International Trade Committee on June 10th, 2010

[Roy McLaren]

Everything is on the table. Both sides, Europe and Canada, entered this negotiation by putting everything on the table, including agriculture.

What will happen in agriculture is, I think, a recognition that as far as supply management in Canada is concerned, the products generally are not exportable transatlantically. Raw milk or eggs do not have a shelf life sufficient to be easily exportable. Cheese does. The opportunities for Canadian cheese in Europe are really endless, and if we can negotiate the correct deal between us, we will open up all sorts of new markets for Canadian cheese producers. Otherwise, raw milk, poultry, and eggs are not products that would normally be involved in transatlantic trade.

[The Chair, Conservative, Lee Richardson]

Thank you.

That was an excellent round.

We're going now to Mr. Julian.

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

Thank you, Mr. Chair.

Thank you to our witnesses for being here today. You're the very first as we dip our toe in the water of the Canada-EU agreement. We'll be getting a briefing next week, but it is very good that all of you could be available on short notice.

When starting any process, you have to evaluate what happened in past processes, and what has been disturbing is that after we've signed these bilateral trade agreements, in case after case our exports to those markets have actually gone down. Costa Rican exports never attained the same level we had prior to implementation. In Chile it was ten years before we got back to the previous export level. I'm talking in constant dollars, not the current dollars that our current minister unfortunately uses. For Israel it was seven years before we got back to where we were before.

We can't even talk about EFTA because it's been a collapse, an $831 million decrease in exports, and the most recent export figures for the United States show that in constant dollars we're below where we were in 1995. The only exception has been Mexico, but we have a sizable trade deficit with them, and the numbers have actually declined over the last three years.

There is obviously a functional problem here.

My question will be to Ms. Sullivan and Mr. Phillips. I've raised this with you before. Anecdotally it seems that at the same time we've also had a shift from value-added production and manufacturing exports to primary exports. Has that been your experience, and do you have figures for where we've been prior to the implementation of these bilateral trade agreements and where we are now, specifically in terms of beef, pork, and grains and oilseeds?

[Kathleen Sullivan]

Thank you, Mr. Julian.

We had a chance to meet with you briefly last week and start this conversation.

We have started the analysis to take a look at agriculture and food specifically to see what the trends have been since we signed free trade agreements. Our initial review would suggest that in fact we've fared very well after we've signed trade agreements with other countries. We're going to do some more analysis to take a closer look at that and to see if we can take a look by sectors.

There is no doubt that when it comes to processed food, our place relative to other countries is going down. There is no doubt about that. We have to take a look to see if that has changed in absolute dollars, and we can get back to you with that, but our experience is actually quite different. We've found that when we've signed free trade agreements with other countries, our agricultural exports have started to go up.

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

Even though Canada overall has been a loser after signing these agreements, you're saying that at least in your sector there has been an increase in exports.

[Kathleen Sullivan]

Yes. The preliminary analysis certainly shows that we have strong growth in those countries.

[Richard Phillips]

If I could add a bit, the other thing is that it's not static out there in the world. Other countries are also doing free trade agreements. With Morocco, for example, the U.S. is already ahead of us. As Canadian wheat and durum exporters, we'll be virtually eliminated from that market in a few years simply because of the preferential tariff the U.S. will get, and it is a big market for us. The Canadian Wheat Board has met with us a couple of times to raise the concern that if we don't get things going, we're going to be excluded.

Will there be some ups and downs? Yes. It may also depend on when other countries have negotiated their deals. As well--and I go back to the point I made at the start on the enforceability of the agreements--have local people within those countries raised non-tariff barriers to stop us from having trade even when the deals are signed? Do we have the ability to enforce them to make them work? Those are key components that we need to have in all our deals so that they do work.

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

There is the question around resources, which we talked about before: this government provides pennies, while other countries, our major competitors, are providing support to their export industries in a very strong and consistent way. That has been flagged a number of times, but you're saying that the issue around enforcement is also something that we need to look at. Hopefully the committee will go into that at some point, because the facts don't lie. The facts are very clear.

I want to come back to the issue around processed food among agrifood exports. We moved from third place in 2000 to ninth place in 2008. There has been growth in the countries where we haven't signed free trade agreements; there hasn't been as much growth--although I will await your figures with much interest--in the countries we have signed with.

To what would you attribute that fall, that slippage, from third to ninth place, when all countries are facing the same worldwide recession that the chair mentioned?

[Kathleen Sullivan]

We'd have to do more analysis and get back to you on that, but I think one of the interesting points is one Richard raised: you have to take a look at the trade agreements the countries we're dealing with are signing.

That's one of the reasons the Canada-EU trade agreement is very exciting to us. We are getting into the European market potentially ahead of some major exporters around the world and ahead of some of our major competitors, and that's important. It gives us an opportunity to establish commercial relations. It gives us a chance to figure out the import-export system and get a foothold in the marketplace before other countries come online. It is very important that we continue to pursue trade agreements aggressively, whether regional or bilateral.

I would say again, and I'll re-emphasize this, that it is essential that we continue negotiating towards a WTO agreement. With this idea of one country being ahead of the other, and particularly in relation to agriculture trade, which is highly distorted around the world, it's critical to all of these FTAs we sign to put in place some transparent rules that everybody is going to have to abide by. We always like to make the point that we can't lose sight of the necessity of that agreement.

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

We've certainly taken note of that.

My final question is to Mr. McLaren and Mr. Langrish.

You mentioned an economic study that has been done on the impacts of the EU agreement. Will you make that study available to the committee?

[Jason Langrish]

Actually, I'd like to answer two questions. The first is that I would be curious to know where your statistics showing that free trade agreements lead to a national trade decrease have come from.

The second is that it seems the focus is entirely on trade. If you look at a lot of these relationships we've entered into, that's a little bit yesterday. If we want to export, say, into the European Union, often what we'll do--unless it's a fixed resource--is invest in the European Union and then export onwards from there. Often the problem with statistics is that they don't capture sales by foreign affiliates, so none of that gets reported. In actual fact the numbers are skyrocketing, but that's not getting caught in the official statistics because when Bombardier buys Adtranz and then sells trains in Europe, it doesn't qualify as an export from Canada.

In terms of the economic study, we didn't do that study. That study was conducted by the Government of Canada and the European Commission, so it should be available. I think it's publicly available on their websites in both cases.

[The Chair, Conservative, Lee Richardson]

Thank you.

That will do. That was 7:49.

We'll now turn to the Conservative side. Go ahead, Mr. Allison.

[Dean Allison, Conservative, Niagara West—Glanbrook, ON]

Thank you, Mr. Chair, and to our guests, thank you as well.

My question revolves around agriculture. We talked about wine; Mr. McLaren, you talked about the wine industry. My neighbour here and I come from different parts of the country, but we represent wine regions. Certainly one of the concerns I have is the agriculture subsidies in the EU and in some of those places, and whether it's very tough to actually challenge.

Do you feel that's going to be addressed? As a government we were able to lower the excise tax on 100% VQA wine here in Canada, and the EU challenged us on that. The fact that they get access to all our markets through the LCBO and these other things is not that disturbing, but they have 70% market share versus our own Canadian wines here in Canada. We could be doing more.

My question really is around agriculture subsidies. I could talk about any product, but I'm going to talk about wine in particular, because that's what's near and dear to my heart. Is there any way we can address this?

[Kathleen Sullivan]

Thank you for the question. I'll try to take it on to start with.

One of the things that we've insisted needs to be addressed in this deal is export subsidies. At this point we're fairly confident that export subsidies are going to be brought up in the context of the negotiations. Certainly we're going to have to be in a situation in which the Europeans will not be permitted to apply any export subsidies to agriculture products.

When it comes to domestic supports, by and large this is where we come back to the WTO. There are a number of really broad-based issues that have to be dealt with in a multilateral context, because for the Europeans to do away with some of their domestic policies in our agreement essentially benefits every other country around the world, so it's very difficult to pressure them in that context. I think we can make some important strides in the context of the Canada-EU agreement, but this is why it becomes critical that we not lose sight of the WTO, and I think Canada can really play an important leadership role on the WTO front.

[Dean Allison, Conservative, Niagara West—Glanbrook, ON]

Are there any comments from Mr. McLaren or Mr. Langrish?

[Roy McLaren]

I support what Ms. Sullivan said. I'll add that we're all in favour of the WTO and we're all in favour of the Doha Round, but we know perfectly well, and you know perfectly well, that the Democratic Congress in the United States is not going to give Barack Obama a fast track for the Doha Round in the remainder of his present term or if he's re-elected for the four following years. For no other reason than that, the Doha Round is, to put it kindly, suspended.

Here is an agreement in which we can do WTO-plus. We can go beyond. We're not going to be stopped by some members of the WTO who can't participate in the Doha Round. Here's an opportunity to expand our trade and investment beyond what we could possibly achieve in the Doha Round.

[Jason Langrish]

I'd add that the other thing is that we both have sensitivities. The Europeans and Canada both have sensitivities. We're not saying to dismantle everything and start again. We understand there are political realities, including a minority Parliament in Canada, but there's enough there. There's enough there to put together a package that will have meaningful, on-the-ground impact, create jobs in Canada, strengthen our industries, and strengthen our hand in one of the four major markets in this world.

I think it's important that we do this and accept that we will have to make some changes, but they will be well worth the benefit we're going to gain from this agreement.

[Roy McLaren]

The short answer to your question about wine is yes.

[Dean Allison, Conservative, Niagara West—Glanbrook, ON]

Thank you.

Go ahead, Mr. Keddy.

[Gerald Keddy, Conservative, South Shore—St. Margaret's, NS]

Thank you, Mr. Chairman.

Welcome to our witnesses. Welcome to Mr. McLaren and Mr. Langrish. It's good to see both of you again.

I want to explore a little bit with all our witnesses some of the areas we expect will be a little more problematic. A couple of them--forestry and non-tariff trade barriers--have been mentioned.

I'll use the example of Nova Scotia. Nova Scotia used to do about $900 million to $1 billion worth of forestry exports to Europe before the advent of the pinewood nematode, which I think has been here forever. Five hundred years of exports to Europe went down the drain. That will be an issue that certainly holds promise for new markets for Canadian forest companies.

The other issue that I wonder a bit about is in the fishery. We know there's a market there for northern shrimp, but certainly there's a market there for all of our fish products. We don't want to be held out because of processing plants or perceived EU regulations. There's the real danger of a non-tariff trade barrier.

My final point is the whole question of geographical indicators and how we get around that. I really think this agreement has great potential. It's not an agreement yet, but if we get to the point that we actually get this to the House, I think it's an agreement that every party in the House would be able to support, because there really is something here for everyone in every part of Canada.

My question was specifically on the non-tariff trade barriers, and specifically in relation to slaughterhouses and fish plants.

[Richard Phillips]

I was going to give you a different example of a non-tariff trade barrier. It can even happen within your blueberry industry. When you're looking at agricultural opportunities out in Nova Scotia, there is a lot of fruit and berry production and the EU has a huge potential, but in the prairies they wanted to export Saskatoons to the European Union, and they said they weren't sure if Saskatoon berries were blueberries. It's a multi-year process and takes literally millions of dollars in testing for human consumption and human food safety, even though we've been consuming them for thousands of years.

It takes ministerial-level interventions. At that time I think Mr. Speller was the Minister of Agriculture, and he had to meet with Franz Fischler, the EU trade commissioner. They had to work out a deal just to allow Saskatoons in.

Those are the sorts of things. In a trade negotiation we need to establish clear rules and clear dispute resolution processes so that we don't have to literally keep products out of the market because of the cost of trying to meet all the standards that they want.

[Gerald Keddy, Conservative, South Shore—St. Margaret's, NS]

You mean rules-based trade.

[Richard Phillips]

Yes.

[Kathleen Sullivan]

If I could just add to that, non-tariff barriers are critical in this agreement, so critical that if we can't deal with the major non-tariff barriers we have with the European Union, there really is no viable trade deal here. They really are that critical, and they have to be integral to the package we negotiate. We're not just negotiating market access. This is a two-pronged process, probably even more than that. The non-tariff barriers are as critical, from an agriculture standpoint, as the market access is.

[The Chair, Conservative, Lee Richardson]

Thank you.