International Trade Committee on April 15th, 2010

[The Chair, Conservative, Lee Richardson]

I call the meeting to order. I'm sorry that we're a little tardy getting started; a couple of our members have yet to arrive.

We are in the ninth meeting of the Standing Committee on International Trade. Today we're going to continue our discussion of the Canada-Jordan free trade agreement. We are waiting with anticipation for a bill to come from the House on that matter and we are getting a bit of a head start with some expert witnesses today. We will follow that with an in camera session on the furtherance of our report on Canada-U.S. trade relations, with particular regard to government procurement.

Before we do that, Mr. Silva has a comment.

[Mario Silva, Liberal, Davenport, ON]

Thank you very much, Mr. Chair.

Unfortunately, our vice-chair is not able to be here--he's not feeling well--and our critic, Scott Brison, is not here because he had another commitment. They both had issues they wanted to raise with the report, and I was wondering if we could defer the report to the next meeting. Then we'd all have an opportunity to debate the report. That would be with the acceptance of the committee.

[The Chair, Conservative, Lee Richardson]

Let me take that under advisement for a moment. Rather than get into a debate on it at this point, and rather than pull our witnesses through that discussion, if there is going to be one, could I ask that we pursue that at about 4:40 and take it up for consideration at that point?

Right now we have our witnesses waiting, and we're glad to have them here again on our discussion of the Canada-Jordan free trade agreement.

I welcome back John Masswohl from the Canadian Cattlemen's Association.

John, thank you for your continued support of this committee and for providing information to us.

We also have the president of the Grain Growers of Canada, Doug Robertson.

It's a pleasure to have you with us. We've had your colleague, Richard Phillips, with us before. He is the executive director.

Richard, welcome back.

We're going to begin with some opening statements. I take it we have three opening statements, so that's fine. I hope you can keep them under 10 minutes. You are all used to that by now.

We are going to start with Mr. Phillips.

[Richard Phillips, Executive Director, Grain Growers of Canada]

Thank you, Mr. Chair, and members of the committee.

My name is Richard Phillips, and I am the executive director of the Grain Growers of Canada, Producteurs de grains du Canada. With me today is our president, Doug Robertson.

The invitation today was originally sent to the Canadian Agri-Food Trade Alliance. On behalf of the Grain Growers of Canada, I sit on the board of the Canadian Agri-Food Trade Alliance, and I'd like to make a few opening comments before I put my grain grower's hat back on again.

The Canadian Agri-Food Trade Alliance is a coalition of Canada's major beef, pork, grain, and oilseed organizations supporting a more open and transparent international trading environment for agriculture and agrifood.

Canada is a world leader in agricultural trade. We are the fourth-largest agrifood exporter in the world, exporting half our beef cattle and wheat, 60% of our hogs and pork, and over 70% of our canola. Across Canada over 90% of farms are directly dependent on export markets. They either export their products or sell them domestically at prices set by the international marketplaces. This represents 200,000 farms and includes the majority of farms in every province, including Ontario and Quebec.

A more open and fair trading environment is essential for the future growth and prosperity of our agrifood sector and Canada's economy as a whole. CAFTA's primary focus, though, is the successful conclusion to the Doha Round of world trade talks.

Bilaterals can achieve major gains for us, but it is difficult to get at the issues of domestic subsidies, domestic supports, and export subsidies. Therefore it is important that you, as politicians of all parties, encourage the government to actively push other countries to get back to the table at WTO.

CAFTA, although our focus is multilaterals, is engaged on one bilateral. The Canada-European trade negotiations, due to the huge population and potential size, are of great interest to our membership. We encourage you to follow the talks closely and to support our efforts to gain access to this highly lucrative marketplace.

At this time I'm taking off my CAFTA hat and giving the floor to the president of the Grain Growers of Canada, Doug Robertson.

[Doug Robertson, President, Grain Growers of Canada]

Thanks, Richard.

I'm a farmer from Carstairs, Alberta, and at present the president of the Grain Growers of Canada, as Richard said. We represent approximately 80,000 farmers across western Canada and the Maritimes. Our primary belief is that Canadian farmers are efficient, competitive people, and as businessmen they want to make their living from the marketplace. So that's what drives our organization.

One of our major concerns is a free and open trade of agricultural products and commodities between Canada and the rest of the world, since, as Richard said, about 90% of Canadian farmers rely on exports or export prices to drive their business. While we favour an overarching multilateral deal on trade, bilateral agreements are at present the only way for Canada to keep pace with our competitors in the key markets we're working on.

On a sectoral basis, this Canada-Jordan free trade agreement has an impact especially on the pulse industry in western Canada, although we do ship some wheat to Jordan as well. Pulse crops are crops such as peas, beans, lentils, and chickpeas. At present, Jordan's tariffs range from 5% to 10% on these crops. These would be eliminated under the free trade agreement.

In 2009, we exported approximately $6.4 million worth of these crops to Jordan, down from $8.3 million in 2008. So the potential is high in these crops.

Other crops exported include frozen potato products, which have been subject to tariffs as high as 20%. Elimination of this tariff would place Canada on an even playing field with our competitors, especially the United States. The United States already has duty-free access to the Jordanian market. Exports of animal feeds currently see tariffs as high as 23%, which would be eliminated as well. Crops such as canary seed, which is a fairly big crop in some areas of Saskatchewan and Alberta, are subject to a 10% tariff and would also see elimination of that tariff upon the adoption of this free trade agreement.

On a provincial basis, Quebec exporters of agricultural products were subject to tariffs that would be eliminated in a number of areas. Animal feed preparations, for instance, are currently subject to 10% to 23% tariffs. Maple products are currently subject to 24% tariffs. Sugar confections are subject to tariffs of up to 30%; and jams and jellies have a tariff of 25% applied to them. All these would be removed and eliminated once the free trade agreement is adopted.

In Ontario—and this would also apply to Quebec—cheeses are subject to a tariff of 20%. Sauces and other food preparations have tariffs of up to 24% applied against them, and a number of things, such as bovine livestock genetics, are subject to a 10% tariff at present. All these would be eliminated under a free trade agreement.

In western Canada, as I said before, the pulse crops are the main beneficiaries of the current tariff reduction of 5% to 10%. Beef exports have a 5% to 23% tariff, depending on the product; animal feeds, 10% to 23%; and, as I said, canary seed, up to 10%.

In Atlantic Canada, where the primary amount of potato products are being grown, frozen french fries and other potato products are subject to 20% tariffs right now. Fish and seafood are also tariffed from 10% to 30%.

The benefits agriculturally are added to other land resource sectors that farmers depend on to boost their incomes. These would include things like forest products, which are currently at 10% to 30% tariffs.

At the present time, we have a lot of growth potential, especially with fairly high tariffs in some areas to grow products into these markets.

Richard.

[Richard Phillips]

I'd like to wrap up on behalf of the Grain Growers of Canada.

I was going to mention that we sell wheat. We have sold a little bit of wheat when they have had a real shortage, and in the last few years the Canadian Wheat Board has also sold a limited amount of barley as well. That's another crop that goes there.

In terms of imports, we actually import a small amount of vegetables from Jordan. In 2008 it was over $1 million, mainly cucumbers and gherkins, but it has been as high as $1.3 million in recent years.

In summary, while the immediate trade gains don't appear large, we feel that there is strategic potential here. First, Jordan acts as a trading and distribution hub in the Middle East, with easy access to a number of other countries. Jordan has a moderate and stable government, and outside of the United States, we will be one of the few agricultural exporters with a free trade agreement there.

Jordan has challenges in being self-sufficient in agriculture because of a lack of water. This trade deal makes good sense, then, because what we grow and what we export does not displace the local farmers on the ground in Jordan. I know that some parties especially are quite concerned about whether we are being fair to local farmers in those countries. This is a good deal, because when they're short of water, they simply import, and Canada is an exporter. So this particular trade deal is a good fit for us; it doesn't negatively affect the small farmers there.

Secondly, Jordan with its population of six million people is a foothold into a larger trading body, the Gulf Cooperation Council, which consists of the nations of Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates. This group has a population of 40 million people. It is a relatively wealthy area. It's largely desert, frankly, and they import almost all of their agricultural products.

So this deal could be a foothold for us to get into a much larger market in that region, and that's why we'd encourage you very strongly to support this trade agreement and do so in a timely manner so that we can get it up and going.

Thank you for the opportunity to be here.

I think Mr. Masswohl, from the cattlemen's, is next.

[The Chair, Conservative, Lee Richardson]

Great. Thank you, gentlemen. Well done. I enjoyed the choreography as well.

Mr. Masswohl.

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

Thank you, and thank you for the opportunity to be here again.

My comments will be fairly brief. I thought Richard would be pretty comprehensive, and he didn't disappoint, so I'll just take a couple of minutes.

The bottom line is that the Canadian Cattlemen's Association supports implementation of the Canada-Jordan free trade agreement. Our standard for supporting an agreement is that it must provide us with the opportunity for commercially meaningful access for Canadian beef. Jordan announced the lifting of all BSE restrictions on Canadian beef and live cattle when Minister Ritz travelled there last year. This free trade agreement itself provides for immediate, unlimited, duty-free access for beef and also for genetics and for live cattle.

Admittedly, Jordan is not going to be a large market for us, but the important thing here is to recognize that the terms of an FTA just don't get any better than this. It is realistic for us to expect to negotiate an agreement that provides us with unlimited, immediate, duty-free access, and that's what we have here. We would like to see all future negotiations take note of this result and seek the same outcome.

Those are my brief comments. I think they're fairly unambiguous. I'm pleased to take your questions either on the Jordan situation or on any other trade agreements or trade issues that you want to explore.

Thank you.

[The Chair, Conservative, Lee Richardson]

Thank you, Mr. Masswohl.

We're going to go to questions now. I should say to the members that you're at liberty to ask any or all of our witnesses any of your questions. We're going to try to keep the first round of questions to seven minutes for questions and answers.

I'll again remind you that Mr. Masswohl is representing the Canadian Cattlemen's Association, Doug Robertson the Grain Growers of Canada, as is Richard Phillips.

I presume as well, Mr. Phillips, that you're prepared to answer anything to do with CAFTA, the Canada Agri-Food Trade Alliance?

[Richard Phillips]

Yes.

[The Chair, Conservative, Lee Richardson]

Thank you, Richard.

We're going to begin our questions this time around with Mr. Silva.

[Mario Silva, Liberal, Davenport, ON]

Thank you. I'll be short as well with my questions, Mr. Chair.

It seems from the witnesses we heard today that, from the agricultural perspective—not all aspects of the trade agreement, because we still need to go through and pick out what the implications are going to be for different sectors—for your sector in agriculture it seems to be a positive thing, because it is a country and a region that doesn't have a lot of farming, and therefore agricultural products are going to be needed. Also, you specified the issue I was going to raise, of small farmers and whether there was going to be displacement or not.

I want to know, and I think I have already had the assurance from you, while from the Canadian perspective on agriculture it seems like a positive thing, whether there are undue concerns that we should be looking at, particularly in terms of small farmers. Is there an issue that needs to be clarified in the agreement that we should be looking at?

[John Masswohl]

To be honest with you, we don't really see any issues, at least in the beef and cattle world. As you say, we don't expect to have large shipments there. Maybe we'll do a couple of hundred tonnes per year. It will have to be halal production. We do have that capability to produce halal beef in Canada. We really don't expect any competition from Jordanian cattle producers. I'm sure there are a few people with a few cows over there, but in terms of it being beef production it's not anything for us to worry about.

[Mario Silva, Liberal, Davenport, ON]

Thank you.

I'll split my time with Shawn.

[The Chair, Conservative, Lee Richardson]

Mr. Murphy, welcome to our committee.

[Shawn Murphy, Liberal, Charlottetown, PE]

Thank you very much, Mr. Chair.

I just want to pursue with you, Mr. Phillips, the point you raised about how right now the agricultural trade with Jordan is a not big issue for obvious reasons because of the existing tariff. But what's your thought on this: if the FTA were implemented, do you have any projections as to how this could grow?

My second, and perhaps more important, question is that you mentioned this could be an entry into a lot of other countries in the Middle East, so I'd ask, do goods flow without impediment to other countries? If you land in Jordan, can you go to other countries or are you stuck in Jordan? Please describe that to me, because it seems to me that the bigger fish is the larger Middle East rather than the country of Jordan, which probably will never be a big issue.

[Richard Phillips]

I think to some degree in that part of the world, and in all parts of the world where there are regions like that, once you have your foot in the door and you establish that you are a fair trader and you are not actually coming in to dump products on the market and displace farmers, for example, and you are trading in a fair process, then it establishes good relationships, and in much of the Middle East a lot of business is built on relationships. Business will grow because of relationships. That's how we see it. That's why it's so important to get in there and build those good relationships with people and that trust. From there it is so much easier to grow a business.

[Shawn Murphy, Liberal, Charlottetown, PE]

The goods would not move from Jordan to another Middle East country. You'd have to establish a trading relationship with the other country, like Bahrain and some of those other countries nearby.

[Richard Phillips]

I have to confess that I don't know about the internal trade and whether they could move to Syria or Bahrain or other countries internally. I'm not exactly sure what the rules would be on the transshipping in there. I apologize for that.

[Shawn Murphy, Liberal, Charlottetown, PE]

Right now, obviously, Jordan is purchasing agricultural products from another country. As you pointed out, Canada is capable of competing with any other country. But who has the market now?

[Richard Phillips]

I would say it's a very price-sensitive market and they will go to where the lowest price is to a large degree. Turkey, for example, produces a lot of lentils and other crops that we would be producing as well. So Turkey would certainly be a major competitor,

So I would say they would first go to their own farmers and then go within the region simply because of the proximity and less freight, shipping, and handling. Only after that do they go outside to, say, the EU, or the U.S. or Canada.

[Shawn Murphy, Liberal, Charlottetown, PE]

But do others among our normal competitors, such as the United States, Australia, New Zealand, have any sizeable market share in Jordan now?

[Richard Phillips]

Of those, the only other country that has a free trade agreement is the United States, which does have some market. But when I was doing the research on this, I found that they do not do a lot of agricultural trade with Jordan.

[The Chair, Conservative, Lee Richardson]

Thank you, Mr. Murphy.

Mr. Laforest.

[Jean-Yves Laforest, Bloc, Saint-Maurice—Champlain, QC]

I believe Mr. Guimond, who is a farmer, is well suited to put questions to our guests.