Agriculture Committee on Feb. 21st, 2017

[The Chair, Liberal, Pat Finnigan]

I call the meeting to order.

Good morning, everyone. We shall get going with our first meeting on the study of non-tariff trade barriers to the sale of agricultural products in relation to free trade agreements.

I would like to welcome our usual members, but we also have Ms. Georgina Jolibois for Madame Brosseau.

Welcome.

On the other side, we have Mr....

Mr. McGuinty, thank you for being here with us this morning.

[David McGuinty, Liberal, Ottawa South, ON]

Thank you for recognizing me.

[The Chair, Liberal, Pat Finnigan]

I was just having a Monday morning kind of a....

[David McGuinty, Liberal, Ottawa South, ON]

I have a tie somewhere.

[The Chair, Liberal, Pat Finnigan]

I was thinking of your brother.

[David McGuinty, Liberal, Ottawa South, ON]

Which one? I have five brothers. Be careful.

[The Chair, Liberal, Pat Finnigan]

Let's not go there this morning.

Also with us today for our first witness appearance we have, from the Department of Agriculture and Agri-Food, Mr. Frédéric Seppey, chief agriculture negotiator, trade agreements and negotiations, market and industry services branch.

Welcome, Mr. Seppey.

Also with us, we have from the CFIA, the Canadian Food Inspection Agency, Mr. Paul Mayers, vice-president, policy and programs branch.

Welcome, Mr. Mayers.

Finally, from Global Affairs Canada, we have Ms. Shendra Melia, acting director general, market access, trade agreements and negotiations.

Mr. Seppey, I understand that you will give us a 15-minute or so opening statement.

The floor is yours.

[Frédéric Seppey, Chief Agriculture Negotiator, Trade Agreements and Negotiations, Market and Industry Services Branch, Department of Agriculture and Agri-Food]

Thank you, Mr. Chair.

I appreciate the opportunity to be here today and speak to you in the context of your study of non-tariff trade barriers to the export of agricultural products in relation to Canada's trade agreements.

Let me first briefly set the context for Canada's agriculture and agrifood trade.

As you know, Canada is an export-oriented economy and was the fifth-largest exporter and importer of agriculture and agrifood products in 2016. With over half of our agricultural, and fish and seafood production exported, the sustained growth and profitability of the Canadian agricultural sector relies heavily on export markets and on Canada's continued competitiveness abroad.

In markets where we have negotiated free trade agreements, our exports benefit from preferential tariff treatment and the establishment of bilateral mechanisms that enhance our ability to effectively engage with our trading partners on issues of mutual concern. This puts Canadian companies on equal or more competitive footing with other exporting countries in accessing foreign markets.

In 2015, as a result of Canada's ambitious international trade agenda, 72% of Canada's overall agrifood exports were covered by a trade agreement that was either signed, concluded or in force.

Despite these trade agreements, our exporters continue to face a number of non-tariff barriers that can significantly impede the market access established through the elimination of tariffs.

Non-tariff barriers, also referred to as non-tariff measures, are a category of trade obstacles that include government interventions, other than customs duties and charges on imports and exports, that act as restrictions to trade.

It is important to remember that non-tariff measures are, in many cases, justifiable. In fact, some are, indeed, necessary to ensure imported food is safe, and that the agriculture sector and the environment are protected from the introduction of pests and diseases. Such measures become trade concerns when they are unjustified or overly restrictive.

From a trade perspective, our focus with respect to non-tariff measures is on ensuring that any measure adopted or maintained is necessary to fulfill a legitimate objective, is based on factual or scientific evidence, and is the least trade-restrictive possible. A non-tariff measure also needs to be consistent with international trade obligations.

Unjustified non-tariff barriers to trade can include a broad range of measures, such as import or export prohibitions or restrictions, discriminatory taxes, burdensome customs procedures, arbitrary application of trade rules, measures imposed to protect domestic industry, or measures not based on appropriate and evidence-based risk assessments.

Canadian exporters have faced, over time, multiple market access challenges related to non-tariff barriers imposed by trading partners. Let me give you a few examples of such measures to illustrate the significant economic and trade impacts non-tariff barriers have for the agricultural sector.

One example is country-of-origin labelling requirements, which become non-tariff barriers to trade that impose significant costs on the industry when they are mandatory and discriminate against imported products, as in the case of the country-of-origin labelling requirements imposed for beef, pork, and other commodities under the United States 2008 farm bill. They can lead to additional and costly requirements being imposed on imported products, such as segregation requirements that create an incentive for processors to use domestic products.

Another illustration is the recurring challenge faced by Canadian grains and oilseeds exporters with respect to approvals of products of biotechnology in export markets, notably genetically modified products.

In many countries regulatory regimes for the approval of genetically modified products are not based on science, nor are they timely, predictable, or transparent. In other countries, genetically modified products may simply not be authorized.

Delays in approvals of genetically modified products in major export markets have varied consequences for Canadian farmers. They can, for example, limit their access to beneficial, innovative agricultural technologies, as growers will hold off on using new products approved in Canada until they are approved in key export markets.

Related to international standards is the issue of pesticides, which are regulated by maximum residual limits on the agriculture or food product. Maximum residual limits regulations may vary from one country to another due to assessment methodology, consumption patterns, delays in regulatory approvals, or even a zero tolerance if no import regulation has been established. Differing pesticide regulations may be considered as non-tariff barriers if they have not been established in accordance with international practices.

To ensure the Canadian agriculture industry is able to compete on a level playing field, Canada uses a variety of approaches and mechanisms to prevent, monitor, and mitigate non-tariff trade barriers.

First, the World Trade Organization, or WTO, is the cornerstone of the international trading system. It provides the predictable, science-based trade rules upon which exporters depend to maintain market access. It also provides mechanisms through which Canada can address non-tariff measures that affect our export interests, including through recourse to dispute settlement.

Two agreements under the WTO are especially important in this regard.

The first one is the Agreement on Technical Barriers to Trade, which is aimed at ensuring that technical regulations, standards, testing, and certification procedures do not create unnecessary obstacles to trade.

The second agreement, the Agreement on the Application of Sanitary and Phytosanitary Measures, imposes disciplines on measures aimed at ensuring food safety and animal and plant health, allowing countries to take any measure necessary to protect their territories and populations so long as it is based on a scientific risk assessment or an international standard.

Common principles in these agreements include transparency—that is, informing countries of new regulations or regulatory changes and accepting comments on the regulatory proposals; the use of international standards; proportionality—that is, measures should not be more trade-restrictive than necessary; and equivalency—that is, countries should accept each other's standards when they offer an equivalent level of protection.

Canada is an active participant in the WTO committees on technical barriers to trade and sanitary and phytosanitary measures. We use these committees to advance policy discussions around the application of our regulatory approaches in collaboration with like-minded countries, as well as to raise, in some cases, specific concerns with certain measures imposed by other countries.

Another area is international standards. Science-based international standards also contribute to a transparent, predictable trade environment, reducing business risk and facilitating market access. The standards developed within international standard-setting bodies, such as Codex Alimentarius for food safety, the International Plant Protection Convention for plant health—i.e., phytosanitary—measures, and the World Organisation for Animal Health for animal health measures, are all referenced in the WTO agreement on sanitary and phytosanitary measures.

Rules governing non-tariff measures in trade agreements are generally based on standards established by these international organizations, and hence the application of these standards is generally deemed to be consistent with trade rules.

This is why Canada actively supports and participates in the work of international standard-setting bodies. Canadian involvement and contribution is achieved through various means, notably by embedding technical experts within the three bodies, providing funding to support standard development in areas important to Canada, and increasing Canadian engagement and participation within these organizations. For example, Canada recently provided $1 million in funding to support activities of the three bodies.

Free trade agreements provide Canada with opportunities to address new trade concerns, including non-tariff barriers. They incorporate chapters that deal with these measures and set out the international trade obligations countries must adhere to.

Overall, Canada's approach to free trade agreements is to include chapters and provisions that reaffirm and extend the obligations of the World Trade Organization, or WTO. Free trade agreements can also contain other non-tariff barrier mechanisms and measures that are not sanitary, phytosanitary, or technical trade barriers, strictly speaking. For instance, the recently concluded Canada-EU Comprehensive Economic and Trade Agreement, known as CETA, includes an engagement component to facilitate co-operation in the area of biotechnology.

The Canada-EU agreement also contains a chapter on regulatory co-operation, aimed at promoting potential areas for co-operation between Canada and the EU in developing new measures. By facilitating access to federal regulatory development processes, the parties expect to reduce the differences in their regulatory approaches, resulting in fewer barriers to trade when regulations are implemented.

Bilateral relations clearly transcend free trade agreements. Agriculture and Agri-Food Canada, in close co-operation with the Canadian Food Inspection Agency, Global Affairs Canada, and other regulatory partners, is working to maintain access to existing markets. The goal of the Canada-U.S. Regulatory Cooperation Council, for instance, is to facilitate closer regulatory co-operation between the two countries and enhance economic competitiveness by aligning our regulatory systems where appropriate.

These sustained efforts include bilateral co-operation with our trading partners on a regular basis, specifically, when regulatory and administrative issues between the countries need to be resolved or when a disease outbreak in Canada—such as the avian flu outbreak—impacts access to export markets.

Our trade advocacy can also lead to the creation of international fora to provide accurate information, advance trade policy discussions, and address potential trade irritants at an early stage. For example, Canada created the global low level presence initiative in recent years to address the trade risks associated with the management of the low level presence of genetically modified crops in imports. This initiative brings together 15 countries that work together to develop global solutions for the effective management of low level presence occurrences. This initiative illustrates how we are able to work with like-minded countries to promote the development of international approaches to manage trade-related issues.

We also work closely with our provincial and territorial government partners and with the industry to ensure that non-tariff barriers that are essential to achieving market access are addressed. There are a wide variety of mechanisms through which the government works with the Canadian agriculture sector, including consultations and government-industry working groups.

Let me close my opening remarks by saying that the government’s efforts to improve the international trade environment for Canadian agricultural exporters, through trade negotiations, bilateral advocacy and active participation in multilateral fora, will continue to play a key role in overcoming non-tariff barriers and ensuring Canada remains an important player in agricultural trade.

Mr. Chair, members of the committee, I wish to thank you again for your invitation and attention. My colleagues and I will be pleased to answer your questions.

Thank you.

[The Chair, Liberal, Pat Finnigan]

Mr. Seppey, thank you for your presentation.

I think this is a very exciting and timely study that we're doing. With the recent signing, and also with the possible review of existing trade agreements, I think it's going to be fun and exciting for us.

First on the list for questions is Mr. Anderson, for six minutes.

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

Thank you, Mr. Chair.

I thank the witnesses for being here today.

You talked about international standards being one of the ways we can use to combat some of these non-tariff trade barriers. Can you talk a bit about how much effort during our trade negotiations is put into dealing with non-tariff trade barriers? The follow-up from that would be that if we have spent a lot of time on this, particularly in CETA, why are there still some 300 non-tariff trade barriers in place now that the agreement has been finalized? What's the dynamic there?

[Frédéric Seppey]

Thank you. That's a very good question.

When we initiate trade negotiations on a free trade agreement, it's standard now to conduct extensive consultations with industry stakeholders. We seek their views in terms of the issues that we should address in the negotiations.

It goes without saying that there are issues that we're addressing, such as non-discrimination in tariff treatment, as well as trying to reproduce and build on the existing disciplines that are of interest to non-tariff measures, such as disciplines on technical barriers to trade or sanitary and phytosanitary measures.

However, often when we negotiate with a country.... I will take the example of the Canada-European Union comprehensive economic and trade agreement. In the lead-up to developing our negotiating positions, we consulted extensively with the industry. Several of the stakeholders—for example, the beef and pork sector—identified that regulatory approvals of certain techniques such as washing techniques for beef carcasses were an important element for them to have addressed as much as possible in the negotiations. We have tried to do that.

There are a number of things, typically, in a trade agreement. What we codify is rules of general application. We're reproducing, for example, what we have with the WTO in terms of disciplines on technical barriers to trade or sanitary and phytosanitary measures. We have also negotiated, in the context of this agreement with the European Union, side letters that allowed us to especially insert political commitments towards the resolution of a number of these issues. For example, included in these side letters there are two carcass-washing techniques that were resolved to the satisfaction of the sector.

That said, when you talk about regulatory measures, there can always be, despite the trade agreements, new measures that constantly come into effect. That's why we can use the trade agreements as an anchor point to have a productive dialogue between regulatory agencies—for example, between the Canadian Food Inspection Agency and their European counterpart—to try to build on the trade agreement in trying to resolve these emerging issues.

I will end my answer by also noting that you mentioned a list, which I think refers to our market access support system. It identifies roughly 300 market access issues that exist. Not all these market access issues are necessarily non-tariff measures. In some cases, a sector is identifying that it would like to have an equivalency arrangement between Canada and a given country in terms of standards, or it would like to have an import certificate that is prepared. These are slightly different from non-tariff measures, but they are issues that have been identified by the sector. Of that 300, it's not necessarily all of these 300 that are non-tariff measures.

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

I'd like to ask you, then, where you see the growth in these areas. What are the likely growth areas? Is it phytosanitary? Is it biotech? Is it environmental concerns? In the next few years, where will we see that kind of activity taking place?

In the past, it's been pretty direct a lot of times, such as COOL from the States, and often with the Chinese and the canola, when they don't want it or whatever. Where do you see this going in the next few years?

[Frédéric Seppey]

It's difficult to predict trends, but what we have seen over the past 20 years is that many of the means of protection in foreign countries have moved from border measures to measures that are behind the border, taking a technical or a regulatory form.

What we are hearing from the industry as possible measures is often about either how we can work by regulatory co-operation to reopen closed markets—for example, if there's an animal disease situation such as BSE or the avian influenza, how we can work with the foreign regulatory agencies to reopen closed markets—or how we can keep the existing markets open.

For illustration, a good example is the issue in China related to canola. We are working on these elements.

How can we expand markets? For example, in specific markets the market may be open for boneless beef; how can we extend it to bone-in beef?

These are the types of issues we are seeing being raised and brought up by the industry on a regular basis. I think this trend will continue. Our trading partners are facing the same kind of situation in third markets as well.

[The Chair, Liberal, Pat Finnigan]

That's right on time.

Thank you, Mr. Anderson, and thank you, Mr. Seppey.

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

[Pierre Breton, Liberal, Shefford, QC]

Thank you, Mr. Chair.

Thank you to all three of you for being here today to provide insight into our study.

I have a few short questions for you.

Which department, exactly, does the market access secretariat fall under?

[Frédéric Seppey]

It falls under Agriculture and Agri-Food Canada.

[Pierre Breton, Liberal, Shefford, QC]

That means you can answer a few questions I have about the secretariat. Is it still around?

[Frédéric Seppey]

Absolutely.

[Pierre Breton, Liberal, Shefford, QC]

What function does it serve? Can you briefly tell us what its role is?

[Frédéric Seppey]

The market access secretariat has two core responsibilities.

First, within the Department of Agriculture and Agri-Food, the secretariat is in charge of bilateral agriculture trade relations with our various markets. We have teams that work on European, Asian, and North and South American files. Second, the secretariat provides international market development support for agricultural, agrifood, and seafood products. With respect to market development, the department is responsible for promoting international trade in relation to seafood products. To that end, the department has an international trade commissioner service, overseen by the market access secretariat. Thirty-six agriculture and food trade commissioners are present in 15 priority markets around the world.

In addition to the efforts of these dedicated agriculture trade commissioners, some 100 Canadian diplomats at Global Affairs Canada are either wholly or partly responsible for promoting our agricultural interests. Those are the traditional core roles of the market access secretariat.

At industry's request, a new component has emerged in recent years. In the event of market access problems—whether due to non-tariff barriers or access to new or existing markets—the market access secretariat is now able to provide a swift solution. The secretariat has the ability to coordinate efforts with partners inside the department, regulatory experts at the Canadian Food Inspection Agency, and partners at Global Affairs Canada in order to provide a timely response.

[Pierre Breton, Liberal, Shefford, QC]

Very good.

You mentioned 36 trade commissioners around the world. That is what I understood.

[Frédéric Seppey]

That is correct. Thirty-six trade commissioners work for the agriculture and food trade commissioner service, on top of the 100 or so general trade commissioners—

[Pierre Breton, Liberal, Shefford, QC]

Diplomats at Global Affairs Canada.

[Frédéric Seppey]

Yes.

The market access secretariat has 60 or so full-time equivalent employees in Ottawa. They constantly monitor international markets and work with industry to identify potential solutions and strategies in response to market access problems around the world.

[Pierre Breton, Liberal, Shefford, QC]

With the rise of non-tariff barriers in recent years, has the secretariat acquired more human or financial resources, or have they remained about the same?