Canada-China Relations Committee on May 27th, 2024

[Brian Innes]

When we look at the region, there is just an immense opportunity for growth. More than two-thirds of our exports of soybeans from Canada go to the region. They're a region that loves soybeans. They love to eat soybeans, and they're a region that needs protein and needs oil.

Specifically, we look at Japan, one of our most valuable markets. They really value the quality that Canada provides. The soybeans we export there are of the highest quality, with over 100 different specific varieties going to specific tofu manufacturers, for example.

I can give you a story. When we were in Japan, we visited a tofu factory in the mountains and got to try their deep-fried tofu. It's not something that we would find here, but certainly in Japan, when we take our farmers and take our exporters there, we connect with our customers in a way that's just not possible virtually.

When we were in Thailand, we were able to visit a soy milk manufacturing facility, an ultramodern facility. That was a bit different from tofu in the sense that they're looking for a more generic soybean, but what they value from Canada is the reliability of what we're able to produce and, also, as a trusted partner, to deliver when they expect it to be delivered.

When we look at the opportunities and what we take from that in connecting our farmers.... We had farmers from Quebec, Ontario, Manitoba and Saskatchewan with us on the mission to see directly where their soybeans go. To see that container of soybeans opened at the soy milk manufacturer and dumped into their facility was a really gratifying moment for our farmers: to see not only how they plant and ship their soybeans but also how they're used halfway around the world—in fact, all the way around.

Hopefully, that gives you a bit of a sense of the value that we took from that, and certainly our customers appreciate touching the hand of the farmer who produces the soybeans they use and also appreciate that their need to produce food for their people has a connection back to a country like Canada, which values that relationship.

[Marie-France Lalonde, Liberal, Orléans, ON]

Thank you very much.

I'm not sure if everyone could answer this, but certainly, when you look at the disruptive actions on the international scene by the PRC and the geopolitical environment and the reason.... Certainly, we're having a conversation today, and we talked very briefly about the 2019 example. Maybe I could hear a bit of your thoughts on Canada's economic relations with the main Indo-Pacific economies.

That means the countries of ASEAN. One of the strategy's priority sectors for developing Canada-ASEAN relations is in agriculture and agri-food. How do you think a free trade agreement between Canada and ASEAN would benefit Canada's soybean industry and why?

If others have thoughts on this, I would certainly like to hear you.

[Brian Innes]

I'm happy to start, but I know my colleagues would also like to contribute.

When we look at trade agreements, they establish relations between governments. They establish a real opportunity to make trade more stable. We really want to see a useful agreement established between Canada and Indonesia and ASEAN.

[Dave Carey]

I would quickly say that we're very supportive of the Canada-ASEAN agreement as well as the Canada-Indonesia free trade agreement. We cannot take international trade for granted.

For those of us who were at the WTO ministerial conference in the UAE this year, rules-based international trade is something that directly benefits every Canadian, regardless of your sector, and it's not something that we can take for granted. The more multilaterals and bilaterals Canada signs, the more rules-based trade, the better the quality of living for all 40 million-odd Canadians.

[Michael Harvey]

I would just add that these are quickly growing markets, and our competitors are there. Australia has an agreement with these countries.

[The Chair, Liberal, Ken Hardie]

Thank you very much.

That's your time, Ms. Lalonde.

[Marie-France Lalonde, Liberal, Orléans, ON]

Mr. Chair, I still have to hear from Mr. Kucharski.

[The Chair, Liberal, Ken Hardie]

All right. Yes, we will give Mr. Kucharski a quick moment here.

Go ahead, sir. I'm sorry.

[Dr. Jeff Kucharski]

I'm going to say just very quickly that it's very gratifying to hear that the soybean and canola growers are looking to expand and diversify markets in ASEAN, and I applaud that.

The one thing I would say as to why that's particularly important is that, before 2019—I just had a quick look at the statistics—before the ban on canola, China represented 40% of Canada's total canola exports, and today, with $5 billion in exports, as was mentioned, Canada relies on the Chinese market for 65% of its total exports of canola.

As good as that business is, I just want to point out that it's a huge vulnerability in a world where tensions with China are likely to continue. There are very likely going to be disagreements again between Canada and China at some point. You can bet that this number of canola exports will be used as a coercive mechanism by China again. It's a vulnerability that we do have.

[The Chair, Liberal, Ken Hardie]

All right. Thank you for that.

Now we'll go to Monsieur Perron for two and a half minutes.

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

Thank you, Mr. Chair.

I'm going to continue along the same lines, since that's the subject I wanted to address.

Mr. Harvey, I'd like to talk about political uncertainty in the Asia-Pacific region. We know what's happening in the South China Sea, between China and the Philippines: There's been a lot of friction. We saw what happened last week in Taiwan. What's your view of that?

The office is a good thing. You took part in the negotiations and we will try to develop new markets. That said, we have to think about a potential conflict or escalating tension. These are not necessarily open conflicts. For example, it could be a situation like the one Canada experienced with India last year, which certainly didn't help trade.

What do you have to say about that?

[Michael Harvey]

For people who sell products, it's true that those are risks to be managed. There are business opportunities and there are growth opportunities. We look for growth opportunities, but we have to analyze the situation based on risk, including political risk and infrastructure risk, such as trouble at the ports. Risk can also be related to labour relations, such as potential strikes. In addition, there are climate-related risks. When we open markets, we analyze all sorts of risk.

There are different ways of managing risk. One of the key ways is to diversify markets as much as possible, but that's not the only way. There's also managing long-term relationships. Mr. Innes mentioned several times the issue of regulatory authorities in Canada and in the markets of the various countries where we sell our products. He talked about how long-term relationships between regulators can also help manage risk.

That's all part of the risk we manage. It's a reality.

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

What does the Canadian presence in India look like right now? Is it also a growing market?

[Michael Harvey]

I know less about that than my colleagues, I believe.

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

Mr. Carey and Mr. Innes, what do you think?

[Brian Innes]

India is a very big soy market, but one we are shut out of because they have really high tariffs against our products.

[Dave Carey]

It would be the same. It gets very political in India, and they do grow their own version of canola called rapeseed. However, tariffs are very high.

I just wanted to say we work to establish relations with China. The chair of our farmer board, Roger Chevraux, was in Beijing in November.

Just to Mr. Kucharski's point, we're actually at less than 33% trade to China. If you're only looking at seed exports, then that is correct, but we're at less than 33% trade exports to China. We are working to diversify. They were $5 billion of $15.8 billion last year. I just wanted to get that on the record. Our trade exposure to China has not actually increased.

[The Chair, Liberal, Ken Hardie]

Thank you, Mr. Perron.

Back when I was doing radio and television in Brandon, we called it rapeseed. I was the backup farm reporter, by the way, just so you know.

All right. We'll go to Ms. McPherson for two and a half minutes.

[Damien Kurek, Conservative, Battle River—Crowfoot, AB]

That's the pre-genetic-modification version of rapeseed. It's now called canola, post-genetic-modification.

[The Chair, Liberal, Ken Hardie]

Okay.

[Heather McPherson, NDP, Edmonton Strathcona, AB]

There are many people in the room who know much more about rapeseed and canola than I do, I can assure you.

Thank you again for all of the information you've been providing to us.

Mr. Carey, you talked about China. One of the things that keeps coming into my mind is that it's risky to be working in this market. I recognize it's a giant market and I recognize how important it is to us, but it is a risk because they have shown, they have proven, that they don't recognize the rules-based order when it comes to international trade and they are willing to politicize and weaponize that at any time. It's just something I'm trying to get my head around.

When we talk about the Indo-Pacific strategy, I've been very concerned, with the strategy, that we're in fact taking eggs from one basket and putting them in another with regard to human rights. We speak about India and the challenges we have there. That we're not in fact thinking about this strategically enough is one of my concerns.

I know that in February the government did open the Canadian Indo-Pacific Agriculture and Agri-Food Office. I'm just wondering if all of you have some comments to make on whether you've seen any impact of that to date, and whether or not you believe it's resourced sufficiently and it has what it needs to do the job that it needs to do.

Why don't we go backwards? Mr. Innes, why don't I start with you?

[Brian Innes]

Sure. I'm happy to start.

When we were in Thailand, actually, we had the new director of the office present to our seminar and meet our customers and meet our exporters and farmers first-hand. We're seeing that the office, just recently set up this spring, is already having an impact by connecting regulators to regulators in different markets, such as Indonesia, such Bangladesh, such as Thailand as well. What we're seeing in that office is a real presence in the region. Just as I described that our sector is looking to be present in that region multiple times per year, so, too, is it helpful for the Government of Canada to be there more often, in as many places as one can be.

The investment in the office shows that Canada is invested in the region. What we've seen through our seminar this spring is that having someone on the ground to speak to people, to make networks and to expand networks, and having the Government of Canada present beyond what it has done in the past, is really helpful.

[Dave Carey]

I echo my colleague's comments. Our only advice—it's not a criticism—is that we had a five-year commitment, but we need to be looking longer term than, simply, five years. Right now it's a staff of about 10 with a $35-million envelope over a five-year period. If we want to be serious about it, we need to look at that as just the beginning. This office can't go away after five years.

Lastly, even in that part of the world, diplomatic postings are typically three years. As I spoke to earlier about the deep relationship in that part of the world to do business, we should also consider potentially having longer diplomatic postings to establish those regulator-to-regulator relationships.

[Michael Harvey]

Can I just add...? In any market there are questions of political and regulatory risk. The office, I think, is going to play a key role in managing regulatory risk, in particular, with the regulatory authorities in those countries, but it's also useful in terms of political risk because it helps show a commitment to our relations with those countries in the agri-food sector.

[Heather McPherson, NDP, Edmonton Strathcona, AB]

Mr. Kucharski, do you have any comments?