My opening remarks are in French and English.
Good afternoon, Mr. Chair.
Thank you for inviting me to appear before the committee this morning. I always appreciate the opportunity to contribute to your work.
The Canadian Agri-Food Policy Institute, or CAPI, has been working on the link between international trade and sustainability for years. I would like to share my thoughts on how these two elements intersect—or collide.
It is essential to frame any conversation on sustainable trade around a couple of really critical facts. The world is facing increasing food insecurity. Supply, demand and stocks of key commodities are tightening. There are fewer net exporters and more net importers. Not all food is created equal. What it is, and how it is produced, all play an important role in its environmental footprint. Transport, especially ocean freight, actually has a very small impact on most food’s environmental footprint.
Therefore, trade will increasingly be essential to ensuring that food can get from the small number of countries where it can be produced in abundance more sustainably to those countries where they cannot produce enough to meet demand.
While economists and trade lawyers have long explanations for them, border carbon adjustments are there to ensure a level carbon playing field among countries, but how you measure the carbon and how you know if the playing field is level is immensely more complicated than that. The BCAs are not likely to be an issue for the food system for the foreseeable future.
While the EU is moving ahead with BCAs, the coverage is limited to six emissions-intensive trade-exposed products that are covered under the EU Emissions Trading System. Fertilizer is the only agriculture-related product impacted by the BCA. Agriculture production is not covered by the EU ETS, and there is no serious dialogue that it would be covered by the ETS or the BCA.
The world is struggling to figure out how to deal with carbon at the border. This is incredibly complicated, and the solutions are not evident. It is not likely that a border carbon adjustment will be the solution to that problem.
While it is not an agriculture commodity, it is important to recognize the impact that a BCA could have, and is likely to have, on Canadian fertilizer. Luter Atagher, a recent CAPI doctoral fellow, put out an excellent paper exploring the potential impact of a BCA on fertilizer.
The recent tariffs on Canadian fertilizer imports have shown how much of a negative impact tariffs can have on Canadian farmers and how Canada should be motivated to seek out a different approach.
Setting aside fertilizer, for most Canadian agriculture exports, the EU deforestation regulations are a significantly greater challenge than a theoretical BCA. It was positive to see yesterday that they have been delayed by a year, but there's a lot more work to be done there.
While much of the attention on the collision between sustainability and trade focuses on regulatory and border measures, it is important not to lose sight of the impact that domestic policies and green spending could have on Canadian exports around the world.
The increasing use of green subsidies in the U.S. is a great example of sustainability measures that have the potential to negatively impact Canadian exports. At the WTO, the green box is typically seen as not trade distorting, but that is an antiquated view of the world.
I would also like to make a few comments on the reciprocity of standards.
It's easy to understand why Canadian producers are concerned and support the concept of reciprocity. They produce very high-quality food and don't want to be forced to compete with imported products that aren't of equivalent quality. Producers also don't want to compete with products made or grown using inputs not available on the Canadian market.
Again, while it's easy to understand the concerns raised, it isn't as easy to find solutions.
First and foremost, the Canadian government has the authority to ensure that imported food is safe for consumption and meets Canadian requirements. Whether they have the resources is a different question.
The issue of reciprocity of standards is indeed a competitiveness issue, not a food safety issue. Beyond potential conflicts around international trade rules, the reciprocity of standards remains a difficult approach to implement without adding costs and creating friction in the food chain.
A better approach would be to encourage greater harmonization of farm input standards, regulations and approvals. For example, Bill C-359 creates conditions that can ensure access to competitive technologies without creating a thicker border and less functional international trade.
There is clearly a need to develop solutions that continue to improve agricultural sustainability while promoting trade and supporting food affordability. However, adding taxes and barriers at the border is not likely to have the desired impact. It is through collaboration and co-operation among governments, farmers and food producers around the world—not barriers, taxes and regulations—that we will find the solutions needed to meet the productivity growth required to deliver the economic, environmental and social sustainability the world needs from its food systems.
Thank you.