Canada-China Relations Committee on May 27th, 2024

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

So you still think you can do well.

I'll go back to both of you.

I think we need to continue to trade with China. It seems to be a fairly unanimous opinion again this evening. We have to be pragmatic, as we said earlier. However, we need to reduce our dependence on China.

How dependent on the Chinese are your exports to the Asia-Pacific region? Could we diversify export markets? That's more or less the objective behind Canada's Indo-Pacific strategy and opening an office in the Philippines.

What do you think? Do you have a lot of hope in that regard? Do you really want to diversify your markets significantly or will you continue to focus on the Chinese market?

[Brian Innes]

China is certainly very important. As our exporter says, when China buys, we sell.

However, our experience over the past few years has shown us that diversification is very important for the sector. That's why Canada's Indo-Pacific strategy is very important to us, as is the Indo-Pacific agriculture and agri-food office in the Philippines. They allow us to work on issues such as the ones I mentioned, non-tariff barriers in particular. It's very important to have a strategy like this in order to negotiate new trade agreements and work on these kinds of issues.

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

Mr. Carey, do you want to add anything quickly?

[Dave Carey]

Yes, absolutely. Diversification is critical. It is important. However, for canola in the region, there's really no getting around it. China will continue to be a major market.

Agriculture products always flow to the countries that demand them. We certainly have been working on diversification. The United Arab Emirates has become a major market for us, with just shy of $200 million last year. To put it in context, there were $5 billion of canola exports to China in 2023. For a country like Vietnam, it was $604,000.

Certainly, there's opportunity, particularly with canola meal, which is the by-product. When you crush canola, you get oil and meal. The meal is certainly something that we need to find new markets for. We have more crush capacity in Canada. We're at 11 million metric tons now. We're adding about another three million tonnes. Therefore, there will be new markets for meal, but China, for the foreseeable future, will be a hugely important market for Canada's canola farmers.

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

Thank you very much.

[The Chair, Liberal, Ken Hardie]

Thank you, Monsieur Perron. That's your time.

We will now go to Ms. McPherson, for six minutes or less.

[Heather McPherson, NDP, Edmonton Strathcona, AB]

Thank you very much, Mr. Chair.

This has been very interesting testimony. I want to thank the witnesses for being with us today.

I have a few questions. I want to follow up on what Mr. Perron was speaking about. The whole point of the Indo-Pacific strategy is, of course, to ensure that we are reducing our reliance on China.

Mr. Carey, I understand what you're saying when you say that we have a very big reliance on China, and that's not going to change in the foreseeable future. On the other hand, we saw the punitive non-tariff trade barriers that were put in place by China on the canola industry. We also know it was politically motivated. Therefore, there is that vulnerability in terms of our relationship with China that we have to manage.

How do we manage that vulnerability? How do we deal with that? As we develop relationships with other countries in the Indo-Pacific region, how do we ensure those relationships are not as vulnerable to punitive actions as we've seen, historically, with our relationship with China?

I'll start with you, Mr. Carey, and then I can go to Mr. Harvey and Mr. Innes.

[Dave Carey]

We're large proponents of the Indo-Pacific strategy and the Indo-Pacific Agriculture and Agri-Food Office. That part of the world is not transactional when they do business. Trade is built on long-term relationships. Western Europe, North America and even parts of Central America are transactional. When you get in the Indo-Pacific, these are about long-term relationships.

For us to do that, we've now established this office. We have a five-year funding commitment from the federal government. Five years is not long enough to build deep, meaningful relationships. If we truly want to expand and diversify our markets, we need Canadian experts, we need Canadian industry and Canadian parliamentarians in market not once a year but multiple times a year to continue to build those relationships. As they are not transactional, they are deep and built on long-term relationships.

[Heather McPherson, NDP, Edmonton Strathcona, AB]

Go ahead, Mr. Harvey.

[Michael Harvey]

The way I see it is that China is a market that's too large to replace exactly. We're not the only ones dealing with this issue. If you look at our agri-food competitors who are also our national security allies, like the United States and Australia, they are dealing with similar issues.

There's a political risk to manage, and it's not always easy to manage. There are different ways to manage it, and one of the most important ways to manage it is to work on diversification in the markets. That's where we've seen the Indo-Pacific office playing an important role.

[Heather McPherson, NDP, Edmonton Strathcona, AB]

Mr. Innes...?

[Brian Innes]

Just to elaborate on our experience in the soybean industry, having been exporting to Asia now for almost four or five decades, what we really see is the importance, to build on Dave's comments, of relationships.

As an example, our industry travels to the region together at least once a year. Our industry members themselves go more than that and often have offices. Where we were this year was in Thailand. Last year it was in Malaysia and Vietnam.

To give you an example of how we can help this diversification, what we did while we were in Vietnam was meet with local industry. We had a round table, something like this here today, with dozens of our customers, and we talked about the importance of the stability of the relationship and how it was important, working with our governments, to work on trade issues together.

Now with the office there, that enables more continuity so that the Government of Canada can be present there more often. They're seen as a trusted partner, someone who is there working at multiple levels on the stable trade relationship. For our industry, diversification means investing in relationships. It means supporting the investment of the Government of Canada in the Indo-Pacific office to help work through issues and build relations over time.

[Heather McPherson, NDP, Edmonton Strathcona, AB]

Yes, it's an interesting thing to think about, because I think that there is a role for parliamentarians too, to build those relationships and to ensure that we have those connections and those relationships with people in the Indo-Pacific strategy as we try to diversify Canada's economy. Unfortunately, at this point, there is one party in the House of Commons that is not allowing for parliamentary travel at the moment. It is disappointing, because I think there is that role there.

Mr. Kucharski, I feel like you're being a little bit abandoned, but we're both online. I'm going to ask the next question of you.

You spoke a lot about Canada being left out of the, as you call them, minilaterals, that we're not at those tables. We know that in the Indo-Pacific strategy there is a desire by Canada to join in the Indo-Pacific economic framework for prosperity that the United States launched in 2022.

First of all, can you explain why you think we're not being included? I think you touched on it, but give just a little bit more detail. Do you think it is worthwhile? What is the value of being part of the Indo-Pacific economic framework for prosperity?

[Dr. Jeff Kucharski]

If we want to talk about the IPEF, the Indo-Pacific economic framework, although it's certainly not as valuable to Canada as, say, the CPTPP, which is a full-blown trade agreement, it is important to be at the table where significant players in the region are sitting down talking to each other.

Unfortunately, we are not at that table. It's not just about trade or even just about investment. It's about relationship building in the region. We have not yet been able to establish our bona fides, as it were, in the region, because, quite frankly, we've had decades of neglect. We've underinvested in the region. We have not come to the table as we should have with the commitment that is expected of us on defence and security. As a result, I believe that has made some countries reticent about inviting Canada to the table. They're not sure if we're a serious player.

That was what I was touching on in my earlier comments. I think, as we go forward and as we follow through on the commitments we've made in the Indo-Pacific strategy and hopefully strengthen the ones on our military security side as well, that will change. I think that's the background.

[The Chair, Liberal, Ken Hardie]

Thank you, Ms. McPherson. That's your time.

We'll now go to our second round, which will be Mr. Majumdar, Mrs. Lalonde, Mr. Perron and Ms. McPherson again.

Mr. Majumdar, there are five minutes for you, sir.

[Shuv Majumdar, Conservative, Calgary Heritage, AB]

Thank you, Chair.

It's nice to see you, Jeff Kucharski. It's been a while. I don't mean to be incestuous by bringing up our Macdonald–Laurier roots together around this table, but I'll take advantage of the opportunity nevertheless.

You've written extensively about the Indo-Pacific region. You've obviously looked at the Indo-Pacific strategy in careful detail.

Let me ask you this: Is there a definition in the Indo-Pacific strategy of what the government terms “clean energy”?

[Dr. Jeff Kucharski]

No, there isn't. It's a very general term. It's defined as they see it internally, so I couldn't tell you what clean energy is completely. There are things most of us would consider to be clean energy or non-emitting types of energy, but people will differ on the definition of clean energy.

[Shuv Majumdar, Conservative, Calgary Heritage, AB]

I appreciate that.

We've seen, Professor Kucharski, that Europe has had a chance to redefine what it considers to be clean energy in the wake of Russia's expanded invasion of Ukraine, particularly things like LNG and nuclear.

You've written extensively on Europe, as well. Would you agree that this should be an international standard—or at least the beginning of an international standard—for defining what clean energy is?

[Dr. Jeff Kucharski]

I agree that, if we're going to use a term like “clean energy”, it needs to be more specifically defined. I think it should be more inclusive of even hydrocarbons, if they are produced responsibly and if measures are taken to reduce emissions. We're going to have to rely on all forms of energy in order to reach our emissions goals over time.

Yes, I would agree.

[Shuv Majumdar, Conservative, Calgary Heritage, AB]

Thank you for that.

You cautioned us a bit about what the impact of tensions in the South China Sea could be, or even more widely in the waters of the Indo-Pacific region. Hong Kong Watch recently published a report indicating that war with Taiwan would result in an 8% GDP hit to Canada, which is bigger than the COVID-19 pandemic and the global financial crisis. That would be via 1% financial shocks, 5% semiconductor imports and 2% trade shocks. It strikes me that providing stability to the Indo-Pacific region, where you have energy suppliers like Russia leveraging their energy, or China's control and dominance of energy transition technologies, critical minerals, refineries and all that stuff.... Canada could play a critical role in offsetting dependence on dictator energy.

How important do you think our energy proposition is to the Indo-Pacific region and therefore ought to be read into the Indo-Pacific strategy?

[Dr. Jeff Kucharski]

It's absolutely essential, in my view.

I think the region will be significantly held back if Canadian energy exports are in any way inhibited in the region. The fact remains that natural gas, in particular LNG, is going to be required in the region to reduce the amount of coal being burned and therefore reduce emissions. LNG as a substitute for coal is very important in their transition policies. A lot of these countries, particularly in ASEAN, are developing countries. They are not able to...or there are geographic reasons why renewables can't be installed immediately. We're talking about a transition that will take place over decades. That's going to require a wide range of energy sources.

Canada is in a position to provide responsible energy supplies to these countries as they transition, going forward. It's a benefit to Canada. It's a benefit to them. They're asking us for these products. We're just on the cusp of supplying for the first time, but I think more needs to be done.

[Shuv Majumdar, Conservative, Calgary Heritage, AB]

Our national security serves international energy security. I'm very grateful for your many interventions over many years in pushing Canada to think big about what it can be.

Thank you very much.

I'll close my time.

[Dr. Jeff Kucharski]

Thank you.

[The Chair, Liberal, Ken Hardie]

Thank you, Mr. Majumdar.

We'll go to Mrs. Lalonde for five minutes.

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

Thank you very much.

Thanks to all our witnesses this evening. My first question will be for the representative from Soy Canada.

In early February 2024, Soy Canada led a mission to the Indo-Pacific region—what they described as connecting with more than 150 current and potential customers in Japan and Thailand.

Maybe you can share with our committee the key opportunity for Canadian soybean producers in the region and also what the main outcome was of the Soy Canada mission to the Indo-Pacific region.