Agriculture Committee on Oct. 8th, 2024

[The Chair, Liberal, Kody Blois]

Mr. Perron, I'm sorry to interrupt you, but a point of order has been raised.

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

I think Mr. Perron was just about to broach the topic of supply management. I would love to discuss that with Mr. Charlebois, but I think we have to stick to the subject at hand.

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

It was the subject at hand, since that's the example he gave.

[The Chair, Liberal, Kody Blois]

This is just a gentle reminder.

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

I was getting to it. You can trust me, Mr. Chair.

[The Chair, Liberal, Kody Blois]

Mr. Perron, I understand that it was related to Mr. Charlebois' comment.

You have 45 seconds left.

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

I don't want to turn this into a debate, but these are temporary compensations for permanent losses. This is an important debate that cannot be held in two minutes.

Ms. Loftsgard, I would like you to send the committee the details of your three proposals in writing, because the time allotted for testimony is very short. I would like to know what you see in this piece of legislation.

Mr. Cosbey, I'd like to talk to you about reciprocal standards. Do you think it's possible to have completely different systems and provide our citizens with affordable food while implementing measures to have reciprocal standards?

[Aaron Cosbey]

I guess the intent of a border carbon adjustment mechanism, and all the other similar mechanisms like that, is that it's a way to deal with non-reciprocity of standards.

[The Chair, Liberal, Kody Blois]

Thank you. We're going to leave it at that.

Alistair, take us home here. I might have one question, but go ahead.

[Alistair MacGregor, NDP, Cowichan—Malahat—Langford, BC]

Thank you, Mr. Chair.

I think I'll save my last spot for Ms. Loftsgard.

In your opening statement, I appreciated how you were talking about the need for Canada to get serious about having its own stand-alone organic act. I know that's something that your organization has been working very hard on. I also appreciate how you talked about some of the advantages. Don't get me wrong. There are challenges for organic farmers, but when it comes to some of the inputs, I know that organic farmers are really trying to lead the way on how they reduce their inputs. I think it's an example that is shared amongst the wider agricultural community.

The question I really want to get down to is this: For some countries in the European Union that have taken a national strategy with respect to organics seriously and are really committed to it, when you put that in the context of where we are at in Canada—and we know that the market and the demand for organics is growing—what kind of a competitive disadvantage does that leave our organic farmers vis-à-vis those European countries that are taking this very seriously?

[Tia Loftsgard]

I think it was pointed out that we are an exporting nation, and we are Europe's 20th-largest exporting partner. As they develop their own organic capacity, of course, it's going to be fewer exports I would say unless we can keep our pricing competitive on the export side of things. Also, we're seeing a lot more cheap imported goods coming into our country. We're finding people are buying wheat from other jurisdictions, but we're a wheat-producing nation. There's something wrong with that system.

We really need to look at how to make sure that there is going to be a competitive advantage for sourcing Canadian, without a supply-managed system. Because our sector doesn't even have the ability to apply for a check-off, we can't even access many of the programs that already exist with Agriculture Canada.

If we can get to that place where we have an organic act, we can unveil the funding mechanism that we're in discussions about. We're really looking at how we can have more support from Agriculture Canada on the market development side, but also more transition funding for farmers and extension services.

[The Chair, Liberal, Kody Blois]

Thank you very much. You are right on time.

I have quick question for either Mr. Cosbey or Mr. Charlebois.

It's interesting because the conversation is premised on whether we believe there's something to be done to support the sector in decarbonization or reducing emissions. I'm not hearing any of the testimony to say that it's not the case. The question becomes how you go about doing that.

Mr. Charlebois, you talked a lot about that, about green incentives, investment from the government. We're seeing a lot of that in the United States with the IRA. Carbon pricing is one tool. There are other tools. There are regulatory tools. There are government subsidies. All of that comes with a cost, either a cost to the producer or a cost to the national treasury, maybe a cost to the consumer. Then, of course, doing nothing on climate has its own cost.

Beyond CBAM, because, Mr. Cosbey, you've said that you think that's unrealistic—I think that's fair—is there ever a way that we're going to be able to reconcile the competitive advantage that Canadian agricultural already has from an emissions-intensity perspective in certain goods...or to be able to reconcile countries that are choosing to try to work with industries to reduce emissions that inherently have one of those cost factors? Do you ever account for that, or are we just going to decouple this conversation altogether and really that doesn't come into the fore?

That's what I want to get at. If you have 30 or 45 seconds each.... If not a carbon border adjustment—fine, because it's too complex—do you see a club system where countries that are actually choosing to do something get together and say, we're doing something, whether it's regulatory, subsidization or some form of carbon price? The countries that are not, are they subject to a tariff, or is this just decoupled completely and we never really account for that, either competitiveness or the true cost, in some form, of trying to reduce emissions?

[Aaron Cosbey]

I can take a first shot at that.

The G7 initiated—but it's gone beyond the G7 now—a climate club, more focused on industrial decarbonization for exactly the reasons you're talking about. It's the idea of co-operating among all the willing countries on a number of things but including something like a mutual agreement on regulatory measures, which would raise the cost of production, at least initially, but would also shut out those countries that didn't commit to those kinds of regulatory improvements.

I don't see why you couldn't apply the same principle in the context of agriculture. That climate club is existing and looking for an expanded mandate as we speak. There's also the industrial decarbonization agenda at the G7.

That kind of a club idea strikes me as the one way you could deal with that, if you weren't talking about prices. If you're talking about prices, then you probably want a border carbon adjustment for Canada. Again, I wouldn't go there with agriculture.

[The Chair, Liberal, Kody Blois]

I think it's interesting because it's not really around pricing. It's that there's a true cost. If you're the Americans, you're spending a lot of taxpayers' money right now to help reduce emissions. How is that ever accounted for? I take your point about the pricing being too complex to ever do a CBAM.

Mr. Charlebois, you have 30 seconds to a minute.

[Dr. Sylvain Charlebois]

To quickly answer your question, I would say that you cannot make the agri-food sector more competitive unless you decarbonize the sector. It has to be done in a measurable manner. You also need to talk about investing in green technologies over time. That's the way I see it. Right now, there's little that is being accounted for. There's also little measurement. That's a dangerous thing to do.

[The Chair, Liberal, Kody Blois]

Beyond the measurement, though, is there a way that you actually account for it in the global economy, or is that just decoupled and we do it out of the goodwill of our hearts?

[Dr. Sylvain Charlebois]

Unlike Mr. Cosbey, I mostly look at our domestic reality, because we do export a lot. I don't see that changing any time soon.

[The Chair, Liberal, Kody Blois]

Thank you very much.

Again, I'm sorry to test the patience of Mr. Steinley for a few extra minutes. I won't do it that often moving forward, Mr. Steinley.

Thank you to our witnesses, Mr. Charlebois, Mr. Cosbey and also Ms. Loftsgard.

Colleagues, don't go far. We're going to transition to our next panel. We'll just be a few minutes.

The meeting is suspended.

[The Chair, Liberal, Kody Blois]

Colleagues, we're going to get right back at it.

Thank you to our technological team for turning us around pretty quickly.

We're going to get right back at it because we have a busy second panel. From the Canadian Cattle Association, we have Jack Chaffe, officer at large, and Jennifer Babcock—who is no stranger—senior director of government relations and public affairs. From Cereals Canada, we have Mark Walker joining us online.

It's good to see you again, Mr. Walker.

From CropLife Canada, we have Pierre Petelle and Émilie Bergeron. It's great to see you both as well.

I'm going to start with the Canadian Cattle Association.

It's over to you for five minutes.

[Jack Chaffe, Officer at Large, Canadian Cattle Association]

Thank you, Chair.

Thanks for the opportunity to present here on behalf of the Canadian Cattle Association, or CCA, for your study on carbon border adjustments and impacts on the ag sector.

My name is Jack Chaffe. I'm an officer at large with the CCA. Along with my family, I own and operate a beef feedlot in southern Ontario. I'm joined here today by Jennifer Babcock, senior director of government and public affairs.

CCA is a national organization representing Canada's 60,000 beef producers. The Canadian beef industry is a significant driver of our economy and a global leader in sustainability, contributing $21.8 billion to Canada's GDP and supporting approximately 350,000 full-time equivalent jobs. A prosperous and thriving beef industry generates considerable economic, environment and social opportunities and benefits for Canada.

As you may have heard, the Canadian beef industry has set ambitious 2030 goals that will drive the future for economic and environmental sustainability. Beef producers are significant positive contributors to Canada's environment in sequestering carbon while conserving biodiversity. We already lead the world with less than half the global average in greenhouse gas emissions intensity, and we're not resting on those laurels.

Several of our 2030 goals include a 33% further reduction in greenhouse gas emissions; preserving our 1.5 billion tonnes of carbon sequestered in Canadian grasslands; sequestering an additional 3.4 million tonnes annually; and preserving Canada's remaining 35 million acres of native grasslands.

When we look at government programs and policies, we need to look at the whole picture to ensure we're not in unintended consequences. This is where the border carbon adjustments, or BCAs, raise concerns in our sector, particularly on trade perspectives. With the rise of protectionist measures around the world, how do BCAs impact the global trade dynamics?

The Canadian beef sector exports around the world approximately 50% of our production of live cattle and beef. Trade is essential to achieving global food security, as well as sustainable development.

It's worth noting that at the World Trade Organization's recent public forum, where sustainability was a central theme, BCAs and other similar policies were flagged as non-tariff trade barriers. The WTO notes that these types of policies have a negative impact on developing countries. With so much international discussion blending sustainability and trade policy, the CCA urges that any domestic sustainability policies are consistent with our WTO obligation to consider international trade implications before implementing.

I'm going to highlight a few of our recommendations focusing on regulations, costs to producers and competitiveness.

One is regulatory harmonization. We continue to seek further regulatory alignment with trusted partners. The implementation of sustainable policies should not add regulatory burdens to producers but instead look at how to align regulatory systems and reduce red tape that impacts the flow of trade.

Two is additional costs to producers. Producers are price-takers. When additional compliance and administration costs are incurred, producers are disproportionately affected, making it more difficult to compete. As new policies are developed, the cost to producers must be addressed.

Three is competitiveness. Canada's current domestic carbon policies have led to increased costs for producers, which puts us at a competitive disadvantage with producers around the world. We encourage the government to ensure that there are not unintended impacts to our global competitiveness through new policies.

We urge policy-makers to consider potential trade impacts to the agriculture sector, of which 90% relies on trade. Canada should be proud of beef production across the country. Not only are we leaders in world sustainability practices, but we are always looking for continuous improvement. Canada will naturally be at a competitive advantage. We need to ensure that government policies enable us to grow our sector.

Thank you. We'll be looking forward to questions.

[The Chair, Liberal, Kody Blois]

Thank you very much.

We'll now turn to Mr. Walker, please, for up to five minutes.

[Mark Walker, Vice-President, Markets and Trade, Cereals Canada]

Thank you, Mr. Chair and members of the committee, for having me here today.

My name is Mark Walker. I'm the vice-president of markets and trade at Cereals Canada.

Cereals Canada is the national industry association for wheat, durum, barley and oats in Canada. We represent the full value chain from farmers to crop development companies, grain handlers and exporters. Our members are focused on the benefits of export-led growth facilitated by access to diverse global markets. Canadian cereals are a staple food exported to every corner of the globe and over 80 different countries. In an average year, Canada's wheat, durum, barley and oats sectors generate $68.8 billion in economic activity, including more than 370,000 Canadian jobs.

I appreciate the opportunity to appear before you today to provide input into the committee's study regarding border carbon adjustments, or BCAs, as well as reciprocity standards on Canadian agriculture. BCAs are a new and developing area of environmental policy with some certainties and significant uncertainties.

At the outset, it's important to note and highlight how a BCA and associated reciprocity might function, but also the structure required to achieve that function.

A BCA and associated reciprocity must apply a price on carbon on imported products from jurisdictions that do not have a price on carbon and provide reciprocal relief to entities exporting to jurisdictions that do have a price on carbon. In creating a BCA that would apply to jurisdictions that do not have a price on carbon, the government would have to assign carbon intensities to the harmonized system or HS codes of products that are imported into Canada, aligned with the carbon intensity of the life cycle of that product in the exporting country's production system.

Some thought would also have to be given to the carbon intensity of comparable domestically produced goods, and whether the carbon price assigned to that domestically produced good is higher or lower than the imported good. What this would do is take the work of ECCC's carbon markets bureau and replicate it on a global scale. For example, in order to assign a price on carbon to north African or North American fertilizer, the scope 1, 2 and 3 emissions of that product would need to be properly verified.

The concept of a reciprocal structure is somewhat more straightforward. However, one must consider exempt jurisdictions with a price on carbon that are subnational, like California; national, like China or the United Kingdom; and supranational, like the EU. This reciprocal structure would need to be spelled out in treaties that seek to avoid double taxation, like the kinds Finance Canada already currently administers. These treaties would provide relief to exporters sending products to markets with a price on carbon and their importers shipping products to Canada.

Again, thought would have to be given to the carbon intensity of comparable domestically produced products and whether the price on carbon assigned to that domestically produced good is higher or lower than the imported good when assessing the appropriate quantum of relief.

In addition to administering the noted treaty regime, the government would need to be properly resourced to collect and refund taxes as necessary.

These are the considerations related to a BCA and associated reciprocity that are well understood. However, there are other considerations that I must flag which, while far less clear, are also critically important.

In addition to the significant government resources required to set up and administer this initiative, it would also burden private companies and individuals with new reporting requirements, processes and costs. It would create an entirely new school of accounting in Canada akin to GST and capital gains.

The Canadian cereals industry is export-oriented but reliant on imports of key inputs. A BCA could increase the cost for Canadian farmers of things like imported fertilizer products from some of our largest import sources. Specifically, these are north Africa and the U.S. Furthermore, the carbon intensity of various agriculture inputs varies across the country, whether they be kilowatt hours, BTUs or fertilizer. This policy runs a significant risk of creating and exacerbating regional discrepancies due to the varied carbon intensity of available products.

Over 70% of Canadian cereals are exported around the world. It is unclear what impact associated reciprocity would have on our primary production and domestic end products. Certainly, some domestic consumers of some products would be better off, while some exporters of other end products could be worse off. In seeking to realign economic equilibria from existing government intervention, this policy could in fact exacerbate existing economic disequilibria.

I would note the government's efforts through this policy to place value chains on more equal footing with international competitors. However, the outcomes of that effort are far from certain at this time.

Given the uncertainty regarding possible outcomes, Cereals Canada would ask that this policy not move forward until its administrative and economic impacts have been comprehensively studied and addressed by the government.

Thank you for your time. I look forward to any questions you may have.

[The Chair, Liberal, Kody Blois]

Thank you very much, Mr. Walker.

We'll now turn it over to CropLife.

Mr. Petelle, go ahead.

[Pierre Petelle, President and Chief Executive Officer, CropLife Canada]

Good morning.

My name is Pierre Petelle. I'm the president and CEO of CropLife Canada.

I'll be sharing my time and opening remarks with my colleague from CropLife who is with me today, Émilie Bergeron, vice-president of chemistry.

Thank you very much for inviting us to participate in your study on the impact of border carbon adjustments and reciprocity standards on Canadian agriculture.

CropLife Canada is a national trade association representing the manufacturers, developers and distributors of crop protection products and plant breeding innovations for both the conventional side and the organic side, representatives of which were here earlier.

We advocate for a predictable, science-based regulatory environment for both pesticides and plant breeding innovations in Canada and internationally. Furthermore, we champion a regulatory environment that both protects human and environmental safety while encouraging innovation and competitiveness.

As a heavily trade-dependent nation and the fifth-largest food exporter in the world, in fact, Canada must ensure that protectionist measures are vigorously challenged and that we don’t contribute to this trend by imposing measures that, while well intentioned, could result in further trade-restrictive actions by our trading partners.

Our regulatory system for crop protection and plant breeding innovations is rigorous and protective of health and the environment. We mustn’t let other countries dictate what’s in our farmers’ tool box. It could be tempting to call for the adoption of unilateral reciprocity measures to create a level playing field for growers. However, the adoption of these measures could result in a race to the bottom, preventing producers from using safe and efficient tools to produce the abundant and affordable food that we need to feed the growing population.

Don't get me wrong: We have a lot of work to do on our own domestic regulatory system to be more nimble, to encourage new innovations and to make sure our farmers are the best equipped to deal with growing pest pressures and increasingly volatile weather. However, in our view, the best way of supporting the competitiveness of the agriculture sector is through increasing regulatory harmonization and co-operation with trusted jurisdictions and by promoting the adoption of international safety standards.

I'll turn it over to Émilie.

[Émilie Bergeron, Vice-President, Chemistry, CropLife Canada]

Farmers in Canada and around the world are increasingly faced with the need to produce more food from fewer resources and under less predictable growing conditions. With that in mind, Canada must continue to stand firmly in defence of a science and rules-based trading system for agricultural products.

CropLife Canada and our members share the view that, as others, such as CAFTA, have previously expressed to the committee, sustainability policies and trade-related climate measures must not impose unnecessary regulatory burdens or become non-tariff barriers to trade.

As an industry, we're concerned about the rise of protectionism that we're seeing around the world. In this regard, the mirror clause or reciprocity clause that Europe is using to impose a new unjustified barrier to agricultural trade is of particular concern.

For example, Europe recently adopted new measures on pesticide residues under the guise of creating a level playing field for its producers. This new measure, which is not science‑based, will create unjustified barriers to imports and will dictate to producers around the world the practices and tools they can use if they wish to export to Europe.

Not only does this type of measure have an impact on producers' ability to respond to the agronomic challenges they face, but it also prevents them from using safe, effective and innovative tools to be more productive and competitive.

We believe that Canada must play a leading role at the international level to defend the multilateral rules-based trading system and the interests of Canadian producers.

As an export‑oriented sector, we need our government to be at the forefront of international efforts to denounce the use of unilateral measures inspired by the mirror clause and to ensure that sustainable development policies facilitate trade and are consistent with World Trade Organization or WTO rules.

As this committee is aware, the Canadian agriculture industry produces some of the most sustainable, high-quality crops and food in the world. As others have previously testified, there is clearly a need for government and industry to develop solutions that will continue to improve agriculture sustainability while promoting trade and supporting food affordability.

Canadian growers rely on access to the latest innovative tools, including pesticides and crops developed through modern biotechnology, to meet the food and feed needs of Canadians and the world and to improve agricultural sustainability. They also rely on a strong multilateral rules-based trading system that supports their competitiveness and allows for achieving greater sustainability outcomes.

Thank you once again for inviting CropLife Canada to participate. We look forward to your questions.