Evidence of meeting #9 for Agriculture and Agri-Food in the 42nd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was beef.
A recording is available from Parliament.
Liberal
Mark Gerretsen Liberal Kingston and the Islands, ON
I'm filling in on this committee, so please excuse my naivety if I ask a question to which, perhaps, the answer should be obvious.
Starting with Mr. Darling, if I understand correctly, you were saying that 71% of Canadian beef is exported to the U.S. Is that correct?
Liberal
Mark Gerretsen Liberal Kingston and the Islands, ON
Given that there's so much reliance on the U.S. market and the things can affect our ability to sell, such as the increase in the U.S. dollar, how confident are you that the TPP will actually allow us to further diversify from that 71% so that we don't have to rely so much on the U.S.?
President, Canadian Cattlemen's Association
As I was saying earlier, in many cases the products that we are looking to sell into Japan, as an example, are products that are not held in high regard in North America, like tongue, stomach lining, and that type of thing. It's a piece of the puzzle that we don't have right now.
President, Canadian Cattlemen's Association
I don't anticipate the U.S. would start buying tongue and stomach lining.
Liberal
Mark Gerretsen Liberal Kingston and the Islands, ON
No, but what if those other countries start being interested in some of the stuff we are selling to the U.S.?
President, Canadian Cattlemen's Association
That's where upping our number of cows and where production comes into play, which we would do immediately—and have started to do anyway. If you remember, our industry has been in retraction ever since 2005 because of BSE. BSE occurred in 2003, but because we couldn't export anything, our herds grew. Then after 2005 and 2006, when we reopened some markets, our herds retracted mostly because of our producers becoming older and there being no value in the product. Now things have changed around, as there's value in our product. We have young producers interested in getting into the industry, so our herds are starting to grow again.
We don't feel there will be any problem meeting the markets. Another thing to remember, too, is that Japan was a market we had prior to BSE. They liked their grain-fed, high quality product, and when our borders closed, that's when Australia took over and Japan learned to like that grass-fed product. We feel very confident, because they like higher-end product, that we can regain that market.
Liberal
Mark Gerretsen Liberal Kingston and the Islands, ON
Do you believe that number of 71% should go down then, as we become more diversified with other partners?
Liberal
Mark Gerretsen Liberal Kingston and the Islands, ON
Okay.
I'll move to Mr. Everson for a second. I didn't hear how much soya bean is actually sold domestically. What percentage of our production is sold domestically?
Executive Director, Soy Canada
We grow two different kinds. We grow non-GM food grade soya beans, and domestically we consume very little of it. We export 95% of our food grade soya beans. From a crush point of view, soya beans for crushed animal feed, I wish I could know the number right offhand, but it would be in the 25% to 35% range, and we would export the rest.
Liberal
Mark Gerretsen Liberal Kingston and the Islands, ON
So the TPP would have little impact on how much of market share remained in Canada then.
Executive Director, Soy Canada
The TPP would give us options to expand, especially potentially in value-added processed in Canada. As I was explaining a little bit earlier, for a market like Japan, which is a large market for us, we have duty-free access on seed, but when you do the value-added processing in Canada and turn it into soya bean oil, there's a prohibitive market in Japan for the oil. Canola is very much the same way. So if you bring down tariffs on oil to zero, as the TPP promises to do, then we have the opportunity to do value-added in Canada and ship the value-added product to Japan instead of the seed.
In western Canada now, we expect to have increases in soya bean acreage, and eventually that will draw investment in a processing facility that can produce soya bean meal and soya bean oil. Right now we have three processing facilities, but they're all in eastern Canada. That's what I mean by the long-term factors of an agreement like this. If you can confirm a predictable environment with low tariffs, then a company can make a major investment in an oilseed processing plant that could lead to more value-added in Canada.
Liberal
Mark Gerretsen Liberal Kingston and the Islands, ON
For my last question, I would like all four of you to answer yes or no quickly. If the U.S. does not ratify the TPP, does your position change?
No, no, no, and no. Thank you.
If I have more time left, I'd be happy to share it with.... How much time do I have left?
Liberal
Mark Gerretsen Liberal Kingston and the Islands, ON
One minute. Would anybody else like to take that minute?
Perhaps the parliamentary secretary would like to take the time?
Liberal
Jean-Claude Poissant Liberal La Prairie, QC
Thank you, Mr. Chair.
My thanks to the witnesses for joining us today.
Mr. Everson, earlier, you mentioned competition based on rules. Actually, Canada already has well-established rules about production, health and the environment. Are other countries equally as regulated in terms of putting their products on the market? Does the fact that we are so well regulated run the risk of coming back to haunt us?
Executive Director, Soy Canada
I think the key thing is that all countries have different commitments to SPS rules, for example, and non-tariff barrier arrangements and so on. The key for us is to be sure that all of the countries that are exporting, for example, are playing by the same rules in a country, so that just because a country is bigger and its importers are so reliant on their product, they can't take advantage of the rules to block access to that market from other competitors.
So for us as a modest player in the international market, but with high-quality products, we need to be able to rely on instruments to get us access, and those are clear and fair rules of engagement.
I hope that helps.
Liberal
The Chair Liberal Pat Finnigan
Thank you, Mr. Everson.
Thank you, Mr. Poissant.
Now , Mr. Warkentin.
Conservative
Chris Warkentin Conservative Grande Prairie—Mackenzie, AB
Thank you, Mr. Chairman. I certainly appreciate the opportunity to jump in here.
Dan, congratulations on your new post. This is the first time I've had an opportunity to question you in your new role as president. You've got big shoes to fill and I know that you're filling them well, so congratulations.
We've had a good discussion thus far in terms of trade and the necessity of diversifying our own Canadian economy as a result of trade deals. It was interesting to note across the way the suggestion that somehow if we didn't engage in these trade deals, we might actually increase our ability and would rectify the trade surplus versus trade deficit issues.
I would suggest it's probably the opposite. It seems like it takes decades for countries to change their supply chains, and the fact that Australia has been able to enter markets more aggressively before we were able to sign these deals, because of their more aggressive trade provisions, is a demonstration of how we can continue to see our trade position continue to diminish, even though we have the best-quality product and some of the best food safety rules. The issue is that people value those things, but when we are out-priced because of the deals others have reached to improve their pricing, then we're left out in the cold.
So I think there's another element that Canadians are unaware of, and that is with regard to increasing the diversification of our industries here in Canada.
Obviously we've talked a little bit, Dan, about the fact that there are parts of the animal carcass that North America just doesn't consume. So we have these products like tongue and other parts of the animal that really don't have a market here in Canada, and when you consider the duties that other countries might have to pay, there really isn't a market there. But if we can reduce some of these duties, we all of a sudden have an additional commodity that could be exported that isn't being consumed here.
We've heard that point. Maybe you want to talk a little bit more about that, but I also want to get back to Mr. Everson's point.
Jim, you talked about the fact that we have massive duties going into Japan for value-added products that would be diminished over time as a result of the TPP being enacted.
Could you both talk a little bit about some of the provisions with regard to value-added that could be seen as a result of this deal over the next number of years, if it's ratified.
President, Canadian Cattlemen's Association
You never know for sure about a deal until you get into it.
Mr. Shipley was mentioning collaboration during the TPP negotiations. Claire and I and many others were right there with the negotiators and had the opportunity to be informed of what was going on and to have our input. For that we thank the negotiators, because it meant a lot to us. Obviously, we would like to have come out of the deal with a zero tariff, but 9% is as good as we could do, so we're happy with that.
As far as getting products in there goes, it's a work in progress. I mentioned some of the products that they deem in high regard that we can't sell here, but even on the better-end, high-quality products, another bidder on the market drives the price up here. We've talked here a little bit about transportation of grains and soybean, what they would do, from the crushers.... Don't forget that barley, corn, soybeans all go into the production of cattle and pork. You can't just say, okay, what's cattle going to gain from it? What's pork going to gain from it? In collaboration—and we all work together—all these industries gain a section when we gain, and vice-versa.
It's hard to put my finger on more things than that, but that'll give you an idea.
Executive Director, Soy Canada
On the oilseed side, Mr. Warkentin, as I expressed earlier, often in these trade agreements you have duty-free access on seed, but then you have what's called tariff escalation, where the products are tariffed at a higher level, which reduces our value-added opportunity. Canada now has 14 major-size oilseed plants, and they've come about, I think, as a result of free trade with the United States, where companies could predictably invest. There must have been $1.5 billion in new oilseed processing plants in the last 10 years. We've doubled our capacity over that period of time. That allows access to the lucrative U.S. market, but it also allows...if you reduce those higher tariffs on products in countries like Japan, where we have a very strong market already, us an opportunity to turn seed exports into oil exports at a higher value-added than in the Canadian marketplace.
Conservative
Chris Warkentin Conservative Grande Prairie—Mackenzie, AB
Claire, regarding our ability to add value here in Canada, are there any other areas with potential that you've been able to identify, based on this deal?