International Trade Committee on Oct. 20th, 2010

[John Masswohl]

Traditionally, in the past—

[Martha Hall Findlay, Liberal, Willowdale, ON]

Thank you for being here, by the way. I just jumped right in without even being polite enough to say thank you for being here.

[John Masswohl]

Sure thing.

We haven't been part of that process in the past. We haven't been the beneficiary, so I probably couldn't give you all the nuances of how it works. But I imagine how it works is probably similar to the way our government officials consult. They go to the industry in their member states. They probably put out notices requesting input as to what the requirements are going to be. People get in their submissions, and they do their lobbying internally in Europe to come up with numbers. They also try to make assessments—what's the cattle herd, what's the capacity, and what's the availability going to be in Europe.

[Martha Hall Findlay, Liberal, Willowdale, ON]

But we don't participate in that, that you know of? Neither your industry nor the Canadian government participates in any of these discussions.

[John Masswohl]

No, we have not.

[Martha Hall Findlay, Liberal, Willowdale, ON]

There is no lobbying on our behalf?

[John Masswohl]

No, because we just can't compete with the tariff.

[Martha Hall Findlay, Liberal, Willowdale, ON]

I have a quick question on Jordan. Can you just repeat the percentages? I know we have them on file, but I just want to ask a question about relative percentages, so can you just repeat what they are?

[John Masswohl]

On beef muscle cuts it's 5%. On genetics—semen and embryos—it's 10%. And on the processed products—sausages, deli meats, cured products—it's 21% to 28%, depending on what the product is.

[Martha Hall Findlay, Liberal, Willowdale, ON]

I'm interested because it seems that with a lot of these trade agreements the issue isn't always the actual percentage in isolation but what that is relative to other countries who are competing for the same market.

[John Masswohl]

Right.

[Martha Hall Findlay, Liberal, Willowdale, ON]

If we move forward with this trade agreement, that's great for you. Where does that put some of the other countries?

I ask just because with this focus on all these bilaterals, we find ourselves trading off bits and pieces in various places, it seems. Can you actually just talk a little bit about what this might mean? Beneficial as it is to your industry and Canada, are you aware of other countries that will continue to have now relatively higher tariffs that will affect those other discussions perhaps? If we sign this and put it into effect, who is still facing higher tariffs?

[John Masswohl]

Barriers that we would face shipping to other countries or that other beef suppliers would have into Jordan?

[Martha Hall Findlay, Liberal, Willowdale, ON]

The latter.

[John Masswohl]

With the kind of beef that we compete in, we're not going to compete with India per se. India has a lot of what we call water buffalo. They do eat beef in India, but it's frowned upon, yet they produce a lot of cattle, they slaughter a lot, and they produce a lot of low-cost, low-quality product, and that gets exported. We're not going to compete with that. A lot of that goes into Africa; it goes to certain places.

Our competition really is Australia, New Zealand, and the United States. And really when it comes down to the high-quality, grain-fed business, which is where we want to play and where we want to make our money, it's the United States. That's our competitor.

The United States has had a free trade agreement with Jordan...off the top of my head, I forget, I want to say since 2001. That might not be the correct year, but it's been a number of years that they've had duty-free access into that market already. So in terms of what your question really is, we are playing catch-up.

[Martha Hall Findlay, Liberal, Willowdale, ON]

This is a catch-up. That's exactly where I was going.

And Australia?

[John Masswohl]

I don't believe they have an agreement there. Australia is more of a grass-fed.... It's not as high quality a product, so we think more in terms of how we stack up against the U.S. in terms of our access.

[Martha Hall Findlay, Liberal, Willowdale, ON]

Okay, great. Thank you.

I think we just got buzzed, didn't we?

[The Chair, Conservative, Lee Richardson]

We did. Thank you.

Thanks for that, John. This is very useful to get the perspective of how it fits in with some of the other agreements.

Monsieur Guimond, welcome back. Sept minutes, s'il vous plaît.

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

Thank you, Mr. Chair.

Good afternoon, Mr. Masswohl. Of course, your openness to Jordan is not that surprising. It is fine, we support the agreement, as well.

We know the Americans have had an agreement since 2001. So they are ahead of us when it comes to Jordan. Is it possible for Canada to close that lead? What are your thoughts on that?

[John Masswohl]

You know, we've often tried to play that game and to get ahead of them in some markets, because it does make a difference being first, making the contacts and having the customers get used to you.

Is it an insurmountable lead? My answer would probably be backed by the fact that I don't think Jordan is ever going to be a huge market. If we go back and look at the trade stats for the last 10 years, we've shipped about one tonne in total into that market in that time. Now is that because it's not a potential market? Is it because we haven't directed a lot of effort to that market? Is it because our tariff is 5% and the Americans have been duty free in the last 10 years? Probably elements of all of those things are involved.

Our expectation is that this market is probably going to be worth a couple of hundred tonnes per year to us. Maybe it would be worth more if we were there without the Americans, but I think we'll be able to catch up, to get it to what we think its potential is.

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

Earlier, Ms. Findlay talked about the meat market as compared with the genetics market. As a farmer, I am fully aware that Canada is quite well positioned in the genetics market.

Is there a way to continue to develop the genetics market, and do you have a development strategy? We all know, and as you yourself said, Jordan is the gateway to the Arab world and the Middle East market. So is there a way to build on a worthwhile development approach to genetics?

[John Masswohl]

I think so. We'd want to look at it from both the beef genetics and dairy genetics angles. I know the organizations that concentrate on those. There's the Canadian Livestock Genetics Association, which focuses on dairy as well as small ruminants, such as sheep and goats. There may be opportunities for some of those other species as well. And there's the Canadian Beef Breeds Council, which focuses on the beef genetics. They really see the Middle East region as a whole as holding some very good potential for genetics, for young live animals, as well as semen and embryos.

What they often find is that it's not just about making the initial sale; rather, it's the after sale that's extremely important. If customers in those countries are going to invest in what we would be selling—the possibility of a very high-quality, high-performing animal—they're going to want to be able to manage that animal to make sure it maximizes its potential. So it's the initial sale of the product, plus that after-sale service, if you will.

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

One of your priorities had to do with your concerns about country of origin labelling. We are hearing a lot about the Canada-Europe agreement right now, and it is especially relevant to that agreement. I would like you to elaborate on your concerns about country of origin labelling.

[John Masswohl]

Right. The problem we have with the U.S. legislation is not a philosophical objection to origin labelling. In fact, we have origin labelling in Canada. We support the origin labelling that we have in Canada. When we ship beef to the United States, we're glad to label it as Canadian and market it as Canadian.

The problem with the U.S. law is that it requires beef that comes from cattle processed in U.S. slaughter facilities to be labelled with the place where the animal was born. And that has really created a cost structure in the U.S. slaughtering and the U.S. feeding industries.

We found initially that the U.S. cattle feeders and U.S. slaughter companies were very hesitant to handle Canadian cattle. After some months, it became apparent that they needed those cattle, but they would only take them if they could segregate them and pay lower prices. They had to recoup those costs somehow. They needed them, but they were going to pay less for them.

So our complaint about the U.S. country-of-origin labelling is not seeking to throw out the whole law; it's really to change the aspect of how it treats imported cattle that get fed or processed in the United States. Our view is that once they feed them there, or once they process them.... And the slaughter operation is complicated one. If you've ever been in a slaughter operation and seen how complicated it is, you will know it's not just a simple matter of finishing off the animal and throwing a few bits of meat in a box. It's very complicated, it's very costly, and it occurs under government inspection.

We think that once they do those operations, they've transformed the cattle into a U.S. product, which shouldn't be labelled or treated in a separate stream—which costs us dollars.