Agriculture Committee on Oct. 3rd, 2024

[The Chair, Liberal, Kody Blois]

I call this meeting to order.

Welcome to meeting number 111 of the Standing Committee on Agriculture and Agri-food.

I will start with a few reminders. Today's meeting is taking place in a hybrid format. The proceedings will be made available via the House of Commons website. Just so you are aware, the webcast will always show the person speaking, rather than the entirety of the committee.

Pursuant to Standing Order 108(2) and the motions adopted by the committee on Thursday, February 8, 2024, and Tuesday, September 24, 2024, the committee is resuming its study on the impact of border carbon adjustments and reciprocity of standards on Canadian agriculture.

I would now like to welcome the group of witnesses we have with us for the first hour of the meeting.

From the Canadian Agri-Food Trade Alliance, we have Michael Harvey, executive director.

From the Canadian Pork Council—and he is no stranger to this committee or its members—we have René Roy, chair, and Katerina Kolemishevska.

From Farmers for Climate Solutions, we have Geneviève Grossenbacher, director of policy.

Welcome to all of you. Thank you for being here today. It's very good to have you.

You know the drill. We'll do five minutes for opening remarks from each organization. Then we'll turn it over to questions from MPs.

I'm gong to start with you, Mr. Harvey, for up to five minutes. The floor is yours.

[Michael Harvey, Executive Director, Canadian Agri-Food Trade Alliance]

Thank you, Mr. Chairman. I think this is the first time I've been in a meeting chaired by someone from Hants County since I went to high school in Hants West in the eighties.

I would like to thank the committee for inviting the Canadian Agri-Food Trade Alliance, or CAFTA, to share its views as part of this study.

CAFTA is a coalition of national organizations that support a more open and fair international trading environment for agriculture and agri-food.

CAFTA members include farmers, ranchers, processors, producers and exporters from key sectors, such as beef, pork, cereals, oilseeds, sugar, pulses, soybeans and processed foods.

An open and fair international trading environment for the agri-food sector is in Canada's economic interest. Agri-food accounts for one in nine jobs in Canada, and the majority of those jobs are in the export-oriented agri-food sector. In 2022, Canada exported $92.8 billion in agriculture and food products. More than half of our agricultural production is exported or processed for export.

Border carbon adjustments, or BCAs, are a prime example of the imperative for Canada's agri-food exporters to engage in domestic and international discussions of sustainability and trade. We believe trade is not only important for economic and social outcomes globally, but it can be a driver for improved national and international sustainability outcomes.

On August 6, we responded to this imperative by developing CAFTA's principles for sustainable trade to provide a structured approach to engaging in the evolving policy discussion at the nexus of trade and sustainability, and its implications for agri-food.

As the world grapples with the dual challenges of feeding a growing population and protecting the environment, CAFTA's principles offer a clear road map for balancing these critical priorities. In our view, trade is crucial for achieving sustainable development and for improving global food security. Canadian farmers, processors and exporters grow our economy through trade. It is essential that sustainability measures do not become barriers to fairer and freer international agri-food trade or do not serve as cover for protectionist trade policies. We must ensure that our efforts to promote sustainability do not inadvertently create barriers or excessive burdens.

Sustainability policies and trade-related climate measures must not impose unnecessary regulatory burdens, restrictions or compliance costs on producers or on the broader value chain. Applying CAFTA's sustainable trade principles to BCAs allows us to see some of the complexities of a relatively simple initial concept.

CAFTA has not developed an institutional position on BCAs. We are watching the issue as it develops internationally. Committee members have examined the EU's carbon border adjustment mechanism, which may include sectors like agriculture in the future. CAFTA's concern with the EU CBAM is that it can become a trade barrier used in a discriminatory manner in the interest of protectionism.

Measuring the carbon footprint of food products can be more complex than in other sectors, due to factors such as varying agriculture practices, transportation distances and land use changes. Agri-food exporters worry about the costs and technical challenges of tracking and reporting emissions across diverse agricultural supply chains.

We are also concerned about the lack of harmonized carbon accounting standards across countries. This inconsistency could lead to confusion and disputes about how emissions are calculated and verified, adding to administrative burdens. Further, complying with carbon regulations and providing the necessary documentation to verify emissions would increase costs for food exporters.

Exporters will also need to navigate complex certification processes to prove the sustainability of their agricultural practices, which could be time-consuming and costly. Such requirements could slow down trade, disrupt supply chains and add significant financial burdens. BCAs could lead to trade disputes, especially if agricultural exporters in countries with weaker environmental regulations view these measures as protectionist. Regulatory tariffs or disputes in the WTO could arise as a result.

Despite these difficulties, we are seeing other countries beyond the EU looking at border carbon adjustments. The U.S. senators have introduced ideas in their legislative process, and we recently saw the U.S. energy department announce a pilot project to collect statistics on the emissions of certain industrial products, an effort the administration says will help inform the White House's recently established task force on climate, trade and industrial competitiveness in its work with trade partners.

In this shifting international environment, Canada may end up moving forward and adopting a BCA. We should examine the international trade implications carefully before doing so. CAFTA argued, in the government's recent consideration of measures to counter Chinese electric vehicle imports, that our country should take an approach consistent with our WTO obligations, underlining Canada's national interest in the global rules-based trading system and reducing the risk of retaliation.

We wish to continue to insist on such approaches to international trade challenges. BCAs are an area where Canada can work with international partners multilaterally at the WTO or in regional or like-minded groups like the G7 to manage international trade in a strategic manner that serves our broader national interest.

I look forward to answering any questions you may have.

Thank you.

[The Chair, Liberal, Kody Blois]

I'd expect nothing else from a guy from Hants County—right on time. Thank you, Mr. Harvey.

Mr. Roy, you have the floor for five minutes.

[René Roy, Chair, Canadian Pork Council]

Good afternoon, Mr. Chair.

Thank you for the invitation.

I also want to thank the committee members for their work on this issue.

My name is René Roy, and I'm the chair of the Canadian Pork Council. With me this morning is Katerina Kolemishevska, who is our director of policy and sustainable development.

I will outline the key concerns of the pork industry regarding the introduction of the border carbon adjustment and reciprocity of standards, as well as our recommendations to ensure a balanced and effective approach.

I'll inform members that the Canadian Pork Council will be submitting a brief after our appearance to give a more extensive response. We cannot do everything in this hour.

Here are some of our key concerns.

The first concern is trade retaliation and the export market risk. A major risk is that these measures could trigger retaliatory measures from Canada's key trading partners, such as tariffs or restrictions on pork exports. This is particularly important and concerning, given that 70% of our Canadian pork is exported.

The second concern is the increased compliance and administrative burdens. Introducing BCAs and reciprocity of standards will impose additional administrative burdens on our producers, particularly regarding reporting and verifying compliance with environmental regulation. These increased burdens, which do not always translate into financial value, could disproportionately affect producers, raising their operational costs and making it more difficult for them to operate and compete.

When we increase regulatory burden, we reduce the number of pork producers, because it is often the operator who takes on the burden of reporting and implementing these additional regulations at the expense of the operation of their business. Reducing the number of producers also reduces the economic activity in our rural areas and the resilience of our industry.

There are other concerns, such as questions around higher production and input costs, as well as harmonization and trade disruption, but let me close with some recommendations.

The first recommendation is gradual implementation and transitional support. We urge the government to adopt a phased approached to implementing BCAs, allowing both producers and international partners time to adjust to such regulations.

Also, provide financial and technical assistance for producers. Support mechanisms such as subsidies or low-cost financing will ease the financial burden on producers and encourage innovation in sustainable farming practices. Indeed, the study's benchmark from the EU and the U.S. did not address the difference in financial support in the analysis. That's a really important point.

We have other recommendations, including some on international harmonization and trade diplomacy and on the establishment of clear guidelines and simplified reporting processes, but we will share those thoughts in our brief.

While BCAs and reciprocity of standards present important opportunities for levelling the playing field and promoting sustainability, it is critical to consider the potential risks to trade, compliance costs and the competitiveness of Canadian pork producers.

We urge the government to adopt a balanced approach to ensure Canadian agriculture's successful and sustainable future.

Thank you.

We're ready to answer questions.

[The Chair, Liberal, Kody Blois]

Thank you very much, Mr. Roy.

Ms. Grossenbacher, you have the floor for five minutes.

[Geneviève Grossenbacher, Director of Policy, Farmers for Climate Solutions]

Good morning. I'll speak English, if that's okay.

Mr. Chair and members of the committee, thank you so much for the opportunity to be here today.

I'm here representing Farmers for Climate Solutions as its director of policy and also as a farmer myself. I farm just on the outskirts of Gatineau on the other side of the river.

While the concept of carbon border adjustments—what we call CBAs or BCAs—is still in its early stages in Canada and is not an area we've studied directly, we really welcome this important discussion.

In addition to my opening remarks, I have shared with the clerk a brief that I hope can be considered as part of the study; it has additional background material that can hopefully help you.

Today I want to emphasize three points.

First, carbon border adjustments are increasingly common and are beginning to really shape or influence trade dynamics. CBAs are not just theoretical; they are already being implemented in the EU, and the U.S. is thinking about them, as are many other countries. These adjustments have begun to reshape trade dynamics, as I mentioned, and influence the decisions of our trading partners.

Second, reducing carbon intensity is really crucial, which I think you heard from panellists two days ago. Regardless of the global status of CBAs, it's imperative that we focus on reducing the carbon intensity of our Canadian agri-food sector as soon as possible. While Canadian farmers do really well on some areas in terms of carbon intensity, we really don't do well across the board, which is something we need to fix.

More importantly, a lot of other nations—like the U.S.—are investing far more into reducing emissions and into climate resilience than we are. According to the Canadian Federation of Agriculture, we would need to invest $2 billion per year over the next five years to close that gap. Right now, we appreciate the $1.5 billion that has been implemented for agriculture and climate since 2021, but a lot more is needed.

More importantly, my third point is that we need to support farmers and ranchers to remain competitive in light of climate change. In a recent poll we did with Leger across the country with farmers and ranchers, when we asked them an open-ended question about what the top concern they have for the next 10 years is, the top answer we got back was climate change. Moreover, a large majority of farmers and ranchers—79%—said that they were concerned that it would reduce income. Seventy-six per cent said reduced yields, and 69% said an impact on their mental health or the mental health of their employees.

There's more information about that poll in the brief I shared. There's a clear need to enhance support for farmers and ranchers to help them reduce their carbon intensity while enhancing their farm viability.

The good news for me is that right now we're doing a study looking at the best ways to reduce emissions and also strengthen climate resilience on farms and farm viability. The research is coming out soon, but it turns out that there are 16 best management practices that we looked at, and together those best management practices have the potential of reducing emissions from farms by 16 million tonnes of CO2 equivalent through proven and tested techniques like reduced tillage, enhanced efficiency fertilizers, adding legumes to rotation, cover cropping and rotational grazing. Again, these techniques exist. They're proven, they're cost-effective, and they have a positive impact on farmer incomes and on the environment. Really, they're a win-win for farmers, the environment and the economy.

Whether or not CBAs become a reality around the world, we must prioritize increased funding to support farmers and ranchers to reduce their carbon emissions and improve their competitiveness. There's a strong consensus in the agricultural sector—actually, we heard that yesterday at the CAPI conference—that what we, as farmers, need right now is more economic incentives, knowledge transfer to adopt better climate-resilient practices and data management at the farm level. These investments are critical for supporting our farmers and ranchers in adopting high-resilience, low-emissions practices.

Again, discussions at the sustainable agriculture strategy advisory committee, our national poll and the results of this report all say the same thing.

Let's act now to equip our farmers and ranchers with the resources they need to thrive in a changing climate. Together, we can ensure the sustainable and competitive future of Canadian farms.

Thank you.

[The Chair, Liberal, Kody Blois]

Thank you very much, Ms. Grossenbacher.

We'll now turn to the period for questions.

I'll turn the floor over to Mr. Barlow for up to six minutes.

[John Barlow, Conservative, Foothills, AB]

Thank you very much, Mr. Chair, and thank you to our witnesses for being here with us today.

Certainly we heard from the officials on Tuesday, particularly from Mr. Webb from Global Institute for Food Security, that there are many unknowns when it comes to dealing with this particular policy.

Mr. Harvey, I certainly understand your position with CAFTA and the importance of agricultural trade. I share many of the concerns that you raised that this would simply be.... First, this is hypothetical. No one is talking about doing this for the agriculture industry, as far as we can tell. The EU is going to implement something in 2026, but agriculture won't be covered.

Just looking at our previous relationship—and I am specifically talking about Canadian beef, durum wheat and some of those things—I look at this as a protectionist measure, or a potentially protectionist measure, whereby we think we will have a standard that we're supposed to meet with countries in the EU.

However, when push comes to shove, they will come up with something so that there's no way we're going to meet the standard, or each individual member of the EU, for example, will have its own little niche rules.

If this were something that was going to happen, how critical would it be to have an internationally recognized standard, a standard for measuring the elements of that, whether it's carbon sequestration or soil health? Who would ultimately oversee that, or administer that, to ensure that it is being levelled fairly across the board?

Is there any work that CAFTA has done on that?

[Michael Harvey]

We haven't yet, actually. When we received the invitation, some of us thought that it was a little bit early, so we haven't developed a position on this. We have developed sustainable trade principles, which provide us this framework for looking at sustainable trade issues. Really, what we want is to prevent sustainability measures from becoming trade barriers.

Let me go to where work would be done. First, we haven't got to a point of saying that we think it's necessarily a good idea to do the work. We want to avoid countries having different measures that then create a lot of uncertainty in international markets. At the global level, the World Trade Organization is really the heart of the rules-based trading system.

Most agricultural trade takes place under WTO rules, so whenever you can have WTO rules, that's by far the best approach. If that's not possible, like-minded partners—sometimes groups like the G7—can be places to multilateralize preliminary solutions, ideas, and approaches. However, when things aren't decided at the WTO, almost inevitably, you're going to have patchwork rules, and that's problematic.

[John Barlow, Conservative, Foothills, AB]

Thank you.

I certainly understand that CAFTA doesn't have a position on this yet, and that's a good point. I think we're a little early in terms of taking this on.

I have more of a comment here than a question. We have to start looking at partnerships with like-minded, rural-based trading jurisdictions like Canada, the United States, Australia and members of the TPP to start pushing back on the EU on how it's managing its trade relationships. Again, wheat and cattle are a great example of the dangers of following that path that is more ideologically based and not science-based.

Mr. Roy, that would be the lead-in if we're going to talk about these trade barriers and harmonization regulations. Proposition 12 in California is now spreading across the United States, with individual states changing the playing field.

What kind of an impact is that going to have on Canadian pork producers? Are you starting to see the implications of that in terms of our needing to be aligned with our most trusted trading partners, when you're seeing state legislatures changing the rules?

[René Roy]

I will start by underlining that there is also a significant problem exporting our pork products to the EU, so we want to make sure that they are part of our concern. Beef, wheat and pork are not easily able to go to Europe.

In terms of Proposition 12 and all these non-tariff trade barriers, we have major concerns. We believe it is something that we have to push back on. We have to be really concerned when there are new rules being added, such as plans for BCAs.

If we have 30 seconds, I would pass on the financial concerns we have and allow Katerina to answer.

[Katerina Kolemishevska, Director, Policy Development, Canadian Pork Council]

To add to that question, I'll be quite short.

I think that as Canada, we definitely need to focus a bit more on how we define sustainability and what those standards mean, because there is a lot of misunderstanding of the definition itself, and I think that's quite problematic, especially with our partners in the United States.

If we review studies that have been done with OECD, I think we see that Canada is doing much more on sustainability than other countries from which the EU is importing their pork and beef. We have to do that type of analysis as well, to see where we stand and how we actually represent, measure and report sustainability. I think we have a very good advantage at that point.

With respect to the study itself and the financial aspects, I think it's very important for us to consider how the standards will have applications. We know the EU is already doing some of the analytics and statistics on that part. I think that for us it's very important also to dive in a bit on the financial projections of the standards and how they will apply for the producers and also for the industry itself. It doesn't start with producers and it doesn't finish with producers; it's the whole value chain. I think that's very important.

Thank you.

[The Chair, Liberal, Kody Blois]

Thank you very much.

We're going to start with Ms. Taylor Roy for six minutes.

[Leah Taylor Roy, Liberal, Aurora—Oak Ridges—Richmond Hill, ON]

Thank you very much, Mr. Chair.

Thank you to all our witnesses for being here. I apologize for being a little late. On the way over, I was actually talking to turkey farmers on the street about some of this.

I think that the point of this study that we've undertaken is not to talk about putting on border adjustment mechanisms yet. It's really to talk about what's happening elsewhere in the world in the EU and in the United States. It's the contemplation of these border mechanisms and how we can help our producers to ensure that we remain competitive in world trade.

I appreciate, Katerina, what you said about our farmers doing very well when you look at sustainability and the need for more definition on that.

I'm going to direct my question to you, Ms. Geneviève Grossenbacher.

There are some comments that if this were to happen, we would have to look at it in a certain way. I don't think it's “if” anymore. I think it was the OECD that has listed 73 different mechanisms to control carbon emissions that national and subnational governments around the world are putting in right now. I think this is the direction the world is going.

You mentioned in your introductory remarks that you're doing a study that has 16 different recommendations. I didn't catch how much of a reduction in CO2 you said could be attained by looking at spreading some of these practices, which our farmers are already using in many instances throughout the industry.

[Geneviève Grossenbacher]

Thank you so much for the question. We really appreciate that.

Our study is coming out soonish. We actually studied 44 practices. Most of the 44 practices are really no-brainers, and they're cost-effective. We should implement them. Of those, 16 specific ones would lead to a 16-million-tonne reduction by 2050.

Overall, if you look at it as a sector, our research has shown that actually by 2030, we could get between a 15-million-tonne and 16-million-tonne CO2 reduction with the right support. That is key here. By 2050, it's more in the range of 31 million to 51 million.

Again, what you said is really key. The 16 practices that I was talking about that can lead to an equivalent of a 16-million-tonne CO2 emissions reduction are practices that farmers currently use and are proven, like reduced tillage. Enhanced efficiency fertilizers are really key too. That is one thing we could really do.

What's missing there is support. Farmers right now are in the field and feeling the brunt themselves. They're on the front lines of climate change. They need support to be able to adopt and scale up those practices.

[Leah Taylor Roy, Liberal, Aurora—Oak Ridges—Richmond Hill, ON]

Thank you.

I hear loud and clear that more support is needed. Even though we're at $1.5 billion, it doesn't seem to be enough. We are working on it and realize that it's a very important part of our agricultural industry.

When we're talking about putting in the standards that are happening around the world and how they might affect Canada, you're all saying that the definition of sustainability and perhaps the multilateral approach through the WTO is the way to go, if I'm hearing correctly,

I know there are also guidelines already in place. I can't remember the name of them. I think there's a Latin name for them. There are certain requirements needed right now for the phytosanitary regulations. Would you see adding the sustainability requirements into that same kind of framework that is currently used by the WTO?

Michael, maybe you could answer that one.

[Michael Harvey]

Again, we haven't made a decision on whether or not this is a good idea, but in the context of different countries taking on the idea, then it's much better to do things multilaterally so that we're all working under the same rules and preventing disputes. If that were the case, the WTO is the best place.

Multilateral solutions, such as the G7, are better than nothing, but not as good as the WTO, for different reasons. One is that the WTO has a set of rules that are easier to add on to. It's a legal body. The other one is that it's the whole world, essentially. We trade with people who aren't part of the G7, like China and India. The WTO is where everybody we would trade with is.

[Leah Taylor Roy, Liberal, Aurora—Oak Ridges—Richmond Hill, ON]

Thank you.

My final question is for Mr. Roy. I like your last name, by the way.

We've met before, and as I've told you, I have cousins who are in the pork industry. You talked about the administrative and regulatory burden on farmers. I think that perhaps larger farmers can handle it better. It's still a pain, but it's a pain for the small farmers in particular. What recommendations do you have for us for ways we could support farmers in dealing with these burdens, these new administrative regulations that likely are going to be a result of a CBAM being implemented by the EU and other countries?

[René Roy]

I believe that this is a really great point to raise, that it's not all entrepreneurs who are at the same level of understanding and implementation and that the size of the business has an impact on their ability to cope with the new regulations or requirements.

One of our propositions is that there be some money invested. We have a carbon tax. It was promised to be revenue neutral in the sense that the industry could have some part and reinvest it. There is a possibility to have some information infrastructure that will reduce the burden of the businesses to report this information. This would help to make sure that everybody can thrive through these new regulations.

[Leah Taylor Roy, Liberal, Aurora—Oak Ridges—Richmond Hill, ON]

Thank you.

I certainly want to make sure that our farmers who are doing so well on sustainability standards benefit from that, and I think that competitively in the world, we will.

Thank you for the input.

[The Chair, Liberal, Kody Blois]

Thank you, Ms. Taylor Roy.

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

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

Thank you, Mr. Chair.

I want to thank the witnesses for being with us this morning.

Mr. Roy, I'll pick up on the interesting things you were saying.

You talked about a data infrastructure to help standardize things, but there are existing barriers. You mentioned Europe, which won't let your meat in. My belief is that meat from places like Brazil might start coming into Canada, even though their production standards there are completely different, the quality of the product is completely different and the environmental impact is undoubtedly greater.

How can we make sure it's fair for everyone when we start adding standards? I think it's pretty inevitable that these standards are going to come.

[René Roy]

I think it's important to talk about reciprocity of standards.

One issue that producers are talking about is greenwashing. Bill C‑59 addresses that. There's a connection between this issue and the one the committee is studying now. In both cases, our industry is being obligated to perform. When we inform consumers about the work we do, we have to avoid greenwashing. Will Brazilian or American products be subject to the same constraint? We highly doubt it, because Canada has limited power to enforce that.

We feel that this kind of pressure on our industry can put us at a disadvantage and exacerbate the competitive imbalance.

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

Thank you. That's a very interesting point.

Ms. Grossenbacher talked about the importance of providing equivalent support to producers. I'm sure Mr. Harvey will like what I'm going to say next. We all know that agriculture in the United States gets a lot more support than in Canada. That's one example, but there are others.

In 30 seconds, can you tell me your thoughts on that?

[René Roy]

Ms. Kolemishevska, would you like to answer the question?