International Trade Committee on May 7th, 2009

[The Chair, Conservative, Lee Richardson]

We're going to begin the 17th meeting this session of the Standing Committee on International Trade.

Today we will continue our discussion of Bill C-24, an Act to implement the Free Trade Agreement between Canada and the Republic of Peru, the Agreement on the Environment between Canada and the Republic of Peru and the Agreement on Labour Cooperation between Canada and the Republic of Peru.

First, a technical announcement. We had lined up Dr. Luis Carlos Rodrigo, who is the president of the Canada-Peru Chamber of Commerce, from Lima, and the Canadian Wheat Board, but unfortunately our technical problems prevent them from appearing today. It was an equipment problem within this building, not in Winnipeg or in Lima, I'm told.

So I'm delighted to have the Canadian Federation of Agriculture here, represented by Laurent Pellerin and Robert Godfrey.

My sense is we'll probably go the hour with these witnesses. We'll give it a full hour, until about 10:15, at which time we'll revert to committee business. We have some travel to discuss.

With that, I will ask Laurent Pellerin to begin with an opening statement from the Canadian Federation of Agriculture.

Monsieur Pellerin.

[Laurent Pellerin, President, Canadian Federation of Agriculture]

I will make most of my presentation in French. I may speak English at times, but I will try to make my presentation in French.

First of all, I want to thank you for the invitation to today's committee meeting. The opening and closing of borders are very significant issues for Canadian producers. You are aware of the situation for certain types of operations, pork production in particular. We are currently seeing border closures for the moment. These are issues that we follow very closely.

We were asked to participate in this meeting on Monday, late in the afternoon. You will understand that we do not have a printed document to distribute to everyone today. I will speak using my notes on the Canada/Peru Free Trade Agreement, an issue that we have been following over the last few months.

The Canadian Federation of Agriculture is the biggest producer organization in Canada: it represents more than 200,000 Canadian farmers. The vast majority of Canadian producers are members of a provincial association and a product association. We consulted with each of these associations in order to prepare our document and the comments that we will make today. The impacts of the Canada/Peru Free Trade Agreement vary from one product to another. It is more advantageous for certain producers, whereas for others, it represents almost the status quo. And then there are other groups that do not have much interest in signing an agreement with Peru.

First of all, I would like to say that this agreement should be implemented as quickly as possible. It is not a huge achievement with regard to the objectives of agricultural producers, but some improvements are worth implementing.

We are negotiating this agreement more or less at the same time as the United States, or a bit later. We believe, however, that we must negotiate parity with the United States in future negotiations or free trade agreements and contracts with countries like Peru. Unfortunately, in the case of Peru, Canada is far from achieving the same thing as the United States. We recognize that the Peruvian market is probably more significant for the United States than it is for Canada, but all the same, parity would have been a very desirable goal.

In the case of Peru, the United States will have shorter tariff elimination periods, and in some cases, tariff-free access, and in others higher quotas. Even if Canada negotiated something better than our current conditions, because the Americans negotiated tariff reductions and completely free access before us, the market or business will favour American products over ours. This is something we must bear in mind.

As a result, it is important to ensure when we are negotiating contracts with countries like Peru that we obtain similar access to that obtained by other countries, particularly our American neighbours with whom we already do a lot of business.

The agreement is a success for some sectors while for others, it does not change much. The sectors that will benefit the most from this agreement are no doubt the producers of Canadian wheat, durum, barley and pulse crops, which is to say all of the beans and oilseeds. Our Canadian producers already had a presence in this market. A shorter elimination period and tariff-free access in this sector will certainly improve and facilitate trade for grain producers.

Some tariff lines will have a shorter elimination period for Canada than for the U.S. There are not many, but there are a few for which this is the case, for example garlic, frozen green beans and frozen spinach. The tariff elimination period is shorter for Canada than it is for the Americans for these products. These are not very significant volumes, but we must take advantage of this.

For other sectors, this agreement is more problematic or has limited possibilities. For example, the tariffs will almost all be eliminated immediately on U.S. beef, whereas only a part of tariffs on Canadian beef will be eliminated. This will result in fiercer competition with the United States.

In the near term, the United States will get immediate access for all Prime and Choice beef cuts, plus a quota starting at 800 tonnes per year and increasing to 1,433 tonnes by year 11 of the agreement.

As concerns Canadian products, these 800 tonnes, increasing to 1,433 tonnes, allocated to the United States, are not particularly large quantities. In Canada, over the same period, producers will also obtain duty-free access for beef cuts meeting the Peru "fine" cut standard, which corresponds to Canadian Prime and AAA cuts, plus a quota for boneless beef which will start at 100 tonnes and increase to 122 tonnes in year 5 of the agreement. So you can see that Canada's quota is even smaller.

A great deal of fresh, chilled and frozen beef offal is traded between Canada and Peru. In this sector, the tariffs will be eliminated simultaneously for both Canada and the United States, but it should be noted that the quota or volume exported by the United States is twice as large as Canada's. So once again, the agreement will favour the U.S. market.

In the long term, both Canada and the United States will achieve duty-free access for pork carcasses and cuts. However, in the short and medium term, the agreement is definitely more favourable for the Americans and could seriously affect the products from Canada because there again, the tariffs on U.S. pork will be eliminated by the beginning of the 5^th year, whereas for Canada they will not be eliminated until the 17^th year. This is an extremely large gap in an area where Canada is very present on export markets. One of our main competitors on the global market, the United States, will have a significant advantage.

Still in the pork sector, the quota for cuts in the offal category, including pig fat and bellies, will start at 325 tonnes per year and increase to 504 tonnes in year 10. Once again, these are not large quantities. However, the Canadian Pork Council has told us that this agreement must be supported, since a deal with slightly increasing quotas is better than no deal at all with a risk of retaliation. They agree with these measures.

Canada is extremely present on the potato market as well. Duty-free access strongly favours the United States over Canada, particularly during the first nine years. Tariffs on fresh and chilled potatoes, other than seed, will be eliminated immediately for the United States. As for tariffs on Canadian potatoes, they are subject to a gradual reduction and will be eliminated as of year 10. There again, our small Peruvian market may be replaced by American products, which will be more competitive because they will have duty-free access.

In the sector of frozen potatoes, Canada is fairly active—

[Some voices]

Oh, oh!

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

Mr. Chair, some people are talking. All other conversations must stop so that we can hear the witness clearly.

[The Chair, Conservative, Lee Richardson]

Thank you.

Mr. Pellerin.

[Laurent Pellerin]

As concerns frozen potatoes, I don't need to name the large Canadian companies in this sector, because you already know them. Canada is very active on this market as well, and Canadian potato farmers count on this market, especially the frozen french fry market. If the agreement is signed, tariffs on frozen potatoes from the United States will be eliminated immediately, whereas the tariffs on Canadian potatoes will be eliminated gradually, reaching zero in year 10 of the agreement. This market could potentially be attractive for Canada, but you will understand that over the next 10 years, the United States will have a major competitive advantage in the potato sector, and so this is not a major gain for Canada.

As concerns products in the bean category, whether dry or canned beans, the tariffs on U.S. products will be eliminated immediately. Similarly to the two sectors I have just mentioned, the tariffs on Canadian products will be eliminated at the end of the 10^th year of the agreement.

So if we do business with Peru, there is a risk that Canadian products will be replaced by American products for the next 10 years because of the competitive advantage. American producers will not have to pay this tariff from the outset. We thus risk losing our market in the three sectors I have just discussed.

In general, the reduction of Canadian tariffs will take four years longer than U.S. tariffs. Therefore, there is a risk that American products will replace Canadian products on the Peruvian market.

Aside from the tariff reduction issues, there are two other important conditions that must also be monitored. As concerns the preference matching provisions for the U.S.-Peru Free Trade Agreement, Canada did not receive the same commitment as the United States. So Peru could give priority to U.S. products with no possibility of recourse for us, but Canada was not given the same commitment concerning our products. So there again, you can see that the tariff treatment is different.

There is a Peruvian agricultural price support system to protect Peruvian markets from imports. In the case of U.S. products, this Peruvian legislation does not apply at all, whereas Peru could implement a price ban system on Canadian products for the duration of the agreement.

Here again, we did not receive a similar commitment to that given to the Americans. I could come back to the example of potatoes. If their imports affect the local Peruvian potato market, Peru does not have the right to implement its price ban system to prevent the entry of American potatoes. But if the same potatoes came from Canada, Peru could apply its price ban system to prevent them from entering. So this provision could be detrimental to some of our exports.

In general, the agreement does provide certain access guarantees to Canada for wheat, barley and pulses. The Canadian Federation of Agriculture recognizes that the export volume to Peru is not very high, but for the products concerned, it is nonetheless significant.

In closing, I will repeat what I said in my introduction. Should Canada sign this agreement with Peru, it must be ensured that in future bilateral negotiations with other countries, Canada achieves parity with other trading partners who are important for us, like the United States. Otherwise, our products and our producers are at risk on these markets.

This will be my last comment concerning the draft agreement with Peru.

[The Chair, Conservative, Lee Richardson]

Great. Thank you.

With that, we will go to questions, and we'll begin with Mr. Brison.

[Scott Brison, Liberal, Kings—Hants, NS]

Thank you very much.

I greatly appreciated your comments on our supply management system.

Does the Peruvian beef and pork industry represent a significant threat for our Canadian industries?

[Laurent Pellerin]

No. Peru does not produce a great deal of meat, so there is really no threat in that regard.

Was the question of supply management completely excluded from the negotiations?

You asked whether supply management has been excluded from the negotiations. There's no impact at all on supply management commodities, so that's the good side of it. Our domestic production is really under the same protection system, and the products we have on the export market, such as grain, beef, pork, potatoes, and others, will have slightly better conditions than what they have now. It's not a big increase or a very large door opening, but it's a little bit more.

[Scott Brison, Liberal, Kings—Hants, NS]

So supply management is excluded and there will be no effect. It's better for grains and potatoes. It's helpful and not a risk to pork or beef. So on the whole, it's a move forward.

[Laurent Pellerin]

That's why we say we have to sign that as soon as possible, and make sure that the next time we negotiate with a country, we look for or try to achieve a result that will give us the same conditions the other countries, namely the U.S., have, because there is a very open market in pork, grain, and beef with the U.S. Not obtaining the same conditions will come back in our faces. There is no doubt about that.

[Scott Brison, Liberal, Kings—Hants, NS]

In the U.S.-Peruvian deal, I don't think the conditions in the agreements on labour or environment are as rigorous.

[Laurent Pellerin]

I'm not aware of the--

[Scott Brison, Liberal, Kings—Hants, NS]

That's my understanding.

That's the only question I had. I wanted to know what the effect on those sectors would be, and it's neutral or positive, so that's helpful.

Could I split my time with my colleague?

[The Chair, Conservative, Lee Richardson]

Did you want to jump in, Mr. Wilfert?

[Bryon Wilfert, Liberal, Richmond Hill, ON]

Since I'm not on this committee, I guess I'll just ask a couple of questions.

On the issue of access, with regard to beef and pork, when we're negotiating these free trade agreements, certainly with regard to Korea, we often look at what the Americans have been doing, or with regard to Singapore, we say that we should be able to maintain, particularly in the agriculture sector, the same, if not almost the same, standards.

What is your view of why, in this case, we're prepared to settle for less? If I understood your comments earlier, this is not necessarily going to have a great impact on the beef and pork sectors, but there is concern from some of those groups with regard to the long-term implications.

[Laurent Pellerin]

There's an expression in French--I don't know if you have the same in English--Ce n'est pas le Pérou; it's not Peru. That's very true of that deal, but overall it's positive. It's little, but it's positive.

I was not that clear on the second-last comment, that if another country negotiates something with Peru in the future, there's a clause in the agreement that the U.S. will obtain the same consideration. Canada was not able to put the same clause in our agreement. So if, for example, Europe obtained something better with Peru than what the U.S. has, the U.S. will have it. If Europe negotiates something better with Peru than what Canada has, Canada will not have it. We didn't include that part in the deal. That's also something that embarrasses us a little.

That's why, if you understand the overall picture, there is a risk in the next couple of years, up to 10 years, that some of the market we already have in Peru will be taken by somebody else, especially the U.S. There is a risk. So there is probably a need for a very close follow-up of the numbers for what Canada is trading with Peru, and back and forth.

[Bryon Wilfert, Liberal, Richmond Hill, ON]

With regard to Canada-Colombia versus Canada-Peru, again, do you feel that the negotiations that have gone forward protect in the longer term the interests of your membership, and are there any significant differences between what's being negotiated with Colombia and what's being negotiated with Peru?

In both cases, of course, human rights issues are cited. I see that the government has improved significantly over the years, although there are still, in my view, significant issues with regard to human rights, particularly for the indigenous peoples in Peru.

[Laurent Pellerin]

I don't have comments on the impact on other sectors--labour and government and things like that. We didn't look at those, but probably somebody would have to look at those to measure the overall impact of that type of deal.

There's no doubt in our minds that long term those countries are really developing rapidly in agriculture. There is also a need for a very close follow-up of what will happen in those countries. You know what Brazil did in the last 10 or 15 years. So when you have a deal that says that in 10 years you will send 120 tonnes of pork to Peru, perhaps it's nothing compared to where that will be in 10 years. So we have to follow up on that deal very closely.

[Bryon Wilfert, Liberal, Richmond Hill, ON]

I notice that supply management is excluded. I'm not really that familiar with Latin America--my area is Asia--but I know that the Japanese often talk about agriculture as if it's some monolithic issue, which it isn't. If you look at different sectors, you can exclude, as we did with the United States, certain elements--egg marketing, milk, etc.

In terms of supply management being excluded--and I'm not sure on this one, Mr. Chair--is there a timeframe, or is this simply to be reviewed later, or is it permanent?

[Laurent Pellerin]

No. My understanding is it's there, period.

It's quite interesting to see, as you mentioned, if we go back 10 or 15 years, that when Canada presented its position, especially when the Canadian farmers presented their position worldwide about the fact that we have domestic production and export production, a lot of people were...not laughing, but were smiling a little bit at Canada.

I have been part of those meetings in Geneva, Cancun, Hong Kong, and everywhere in the world, on trade missions, and I realize now that a lot of people--government people and farmers--are looking at our position in Canada, and they are not smiling anymore, because they all realize that they have some domestic commodities they want to protect. First of all, there is the U.S. The EU also has a lot, as does Japan. They all have some commodities they don't want to put on the world market and some other commodities they are very interested in trading. They looked at our position and asked us to explain a little bit more what we are doing, because they're very interested. So there's a change there also. It's very interesting for us.

[Bryon Wilfert, Liberal, Richmond Hill, ON]

Thank you, Mr. Chair.

[The Chair, Conservative, Lee Richardson]

Thank you, Mr. Wilfert.

Monsieur Cardin.

[Serge Cardin, Bloc, Sherbrooke, QC]

Thank you, Mr. Chair.

Hello, Mr. Pellerin and Mr. Godfrey. You are right, it is not in Peru that we will make our fortune. I understand that you did your study. You did, for all intents and purposes, an impact study concerning the entire agricultural industry. You are thus in a position to tell us that, even if we lag behind the United States, over a longer period, we will do business with Peru, even if the gap is not particularly large.

When free trade agreements are developed here, we rarely see complete impact studies that deal with all industries. You see things from an agricultural standpoint, while we see them from the viewpoint of all industries.

I can understand your position. The Bloc Québécois is currently tending toward disagreement concerning the free trade agreement for other... Moreover, in agriculture, supply management is protected, and that suits us just fine, obviously. So the impact studies are conclusive for you, but they are less so from a comprehensive standpoint.

We also criticize the government for never submitting any overall impact studies. Of course, it is easy, up to a certain point, to tell us in what direction they are heading.

Earlier, you referred to the most favoured nation clause. Correct me if I am wrong, but my understanding of this clause is that even if we sign a free trade agreement, these agreements are not necessarily affected by the most-favoured-nation clause, but this affects us with regard to other countries that are members of the WTO. Even with the most-favoured-nation clause, our conditions would not be adjusted to those of the United States, because we did not negotiate them.

You also referred to certain problems with the negotiations.

That is why I am wondering about these things. Even if you agree with regard to agriculture issues and you hope that the agreement is signed as quickly as possible, the fact remains that an overall impact study would have been useful for this agreement. We do not have one and therefore we are always left guessing.

Those were my, shall we say, editorial comments. Given that I have an agriculture expert with me, I will turn the floor over to him now.

[Claude Guimond, Bloc, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Thank you.

Hello, Mr. Pellerin. Hello, Mr. Godfrey. Mr. Cardin made an excellent remark concerning the vision of the Bloc Québécois.

Mr. Pellerin, I have known you for a long time. You represented Quebec farm producers in Africa, particularly with the UPA DI. You were present everywhere and you have always been a staunch defender of fairness among farmers from Quebec, Canada and the world over.

Your analysis earlier was technical and commercial. It was well presented and clear.

The regrettable thing about this free trade agreement with Peru and the one with Columbia, which we are dealing with at the same time, is that there are major weaknesses in the area of accountability, especially concerning a genuine policy of accountability with regard to human rights, among other things.

In your area, which is also mine, as a farmer, what is your vision of a solid agreement that would be effective in trade terms, but would also give the farmers concerned the opportunity to obtain a fair income throughout the planet?