Thank you again for the opportunity to talk about non-tariff barriers. It does seem that the agriculture committee is very busy now, especially with the focus on agriculture from Barton and the export targets set by the government. I think it's important to make sure we deal with issues such as non-tariff barriers to capture the opportunity for Canadian agriculture.
As you know, Canada has a strong and growing agriculture industry. Despite all the challenges of disease, drought, and frequent below-cost production prices, it has risen above all that and remains one of Canada's most important industries, contributing about 6.7% to Canada's GDP and one in eight jobs.
Canada relies on export trade for 60% of its agricultural output. Clearly, international trade is the undisputed backbone of Canadian agriculture. Canada has consistently ranked as the world's fifth largest exporter of agriculture and agrifood products. There is almost unlimited potential to improve our standing in that category, especially with a projected population growth by 2050.
Our market in Canada is limited, so agreements such as the recently ratified CETA are very important, including but not limited to the increase in profitable market access for pork, canola, and beef.
We are also looking forward to increased access to Japan through the TPP. It seemed for a while that it had no chance of survival, and we support any efforts to revive it. If that fails, Canada should focus on renewing bilateral negotiations with Japan. CETA unfortunately didn't come without hurt to the dairy industry, so commitment from the government to mitigate the damages through compensation needs dedicated focus.
Canadian food exports have grown 77% over the last 10 years, 20% from 2013 to 2015 alone, to $56 billion annually. The United States alone accounts for $29 billion. We rank as the number one supplier of agriculture and agrifood products to the U.S., which is the world's second largest importer of agrifood and seafood products, with Canada's share proudly sitting at 19.2%. Mexico accounts for close to $2 billion.
However, we will never make the mistake of focusing only on the reduction or elimination of tariffs as being the only impediment to our trade and to our competitiveness in foreign markets. We have to ensure that resources are dedicated to the elimination of non-tariff barriers in current trade agreements, that proactive work is done during negotiations to eliminate the potential of these barriers. All too often, lofty access commitments are made, only to have countries then manage to slow the import of products through non-tariff barriers.
The recent Senate ag committee considered it a priority by naming non-tariff trade barriers in their first recommendation:
The committee recommends that the Government of Canada consider establishing a national committee with a mandate to monitor non-tariff barriers faced by the Canadian agriculture and agri-food sector in the international market. This monitoring would facilitate negotiations toward the elimination of non-tariff barriers.
Health, safety, and environmental concerns must be assessed and evaluated using a sound, science-based approach. The bottom line is that farmers increasingly have to manage the impact of existing or new non-tariff barriers.
With regard to removing barriers to competitiveness, non-tariff barriers, such as technical barriers to trade and sanitary and phytosanitary barriers to trade often create major obstacles, even when tariffs have been reduced and eliminated. When countries belly up to trade negotiations, they should always include regulatory harmonization discussions as well. It's one thing to open borders to free trade but quite another to make sure that differences in regulation don't create an unlevel playing field.
The Senate report also specifically mentioned the importance of developing maximum residue limits for pesticides, joint registrations, and a more robust skilled worker immigration program.
Non-tariff barriers can take several forms. A destination country may have a different regulation that prevents Canadian products from entering. Differences may range from sanitary, as was mentioned before, to maximum residue limits, acceptance, or a recognition of biotechnology.
Competitiveness is also affected when you go through regulations, and some of these are self-inflicted. One is the example of the difference in pesticide registration between Canada and the U.S. Canada is still one of the most difficult countries in the world in which to register a lower-cost generic crop protection product, increasing the cost of production for Canadian grain producers and lowering their competitiveness in international markets.
Newly introduced carbon taxes in Canada take on special interest when related to the situation in the United States, which looks as though it is not going to move ahead.
The impact is always greater when a country with the proximity of the U.S. has lower costs of production or when it provides far more domestic support, making it difficult for Canadian farmers to compete against U.S. farmers.
Onerous special risk removal coming out of the BSE incident with beef is an example of disposal rules that are more costly than those implemented in the U.S., which have created a competitive disadvantage.
These are some market-access examples:
China is trying to manage its blackleg fungal disease in canola through lowering allowable dockage to 1%, while Canada's dockage standard is 2.5%. Available research and science indicate that the spread of blackleg through dockage is virtually non-existent.
As mentioned, maximum residue levels regarding crop protection products are a barrier. For example, there has been a great deal of uncertainty about whether certain important export customers will accept canola treated with Quinclorac. It leaves detectable residues, but there is no established maximum residue limit.
We understand that at least one protectionist group in the United States is advising the Trump administration that the renegotiation of NAFTA is the ideal forum in which to reinstate country-of-origin labelling for beef and pork, driving extra costs into Canadian products.
On reinspection of meat at the Canada-U.S. border, since Canada and the U.S. deem each other's meat inspection system to be equivalent, inspections at point of production should be significant.
Canadian cattle are required to bear permanent identification in the United States, while there is no such requirement for U.S. cattle.
Food safety interventions approved and used in Canada and the U.S. take years to gain approval in the EU. By the time they are approved, we may have well moved on to something newer and better here and have to start from square one on the EU approval process.
Another example is that Canada can sell only frozen beef to China because its definitions of frozen and fresh are different based on the temperatures it uses.
India insists that pulse cargoes be fumigated with methyl bromide in Canada before leaving. However, in Canada's climate, that process is ineffective most of the year.
We have a number of different examples. Ractopamine is licensed for sale in Canada, but in other countries it is not.
Several trading partners maintain freezing or testing requirements for Trichinella that are different from those in a number of different countries.
I think this brings up the fact that there needs to be consistency in approaches and regulations across the board. Dealing with the elimination of non-tariff barriers is more important now then ever. Canada needs to focus on existing trade agreements in which these barriers have prevented the maximization of benefits. As you're fully aware, the dynamics regarding NAFTA and the discussion around negotiations will bring this forward.
U.S. farm leaders we have met with to date have supported the notion that more important than renegotiating every aspect of NAFTA is the need to look at regulatory harmonization as one of the key issues.
We also need to continue to emulate CETA in which non-tariff issues, including regulatory changes and a dispute process to deal with non-tariff barriers, were addressed to an extent.
We do celebrate the successes of CETA. We are concerned about the failure of TPP. We vigorously defend NAFTA, and we pursue additional bilateral trade agreements. We must not forget that trade negotiations and agreements need a multi-faceted approach, a combination of access through lower tariff rates, a harmonization of various regulatory regimes, and our own due diligence with regard to production, transportation, and marketing costs as these factors may also severely hinder our competitiveness.
I look forward to your questions.