International Trade Committee on Nov. 15th, 2011

[Andrew Casey]

Yes.

[Ed Holder, Conservative, London West, ON]

Was it 5% to the EU?

[Andrew Casey]

Correct.

[Ed Holder, Conservative, London West, ON]

And most of the balance went to Asia?

[Andrew Casey]

Yes, and then there's another small piece that goes all around.

[Ed Holder, Conservative, London West, ON]

From that standpoint--and you talked about us coming out of this recession leaner, meaner, and stronger--what are the possibilities in terms of growth potential for the EU? How do you see that in terms of your industry, it being as significant as it is for Canada, in terms of the number of people directly and indirectly employed?

[Andrew Casey]

Generally speaking, the EU is what you would call a mature marketplace. They're not growing exponentially. Our market share has shrunk over the past couple years. The important part about this deal is that they do import, from non-EU countries, about $23 billion worth of product. We're only $1.4 billion worth of that. Within that tranche, there's probably a fairly significant ability to grow, and of course one of the things that's restricted our growth is that 7% tariff on the building products side, the wood panel side, that's rendered us relatively uncompetitive vis–à–vis our competition coming in from outside of the EU on those product lines.

That would be an important part to help grow a little bit, but it will not be the holy grail for the industry. If we're going to look at the greatest potential for growth, it's going to be east into Asia and India.

[Ed Holder, Conservative, London West, ON]

When we get further along, I'm sure we'll have you back to have that discussion.

You touched on market diversification, and you talked about the bioeconomy as a way to extract more value. Can you expand on that and help me understand it a bit more, please?

[Andrew Casey]

Absolutely. The traditional lines of business that the industry's been in for many years have been the lumber, the pulp, and the paper.

A tree, of course, can now be broken down into far more chemical-like components. One of the key aspects that the industry has been pursuing started with getting into the green energy business, which is using our waste material that comes out of making the pulp and paper—the sawdust and bark and chips of that nature. What doesn't get put into pulp or into oriented strand board then gets burned and you can make cogeneration power, which is basically using the heat to heat water to generate steam to power the plants. Most of our energy now, about 67%, comes from renewable biomass material.

The other part of this, which we're pursuing aggressively, is that you can essentially break a tree down—and we're getting way beyond my expertise in some respects—and turn it into anything that you could use plastics, steel, or metal for. You could make it as strong. To give you an example, one of our member companies, Tembec, has the worldwide patent for a thing called three-dimensional pulp. When you think of paper, paper is very strong in two dimensions. You can pull it one way, and you can pull it from the top, but if you pull it this way, it will rip in half. They've developed three-dimensional pulp so that you can't tear it that way. The process is one that can now be taken and moulded into any shape or form you want. You could make car parts or airplane parts; anything that you would use aluminum for, you could make with this thing. Of course, it's renewable and uses less energy.

Essentially, going into that—bioeconomy, bioproducts, biochemicals—all of that can be rendered from a tree. In a sense, you're going to end up using 100% of the tree that you pull out of the forest.

[Ed Holder, Conservative, London West, ON]

Thank you.

I would like to move to Mr. Pomerleau, if I may.

On two comments you've made, I just want to reinforce them if I can. In one, you commented that you've been very pleased with the consultations you've had from the beginning in CETA discussions. I think it's important for the committee to be aware of that.

The second was touched on earlier, but I want to reinforce it. It was that while the market in the United States in terms of pork was at one point 75% and is now down to 32%, that is not at the exclusion of value of exports to the United States. In fact, you said that exports actually doubled. Did I hear you right? So we've gone to less than half in exports in terms of percentage, but we've actually doubled the amount of value to the United States.

[Jacques Pomerleau]

That's true.

[Ed Holder, Conservative, London West, ON]

What do you credit that to?

[Jacques Pomerleau]

To the fact that in the early 1990s we specifically established CPI to diversify away from the U.S. market. It was a concerted effort by the industry to develop markets like Japan, to develop all the promising market opportunities, because at the end of the day what we have to realize is that we have to sell all the parts of the pig, and some markets are more valuable than others for some parts. For example, we are very pleased to be able to open this to China, because Canadians are not usually fond of offal. So you need all the markets for that.

But on the EU, where it's become very important for us is the fact that the EU is a major market for legs and hams, while that cut is always in surplus in Canada, bringing down the overall value of the pig. That's why the EU is so important for us.

[Ed Holder, Conservative, London West, ON]

It's interesting that you mention this from your standpoint. By the way, compliments to free trade with the United States. That's all I can say. There's no coincidence of timing, obviously, between the free trade deal of the United States and the success of the pork industry.

You mentioned that the EU could be in the top ten and possibly the top five. With a population of 500 million, that feels a touch.... When you said “top ten”, my first reaction was that it felt a bit conservative, and as much as I like that word, it struck me as being a little reserved. Why so conservative in terms of your estimates? Also, how long do you think it will take to get into the top with the EU being the market of choice in the top five?

[Jacques Pomerleau]

It will depend on the agreement we reach

[Ed Holder, Conservative, London West, ON]

That's fair enough.

[Jacques Pomerleau]

If we only get a quota of 25,000 tonnes, I don't think we'll go anywhere.

[The Chair, Conservative, Rob Merrifield]

That's very good. Thank you very much.

[Ed Holder, Conservative, London West, ON]

Thank you.

[The Chair, Conservative, Rob Merrifield]

Yes, that is an interesting word.

[Voices]

Oh, oh!

[The Chair, Conservative, Rob Merrifield]

Mr. Easter.

[Wayne Easter, Liberal, Malpeque, PE]

Yes, it is a troublesome word indeed.

Thank you, folks, for coming.

When Minister Fast was before the committee, he talked about how the benefits of the CETA agreement would be immense and he said that they would open up new markets for a number of agricultural products, including beef and pork. Yet when the negotiator was before the same committee, he said there had been no in-depth discussions with the EU as yet with respect to beef and pork.

Can you enlighten us? Where is this at in terms of the negotiation for beef and pork? I mean, we recognize that the Europeans have sensitive commodities, as do we, but do you know where discussions are at?

[Jacques Pomerleau]

We know exactly where they're at. We were warned from the very beginning that pork would be one of the very last items to be negotiated with the EU, because it's very sensitive. Therefore, right now we will be working in the next couple of weeks with our negotiators to develop a position, line by line, in terms of duties and in terms of quotas. We are working with them very closely.

[Wayne Easter, Liberal, Malpeque, PE]

Okay, so that's forthcoming.