Good afternoon.
We are here today on behalf of the Producteurs de lait du Québec, but the issues we'll be discussing affect all of the country's dairy farmers.
Although dairy producers make up a small part of the population, their contribution to Canada's economy is substantial. They operate more than 10,300 small businesses across the country, and dairy production is often one of the main sectors driving regional economies. Those 10,300 businesses account for nearly $20 billion of gross domestic product, not to mention $3.8 billion in tax revenue for cities, provinces and the federal government. What's more, our businesses generate 220,000 direct, indirect and induced jobs. All that to say, our sector makes a tremendous contribution to Canada's economy.
We are here today mainly to make you aware of the issues and impacts related to the trade agreements signed by Canada in recent years. There are two parts to my presentation. First, I'll touch on the agreements and their major impacts. Then, I'll summarize our top requests.
Two agreements came into force in recent months. To begin with, the Canada–European Union Comprehensive Economic and Trade Agreement, known as CETA, was signed in 2013 and came into force in 2017. Under the agreement, access to 1.4% of Canada's market was conceded. That's the first chunk of the market that was conceded in an effort to conclude an agreement. The second agreement I want to mention is the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, known as the CPTPP. Under that agreement, an additional 3.1% of Canada's market was conceded.
We recognize that trade agreements play an important role in the country's economic prosperity, so we are not calling into question the fact that Canada has signed such agreements. However, as all the analysts have pointed out, in order for Canada to sign those deals, the dairy sector had to pay a heavy price. We were used as a bargaining chip so the country could benefit from the deals.
Thankfully, in the last few months of 2019, the federal government announced a $2-billion compensation program for concessions in the two agreements. Although that may seem like a lot, it represents only a portion of the financial losses producers will suffer permanently for the concessions made. Keep in mind that, under Canada's dairy policy, farmers committed to producing the quantity of dairy products needed to meet the population's needs, and to do that, they made an investment, a long-term investment. Clearly, then, the concessions are having repercussions on them.
I'd like to highlight some key elements in one last agreement, the Canada–United States–Mexico Agreement, known as CUSMA. In fact, legislation to implement the agreement was recently introduced in the House of Commons. With this agreement comes an additional 3.9% in market access that was conceded. That’s on top of market concessions under the other two agreements. I can speak to the various facets at greater length when we get into questions, but this agreement has something the other two don't. In addition to granting the signatories market access, Canada agreed to impose a cap on skim milk powder exports by Canadian companies. The cap will have financial implications that weren't factored into the estimated losses related to the tariff concessions. The measure, which requires Canada to pay a surcharge when skim milk powder exports exceed 35,000 tonnes in the second year, will result in losses of $15 million to $20 million in the first year, and those numbers will continue to rise.
To conclude, I’ll turn to our demands. Our first demand concerns the first two agreements. In relation to CETA and the CPTPP, we are asking the federal government to clearly set out, in its next budget, the terms and conditions for payments of the remainder of the $2-billion compensation package it pledged to deliver. An initial amount of $345 million was paid out this fiscal year, and I must say it went quite smoothly. When that happens, it’s worth mentioning. We feel it’s important to do that. It’s a good thing. However, we are calling on the government to make clear in the next budget the terms and conditions under which it will follow through on its commitment as regards the remaining $1.4 billion.
Our next demand relates to CUSMA. We are asking that the next budget take into account the impact of the tariff concessions by setting out a mechanism to deal with the precedent-setting losses resulting from the export cap. To that end, the government should act to limit the negative financial impacts by concluding an administrative agreement with its American and Mexican counterparts to ensure the measure applies only to the signatories—in other words, the U.S. and Mexico—not the global marketplace, as CUSMA stipulates. In our view, the measure has the effect of reducing trade, which runs counter to World Trade Organization agreements.
I’ll leave it there for now. Thank you.