Agriculture Committee on Nov. 17th, 2016

[The Chair, Liberal, Pat Finnigan]

I call the meeting to order.

Good morning, everyone. We're pursuing our study on the agricultural policy framework.

Today we have the Canadian Agri-Food Trade Alliance with us.

Welcome.

Also, from Soy Canada, we have Jim Everson. Welcome to our panel this morning.

We will do the first hour. Madame Citeau, I will give you up to 10 minutes to do your opening statement, and then we'll go to questions.

[Claire Citeau, Executive Director, Canadian Agri-Food Trade Alliance]

Thank you.

Thank you for inviting me today to speak on behalf of CAFTA, the Canadian Agri-Food Trade Alliance, on the next agricultural policy framework.

CAFTA is the voice of Canadian agriculture and agrifood exporters. We are a coalition of national and regional organizations that seek a more open and fairer international trading environment for agriculture. Our members represent farmers, producers, processors, and exporters from the major trade-dependent sectors, including beef, pork, grains, oilseeds, pulse, soy, malt, and sugar sectors. Together we account for 90% of Canada's agriculture and agrifood exports, about $50 billion in exports annually, and economic activity that supports 940,000 jobs across the country.

I'd like to imprint on the committee today the importance of competitive access to global markets for our export-oriented sector. I'll begin by explaining why agriculture and agrifood matters to the Canadian economy.

Canadian agriculture and agrifood exports make a significant contribution to the Canadian economy. Canadian agriculture and agrifood exporters generate a direct and indirect GDP of $30 billion for agriculture and over $65 billion for food manufacturing. Our sectors represent 352,000 direct and indirect jobs in agriculture, along with 588,000 jobs directly and indirectly in food manufacturing.

The specific contribution of agriculture and agrifood exports in Canada is similar to the direct contribution of entire sectors, such as universities, financial investment services, and art, entertainment, and recreation. It is even much greater than the contribution of the aerospace manufacturing sector.

Our sector is inherently dependent on trade. We are by and large export-focused, as we export over half of everything we produce—that's half of our beef, 65% of our soybeans, 70% of our pork, 75% of our wheat, 90% of our canola, 95% of our pulses, and 40% of our processed food products.

International trade is crucial for Canadian agriculture and agrifood, as 58% of its total value is generated through exports. Over the last 10 years our exports have grown by 103%, from $30 billion to over $60 billion, boosting farm cash receipts by 61% over the same time period. To put this in perspective, 90% of farmers rely directly on exports. One in two jobs in crop production depend on exports, and one in four jobs in food manufacturing, so for our trade-dependent sectors, competitive access to global markets is simply not a choice but a requirement.

CAFTA welcomes the six overarching objectives and the six priority areas of the next agricultural policy framework, but believes that success will require commitments that extend much beyond the mandates of Canada's Minister of Agriculture and Agri-Food. Given that CAFTA works solely on trade issues, I will concentrate my remarks on the market and trade priority area of the agricultural policy framework.

Canadian agriculture produces what the world needs and is well positioned to continue to do so, but Canadian agriculture cannot be globally competitive without commercially viable access to export markets. The negotiation of access to foreign markets is an exclusive mandate of the federal government, and this cannot be undertaken by industry. We can't thrive if tariff and non-tariff barriers prevent us from being competitive with competitors who have preferential access because their governments have been better at reaching trade agreements, as is the case with Australia, which already has agreements with both Japan and China, and we don't.

Canada needs to do more to eliminate tariff and non-tariff barriers for agriculture and agrifood through free trade agreements. Agricultural tariffs on average worldwide are much higher than tariffs on manufactured goods. Agriculture also accounts for a disproportionately large share of trade disputes, increasingly with respect to SPS and TBT complaints. While the next agricultural policy framework emphasizes increased global competitiveness and trade, it is critical that resources available to departments and agencies in charge of trade negotiation and resolution of market access issues be increased to levels that would permit these organizations to fulfill their mandates adequately.

I'd like to share with you two of the most significant developments in global agricultural trade in recent years.

First, we've entered an era of competitive trade liberalization in which countries compete for preferential access through bilateral and regional free trade agreements. This even includes countries that are not traditionally known to be free traders, such as Japan.

In this environment, the growth and sustainability of our sectors depends on the timely negotiation and implementation of trade access to the markets that our competitors are also after. Canadian agriculture has already lived through this before, with South Korea, when a billion-dollar market was cut in half virtually overnight as our competitors—the U.S., the European Union, and Australia—had their tariffs eliminated, and we did not. We cannot afford to see this again.

We currently have two of these free trade agreements before us.

We strongly encourage CETA, the Canada-Europe free trade agreement, and we strongly encourage the completion of the respective legal and political processes related to CETA while completing the technical discussions so that the benefits can be realized in the form of commercially viable access for all Canadian agriculture and agrifood exporters.

The TPP is another free trade agreement. Eight out of the 12 signatories have already put the agreement in front of their parliaments. Two have passed it, and Japan passed it in their lower house last week. Canada needs to follow suit, ratify quickly, and send strong signals to key trading partners such as Japan.

Given the uncertainty on the TPP at the moment, it would seem wise for Canada to also prepare for plan B and revisit bilateral talks with countries such as Japan, among others.

Second, the proliferation of non-tariff barriers in agriculture over the past decades has significantly increased the number of market access barriers our exporters face as they try to diversify their export profiles. Agriculture remains one of the most protected sectors in the world. Barriers take the form of import quotas, export subsidies, countervailing duties, technical barriers to trade, sanitary and phytosanitary measures, licences, non-science-based decision-making on the safety of food products, bureaucratic delays, export restrictions, and so on.

There is evidence that TBT and SPS measures have a negative impact on export market diversification and that the contribution of non-tariff measures to overall trade restrictiveness is significant. At times, non-tariff barriers are far more trade restrictive than tariffs themselves. For farmers, producers, and exporters of all sizes, this has a direct commercial impact on export revenues, risk management, and predictability of operations.

Agriculture and Agri-Food Canada's market access secretariat has a priority list of over 300 foreign market access barriers to deal with. Given the characteristics of the prioritization mechanism, it seems unlikely that many of these issues will be addressed, yet doing so is essential for farmers and producers' businesses.

Our recommendations for the policy framework to contribute to a globally competitive agriculture and agri-food sector are as follows:

First, while the next agricultural policy framework emphasizes increased global competitiveness and trade, it is critical that sufficient resources be available to the departments and agencies in charge of trade negotiations and market access and that resources be maintained to levels that would permit these organizations to fulfill their mandates.

The policy framework should allocate proper resources to the functions in charge of negotiating free trade agreements, specifically the team of negotiators working on trade agreements such as the TPP, CETA, WTO, CJEPA, China, ASEAN, and India, as well as the next generation of future trade agreements. That's both within Agriculture and Agri-Food Canada and Global Affairs, which is the department that has the mandate for negotiating international trade deals.

The policy framework should also allocate proper resources to the functions in charge of implementing free trade agreements and maintaining and restoring market access. Typically, once free trade agreements are implemented, multiple non-tariff barriers arise. It is essential that adequate funding be allocated to the market access secretariat so it can continue its critical work in terms of minimizing technical barriers to trade and ensuring real access for our exporters. It must be noted that MAS, the market access secretariat, depends in part on the Canadian Food Inspection Agency, CFIA, to deliver technical support, so proper CFIA resources there would be a component of that resource allocation.

The policy framework should allocate proper resources to the network of Canadian representatives abroad, notably embassies and agriculture trade commissioners. Canada's ability to build a competitive industry depends in large part on how well the country opens doors abroad and builds and leverages relationships with relevant government and industry influencers and decision-makers.

Last, the policy framework should continue to support relevant ministers and senior officials in their activities to build and cultivate relationships at a high level in foreign markets. This is particularly critical to support trade and market development efforts for Canadian exporters in Asian countries.

In closing, our sector encourages a policy framework that expands our ability to competitively market our products in foreign markets. Ultimately, not just farmers and food processors benefit. Communities and urban/rural areas also do better when we have better access to countries abroad.

Thank you.

[The Chair, Liberal, Pat Finnigan]

Thank you, Ms. Citeau.

We will now hear from Mr. Jim Everson, from Soy Canada.

Mr. Everson, you have 10 minutes.

[Jim Everson, Executive Director, Soy Canada]

Thank you, Chairman.

Thank you to the committee for having Soy Canada here today.

I appeared before the committee not very long ago, so I thought I would try to truncate the introductory message about who we are and so on to say that Soy Canada is a value-chain organization. We represent the national soybean industry, including all of the producers across Canada of soybeans, the exporters of food grade and commodity soybeans, soybean processors, and seed companies.

The industry is growing rapidly in Canada. Farmers in large numbers are adopting soybeans as part of their crop rotation. We have 5.4 million acres of soybeans, which is an 82% increase over the last decade. This year we've had a 250% increase in our exports as a result of additional production in Canada. We now export 4.4 million metric tonnes, or roughly 70% of what we produce in Canada.

Our industry produces non-GMO food-grade soybeans, and we have an absolutely excellent record internationally for meeting very specific quality standards for soybeans that are going to be used for food products internationally, such as soy milk, tofu, soy sauces, and those kinds of products.

We also have a growing industry in growing what's called genetically modified or commodity soybeans, which are largely used in the animal feed industry internationally. The enormous growth in Asian meat production—swine, cattle, and so on—is what's driving this enormous demand for soybeans internationally, and Canada is increasingly feeding that market.

That's just a bit of a profile of our industry.

With respect to the agriculture policy framework, the importance of the framework, in my mind, really cannot be overstated. It's a really critical aspect of Canadian agriculture these days. It's very broad in scope, and Soy Canada supports the objectives and the priority areas that were identified recently in the Calgary Statement by the federal and provincial ministers. We support the continued emphasis on existing policy areas.

Growing Forward 2 was very, very good for the sector. It focused on markets and trade, innovation, and risk management. Those continue to be important, and continuing to improve in those areas is important. We also welcome a focus on climate, public trust, and value-added processing, which are part of the new Calgary Statement.

Today I'd like to focus on a couple of priority areas that Soy Canada has identified. They are mostly in the areas of innovation and market access and promotion.

Today's agriculture really is all about innovation. The development of new seed varieties, which addresses the needs of our customers globally and which provide new tools such as yield gain and disease resistance for our farmers, is a big Canadian strategic advantage. The new agriculture policy framework needs to continue to invest in research and innovation and continually improve on collaboration and efficiency of that investment. We should build on the success of the policy framework in this area. A lot of the growth of the industry recently is based on having that support from Agriculture Canada's policy framework.

Many of the leading soybean varieties, for example, that are grown by farmers today have been developed with support from the APF, supported by research stations and universities such as the ones in Harrow, Guelph, and Ottawa. Those are the Ontario-based ones.

The APF's research cluster program is an excellent example of how industry and government researchers can align their efforts for more effective and efficient results in research. It facilitates nationwide cross-institutional collaborations. This is really important when competing against much larger exporters. In the soybean sector, both in food soybeans and crushed soybeans, we compete against the United States and their enormous volumes and institutional support. Bringing together our industry and making sure the private sector, universities, and the public sector collaborate is the only way that we can get the kind of efficiency and alignment needed to compete in those kinds of markets.

The cluster groups have been a very positive force in that industry and have shown considerable collaboration in tackling a number of agronomic and genomic priorities.

For example, over the last six years, the Canadian Field Crop Research Alliance, which is a cluster group that supports soybean research, has been successful in releasing over 63 new soybean varieties that provide innovation for farmers and new quality characteristics for customers.

Publicly funded research has helped push the boundaries of soybean production in Canada, greatly facilitating growth in our industry.

Over the past 10 years, new short-season varieties that have been developed through this research have led to major production growth now in Eastern Ontario and Manitoba, two regions that have traditionally been a challenge for growing soybeans because they have shorter growing seasons. Our university-based researchers benefiting from APF support have also developed new shorter season varieties, as have our private sector breeders.

In June, Soy Canada brought together the national soybean research community to focus our efforts and to align priorities. We want to get the best from our national collaboration, including public and private researchers. The priorities developed through this approach will go into our sector's development of jointly funded research in the next APF funding round. The cluster approach to funding encourages this collaboration, so we strongly support it.

This strategy of innovation is aligned with our priorities for market development and market access. These linkages are an important consideration for APF design. In addition to being innovative to support competitiveness, we need to have predictable access to international markets. Seventy percent of Canada's soybean production is exported, and that's going to increase in the future with production increases.

Two priorities stand out when it comes to continued support for market development and market access.

First, continue to support existing APF programs that are working. One that I have in mind is the AgriMarketing program, which has helped our industry promote Canadian soybeans in export markets and maintain and secure market access. It's a jointly funded program. Government provides 50% support, industry provides 50% support, and it's an industry-led initiative to determine the requirements we have for promotion and for market access issues. It supports promotion in new markets and assists in resolving market access issues. AgriMarketing funding supports Soy Canada's outgoing and incoming trade mission program, market research studies, and other activities that help build and retain markets.

In February of 2016, Soy Canada was able to undertake its first mission to South Korea and leverage the advantages from the recent free trade agreement and make important business contacts. Last week we participated in Minister MacAulay's trade mission to China, an opportunity that put us directly in front of importers in our largest market. We see that program as being really very helpful and we look forward to it in the future, as well as improvements to it.

Second—and I'm saying things similar to what was in Claire's presentation—it's important that government focus its resources in key departments on market development support and market access. Our industry and other sectors of agriculture benefit from the support of Agriculture Canada's market access secretariat, the Canadian Food Inspection Agency, the Canadian Grain Commission, and Agriculture Canada's trade support staff in foreign missions.

Increasingly, we see these agencies straining to keep up with the demand from the sector for assistance in export markets. In many cases, this work is not substitutable by any other means. For example, CFIA has a unique role. It is Canada's official plant protection organization for negotiating with its counterparts around the world and applying sound science to trade-related issues. Its international role is important to agriculture market access, but we find it it very focused on its domestic focus, the safety of Canadian humans and animals and so on, which obviously is a critical mandate. However, its role in terms of science and regulation internationally is critically important to our market access, and there is no other government institution that can stand in and do that work.

Those are the key areas.

We also really welcomed the Calgary discussions around public trust and climate. Despite the excellent track record that our industry has on stewardship and safety, we understand that the public is increasingly calling for more information and transparency. It's important that the agriculture sector maintain the trust of consumers. It is up to our sector to explain and build awareness, and we share this responsibility with government.

The next program should assist in the development of vehicles to bring consumers, governments, and civil society together with the farm community. It should assist in developing certification systems and standards that demonstrate best practices being followed in the sector.

Likewise, Canadian agriculture has to do its part in addressing climate change, and we are. When it comes to the stewardship of our natural resources, we have a lot to talk about. Since 1981, Canadian soybean production land use efficiency has increased by 16%. Over the same period, farmers have improved the net carbon footprint per unit of soybean output by 11%, and soybean growers are using 26% less energy in crop production. However, we need to demonstrate this. We need to talk about it more and let Canadians know we are doing these things.

Canadians have concerns about the use of technology in the production of their food, and it's—

[The Chair, Liberal, Pat Finnigan]

Mr. Everson, can you please conclude? We're a little past the time, so maybe just give a conclusion.

[Jim Everson]

I will conclude by saying that we greatly support where the agricultural policy framework is going and the major priority areas that the government has outlined.

[The Chair, Liberal, Pat Finnigan]

Thank you very much.

Now we get to the question part.

Mr. Anderson, you have six minutes.

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

Thank you, Mr. Chair.

I want to thank our witnesses for being here today. These were great presentations with lots of content.

I'm thinking, Mr. Chair, that we should actually be asking our witnesses to come up with some costing information for each of these requests. As we go further into our hearings here, the grocery list seems to be growing. We've covered BRM requests and we've talked about market access, research, innovation, and technology. I'm not putting that on you, but this seems to be a bigger and bigger project for us. It will be interesting to see what recommendations we come out with. It's hard to know what the bill is on all of these things.

Ms. Citeau, I wanted to talk about foreign market access barriers.

There are 300 technical barriers, which has come up in our conversation a couple of different times. Do you have any suggestions about how we might deal more effectively with the non-tariff trade barriers and the technical barriers? Is it just a case of needing more resources, or is there something more that the government can be doing on that issue?

[Claire Citeau]

Overall, when technical barriers come up, they are handled directly by the CAFTA members who are facing these issues. It's not a CAFTA activity. It's not something that we work on.

I'd like to add that overall, the communication with our negotiators, officials, and those who handle trade issues is good. There is information that industry provides to the market access secretariat and the government trade negotiators. What may be improved is that at times there seems to be, in certain areas—and it's not across the board—a lack of appreciation for what the industry goes through and how dependent our farmers and producers are on trade. That may transpire into a lack of action or timeliness of response. It can always be improved upon.

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

Go ahead, Mr. Everson.

[Jim Everson]

I would add that I think it is a little about resources, as I indicated in the presentation, especially around science and technical issues.

The other thing I would stress is that Canada can really help in a leadership role, by ensuring that our major science-based international organizations are well funded and working better than they are. We need to have international protocols for dealing with some of these SPS issues—the International Plant Protection Convention, the WTO, the Codex. In the case of maximum residue levels—residues on grains going from one country to another—what's happening at the moment is that countries can impose import limits on those residues, so it's an important element. Rather than having one country have this system and another country that system and a proliferation of different maximum residue levels in every country, we need to bring the scientists together. These products are no different. The science in one country is no different from the science in another country. Why don't we have a single, effective international organization that sets an MRL that all import countries can get behind? That would be huge for us.

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

Ms. Citeau, do you think the TPP can succeed if the U.S. chooses not to participate? You mentioned that a number of countries have brought it forward to legislatures for approval. I think we would all like to see it go ahead. Can it go ahead without U.S. participation? If not, are bilaterals the only alternative to that?

[Claire Citeau]

I don't want to speculate about what will happen and I don't have a crystal ball, but in its current form the TPP needs both the U.S. and Japan to go ahead. That said, who knows? The 11 TPP countries could negotiate something on the side on their own, and maybe give two, three, or four years to the U.S. to join when they are ready to do so.

I think we want to have Canada send strong signals to some of its key trading partners, and Japan, in the TPP, is one of them. Japan is our third export market and a high-value market. The EU is negotiating free trade agreements with Japan, Vietnam, and Malaysia. Some of the other TPP members—Australia is one of them—already have a bilateral agreement with Japan. The more we wait, the more we fall behind.

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

Okay.

Mr. Everson, you talked about the strength of the American infrastructure in the soy industry. Are there some things that Canada can help with for the infrastructure? Is that the role of the APF? What are the infrastructure needs? Are they agronomic, more varietal development, transportation, or processing? What kinds of things does your industry need? Is the APF the vehicle for providing that?

[Jim Everson]

Yes.

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

How much would it cost?

[Jim Everson]

We compete in the soy bean sector directly with the U.S. The numbers come from my counterpart in the United States, the United States Soybean Export Council, which grows 110 million tonnes of soybean, so they're much larger. They have $12 million in support coming directly from the federal government for market access work and market promotion work. Overall, they have a budget of $42 million. They have a presence in 70 countries, where they have staff on the ground who are dedicated to the U.S. Soybean Export Council. We compete directly and well with U.S. exporters, but we find ourselves fighting against that kind of institutional power everywhere.

Yes, I think APF does do it. The support they provide for market access work, such as the AgriMarketing program, is the right answer that helps us—

[The Chair, Liberal, Pat Finnigan]

Thank you, Mr. Everson. We'll have to move on.

Thank you, Mr. Anderson.

Mr. Breton, you have the floor for six minutes.

[Pierre Breton, Liberal, Shefford, QC]

Thank you, Mr. Chair.

I also want to thank our witnesses. It is a pleasure to see you here again today.

Ms. Citeau, you spoke at length about the dependency of the agri-food and agriculture sector on international trade. You presented some impressive figures. You said there had been a 103% increase in the value of exports. They represent $61 billion, which is really a large sum. In addition, you said that one job out of two in the agricultural production sector depends on exports. There are some free trade agreements coming, such as CETA and the TPP.

I see these agreements in a positive light personally, but I would like to know how the industry is going to manage to export more.

How is Canada going to produce more to satisfy global demand?

[Claire Citeau]

In this area, Canada has abundant natural resources. Also, many enterprises are not functioning at full capacity. The important thing is to have access to markets so as to allow businesses to determine which ones are more advantageous for them, and what products they can export to which countries. We have the capacity to produce.

[Pierre Breton, Liberal, Shefford, QC]

What do we have to do to get there?

Do we have to cultivate more farmland, increase our productivity, or our ability to compete?

How can the government be a partner to industry in this context?

[Claire Citeau]

I think that the members would be in a better position to answer these questions, especially as concerns their sector. Generally speaking, I would answer yes to everything you mentioned. This involves productivity, research, innovation, access to markets and the resolution of market access problems.

[Pierre Breton, Liberal, Shefford, QC]

You said—and Mr. Anderson spoke of this briefly—that a priority list of more than 300 barriers to foreign markets had been drawn up.

Can you speak to us about the two or three most important barriers mentioned by Agriculture and Agri-Food Canada to date?

[Jim Everson]

To answer your other question, first of all, we tried in our opening statements to talk about priority areas where government can provide support, particularly on market access issues, because government negotiates trade agreements and government has the institutions that can reach out, such as the Canadian Grain Commission, Agriculture Canada, and so on. Those are really important roles. We can grow the crop, we have the most competitive farmers in the world, we have really great research support, but we need access to markets.

Among the market access issues, at the top of the list would be the maximum residue level issue that comes up from time to time when a country imposes a limit that is lower than we have in Canada. That can make it difficult for our exports. Then there are approvals of biotechnology products, such as seeds that have been cultivated in Canada with the assistance of genetic modification. Those products need to be approved in export countries. The processes for approval are sometimes very slow and difficult.

Then there are a number of issues that come up with respect to sanitary and phytosanitary standards when a country is applying standards in a way that Canada doesn't agree with. There needs to be discussion between our various scientific agencies. The whole issue around canola has been an example, and it has threatened billions of dollars of Canadian trade.

[Pierre Breton, Liberal, Shefford, QC]

Mr. Everson, there is a new priority sector: the environment. Do you think that that priority should be included in existing programs? If not, should it have its own program? Please give me your opinion on this.