Agriculture Committee on Nov. 28th, 2022

[The Vice-Chair, Conservative, John Barlow]

I call the meeting to order.

Welcome to meeting number 40 of the House of Commons Standing Committee on Agriculture and Agri-Food.

I have a couple of reminders.

I'm sure our witnesses have been through this before, but in case they have not, today's meeting is taking place in a hybrid format. The proceedings will be made available via the House of Commons website. Just so that you are aware, the webcast will always show the person speaking, rather than the entirety of the committee. Screenshots or photos of your screen are not permitted.

For the benefit of the witnesses, members and witnesses may speak in the official language of their choice. Interpretation services are available for this meeting. If interpretation is lost, I will ask you to pause, I will stop the clock and then we will resume once we have interpretation back for the proceedings.

Before speaking, please wait until I recognize you. For those of you who are in the room, you know your microphone will automatically come on. For those on Zoom, specifically, wait until I recognize you to unmute. When speaking, please speak slowly and clearly for the benefit of translation. I would remind the members and witnesses to put their comments through the chair.

In accordance with the committee's routine motion concerning connections and tests for the witnesses, one of the witnesses did not complete the required connection test. That was Kathleen Donohue.

I want to thank the witnesses for coming to the committee on relatively short notice for this study on the Ukraine goods remission order.

Welcome to panel number one.

I welcome our witnesses here today. From the Department of Finance, we have Michèle Govier, director general of the international trade policy division, as well as Yannick Mondy, director of trade and tariff policy at the international trade policy division. From the Department of Foreign Affairs, Trade and Development, we have Doug Forsyth, director general of market access, as well as Blair Hynes, deputy director of the supply-managed trade controls division.

Each department will be given five minutes for opening remarks to, hopefully, shed a bit of light on this issue for our committee members.

I will raise my hand when you have one minute left, as a one-minute warning. You can carry on with the last minute and then we will move on to questions from our committee members.

Thank you very much, again, for being with us today.

I will now invite Ms. Mondy and Ms. Govier to begin. Your time starts—

[Tim Louis, Liberal, Kitchener—Conestoga, ON]

I have a point of order, Mr. Chair. I'm sorry.

I'm in the process of switching some staff. I have a new team member in today. I would ask for unanimous consent to have my incoming and outgoing staff here, whose first and last weeks are at the same time.

[The Vice-Chair, Conservative, John Barlow]

Do I have unanimous consent to have an extra staff member from Mr. Louis' office?

[Some hon. members]

Agreed.

[The Vice-Chair, Conservative, John Barlow]

It's passed. Thanks.

Now, Ms. Govier and Ms. Mondy, please begin. Your five minutes start now.

[Michèle Govier, Director General, International Trade Policy Division, Department of Finance]

Thank you.

Thanks for the invitation to speak before this committee today.

My name is Michèle Govier. I am the director general of the international trade policy division at the Department of Finance. I'm joined by Yannick Mondy, the director of trade and tariff policy.

Our division is responsible for Canada's import policy, including measures related to the customs tariff and the Special Import Measures Act.

I am here to speak about the Ukraine goods remission order and will provide some context as to the rationale, process and key features of the order, as well as the results of our close and regular import monitoring, including on the imports of supply-managed goods.

The Ukraine goods remission order was introduced in the context of Russia's invasion of Ukraine, which has caused widespread human suffering and destruction.

Russia’s invasion of Ukraine, with support from Belarus, has had untold impacts on Ukraine and its people, including a significant effect on its economy and its ability to export its goods to other countries.

In response, Canada has worked in close coordination with our allies to impose severe sanctions and continue to provide humanitarian and financial support to Ukraine. Canada has committed more than $5 billion in financial, military, and other aid to Ukraine.

That includes $2 billion in direct financial support for the Ukrainian government. This is money that has already been disbursed and is helping the government continue to operate.

As part of its response, the Government has also temporarily waived tariffs and trade remedy duties on imports originating from Ukraine. This was done by way of a temporary remission order, which came into force on June 9, 2022, and will expire after one year.

This measure was part of a concerted effort with Canada's allies who have taken similar measures. Notably, the European Union implemented comprehensive tariff relief for goods not already covered by its free trade agreement with Ukraine. The United Kingdom reduced all tariffs on goods imported from Ukraine to zero, and removed all quotas. The U.S. has also taken the step of removing Ukraine from its 25% section 232 tariffs applied to steel.

Canada's remission order temporarily lifts remaining customs duties on Ukrainian imports—for example, supply-managed agricultural goods, passenger vehicles and sugar—and makes it easier for importers to meet the rules of origin and shipping requirements when importing into Canada.

Canada and Ukraine enjoy a positive and growing trade relationship. The Canada-Ukraine Free Trade Agreement, or CUFTA, came into force in 2017, and is the ongoing subject of modernization negotiations. Canada's two-way trade with Ukraine expanded by 17%, from 2017 to 2021, to $446 million annually.

While the remission complements these important steps, the remission is temporary. There are no plans to consider any permanent changes under the FTA.

We are also mindful of the importance of tariffs as a key pillar in Canada's supply management system, and that providing such temporary duty-free access to supply-managed goods is unprecedented.

In considering this measure, we assessed the potential for exports from Ukraine. ln general, it was assessed that the scope for Ukrainian businesses to start exporting meaningful quantities of supply-managed goods to Canada could be hindered by the current conflict situation, the short time frame for the remission of one year, and the lack of recent exports to Canada and associated business ties.

Over the period from June 9, when the order came into force, to November 23, imports of supply-managed goods have been limited to one importation of supply-managed products—ice cream—with a value for duty of $6,000.

We are aware of concerns over the prospect that imports could increase, particularly related to chicken. The department is working closely with other departments to track the level of imports, including in the over-access supply-managed goods, and to promptly identify imports that could have an impact on domestic producers. If imports in meaningful quantities are detected, we will ensure that any risks and impacts to domestic producers are assessed and considered in a timely way, while being mindful of the intended purpose of the measure. Further, we would reinforce that in light of the exceptional nature of the current conflict and situation in Ukraine, the precedential risk of this order is very low.

In sum, the remission order was part of a broader Canadian response to the invasion of Ukraine, intended to support its economy, and was undertaken as part of a concerted effort with allies. We are closely monitoring its impacts.

I'd be happy to answer your questions.

Thank you.

[The Vice-Chair, Conservative, John Barlow]

Thank you very much, Ms. Govier.

I would be remiss if I didn't also welcome Mr. Cannings to the committee today. He is subbing for our colleague Mr. MacGregor.

Welcome to the agriculture committee.

I'll now turn it over to Mr. Forsyth and Mr. Hynes for five minutes.

[Doug Forsyth, Director General, Market Access, Department of Foreign Affairs, Trade and Development]

Thank you very much, Mr. Chair.

It's a pleasure to be here this afternoon to discuss the Ukraine goods remission order. As noted, I am the director general for the market access bureau at Global Affairs Canada.

I would like to acknowledge that my team and I are joining you today on the traditional and unceded territory of the Algonquin Anishinabe people.

I would like to focus my opening remarks on the role that Global Affairs Canada plays in Canada’s system of supply management and how we assist in imports of supply-managed goods.

Canada's supply-managed system operates on three separate pillars—production controls, pricing controls and imports controls. Global Affairs Canada administers the import controls. Most importantly, we administer Canada's various tariff rate quotas for supply-managed goods, or TRQs. A TRQ is a quota, implemented as a result of Canada's commitment within various free trade agreements, that establishes a quantity of a product that may be imported at a lower or within-access rate of duty.

Controls for supply-managed goods and their associated TRQs are implemented and administered under the Export and Import Permits Act, which requires that imports of supply-managed goods be authorized through the use of a permit.

For imports of supply-managed goods, there are two types of permits. The first is an individual import permit, which applies to a specific shipment of goods and allows the importer to claim the within-access rate of duty. This type of permit is issued to allocation holders under Canada's various TRQs.

Entities apply directly to Global Affairs Canada for an individual import permit for supply-managed goods. Upon approval, all pertinent information associated with the permits issuance is shared, via our integrated electronic systems, with the Canada Border Services Agency, who is the responsible authority for the enforcement of import controls for supply-managed goods at the border.

The second type of permit is called a general import permit, which is a regulation issued under the authority of the Export and Import Permits Act that allows a resident of Canada to import control goods subject to the terms and conditions of the regulation. These regulations allow for the import of supply-managed goods at the higher over-access rate of duty and, in certain cases, limited volumes of imports for personal use at the lower within-access rate of duty. From an administrative standpoint, the key difference between these two permits is how an applicant obtains and uses the permit and the volume of goods that can be imported.

As stated, for individual import permits, there is an application, which in turn requires a decision by Global Affairs Canada and, if approved, information is shared between Global Affairs Canada and the Canada Border Services Agency to ensure the efficient completion of the clearance process. Additionally, under shipment specific permits there is a limit on the quantity of goods that can be imported under the permit and the TRQ itself.

With general import permits for supply-managed goods, there is no application to, or decision by, Global Affairs Canada. An entity importing under the authority of a general import permit must simply cite its use on their import documentation. Furthermore, there is no limitation on the volume of goods that can be imported at the over-access rate of duty under a GIP—general import permit.

Mr. Chair, in closing, I would like to state that while the issuance of the remission order temporarily alters the long-standing environment under which import controls for certain supply-managed goods functions, Global Affairs Canada, along with governmental partners, remain committed to ensuring the long-term health of our supply management system.

Thank you.

[The Vice-Chair, Conservative, John Barlow]

Thank you, Mr. Forsyth.

We'll now go to the committee members for questions.

For the Conservatives we have Mr. Lehoux for six minutes, s'il vous plaît .

[Richard Lehoux, Conservative, Beauce, QC]

Thank you, Mr. Chair.

Thanks to the witnesses for being here.

My first question is for the representatives from the Department of Finance

Ms. Govier and Ms. Mondy, you said the department worked with partners to hold consultations. Were stakeholder groups in the industry consulted before the order was signed in June?

[Michèle Govier]

Because the order was made somewhat urgently, we did not hold formal consultations with the interested groups. However, we obviously spoke with the departments involved. That is how we proceeded.

[Richard Lehoux, Conservative, Beauce, QC]

You said earlier that you had assessed certain things. Did you do specific calculations regarding the quantities of products that could be imported into Canada?

[Yannick Mondy, Director, Trade and Tariff Policy, International Trade Policy Division, Department of Finance]

We did not do calculations relating specifically to supply-managed goods, given that those products were not imported from Ukraine in recent years. Our assessment is based on average imports in recent years; it was published in the regulatory impact statement. The annual tariffs to be waived were estimated at $2.6 million.

[Richard Lehoux, Conservative, Beauce, QC]

It seems that a number of countries have closed their doors firmly to entry by those goods.

In that case, does Canada not risk receiving more goods from Ukraine?

Was that one of the things you considered?

[Michèle Govier]

I want to make sure I understand your question correctly. What you are saying is that Canada might receive more goods from Ukraine because other countries are no longer importing them. Is that correct?

[Richard Lehoux, Conservative, Beauce, QC]

Yes.

[Michèle Govier]

That wasn't really included in our analysis. I don't know whether the representatives of the Department of Foreign Affairs know a bit more about the measures adopted by the other countries, but we didn't particularly look at that question.

[Richard Lehoux, Conservative, Beauce, QC]

Right.

My question is very simple and is for the representatives of the Department of Foreign Affairs, Trade and Development.

There is much talk in the House of Commons, for example, about environmental footprints and food insecurity, two factors we have heard a lot about in the last six months.

Here, some products are under supply management and there are rules governing them. When it comes to imports, could Canada not have supported countries close to Ukraine? Those countries could have benefited from our aid. We would have reduced the environmental footprint and we would have tackled food insecurity.

[Doug Forsyth]

Thank you very much for the question, Mr. Chair.

I think that our internal analysis of the types of information that we would provide as a decision was being made.... No, there was no decision with respect to the carbon footprint or the environmental impact with respect to the export of the goods into the Canadian market.

[Richard Lehoux, Conservative, Beauce, QC]

However, on the question of food insecurity, should those things not have been considered before signing the Ukraine Goods Remission Order?

[Doug Forsyth]

Absolutely, that was part and parcel of the overall government response to the Ukraine situation and looking at how we could provide help and what type of assistance we could provide globally in and around that area. Global food security was top of mind in our overall government reaction.

[Richard Lehoux, Conservative, Beauce, QC]

I'm going to come back to the Department of Foreign Affairs, Trade and Development.

The bottom line is: was or is the department aware that the company that sells 70% of the poultry produced in Ukraine for export is not even owned by Ukrainians? Were you aware that that company is owned by people from a country other than Ukraine? In that case, how are we helping Ukraine by making the order?

[Michèle Govier]

I don't know all the details of the company that is exporting. I think the idea is that the companies that are exporting from the Ukraine are providing added value in the Ukraine market. Ukrainian people are working at those companies, so I think that's where it would come from; but we don't have a lot of detailed information about particular companies that might be benefit from the remission order.

[Richard Lehoux, Conservative, Beauce, QC]

The bottom line is that you were actually aware that the main exporter of chicken from Ukraine is owned outside Ukraine, is that right?

[Yannick Mondy]

If I may, I would like to try to flesh out the answer.

As my colleague said, the purpose of the remission order is to benefit Ukraine and so we base our decisions not on who owns goods, which may be a foreign investor in Ukraine, but on the added value of production that then happens within Ukraine. So it is related to the location of the goods, not on who owns them.