Thank you, Madam Chair.
My name is Bruno Letendre, and I am the chair of Les Producteurs de lait du Québec, as well as a member of the Dairy Farmers of Canada board of directors. Thank you for the opportunity to address the committee today.
The dairy sector produces a stable supply of nutritious dairy products for Canadian consumers. As one of the top two agricultural sectors in seven out of 10 provinces, Canada's dairy sector is a driver of economic growth, and a leader in innovation and sustainability.
With over 10,000 dairy farms and 500 processors, the dairy industry has been a bedrock of Canada's rural communities for generations. In 2015, the sector's economic contributions amounted to nearly $20 billion towards Canada's GDP and $3.8 billion in tax revenues. In addition, the dairy sector sustains approximately 221,000 full-time jobs across the country.
In Quebec, some 5,000 dairy farms produce 3.37 billion litres of milk, generating a farm gate value of more than $2.6 billion. Dairy farmers and processors are responsible for 83,000 direct, indirect and induced jobs in Quebec and contribute $6.2 billion to GDP. Lastly, they generate $1.3 billion in tax revenue.
Canada's three most recent trade agreements were made on the backs of Canadian dairy farmers. CUSMA is but the latest example. The outcome of CUSMA negotiations goes far beyond dairy market access concessions, which alone represent 3.9% of Canada's 2017 milk production, in addition to the existing imports under the World Trade Organization, plus access already granted under the Canada– European Union Comprehensive Economic and Trade Agreement, or CETA, and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, or CPTPP. CETA and the CPTPP represent 1.4% and 3.1% of the Canadian market, respectively. By 2024, total imports will be the equivalent of 18% of Canadian milk production.
CUSMA also requires consultation with the U.S. on any changes to the administration of Canada's dairy supply management system. A trade deal that forces a Canadian industry to consult with its direct competitor in another country over any administrative changes it might make domestically in the future sets a dangerous precedent, and in doing so, Canada is giving up part of its sovereignty.
The impacts of the recent trade agreements have created uncertainty, especially among young farmers, and could have a dramatic impact on investments in agricultural exports and processing. The agreements may also lead to job losses, with ripple effects in communities across the country. These impacts go beyond economic considerations; displacing Canadian dairy to grant increased market access creates additional uncertainty at a time when the mental health of farmers and rural Canadians continues to be a concern.
The Prime Minister has repeatedly committed to full and fair compensation to the dairy sector for the cumulative impacts of CETA, the CPTPP and CUSMA.
That commitment was reiterated in a motion unanimously adopted by the House of Commons in October 2018. It reads as follows:
That the House call on the government to implement a program that provides financial compensation to egg, poultry and dairy farmers for all the losses they sustain due to the breaches to the supply management system in CETA, the CPTPP and the USMCA, and that it do so before asking parliamentarians to vote on the USMCA.
On August 16, 2019, the federal government announced a $2-billion compensation envelope to mitigate the impacts of CETA and the CPTPP. This does not include CUSMA. Of the announced $2 billion, $250 million was provided previously under the dairy farming investment program. The remaining $1.75 billion will be paid out over eight years. The dairy direct payment program, launched in the fall of 2019, is expected to pay out $345 million to dairy farmers by the program end date of March 31, 2020. The remaining commitment of $1.4 billion needs to be confirmed as direct payments and be paid out over the remaining seven years.
Canadian dairy farmers, who are all impacted by the recent trade agreements and are best positioned to know their own needs, have indicated that compensation should come in the form of direct payments. This is consistent with farmers' recommendations from the mitigation working group established by the federal government after the signing of CUSMA and the government's commitment to listen to farmers on how compensation should be paid.
The announced compensation package for the access granted in CETA and the CPTPP was a first step in this regard. However, in order to fulfill its commitment, the government will also need to deliver on its promise of full and fair compensation for the impacts of CUSMA.
The Canadian government has repeatedly stated that it wants a vibrant, strong and growing dairy sector that creates jobs and fosters investments. Compensation is needed to restore confidence within the sector. The compensation will provide stability for dairy farmers to move forward. Our dairy farms aren't relocating.
The government's assistance will be spent and reinvested in the Canadian economy. It will also help ensure that farmers can continue to maintain investments at current levels in the development and adoption of innovative on-farm best practices and sustainable technology. A viable and sustainable dairy industry is key to the ongoing provision of nutritious and healthy dairy products at an affordable cost to Canadians.
Instead of compensation in exchange for concessions granted in recent trade agreements, Canadian dairy farmers would have preferred to have seen no dairy concessions. Therefore, the Dairy Farmers of Canada recommend that:
1- The Canadian government continue to provide dairy farmers, in the form of direct payments, the remaining seven years of full and fair compensation to mitigate the impacts of CETA and CPTPP, and that the total amount be included within the 2020 main estimates.
2- The Canadian government fulfill its commitment to fully and fairly compensate dairy farmers to mitigate the impacts of CUSMA, as per the recommendations made by the mitigation working group established by the government following the announcement of CUSMA.
Let's move on to export charges.
CUSMA also contains a provision imposing export charges over a certain threshold on certain dairy products, setting a dangerous precedent that could affect other sectors in future trade deals.
CUSMA requires any exports of skim milk powder, milk protein concentrate and infant formula, beyond a specified amount, to face an export charge that effectively equates to a worldwide cap on the export of Canadian dairy products. As a result, these products won't be competitive in relation to the products of other global players.
The impact of the export charges must be mitigated. This could be done through administrative agreements with the United States, even after the ratification of CUSMA. These caps would set a dangerous precedent for any Canadian product that may be exported, since the caps would limit Canada's competitiveness in world markets.
It's also important to note that the impacts of recent trade agreements aren't limited to dairy farmers. The agreements also affect dairy processors, which are key to the long-term sustainability of the sector, as well as to other supply managed sectors.
Therefore, the Dairy Farmers of Canada recommend that:
3- The Canadian government negotiate an administrative agreement with the American government to mitigate the impact of the export charges contained in CUSMA, which are triggered after a threshold on certain dairy products, such as milk protein concentrates, skim milk powder and infant formula, has been reached.
It's important to note that, should CUSMA enter into force before August 1, the beginning of the dairy year, the export thresholds for skim milk powder, milk protein concentrate and infant formula will see a dramatic decline of nearly 35% after only a few months. This would be another blow to the dairy sector, which wouldn't be able to benefit from a transition period. It's also important to consider that the impacts of recent trade agreements aren’t limited to dairy farmers.
Therefore, the Dairy Farmers of Canada recommend that:
4- The government establish a proper transition period for the dairy industry to adapt to the export thresholds, by ensuring that CUSMA doesn't enter into force until after August 1, 2020.
Unfortunately, the Canada Border Services Agency, or CBSA, doesn't have the training, tools or resources to effectively monitor what's coming in to Canada. These agencies must guard porous borders, which will become even more problematic as imports continue to increase.
Therefore, the Dairy Farmers of Canada recommend that:
6- Increased resources, tools and training be provided to CBSA to improve its effectiveness in dealing with border issues in a timely and transparent manner, particularly given the additional level of imports granted under recent trade agreements.
In conclusion, Canadian dairy farmers still maintain that any future trade agreement mustn't include market access concessions for the dairy sector.
The Dairy Farmers of Canada understand the importance of international trade for the broader Canadian economy. They're in no way opposed to Canada exploring or entering into new trade agreements, provided that such agreements don't negatively impact the dairy sector any further. With the support of the federal government, Canadian dairy farmers can continue to build on their successes, while contributing to the health and well-being of Canadians.
Thank you.