Agriculture Committee on Oct. 1st, 2024

[Francis Drouin, Liberal, Glengarry—Prescott—Russell, ON]

My colleague mentioned the cost of implementing border adjustment mechanisms for carbon.

I know that European auditors are currently here in Canada to assess the supply chains of industries such as cement, steel and aluminum, for example.

Will the cost be borne by the Canadian government or by the states that want to implement such a tariff?

What are your interactions with these auditors?

[Michèle Govier]

We don't interact with them. Canadian exporters are the ones affected by these inspections. Our team at the Department of Finance deals with imports. There may be other people in government who are concerned about that.

In terms of the cost, it depends on how the system is designed. The cost could be borne by the government, or it could be passed on to exporters or importers. Different ways of doing things are possible.

[The Chair, Liberal, Kody Blois]

Thank you.

[Francis Drouin, Liberal, Glengarry—Prescott—Russell, ON]

Colleagues, I have to apologize, but I have duties to talk about, too. They're not tariffs; they're daddy duties.

I'm going to remove myself, but my good colleague, Ken McDonald, will take over for me.

Thank you.

[The Chair, Liberal, Kody Blois]

Thank God we brought in some Atlantic expertise.

It's good to have the member from Avalon.

Welcome, Mr. McDonald.

Mr. Perron, you have the floor for six minutes.

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

Thank you, Mr. Chair.

Thank you to the witnesses for being here.

The brief update I gave at the beginning of the meeting was important. On behalf of my party, I agreed to have the committee study climate change requirements, but I wanted the committee to cast a broader net and explore the issue of standards that are required for food entering Canada.

Ms. Donohue, you talked a lot about that. You said that imported products must meet the same standards and offer the same levels of protection as Canadian products. However, that is not what local producers are telling us. They are telling us that products coming from outside the country are not subject to the same standards as Canadian products and that foreign producers often use inputs that are prohibited here.

How do you explain that? Who is telling the truth? Explain the nuances, if there are any, because they are important.

[Kathleen Donohue]

Thank you for the question, Mr. Perron.

In terms of the Canadian Food Inspection Agency, we expect that all imported and domestically produced food will meet the same regulatory and quality requirements. I understand and acknowledge what you are hearing. If there's a specific issue, we're certainly open to exploring that and understanding what that complaint is.

With respect to what we require, we expect that people importing or producing food under the oversight of the agency.... They have to have a valid licence issued by the agency. They also have to be aware of the hazards associated with the food that they are either importing or producing. They have to have controls in place to address them. This is what we call a preventative control plan.

Lastly, we expect them to also keep records to ensure traceability, so that in the case of there being an issue, we have the ability to trace.

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

However, with respect to products used for agricultural production, that is to say crop protection products, you do not have much control over what comes from outside, from what I understand. Is that correct?

[Kathleen Donohue]

No, the same regulatory requirements apply.

Again, imported food or food produced here in Canada has to meet the same regulatory requirements.

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

Far be it from me to corner you, but I will take the example of ducks, which present a problem in terms of imports and genetics. You're certainly aware of that. France, which is not a Third World country, has given us guarantees regarding the genetics of a species that is not vaccinated, but its importation is still not authorized. I think that a trip is planned, but that jeopardizes next year's production. I imagine you are aware of that.

I can also tell you about ducks from Hungary or Poland. When you look at the package and you open it, you can see right away that the product doesn't meet Canadian standards because of feathers and a bunch of other factors.

Meanwhile, as you said earlier in your statement, you are focusing on local products. Don't get me wrong, I'm not asking that we be negligent. It's all right for the CFIA to be demanding. However, our local producers feel that we are picking on them, whereas products from outside are not treated the same way. They've been telling me this for over five years, so it shouldn't be a spontaneous impression that fades after a month.

I could also tell you about the carrots that were imported from China last year. In order to know what products were used to grow food, you must always have the co‑operation of local authorities. In the case of China, I don't know how to say it, but it's not nirvana.

I'll let you speak to that.

[Kathleen Donohue]

Thank you again for your questions, Mr. Perron.

I could talk to you about duck from France and duck genetics, so it is true that we currently have a temporary suspension of imports of both poultry and poultry products from France, which is due to the highly pathogenic avian influenza vaccination program that France has. We currently do not permit the importation of poultry or poultry products from countries that vaccinate for this disease called HPAI, highly pathogenic avian influenza. We impose these restrictions on imports because we have to do our due diligence. We are working at the moment—

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

I'm sorry to interrupt you, Ms. Donohue, but I only have 40 seconds left.

Our producers tell us that products coming into the country do not meet Canadian standards. How do you explain that?

There are inspectors who work almost full-time in some of our agri-food production plants. However, how often are foreign products inspected? How rigorous is that?

[Kathleen Donohue]

I can speak to the frequency of inspections.

We use a risk-based approach to our inspection. You mentioned earlier the issue with Hungarian duck imports, and I'm aware that last year we did receive a complaint through our complaints and appeals office at the agency. We looked into the matter, and we carried out product inspection and preventative control inspection on importers of duck meat from Hungary. We did find an importer lacking in certain areas, and we have asked that importer to implement what we call corrective action.

[The Chair, Liberal, Kody Blois]

Thank you very much, Ms. Donohue and Mr. Perron.

Mr. Cannings, you have the floor for six minutes.

[Richard Cannings, NDP, South Okanagan—West Kootenay, BC]

Thank you.

Thank you for being here today.

I'd like to try to get some understanding personally about, first of all, the EU proposal or the CBAM that the EU is proposing to bring in in 2026.

I assume that Ms. Govier might be best for this. Where does Canada stand in terms of carbon pricing versus the EU? Are we on par with them, or are we going to take a hit because of this in terms of our exports to the EU? I want to see how things shape up.

[Michèle Govier]

I might defer to Judy on some of this, because I'm focused more on our BCA, the import measure. I do know some aspects of CBAM, but I'm not the expert. Colleagues at Global Affairs are tracking that more closely from that angle.

Obviously, we feel that we have quite robust carbon pricing and have been very actively engaging with the EU to ensure that that's recognized in their system. They are still in a reporting phase right now, so it's probably premature to say exactly what's going to happen. Right now, exporters are providing information so that there's an awareness about what the emissions profiles are, but I think we'll have to wait until there are measures in place to see how that's going to hit. I think conversations are very active, and I think it would be better for Global Affairs to give more details on the status of those.

Judy, I don't know if you have anything to add to that.

[Judy Meltzer, Associate Assistant Deputy Minister, Environmental Protection Branch, Department of the Environment]

Thanks, Michèle.

That's exactly right. We've been working very hard with Global Affairs as well, to make sure that our European Union colleagues have a good understanding of how the systems work in Canada, including across provincial, territorial and federal systems, but it's a bit premature. They're still in the reporting phase, so I don't have a specific answer.

[Richard Cannings, NDP, South Okanagan—West Kootenay, BC]

I'm not sure if this is true throughout Europe or if it's just some of the countries, but it's my understanding that they are at a level that's considerably higher than ours in terms of carbon pricing per tonne of carbon. Is that not the case?

[Judy Meltzer]

Again, not wanting to get too far ahead given the status of the CBAM implementation, I would note that we need to take into account the different ways these emissions-intensive, trade-exposed industries are priced under Canadian output-based pricing systems, including our other industrial trading systems, like Quebec's. We need to look carefully to make sure they have a good understanding of all the provincial systems. These are systems that are under carbon markets, so these are under trading systems.

We'll continue to work closely to make sure they understand our systems well and understand the price per tonne as they move forward.

[Richard Cannings, NDP, South Okanagan—West Kootenay, BC]

I have another question. We live in a world where there are a lot of trade agreements. We have a trade agreement with the European Union, and we have trade agreements like CUSMA with the United States and Mexico.

How do carbon border adjustments fit into that framework? Is it all “trade legal”, as they say, or how would this be implemented in that world?

[Michèle Govier]

The World Trade Organization rules are probably the broadest framework that we're operating under. Obviously, introducing new border measures is of interest to WTO members. The key thing is ensuring that the measure is being undertaken strictly for an environmental purpose. It's not strictly about protecting our industries or what have you. It's really about ensuring that our carbon goals are met for our country while also avoiding carbon leakage, where those carbon emissions just go to other countries, which is not a good environmental outcome. It's also making sure that the adjustment actually matches what the domestic producers are facing.

Basic trade agreements have non-discrimination clauses and national treatment clauses, which means you're placing the foreign exporter on a level playing field with how you're treating your own domestic companies. Ours face a carbon price, so the carbon price you seek to impose on others should reflect that level playing field.

The devil will very much be in the details; there are probably going to be disputes arising because of that and whether countries have actually hit the right mark in terms of that balance.

[Richard Cannings, NDP, South Okanagan—West Kootenay, BC]

The one sector that seems to be in this EU list that would affect our agriculture sector would be fertilizer. I'm just wondering if somebody on the panel could give us a précis of how exposed we are. I know we make some fertilizer here. We probably import some from the United States. I'd like an idea of where we would be exposed to this kind of measure.

[Tom Rosser]

Perhaps I can take a shot at that, just to say that we use the term “fertilizer”, but my understanding is the EU is specifically targeting nitrogen fertilizer, of which we do not export significant volumes to the European Union in contrast to other types of fertilizer.

[Richard Cannings, NDP, South Okanagan—West Kootenay, BC]

Do we import it?

[Tom Rosser]

We do import nitrogen fertilizer in the eastern part of the country. About 80% of the variable cost of producing it is natural gas, so it can come from North Africa; it can come from Trinidad, and it can come from various parts of the world.

I'm less certain what the trade flow is this way, but I would be surprised if we imported significant volumes from the European Union.