Thank you for the invitation to appear before this committee to discuss the impact of carbon border adjustment mechanisms.
As the chair indicated, my name is Rick White, and I'm the president and CEO of the Canadian Canola Growers Association. I'm based here in Winnipeg, and we have an Ottawa-based team as well.
CCGA is the national association for Canada's nearly 40,000 canola farmers, representing them on issues, policies and programs that impact their farms' success.
Developed in Canada, canola is a staple of Canadian agriculture, as well as science and innovation. Today it is Canada's most widely planted crop and the largest farm cash receipt of any agricultural commodity, earning Canadian farmers over $13.7 billion in 2023.
Annually, the canola sector contributes $29.9 billion to the Canadian economy and provides over 200,000 jobs. Canola farmers are heavily trade-dependent, exporting 90% of what they grow as seed, oil or meal, while importing critical crop inputs such as fertilizer, crop protection products, and farm machinery and infrastructure. Exports alone were valued at $15.8 billion in 2023.
We urge the government to exercise utmost caution when considering a carbon border adjustment mechanism and do its due diligence to ensure any such mechanism does not go against the principles of international rules-based trade. It is imperative that we balance Canada's climate change ambitions with our economic competitiveness and our global trade reputation and commitments.
Additionally, any design should fully account for Canada's World Trade Organization commitments and respect our bilateral free trading agreements. The WTO's framework underpins our international trading system, offering clear and predictable rules on trade. The mechanism's design and details will determine trade compliance, and any deviation from that could open Canada up to potential trade disputes or criticisms of protectionism, undermining the mechanism's stated objectives.
Our partners at the Canadian Agri-Food Trade Alliance, also known as CAFTA, stated before committee last week that it is essential that sustainability measures do not become barriers to fair and free trade or serve as cover for protectionist trade policies. CCGA is fully aligned with this statement. CAFTA has also developed principles of sustainable trade, which would be an excellent resource for this committee to review.
While other countries may have similar goals to reduce greenhouse gases and achieve carbon neutrality, approaches to carbon border adjustments are not standardized and likely not easily harmonized. A patchwork of regimes has the real potential to enact barriers and disrupt trade, increase the possibility of a double carbon price, and create new and possibly cumbersome accounting regimes for both government and industry. Engaging early in the design process increases the chance of a multilateral approach and of having Canada's approach recognized as equivalent, most notably by countries such as the U.S. and the European Union.
With international trade being the lifeblood of our sector, canola farmers need to remain competitive in global markets. Any mechanism must consider the cost increase of imported products and mitigate impacts on downstream users. Fertilizer, fuel, food and beverage, and steel and aluminum are highlighted as emissions-intensive and trade-exposed sectors. Farmers rely on fertilizer imports for specific nutrients not produced in Canada in order to grow and realize crop yields, whereas steel and aluminum are required to produce tractors, equipment and storage bins. For example, targeting primary steel production could potentially shift the cost to end-use products like combines. Farmers are ultimately responsible for any increased cost. As the last link in the value chain, and with grain prices set globally, they can't pass on any of those increased costs.
While CCGA understands Canada's commitment to achieving ambitious climate change targets, we are also wary of the negative impacts this mechanism could have on open trade and thus have a trickle-down effect on farmers. Given the current trade investigation China has launched on canola in response to Canadian-imposed tariffs on EVs, steel and aluminum, canola farmers—now more than ever—need the Canadian government to follow international rules-based trade principles.
Given these considerations, CCGA recommends that government exercise extreme caution and thoroughly consider the unintended consequences of implementing carbon border adjustment mechanisms. Any Canadian CBAM must maintain our global competitiveness and be designed to align with, and be recognized by, our major trading partners.
Thank you.