producers and processors quickly got used to an Asian market that did not want ractopamine, then a Russian market that did not want ractopamine.

Martin, do you want to finish the answer?