Canada-China Relations Committee on May 27th, 2024

[Dr. Jeff Kucharski]

I think those risk management measures that were pointed out are all good. The only thing I will say is that, irrespective of the good relationships and relationship-building we try to do—having offices in the region and so on—it's a country that, essentially, is an authoritarian regime where political goals are going to trump trade and relationships, depending on the issues. It's good to have relationships, and I totally agree that it's a relationship-driven region, but at the end of the day, China will make decisions that are in its own political interest, and if that means we're a casualty, well, then so be it.

[The Chair, Liberal, Ken Hardie]

All right. Thank you very much.

We now go to our next round. We have Mr. Chong and then Mr. Fragiskatos. We did get a bit of a late start, so we'll maybe do another round after that with Ms. Lantsman and Mr. Erskine-Smith, and then round it out with Mr. Perron and Ms. McPherson. That will polish off our first panel, if that's okay with you guys.

Let's go to Mr. Chong for five minutes or less.

[Michael Chong, Conservative, Wellington—Halton Hills, ON]

Thank you, Mr. Chair.

Thank you to our witnesses for appearing.

When I first arrived here in 2004, a lot of free trade agricultural associations told us that we needed to diversify trade away from the United States because we were overly reliant on that single trading partner. Subsequently, governments negotiated the comprehensive economic trade agreement with the European Union and the CPTPP in the Indo-Pacific region.

When we look at global GDP, we have a free trade agreement with the United States, which is about one-quarter of global GDP; we have one with Europe, which is just under 20%; and now we have one with the Indo-Pacific region, which is, roughly, another 15% or so. When we add it all up, we have free trade agreements now with over 50% of the global economy, yet it doesn't seem like we're taking advantage of those newly negotiated and implemented agreements.

I pulled up some trade data. In 2022, the most recent year for which I have data, Canada's primary and secondary agricultural production amounted to $94 billion Canadian, with some of that going to the Indo-Pacific region. The Netherlands exported $167 billion Canadian on current exchange rates. That's almost double what we exported, so why are grains and oilseeds associations not...? What's the solution to this? The Dutch export more fats and oils than we do, and as you know, they're on a postage stamp of a country. How come they export way more fats and oils than we do?

[Brian Innes]

Perhaps I could start. Thank you for the question.

I guess I would first share that we are taking advantage of opportunities created by trade agreements. I was just in Korea as part of the team Canada trade mission. We have 17,000 tonnes, out of a 300,000-tonne market, that we fill routinely every year. That is tariff-free. That is opportunity for us to add value and have the highest-value soybeans go to those customers who appreciate our quality. We would love to have more of that 300,000-tonne market than the 17,000 tonnes we have now through the trade agreement.

I would say that there are opportunities, and we are taking advantage of them, but to your question around how we get more, I think that's a really important question that our industry is continually speaking to our government partners about, federally and provincially. For us it's about recognizing our competitive and comparative advantages and looking at the infrastructure required to help us excel.

There was a question earlier about transportation infrastructure. That is a key piece of it, as is the innovation infrastructure and research infrastructure that allows the industry to capture the most value from the highest-value markets. That's to your point around how the Netherlands succeeds. We see those as key opportunities.

For example, we're working on the next generation of a soy quality program. How do we sell the highest-quality soy in the world without having a soy quality program here in Canada? That is a key question we're struggling with. We need to work on it together in our country.

[Dave Carey]

I would just say that it's a very good question. Besides what my colleague said, we need massive investments in our trade corridors, our infrastructure, our ports and the demurrage costs, but—

[Michael Chong, Conservative, Wellington—Halton Hills, ON]

As a colleague of mine mentioned, the port of Vancouver ranked 347th out of 348 ports for global efficiency. It was second-last out of 348. What do we need to do to make the port of Vancouver more efficient so that we can export more of your members' products to the Indo-Pacific region? That is our country's largest port.

[Dave Carey]

If you look at it from a resilience perspective, as I said earlier, we have one bridge and we have one tunnel that goes to the port of Vancouver. That's all owned by CN. We have no resilience. There's no backup plan for that. Marine vessel traffic still takes precedence over getting rail action in the port of Vancouver. We need railways to deliver on time. They need to be predictable.

To your broader point about why the Netherlands is so successful, I would suggest that signing a free trade agreement is just the start. Implementing and following through on trade agreements is critical. The U.S. trade representative has an entire office dedicated to the enforcement of their free trade agreements. We have not seen CETA provide really the opportunities for agriculture, because the EU is not following through on the spirit of that.

I think a big part of it is that signing a trade agreement is relatively easy—it's very difficult but relatively easy—but implementing and enforcing the spirit of free trade agreements is something that Canada needs to make a priority.

[The Chair, Liberal, Ken Hardie]

Thank you, Mr. Chong.

We'll now go to Mr. Fragiskatos for five minutes.

[Peter Fragiskatos, Liberal, London North Centre, ON]

Thank you, Chair.

Thank you to the witnesses.

Mr. Carey, earlier tonight you talked about the transactional nature of the trade relationships that we find generally in western countries as opposed to Asia writ large, where something else is at play. The long-term relationships, as I think you put it, are much more important in terms of serving as a driving force to ensure the long-term viability of trade relations.

Can you expand on that a bit? What ultimately underpins those long-term relationships in terms of how they're brought into being and how they're maintained?

[Dave Carey]

Government and industry both have a role to play. The example that I use—my colleagues Brian or Michael might have some great examples too—is that I think we're going on year 48 of what we call the “preconsultations”, where we host the Japanese every year and they host us every year. They want the same farmers going every year. They want to see the same government officials. We all recognize politics and democracies, but they want to know that when they have a relationship as an importer with Canada, they know the people in Canada. They've come to Canada. They want to come and visit our farms. They want to visit the facilities. When markets like the Japanese market, I believe with soy as well, are established, that's a relationship going on 50 years of economic activity. There was nearly a billion dollars in exports to Japan last year. That has been the result of 40-plus years of industry-government collaboration and dialogue.

Oftentimes when you're doing business in parts of the world like southeast Asia, the first meeting is not when you're closing the deal. In the United States and western Europe, that often is. It's transactional; you move on. They're looking to forge long-term relationships. They're looking at decades. They're not looking at the next quarter, for example. That requires sustained effort. That requires trade agreements. That requires trade missions. That requires offices. That requires hosting and reciprocating. They really want to come to Canada and see the farms that grow the products they're purchasing.

There's no silver bullet, but it's sustained, long-term, genuine relationship building in that part of the world.

[Peter Fragiskatos, Liberal, London North Centre, ON]

I take your point, and I think it's a point that might be lost on many. When you think of trade, you think of dollars and cents and of the transactional, traditional approach. However, it's not so straightforward.

Mr. Innes or Mr. Harvey, do you have any thoughts on that point?

[Brian Innes]

I'll just build on my colleague's comments.

Our sector looks at investment. The soybeans used in tofu today, in Japan, started more than 10 years ago here in Canada. It takes a long time to develop a specific variety of soybean that will provide value to our customers.

It's about providing value not just to our customers but also to our farmers. Look at value-added, food-grade soybeans, for example, which give our farmers 30% more per acre relative to the conventional or commodity alternative. There is long-term relationship value when a customer tells the industry what they're going to need in 10 years, and the industry invests and delivers on it. This speaks to the importance of long-term thinking.

[Michael Harvey]

I will bring it back to what Mr. Carey was saying about our infrastructure.

Reliability is a key element of the relationship, because the buyers need to know the product is going to arrive. If you can't meet a timeline, it's going to hurt your credibility.

[Peter Fragiskatos, Liberal, London North Centre, ON]

Of course.

I would be remiss if I didn't mention that I was recently at the Ferguson family bean farm just outside of London, in St. Thomas. When you made your point about how long it takes to develop a bean crop, Mr. Innes, it matches exactly with what they told me. I grew up in a rural area as well, so I don't come to it absent any knowledge, but it's always good to learn about these things. What you're telling us, basically, is that this requires a lot of hard work that, again, isn't noticed at first glance.

What needs to go into all of this? I don't want to put words in your mouth, Mr. Carey. What do we need to prepare for, as part of a wider Indo-Pacific strategy on the agriculture side, in order to ensure these long-term relationships come into being and are sustained?

[Dave Carey]

As my colleague Mr. Innes said, it's about knowing your markets, knowing what they want and knowing why they're coming to Canada. In Canada, we don't often have a price advantage. We have high quality. We certainly have a reputation for food safety and excellence in food products, but Canada's not the cheapest country to produce agriculture in. We have a high standard of living. We have high costs. It's about knowing what your markets want.

As my colleague Mr. Harvey said, increasingly, the questions our colleagues around the CAFTA table get asked by importers is this: “You have the product and you have the quality, but will it be here on time?” That comes down to infrastructure, whether it's rail, ports or vessels. Knowing what your markets want but not delivering on time is becoming an increasing problem for Canada's global reputation.

[Peter Fragiskatos, Liberal, London North Centre, ON]

Okay. Thank you.

[The Chair, Liberal, Ken Hardie]

Thank you, Mr. Fragiskatos.

We'll switch it up a bit and go to Mr. Kurek now for five minutes.

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

Thank you very much.

It's been a great series of rounds.

Specifically, Mr. Carey, I know we talked a bit about the non-tariff trade barriers put forward on Chinese imports of our canola products.

I'm curious about whether you can give me, very quickly, a snapshot of where things are at, in terms of addressing those things.

[Dave Carey]

The concerns Chinese officials cited were around weed seeds and other pathogens like blackleg. Those are issues that were adjudicated at a technical level. Canada brought forth a WTO case. As of right now, we have full market access restored with China. Again, that's not something we take for granted. We don't take any market for granted.

However, as of right now, all shippers have access to the Chinese market, but they have to go through the requisite approvals. Canola seed is typically what they want. They like to crush it themselves.

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

I appreciate that.

You made a statement that said free trade agreements are the start. I know I will be asking our friends from the Canadian Cattle Association some fairly direct questions about this in the next round. What can the government of Canada do to make sure we are able to empower industry to access the markets we've signed free trade agreements with, so our products are, in fact, getting to market?

I'll preface that with a quick anecdote. I speak often with counterparts and ambassadors from other countries. Quite often, they highlight how, when they speak with the federal government, there is a massive disconnect among what provinces produce. That's as true for agriculture as it is for a whole host of other things. That's an intricacy of our federation. Many states around the world don't have that same understanding of it.

What can we do to make sure the high-quality products your members—many of whom are my constituents—produce actually get to market, so people know what they're buying, can trust what we're selling and ultimately provide the reciprocal relationship that is supposed to be what trade is built on?

[Dave Carey]

It certainly comes down to federal-provincial collaboration. Many of the provinces have trade offices around the world.

I think it's knowing what any particular market wants and what those issues are. Some of them are political. Some of them are technical. Developing countries often look to countries like Canada to help them walk through why our country is not a concern for this pest or this pathogen.

It takes long-term, concerted effort. For those for which we have an FTA, Canada must make sure that its counterparts follow through on the spirit of the agreement. If it says “may” and they're interpreting “shall”, you have to hold them accountable for “may”.

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

I appreciate that.

Mr. Innes and Mr. Harvey, is there anything you want to add there in 30 seconds or so?

[Brian Innes]

To build on that, when we think about how the Government of Canada engages with our counterparts, the benefit of the Indo-Pacific office is that there is someone who deeply understands the region who is then able to help coordinate the federal government and the provincial assets and resources alongside industry and the group that Mr. Harvey co-chairs, to be able to make those assets useful and really provide more trade stability over time.

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

Mr. Harvey, is there anything you want to add very quickly?

[Michael Harvey]

No, that's good.