Agriculture Committee on Feb. 23rd, 2017

[The Chair, Liberal, Pat Finnigan]

Good morning, everyone.

Welcome to meeting number 46 of the Standing Committee on Agriculture and Agri-Food. The study that we are now doing is on the non-tariff barriers to the sale of agricultural products in relation to free trade agreements.

I want to welcome Ms. Jenny Kwan from the NDP, who is replacing Madame Brosseau. I think on our side we're all good, so far. There's one seat empty, but it will soon fill up.

Today we have with us the Canola Council of Canada. We've seen them before on different studies that we've done, and we welcome them again. We have Mr. Brian Innes, vice-president of government relations.

From the Canadian Canola Growers Association, we have Mr. Brett Halstead, president, and Ms. Catherine Scovil, director of government relations, who is also from my beautiful province of New Brunswick, I think.

Welcome to all of you. We will begin with your 10-minute opening statements.

I think, Mr. Halstead, that you would like to start, so I'll give you 10 minutes. Thank you.

[Brett Halstead, President, Canadian Canola Growers Association]

Good morning, and thank you for the invitation to be here again. It's a pleasure.

My name is Brett Halstead. As you said, I currently serve as president of the Canadian Canola Growers Association. I farm near Nokomis, Saskatchewan, growing a variety of grains and oilseeds, and raising a beef cattle herd.

With me here today is Catherine Scovil. She's our government relations director here in Ottawa. CCGA is the national organization representing canola farmers. We have a membership of 43,000 farmers, and we represent those farmers on national and international issues, policies, and programs that affect their farms' success. We also are members of the Canola Council that is here with us today.

In my tenure as president of CCGA and my time spent on various agriculture boards, free trade has remained a central interest to grain farmers. Canada is blessed with great land and agriculture production, but we need an international customer base for our farms to be successful. This is particularly important for canola because we export 90% of what we produce in either seed, oil, or meal. That was valued at $10.2 billion last year in Canada.

It used to be that the focus of trade and trade agreements was on tariffs, but now we are finding that non-tariff trade barriers need to be front and centre. In addition to addressing tariffs, farmers are increasingly having to manage the impact of existing and new non-tariff trade barriers. These can take many forms, including non-scientific sanitary and phytosanitary requirements, delays in approvals for new crops from biotechnology or crop inputs, or additional business requirements asked of our Canadian exporters.

Each of these barriers creates uncertainty in our operations, impacting demand for our crops, the price we receive, and what crop inputs we can use. The added uncertainty of these risks impacts our entire business, from deciding what crops we will grow, where we ask questions like “Will China buy our canola seed this year?”, to determining what seed or crop inputs we purchase, “Has the U.S. approved a certain chemical for use on the products they import?”, and how we market our crops, “Will prices decline, if markets are closed?”

Increasingly farmers are asked to manage competing market requirements and adjust their operations accordingly.

The situation with China this last summer highlights that point. China signalled that its solution to the blackleg situation was to lower dockage levels. Whereas blackleg is a fungal disease found in canola fields, dockage refers to the material in the canola seed that is not the plant, including weeds or straw or other foreign matter. Canadian standards allow for 2.5% dockage. While many companies negotiate and set those levels in contracts, China was asking for 1%.

Based on the available research and science that was proposed, the Chinese rule was counter to the finding that showed that the threat of spread of blackleg through dockage was nearly non-existent. China, however, continued to push for reduced dockage levels.

Through the summer of 2016, the industry worried about the potential loss of our second-largest export market, valued at $2.7 billion, and our largest market for our raw seed. Prices fluctuated during the summer as there was uncertainty in the markets. For me and other farmers, this meant having to keep canola on the farm longer than anticipated or having to sell at a reduced price. For those forced to sell for cash flow, it also meant taking a lower price.

The industry was thankful that a solution was found and wants to recognize the work of Ministers Freeland, MacAulay, and Prime Minister Trudeau on finding that resolution. But the solution required the involvement of every level of government, and sometimes that is what's required. If Canada is truly going to capitalize on the benefits of trade, we need to have continued and ongoing commitment to resolve barriers. Relationships with trading partners must be managed, and addressing barriers must be a priority across government departments and at all levels of government.

Tariffs can be addressed through trade agreements, and increasingly there are opportunities to address non-tariff trade barriers through those agreements as well. CETA and TPP offered examples of this. CCG is supportive of CETA with the European Union and looks forward to its implementation. With CETA, the tariff on crude and refined canola oil will be eliminated immediately, creating new opportunities for canola. But to truly capitalize on CETA, tariff elimination needs to be completed with a timely and predictable EU regulatory system for biotechnology varieties and crop input products.

Under CETA, Canada and the EU agree to strengthen co-operation on biotechnology and have signed parallel letters committing the EU to an efficient and timely process for biotechnology trades. Different from past Canadian bilateral agreements, CETA expands past tariffs and looks at other factors influencing trade. If successful, it provides an example whereby non-tariff issues can be incorporated in such agreements.

The Canadian government must continue to pressure the EU to live up to this commitment, not just on paper but in real time. This is an ongoing project.

The TPP also aimed to establish better rules for trade. The agreement set new rules to address biotechnology-related barriers committing TPP members to increase co-operation, to exchange information, and to rely on a more transparent process. In addressing the challenges that may emerge, we look forward to working with the government to find ways to pursue the gains that have been negotiated under the TPP and to maintain access to the Asia-Pacific markets.

As Canada looks to a potential agreement with China, both tariff and non-tariff trade barriers must be part of this dialogue. Beyond specific agreements, solutions to manage such broader issues as maximum residue limits, also known as MRLs, or the low-level presence of biotechnology, known as LLP, are required, either through bilateral or multilateral trade agreements and/or recognition of global standard-setting bodies such as Codex. Canada is and should continue to take a lead in addressing issues such as missing or misaligned MRLs and promoting that LLP policy.

As producers, we do our part to facilitate trade. We wait to use new technologies and new crop inputs until they are recognized in our key export markets. Often this means not adapting to the newest and best technologies on our farms. These technologies may have been deemed safe and effective by our Canadian regulatory bodies, which we feel are amongst the best in the world, but we do this in order to protect our export markets.

As we do our part, we also need our Canadian government to maintain a strong and dedicated commitment to pursuing trade agreements and addressing and resolving non-tariff trade barriers across all departments and at all levels of government on an ongoing basis. We need our governments to be competitive in addressing the barriers to trade.

Our focus is on transparent and science-based trade. Through free trade agreements, ongoing work to address trade barriers, and Canada's leadership internationally, we have a platform to be competitive and to expand our exports.

Thank you for this opportunity, and I look forward to your questions.

[The Chair, Liberal, Pat Finnigan]

Thank you, Mr. Halstead.

Now we have Mr. Innes, for 10 minutes.

[Brian Innes, Vice-President, Government Relations, Canola Council of Canada]

Thank you, Mr. Chair.

Thank you very much for the invitation to be here this morning.

First, I'd like to explain a little bit about the Canola Council and our industry. The Canola Council is a value-chain organization representing the entire canola industry, including the 43,000 canola growers, the developers who develop the seeds, the processors who turn canola seeds into canola oil for human consumption and meal for livestock consumption, and the exporters who send canola seed for processing at its destination.

Our industry has a plan to meet the world's growing appetite for healthy oils and protein. “Keep it Coming 2025” is our plan to meet this increased demand through sustainable production and yield improvement, achieving 26 million tonnes of production by 2025.

Allow me to put that 26 million tonnes into perspective. Our industry has doubled production over the last 10 years and now produces about 18 million tonnes of canola a year. We're driven by international demand, and we will keep it coming, but we will only be able to do so if we are able to have stable and open trade with the markets that value our products the most. This is why stable and open trade is a key pillar of our strategy for growth, along with sustainable production and differentiated value.

More than 90% of what we produce in Canada is exported as seed, oil, or meal. This was worth more than $10 billion last year in export revenue for Canada, which is roughly three times the value of a decade ago. Our exports are bringing value from international markets to drive growth here in Canada. Access to a variety of markets free of tariff and non-tariff barriers is essential for our industry to earn the most value for our exports.

We've had success in improving market access for canola by working with government, and we have a plan for market access for the future. The Canola Council has prioritized the key market-access challenges facing our industry. We have a long-term plan to improve market access. In our plan we focus on tariffs; biotechnology and innovation; sanitary and phytosanitary measures, or SPS; and sustainability.

For innovation and biotechnology, it's about ensuring that these technologies are regulated based on science, including innovations. For sanitary and phytosanitary measures, it's ensuring that measures designed to protect plant, animal, and human health are predictable and based on science. For sustainability, it's about ensuring that the practices our industry uses are recognized as sustainable.

Co-operative efforts by industry and government have been successful, and they must continue. For example, the support of market access by the Government of Canada has been instrumental in achieving stable access to China for our canola seed until 2020. Our success with China is a testament to the government's commitment to science-based regulations and science-based rules of trade.

Former trade minister Chrystia Freeland, agriculture minister Lawrence MacAulay, and Prime Minister Trudeau all had a hand in achieving that success, and support must continue to be able to resolve these market access issues in the future.

Through all of this effort, we have seen first-hand that market access is truly a team effort. We've had success because we've worked together, both within industry and across industry and government. For example, by working with the market access secretariat at Agriculture and Agri-Food Canada on non-tariff barriers, we've maintained markets worth $2.7 billion in 2016. These were addressing non-tariff barriers, like canola seed going into China and our access to biofuel markets in the European Union and the United States. By eliminating those non-tariff barriers, just in 2016, we've maintained access to markets worth $2.7 billion.

The market access secretariat brings together resources from across the Canadian government, including the Canadian Food Inspection Agency, the Health Canada pest management regulatory agency, Agriculture Canada, as well as Global Affairs, the provinces, and officials at our embassies abroad.

Similarly, our industry has demonstrated that we can come together and work with government co-operatively to address these issues, but there is more to be done. Non-tariff barriers are preventing our industry from growing, and trade agreements can help.

I'd like to focus my specific comments on two areas. The first is an example of what has worked in the past, and the second is what should be included in future trade agreements.

As an example, we've had success in advancing policies to prevent trade risk caused by low-level presence. Low-level presence refers to the presence of a biotech crop approved in an exporting country but not yet approved in an importing country.

We've seen this success through several initiatives. Consider the trans-Pacific partnership and the Canada-Europe comprehensive economic and trade agreement. Both included low-level presence in the text of those agreements. There's also a global low-level presence initiative led by Canada that is advancing policy solutions with 15 like-minded countries, and Canada has released a model policy on how countries can support stable trade while respecting their regulatory obligations.

How did we achieve this success? We've seen success on LLP because there has been a whole-of-government approach and we have had clear direction from parliamentarians and ministers. Industry has also worked closely with government throughout this process. All three of these are required for success: a whole-of-government approach, a clear direction from parliamentarians, and industry engagement in the process.

Now, looking forward to potential free trade negotiations with China, we note that China is a very important market for canola but more broadly for agriculture and certainly for grains and oilseeds. There are clear opportunities for a free trade agreement to prevent non-tariff barriers that are hampering our industry. You've heard two of them mentioned. I'll expand on that slightly.

Key examples are related to biotechnology and crop protection products. As Brett outlined, before Canadian growers can use these new biotech seeds or use these new products to protect their crops, these products must meet Chinese requirements. As approvals are much slower and less predictable in China, this means that Canadian farmers are denied access to these new innovations.

There is an opportunity through free trade agreements to get solutions for these non-tariff barriers. For example, there are opportunities for Canada and China to further define what both countries have already agreed to through the WTO—making SPS measures that are based on science and that are the least trade-restrictive measures possible.

In the case of crop protection products, this could mean that if a residue limit for a crop protection product does not exist in one country, the other country's standard—or an international standard—could apply on an interim basis while the importing country completes its domestic process.

That's just one example, but it's important to realize that getting rid of these non-tariff barriers will have benefits for the entire value chain. For seed developers and life science companies, it creates a more predictable investment environment, and that encourages more innovation. For growers, it means more options to control pests such as insects and weeds, and it means better access to new seed varieties. For exporters and processors, it means more predictability, and that means less risk and more value back to Canada.

In closing, canola has grown because we are a competitive exporter with access to world markets. It contributes more than $19 billion to our economy every year and supports a quarter of a million stable jobs. Maintaining and growing this prosperity will depend on successfully overcoming future market access challenges and non-tariff barriers.

I look forward to your questions.

Thank you.

[The Chair, Liberal, Pat Finnigan]

Thank you very much, Mr. Innes.

We will move to our question portion.

We'll start with Mr. Anderson, please, for six minutes.

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

Thank you, Mr. Chair.

I want to thank our guests for being here this morning. I wish we had more time to talk about this than we do.

Mr. Innes, you talked a bit about China in these last few minutes and about some of their concerns on crop input products and biotech. In your news release last week, I think you supported CETA, but you also mentioned that those same sticking points are in place there. What are your reservations around those non-tariff barriers for grains and oilseeds in CETA?

[Brian Innes]

The CETA is very positive in that it gets rid of tariffs, and certainly with the world environment we are in, being able to get rid of tariffs and conclude free trade agreements is very positive.

Where we have reservations is around our ability to continue to have stable access to that market, because of their regulatory systems and how they implement them for biotechnology and crop protection products. For example, during the negotiations of the CETA, there was a letter from the European minister to the Canadian minister saying that they will approve biotech traits of interest to Canada as fast as possible through their system. We saw in 2016 that this did not happen. In fact, there was an example involving a soybean trait, and Canadian growers lost out on an entire growing season because of political delays in the system. That had to do not with the science-based assessment process but with the implementation of that system through the political process.

What impact would that have on the canola sector going forward? That same thing could happen to us despite the commitment that was made in the context of the agreement. As we talked about, that means that when we grow a biotech trait, it will be present in the Canadian system, even if we decide to segregate a certain crop to go to Europe. Europe does not have a low-level presence policy, meaning that any presence of a trait that is not approved in the European Union would not be in compliance with their system.

As an industry, we would face a choice. Do we not commercialize that product? Do we not grow it, as happened with soybeans last year in Ontario? Do we not ship at all to Europe, or do we try to segregate and ship knowing that there's a real risk that we won't be in compliance with European regulations? That's where our concern comes from.

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

Is that basically the application of the precautionary principle that they're applying to trade?

[Brian Innes]

Certainly their system functions on a political decision process as opposed to a science-based process, and because there are political concerns, the process does not function efficiently.

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

What do you think is the most threatening area then? Is it government restrictions? Is it a refusal to accept new biotechnology? Maybe Brett could answer this too. It might be different for growers than it is for the value chain. Where's the biggest threat to you in the next few years?

[Brian Innes]

I'll let Brett follow this from a grower perspective.

The threat to industry is that in Canada we are competitive because we are an innovative sector. We adopt new innovations, and that means that whether it's new breeding techniques or new crop protection products or new varieties, that is how we maintain competitiveness. As we move away from science-based systems in places like the European Union, it is more difficult for us to adopt those innovations.

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

You mentioned not being able to use new technology.

[Brett Halstead]

Right. Many of the new innovations help us control weeds or disease species that are harder to control, and that's where the innovation and the development of new products is attempting to work for producers. The sooner I can get those new innovations, the more competitive I can be. We compete globally with other products, both oilseeds and soybean-type products, so it's very important to maintain my competitiveness.

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

This might sound like a bit of a strange diversion here, but can you tell us a bit about your lobbying structure and strategy? Can you give us an inside look at how you deal with these issues? Do you focus primarily domestically trying to get the Government of Canada to go and do your work for you? Do you expend a lot of energy, say in Europe, on these issues as well? How does the Canola Council address these kinds of issues?

[Brian Innes]

Collectively as a value chain, along with our grower partners, we do have links internationally, so we do work with our industry counterparts. When it comes to regulations in the European Union, the Government of Canada is the direct voice to the government of Europe, whether it's European Commission or otherwise. While we work with our industry partners, we have common interests with our Australian and North American counterparts and in many cases with European importers, but the government-to-government voice and the political voice are those of the Government of Canada.

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

What are the best of the government initiatives on this side, in our country here? The government obviously has a big focus on trade, trying to deal with these barriers, both the trade barriers and non-trade barriers. But what are the best initiatives that you see coming out of the government? Is the market access secretariat useful at all? Do you have any suggestions for us? We're going to do a report, I assume, so what should we be recommending?

[Brian Innes]

Certainly the market access secretariat has been a key way to bring government together from across departments. There's been clear direction from parliamentarians that market access is important and that resolving non-tariff barriers across government departments is incredibly important. Agriculture obviously has technical expertise but they can't do it themselves. That's where the message from parliamentarians for government to co-operate at all levels is important.

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

I think I'm probably running out of time.

[The Chair, Liberal, Pat Finnigan]

Thank you, Mr. Anderson and Mr. Innes. Now we'll go to Pierre Breton.

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

[Pierre Breton, Liberal, Shefford, QC]

Thank you, Mr. Chair.

I also want to thank the witnesses for joining us.

We will continue the discussion on the Market Access Secretariat Mr. Anderson started.

The secretariat was created to help industry resolve issues related to market barriers. You were going to provide details on your experience, current or past, with that secretariat. Given that this organization plays an important role in reducing barriers, could you elaborate on the subject?

Mr. Innes and Ms. Scovil, I will let each of you answer.

[Brian Innes]

I will begin.

Thank you for the question.

The market access secretariat is incredibly important because it brings people together from across governments, across government agencies and departments. That alignment is incredibly important. On issues that we're looking at for non-tariff barriers, for example, it's really important to have the regulator at the table, because it's the regulator from CFIA or the PMRA who has the direct interface with their counterpart in other countries.

The market access secretariat works because they're able to bring together policy people from within agriculture, the regulatory experience from CFIA and PMRA, as well as the folks from Global Affairs who have a mandate on behalf of Canada to be the main interlocutor with other governments around the world.

Do you want to add to that?

[Catherine Scovil, Director of Government Relations, Canadian Canola Growers Association]

To further that, I think we've seen a tremendous commitment from the market access secretariat to address trade barriers. I know on Tuesday of this week, you heard testimony from government officials. You talked about the number of trade barriers that are in that big matrix for the market access secretariat.

We do think, as industry, that all trade barriers need to be addressed to the greatest extent possible, and that the resources required to address those really need to be in place. That's really where parliamentarians have a critical role to recognize that this is part of our being successful in export markets, by addressing tariff and non-tariff trade barriers.

It is not just the work of Agriculture Canada and CFIA. There are other really critical departments that may not have trade as their top priority, like PMRA, but they need to have direction as well so that resources are available from those experts when they're needed to help the market access secretariat resolve problems.

As Brett said in his comments, it's really about having a mechanism to address trade barriers across departments as a priority and within all levels of government, right up to elected officials.

[Pierre Breton, Liberal, Shefford, QC]

In a similar vein, Ms. Scovil, how satisfied are you with the way barriers are addressed, be they seen as priorities or not? By the way, we heard from department representatives earlier this week, and they referred to a list of about 290 barriers—a significant number. We know that the secretariat provides resources on various markets, both here, in Ottawa, and around the world.

Can you tell us about how satisfied you are with the way barriers addressed on a priority basis are identified?

I would also like to hear from each witness on this issue.

[Brian Innes]

Thank you for the question.

I will begin.

Certainly there are hundreds of issues on the list to be addressed. Some of them are canola issues. Sometimes issues take time to resolve, so it's not realistic to think that the list is going to be zero, because issues take time to resolve.

I would say from our experience that more resources would help resolve issues quicker. When there are priority issues, as what we had with China, we had sufficient resources to deal with that from government, including the market access secretariat. When there are pressing issues, there are resources.

But smaller issues that still could be solved with attention take a back seat when there are not resources. That's part of why we see so many issues on that list of issues to be addressed. There are non-tariff issues on that list—for canola, for example—as there are some tariff issues.

[Catherine Scovil]

Further to that, I sometimes think of our health care system that we tend to be ranked very well in terms of handling acute crisis situations, but not so much on those low-level issues. That's what we see, certainly, with the market access secretariat, in its ability to address things.

When issues become very acute and huge export markets are at risk, the resources are there but they are at the expense of other things that don't get addressed. Sometimes they're in canola, but sometimes they're in other sectors.

As Brian said, that list will never be at zero. As soon as one trade barrier is addressed, something else is going to come up. That's why, really, a continuous resourcing is required to address these issues on an ongoing basis.