International Trade Committee on Nov. 24th, 2011

[Wayne Easter, Liberal, Malpeque, PE]

That's okay. I come from a farm, Mr. Chair.

[The Chair, Conservative, Rob Merrifield]

So do I, Mr. Easter.

[Wayne Easter, Liberal, Malpeque, PE]

In any event, in terms of both the C.D. Howe Institute and AIMS, where would you say the gouging of the public is higher--in the dairy industry, or in the oil industry?

In the dairy industry the most efficient producers are losing money all the time at the bottom end, and it's based of cost of production. Oil gets up to $100, and I think that's $80 over the cost of production in some countries.

How about in the potash industry? At the agriculture committee we learned that it is an administrative supply system, where they try to short the system on potash in order to make greater profits.

So why in these other areas...? Why is it always supply management? How come these other areas are never talked about in terms of gouging the public?

[Don McIver]

Let me have a crack, and I'm sure Daniel would like to get in there as well on this one.

I'm not suggesting that there's gouging going on. All I am suggesting is that in the agricultural supply management side there is a built-in inefficiency. The example that I use, and I've seen talked about elsewhere, of Australia and New Zealand overcoming these issues and having a much more productive and profitable agricultural industry.... As you say, the bottom line—

[Wayne Easter, Liberal, Malpeque, PE]

Mr. McIver, I think you'd better double-check your figures. In Canada, because of the security, our Holstein breed is the one everybody around the world wants. Because we've had the security of an income from the sale of milk, we've been able to put money into the genetics to build the herd.

We produce more per cow. In fact, I think you should go back to look at your New Zealand numbers, because we were looking at them yesterday on another issue. Production has gone down per cow in New Zealand in the last few years. They're a grass-fed industry versus a grain-fed industry. Gerald is right that they are the most efficient in the world in terms of milk per acre, where we are most efficient in milk per cow. We can argue that all day, I guess.

But I would just ask you to look at some of these other industries, maybe raise some issues there, and really look at the facts surrounding the supply management industry in Canada. The fact of the matter--as Bev said to me a moment ago--is we allow more chicken into our Canadian market than the Americans allow into their market. That's the reality, but everybody thinks we have put this wall up. We've been accommodating as an industry. So I'm just saying to look at those facts.

There's a question I want to get to on CETA.

Daniel, you said that a fair bit would mean more competition on intellectual property. I think this is something we're all questioning. The generic pharmaceutical industry says it will cost $2.6 billion more for our health care system as a result. I quite honestly think their numbers are a little high. The pharmaceutical industry says the increased investment for greater IP will mean more research, better drugs, and cheaper drugs eventually.

Where are you in that area? Do you have anything you can provide to us? Is there any worry about sovereignty on some of these competitive issues?

[Daniel Schwanen]

On intellectual property, I have the same type of answer I provided on supply management. We just need more intelligent tools to deal with some of the issues, and we have access to those tools.

Governments in Canada have an overriding interest in making sure that when drugs are available they're available at a price that encourages drugs to be made available in the long run. That requires innovators and people to have good protection for their patents. It also makes sure that governments use their purchasing power to ensure that drugs needed for public health are available.

We also provide a number of R and D tax credits to people who perform research here. To me that means Canadians have a public interest in the results of that research to make sure research doesn't get held up and that it gets disseminated. So there is inevitably a trade-off between the two.

But I'm not quite sure, for example, that we are intervening in the market for patents the way we should. In other words, why does government not have a proprietary interest in these patents?

In short, like Don, I think we need to bring our standards to an international level. But there are other tools--whether it's intervening in the patent market or through competition policy--to make sure the product gets to the consumer at the appropriate price so there is no price-gouging.

[The Chair, Conservative, Rob Merrifield]

Thank you very much.

Mr. Hiebert.

[Russ Hiebert, Conservative, South Surrey—White Rock—Cloverdale, BC]

Thank you.

I'm going to follow up with questions on both these recent topics, intellectual property and supply management, more so on the latter. I also wanted to give you a greater opportunity to respond to one of the comments that was made by my colleague and also by the member from the Liberal Party, and that is why would we want to put our Canadian producers at a systemic disadvantage?

If it's true that the U.S. subsidizes their supply-managed or their agricultural industries behind the scenes, and if it's also true, as we know, that the New Zealand and Australian farmers work in a very different environment--they have a climate advantage, they don't have to keep their cows inside, they can grass feed them--that being the case, why would we want to put Canadian farmers at both of those disadvantages? What's the benefit? Sixty cents a litre--is it worth it?

[Daniel Schwanen]

It's worth it for me. I have a nine-year-old. I love milk. I love cheese. I buy lots of eggs.

[Russ Hiebert, Conservative, South Surrey—White Rock—Cloverdale, BC]

But if it means the end of the industry....

[Daniel Schwanen]

No, it does not mean the end of the industry. When we opened our wine industry to competition from the U.S. under NAFTA, everybody was predicting the end of the industry. It's flourishing in Ontario and B.C. It doesn't need to mean that at all. If we have competitive disadvantages of the kind Mr. Easter mentioned with respect to fuel, potash, climate, needing barns when others don't, let's address those more specifically but not protect against competition, especially when opening up to competition would mean that consumers and users would tend to be forgotten in these discussions. They would pay a significantly lower price, which for some people means a lot.

I see advertisements from the milk producers saying milk is such a healthy thing. It is. I love it. Why keep the price artificially high? That's my question. As has been mentioned, other countries are using other ways of supporting farms that seem to be more acceptable to their trading partners.

[Don McIver]

What I would like to come back to are the economic fundamentals of the whole issue. I do not like any type of distortion built into any product market, whether or not the oil market or the potash market is distorted. As a free-market economist, I don't like that. I would prefer to have a level playing field across the board.

That may raise the suggestion that I'm somewhat naive in the real world, because our trade competitors are actively engaged in destructive practices and have been for a long time, but that's what these negotiations are about. Not just these negotiations, all trade negotiations are about trying to get free trade, which has never existed, but that's the objective, to eliminate these distortions and try to have a level playing field. If it turns out that the Australians have a fantastic advantage in terms of producing cheese, is there any reason why we cannot use our tremendous advantage, perhaps in higher education and R and D, and concentrate on those areas and trade those to the Australians and import cheese? We'll be better off.

I don't want to leave the impression that I am ignorant of a lot of the distortions that are out there in our trading environment. I'm just in favour of finding the way. That's why I said for me it's not about the free trade agreement, it's about what's good for Canadians.

[Russ Hiebert, Conservative, South Surrey—White Rock—Cloverdale, BC]

In the paper you submitted, Mr. McIver, you covered four areas, as you did in your discussion, and I think some are worth repeating. You said government procurement saved European nations at least 30%. That's substantial. That's a huge saving. In terms of labour certification, I haven't heard a lot of opposition to providing opportunities for labour mobility and recognition of professional credentials, because you're right, we do have a declining population and we need access to those bright minds. We've covered supply management.

The only one left is the IP regulations. You make the statement in your paper that unless Canada endorses and adopts broad intellectual standards of property protection, a lot of bad things are going to happen. What are those broad intellectual standards of property protection you're referring to?

[Don McIver]

I'm not professing to be an expert in patent law by any stretch, but some of the areas that have been brought to my attention are on the pharmaceutical side. For example, one area is how long you're able to keep information proprietary that you, as a producer, generated to support your patent case, instead of having others simply walk in and use the evidence that you've shown, with respect to the efficacy of your product, to prove the efficaciousness of their product.

One of the other things that comes to mind is, again, in the pharmaceuticals, where you have such a lengthy process of testing by regulatory agencies before a product is actually allowed on the market. The patent protection period needs to encompass when the clock needs to start.

[Russ Hiebert, Conservative, South Surrey—White Rock—Cloverdale, BC]

That's the issue, absolutely.

The question is, do we simply mirror the standards elsewhere? Is that what you're suggesting?

Mr. Schwanen, do you want to comment on this?

[Daniel Schwanen]

Yes, I think we need to bring those kinds of timing issues up to international standards.

But what I was trying to say is that we want the effects of this to be mitigated by other tools we could use to make sure. For example, I know everybody is thinking about pharmaceuticals, but too much patenting is not necessarily a good thing either. If you create patent tickets, people can't innovate because they're infringing on somebody else's innovation. We could play with that, as the U.S. has done in their recent patent reform, for example, to make sure we don't use a patenting system to prevent other people from using your own innovation down the road as the basis for something else. So those are the kinds of tools....

We can also look at the limit and at using competition tools to make sure products can get to the market efficiently once they're past the competition, so that you don't use your patent in an anti-competition way by preventing others from using your innovation and spreading it to the market.

[The Chair, Conservative, Rob Merrifield]

Thank you very much.

We're finished our first round of questioning and we're going into the second round. We have two questioners and I'll ask each of them to take a couple of minutes. But I'm going to use a chair prerogative right now and just ask the witnesses to expand on some of their testimony.

You came to this committee suggesting supply management.... You may have rattled us a little bit, in the sense that you have a number of dairy farmers or farmers around the table.

We've talked a lot about Australia and the United States, but we haven't focused in on Europe. I find it strange that in your testimony you've attacked supply management in Canada, yet you have not attacked supply management in Europe or the agricultural subsidy in Europe. If you could eliminate all of those, then I think you'd get a much softer response to playing on a level playing field. But I find it striking as to why you never addressed that when we're talking about CETA.

[Daniel Schwanen]

I think I'm going to have an easier time than Don will.

[Some hon. members]

Oh, oh!

[Daniel Schwanen]

Because in fact I didn't mention supply management. I said that imports were good, and that does apply to the milk—

[The Chair, Conservative, Rob Merrifield]

If they're not subsidized.

[Daniel Schwanen]

I said there just happened to be a lot of questions about supply management.

Just to be clear, in the fuller paper, of course I'm saying that Canada should get something in terms of market access, whether it's for fish, beef, or other products, in exchange for anything we might give—which, in my view, at the moment would be only marginal. I did say I think these issues are coming down the pipe internationally, on even bigger files than that of the EU, and that it would be a good time to start thinking about alternative strategies to promote and support the people who are currently under the system.

[The Chair, Conservative, Rob Merrifield]

Okay. In fairness, I'll let you stew on that question for a bit.

I'll leave two minutes for Mr. Côté, then two minutes for Mr. Shory, and we'll wrap it up.

Go ahead.

[Raymond Côté, NDP, Beauport—Limoilou, QC]

Thank you, Mr. Chair.

Gentlemen, I am going to dive right in, with no preparation.

Canada's trade balance has been getting worse for years. It doesn't look like any free trade agreement is improving that situation. We could even ask ourselves whether they are helping to make the trade balance worse.

Recently, Mr. Myers, the president of Canadian Manufacturers and Exporters, told me, in terms of trade with Europe, that a lot of trade was going to be done between branches of the same company.

I will grant you that we hear a whole lot of generalities, for example that the eventual benefits of a free trade agreement will possibly be in the order of $1000 for each family in Canada. That really is a simplistic view. It's the same as dumping ten loads of topsoil at my house. I am just interested in the final result; I don't want to know what the wind and the rain will do to the topsoil.

Can you tell me which groups in Canadian society are going to benefit the most from a free trade agreement between Canada and Europe?

Surprise me, gentlemen.

[Don McIver]

Maybe I can shoot at that one.

If you get a chance to look at the paper, I think you will see that I stress that I understand that the European-Canadian trade agreement is essentially small potatoes. Any of the numbers we look at say that less than 1% of Canadian GDP is what an agreement would be worth. We don't know, because we don't know what the agreement is. But that is a one-off thing. It is not 1% per year; it is one-off once implemented.

It is small. It is the illustration value that is more important than anything else. It is important for us to be clear that we're working with the Europeans and with the Americans and use that as a means of getting to the next level, which is the Asian.