International Trade Committee on Feb. 4th, 2008

[The Chair, Conservative, Lee Richardson]

Order. We will begin the meeting. We have quorum.

Welcome to the eleventh meeting of this session of the Standing Committee on International Trade. We will continue our debate and discussion and hear witnesses on the proposed Canada-Korea free trade agreement.

Before I introduce our witnesses today, I would like to go back to the agenda for a moment. We had some previous business that was not concluded at the last meeting.

I would like to propose to the committee, and perhaps ask for unanimous consent, that we conduct the questioning of witnesses until 5 o'clock today, and that at 5 o'clock we thank the witnesses and resume consideration of the motion of Monsieur Cardin from the previous day.

Do I have agreement there?

[Some hon. members]

Agreed.

[The Chair, Conservative, Lee Richardson]

Thank you.

That said, we will go to orders of the day, which is the proposed Canada-Korea free trade agreement.

I'd like to welcome to the committee today the following witnesses: from Canada Pork International, Edouard Asnong and Martin Lavoie; from the Canadian Cattlemen's Association, John Masswohl; from the Canadian Vintners Association, Robert Keyes; and from the Canola Council of Canada, Dave Hickling.

I thank you all. I understand that each group has prepared an opening statement. I would ask that all four of you briefly read those statements into the record, after which the committee members will pose questions to you, jointly and severally.

I would ask Dave Hickling of the Canola Council of Canada to begin.

[Dave Hickling, Vice-President, Canola Utilization, Canola Council of Canada]

Thank you, Mr. Chairman, and my thanks to the committee for the invitation to speak today.

The Canola Council of Canada is a national trade association representing all sectors of the industry, including producers, input suppliers, processors and crushers, and marketers of canola and its products. Our mission is to foster a regulatory policy and business climate based on innovation, resilience, and creation of superior value for a healthier world. Our current goal, which we set this last year, is to help the industry grow to 15 million tonnes of market demand and production by the year 2015. To put that in perspective, our current production is approximately 9 million tonnes.

Korea is currently a market for Canadian canola oil—and I have supplied documentation on that. In the past, especially during the 1990s, Korea was a significant market for canola meal. In the future, we think it will be a continuing market for canola oil, canola meal, and perhaps canola seed.

Canada now supplies approximately 35,000 tonnes of canola oil to the Korean marketplace. At today's prices of $1,200 to $1,300 per tonne, that trade is worth approximately $45 million to the Canadian economy.

Our market for canola in Canada is limited in part by the tariff structure. There are discriminatory tariffs. They've existed for a long time and they are different from those affecting our main competitor products, which are soybeans and soybean oil.

The current tariff structure for canola oil is 8% for crude oil and 10% for refined oil. At today's prices, this tariff is costing approximately $100 per tonne. Based on sales of 35,000 tonnes, that is about $3 million to $4 million in total costs.

At the beginning of 2006, the Korean government reduced the tariff on crude canola oil—from 10% to 8%. At that time, they also lowered the tariff on refined canola oil from 30% to 10%. This has certainly helped our case. As the numbers show, during this time we almost doubled our sales of canola oil to Korea, and we have certainly seen an increase in the amount of refined oil that is sold. As we look towards 2015, we see that Korea has the potential to import between 50,000 and 100,000 tonnes of canola oil.

We are not now supplying any canola meal to Korea, because there are higher-value markets in the United States. With our expected increase in domestic crushing and increased supply in canola meal, however, we see that in future Korea could import as much as 100,000 tonnes of canola meal from Canada.

With regard to canola seed, the infrastructure is currently more suited to crushing soybeans than to crushing canola. But if the market conditions are right, there is the potential to develop a canola seed market in Korea as well.

In our submission to the standing committee, we stated, with regard to the free trade agreement, that we would like to see the elimination of tariffs on canola seed and oil. In the current negotiations, our first priority would be an immediate reduction of canola oil tariffs to 5.4%, which would provide tariff parity with soybean oil. If we could get a deal similar to what the Americans got with their free trade agreement with Korea, it would be a step forward for us.

As for the phase-down from 5.4% to 0%, we would like to see this at the same rate as soybean oil, so that we are not disadvantaged in comparison with our major competing product.

Thank you. I look forward to your questions.

[The Chair, Conservative, Lee Richardson]

Thank you.

Next we will hear from the Canadian Vintners Association, Robert J. Keyes, vice-president, economic and government affairs. Mr. Keyes.

[Robert J. Keyes, Vice-President, Economic and Government Affairs, Canadian Vintners Association]

Thank you, Mr. Chairman.

I'm pleased to be here with the committee to talk briefly about the Canada-Korea free trade agreement and its implications for the wine industry.

The CVA is the national association of the wine industry. We represent wineries across Canada and are responsible for more than 90% of Canada's annual wine production. Our members are engaged in the entire range of the value chain, from grape growing, farm management, R and D, grape harvesting, wine production, bottling, and retail sales, to tourism.

This afternoon I will touch very briefly on a little bit of the background of the industry and on three aspects of the Canada-Korea free trade agreement that are important to us in these negotiations.

Many of you are familiar with our industry. It's a growing sector. We now have more than 26,000 acres planted. Grapes are produced by 1,000 grape growers, and we have 325 wineries that are providing 10,000 direct and indirect jobs. We have many more wineries coming on. The industry's thriving, and not only in its traditional centres in B.C. and Ontario; it's expanding in Quebec and Nova Scotia. There are now grape-based wineries operating in six provinces. Our key economic indicators are all positive and are going up.

I also point out that in our industry, the 100% Canadian VQA and blended wines have a multiplier effect of $4.29 per litre compared with 56¢ per litre generated by imported wines. So we are getting a great return in our industry.

In terms of the benefits of the free trade agreement, it's vital that we seek international markets. As with some other goods and services, it's easier to trade internationally than it is to sell wine across Canada. The issue of our internal trade barriers is a subject for another day, but it's one of the reasons wineries are eager to take advantage of international opportunities.

In terms of Korea, the statistics tell the story of export growth. It was a mere $3,035 in 2001. Last year, in the first 11 months of 2007, we were up to $2.6 million. And with knowledge of orders that are going forward, we're looking forward to probably over $3 million by the end of 2007. Growth was approximately 26% last year, and over the past two years it was 186%.

Wine products entering Korea include both red and white table wines, but 96% of the exports are icewine products, which are, of course, our signature export for which Canada is internationally recognized. Korea is going to figure very prominently in our export target markets for 2008 and 2009, so it's timely that we are talking about the impact of the agreement.

Wines entering Korea currently face a 15% import tariff, which is a significant impediment to trade. Elimination of this tariff would clearly provide a significant impetus for increased exports to the growing Korean market. The most recent proposals on the table for negotiation would see icewine tariffs eliminated immediately upon an FTA coming into force. Tariffs on table wines would drop over a three-year period, which in our view is acceptable, given the small volume of table wines exported to Korea at the moment.

Reducing these tariffs is clearly a benefit of these negotiations for the wine industry, but there are two other issues I want to touch on.

The first involves geographic indicators. As our industry grows, it's important that the various regions where the wine is produced are branded, and branded well, both on the labels and in the promotional literature for our export marketing. This is the path to increased returns and the perception of quality. It also informs the world about our wine industry and assists tourism.

Everybody's familiar with France's system of appellation contrôlée and Italy's DOC. These systems have very strict criteria for what's a Bordeaux or a Burgundy, a champagne, a Valpolicella, or a Barolo. Similarly, wine consumers are very familiar with the Napa Valley or the Sonoma Valley in California. In Canada, many consumers may have heard about Niagara or Okanagan. But how familiar are consumers with the sub-appellations of St. David's Bench or Beamsville Bench in Niagara, the Similkameen Valley in B.C., or the Gaspereau Valley in Nova Scotia?

These so-called GIs, or geographic indicators, are an important topic of negotiation within the WTO, and indeed the EU has put this at the forefront of their current negotiating agenda. We've asked Canadian negotiators in the Korea trade negotiations to try to protect these names and to have them referenced. It's a form of insurance for descriptors that will brand our future and the distinctiveness of our wines. So geographical indicators are something that we hope we see referenced in any agreement.

The second ancillary issue is around icewine and the definition of icewine. This is Canada's flagship product in terms of our wine exports. Icewine is currently defined provincially under the Vintners Quality Alliance Act in Ontario, and the Agri-Food Choice and Quality Act in B.C., and there are industry production standards in place in Nova Scotia and Quebec. But at the federal level, there is no definition. Canada has agreed to a definition of icewine for purposes of the Canada-EU Wines and Spirits Agreement, and also in the most recent agreement with the World Wine Trade Group in their labelling agreement. However, we don't have any federal legislation or regulation.

The industry has been talking about this with federal agencies for many years, and its inclusion has been tied to the completion of national wine standards where, unfortunately, completion of negotiations has proven to be elusive. We now hope to look at how it could be defined under the Food and Drugs Act.

This lack of a definition is a barrier to success in our trade negotiations. The industry's flagship product is out there in the international marketplace, but without any nationally accepted definition, rule, or approach, its inclusion in international agreements becomes much more difficult. Not surprisingly, foreign trade negotiators, including those from Korea, question our attempt to protect our interests by pointing out that we don't have this defined at home.

Another dimension of this situation is the counterfeit icewines, which have become a significant problem, particularly in parts of Asia. The inclusion of an icewine definition in the Korea agreement would be important, given the rapid growth of our exports to that country, and Korea is now our number one icewine export market. Counterfeit icewine is rampant in China, and a growing concern in other Asian markets. The risk of fake products turning up in Korea is real, and if it happened we could potentially have problems for not only Canadian exporters but also the health and safety of Canadian consumers. To protect our interest and assist Korean authorities, should these problems ever occur there, a reference to icewine in the agreement would be very positive.

Canadian wine has come of age. We're winning international acclaim at prestigious wine competitions. However, as producers of other high-quality products found, high value and quality attract imitators. Icewines have become the Canadian Gucci of the counterfeit world, and more recently, Chinese nationals have even attempted to trademark VQA in China, something which we are actively opposing.

The industry supports positive results from these negotiations. We think the benefits that would come from tariffs and these related definitional issues would be good for the industry and good for Canada. It's vital that we try to achieve progress on these matters in our bilateral agreements because of the stalled nature at the moment of the WTO negotiations.

Thank you.

[The Chair, Conservative, Lee Richardson]

Thank you, Mr. Keyes.

We'll now hear from John Masswohl. John is the director of governmental international relations with the Canadian Cattlemen's Association.

[John Masswohl, Director, Governmental International Relations, Canadian Cattlemen's Association]

Thank you for the invitation to be here before you on this important topic of the Canada-Korea free trade agreement.

The Canadian beef industry is highly export dependent. Nearly 90,000 Canadian cattle producers collectively produce approximately 1.6 million tonnes of beef and live cattle beef equivalents each year, but the size of our domestic Canadian beef market is less than 1 million tonnes per year.

Furthermore, Canadians mostly like to eat steaks, roasts, and hamburgers that come from beef muscle cuts and ground beef trim. Canadians are not as keen on eating tongues, livers, stomachs, and those sorts of products. So we end up importing a small portion of our demand for steaks and ground beef, especially during the summer barbecue season, and we rely on exports to direct all parts of the animal to customers who value them the most. On balance, about 50% to 60% of Canada's beef production is available for export, so Canadian cattle producers are generally supportive of initiatives to further open export markets for Canadian beef.

Korea has long been an important market for Canadian beef exports. From 1994 through 2002, Korea and Mexico kind of traded ranks as Canada's third and fourth largest export markets for beef. Beef exports to Korea grew strongly during this period, reaching l7,300 tonnes in 2002. This success was achieved despite the existence of a 40% import tariff.

At first glance it would seem obvious that the elimination of such a tariff would be a very positive development for Canadian beef producers. Unfortunately, Korea has not allowed the importation of a single pound of Canadian beef since May 2003. Korea remains one of the few and certainly the most important beef export market to not allow the resumption of trade for any Canadian beef product. Korea maintains this prohibition despite Canada's designation last year as a controlled risk country for BSE by the World Organisation for Animal Health, also known as the OIE.

Controlled risk status means that all countries should accept all beef from all Canadian cattle of all ages. To be fair, since spring 2007 the Koreans have shown a greater willingness to examine lifting the beef prohibition, as reported by former foreign affairs minister MacKay following a visit to Korea several months ago. We are cautiously optimistic; however, it remains unclear what the timetable for lifting that prohibition will be.

As we look at a Canada-Korea free trade agreement, we have a number of key conditions we would like to see. The first includes terms of access for Canadian beef products to the Korean market that reflect Canada's controlled risk categorization. They need to lift the prohibition on all beef from all cattle of all ages.

Second, we'd like to see tariff-free access or, at a minimum, equivalent terms of access to that achieved by the U.S. in their Korea-U.S. free trade agreement.

Third, we'd like to see a mechanism to resolve SPS--sanitary and phytosanitary--issues associated with trade in beef products. That could potentially be similar to the mechanism that was established under the Korea-U.S. free trade agreement.

Fourth, there should be terms that will not interfere with the continued trade of cattle and beef products between Canada and the United States and the export of those products to Korea. This should include things like rules of origin. If Korea approves certain products from the U.S. and other products from Canada, we don't want to get into a situation where our exports to the U.S. are jeopardized because the U.S. is worried about their exports to Korea or other markets.

Fifth, we would like to see a forward-looking MFN clause. Such a clause would ensure that Canada would not be disadvantaged if terms of access were enhanced for the United States in the future, or if other countries reached free trade agreements with Korea. In other words, if somebody got a better deal in the future, we would automatically get that same deal. So we'd like to see that forward-looking clause.

We will continue to assess the progress of the negotiations. I understand they're still ongoing. If our conditions are met, the Canadian beef industry will be a strong supporter of a Canada-Korea free trade agreement. On the other hand, if our needs are not met, our recommendation would be that Parliament direct the negotiators to continue working towards a resolution of beef access before ratifying an agreement.

The United States senators and congressmen have publicly stated that the Korea-United States free trade agreement will not be approved by Congress until Korean restrictions on U.S. beef are lifted. Canadian beef producers are seeking a similar assurance from their Parliament.

On a separate but related topic, we recently learned that after 10 years of negotiating with the EFTA countries—Switzerland, Norway, Iceland, and Liechtenstein—Canada has reached a free trade agreement with them. That agreement is completely devoid of any benefit to Canadian beef producers. We hope this means that Canadian negotiators expect to achieve significant tariff cuts by all European countries in the WTO. We'll wait and see if that happens.

Also announced a little over a week ago was the conclusion of a free trade agreement with Peru. Canadian beef did not do as well as U.S. beef in a similar U.S.-Peru agreement. Under the Canada-Peru free trade agreement, Canada will get access for some boneless beef cuts and no bone-in cuts. On the other hand, under the U.S.-Peru agreement, the United States beef industry will benefit from a broader range of boneless and bone-in U.S. beef cuts.

One of the government's stated objectives for conducting and reaching these free trade agreements is to ensure that Canadian exporters remain competitive in markets where the United States has reached agreements. The Canada-Peru agreement falls short of this objective for the beef industry. In fact, every time the U.S. gets better access for its beef than Canada, it becomes more difficult to justify slaughtering cattle in Canada, and we increase our reliance on shipping live cattle to the United States.

The competitiveness of our processing industry is a major area of concern that we are discussing with your colleagues at the Standing Committee on Agriculture. The rapid ascent of the Canadian dollar has exposed significant competitive challenges in the Canadian beef processing industry—from government regulation and inspection fees to labour availability, and other issues. I don't mean to go into these issues here, but the point is that if U.S. meat-packing facilities have export opportunities for a broader range of beef cuts than Canadian facilities have, an already challenging competitive situation becomes worse.

I'll conclude by saying that we would ask the committee to do a couple of things as we go forward in these various negotiations.

First, we would like you to instruct the Canadian negotiators to go back to Peru to achieve parity in access for U.S. and Canadian beef before bringing the agreement to Parliament for ratification. The weight of such a parliamentary direction would almost certainly be taken into account by Peru.

Second—and I'm bringing us back to Korea—we would like you to tell the negotiators working on the Canada-Korea agreement to take note of this instruction to Peru, and not to bring an agreement to you that does not achieve equivalent access for Canadian versus U.S. beef in a Canada-Korea free trade agreement.

Thank you. I'd be pleased to answer questions.

[The Chair, Conservative, Lee Richardson]

Thank you very much, Mr. Masswohl.

From Canada Pork International, we have Edouard Asnong, president; and Martin Lavoie, assistant executive director.

Mr. Asnong.

[Edouard Asnong, President, , Canada Pork International]

I would first like to thank the members of the House of Commons Standing Committee on International Trade for inviting Canada Pork International to present its position for the second time on a trade agreement between Canada and the Republic of South Korea. Things have evolved significantly since our first appearance before this Committee in June 2006.

Before I proceed any further, I wish to formally introduce our organization and the sector it represents. Canada Pork International is a joint initiative of the Canadian Meat Council, representing the pork packers and trading companies, and of the Canadian Pork Council, which is the national hog producer organization. Specifically established to be the export market development agency of the Canadian pork industry, Canada Pork International is mandated to identify export market opportunities and to seek and maintain access to foreign export markets.

In 2007, the Canadian pork industry exported for over 1 million tonnes of products, worth around $2.5 billion, to nearly 100 different countries and this does not include the 8 million live hogs, worth over 700 million dollars, being shipped annually to the US.

Canada now ranks as the world’s third leading pork exporter, only preceded by the European Union and the United States. We were first before the steep depreciation of the US dollar. Brazil and Chile also constitute competitors that need to be taken seriously. Canada’s share of the total world’s pork trade is nearly 22%. As more than 50% of Canadian pork production is exported every year, exports are essential to ensure that the Canadian pork industry continues to prosper.

Despite the return of US beef on the Korea market and the highest levels in years reached by the Canadian dollars, the Republic of Korea was Canada’s fifth largest pork export market in 2007 with sales approaching $130 million. In the years that followed the exclusion of Korean exports to the Japanese market because of a foot and mouth disease outbreak in 2000, Korea was mostly a commodity market. However, Canada and other suppliers such as the United States are shipping increasing amounts of chilled pork into Korea that are destined directly to the retail and HRI sectors. Korea is probably the best market in the world for shoulder butts, and a significant market for bellies. In order to prosper and to survive, the Canadian pork industry needs to have access to all the markets offering the highest returns for each part of the animal.

Canadian pork exports to that country doubled between 2004 and 2005. We expect that this market will continue to grow over time, albeit at a lower pace. In spite of those impressive results, the strengthening of the Canadian dollar was also felt in that market as our American competitors tripled their sales in Korea to become the leading foreign supplier.

High production costs, continuing problems with swine disease outbreaks, implementation of strict environmental regulations and an aging producer base will not allow the South Korean national production to keep pace in the long term with an ever increasing demand. In fact, it is likely to decrease when Korea will ban in 2008 the disposal of swine manure in the deep sea, which accounts for 25% of all disposal methods and amounts to 2.3 million tones. In light of what I just mentioned, Korean pork imports are forecast to almost double in the next ten years and could reach 600,000 tonnes.

As you are all aware, in the spring of 2007 the U.S. and Korean governments reached an agreement that will seek the elimination of most tariffs on pork for a period of seven years, originally leading to a complete elimination by 2014. Canadian pork exports to Korea cannot be sustained for more than one year after the beginning of the phasing out of the tariffs on pork without being completely kept out of the Korean market. It is therefore not only crucial that Canada reaches an FTA with Korea, but it is imperative that the gap between the signature of the U.S. agreement and ours does not result in a tariff reduction schedule that is different from ours.

The Canadian pork industry is currently going through its most severe financial crisis in history. We are expecting that a significant number of hog producers will continue to cease their activities because of the hard time caused by the conjunction of the record-high Canadian dollar, the record-high feed prices due to the high demand for corn by the subsidized ethanol sector in the U.S., and a worldwide oversupply situation of meat proteins. In the current context, the signature of an FTA with Korea is not considered as a bonus that can give Canadian pork exports an edge over our competitors. It is simply a question of survival of our exports in the market and not taking any further blow that can make our situation grow ever worse.

Canada Pork International is starting this year a retail promotion campaign in Korea for Canadian chilled pork. In the case where Canada would be unable to reach a free trade agreement with Korea, efforts to tap into the growing opportunities provided by the Korean fresh pork market would have to be abandoned. The implementation in 1995 of the WTO Uruguay Round Agreement forced the Republic of Korea to open its much-protected pork market. Aside from the last three years, where the U.S. dollar has started to come down, Canada has been the leading foreign pork supplier to Korea, with a market share of around 25%. This was achieved through hard work from Canadian exporters and the strong support provided by the Canadian government.

In recent market studies Canadian pork clearly stood out as the preferred product among Korean importers because of its quality and its consistency. We would like to be able to take that story further and become the preferred supplier among Korean consumers. Disappearing is not an option we want to consider at this point.

In 2004 Korea and Chile signed a free trade agreement by which Chilean pork has recently emerged as a fierce competitor that will receive unlimited duty-free access by 2014. In a scenario where the U.S. Congress will reject the U.S.A.-Korea FTA and Canada was able to reach an FTA with Korea, we strongly believe that our exports to Korea could reach $500 million in the next five years.

We understand that the FTA negotiations have progressed to a situation where we have an agreement in agriculture for basically all products except for beef and pork and that the Korean side has a smaller appetite to give to Canada the conditions they granted to the US, because of the strong pressure applied by domestic livestock producers after the signature of the FTA with the United States. It is crucial, and has been our negotiation position now that we know what our competitors have obtained, that Canada receives a treatment that is better or at least equivalent to the one given to the US, if we do not want to see our pork exports to Korea and by the same token a significant part of our producers disappear. The inclusion of a Most Favored Nation (MFN) provision in our FTA is the key to a successful FTA with Korea. It would protect us against a better agreement that other competitors such as the EU could get in the future. We have kept in close contact with Canadian bilateral negotiators for agriculture to make sure that our position is known and clear.

So far, none of the FTA negotiations undertaken by the Canadian Government with trading partners such as EFTA (Switzerland, Iceland, Norway and Lichtenstein), Jordan, Singapore (0% tariff already) and the CA4, can provide access that is significant enough to provide real relief to our industry. The Canada-Korea FTA is the only one that really matters to us and we desperately need it to happen.

Thank you.

[The Chair, Conservative, Lee Richardson]

Thank you.

This is fascinating. These are very interesting presentations and very informative. Thank you. I'm sure you've generated a lot of questions. I've got a few of my own but I'll hold off until we've heard from the committee.

Mr. Bains will begin the questioning.

[Navdeep Bains, Liberal, Mississauga—Brampton South, ON]

Thank you very much, Chair.

I'd like to thank the witnesses for coming before the committee. Your input is greatly appreciated, and we take this subject very seriously because currently we're obviously, as you've mentioned, in the process of negotiating the free trade agreement with South Korea and the next round of negotiations is taking place in March. So what you say today in committee holds a great deal of weight in terms of timing with respect to the next round of negotiations.

All of you have consistently talked about the reduction of tariffs and how vital and critical that is for market access, and I think that's an area we are examining: genuinely looking at levelling the playing field and looking at market access. But you've all talked about and focused a lot on tariffs. I think the Canadian Cattlemen's Association did bring up an important issue, which is non-tariff barriers, and you illustrated that by mentioning the ban on beef since 2004, the beef prohibition as an example of a non-tariff barrier.

I want to ask the other members this. Have you encountered any problems outside of tariffs as a means to preventing your product from having proper access into the Korean market? So there are no other non-tariff barriers? None of those issues have ever come up?

The second question I had was in terms of the negotiation process. Have any of you been consulted by the government, or have you been asked for any input from your respective associations for the current round of negotiations? Have you been consulted for your input?

[Edouard Asnong]

With regard to Korea?

[Navdeep Bains, Liberal, Mississauga—Brampton South, ON]

Yes, and this free trade negotiation. Have you been consulted?

[Martin Lavoie, Assistant Executive Director, Canada Pork International]

The pork industry had frequent meetings with the negotiators at Agriculture and Agri-Food Canada. Also, we've been fortunate to be in Korea at the same time as some of the rounds were happening. So I can say we've been involved and consulted. As we said, now that we know what the Americans got, I think it's clear what our position is, as we can't afford to have any less than what they receive. It's more a matter not of the amount of the reduction but the level playing field.

[John Masswohl]

We participate in an agriculture trade consultations group. We have a beef cattle trade advisory committee in which we participate as well.

[Robert J. Keyes]

Yes, the vintners are part of the larger group, which was just mentioned, and we've had direct one-on-ones with our negotiators.

[Dave Hickling]

The canola industry certainly has been part of the discussions, both through our group and the Canadian Oilseed Processors Association, which is the crusher organization. We both have a common position with respect to parity with soybean oil as per the U.S.–Korea free trade agreement.

[Navdeep Bains, Liberal, Mississauga—Brampton South, ON]

I appreciate that.

You raised a very important point in your remarks in referring to the Canada Pork International and the Canadian Cattlemen's Association with respect to the recent free trade agreement between Canada and Peru. You talked about the fact that the deal signed by the United States and Peru had a much better reduction of tariffs and better market access for their products, as opposed to the current free trade agreement signed by Canada. Was there any justification or rationale given by the negotiators?

Since you've been consulted for Korea, I assume you were consulted for Peru. Under that premise, was there any rationale given as to why the deal was less advantageous for Canada compared to the United States in their free trade agreement with Peru?

[John Masswohl]

Yes, we were consulted a few times in the last few months and we got the impression the agreement was getting close with Peru, especially after the U.S. Congress ratified it in early December. The sense we had from the Canadian negotiators is that Peru wanted to sign it with Canada and move on. The option perhaps was, it seemed to us, that if Canada was not prepared to sign with Peru, Peru would move on anyway.

We talked about what we needed: we needed parity. Ultimately, Peru isn't going to be a huge market for Canadian beef. It maybe represents a couple of hundred tonnes per year, and perhaps you could accept that we didn't get great access. We could accept that perhaps we weren't the highest priority of the negotiators. But it just seems to us that if this is part of a global strategy, if every time the other team gets a touchdown we kick a field goal, by the time we get to the fourth quarter we're going to be way behind.

[Navdeep Bains, Liberal, Mississauga—Brampton South, ON]

That's the point I want to raise. I assume that the same concerns as you've raised now with Peru would apply to Korea.

[John Masswohl]

Absolutely.

[Navdeep Bains, Liberal, Mississauga—Brampton South, ON]

You've highlighted that with respect to the deal that the U.S. has tentatively signed—I know it hasn't been ratified—it is much more advantageous for them and it puts us at a disadvantage. But I was wondering what the rationale is, aside from, as you've indicated, that part of it is the countries that have negotiated just might want to move on. Is there any other rationale or feedback that you received from the negotiators as to why we were unable to be put in a better position?

[Martin Lavoie]

I can talk for the pork side. I think they have the feeling—or this is their argument—that they gave as much as they could to the U.S. There were a lot of demonstrations in Korea after the tentative agreement between the U.S. and Korea. That created a lot of pressure on the political system in Korea. They are also negotiating with the EU right now, which is a major player. None of the countries individually is as dominant as Canada or the U.S. in the Korean market, but if you add all those countries together, they are probably 45% to 50% of the supply in Korea.

My understanding is that right now there's a change of government in Korea and they're waiting to see what's going to happen with the EU. That's going to impact the offer they can provide to Canada. Obviously what the other players are getting has a huge impact.

Also, you made reference to other free trade agreements. In the case of Peru, we haven't been consulted. For pork it's a minor market. There are some markets in that area, such as Colombia, where we had discussions. But as we concluded, the only bilateral free trade agreement that will have an impact on pork prices, on our situation, is the one with Korea. The impact of that free trade agreement alone is more than 10 times larger than the impact of all the other free trade agreements that we've signed so far.

[Navdeep Bains, Liberal, Mississauga—Brampton South, ON]

Thank you very much for that.