International Trade Committee on April 30th, 2008

[The Chair, Conservative, Lee Richardson]

Welcome to the 28th meeting in this session of Parliament. The Standing Committee on International Trade is continuing its discussion of free trade negotiations between Canada and Colombia, with a focus on how environmental impacts and human rights concerns are addressed in trade agreements.

We have two groups of witnesses today. We're going to begin when everyone is seated. We'll probably go for about 55 minutes and then take a brief break before we begin the second round.

I'll begin by introducing our guests. We have John Masswohl, from the Canadian Cattlemen's Association; it's nice to see you back again, John. From the Canadian Federation of Agriculture, we have Bob Friesen; and from the Canadian Sugar Beet Producers' Association, we have Bruce Webster. I think they all have something specific to say, so I'm going to ask them all to give a brief opening statement, and then we will go to questioning. We'll probably get through at least one round and hopefully two.

I don't think we have any other business. Is there anything else we need to deal with today?

Very well, we'll begin. I'm going to ask Bob Friesen from the Canadian Federation of Agriculture to begin.

Mr. Friesen, the floor is yours.

[Bob Friesen, President, Canadian Federation of Agriculture]

Thank you very much, Mr. Chair.

Thank you for the invitation. It certainly is a pleasure to be here, and to be here with my colleagues, Mr. Masswohl and Mr. Webster.

I'm going to be very brief.

Basically, we applaud the federal government for engaging in bilaterals. We sent a letter to Minister Emerson some time ago, asking him to spend more energy and more resources on bilaterals. While we say that the WTO should be the primary forum in which we develop fair and equitable trade rules, we do know that other countries are doing bilaterals, and we're at risk of either losing the preferential market access we already have or of losing the preferential market access we might otherwise get if we were a little faster out of the gate when it comes to bilaterals.

As you well know, the U.S. already has an agreement that they're trying to vote on. At the very least, we want to be on a par with what the U.S. is getting, so while we applaud them for engaging in this negotiation, I think you will hear from both of the gentlemen with me here that it's not yet exactly where it should be.

Colombian exports to Canada are largely tariff-free. We import coffee and bananas from Colombia, and there's a very small tariff on cut flowers, but essentially they're tariff-free, while we are still facing tariffs in Colombia with some of our very important exports, such as wheat, barley, peas, lentils, and beans.

We do have potential on.... I'm not going to go in too deeply, because Mr. Masswohl is going to cover that one; Mr. Webster is going to cover the sugar situation and identify what still needs to be done in that area, but certainly wheat, barley, lentils, peas, and pork still face tariffs in Colombia.

We don't have a very large pork market in Colombia. However, because their middle class is growing and because the pork industry is shrinking in Colombia, Canada Pork International and the Canadian Pork Council feel that there may be good potential there in the future.

We currently have a trade deficit with Colombia: we export about $200 million and we import about $280 million. As I already said, we still face tariffs.

It's an interesting situation. I was reading the blues when the department was here, and this will be familiar to you. Colombia clearly needs our products, because their applied tariffs are much lower than their bound tariffs. However, they use the relationship between applied tariffs and bound tariffs as a safeguard. They offer our exports at a fairly low tariff, but if suddenly we sell for too low a price in Colombia, they can, of course, increase those applied tariffs to a maximum of what their bound tariffs are. It allows them a lot of flexibility.

We would simply like those to be eliminated the way they will be for the U.S. One could also argue that while they want our products, they use the low tariffs simply to raise cash for their country.

Again, we'd like to see the elimination of those tariffs, at the very least to where the U.S. is.

In closing, I'm going to mention two other aspects that aren't directly related to the Colombian trade agreement but are directly or certainly related to all the trade agreements that we do.

One has to do with transportation. As you know, wheat and barley are very important products for our exporters into Colombia. Our farmers in western Canada still pay a huge amount of freight to export that grain. That's why CFA and others have called for a full costing review on freight; if our producers have to pay too high a level of freight, it makes them less competitive in the international marketplace.

You know that we're still using 1992 numbers when it comes to the calculation of revenue caps for railways, and our farmers are victimized by the fact that we have a railway monopoly. We'd like to have a close look at that. In fact, the House of Commons agriculture committee did pass a motion that the impact of freight should be under consideration in that process, and we would like that added to the level of service review that the minister has already mandated.

The second one, and my last point, is that when it comes to trade agreements, we have to be very careful what we implement in Canada. We are very concerned with the mandatory GMO labelling bill that's currently in the House. There are all kinds of arguments why that will not work for agriculture, why it will put us in a vulnerable position with those countries with whom we have trade agreements.

I would just simply ask the members to consider those two issues as we talk about trade agreements and trade negotiations.

But suffice it to say, our agricultural industry needs development of export markets, and we need more and more profitable market access in other countries because that's how our agricultural industry can grow. It provides a very important contribution to our Canadian economy.

Again, we applaud the government for engaging in bilaterals, but we need to negotiate more to make sure it works out the way we need it to work out with regard to the U.S. We have a very integrated agricultural industry with the U.S., and that makes it even more important that where the U.S. gets deals like they're getting in Colombia, we get similar deals as well.

Thank you very much, Mr. Chair.

[The Chair, Conservative, Lee Richardson]

Thank you, Mr. Friesen.

I'd like to ask Mr. Masswohl now to tell us about the cattle situation, if you could, and then we'll find out about sugar beets.

Go ahead, sir.

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

Thank you, Mr. Chairman, and thank you for the opportunity to appear before you again.

The Canadian Cattlemen's Association also appreciates and applauds the government's efforts to open markets for Canadian exports and Parliament's willingness to seek our input into the content of these new agreements.

The last time I was here to speak about Korea, I stressed the importance of Canadian beef being treated at least as favourably in our agreement as U.S. beef is treated in the Korea-U.S. agreement. With respect to Colombia, we're really in a very similar situation right now.

Upon learning the results of the U.S.-Colombia agreement and consulting with Canadian officials as to the status of our negotiations, the CCA, along with the Canada Beef Export Federation and the Canadian Beef Breeds Council, felt it was important that we travel to Colombia and meet with our counterparts. We did that in early March, and we had excellent meetings with the Colombian Cattlemen's Federation—they're known as FEDEGAN—and we also met with the various breeders' associations. We met with key officials in charge of what is the Colombian equivalent of the Canadian Food Inspection Agency. We also met with beef processors, food service representatives, and large retailers.

Our impression is that Colombia has the potential to be an important future market for beef exports. It's a market with a growing middle class. Furthermore, it's a country that seems to be emerging from a history marred by many serious issues. The cattle industry in particular appears to be on the verge of getting its long-standing foot-and-mouth disease problem under control, and it seems eager to position itself to start to become a player in the global marketplace. All of this leads us to believe that a free trade agreement with Colombia could be a positive development for Canadian cattle producers.

But as far as beef is concerned in the proposed Canada-Colombia free trade agreement, I would have to say that the jury is still out. Colombia has agreed to provide U.S. beef with much better access than they're currently offering to Canadian beef. Colombia has agreed to consider three categories for U.S. beef. First, all high-quality U.S. beef—so that's any cut coming from a carcass that grades as “prime” or “USDA Choice”—will enjoy unlimited, immediate, duty-free access into Colombia. The standard-quality U.S. beef—so that's the lesser grades—will receive duty-free access up to a limit of 2,100 tonnes until the tariff is completely eliminated over five years. Finally, U.S. variety meats and offals, including liver, will receive duty-free access up to a limit of 4,642 tonnes until the tariff is completely eliminated over 10 years.

We don’t think it's really advisable to discuss the particulars of what Colombia has offered to Canada, in that this is a public forum, but I can tell you that what they are offering Canada right now is far less than what they have given the U.S.

When we visited Bogota, we made a proposal to FEDEGAN, outlining the terms of access that would be acceptable to the Canadian cattle industry, and so far we're waiting to hear their reply. I have been in e-mail contact with them frequently and I know they're working on a reply, but so far the ball remains in their court.

Nevertheless, I want to give you a flavour of the meetings we had with FEDEGAN. FEDEGAN indicated that they very much wanted to establish a free trade agreement with Canada. Currently, their only export market for Colombian beef is Venezuela. But when they receive their FMD-free status—and they are expecting to get that status at a meeting that's going to occur in Geneva later this month—they are hopeful that new export opportunities for their beef will arrive.

FEDEGAN also explained that they represent both the dairy and the beef cattle industry in Colombia, and that since Canada will not allow access for any dairy products, they find it difficult to agree to Canada’s requests for improved access for beef. This seems to be a common issue that we hear in many of Canada’s free trade negotiations and at the WTO, that Canada’s narrow defensive interests are undermining the interests of our much broader, export-oriented sectors. FEDEGAN also explained a number of reasons why they felt Canada should not get as good a deal as the United States.

We refuse to agree that Canada is a lesser market for our trading partners or that we should settle for less. We may not be as large as the United States, but Canada is a sophisticated, high-income market that could be of great potential for many Colombian products. Furthermore, if Colombian beef or other products are sufficiently processed in Canada, they may meet the requirements of the NAFTA rules of origin and allow those further-processed products to be exported to the United States under the terms of that agreement.

But beyond the principle that Canada should not settle for less, the Canadian beef industry has very strong economic reasons, which I outlined the last time I was here, why we can't accept a deal that is inferior to the access provided to U.S. beef. 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 U.S. and letting them add the value there.

Competitiveness of our processing industry is a major area of concern, and consolidation of the industry is now a daily reality. The rapid ascent of the Canadian dollar has exposed significant competitive challenges in the Canadian beef processing industry, from government regulation, inspection fees, labour availability, etc. If U.S. meat packing facilities have export opportunities for a broader range of beef cuts than Canadian facilities, an already challenging competitive situation becomes worse.

The last time I was here I used the analogy that if we settle for field goals every time the U.S. scores a touchdown, sooner or later we're going to be out of the game. So we don't want to see that continue to happen.

For the time being, the Canadian Cattlemen's Association supports continuing the negotiation of an agreement with Colombia. With the right terms of access, we could be a strong supporter of a Colombia-Canada free trade agreement. But we really want to caution the government not to be too eager to agree to terms that do not provide parity in beef access with the United States.

Thank you.

[The Chair, Conservative, Lee Richardson]

Thank you, John.

Now from the Canadian Sugar Beet Producers' Association we have Bruce Webster.

[Bruce Webster, Executive Director, Canadian Sugar Beet Producers' Association Inc.]

Thank you, Mr. Chair and members, for hearing us today on important matters concerning the Canada-Colombia free trade agreement.

Since sugar beet is a relatively rare crop in Alberta and Canada, I'll briefly describe our background. We are called the Canadian Sugar Beet Producers' Association Inc., which was founded in the 1940s. At that time, sugar beet production occurred in five provinces of Canada. What I represent here today is the balance of the integrated industry that exists in southern Alberta on irrigation. About 250 farmers produce sugar beet in southern Alberta.

We have transformed ourselves greatly in the last few years and now operate off the open market for our revenues, which is why the terms of trade agreements are very important to us. It should also be noted that since the 1995 crop, there has been no price support on sugar beet in Canada. In 1995, the sugar beet farmers in southern Alberta voted unanimously to ask the federal and Alberta governments to end our price stabilization program. Since that time we've changed our business to survive off the market.

This plays into our general opinion on free trade agreements. We want to participate in international markets, and we want those markets to be open on free and fair terms. To date, our experience with free trade agreements that have been negotiated has not been good. I can use the analogy that we're the untold chapter of the Charles Dickens novel, Oliver Twist. When Oliver goes and asks for “more, please”, the big cook behind the kettle grabs our gruel and gives it to Oliver. That's been our experience with free trade--it's one-way trade. Canada has been unsuccessful in negotiating the greater access we want.

Before the modern era of free trade agreements, we had free trade in sugar with the United States, and that was negotiated away to nothing. We've grown that to 10,300 tonnes of raw value of sugar, which has to be beet sugar from southern Alberta. So our main advice to the Government of Canada, as it's negotiating a free trade agreement with Colombia, is that we don't want the unsuccessful pattern in sugar negotiations that has occurred to date to repeat itself. Colombia has a fully modern sugar industry. It is very competitive. It is one of the highest production-per-acre areas in the world. There's no reason, as there might have been in some of the smaller negotiations, to give asymmetrical access to our trading partner or not give us any access at all.

We think it's very important in this negotiation to stand by a few general points when talking about sugar. First, we think that any tariff-free quota negotiated with Colombia should be limited to a very small volume, and I'll explain why. The TRQ should be implemented over a long timeframe, and Canada should maintain its normal refined sugar tariff on any volume above the tariff rate quota that is negotiated with Colombia.

Most importantly, we should have reciprocal access. If Colombia can sell sugar at better terms than Canada, we should be able to sell sugar to Colombia. Colombia does import a lot of sugar, and there is no reason why Canadians should not participate in that market. It has to be reciprocal access. If we give a tonne of access to our market, we need a tonne in the Colombian market. So we would not favour asymmetrical access or even zero access.

There are a couple of things on the general topic of what this committee is looking at that I thought would be of interest, and they come from the Colombia Sugar Annual 2008, out of the USDA Foreign Agricultural Service. We don't have to look at Colombia and say the only thing they can do with land that's in cane production is produce cane and sell it to Canada. There is ethanol sugar beet in development, which would allow two crops a year to be grown on perennial sugar cane land. One crop of ethanol beet would produce ethanol for fuel for local inhabitants, and the second crop could be produced on that land as a food crop for the people in Colombia. So I don't think we have to accept any Colombian position that the only thing we can do is take this cane sugar and sell it in Canada.

I'd also point out that Colombia has a sugar price stabilization fund. There's a levy on internally consumed sugar in Colombia that would directly or indirectly be an export subsidy on sugar sales to Canada and other parts of the world. Both Colombia and our association are members of the global alliance for liberalized trade in sugar, and we should be very cautious about what Colombia might do with that sugar price stabilization fund because we operate off the world price of sugar in Canada. It would almost be automatic that some draw would be put on that stabilization fund to finance either the Canadian exports or other exports to the world market that would in effect have an export subsidy.

In summary, then, we would like real free trade. We don't want to see a repeat of Costa Rica, where we got asymmetrical access and the Government of Canada said we could probably grow potatoes because we're getting french fry access into Costa Rica. Well, the french fry imports were stymied in Costa Rica.

And as Mr. Friesen can attest, at a CFA trade committee last fall, we were talking with a potato farmer from Prince Edward Island who said we can't get our potatoes to Trinidad and Tobago any more because they're coming from Costa Rica. We lost out on a triple play in that Canada-Costa Rica free trade agreement on agriculture, starting with the poor negotiating position for sugar.

I guess all I can say is, “Some please”. That's our attitude to free trade: yes, we want to participate.

Those are my comments, Mr. Chairman.

[The Chair, Conservative, Lee Richardson]

Thank you.

With that, we will begin our round of questioning. I think because of the shortness in time we're going to have to be strict on our timing today. I'm going to have my tough clerk here keep the seven minutes, and I'm going to let him handle that.

We'll start with Mr. Dhaliwal.

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

Thank you, Mr. Chair.

My first question is to Mr. Webster.

You said that Colombia is very efficient when it comes to producing sugar. When you say we should give one tonne and get one tonne, how would you be able to compete there?

[Bruce Webster]

Well, it's a basic principle of free trade that if one person is allowed to engage in trade, the other should as well. If you refer to the Senate agricultural and forestry committee hearing from, I believe, last December 13, when we were questioned by the senators on this matter....

It happens that at this point in time the largest export market for refined beet sugar from southern Alberta is Mexico. So we can sell in foreign markets and we can compete against cane sugar.

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

So you have no problem competing there?

[Bruce Webster]

We want the opportunity--yes.

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

My next question is to Mr. Masswohl.

I have difficulty when you say the U.S. is doing the trade and let me go after those guys as well, because the U.S. might have an edge over Canada because of the net imports to that country.

Is there a quality issue that will get our beef into Colombia, other than just a fair trade?

[John Masswohl]

We want to have the same terms of access as the United States.

I didn't mention it in my presentation, but the Colombia tariff on beef is 80%--that's eight zero. As Bob mentioned, that's their applied tariff; they have a higher bound tariff. If they want to increase it, they can increase it up to 108%.

When we see that the U.S., on its high-quality beef, the prime and the choice grades, will be able to ship as much as they want at a 0% tariff right away, and we're not getting that--maybe we get a bit of a reduction in the first year, and our lower grades are even longer, and we get less access for those--it's not a competitive situation. We want to have the same access, or better, that the U.S. gets into Colombia.

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

How many additional jobs do you think you will create if we form a free trade agreement and are able to satisfy where you want to be in this particular issue?

[John Masswohl]

I would say our beef industry is built on exports. About 60% of the cattle and beef produced in Canada is exported. About 80% of that goes to the United States. How to diversify into other markets is a constant challenge. We need these accesses. I wouldn't say it's a question of creating new jobs; it's a question of keeping the jobs in the industry that we have.

It's a reality that the U.S. has an agreement now with Colombia. It'll be ratified. I don't know when, but it will be ratified. Every time the U.S. gets rid of an 80% tariff in Colombia, or a 40% tariff in Korea, if we're not keeping pace, we are not going to keep the cattle-processing jobs in Canada. We'll raise cattle and export the cattle to the U.S. They'll kill them there, and they'll do the value-adding in the United States. We want to keep those jobs here.

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

So you are suggesting that we should negotiate hard on these issues, right?

[John Masswohl]

Absolutely, yes.

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

Otherwise there should be no free trade.

[John Masswohl]

We're supporting the negotiations. Once we see what the agreement is, then we'll be glad to come back and give the thumbs up or thumbs down.

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

I'll now go to Mr. Friesen.

On the agriculture issues, you said we are exporting wheat, barley, and beans. There is no local competition there, but we are competing against the U.S. as well, right?

[Bob Friesen]

That's right, and I think that's why it's an important point, even on the question you asked Mr. Masswohl.

If my recollection is right, Colombia imports somewhere around 80% of their wheat, barley, and pulse crop needs. If we don't have the same deal the U.S. has, then the U.S. will simply fill that demand.

I mentioned earlier that our agricultural industry is very integrated with that of the U.S. We're always competing back and forth, even across our own borders. It makes it almost one market. For that reason, we need parity with the deal the U.S. is getting. It's not so much about replacing what the Colombians might be producing; it's about our ability to be able to compete against the U.S. in the same market.

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

How would it positively impact the middle class or the poor people in Colombia?

[Bob Friesen]

That's why I made the point that they obviously need 80% of their requirements. This isn't about us trying to compete or out-compete the peasant farmers in Colombia; it's about our ability to fill the same market that the U.S. might be filling. If we're not there, the U.S. will fill it anyway. We're saying give us the same opportunity as the U.S. to fill that market.

There's one other thing I forgot to mention earlier, Mr. Chair, and that is on our own ethanol industry. The Colombians are trying very hard to get Canada to eliminate the incentives that your government has generously allocated for the ethanol industry. As you know, Brazil and the U.S. are already far ahead of us. If we want to build an ethanol industry in which we don't just simply import the feedstock or import the ethanol, we simply cannot eliminate, with the Colombian agreement, the incentives that are in place for our ethanol industry.

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

Thank you.

[The Chair, Conservative, Lee Richardson]

Thank you, Mr. Friesen, and thank you very much, Mr. Dhaliwal. That's perfect timing.

We're going now to Monsieur Cardin.