Agriculture Committee on Feb. 20th, 2020

[Kody Blois, Liberal, Kings—Hants, NS]

Thank you.

We mentioned incremental access. I had the opportunity to speak with the Grain Growers of Canada the other day. They mentioned the comparison between the former NAFTA and the new CUSMA. Can you speak to some of the incremental access that was mentioned during the talks and how it could potentially benefit agriculture here?

[Aaron Fowler]

There is incremental market access provided through the FTA. I'd like to start by saying, though, that the maintenance of the existing market access into both the United States and Mexico was by far the most important outcome of this FTA for Canada's agricultural sector. We produce about $120 billion a year in agri-food products in this country, and we export about 50% of that. Of the amount that we export, 56% goes to the United States and Mexico, more than half to the United States. So 25% of what we produce goes to that country. It was extremely important.

Also, NAFTA set a very high bar for market access for agricultural products. There were very few products that were not covered in the initial tariff commitments of NAFTA, so the ground to make improvements was quite limited; nevertheless, there were some that were secured.

[The Chair, Liberal, Pat Finnigan]

Thank you, Mr. Fowler. I think that's all the time we have, so you might be able to pick it up later on.

Mr. Perron, you have six minutes.

[Yves Perron, Bloc, Berthier—Maskinongé, QC]

Thank you, Mr. Chair.

Good afternoon, everyone.

I appreciate the witnesses being here, and I thank them for their work. I appreciate the questions from my colleagues as well.

I would like to come back to some of the points my Conservative colleagues raised earlier about export limits on milk proteins, milk by-products. These are unprecedented concessions, especially given the new loopholes in the supply management system.

We talked about compensation. Of course, compensation has been promised, but we all know that they will never be able to fully compensate for market shares lost forever. This export market in third countries that are not signatories to the agreement is one of the ways in which dairy producers can recover money or liquidate surpluses.

Do you think that is acceptable?

Earlier, you, yourself, described these provisions as extraordinary, and you said that you have never seen anything like it. Could you elaborate on that? How did we get to the point where we signed that?

[Aaron Fowler]

To understand why we ended up with this provision—which is a very unusual provision—you really have to understand the nature of the U.S. concerns that were being expressed with respect to Canada's supply management system for dairy, and in particular the concerns that were linked to the introduction of class 7 in 2017. Following the introduction of that dairy class, which was intended to generate investment in the dairy sector to drive the acquisition of new technologies and allow for the production of new and innovative products, the U.S. saw certain markets for dairy exports to Canada reduced significantly. They also saw significant increases in the export of certain Canadian dairy products to third markets around the world, which they alleged was displacing U.S. exports that had traditionally gone to those markets.

Whether we accepted the U.S. argument or not is one thing, but it was clear that this was an important issue to them, and I would agree with Mr. Verheul, who said that without an outcome on dairy, there was not likely to be an outcome overall. We explored many ways of addressing their specific concerns with respect to exports to third markets. Ultimately, this was the one that proved workable for the two parties.

[Yves Perron, Bloc, Berthier—Maskinongé, QC]

Thank you for your answer.

Can you confirm that under the protocol to replace NAFTA, article 2 states that this protocol and its annex shall enter into force on the first day of the third month following the last notification and that therefore, if Bill C-4 is fast-tracked as the government wishes, the agreement will apply before the beginning of the dairy year, which begins in August?

Therefore, dairy farmers would only benefit from a few weeks of the first year of the agreement because the second year of the agreement would have already begun.

Correct me if I'm wrong. In the first year, 55,000 tonnes could be exported. In the second year, 35,000 tonnes could be exported. We are talking about a major financial issue for Canadian dairy producers and processors.

Have I read the facts correctly?

[Steve Verheul]

Aaron may wish to add to this, but, yes, following the ratification by the last party to ratify, the agreement is intended to enter into force on the first day of the third month after that. We don't know when that's going to be at this point. It's not simply a question of Canada, as the last country to ratify, completing its ratification process. We also have work we need to complete trilaterally among the three parties before the agreement can come into effect.

That includes the uniform regulations under rules of origin. We have to finish and we have barely started. We have to complete the rules of conduct and the rules of procedure, and establish rosters of panellists for dispute settlement. None of that has been initiated, let alone completed. All of that has to be done before entry into force.

We still have quite a bit of work ahead of us.

[Yves Perron, Bloc, Berthier—Maskinongé, QC]

Is it possible that the agreement could come into effect before August 1st and thus deprive dairy farmers of the first year?

I understand that there are still a lot of things to put in place and that there are a lot of technical details. Beyond that, is it possible that our farmers could lose the first year of the agreement? If so, can we do something to improve that situation?

Was that part of the negotiations? Did you raise that point? Has anyone come forward to do that?

[Steve Verheul]

We certainly had extensive discussions about timing issues, including that one. The U.S., once it had ratified and once it had sorted out its own issues between the U.S. administration and the Democrats in the House, wanted to move very quickly. Mexico ratified in December, and the U.S. managed to ratify fairly quickly in the new year, in January.

The U.S. in its statement of implementation included a provision saying that if two of the three parties have already ratified, and the third party is taking a longer time, they reserve the right to move ahead without that third party. In other words—

[The Chair, Liberal, Pat Finnigan]

Mr. Verheul, I'm sorry. I have to cut you off.

Mr. MacGregor, go ahead for six minutes, please.

[Alistair MacGregor, NDP, Cowichan—Malahat—Langford, BC]

Mr. Chair, I would like to continue down that line of questioning, because that was top of mind for both the Dairy Farmers of Canada and the Dairy Processors Association of Canada. The underlying message to me was that, with the start of the dairy year being August 1, there was still a lot of confusion on their part about when this agreement comes into force, as my colleague presented, and whether they are going to, in fact, lose year one and then have that precipitous drop down to the lower threshold amount.

Can you present any clarification to this committee right here and now on that, and allay the concerns that producers have been sending to us as committee members? If you could explain that in clear detail right here and now, that would be greatly appreciated.

[Steve Verheul]

I'm afraid it is just not possible for me to give you any kind of precise date. I think we're moving at a good pace through the House of Commons process. We will then have to go through the Senate process. We don't know how long that's going to take. It will be up to the senators to determine that. Then we will have to go through royal assent. We can't predict the timeline with any confidence.

[Alistair MacGregor, NDP, Cowichan—Malahat—Langford, BC]

I appreciate that, but we are aiming at royal assent maybe happening in June, and then we have the 60 days after that, which gets us to August 1. That's what I'm asking. Is that what's clear to you as the start of the dairy year?

[Steve Verheul]

Yes, we understand the dairy year starts on August 1. With respect to the rules, if we have not yet ratified it and we are into the month of May, those two months would be June and July. The first day of the third month following ratification would be August 1.

[Alistair MacGregor, NDP, Cowichan—Malahat—Langford, BC]

I guess it's in our local producers' interest to have us go according to that timeline.

A lot of the questions that have been asked.... I've been a member of this committee now for a couple of years, and I've been looking at some of our other supply-managed sectors. If we go to the chicken industry for a second, we have the amount of chicken that's allowed to enter the country duty-free progressively rising, so that by the 16th year of the agreement we're up to 62,963 metric tons.

When we've previously had the chicken processors of Canada appear before the agriculture committee, we've often talked about our relationship with the United States, and the subject of spent fowl has come up. I'd be curious to hear about the kinds of conversations you had with your American counterparts during the negotiation of CUSMA.

I'll turn the floor over to you.

[Aaron Fowler]

We were very closely engaged with the chicken sector, both producers and processors, throughout the negotiations. We were well aware of concerns with importations of spent fowl coming in from the United States. It's an issue of circumvention of the import controls that underpin the supply management system when that happens. We've been working with the sector and with colleagues in other departments and agencies, including CBSA, to assess what additional tools might be available to ensure accurate and full implementation of these import requirements and to minimize any risk of the circumvention of those rules.

It was not a topic that was negotiated or discussed during the negotiations. I think it's a question of domestically ensuring that we are appropriately implementing the rules that exist today.

[Alistair MacGregor, NDP, Cowichan—Malahat—Langford, BC]

That's good to know.

I also understand that modernizing the committee on agricultural trade is one of the provisions of CUSMA. I just want to know, in the future, to what extent some of our Canadian agricultural stakeholders will have interaction with that committee. Can you explain a bit how that will work going forward?

[Aaron Fowler]

Canadian stakeholders would not generally engage with the committee. The committee is three parties to the agreement. It is the body where we meet to discuss issues related to the agricultural provisions that are contained in the agreement. Several improvements have been made, in my view, to the committee structure under CUSMA as compared to NAFTA, including for agriculture, where the agriculture committee will now be able to take into consideration work that happens in the three bilateral consultative committees on agriculture that exist outside the agreement.

There are a number of other institutional improvements, in my opinion. When Canada goes to these committee meetings, when we engage in any institutional body, in any FTA, we begin by consulting with our stakeholders on the issues that they would like us to raise and their view on the issues that are raised by our partners in that agreement. That would continue to be the case under the new structure.

[The Chair, Liberal, Pat Finnigan]

That concludes the first part with our government officials. I certainly want to thank them for coming on such short notice to enlighten us on how those negotiations went. Mr. Verheul, Mr. Fowler and Ms. Howe, thank you very much.

We shall suspend for, at the most, five minutes, and then start with our first panel of the industry sector.

[The Chair, Liberal, Pat Finnigan]

For the second part of our meeting today we have Claire Citeau, executive director of the Canadian Agri-Food Trade Alliance. Madame Citeau, you have with you Monsieur Brian Innes. Welcome back, to both of you.

From the Canadian Produce Marketing Association, we have Jane Proctor, vice-president of policy and issue management.

Also, from the Grain Growers of Canada, we have Shane Stokke, vice-chair, and Erin Gowriluk.

Welcome to all of you. We'll have a 10-minute opening statement from each organization.

Madame Citeau, do you want to start with your organization? Go ahead.

[Claire Citeau, Executive Director, Canadian Agri-Food Trade Alliance]

Thank you for inviting us to speak on behalf of the Canadian Agri-Food Trade Alliance, or CAFTA, voice of Canadian agri-food exporters, regarding the Canada-United States-Mexico Agreement.

My name is Claire Citeau, and I am the executive director of CAFTA. I will share my time with our vice-president, Brian Innes.

Our members have a very simple message: CAFTA calls for the swift ratification of CUSMA to ensure continued stability in the North American market and strongly urges parliamentarians in both Houses to pass Bill C-4 quickly.

CAFTA represents the 90% of farmers who depend on trade, as well as producers, manufacturers and agri-food exporters who want to grow the economy through better and competitive access to international markets. This includes the beef, pork, meat, grains, cereals, pulses, soybean, canola, as well as the malt, sugar and processed food industries.

Together, our members account for more than 90% of Canada's agri-food exports, which in 2019 reached over $60 billion, and support about a million jobs in urban and rural communities across Canada. A significant portion of these sales and jobs would not exist without competitive access to world markets.

[Brian Innes, Vice-President, Canadian Agri-Food Trade Alliance]

Despite this incredible success, we're facing unprecedented uncertainty. Predictability has been eroded by governments putting in place tariffs and other measures that blatantly contradict trade rules. It has happened here in North America, and we're seeing it happen around the world.

Last spring, CAFTA released a prescription for what's required in this new environment. “Realizing Canada's Export Potential in an Unpredictable and Fiercely Competitive World” outlines what we see as being required to help us continue setting record agri-food exports.

Our first recommendation in this paper was to preserve and enhance access to key markets, and this is exactly what bringing into force and ratifying the Canada-U.S.-Mexico agreement will do.

We understand the nationalist noise swirling around. We saw it first-hand when members of CAFTA were present at every round of CUSMA negotiations, whether that was in Washington, here in Ottawa, in Montreal or in Mexico City. It's also why we applauded when the talks for this agreement were concluded last fall, and why CAFTA welcomed the end of aluminum and steel tariffs.

We appreciate the value of tariff-free markets, because the agri-food sector has prospered immensely in North America because of our tariff-free access. Over the last 25 years, we've seen Canadian agri-food exports to the NAFTA countries quadruple, from $9 billion in 1993 to $34 billion in 2019. The U.S. and Mexico are our first- and fourth-largest markets, and they make up about 55% of all of our agri-food exports from Canada.

We support CUSMA because it builds on the foundation established through NAFTA, preserves the duty-free access we obtained in that agreement and builds on that in a few key areas.

Our members, the hundreds of thousands of farmers, ranchers, food processors and agricultural exporters who rely on trade, are really pleased that the government and Parliament are taking steps to ratify CUSMA.

[Claire Citeau]

Our members emphasize the following outcomes as key benefits of the new CUSMA.

The agreement contains no new tariffs or trade-restricting measures. All agricultural products that had zero tariffs under NAFTA will remain at zero tariffs under CUSMA. Maintaining predicable, duty-free access to the North American market is a major win for Canada's agriculture and agri-food exporters, which will help strengthen the supply chains that have been developed for the past generation across North America.

The new agreement also includes meaningful progress on regulatory alignment and co-operation. In particular, I would note the establishment of the working group for co-operation on agricultural biotechnology and the creation of a new sanitary and phytosanitary committee, which will help ensure that regulations are transparent and based on science, and that trade in North America flows freely, fairly and abundantly.

Another key benefit for our members is the preservation of dispute resolution provisions that are vital to ensuring that fair and transparent processes are in place when disagreements arise. Preserving chapter 19 in its entirety and much of chapter 20 from the previous NAFTA is an important win for us.

Market access improvements for Canadian agri-food exporters include increased quotas for refined sugar and sugar-containing products, as well as gains for some processed oilseeds products like margarine. These are all welcome gains.

All of these advances will help consolidate the gains of the original NAFTA and provide certainty in the North American market, which is essential to the success of Canadian agri-food manufacturers and exporters.

In closing, CUSMA represents a meaningful upgrade to NAFTA for our members by keeping our trade tariff-free, establishing processes that help remove remaining technical barriers to trade, and maintaining vital provisions to deal with disputes.

We look forward to working with the government to bring CUSMA into force so that our members can realize its benefits as quickly as possible.

Thank you.

[The Chair, Liberal, Pat Finnigan]

Thank you, Ms. Citeau.

Now for the Canadian Produce Marketing Association, Ms. Proctor has the floor for up to 10 minutes.

[Jane Proctor, Vice-President, Policy and Issue Management, Canadian Produce Marketing Association]

Thank you.

Honourable members of the Standing Committee on Agriculture and Agri-Food, on behalf of the Canadian Produce Marketing Association, I'd like to thank you for the opportunity to speak to you today on the study of clauses 44, 46, 53 and 59 of Bill C-4.

The Canadian Produce Marketing Association is a 95-year-old not-for-profit trade association, representing more than 860 member companies doing business in Canada within a supply chain that contributes $17.4 billion in real GDP and supports roughly 249,000 jobs here in Canada. In addition, the fruit and vegetable sector in Canada supports $9.8 billion in wages and salaries. Combined, CPMA members are responsible for 90% of fresh fruits and vegetables purchased by Canadians. As an industry association, CPMA represents the entire fresh fruit and vegetable supply chain, from farm gate to dinner plate.

Our comments are reflective of a wide array of members across the supply chain, who work daily to provide Canadians with the fresh and healthy fruit and vegetable options they demand. That's right from growers all the way through to retail and food service.

The produce industry is a unique entity. This important economic engine is made up of rural, provincial, national and international companies, all working together to increase consumption of fresh fruits and vegetables. CPMA represents the industry in all areas of impact, including sustainability—which currently includes a significant effort around packaging—research, innovation, infrastructure, regulatory modernization and trade, to name but a few.

Since the implementation of the previous North American Free Trade Agreement, or NAFTA, in 1994, Canadian fresh fruit and vegetable exports to Mexico and the U.S. have increased by approximately 396% when adjusted for inflation. This growth is indicative of the importance of tariff-free trade and the integration of our marketplace within North America and within the fresh produce industry.

The integrated North American supply chain also continues to be an important tool in ensuring that Canadian consumers have a consistent and diverse supply of fresh fruits and vegetables year-round, despite a relatively short growing season here domestically.

In order to meet the Canadian government's agri-food export target of 2025, and to ensure that Canadians can meet the recommendation in Canada's food guide that they fill half their plates with fresh fruits and vegetables, the continuation of tariff-free access under CUSMA is essential.

As a side note, industry is pleased that the final text of CUSMA does not include any changes to trade remedy laws related to seasonality and produce. This is an area we're going to continue to be watching, because our understanding is that there is pressure to the USTR still by certain pockets within the U.S. industry. That is one thing we wanted to put on your radar. We stand committed to ratification of CUSMA, and on behalf of industry we are therefore pleased to appear before you today.

Specific to why we are here today, I offer the following comments on clauses 44, 46, 53 and 59 of Bill C-4. Our understanding of the change to subsection 6.2(1.1) of the Export and Import Permits Act, proposed in subclause 44(1), is that it's a simple change to remove the reference to CETA—I think the wording is “for the purpose of implementing CETA”—which we support. Clause 44 relates specifically to dairy products, which is not within the mandate of CPMA and wouldn't be appropriate for us to speak to.

Clause 46 appears to be a simple change to add the text “respecting export charges referred to in subsection 6.?2(5)”. However, unless we are mistaken, there is no subsection 6.2(5) in the Export and Import Permits Act. We're going to reserve comment until that's clarified. It's unlikely that we would object to the export charges if they reflect current practice, but we'd appreciate understanding that text. My apologies if we misunderstood, but I've gone through it a few times and I just don't see that. It ends at 6.2(4).

Clause 53 refers to the Fertilizers Act. Since we do not have the expertise to comment on the specifics of that, we're going to defer to and support our colleagues at both Fertilizer Canada and the Canadian Horticultural Council on this clause. We would like to note that, in general, our industry is very reliant on inputs for fresh fruit and vegetables to continue to provide capacity for production here in Canada. Obviously, we'd like to see the fertilizer inputs remain in place.

Clause 59 refers to the Canada Grain Act. Again, that's outside of our mandate, so we will defer to our colleagues in that sector.

In closing, I would like to underscore our support for the ratification of CUSMA and Bill C-4.

Thank you for the time to present today on behalf of our industry.