Thank you, committee.
I'm very pleased today to be joined by our president, Brian Innes. We're here to address the subject of non-tariff import barriers facing our agriculture and agrifood exporters and how those are linked to free trade agreements.
I would like to begin by commending the committee for undertaking this study. It is a highly relevant topic, given the current focus on trade negotiations.
The existence of an agreement by itself will not ensure the desired increase in trade if the reduction in tariffs reveals technical and other non-tariff measures that prevent exporters from taking advantage of the new opportunities that the FTA was expected to provide.
I'll say a word on CAFTA. We are a coalition of organizations that have a major stake in international trade and seek a more open and fair international trading environment for Canada's agriculture and agrifood exports. Our members represent producers, processors, and exporters from the beef, pork, meat, grains, cereals, pulses, soybeans, canola, as well as the sugar and malt industries.
Together our members account for over 80% of Canada's agriculture and agrifood exports, which last year exceeded $55 billion, and support hundreds of thousands of jobs in communities across the country. As has already been noted this morning, the agrifood sector has been recognized for its potential for growth in the 2017 federal budget, being designated as a supercluster with a target of $75 billion in exports by 2025.
Competitive access to international markets is critical for our sector as 90% of Canadian farmers depend on world markets to sustain their livelihoods. We export over half of the agrifood products we grow, which makes Canada one of the most trade-dependent agricultural sectors in the world.
There is a widespread perception within the agrifood export community that over the past couple of decades, a period of significant tariff reductions through trade agreements, WTO, and regional deals, there has been an increased incidence of non-tariff measures. There is evidence to support this notion. The number of notifications under the WTO agreement on technical barriers to trade more than doubled in the past 20 years. Perhaps more telling is the number of new trade concerns raised with the WTO related to the technical barriers to trade agreement, which more than tripled from the years immediately following the implementation of the last WTO Uruguay round to the most recent period for which statistics are available.
There has been a substantial amount of economic analysis on the cost implications of non-tariff measures with estimates of the sum effect of non-tariff measures for our agrifood exporters being the equivalent of a tariff of 25% to 30% in Asia and 30% to 40% for the European market.
The committee has already heard from CAFTA members several examples of non-tariff barriers and their impact on export access. I won't repeat them here, but Canadian agrifood exporters have experience with virtually every category of non-tariff measures, which include restrictions on the use of pathogen reduction treatments, restrictions on the importation of agricultural products benefiting from biotechnologies, differences between the exporting and importing countries in maximum residue tolerances, and lengthy import approval measures of new types of plants and animal feed ingredients.
The increase in non-tariff measures and how they take on importance as potential barriers to our agrifood exports has occurred in different ways. One of these is the increasing importance people all around the world place on their food, not only on its safety, but increasingly, how it is produced, the result of which is a greater number and complexity of regulatory requirements that our agrifood exporters must adapt to in order to take advantage of the increased commercial market opportunities forthcoming from a newly implemented free trade agreement.
A second situation we are experiencing is where non-tariff measures have been in place in the importing country for some time, but whose existence or significance may not become apparent until tariffs or other border measures in that country are eliminated or reduced through a free trade agreement. An example of this would be European Union meat inspection requirements such as anti-bacterial treatments that differ from those in Canada.
Most countries Canada exports to recognize our system as being at least equivalent to their own such that a Canadian plant approved by the Canadian Food Inspection Agency is automatically accepted for imports to those countries. The EU, however, does not recognize equivalency of results of inspection systems as a basis for allowing imports. Instead, the Canadian industry is expected to adjust its operating procedures to conform to EU regulatory requirements before it can take advantage of the new market opportunities created under CETA.
A third scenario for non-tariff barriers, which can be the most disruptive for our members as well as for our government, are those that appear without warning and often with little or no scientific rationale. They are usually in response to internal pressures, such as a domestic industry seeking relief from import competition or to non-science-based movements protesting innovations in food production. This is the category of non-tariff barriers which seems to be occurring more often as tariff protection declines following a trade agreement, and when there is a domestic industry accustomed to protection from imports.
We should point out that not all regulations and technical measures act to restrict trade. Many of them, when properly designed and implemented, address legitimate health and safety objectives. These generate consumer confidence and support the growth of the markets into which we sell our products and for which we have obtained preferential access through free trade agreements. In addition, Canada's internationally recognized superior plant and animal health status can provide our agrifood exporters in some export markets with competitive advantages over other competitors, even those with their own free trade agreements. This is as a result of freedom in our own country from certain animal and plant diseases.
Of the scenarios described earlier, the first, that of increasing public expectations and demands, exists in Canada as well as most other jurisdictions. Our main concern here is that any new regulations and standards are no more trade discriminatory than is necessary to satisfy the regulatory objective, and thus do not risk provoking a trade challenge under either a free trade agreement or through the WTO.
Those barriers that are established with little or no consultation, or that do not have a rigorous scientific basis are, in our view, the most detrimental, as they often occur after exporters and their import customers have made substantial investments in developing new markets. The experience of losses from often highly perishable food products being held at the border due to the imposition of a non-tariff barrier can be severe enough that exporters lose interest in the market, viewing it as too risky such that the expected gains from a trade agreement are forgone.
We offer the following to the committee for its consideration in respect of non-tariff barriers and free trade agreements.
There need to be undertakings in the trade agreements that commit each of the parties to having in place science-based, transparent, predictable, and timely regulatory approval processes.
Similarly, the WTO-recognized international standard setting bodies, including Codex Alimentarius, the International Plant Protection Convention, and the OIE, the World Organisation for Animal Health, must stick to evidence-based processes such as those of establishing maximum residue limits and not be allowed to become politicized in their decision-making.
We need to start early in a free trade negotiation to clarify the regulatory requirements for Canadian agrifood export products of interest. This requires co-operation between industry and government involving the expertise and intelligence available from Canadian embassy staff, regulatory and trade policy officials in government, and industry associations and their members. Working groups such as those now in place for implementation of CETA need to be established at the earliest opportunity.
Another suggestion is that opportunities for co-operation between trade partners in regulatory standards and approval processes should be encouraged within our FTAs. Harmonization of standards is an example of that. This can also include approvals of animal health products and pest control tolerances.
Human resource requirements of our regulatory and policy agencies increase with each new trade agreement given differences between countries as well as the ever-increasing expectations placed on food producers in virtually all countries. As our dependence on trade increases, Canada must recognize that sufficient investment in staffing and expertise in our regulatory, policy, and diplomatic personnel is essential to take advantage of trade agreements.
More specifically, we would stress the need for adequate funding for several different components of the federal government with key roles in achieving market access for agrifood exports, including the market access secretariat, our diplomatic posts, and departments and agencies including Agriculture and Agri-Food Canada, the Canadian Food Inspection Agency, Global Affairs Canada, and Health Canada.
Thank you for this opportunity. We look forward to your questions.
