Agriculture Committee on Oct. 3rd, 2024

[John Barlow, Conservative, Foothills, AB]

Thank you very much, Mr. Chair.

Thank you to our witnesses.

We had a representative from the Department of Finance here yesterday, and I asked them a similar question. Their response was that to implement a carbon border adjustment and all the administration that goes around that, the costs and the efforts would be intense. We now know that the cost just to administer the carbon tax program is about $83 million. Close to 500 bureaucrats administer that program. We know that the carbon tax is costing farmers about $150,000 on average per farm, with a billion dollars in revenue lost to Canadian farmers by 2030.

Mr. McCann or Mr. White, what would be the cost of a carbon border adjustment in terms of the cost to the farmer and/or the cost to administer in terms of not only dollars, perhaps, but also effort in implementing a program that would be navigable, let's say?

[Tyler McCann]

I think the short answer is that we don't know, but it could potentially be quite significant.

The design parameters around a potential border carbon adjustment could require pretty intense reporting from the farm gate to the exporter. We don't have the systems in place. A lot of good work is being done around building efficient measurement reporting and verification systems, but we really are still a pretty long way off from having something that could be easily put in place.

We also have the unfortunate reality that any time government has had to step in of late, to try to put a governmental touch around these systems, the experience has not been positive. We need to acknowledge that there's a high risk that this will end up being a burden.

I mean, the risk is already good that it will end up being a burden on the sector, one that's difficult to cope with, but it will likely end up being more of a burden than we think it will be, based on our past recent experience.

[John Barlow, Conservative, Foothills, AB]

Go ahead, Mr. White.

[Rick White]

It's a great question, Mr. Barlow. It's difficult; I can't really comment on the administration costs. I can only imagine how expensive and complicated it would be. Again, I don't have any experience in that area.

Focusing on your question about the impact on farmers or price impact, what we're worried about is that if this goes ahead and it's a blanket approach, there will be winners and there will be losers. I believe farmers will ultimately end up losing on the imports of critical inputs like fertilizer, machinery and crop protection products. We import a lot of those products. If those products have taxes attached to them, our input costs go up, our margins collapse and we go from bad to worse.

We already have the China issue right now. That's a big problem for us. The last thing farmers need is more uncertainty about the cost and availability of their inputs. We don't know the details, and the devil is in the details. Proceed on this with caution. Think of all of the circumstances of the winners and the losers. This is very risky, in our view.

Again, it's hard to comment on theoreticals right now, but where the rubber hits the road, we'll be able to answer that question more thoroughly.

[John Barlow, Conservative, Foothills, AB]

I appreciate that, Mr. White. Thank you.

Fertilizer costs specifically were up more than 100%, directly attributable to the carbon tax as it is now. There's a 35% tariff on fertilizer from eastern Europe, and now perhaps there's a carbon border adjustment on fertilizer as well, although maybe not from Europe necessarily. Those are all added costs that are passed right on to the producer as a result of the carbon tax and tariffs that have been put on.

Mr. White, the other interesting thing that was raised was Bill C-59, the greenwashing bill. I know that the Canadian canola producers were highlighted in the Global Institute for Food Security study on the incredible efficiencies and achievements in Canadian agriculture. I think the one on canola was that our carbon footprint on canola is 67% lower than canola grown in other jurisdictions around the world.

If you were to try to achieve the standards set by a carbon border adjustment, but you were unable to actually talk about the incredible successes of Canadian agriculture as a result of the greenwashing bill, what kind of burden does that put on you, as an organization representing thousands of farmers, if you're not able to talk about the incredible achievements that Canadian farmers are already doing and setting the standard globally?

[Rick White]

We need to tell our story, because it is a story of success and achievement. It's the culmination of farmer ingenuity, research and innovation, and of quick adoption of technologies like zero till, zero-till machinery and precision ag; it's all of those things. Farmers are in the business of minimizing their costs and minimizing the disturbance on the environment in their production.

It's a story that needs to be told. If we can't tell it because of the greenwashing bill, then I don't think we're serving our customers around the world. We're not answering the questions that they have. I think it would be very much shortchanging our ability to tell our story and to explain how, why and what we're doing about sustainability and all of the good things that we're doing to the individual environments that are on those farms. I think critical pieces of information would be missing from the conversation globally.

[The Chair, Liberal, Kody Blois]

Thank you, Mr. Barlow.

Mr. White, just for the committee's clarity, is your understanding of the current bill that you couldn't talk about no-till agriculture? It's just so that we're clear on that bill. Is that the testimony you're giving?

[Rick White]

I think we are concerned about the legalities of what we can say and what we can't. We're not going to take chances of going against Canada's laws on greenwashing. We'll be ultra-conservative. It would be tempering our ability to do that.

It really is a risk of... It's not that we are trying to greenwash it. We would never do that, and we don't have to do that. At the same time, you have to think in the back of your mind to be cautious about what you do say publicly because of the lingering potential liability.

[The Chair, Liberal, Kody Blois]

Thank you.

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

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

Thank you so much to our witnesses.

I certainly appreciate all of you appearing before this committee on an issue that I think is not going to impact the ag community tomorrow, but if we don't start preparing, then it will impact our ag community in five to 10 years.

I'm not talking about Canada imposing carbon border adjustments; I'm talking about other countries. It's going to become a reality for—and I think there's been testimony—the steel industry, for the cement industry and for our Canadian fertilizer industry that's exporting to the EU. This is all becoming an immediate reality in two years. I know there are EU auditors currently assessing the supply chain of our steel industry in Canada right now.

I know the biggest barrier right now to imposing carbon border adjustments is measurement and how we measure. There are a lot of Canadian universities working on that. Universities across the world are working on that.

Farmers are putting a lot of pressure across the world on their own legislatures. If we talk about CETA in France, the reason France has not adopted CETA yet is that their own farmers had massive protests, and EU farmers had massive protests on what they called mirror clauses. However, those are reciprocity clauses. Part of that discussion is imposing CBAMs on jurisdictions that may not have environmental laws similar to what they have.

That's why I think it's important to have this conversation now. It's so that we can prepare and so that we don't come back in five or 10 years with our pants down and say, “Oops, we should have done something”, because it takes a while to transition.

I agree that Canadian farmers are doing an amazing job. We have to tell that story better. We have to ensure that the way we measure our carbon footprint is science-based and is pushed and is accepted across the world.

With our biggest trading partner, we have Republicans and Democrats talking about imposing carbon border adjustments. We've had two bills already presented in the Senate on this particular matter.

I know that it may seem far-fetched for some of us, but it is going to become a reality. I can see it. If we are to continue trading in this world, there's going to be more pressure to stop carbon leakage.

We're not talking about Canada imposing carbon border adjustment mechanisms; it's about how we prepare and how we make sure that Canada is best prepared to face that. Of course, we have our trade vehicles and our trade institutions that we can use to fight WTO, etc., but how do we make sure that Canada is prepared to best equip our farmers here in Canada?

I can start with Mr. McCann.

[Tyler McCann]

I think it is worth addressing one comment that you've made and that the chair made earlier.

Last summer the Government of Canada—the finance department—consulted around Canada's approach to border carbon adjustments. I think that it's quite legitimate for the stakeholder community that's trying to navigate and understand where the government may go on this to think that this may be something that Canada is considering doing. I think the last thing we saw, effectively, from the finance department was a consultation asking if Canada should do this. I want to acknowledge that.

One of the good things that this study has done, I think, is remind all of us that Canada is not an island. What we do in Canadian agriculture is part of a global system. That level playing field and that need to be competitive, both from an environmental and from an economic perspective, are really important. Therefore, I do think that we need to be a lot more thoughtful around what are we doing today to prepare for that changing landscape in the future.

There is a potential that carbon is part of it. Biodiversity is something that gets talked about. The reality is that for all of that talk, the action continues to really be around subsidies, which we're largely not being competitive on, or there's very little effective action at all.

I think we're all trying to navigate this. How do you deal with this kind of rhetoric around the need to take action and the reality that Canada has been one of the countries that has been more aggressive? On the carbon tax and its impact on agriculture, it's important to keep in mind that Canadian agriculture is one of the few agriculture systems around the world that is paying a price for carbon that way. That is one of the differences there.

We really do need to be a lot more thoughtful about the fact that this is a complicated, changing landscape, and the landscape is going to change in the future.

We should show leadership around what solutions look like. The world is in need of creative thinking and new approaches that reconcile economic and environmental sustainability, and that improve our sustainable food system while ensuring the profitability and livelihoods of farmers around the world. A lot of the instruments that are available today are pretty blunt and not very effective. I think Canada could do a lot more to say, “This is what our made-in-Canada approach looks like.” I don't think we see Canada leaning into that as much as it could.

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

Part of the issue is that the world's changed. A few years ago we had a U.S. presidency that wasn't afraid to impose tariffs. We've had all parties agree on EV and steel tariffs in Canada, so the world is changing. I would call those particular tools non-trade-barrier tools or tools that impede trade, and politicians are not afraid to use them.

The G20 is talking about carbon border adjustments. It is talking about this. It's part of the conversation at COP. I don't know whether they're at COP28, COP29 or COP30 now, but they are talking about this. It starts from there and it comes back; it trickles down.

I'm just afraid that if we don't start making sure that we give the proper tools to respond to that, then we will leave our farmers in a non-competitive position in the near future.

[Tyler McCann]

We shouldn't reduce it to border carbon adjustments. There are a lot more tools in the tool box and we should have a much more thoughtful discussion around what that competitive landscape looks like.

[The Chair, Liberal, Kody Blois]

That's why we're doing the study.

I do see your hand, Mr. White. We are at time, but I would like to offer you a very brief comment, if you'd like.

[Rick White]

Thank you, Mr. Chair, for indulging me.

Very briefly, I'd just like to say that we should not forget about the WTO. This has been coming up over the last five years, originating from the food systems summit in Rome, and I've made these arguments time and time again. This is coming and this is coming now.

Rather than trying to match or coordinate carbon adjustments at the border, we need to deal with it at the WTO in a trade agreement so that everybody plays by the same rules and so that these rules don't become disguised trade barriers and distort trade.

We need to focus as much time on WTO and on improving that so that it can handle the trade complaints that will come from this. We need to make sure that it's science-based and evidence-based and can be measured scientifically, so that all countries are abiding by it. I'd just like us not to forget about the WTO and augmenting that. We should be leading the charge on that message.

Thank you.

[The Chair, Liberal, Kody Blois]

Thank you, Mr. White.

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

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

Thank you, Mr. Chair.

I'd like to thank the witnesses for being with us today.

Mr. McCann, I'll start with you.

In the previous panel, we talked about how we can recognize what has already been done by agricultural producers, when it comes to implementing new policies or new standards. You say that we have to be vigilant and that the standards we're currently talking about aren't yet in place, but it's not a bad idea to study them before they're in place.

Could you tell us more about it?

[Tyler McCann]

I'll come back to what I said, which is that we should be vigilant about everything that's happening on the ground. Today, we're facing a number of factors that can have an impact on competitiveness, on our exports and imports. We sometimes have a habit of looking at only part of the problem, when the issue is bigger. Sustainability and international trade are very big, multifaceted issues. There should be more awareness of how all of these things work together. We need to be more aware of the fact that, again, all domestic policies, not only in Canada but also in the United States and Europe, have an impact on sustainable trade.

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

I really like the point you raised that we have to have a global vision.

I hear a lot of people expressing concern about this becoming a non-tariff barrier. We know that there are already a lot of problems with that. We talked about it earlier with the pork producers. Meat can't get into Europe. It was supposed to be able to get into Europe, but it can't. We don't want to get into that either.

Mr. White brought up the idea of starting discussions with the World Trade Organization. I don't know if I understood what he said, but he can confirm it in a moment.

How do you see that? Should these discussions take place at the international level? That's the first thing.

Then, how do we support our producers? As you know, our agricultural producers are competing with people who receive much more support than they do. It's already unequal, so how do we prevent that inequality from growing even further?

[Tyler McCann]

First of all, I think it's clear that Canada should be a champion of the World Trade Organization. Canada should be one of the strongest voices supporting everything that's happening there and strengthening the role of the WTO today.

I think we should be more aware of how we do things. Once again, this morning, Ms. Grossenbacher said that producers like the carrot approach more than the stick approach. Other countries seem to like the carrot approach more than we do. I think here in Canada we like the stick approach, maybe a little too much sometimes. We should have better reflexes to find ways to better support and encourage the sector, that is, to use the carrot approach rather than the stick approach.

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

We agree on that. We all prefer carrots, except the ones from China that enter Canada at a low price and compete with our producers.

Can you tell me in 30 seconds how to recognize what has already been done?

[Tyler McCann]

I don't think a good solution has been found to ensure that recognition.

In fact, it really depends on the type of recognition we're talking about. Are we talking about tax recognition? Do we want to support people? When it comes to carbon border adjustments, do we want to ensure a balance in how carbon emissions are measured here and elsewhere? It's a challenge.

In some cases, such as with no-till practices, obviously the producers themselves have benefited from that investment and those practices.

Sometimes the work of recognition is difficult. I think that's lacking, and there needs to be more debate on this issue.

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

Thank you, Mr. McCann.

Mr. White, what are your comments on those same questions?

[Rick White]

Thank you.

Again, I just want to assure that we're thinking more globally and make sure that the multilateral trade agreement that we already have is able to help us and help others around the world determine what's a trade barrier and what's not.

The difficulty with carbon adjustments spread all over the world is how you determine equivalency. Who is going to arbitrate that? We've already experienced a lot of that with the EU. We don't do it their way; therefore, they won't allow something in. It's not based on science particularly, and I feel and I sense that is going to happen in this case, and it's going to get worse. We need a WTO to be able to be strong and have wording and maybe an agreed chapter on this. I don't know what it is, but it needs to bring some semblance of commonality and rules around this so that trade is not impeded.

I want to branch off just a little bit, if I may. This feels and looks like it's protectionist, and it's happening all over the world. This is an example of a protectionist type of adjustment. You could call it a corrective adjustment, but I will call it protectionist, because traders will look at it as protectionism if it impedes their ability to trade.

We're experiencing that right now with canola with China. A protectionist measure by Canada triggered a venomous attack on our industry, and farmers are going to pay dearly for Canada's decision to put tariffs on China. Farmers don't deserve that. That is a big issue. That's an example of what we want to avoid.

[The Chair, Liberal, Kody Blois]

Thank you, Mr. White.

Unfortunately, we're at time, but I wanted to make sure you were able to make your point about concerns around protectionism and the trade piece.

Mr. Cannings, it's over to you.