International Trade Committee on Feb. 11th, 2008

[Patrick McGuinness]

That's the statistic of the FAO. In terms of the commodities that are traded internationally, fish and seafood is number one, dollar-wise.

[Pierre Laliberté]

As a proportion of the total.

[Patrick McGuinness]

A proportion of the total world trade in commodities.

When you're talking about commodities, you're talking about, for example, grain—

[The Chair, Conservative, Lee Richardson]

What about oil and gas? I just know, from our province...you export $4 billion; we export $450 billion. I just wonder how that fits internationally.

[Patrick McGuinness]

I'm talking about world trade, not Canada's trade. Right now, in terms of the world trade in fish and seafood, I just don't have the number off the top of my head, but you have massive exports out of China, out of the Asian countries. As one gentleman said, even in Canada, there's more water than there is land. When you look at the earth from on high, you will see that there's a lot of water out there, and that water has fish and there are countries fishing it, and basically, what they're doing is trading it.

In the fish and seafood world, there are only three markets, really: the United States, Europe, and Japan. We all live on those markets. Canada lives on it, Norway lives on it, Iceland lives on it, Indonesia lives on it. That's how you get that high trade figure.

[The Chair, Conservative, Lee Richardson]

All right.

We'll go to round two, with five-minute questions and answers, starting with Mr. Dhaliwal.

[Sukh Dhaliwal, Liberal, Newton—North Delta, BC]

Thank you, and welcome, panel members.

In fact, the chair was not only generous to Peter Julian, but he was very generous when I moved to this country. He accepted me into his riding when he was a member. When he left politics, I left there to go to British Columbia, which is very beautiful.

When I look at the shipping industry, every weekend I drive along River Road in Delta when I attend one of the funerals at the Riverside Funeral Home, and when I drive along, I see lots of nails in the coffin along that stretch there, when it comes to the shipping industry. Do the majority of those nails have to do with the provincial government policies or with the federal policies?

Mr. MacPherson, please.

[George MacPherson]

For the most part, it's a lack of policy, both federally and provincially. But clearly the industry is focused on the federal government, to try to set clear policies coast to coast. We're trying to level the playing field within Canada itself. To do that, we need the federal government to work with us. We also need all the provincial governments that are surrounded by water to work with us and put those policies in place. So the easy answer to your question is that it's both levels, but it really has to be driven by the federal government. It needs to be driven by Industry Canada.

[Sukh Dhaliwal, Liberal, Newton—North Delta, BC]

When we talk about this motion, I don't know if you're familiar with a Liberal member bringing in motion M-183 to have a local content. Are you aware of that?

[George MacPherson]

No, I'm not aware of that.

[Sukh Dhaliwal, Liberal, Newton—North Delta, BC]

How about Mr. Haynal? Are you aware of motion M-183, brought in by Ken Boshcoff?

[George Haynal]

Yes, I've heard of it.

[Sukh Dhaliwal, Liberal, Newton—North Delta, BC]

Is that motion going to help these two industries, yours and the shipbuilding industry?

[George Haynal]

I go back to what I was saying about living in an imperfect world. It is ironic, at least in our case—and I'm speaking very narrowly—that for us to be able to compete in our own country, we're competing on less favourable grounds than we compete on in other countries. So I guess, from that point of view, it would be a help. But there are more general points to be made. I think the Canadian Manufacturers & Exporters association has done a more detailed study of this issue than I would be able to speak to, so I would recommend, perhaps, that they speak to it at some point.

[Sukh Dhaliwal, Liberal, Newton—North Delta, BC]

My question is for you, Mr. Patrick McGuinness. When it comes to the fishing industry, I have come to know from a lot of restaurant owners and banquet halls that we catch the fish here, and we send it to China and it's processed there. Is that true?

[Patrick McGuinness]

In the case of certain products, that is true. Basically, as I mentioned before, we are a global industry, and the Canadian fishing industry is a global industry. For example, we now export raw material, sometimes to Korea, for further processing into the Japanese market, and we now have contracts, for example, for pollock, which is harvested either in the Barents Sea between Norway and Russia or off the United States. It's harvested by a Russian vessel. The contract is to have it primary-processed in China, and then it comes to Canada for final processing. Basically that's your Burger King fish sandwich or your McDonald's fish sandwich. Yes, that's what happens.

[Sukh Dhaliwal, Liberal, Newton—North Delta, BC]

So when we look at it from that perspective, it's becoming more difficult every day to compete with labour forces like China and India. What are the solid steps we can take in an agreement like this to make it a fairer trade agreement so that it will not affect the British Columbians when it comes to the fishing industry and the shipping industry?

[Patrick McGuinness]

We're not looking for any particular finessing to try to address that issue. The bottom line is things work out economically or they don't, and to try to massage something of that nature, you're probably going to make the issue more complicated than it is.

As I say, in some situations it's much more beneficial to have the total product harvested and processed in Canada. Our groundfish resource has declined, so for us to get, for example, pollock for our marketplace, it has to be harvested some place outside of Canada. It's our companies that have the brand. It's our companies that have the connections, and it's our companies that can make the arrangements so that this comes to completion. In our view, that's in the best interests of the industry. And the industry recognizes that. In a global industry, in a global world, this is our only alternative, and we're doing fairly well at it.

One thing that is emerging, which would have an impact on the direction you're talking about, is what we call “environmental food miles”. There is growing concern among consumers who want to be part of environmentally responsible food purchasing. Those people who feel that way will more and more look for products that are not only “product of Canada”, because they meet the sufficient transformation rules, but they may be looking also for “harvested in Canada” or “grown in Canada”. That movement is growing.

[Sukh Dhaliwal, Liberal, Newton—North Delta, BC]

Is it worthwhile to go for this agreement now, or should we wait two more years for these negotiations? It's a give and take. The way I see it, Korea is not going to be one of the biggest markets for your fishery industry. But on the other hand, when we look at the shipping industry in British Columbia, how much impact would it have, Mr. MacPherson, on your end to see if we can have it balanced when we sign these fair trade or free trade agreements?

[George MacPherson]

Certainly our preference is to halt trade talks at this point and come back and have consultation with industries that are clearly affected, ours being one of them. We think before the talks go forward and before an agreement is put in place, there has to be clear consultation with the industry, and there has to be a strategy put forward that allows the industry to sustain itself over a number of years.

I thought we were reasonably close to doing that a couple of years ago, and then that's all fallen off to the side, and we've now forged ahead with the agreements. That is very concerning and very troubling to me as it is to other people in the industry.

From my perspective, I'm here clearly saying today that these talks should be put on hold, and the government should be coming back, and we should be restructuring the committees and having clear conversations with the industry to find out what is required and what takes you into the future.

[Pierre Laliberté]

If I may add, this is really it. When people talk about the U.S.-Korea deal as a done deal, it's not—and you'd probably know better than I the political situation in that country. I think it may well be the case that the deal will not come to pass, and that will give us a respite to actually look at this with a cool head, because it's not like shipbuilding.

The auto industry right now is under a lot of pressure, and this is not to be taken lightly. If we are hit by the recession down south, it will be very difficult. And Korean car producers are not.... Well, there's surplus capacity in the car industry right now. There will be really cutthroat competition. Unfortunately, because our costs of production have gone up thanks to the exchange rate—essentially increasing by 60% over the past four or five years—that's put us in a very difficult situation.

I would also point out that we import tonnes of steel from Korea. We ship the ore and they send us the steel, which makes absolutely no sense. So there are ways of.... We have to look at the questions of do we need a steel industry in Canada, do we need a shipbuilding industry, do we need a car industry in Canada? Those are the questions.

You talked about sunset industries. We think all of these products are actually high-tech products; there's nothing inherently old-fashioned about these products, and this is where the innovation is embodied.

So to us, there's certainly no rush to sign off on this. And I would not insist, I have to say, on the labour dimension. Korea is certainly not as egregious as China, but we do have some problems there. There are industrial zones that have been created where labour and environmental laws do not apply. There is a zone in North Korea operated by South Korean businesses, called the Kaesong Industrial Park, where folks are being paid $57 U.S. a month—and actually it's lower than that now. The money essentially goes to the North Korean government, which takes its cut. Basically it's akin to slave labour, and it's all done under the eyes of the South Korean government.

I think those are issues that ought to be within the purview of the negotiations.

Thank you.

[The Chair, Conservative, Lee Richardson]

Thank you, Mr. Dhaliwal.

Monsieur Roy.

[Jean-Yves Roy, Bloc, Haute-Gaspésie—La Mitis—Matane—Matapédia, QC]

Thank you, Mr. Chairman.

I would like to come back to what Mr. Dhaliwal said to Mr. McGuinness, among others. We certainly met before, since I was my party's spokesperson of the fisheries committee for five years.

What you are saying seems to me a bit surprising. In the specific case of shrimp, quotas were increased because the industry was in a very bad way. Of course, prices had dropped, given the overabundance of shrimp on the world market. That is what happened in the past few years.

Yet, what are we doing with our production? We send it to China to have it processed, and the Chinese send it back to us. Meanwhile, our processing plants are closing. That is essentially the situation that prevails right now in my area, in the east. It is not only in Quebec, but also in Newfoundland.

We are talking about a free trade agreement with Korea, but if the Koreans were to require that part of the production be processed in their country, for example, we would simply continue to empty the oceans here without creating a single job. That brings us back to what Mr. Laliberté was saying, namely that this is more a trade policy than an industrial or social policy. The objective is solely to enrich certain industry owners or certain owners who only engage in trade, but nobody gives a hoot about the situation of the labour force, not only in Canada and Quebec, but also in Korea. In the final analysis, what is important is that there be a profit and that it continue to pour into the coffers of large corporations. We might as well forget about the social aspect; this is simply a trade agreement.

Shrimp is the typical example of a product for which a free trade agreement would be completely useless. Even if you tell me that import duties of 17% or 20% would be paid by Korea, that changes nothing. We got more from the European Economic Community. Regardless, right now there is an overabundance of this product on the world market, as well as an overabundance of animals raised in aquaculture. In any event, it is a market that will bring about nothing new. On the contrary, our plants will continue to close here because the quotas will be increased again in order to allow the fishermen to survive.

I would like to hear your views on this subject as well as Mr. Laliberté's perhaps.

[Patrick McGuinness]

Thank you very much for the question.

Say, for example, we take the position regarding shrimp in Quebec, a province with four plants producing cooked and peeled shrimp, a processed product. Say, for example, this product is exported to Denmark, and Denmark brines it and puts it into jars for the marketplace. I don't think anybody is saying we should bring back that brining and jarring to Quebec. I don't see that at all.

So cooked and peeled shrimp generally can go directly to retail, or to further processing. What happens in the U.K. is that it's sent to Marks and Spencer. They put it into a sandwich and then that shrimp sandwich is a big item for them. It would be unrealistic to do that type of sandwich manufacturing in Canada, shipping or exporting those sandwiches to the U.K. market.

So it's a product that is harvested at sea, brought into the plants, cooked and peeled, and there is quite a bit of labour content in it. But in getting that type of product to the marketplace, whether it's in Sweden, Denmark, or the U.K., yes, there's probably a rationale for having that end-product transformation being done there.

So the issue would be, for example, in shrimp.... Actually, right now, as you said, the increase in shrimp quota in the world has been totally in Newfoundland and Labrador—a massive increase. That has caused, as you say, too much product going onto the market, and prices have gone down.

We have an opportunity now, given that the Canadian quota has pretty well stabilized and the Icelandic and Norwegian quotas are coming down. So our theory is that where we see a market expanding, free trade agreements such as this may give us the opportunity, now that we've stabilized supply, to perhaps expand and grow demand and bring back better prices, which will benefit not only the companies, but also the workers.

I'll go back to Mr. Dhaliwal's comment about delaying the free trade agreement. What's the issue here? I'll tell you what the issue would be, say, in Quebec, with respect to cook-and-peel plants. Cooked and peeled product is harvested by inshore fishermen. We also have a fleet in Canada that fishes offshore, the shell-on product, which then goes into the Chinese market for retail, for example, because they like to peel the shrimp themselves, or it goes to other countries for further processing. EFTA, Norway, and Iceland already have a free trade agreement with Korea. They do not have the resources, so they will be entering into arrangements with Canadian fishing vessels offshore to supply, if you will, industrial shrimp to Norway and Iceland; but they will further process it into a cooked and peeled product and send it to Korea, while we're dithering--well, not dithering, but we're trying to contemplate.

So there are always wins and losses, and as Mr. Haynal mentioned, the world is changing. Unfortunately, because of the problem of the WTO not coming forward with a comprehensive approach, we have countries such as the United States and EFTA trying to make these types of bilateral arrangements—and some of them are going to be beneficial and some negative for Canada.

[The Chair, Conservative, Lee Richardson]

I'm sorry, Mr. Roy, but we're at seven minutes now.

For our final questions this afternoon, we'll go to Mr. Cannan.