Thank you, Chair and members of the committee, for the invitation to join you today, along with my colleagues.
My name is Troy Sherman, and I am the senior director of government and industry relations for the Canola Council of Canada.
The Canola Council is a full value chain organization, representing approximately 40,000 canola farmers, as well as exporters, processors and life science companies.
As a value chain organization, our goal is to ensure the industry's continued growth and success, and to do this by meeting domestic and global demand for canola and canola-based products, which include canola seed, oil and meal.
Canola's success is Canada's success. Our industry represents almost $30 billion in economic activity annually, supports over 200,000 jobs across the country, generates $12 billion in wages and is one of the largest sources of farm cash receipts.
International trade is vital to the success of the industry. Approximately 90% of canola products are destined for international markets, with exports totalling $15.8 billion in 2023 alone.
Given the significance of exports to the canola industry, trade mechanisms, such as border carbon adjustments, must be carefully considered before being implemented in Canada. While the stated intent of border carbon adjustments is to largely reduce carbon leakage and maintain the competitiveness of domestic industries, the government should proceed with caution as this policy approach is not without risk.
There are at least two key considerations that Canada must weigh, should it consider implementing border carbon adjustments.
The first is the trade implications for border carbon adjustments and their potential impact on Canada's trade policy and international reputation. As an industry that relies heavily on export markets, we are cognizant of ever-changing trade dynamics and, in particular, measures that could impede market access. Current market and geopolitical headwinds underline this exposure and the importance of market access in key jurisdictions.
Border carbon adjustments and potential corresponding import charges and export rebates, depending on how implemented, could result in countries taking action against Canada at the World Trade Organization, or pursuing unilateral action as a form of retaliation to limit our access to those markets. This would not be an acceptable outcome for the Canadian canola industry.
As a result, Canada must thoroughly assess if any potential border carbon adjustments are compliant with its WTO obligations. Respecting and upholding rules-based trade is central to Canada's trade policy, and any policy mechanism designed to avoid carbon leakage should be aligned with Canada's international obligations.
To this end, the Canadian Agri-Food Trade Alliance, of which the Canola Council is a member, recently developed principles for sustainable trade that could serve as a valuable reference and provide appropriate guardrails for policy development. Among other things, these principles emphasize the importance of alignment with WTO principles, obligations and measures that are not barriers to freer and fairer international agricultural trade. Any deviation from Canada's obligation in this regard would further undermine the rules-based trade system.
The second consideration relates to administrative burden. The administrative burden associated with developing and implementing border carbon adjustments must be weighed against the theoretical benefits of these mechanisms. Specifically, any additional administrative burden associated with carbon pricing mechanisms must be avoided. The canola industry specifically and the grain sector generally cannot afford additional administrative burden in the face of increased global competition and volatility.
Knowing this, it is our recommendation that the government not move forward with the border carbon adjustment policy in Canada until considerations related to international trade and administrative burden are properly studied and addressed.
I would like to thank the committee again for its invitation to appear today. I would be pleased to answer any questions the committee members may have.