Thank you, Mr. Chairman, and thank you to the committee for addressing such an important issue. In our industry, it's one that we spend almost every waking hour addressing.
On behalf of Canada's 68,500 beef cattle producers, we want to share with you the challenges we face in exporting our products around the world.
Canada's beef cattle industry generates about $10 billion in farm cash receipts. About half of that is the result of our export sales. The U.S.A. is our largest export customer, followed by Mexico, Japan, China, and Korea, but we export to somewhere between 80 to 100 countries depending on what's happening in market dynamics every year.
Export sales increase the value of every fed animal, and we feed animals so that they can grade as AA, AAA, or prime, as high-quality animals. Export sales will increase the value by about $450 an animal and that, of course, increases the volume of beef we can produce, which allows our industry to flourish in virtually every province in Canada.
This extra value is the result of selling a range of products that are not preferred in Canada but are delicacies in other markets around the world. Examples are short plates, short ribs, tongues, skirt meat, flank meat, long cut feet, lips, and livers. I could go on with a list of about 300 products that we can pull out of every animal we produce. In order to generate the most value, we need to find the best market for every product that is produced.
There is a growing demand for high-quality cuts as well, as middle-income populations increase in developing countries. Global beef imports are forecast to increase by 26% by 2024. Specifically, imports to the Asia-Pacific region are projected to increase by 44%. The opportunities in the Asia-Pacific region are a huge reason why we remain strong supporters of the trans-Pacific partnership agreement and the efforts to try to salvage it.
I'm here today to outline some of the barriers and impediments that stand in the way of Canada realizing even greater potential in these markets. Beef and beef products are generally considered “sensitive products” in many countries, meaning that they're more heavily protected by other tariffs or non-tariff trade barriers.
While we are seeing progress in lowering tariffs, non-tariff trade barriers are frequently waiting, or newly created ones are set in place to be the next wave of protectionism that we deal with. Generally, there is some effort to try to cloak these efforts under some scientific precautionary excuse, when in reality political science and protectionism are really the root cause of much of this.
I'll give you a few examples that we're looking at. We went through seven years of a WTO case on mandatory country-of-origin labelling in the U.S., which was targeted to discriminate against the imports of live cattle and hogs. Fortunately, we were able to win that, but there's a good possibility that it could raise its ugly head again. We just came back from Washington. We've maintained the legal rights and now have the right to retaliate should they put in place a measure like that again, and we would need to be able to stand prepared to do that.
The border reinspection procedure is outdated and costly. This was actually supposed to be phased out. It wasn't, and we've introduced some of the most sophisticated HACCP systems in the world since that time.
With regard to Europe—I'm going through the free trade countries we're dealing with—their ban on growth hormones dates back to the 1980s when they had a huge surplus of beef. Canada and the U.S. won the WTO case on this, but the European Union refused to comply.
Also, during the negotiations, they excluded meat hygiene from the equivalency agreement, which prevents getting systems approval. We have one of the best systems. In most other countries, they don't go plant by plant and approve it—I'll mention that China does as well—but rather they approve our entire system, which is what we would prefer to have.... It makes more sense. There's a very lengthy process to approve individual food safety interventions. Once you go through all of the scientific work, then it has to go through the parliament for each application, which becomes a highly politicized process over there. To produce animals to qualify for that program, we have costly and detailed certification programs that producers have to go through.
As for China—and this is true with many other countries—today they're not meeting the OIE guidelines for BSE. There's still no access for beef over 30 months or for offal. China is not honouring the international agreed-upon Codex standards for MRLs. We mentioned earlier the need for.... There are such sensitive tests out there, parts per billion, that you can pick up.... If you're not following the proper MRLs...in their case it's ractopamine. Essentially, you have to have fully dedicated equipment so that there is no risk of any sort of even coincidental exposure to it.
They have treated chilled beef as frozen beef, so we can't access the fresh market. We have to send it over frozen, and frozen is more frozen than frozen. It has to be frozen to a colder temperature and more quickly. You get into these sort of unusual techniques.
Again, we go back to individual facilities having to be approved, rather than systems approval. It can take very long, 11 or 12 months, every time you get on the list before you can get approval. We are overcoming those things over time, but as we move into these agreements, systems approval addresses that.
We have a free trade agreement with South Korea. Unfortunately, we are at a tariff disadvantage, but I won't go into that. Again, they're not meeting the OIE guidelines for BSE either. They're restricted under 30 months, when they should be allowing beef from all ages. They have a very long review for future cases. When we found a case in February, it took until the end of December. With other countries, we're open in a matter of two to three weeks, in most cases, but there are a few countries that took 10 or 11 months to go through the procedure to reopen.
They're also interfering.... There's a nuance with the United States, which is importing fed cattle from Canada—if you're from Ontario, you might have seen a much wider price discount. That's because a number of the U.S. plants are not bidding on Ontario cattle because of the certification requirements to go to Korea, even though the agreement says those animals are eligible and...shouldn't be. I won't go into that, other than to say that it's an issue.
There are Japan, Taiwan, and others where we are still not meeting the OIE guidelines related to BSE. I'll end with a couple of other examples. In the last number of years, the facilities.... China and these other countries wanted to go to every single plant. It's a very costly process, and right now a lot of that cost has been downloaded to industry. We'll pay a certain amount, but there is a point where we can't afford to pay for every inspection out there. In those cases, they're simply not getting inspected and not getting approved, so it's standing in the way of some plants that are eligible to export.
One of the self-imposed ones, as we heard earlier, is labour. If you go to Europe—as we prepare for CETA—most of these countries expect a more denuded, trimmed product. It's a more labour-intensive and value-added product to go in there. If we're short on employees, we have to either reduce the number of animals we're processing to put on that line, or continue and not go to Europe. We need to address the labour issue. I'll just leave it at that.
I want to end with what I think are some of the solutions. I'm hopeful, after seeing the Barton report, that we're starting to see a culture shift about agriculture in Canada and the tremendous opportunity it presents in the future. We think that, with that, we can be an important economic driver for our country. We're one of the most trusted suppliers of food in the world as well.
We'd like to see that we maintain and increase the profile, influence, and funding of the market access secretariat. Earlier, I heard everyone stressing how important it is.
Another one is to maintain and expand the role of the Canadian Food Inspection Agency veterinarians and food safety experts posted abroad. They establish important trust in relationships, which helps prevent issues. That's always your best outcome—to stop something from happening or to resolve it quickly.
Within the agency itself, we'd like to see a culture more like Australia's. With their structure under AQIS, they're set up so that they have the president and then quarantine on this side and exports on that side. In our Food Inspection Agency, you have to get quite a ways down and pass the term “import” in senior positions before you get to a term with “exports”. If we're going to be creating that culture.... I mean, imports are part of your quarantine system, your biosecurity, and the things you're doing. We'd like to see that.
We heard this earlier, and I'll reiterate: continue to take a leading role in the international standards bodies such as the OIE, the World Organisation for Animal Health; Codex Alimentarius; and JECFA, the Joint FAO/WHO Expert Committee on Food Additives.
When necessary, pursue remedies through the World Trade Organization—I mentioned MCOOL—and continue to champion the benefits of a science-based, evidence-based global trading system. I think Canada is ideally positioned.
