International Trade Committee on Feb. 4th, 2008

[Peter Julian, NDP, Burnaby—New Westminster, BC]

Thank you very much, Mr. Chair.

Thank you to each of the witnesses. It's very important testimony.

I'll start with a very quick question for you, Mr. Hickling. You mentioned that the Korean government moved to reduce the crude canola oil tariff by 20% and the refined canola oil tariff by 66%. I want to know what the impetus was for that reduction.

[Dave Hickling]

I wasn't part of that, but my understanding is that was part of preliminary negotiations between the Canadian government and the Korean government. I gather, in the case of refined oil, it was a reduction from a 30% tariff down to a 10% tariff, as indicated, which we've already seen has had an impact on the market. In the last two years we've seen quite a substantial increase in refined oil.

[Peter Julian, NDP, Burnaby—New Westminster, BC]

So the Korean government has already made decisions to lower tariffs, and this is aside from—

[Dave Hickling]

One of the things is that Korea does not have a canola industry to protect. So from our perspective, it's a fairly easy thing for them to reduce or even eliminate tariffs entirely, because they're not protecting a domestic industry.

[Peter Julian, NDP, Burnaby—New Westminster, BC]

Well, it's good to see that progress has already been made.

Mr. Masswohl, you mentioned in terms of the free trade agreement with the European Free Trade Association and the Canada-Peru agreement that in both cases the beef industry was left aside. Would you consider that a question of being neglected or more abandoned at the negotiating table?

[John Masswohl]

I don't think I'd use those words. In the EFTA marketplace, it seemed that those negotiations were going on for so long, and then all of a sudden there was a deal. I'm not sure what happened. I think the closest thing we got to benefiting from the EFTA agreement is that there will be opportunities for some horse meat going into some of those markets. In the current regulatory environment with our packing plants, there is one beef packing plant that's surviving by processing horses. So that will indirectly help our industry.

We were consulted on Peru. We had a number of meetings, and we do very much value the relationship that we have with the negotiators. I don't think we were abandoned by them at all in terms of being in touch with us and having content contact with them.

It's hard for us to know, though, since we're not in the room with them, exactly what are all the considerations and the trade-offs that are going on and why there is the need to conclude this agreement. So it's hard for me to speculate exactly why we didn't get the full access for beef into Peru.

[Peter Julian, NDP, Burnaby—New Westminster, BC]

I understand your diplomacy. You are very diplomatic, but your industry joins a trail of bruised and battered industries across the country that have been given away by Conservatives at the negotiating table. The forestry industry is one, as well as the automotive and shipbuilding industries. I mean, the list continues to accumulate.

I guess that's the fear around this Canada-Korea free trade agreement, because so many industries have been abandoned by this government. They just don't seem to be effective negotiators. There are very strong concerns about the net job losses overall. We're talking about over 30,000 net job losses from the only credible study that's been done on this.

I'd like to discuss alternatives with you. One of the things that were mentioned by Mr. Asnong was the promotion in the Korean market. In Canada we have a dismal record of trade promotion for agricultural products, for example. The federal government gives about $1 in trade promotion for every $50 that Australia gives. Canada's industries are very clearly disadvantaged.

I'd like to ask each of you how much support you've received from the federal government in dollar amounts for trade promotion abroad, for example, in Korea, but in other countries as well, and whether you have done any studies to show, for every dollar the federal government invests in trade promotion abroad, how much that generates in terms of sales.

Perhaps I can start with Monsieur Asnong.

[Martin Lavoie]

We have access to government funding through the CAFI program, which is managed by Agriculture Canada. The amount that we're receiving on a yearly basis is $1.2 million for all markets. The decision to promote in the Korean market is ours.

We have to go based on our priorities. So far Japan has been the number one priority for retail promotion, but we're starting with Korea. One of the reasons we're starting is that, as you know, in Canada the preferred cut is the loin. This is what we see in the retail market: loins, ribs--

[Peter Julian, NDP, Burnaby—New Westminster, BC]

Excuse me, Mr. Lavoie, you get $1.2 million from the federal government for an industry that's worth $2.5 billion?

[Martin Lavoie]

Yes, and these are matching funds, so the industry has to come up with the same amount of money to leverage similar amounts from the federal government.

What I was about to say is that really all of our markets, North America and Japan, are loin markets. The only market that does ground meat with tenderloins and loins is Korea. They prefer the butts. The Korean market is really complementary to all of our high-value markets. In Canada we would need more loin and ribs, and the same for Japan and the U.S., but this is not what they want in Korea. They want the cut that we have problems selling. This is also why we're starting promotion in Korea.

[John Masswohl]

We're funded in many different ways. Our primary source of funding is the check-off. Every time a head of cattle is marketed in Canada, this check-off is collected, and depending on which province it is, it's different. In Alberta it's $3. In Ontario it's $2.50, but I think there's been discussion about increasing that to $3. In Manitoba I believe it's $2. Depending on the jurisdiction, it's different. That's the primary source. Some of that money goes to fund the Canadian Cattlemen's Association and some of it goes to the Canada Beef Export Federation.

Also, the Canada Beef Export Federation does receive some funding through CAFI. I don't have the dollar amount off the top of my head.

[Peter Julian, NDP, Burnaby—New Westminster, BC]

Would you be able to provide that to the committee?

[John Masswohl]

We could find that out.

We also have something that was created about two years ago called the legacy fund. This was an idea that we, as an industry, had to get our markets back from the BSE and to recover from that. We believed that we were going to need approximately $210 million over 10 years to get those markets back. We decided that through our check-off the cattle industry could probably fund two-thirds of that and we were seeking the governments to provide the other third. We received $50 million from the federal government in 2005, I believe, and $30 million from the Alberta government. So we got $80 million.

The last type of indirect funding support we get is that routinely there are trade missions. These might be led by a minister or assistant deputy ministers, that sort of thing. Occasionally we participate. That's an indirect form.

[Robert J. Keyes]

You wondered about CAFI and us; we're at $225,000. That's the government's share. That was for 2007-08. We hope to get a little more this year, in 2008-09.

Just by way of comparison, the Europeans just announced they are putting 120 million euros for EU wines. They are going to be very active in our markets. Washington State and Oregon just got $650,000 U.S. of federal funding just for those two states alone for export promotion.

[Peter Julian, NDP, Burnaby—New Westminster, BC]

So Washington and Oregon give more support to their vintners through the federal government than Canada gives for the entire industry?

[Robert J. Keyes]

Yes.

We also get excellent in-kind support through Foreign Affairs. We have the wines of Canada mission program through the post that are not in these numbers--support on the ground. So there is a variety of other kinds of support over and above strictly the dollars and cents from the one initiative of CAFI, and that's all very important too.

[The Chair, Conservative, Lee Richardson]

Thank you, Mr. Keyes.

It's nine and a half today, Peter.

We'll move on to round two. We're going to try to get this in. We have 15 minutes.

We'll begin with Madame Folco.

[Raymonde Folco, Liberal, Laval—Les Îles, QC]

Thank you very much, Mr. Chair.

It's a good thing you were looking in my direction.

Thank you very much, Mr. Chairman.

The question I would like to ask you concerns infrastructure in Canada. Given the distances and the climate we have, I wonder to what extent domestic infrastructure would be affected if the Government of Canada signed a free trade agreement with Korea in your respective fields. If it were affected, how long do you think it would take for you to react in order to respond to both Canadian needs and the increased needs of Korea and other countries?

I put the questions to all witnesses here present because I think the situation is different for each of the fields you represent here. I don't know who wants to answer my question first.

Mr. Lavoie?

[Martin Lavoie]

I don't know whether we're talking about units of production infrastructure or infrastructure like port and transportation infrastructure.

[Raymonde Folco, Liberal, Laval—Les Îles, QC]

Think transportation infrastructure. That said, if you think that other infrastructure would be affected in some way, say so; this is the time to say it.

[Martin Lavoie]

You have to consider that there may be an adjustment in demand. What is important is that product will shift from the markets that currently offer less return to Korea. That's not necessary short-term demand; it's more of a market transfer.

That said, we currently have enormous infrastructure problems. That's one of the main problems—

[Raymonde Folco, Liberal, Laval—Les Îles, QC]

Port infrastructure?

[Martin Lavoie]

Port and transportation infrastructure. There are certain points. First, there is the instability of collective negotiations in the railway and port fields. The pork industry is a very big user of the Port of Vancouver. That's a big problem.

Canada has always been a reliable supplier as regards product quality, but is it reliable with regard to its infrastructure? That's one of our weaknesses relative to other countries. The availability of refrigerated containers is also a major problem. That problem started with the war in Iraq, but it continues. The trade balance of certain countries, including China, is resulting in a significant container shortage. The companies that we know sell products until November. They spend much of December trying to find containers and infrastructure to fill orders from China and Russia.

[Raymonde Folco, Liberal, Laval—Les Îles, QC]

We're talking about containers and carriers. There's a difference between the two.

[Martin Lavoie]

Both are used to ship product. This is really a major problem in the pork industry.