Evidence of meeting #38 for International Trade in the 41st Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was japanese.

A recording is available from Parliament.

On the agenda

MPs speaking

Also speaking

Sam Boutziouvis  Vice-President, Policy, International and Fiscal Issues, Canadian Council of Chief Executives
Paul Slomp  Representative, Youth Vice-President, National Farmers Union, Food Secure Canada
Diana Bronson  Executive Director, Food Secure Canada
Richard White  General Manager, Canadian Canola Growers Association
Julian Dierkes  Centre for Japanese Research, Institute of Asian Research, University of British Columbia, As an Individual

12:25 p.m.

A voice

You don't?

12:25 p.m.

Conservative

Mike Wallace Conservative Burlington, ON

No, not on the 110-by-130 lot that I have.

I've been there a number of times, and to be frank with you, it wasn't until there was a change in government that there was a discussion about free trade. The previous government that was there for 40 years didn't seem to be interested. To be frank, I was a bit surprised that the DPJ is interested in free trade, but that's its position.

We will be talking to members of the Diet next week, so can you expand a little bit for me about what is happening? You're saying organized agricultural interests are showing some push back in opposition to a free trade agreement. Is that toward all free trade agreements or is that particularly toward Canada? We're also bringing the parliamentary secretary for agriculture with us. Based on what products we produce and what they produce, I thought there was a bit of a synergy there and that it wouldn't be much of an issue. Can you expand on the point you made here?

12:25 p.m.

Centre for Japanese Research, Institute of Asian Research, University of British Columbia, As an Individual

Prof. Julian Dierkes

Yes, absolutely, Mr. Wallace. Thank you.

Yes, you're clearly right. For example, one of the sticky issues for Japan has always been rice, right? That's not an issue with Canada, to the extent that there just isn't much of an intention to export rice in large quantities to Japan. So that's absolutely right.

To be a bit clearer about that, the agricultural interests—particularly the JAA, the Japanese Agricultural Association—are generally opposed to free trade agreements because they see them as a threat to their livelihood. And it's often a livelihood that is protected by trade barriers to some extent—obviously, allowable within the WTO context.

I wouldn't say there's any specific opposition to Canada in this context, and I think you're exactly right that there may be less opposition to Canada as a partner than there would be, for example, to Australia, which might be the comparator that's also in place.

I would say the opposition to a TPP is very strong. So in the context of Japanese discussions, if you will, it might be plausible to think a little bit about a strategy that, if TPP doesn't go forward or at least doesn't go forward quickly, an argument might be then to say, well, let's engage in more bilateral agreements. In that case, Canada looks very attractive, partly because it's perhaps seen as less threatening by the agricultural lobbies as well. It's a very plausible strategy, I think.

12:25 p.m.

Conservative

Mike Wallace Conservative Burlington, ON

I think the point we're going to be making is that we will take both streams at the same time. For the TPP, obviously, Canada is interested in being at the table. So is Japan; so are a number of other countries that are trying to get included in that trade organization planning. But I think the comment, from our perspective, should be that, regardless of how TPP proceeds, we are interested in a bilateral agreement. I think that will be the message.

I do have another question for you about the—and I may be pronouncing it wrong—Keidanren business organization. We're actually meeting with it. I've never met with it before. Can you give me a little bit of a heads up on what to expect and who the members are and what their messages might be?

12:30 p.m.

Centre for Japanese Research, Institute of Asian Research, University of British Columbia, As an Individual

Prof. Julian Dierkes

Yes, absolutely.

You may have noticed that my title is actually Keidanren Chair because 20 years ago members of the Keidanren supplied the endowment that created the position I currently hold.

The Keidanren is your rough equivalent of the Conference Board, if you will. When Mr. Boutziouvis earlier spoke for the Canadian Council of Chief Executives, he gave a joint statement with the Keizai Doyukai. That is a parallel organization for them, but it would be the Conference Board for the Keidanren.

For you, when you meet with the members, you will find them to be very supportive of liberalization of international trade. You may also meet the secretary to the chairman, who is a UBC graduate. So if you want to talk about Vancouver, there'll be plenty to talk about. But you'll find them, broadly, very supportive. I would say, as an organization, it's fair to characterize it as somewhat dominated by large industry, even though it also includes a membership of smaller companies. But it generally speaks most prominently for the interests of large industry.

12:30 p.m.

Conservative

Mike Wallace Conservative Burlington, ON

Unfortunately, Japan has had a rough year, with a number of natural disaster issues. The prime minister is attempting to get the financial house back in order. He's increasing the consumption tax from 5% to 10%. Can you tell me what the political climate is like in Japan? I believe they're facing an election in the fall. How would that affect our discussions?

12:30 p.m.

Centre for Japanese Research, Institute of Asian Research, University of British Columbia, As an Individual

Prof. Julian Dierkes

Prime Minister Noda has not quite staked his future on the consumption tax, but he has made this a big issue. If those measures don't pass, we would probably see the end of his role as prime minister. But then, we've seen a rapid turnover of Japanese prime ministers for some years now, and it hasn't had much of an impact on international relations or the policies the government has pursued. The prime minister can champion particular issues personally, and Prime Minister Noda has taken TPP as one of his causes as well. Still, I would suspect that even a change of government would not make much difference in the discussions over a Canada EPA.

12:30 p.m.

Conservative

Mike Wallace Conservative Burlington, ON

Thank you.

Thank you, Mr. Chair.

12:30 p.m.

Conservative

The Chair Conservative Rob Merrifield

Thank you very much, Professor.

Mr. Easter.

12:30 p.m.

Liberal

Wayne Easter Liberal Malpeque, PE

Thank you, Mr. Chair, and my thanks to both our witnesses.

I wouldn't want Mike, and Gerald Keddy, and Mr. Morin to just talk about Vancouver, Mr. Dierkes. They ought to have mentioned P.E.I., because we're a big tourist destination for the Japanese as well.

12:30 p.m.

Conservative

The Chair Conservative Rob Merrifield

I'm not sure the Japanese eat potatoes.

12:30 p.m.

Liberal

Wayne Easter Liberal Malpeque, PE

As to seed, I'm not sure if everybody understood the point. When most people think of seed, they think of it as something that's going to be planted. The seed that is going to Japan is going to be crushed over there for canola oil. This point should be made. We would like to add the value in Canada. Could you give us a comparison of Japan's tariff on seed and its tariff on canola oil? Do you have those numbers? Do you want to elaborate on that a little?

12:30 p.m.

General Manager, Canadian Canola Growers Association

Richard White

Seed is commercial production of seed, not seed for seeding, so I'm glad you highlighted that.

As to the rate for canola and soybean oil going into Japan, the tariff is 10.9 yen per kilogram—around $55 a tonne. It fluctuates depending on currency exchange rates. The tariff on seed is zero. So right away, you're taxed if you try to ship oil in, and it's cheaper to put the seed in. So that's what commerce does—it puts the seed in and then the Japanese crushers buy it and crush it over there. Corn oil was going in at 5 yen per kilogram, which is less than what soybean and canola oil are subjected to. For sunflower oil, it's 8.5 yen per kilogram. Those are tariff rates on a per-kilogram basis.

We'd like to see those tariff rates converted to ad valorem equivalency. Over time, if you change that to a percentage, the effect of the tariff fluctuates between 15% and 30% of the value of the oil product. It's driven by exchange rates. So you have this uncertainty in the tariff. It should be reduced if not eliminated, and if it is reduced, it should be converted to ad valorem instead of specific rates.

12:35 p.m.

Liberal

Wayne Easter Liberal Malpeque, PE

But we need to be negotiating for zero tariff, at least that's where we need to start.

You also mentioned that there should be parity across all tariff lines. You're thinking of corn, canola, soybeans, etc. Just expand on that a little bit. I know you're talking about ad valorem equivalents, but how do you get that equivalency across the board? Is it based on what the potential oil result would be—or how do you do it?

12:35 p.m.

General Manager, Canadian Canola Growers Association

Richard White

When you convert it to a percentage of the price of the commodity going in there, that's at least the starting point where you can compare apples to apples. They're all on a percentage basis.

The exact calculation, given the differences in the oil content and the structure of the oil versus seed, would be a technical negotiation. I'm not sure what approach we would take. But I think what we would look for is effective equivalency across competing products. For example, we don't want to see canola oil discriminated against, versus soybean, versus sunflower, versus corn. The objective would be to come up with an ad valorem equivalent across the board, if indeed they did have a tariff on those product lines.

12:35 p.m.

Liberal

Wayne Easter Liberal Malpeque, PE

I have two other questions and hopefully I won't run out of time.

Could you, Richard, expand a little more on low-level presence and how important that is? I ask because it's extremely important to us get other products into Japan. I know we export a lot of canola from Prince Edward Island—not to western standards—to Japan and it's non-GMO. But low-level presence is as important.

Mr. Dierkes, you had said that the TPP may be a high priority for the Japanese government, but it's unlikely to get there due to pressure from its agriculture sector. We have an agriculture sector beyond rice. How much difficulty is that going to cause to our achieving our goals on the agriculture side of the negotiations with Japan?

Mr. Dierkes, do you want to start, and then Richard can close off?

12:35 p.m.

Centre for Japanese Research, Institute of Asian Research, University of British Columbia, As an Individual

Prof. Julian Dierkes

No one will ever match the symbolic importance of Anne of Green Gables in Japan, so whatever we might have in the west, you've got everything locked up and we will never compete.

12:35 p.m.

Liberal

Wayne Easter Liberal Malpeque, PE

It's true.

12:35 p.m.

Centre for Japanese Research, Institute of Asian Research, University of British Columbia, As an Individual

Prof. Julian Dierkes

As you well know, agricultural trade is often the sticking point for some of these negotiations, and there are obviously other areas for Canada. Automobiles come to mind in the negotiations with Japan and the like.

But this is clearly a difficult area, and this is really what has kept Japan out of the game of bilateral agreements, in many cases for a long time. There has been an emphasis on multilateral agreements instead. In fact, I suspect that from the point of view of the ministries most supportive of the liberalization of international trade—and that's primarily METI , the Ministry of Economy, Trade and Industry, and this has been the case for some politicians as well—these negotiations are a way of trying to say to agricultural interests that they need to be stepping away from these tariff barriers because it's hurting them in other areas.

As I mentioned before, I think the hurdles are lower in the negotiations with Canada than they are with some other cases, including Australia. This will obviously be a difficult issue for the negotiators to address, and will also be a task for politicians to engage with stakeholders such as agricultural producers. But perhaps the hurdles are lower in the Canada–Japan link than they are in other cases.

12:40 p.m.

Conservative

The Chair Conservative Rob Merrifield

Thank you very much.

Mr. White, you have been asked to answer, but we're out of time. Perhaps the next questioner will allow that answer, but I'll leave that up to his discretion.

Mr. Cannan, go ahead.

12:40 p.m.

Conservative

Ron Cannan Conservative Kelowna—Lake Country, BC

Sure, I will be gracious to Mr. White.

Go ahead.

12:40 p.m.

General Manager, Canadian Canola Growers Association

Richard White

I am just going to follow up on the low-level presence issue.

Japan is quite reasonable when it comes to technical issues regarding GMO traits. They are good to work with, but it is always a risk that Canada may have an expired trait or a trait long since decommercialized. Those traits never seem to make it 100% out of the system. There are always some trace levels of GMO traits that can and do show up in shipments, and that's a commercial risk.

What we would look for in this agreement is to work closely with the Japanese to come up with a policy, both domestically for our country and theirs, for a science-based, commercially reasonable approach to the low-level presence of the expired traits that are still working their way out of the system, so that these do not impact trade.

In a lot of countries around the world, if there is a unapproved GMO event, their current level of tolerance is zero. With the testing technology out there, we are in a world now where you're always going to pick up some trace element of some obscure trait that could potentially block trade. What we'd be looking for is Japan's partnership in developing our domestic policies around how we treat low-level presence, and to try to get the rest of the world to adopt those kinds of policies.

For example, the EU would be a good place as well to try to get this, so we'd have some international standardization of this issue that is science-based and commercially reasonable, because it's becoming a bigger problem. We need to deal with it because it will start to disrupt trade more and more in the future.

12:40 p.m.

Conservative

Ron Cannan Conservative Kelowna—Lake Country, BC

Thanks, one of my questions was going to be on GMO.

Approximately what percentage of Canadian canola is GMO?

12:40 p.m.

General Manager, Canadian Canola Growers Association

Richard White

Well, there's some subtlety between GMO versus herbicide-tolerant.... If you're looking at the new herbicide-tolerant systems, we're well over 90% GMO overall, and for all intents and purposes canola is a genetically modified crop.

12:40 p.m.

Conservative

Ron Cannan Conservative Kelowna—Lake Country, BC

Thanks. For a quick clarification, why are the tariffs higher on canola than on corn and sunflower oil?