Canada-China Relations Committee on May 27th, 2024

[The Chair, Liberal, Ken Hardie]

I call the meeting to order.

Welcome to meeting number 42—which is the answer to life, the universe and everything, if people know—of the House of Commons Special Committee on the Canada-People's Republic of China Relationship.

Pursuant to the order of reference of May 16, 2022, the committee is meeting on its study of Canada-People's Republic of China relations.

Before we begin, I would like to remind all members and other in-person participants to consult the cards on the table for guidelines. We need to prevent audio feedback incidents because that has been very injurious to some of our translators. We have had a few very serious incidents, in fact.

Only use the approved black earpiece. Keep it away from the microphone. By putting it on the little decal on the desk, it's a good distance away. When you're not using your earpiece, just put it face down and, as I say, far away from the microphone. We thank you for your co-operation there.

Today's meeting is taking place in the hybrid format. Members are attending in person in the room and remotely using the Zoom application.

Please wait until I recognize you by name before speaking. For those participating by video conference, you can click on the microphone icon to activate your mic and mute yourself when you're not speaking. For interpretation for those on Zoom, of course, you have the little globe at the bottom of your screen that you can use to select the language of your choice. For those in the room, of course, use the earpiece and select the desired channel.

I'll remind you that all comments should be addressed through the chair. For members in the room, if you wish to speak, please raise your hand, especially for our witnesses who may have something to add to a particular answer or a reflection. Just raise your hand and we will do our best to recognize you as quickly as possible.

With that, I would like to welcome Mr. Majumdar, who is sitting in for Tom Kmiec, and Mr. Kurek, who is now, I think, a permanent member of the committee. Ms. McPherson has opted—under no duress at all—to be here virtually. We have other people here virtually as well. It's good to have you all here.

Let's welcome our witnesses for today's first panel. From the Canadian Agri-Food Trade Alliance, we have Michael Harvey, executive director. From the Canadian Canola Growers Association, we have Dave Carey, vice-president, government and industry relations. From the Macdonald-Laurier Institute, we have Jeff Kucharski, senior fellow, by video conference. From Soy Canada, we have Brian Innes, executive director.

We normally provide five minutes for opening statements, but we will ask you to keep tight to time because there are quite a number of statements to be made. We want to leave lots of time for questions.

Who would like to start?

Shall we start with you, Mr. Harvey, for five minutes or less?

[Michael Harvey, Executive Director, Canadian Agri-Food Trade Alliance]

Good evening.

Thank you to the committee members for inviting me here tonight.

The Canadian Agri-Food Trade Alliance is a coalition of national organizations that advocate for a freer and fairer international trading environment for the agriculture and agri-food sector.

I will skip a few paragraphs for the time.

CAFTA members have established the following priorities for our work.

First is to open new markets for Canadian agri-food. This includes prioritizing trade liberalization discussions with growing emerging markets in the Indo-Pacific like Indonesia and ASEAN countries.

Second is to uphold the international rules-based trading system. A delegation of CAFTA members attended the WTO's recent ministerial conference in Abu Dhabi. We witnessed first-hand the challenges the system is facing, and we support Canada's efforts through the Ottawa Group to advance key priorities at the WTO.

Third is to strengthen trade diplomacy capacity and industry-government collaboration. We welcomed the opening of the Indo-Pacific Agriculture and Agri-Food Office in Manila, and CAFTA is co-chairing the industry working group that is ensuring alignment between government and stakeholders.

The Indo-Pacific region currently accounts for over one-third of the world's economic activity. In 2023, Canada's agriculture and agri-food exports to the region reached $22.8 billion. In 2021, Canada was ranked the seventh-largest agri-food and seafood supplier to China with values of $11.7 billion, or 3.5% of market share. China's top agri-food and seafood imports from Canada were canola seeds, canola oil and barley. China is our second-largest market for agri-food exports.

CAFTA strongly supported the opening of the Manila office because we believe Canadian business will benefit from more sustained Canadian engagement in the Indo-Pacific. Culturally, it is essential to have Canadian representatives on the ground to develop personal relationships. CAFTA members who travel regularly to the region have seen the need to have permanent representation on the ground. It is essential that the office have the technical expertise needed to manage relationships with local authorities to help prevent the emergence of non-tariff barriers that can keep Canadian product out of the market.

It's also important to note that our agri-food competitors are also very present in the Indo-Pacific region. The U.S. and Australia are particularly engaged, have strong infrastructure on the ground and have developed solid relationships with local buyers.

I wish to underline to committee members that exporting food responds not just to Canada's economic interest, but also to our national security interest of making important contributions to international peace and security.

Canada is the world's fifth-largest agri-food exporter. We're one of the few countries in the world producing enough food for ourselves while at the same time feeding others around the world. We contribute to international peace and stability by feeding the hungry, especially at a time of international instability when major grain producers are at war.

Canada also has a strong track record of not using food as a political weapon or banning agricultural exports. That helps make us a more reliable supplier to countries seeking greater food security.

In summary, it is in Canada's economic and national interest to increase our agri-food exports to the Indo-Pacific region. This will require a consistent, long-term investment to build commercial relationships with buyers and national authorities.

I would be pleased to answer any questions you may have.

Thank you.

[The Chair, Liberal, Ken Hardie]

Thank you very much, Mr. Harvey.

We'll now go to Mr. Carey from the Canadian Canola Growers Association.

[Dave Carey, Vice-President, Government and Industry Relations, Canadian Canola Growers Association]

Thank you for the invitation to appear before this special committee.

The Canadian Canola Growers, or CCGA, is the national association for Canada's 43,000 canola farmers, representing them on issues, policies and programs that impact their farm success. Developed in Canada, canola is a staple of Canadian agriculture as well as of science and innovation. Canola is a strong economic contributor to family farms and rural communities.

Canola is the number one revenue source of farmers, earning Canadian farmers $13.7 billion in 2023. Canadian canola exports were valued at $15.8 billion in 2023, with 90% of this crop exported as seed, oil or meal. Annually the canola sector contributes $29.9 billion to the Canadian economy and provides for 200,000 jobs.

The Indo-Pacific region is a critical area for growth and development for the export of Canadian canola seed, oil and meal. Of greatest importance in the region for canola is China. Canada exports canola seed, oil and meal to China, making it the second most important market for Canadian canola farmers. The main exports in recent years have been seed and canola meal.

In 2023, Canada exported nearly 4.6 million metric tons of canola seed to China, the second-highest export to date, making it the most important seed market. Canola meal exports to China are becoming increasingly important, with 1.8 million metric tons exported in 2023 for a total value of $5 billion in canola exports to China in 2023.

The canola industry is set to grow in terms of total canola yield as well as in the volume of canola that is processed in Canada into oil and meal. Increased canola processing in Canada could potentially generate three million metric tons of additional canola meal. While canola oil is seeing high demand as a feedstock for renewable fuel production in North America, the additional canola meal volume produced will need to continue to find high-value markets.

China's high demand for protein ingredients, as well as plants to diversify its vegetable protein sources for livestock feed, position canola meal well within the market. In addition, China's growing dairy industry's use of canola meal is a proven ingredient in support of increased milk production. In addition to China, the Indo-Pacific region holds opportunity for canola products to be valued and in high demand.

For Canadian canola farmers, countries of interest within the region include Bangladesh, Indonesia, Japan, Pakistan, the Philippines, South Korea, Thailand and Vietnam. Japan is a consistent and loyal buyer of Canadian canola. Strong ties between our two countries support reliable trade. Vietnam, Thailand, Indonesia and the Philippines all represent markets of interest for canola meal. These countries have growing feed markets and increasing demand for vegetable protein ingredients. South Korea has also been a consistent importer of canola oil over the past decade.

Canadian canola farmers grow a high-value crop that is in demand around the globe. Within the Indo-Pacific region, China remains a critical market of importance to farmers, with the industry committed to fostering and expanding this trading relationship. In addition, we see value in the work the Canadian government and our fellow associations are doing to expand market opportunities within the Indo-Pacific region aligned with the growth of our industry.

The newly opened first-of-its-kind Indo-Pacific Agriculture and Agri-Food Office in Manila will play a key role in market access, reduce trade disruptions and likely assist in ongoing free trade agreement negotiations with ASEAN countries and Indonesia.

I look forward to your questions.

Thank you.

[The Chair, Liberal, Ken Hardie]

Thank you very much, Mr. Carey.

We'll now turn to Brian Innes from Soy Canada for five minutes or less.

[Brian Innes, Executive Director, Soy Canada]

Thank you, Mr. Chair.

I'm here representing Canada's soybean industry. That includes Canadian seed developers, and that includes our farmers, our processors and our exporters. We have a very diverse industry with production that spans from Atlantic Canada all the way to the Rocky Mountains.

Soybeans are the third most valuable crop here in Canada, with exports of about $3.5 billion per year. We produce world-leading food grade soybeans to make things like tofu and soy milk, as well as commodity soybeans to make meal to feed livestock and oil for humans and for biofuel. With more than 70% of our production exported every year, we're very focused on global markets.

Before I describe why the Indo-Pacific strategy is important for us, I'd like to share why the region itself presents an opportunity.

From a soybean perspective, the Indo-Pacific is the heartbeat of global demand. Take the ASEAN region, for example, which excludes other important markets like Japan, China and Korea. ASEAN imports soybeans worth approximately $9 billion every year, and our Canadian exports into this region are at about $470 million. We see a lot of opportunity for growth. For example, the USDA sees demand for soybeans in ASEAN countries to grow by 25% now through 2028.

With the committee's focus on China, it's also important to recognize that China is the world's biggest importer of soybeans, demanding 60% of all the soybeans traded in the world. It's also a very important market for Canadian soybean producers and the industry.

The question facing us today is how the Indo-Pacific strategy can help us seize these opportunities in the Indo-Pacific. For our sector, this will happen by helping to improve access to these markets.

First, we need to eliminate tariffs and establish mechanisms through regulatory co-operation through the Canada-Indonesia free trade negotiations. Eliminating tariffs would create growth opportunities and predictability—for example, right now, Indonesia could raise their tariffs on soybeans to 27%—but eliminating tariffs is not enough. We also need to address non-tariff barriers like sanitary and phytosanitary issues. Things that can suddenly appear can create costs and can even stop trade.

Second, we need to continue engaging all countries in the region on our shared interest in stable food trade. As my colleague Michael shared, Canada is one of the few countries that can produce food for itself as well as others.

Our agri-food sector is an engine of growth. Our customers in the Indo-Pacific depend on what we produce to feed their people and their animals. What we produce comes from what we invest, and what we invest is highly influenced by predictability. It's in everyone's interest to support rules-based trade and to continue engagement that supports stable food trade.

Last, we need to make the most of the newly established Indo-Pacific agri-food office under the strategy to work proactively to prevent trade issues and also to address them quickly when they arise. We welcome the office as an important tool to prevent and resolve trade issues. The exciting part is that we're already seeing it work. We're already seeing that engagement help to bring more collaboration and co-operation between governments.

One way we're seeing this is by regulators connecting with their counterparts. They are connecting to discuss plant health issues so they can better understand how governments can regulate these things to prevent trade risks, and they are connecting to improve understanding so that small regulatory differences on how weed seeds are regulated don't create trade barriers. As we look to the future, we see the office as a really helpful tool that can help with new technologies too, like seed technologies such as gene editing.

Throughout the region, regulations are evolving, though often not in sync with what's happening here in Canada. Investing in more collaboration between Canadian and Indo-Pacific regulators can really help to minimize differences that can create trade barriers or regulations that are not based on science.

Thank you for the opportunity to discuss how Canada's Indo-Pacific strategy can help us seize growth opportunities in the Indo-Pacific region.

I look forward to your questions.

Thank you very much.

[The Chair, Liberal, Ken Hardie]

Thank you very much, Mr. Innes.

We'll now turn to Mr. Kucharski from the Macdonald-Laurier Institute for five minutes or less.

[Dr. Jeff Kucharski, Senior Fellow, Macdonald-Laurier Institute]

Mr. Chair, thank you for the opportunity to address your committee today.

I would like to make a few remarks on Canada's Indo-Pacific strategy by first talking about the external environment that we now face and then make some observations about the strategy itself.

First of all, in my view, the IPS is probably the most significant, comprehensive and ambitious strategic document on the Indo-Pacific or Asia-Pacific region that the Canadian government has ever issued. It comes at a time when the rules-based international order is being increasingly challenged by China, Russia and other authoritarian regimes. Consequently, the link between economic security and national security has become increasingly critical to western nations, including Canada.

Canada has a huge stake in maintaining peace and stability in the Indo-Pacific region. In 2022, Canada's total trade with the region was $270 billion, or about 18% of Canada's total global trade. Much of this trade goes by maritime vessel, through contentious waters, the south and east China seas, so any disruptions in that area could have devastating consequences for Canada, and indeed the global economy.

As we all know, China is a significant trading partner of Canada, and at the same time a rival and a security threat to Canada and our allies. However, the Indo-Pacific strategy will not live or die based solely on Canada's relations with China. Canada's trade with China represented only about 8.5% of Canada's total trade in 2022, but the balance of trade is heavily in China's favour. Their exports to Canada—over $100 billion—are more than three times what they import from Canada. Given the realities we face with a rising China, it's in Canada's interest to be more pragmatic and transactional with China, while prioritizing and broadening our economic and security relations with allies like Japan and South Korea, as well as pursuing deeper economic ties with ASEAN nations and Taiwan.

While the IPS itself is quite comprehensive, it does have a few gaps and shortcomings, in my view. One issue where it appears that there's a gap is between Canada's commitment to multilateralism and the realities Canada is faced with in the world. A host of minilateral groupings have sprung up in the Indo-Pacific to address urgent and/or unique regional economic and security issues. While Canada is a member of the CPTPP, it has been left out of other fora, such as the Indo-Pacific economic framework and security partnerships, such as the Australia, U.K. and U.S. AUKUS partnership. A strategy to address Canada's participation in these and other minilaterals is not addressed in the IPS.

Also, while the strategy acknowledges that the north Pacific faces growing security challenges, there's no reference at all to Russia in the strategy. Russia is also an Indo-Pacific nation and a regional security concern, and poses threats to Canada in the longer term, especially in the Arctic.

With regard to trade, the Indo-Pacific strategy notably aims to position Canada as a responsible and reliable energy security partner, but it makes no mention of Canada's hydrocarbon resources, even though Canada is an environmentally responsible, world-scale producer. In fact, the first tanker carrying the Trans Mountain pipeline's first shipment of crude oil to Asia left Burnaby just last Wednesday. Next year should see LNG Canada's project come online.

Canada will then be in a position to help the region lower its coal emissions. The IPS emphasizes clean energy, which is fine, but hydrocarbons are in demand in the region now and likely will be for decades. All of Canada's energy resources should play a part in leveraging Canada's position in the region. In my view, this is a significant oversight.

Ultimately, the effectiveness and success of the IPS will depend on two things.

The first is how the U.S. views our commitment to the region, which is to say, are we prioritizing national security and defence as well as trade and economics? U.S. concerns with Canada's failure to meet our NATO commitments have been made all too clear in the past few days. Meeting our defence commitments at a time when threats are growing is essential to being taken seriously when it comes to being seen as a partner in the region and being invited to join regional fora.

The second key factor is Canada's ability to achieve the goals in the IPS. Much will depend on the strength of Canada's economy and the ability to actually execute on the strategy. Unfortunately, Canada's share of global exports is falling. Manufactured exports are stagnating, and our GDP is underperforming that of our peers.

Canada also needs to urgently address the inadequacies and supports for Canada's foreign service and the personnel-readiness and funding issues plaguing the military. Thus, there are real concerns about Canada's capacity to deliver over the longer term.

I don't want to leave you with the impression that I'm critical or pessimistic. In fact, I'm quite the opposite. My main concern is with follow-through and with ensuring that the strategy is properly resourced and effectively implemented, as I believe its success is an essential component for Canada's long-term prosperity and security.

Thank you very much.

[The Chair, Liberal, Ken Hardie]

Thank you, Mr. Kucharski.

We'll now go to our first round of questioning. First will be Mr. Kurek and then Mr. Oliphant. Mr. Perron is going to be joining us, and Mr. Bergeron will be ceding his time to him. Of course, Ms. McPherson will round up our first round of questioning.

Mr. Kurek, you have six minutes or less.

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

Thank you very much, Mr. Chair.

Thank you to our witnesses.

I think it's self-evident that Canada needs trade and that we should be—and, I would suggest, can be—the supplier of choice. In particular, I look at the three gentlemen here when it comes to our agricultural sector. However, it seems to be that, when it comes to our place, we don't seem to be growing as fast as we could be.

I would suggest, and I would ask the question.... The reason I ask this question is that it's important when this committee compiles a report. My question for the three gentlemen here at the end of the table is this: The method by which we transport our goods primarily to Asia would be what?

If I could just go down the table, starting with Mr. Harvey and then Mr. Carey and then Mr. Innes....

[Michael Harvey]

After leaving Canada, it would be by ship.

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

Mr. Carey.

[Dave Carey]

It would be by rail to port.

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

Mr. Innes.

[Brian Innes]

For soybeans, we're transporting in containers, as well as transporting in bulk. We use a lot of containers—approximately 40,000 every year—to export our soybeans.

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

Those would primarily go through...?

[Brian Innes]

They would primarily go through the port of Montreal, the port of Halifax, the port of Prince Rupert and the port of Vancouver.

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

Okay.

When it comes to, specifically, the Indo-Pacific, we have one major port, although I know there are a lot of conversations, in fact, that I've had with some of your organizations about expanding that. The World Bank had S&P do a report on port efficiencies. I know that my Liberal colleagues like to talk about S&P a lot, so I hope they will note this in particular. In the context of this report, the port of Vancouver—you can see it highlighted there—ranks 347 out of 348 when it comes to port efficiency.

To the witnesses here at the end of the table, is that concerning in terms of Canada's potential—when we are ranked so low when it comes to efficiencies of such a critical part of Canada's transportation infrastructure, which is essential to making sure that your members, those involved with your organizations, and the many producers you all represent are able to get their products to market?

I'll start with Mr. Harvey, and we'll keep it fairly short.

[Michael Harvey]

Mr. Carey is working more on ports on a daily basis that I am.

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

Okay.

Mr. Carey.

[Dave Carey]

Absolutely. Canada needs to get back into the business of nation building. If capacity is needed in the United States at Long Beach, they move heaven and earth, regardless of the party in power at the time. Seven out of 10 tonnes of grains grown in the Prairies by farmers—and many of your constituents—still go through the port of Vancouver. We have one bridge that gets to the port of Vancouver. We have one tunnel. I know discussions with the City of Burnaby are five years now into improving some of the basic grade issues around railway passing.

It is a concern. That is our gateway to economic prosperity in Asia.

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

I appreciate that. “Move heaven and earth”, I think, is a key phrase there. You're absolutely right. We need to be a country that builds and actually gets things done. It's regrettable that over the last nine years or so that has not been the case.

I'll just give a shout-out to my father, who's actually on the tractor right now. He said that he has a little over 1,000 acres of canola left to seed before we move to oats.

Mr. Innes, you wanted to answer that.

[Brian Innes]

Yes, thank you.

We export our soybeans in containers in bulk shipments. To build on what my colleague said, I'll say that predictability, reliability and cost competitiveness for Canadian shippers is paramount to our competitiveness.

In the soybean industry, we compete head-to-head with our American counterparts. When they have better service, when they have better rates—all of which come from infrastructure, as well as thinking about competition of the three global alliances that control the container market, for example.... These are actions taken by government that have a real impact on the shippers and our competitiveness, allowing us to bring value here to Canada.

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

When it comes to competitiveness, I'm glad you brought that up, because Canada, of course, pays a carbon tax. That has a particular and disproportionate effect on the transportation sector, specifically rail. You all mentioned that it's important for commodities to get from the farm, which is generally by truck, to an inland port, and then go by rail to a major port, and then from the port to wherever in the world. Does the carbon tax have an impact on Canada's competitiveness to be able to get our products to market?

I'll start with Mr. Innes, then Mr. Carey and then Mr. Harvey. Go ahead.

[Brian Innes]

I think Mr. Carey is best placed to speak to this.