International Trade Committee on June 21st, 2006

[Raúl Moreno]

Honourable members of the Canadian Parliament, we want to thank you for the opportunity you've given us to share our vision on the free trade agreement and to bring before you the main threats that an FTA between Canada and Central America would entail. With all due respect, we expect and wish for receptivity to our ideas.

The FTAs are not a tool for the development of small Central American economies. Even though the FTAs are signed between the parties with enormous inequalities--competitive, technological, and institutional--these agreements deny deferential and special treatment to the small Central American economies. Besides, Central American governments do not have the same power of negotiation that Canada has in order to be able to prioritize their interests in an FTA.

The FTAs are political instruments with a scope that goes beyond trade in such a way that these agreements invade functions and sovereign responsibilities of our states. The Central American states need to define their own public policies in order to empower strategic sectors that allow our economies to reactivate. However, these public policies are limited in the FTAs by the principles of national treatment and most-favoured nation treatment, as well as for the investment chapter.

The Central American states must guarantee access for the population to basic public services, including those with free access, such as education and basic health, since this access is one of the inalienable rights of the population. The Central American states have enormous difficulties reactivating their economies to levels that allow for a reduction in unemployment and poverty. The FTAs would create a net loss of jobs. With a CA4 FTA, the dependence on agricultural products would increase and would limit our inalienable right to food production sovereignty and to define our own public policies to protect our strategic sectors.

When ratified by the legislative branch, the FTAs, as international treaties, become laws of the republic in our countries. They have a higher legal hierarchy than all secondary legislation, for example, the labour code, the environmental act, the health act, and even at times the constitution of the republic.

Ladies and gentlemen of Parliament, the Central American people need strong and efficient states that guarantee human rights and that undertake the function of leading the development of our nations. We consider that a CA4 FTA would operate with the opposite logic.

The history of international relations between Canada and Central America has been based on mutual respect and cooperation and in the support of democratic processes within our countries. This leads us to believe, and we trust, that you will not support initiatives that will hinder the development of Central American economies and negatively affect their people.

In any case, we are very worried for our rural communities and our environment. These may be affected because this FTA might limit the Central American governments in their state regulations, especially regarding the mining investments that are operating now in Guatemala, Honduras, and El Salvador, and for their exploitation of gold, silver, and copper.

In El Salvador, the ratification of the CA4 FTA was carried out in the early hours of the morning. There wasn't the adequate paperwork, and it was never read. The plenum never even read a single line of it. This generated a series of demonstrations, most of them pacifistic demonstrations, and the government took some retaliative actions, such as beatings, arrests, persecution, and some people even died.

We believe trade and investment are instruments that may contribute to the development of people when they are articulated within the national strategies built democratically. We do not believe commerce and investment are an end in themselves, as considered by the FTAs. So first and foremost, we need to get to know the text of the CA4 FTA. We need transparent negotiations, which is why we request, with all due respect, that you divulge the contents of this agreement.

We want to express that the Central American people deeply value the support that the Canadian nation has given us and can give our nations. We expect that our international relations are based on links of cooperation, solidarity, and friendship, because for us it would be inadequate to reduce foreign policy to a simple trade policy.

We need your cooperation, which we ask you for on behalf of the Central American people, mainly El Salvador. We request that you not ratify the CA4 FTA, or we respectfully request you to consider the negotiation of an agreement of cooperation between Canada and Central America that places at its core not the profit of corporations but the interest to continue contributing to the strengthening of our fragile democracies, the conservation of our ecosystem, and the reduction of inequality, in order for our people to live in justice, with dignity and happiness.

Thank you very much.

[The Chair, Conservative, Leon Benoit]

Thank you very much.

Could you please state your name, just for the record, so we know who did the translation? I would appreciate that very much.

[Ana de Gortari, Interpreter, As an Individual]

My name is Ana de Gortari.

[The Chair, Conservative, Leon Benoit]

Thank you.

Now we'll go to five minutes, please, from Ms. Jeremic. Are you making a presentation?

[Rusa Jeremic]

I am making a presentation. We were informed by the clerk that we would have 10 minutes.

[The Chair, Conservative, Leon Benoit]

No, five minutes, please. We'll have five minutes. Just do your best to cut it down. You've probably done that before.

[Rusa Jeremic]

Okay.

Thank you very much. I am with KAIROS: Canadian Ecumenical Justice Initiatives, and I'm also the co-chair of the Americas policy group of the Canadian Council for International Co-operation.

With me is Gauri Sreenivasan and Nadja Drost, from CCIC; Jamie Kneen, from Mining Watch Canada; Sheila Katz, from the Canadian Labour Congress; and Nick Milanovic and Mark Rowlinson, of the Canadian Association of Labour Lawyers, who have also submitted and made a request to appear before the committee but were not put on the witness list.

Since 2001--

[The Chair, Conservative, Leon Benoit]

Excuse me. I'll just let you know that we can read your complete presentation that you've given on paper. We can have that read into the record, so it will be there in the minutes. Then you can just go ahead and give an abbreviated overview, but it will still be on the record as you've written it, plus what you've said. So go ahead.

[Rusa Jeremic]

Thank you very much.

Since 2001, the APG has striven to monitor the Canada-Central America agreement because of wide-ranging concerns with the impacts of current free trade agreements and extensive solidarity with Central America, amongst all of the constituencies we work with.

With regard to the U.S. free trade agreement, as Mr. Moreno explained, peaceful legitimate protests in the Central American countries were repressed and there was violence. Canadian civil society is very concerned that the Canadian bilateral trade deal is headed down a similar path.

Moreover, due to the leadership role Canada played in Central America during times of civil war, expectations from Canadian citizens are high that the Canadian government will maintain its support for sustainable development, prioritize respect for human rights, and encourage full implementation of the peace accords.

I would like to touch briefly on three areas. First, in thinking about trading with small-economy countries, Canada is clearly under strong pressure to pursue bilateral trade agreements. Although we have legitimate business interests that might reap some benefits from a free trade agreement, it is vital to recognize that Canada, as a nation, also has strong policy priorities and non-economic interests in Central America.

Moreover, the Central American region is comprised of small, vulnerable economies that will never be able to participate on an equal playing field, no matter how much capacity-building or negotiating training they receive. There's no fair competition.

Many Canadians and civil society organizations fear that Canada's historic role in the region is on a collision course with our economic interests.

Recently in Geneva, the United Nations Committee on Economic, Social and Cultural Rights reaffirmed that Canada's human rights obligations need to come first. In reviewing Canada's compliance performance, the committee recommended that the state party consider ways in which the primacy of covenant rights may be ensured in trade and investment agreements, and in particular in the adjudication of investor-state disputes under chapter XI of NAFTA.

Although there are definite Canadian corporate interests in pursuing a free trade agreement, we have to acknowledge and recognize that the Central American market is actually not that big. The trade between the region and Canada still totals less than one percent of Canada's total trade globally. This doesn't mean that it's not important, but what it does allow is for Canada to have an opportunity to think through its approach to negotiating bilateral agreements and also to think about what type of content those agreements should have. It provides an ideal opportunity for Canada to look at a way to negotiate a free trade agreement that recognizes Canada's historic role, its commitment to supporting sustainable development, and its human rights obligations, while pursuing economic interests.

[The Chair, Conservative, Leon Benoit]

Thank you, Ms. Jeremic. You've had over five minutes. You'll have an opportunity during questions, I'm sure.

[Rusa Jeremic]

Could I have 30 seconds more?

[The Chair, Conservative, Leon Benoit]

Yes, you may have 30 seconds, if you wrap it up after 30 seconds.

[Rusa Jeremic]

Our recommendations for the committee are, first, full public debate. We urge this committee to pass a motion calling for full and informed public and parliamentary debate on the Canada's CA4 agreement.

Second, suspend the CA4 negotiations until there's disclosure of all draft text, until there are mechanisms developed for authentic public debate, and until there's further study on the CA4 agreement by the committee.

Third, a new process for bilateral trade deals is needed that involves and includes informed parliamentary debate.

Fourth, consistency with the human rights obligations I mentioned is needed.

Thank you.

[The Chair, Conservative, Leon Benoit]

Thank you.

Now we will hear from Merrill Harris, the president of the Canadian Sugar Beet Producers' Association.

You have five minutes, please.

Of course, you will all have an opportunity during the question section of the meeting.

Go ahead, please.

[Merrill Harris, President, Canadian Sugar Beet Growers Association]

Okay. Thank you, Mr. Chairman.

The Canadian Sugar Beet Producers' Association thanks the House of Commons Standing Committee on International Trade for the opportunity to comment on the Canada CA4 trade agreement negotiations.

For some reason, trade in sugar seems to be more closely monitored and regulated at borders than that of many illegal substances. It is important for my farmers that the way of dealing with sugar in free trade negotiations is changed. My comments are going to focus on two things: the initial comments will pertain to a brief description of our industry and the experiences we've had in free trade agreements, and the second is a question for your committee to think about.

By a process of elimination, the Canadian Sugar Beet Producers' Association is now a group of 260-plus sugar beet farmers in the irrigated region of southern Alberta. There are members only in Alberta because of a historically open market for sugar in this country. A long time ago there used to be both sugar beet farmers and processors in Quebec, Ontario, and Manitoba. The CSBPA was formed during World War II by farmers from all four provinces.

Before free trade agreements became the thing to be doing, Canada maintained what was called a minor revenue tariff on refined sugar and generally no tariff on raw sugar entering the country, combined with the absence of non-tariff trade barriers on imported sugar. Because of this regulatory framework and the normal workings of the international price cycle, where overproduction of sugar in other parts of the world causes foreign producers to find any market at any price to clear their inventories, sugar beet farmers and factories in Quebec and Ontario disappeared.

The Manitoba sugar beet industry closed permanently after the 1996 crop, because its main market was eliminated when the government of the day traded off the sugar beet industry to protect another sector of Canadian agriculture. I know this because the Minister of Agriculture at that time wrote a letter to a former CSBPA president about a year after the fact saying that is what had happened. Regrettably, there are generally winners and losers in free trade, and sugar beet farmers have taken many turns at being in the losing column. We think it is time and justifiable for a win to be delivered in a negotiation.

After 82 years in total and more than a decade into the free trade agreement era, southern Alberta sugar beet production is increasing again. Acreage seeded in 2006 is up one-third from just three years ago; however, it's down roughly 20% from the high in 1999. For five straight crops we suffered adverse conditions, but never once approached the federal or Alberta governments for commodity-specific assistance. We were determined to sort out our difficulties with a processor or not at all.

Alberta sugar beet farmers voted unanimously in 1995 to terminate the national tripartite stabilization program for sugar beets, and that was right at the beginning of our experience with free trade. Sugar beet is a good crop; it is a high value-added crop for farmers and great in an irrigation rotation. We still operate as family farms or neighbours working together, despite losing half our farmers during that bad period.

To continue to grow sugar beets profitably, we need good free trade agreements, and not just any free trade agreement. Perhaps I can partly define what a good free trade agreement is by describing some of the features that do not work for us. An example is that negotiation should aim at improving market access opportunities, not eliminating them. Before free trade we did not have any duties or tariff rate quotas on shipping sugar to the U.S. At the WTO implementation, Canada initially had to concede to a no tariff rate quota access for sugar and prohibitively over-quoted tariffs. In return, we committed to completely eliminating the Canadian minor revenue tariff and to introducing non-trade tariff barriers.

In the Canada CA4 negotiations, we pleaded with the government and Parliament to remember that these agreements are supposed to facilitate trade and not close it down. Just ask former Manitoba sugar beet farmers how the WTO implementation negatively affected them.

The Canada-Costa Rica Free Trade Agreement offers another evolution in our understanding of free trade. Canada agreed to a timed and mutual phase-out of tariff and tariff rate quotas on refined sugar. Canada offered Costa Rica asymmetrical market access volume during the implementation period as an inducement to sign. The agriculture minister of the day and negotiators suggested that if we were not comfortable with these market access arrangements, perhaps we could switch production to potatoes, because french fry access to Costa Rica would be quite promising and southern Alberta was expanding potato acreage at the time. As it turned out, Canadian market access to Costa Rica for refined sugar and french fries was thwarted by non-tariff barriers.

Lessons learned from the last Central American free trade agreement are that effective measures to ensure tariff rate quotas and other access are very important. Non-tariff barriers should not thwart negotiated access, and following a development agenda in a bilateral or regional negotiation by giving asymmetrical access leaves the Canadian industry disadvantaged. The development agenda should be left to the WTO, where domestic support and export subsidies are also negotiated. Canadian sugar beet farmers were faced in the Costa Rica agreement with making unilateral development concessions while still being exposed to the threat of material injury by the European Union's and the United States' sugar policies.

Please do not ask us to grow something else in a CA4 negotiation. Sugar beet in southern Alberta is a competitive crop. We are efficient and cost-competitive sugar farmers, usually producing the best or close-to-the-best quality of sugar beets in North America. Try to remember that for 82 years we have existed without protective tariffs or non-tariff barriers, in a market where most of the domestic supply of sugar comes from countries without similar labour, environmental, or food safety standards. Nor do we have a commodity-specific program. In fact, because agricultural irrigation encourages diversification, it is even hard to qualify for a CAIS payment.

Central American countries already enjoy substantial competitive advantages because of their comparative labour, environmental, and food safety standards. They do not need asymmetrical market access to level a playing field.

Also, please do not try to squeeze us into producing another crop if your negotiations get tough. For example, if we had switched to potatoes, we would now have added capacity in an industry where fluctuations and exchange rates, increasing trade friction, and North American overproduction would have left us with less product and less revenue-diversified. Let producers make the production decisions.

For a quick summary of my comments, we are not opposed at all to the concept of free trade. We firmly believe in it, but only free, open, transparent trade opportunities, with enforceable rules imposed on both parties. We also firmly believe that one commodity should not be traded off in favour of another commodity.

From an on-the-ground, in-the-field, farmer perspective, what is in a possible Canada-CA4 trade agreement for farmers? What benefit would Canadian agriculture, and specifically the Canadian sugar beet producers, get from a free trade agreement with the CA4 countries?

Thank you.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Harris.

You unfortunately brought back some less-than-pleasant memories of a past trade negotiation. I was here at the time.

[Merrill Harris]

We live with those consequences on a daily basis.

[The Chair, Conservative, Leon Benoit]

I'm sure it's a little tougher for you than it is for me to live with it every day.

Ms. Marsden, president of the Canadian Sugar Institute, go ahead. You have five minutes, please.

[Sandra Marsden, President, Canadian Sugar Institute]

Mr. Chairman, I have some slides. I wanted to make sure the members could follow those. Is that possible?

[The Chair, Conservative, Leon Benoit]

Do we have the presentation from Ms. Marsden circulated?

Do you have one? No?

Was that document—

[Sandra Marsden]

It was given to the clerk's assistant at the beginning of the....

[The Chair, Conservative, Leon Benoit]

Was the document prepared in both official languages?

[Sandra Marsden]

Yes, it was.

[The Chair, Conservative, Leon Benoit]

We will have it circulated. It would be better if people had it in front of them as you give your presentation; I can understand that.

Your document, Ms. Marsden, is being circulated.

Mr. Young, from McCain International, are you ready to go right now? Would you mind changing the order?

Thank you very much. Go ahead, please.

[Andrew Young, Director of Marketing, McCain International Inc.]

Thank you, Mr. Chairman and honourable committee members, for the opportunity to appear today.

My name is Andrew Young. I am the director of marketing at McCain International Incorporated. I'm here representing both McCain International and McCain Foods Canada, both divisions of McCain Foods Limited. McCain International is the international market development arm of McCain Foods Limited.

I will not take too much of your time. From our perspective, this is a straightforward issue. We believe the current negotiations and a speedy ratification of the Canada-Central America four free trade agreement is good for Canada, New Brunswick, and for McCain.

As you may know, the McCain group of companies was established in 1957 and is the world's largest producer of frozen french fries and other oven-ready frozen food products. Our headquarters is located in Florenceville, a small town with a population of 700 people in central New Brunswick. We employ over 20,000 people and own 55 production facilities spanning six continents. We process one million pounds of frozen french fries each hour and sell one-third of the world's frozen french fry products in over 110 countries.

In Canada, McCain employs over 4,000 people in 15 processing facilities. McCain is a leader in agronomy, technology, innovation, and new product development. Proudly Canadian, McCain has been successful by focusing on high-quality products and low-cost production and by constantly launching new products to meet our ever-changing consumer needs. We believe we can compete anywhere and with anyone, provided the playing field is level.

McCain strongly supports the timely ratification of a Canada-Central America four free trade agreement, which would help maintain existing markets and would create new trade and investment opportunities for Canadian companies, Canadian workers, and their families. Canada has been negotiating with Central American countries since 2001, and despite some progress, we have not finalized an agreement. In the meantime, the U.S. government negotiated and ratified the U.S.-Central America Free Trade Agreement, which removed almost all trade barriers in those markets for American businesses.

Maintaining and expanding markets has always been important for McCain. In particular, we have worked hard to develop markets in Central America. We currently have sales of over $10 million, and it's frustrating to put these markets at risk when we have made so much progress in them. We risk Canadian jobs and revenue when Canadian-based operations have to account for tariffs, while American-based operations do not. The problem is simple: McCain and other Canadian producers are at a disadvantage. To sell our products into Central American markets we have to swallow a good piece of the tariff to meet the price of the U.S. producers. We cannot do this in the long term, and if it becomes clear that Canada is not going to ratify a Central American free trade agreement, then we will have to reconsider how we service this market.

Currently, McCain exports more than 25 million pounds of frozen potato products to the four Central American countries. This region is serviced by manufacturing plants in two Atlantic Canadian facilities--Grand Falls and Florenceville, New Brunswick. Both facilities employ over 500 people, making McCain one of the main employers of the region. The value of McCain exports into the four Central American countries exceeds $10 million and constitutes more than 15% of the Grand Falls production and 5% of production in Florenceville. Added to this, each one million pounds of finished goods equates to approximately 75 acres of planted potatoes. Thus, 25 million pounds equals 1,875 acres. We contracted 23,600 acres worth of potatoes in New Brunswick for this upcoming year. Losing the CAFTA volume would equate to 8% of contracted acreage.

In addition, the strength of the Canadian currency has increasingly put Canadian-based manufacturers at a competitive disadvantage compared with American-based producers. Currency fluctuations are a normal part of international trade, which we cope with, with increased efficiencies. The new tariff disadvantage is too burdensome, and we feel Canada must act to address the situation. I am here on behalf of McCain to express our support for a trade deal that would level the playing field and allow Canadian food processors and farmers to compete with American counterparts in the region. The United States moved forward to negotiate and ratify similar trade agreements despite strong opposition from, among others, their entrenched sugar and textile lobbies. We have not. A free trade deal with Central America, particularly with provisions for the unfettered access by Canadian food processing companies to those markets, would ensure that Canadian workers and companies, as well as Canadian farmers, have the same level of access to these important and growing markets as their American counterparts.

McCain believes that a free trade agreement with Central America will boost trade flows between Canada and Central America and will increase investment in the region. McCain encourages this committee to support the government's efforts to develop a high-standard free trade agreement with Central America. Such an agreement will allow Canadian-based firms like McCain to maintain and grow facilities in New Brunswick and, in our case, to keep well-paying, stable jobs in New Brunswick.

To conclude, Mr. Chairman, McCain adamantly believes free trade is good for Canada--good for Canadian businesses, Canadian families, and Canadian farmers. It will help drive economic development in Atlantic Canada and allow companies to expand production facilities as we expand access to markets like Central America. It will keep Canadian businesses competitive in a highly competitive and increasingly globalized marketplace.

On behalf of McCain Canada and McCain International, I would like to thank you and the committee members for your time. I would be happy to address any questions, if we have the time.