International Trade Committee on May 29th, 2012

[Allen F. Roach]

A good point is the hard shell versus the soft shell. A lot of our product that we sell—and you know Nova Scotia and the difficulties they have around the sale of lobster—is that purchasers, buyers, automatically say it's a soft-shell lobster. Well, most of the lobster, pretty well all the lobster, that comes out of eastern Canada is hard shell and was being sold as soft shell. That hurts us greatly. We need strong branding of our product. That certainly will put the value in our product that should be there.

[The Chair, Conservative, Rob Merrifield]

Thank you.

Your time is gone.

We're headed into the second round.

I want to let the committee members know that on our agenda we had a little bit of time for business. We'll do that on Thursday.

We'll go right to one o'clock with our witnesses.

Mr. Sandhu, you have five minutes. Go ahead.

[Jasbir Sandhu, NDP, Surrey North, BC]

Thank you.

Professor Tiberghien, I want to follow up on my colleague's question regarding a trade deficit that has ballooned over the last six years, especially in manufactured goods. We've seen hundreds and thousands of jobs being lost in Canada over the last number of years.

What is wrong with our trade policy? How can we reduce that structural trade deficit in manufactured goods? What can we learn from our experience that we can negotiate in the new agreements with other countries?

[Prof. Yves Tiberghien]

This is always a difficult question. There's no magic recipe. What we seem to see from some countries that are quite successful with this, that manage to keep a strong manufacturing base even with high labour costs, say Japan, or Korea, actually, is they keep moving upwards in the value chain.

The key for a country like Canada is to complement the resource and the commodity base, which is still a great asset, with more developments in industries of tomorrow, knowledge-based industries. That can be done by joint investment with companies from Asia in particular, where growth is. It can be done with a bit more industrial policy.

If you look at what's working in Asia, in Korea or Japan or Singapore, there is a bit of industrial policy there that's sometimes successful—often successful. It would be seed money for R and D, making sure we invest a lot in innovation in R and D, etc., to develop a base beyond the traditional manufacturing base. It's sort of natural in a global division of labour that the number of jobs in auto manufacturing will not go up. They may go down gradually a little bit. What matters is to create other manufacturing and high-value jobs in other industries, the next wave of industry.

I guess this means having strong universities, strong research, a strong innovation base that can then span out, and then good laws and policies that encourage venture capital and innovative companies. I think that's the highway. Then there's being a key player, a very network player, with a lot of partners, not just attached to the U.S. economy, but developing a lot of alternatives, both east and west, particularly where the economies are rising, that is in East Asia and India.

[Jasbir Sandhu, NDP, Surrey North, BC]

You talked about having more students in our universities, especially foreign students, and I see the P.E.I. group here is also wanting to attract foreign students to our universities.

My understanding is there have been cuts to consular services in Tokyo that provide information and visa applications for students. I'll ask Minister Roach what sort of impact would that have on us attracting students if the consular services are being cut.

[Allen F. Roach]

Certainly, and I think we pointed it out in our testimony, in order for us to bring those students here, that has to be open, it has to be transparent, and it has to be...I won't say quick, but there has to be a good flow in order for that to happen. We certainly would want to see that. If there are cuts, I think that would have an impact.

[Jasbir Sandhu, NDP, Surrey North, BC]

Would you say we have a transparent process and a relatively quick process the way it's set up right now?

[Allen F. Roach]

In terms of students, the process there now seems to work well. We just have to work with it more and certainly have a better understanding of what the Japanese government has in terms of allowing that to happen and in working with them.

[Jasbir Sandhu, NDP, Surrey North, BC]

Do I have a little bit of time?

[The Chair, Conservative, Rob Merrifield]

One very quick one.

[Jasbir Sandhu, NDP, Surrey North, BC]

Professor Tiberghien, could you let us know what sectors would be the winners in this trade agreement and what sectors you think would be the losers, especially on the Canadian side?

[Prof. Yves Tiberghien]

First we have to separate short term and long term, because it will evolve over time as you will spin out all kinds of outcomes.

On the winners side, we should expect agriculture, beef, seafood, etc., education services, and then it's a matter of specifics. Everything will depend on the specific negotiation and outcome. Certain service sectors probably will be able to move forward and will open up. Maybe it's insurance. Maybe it's legal services. That will all be a matter of specifics, which ones we're able to push with Japan and others we are not.

On the losers side, it's hard to identify. I read that on the Japanese side what they hope for the most is the removal of that 6% tariff on imported cars. That's what they target. They also target more access to commodities. The access to commodities will not create losers in Canada but rather divert a little bit from the U.S. and from China to Japan. Maybe here the losers are not in Canada, they're elsewhere.

On the auto side, I'm not sure if the 6% removal, especially graduated over time, will make such a difference. Often the exchange rate fluctuations are bigger than that. I don't know if it will have a real impact in terms of jobs. I'm sure it will be framed like this in Canada, agriculture versus manufacturing.

In general I think the losers will be outside. FTAs tend to create advantages for their two partners on the backs of third parties, so it will be in Australia, it will be in China.

[The Chair, Conservative, Rob Merrifield]

Thank you very much.

We'll now ask Mr. Holder to finish this off. The floor is yours.

[Ed Holder, Conservative, London West, ON]

Thank you, Chair.

I'd like to thank our guests for attending. It's only appropriate, coming from the 10th largest city in Canada, that I be the one to finish off our questions today. I appreciate the quality of the comments from all of our guests.

I'd like to clarify something about these applications. Members around the table may not be aware of this, because it's relatively recent, but we are now turning around electronic visa applications for Japan within 10 days. I just want to make that clear so there's no misunderstanding.

Mr. Roach, having a Cape Breton mother means that you and I are almost related. Actually, though, I have a serious question. One of the things that you talked about was the impediment to exporting processed canola oil versus seed. Can you help me understand that a bit better? What would happen if you were able to export this as a processed product?

[Allen F. Roach]

I think we touched on that earlier. If we had that same agreement the United States has on the quality, acceptance, and certification of the product, the value-added would reduce the cost of transportation. It would allow us to produce a finished product that would create employment on Prince Edward Island and add to our GDP. If we could create a canola market and make that market greater, we could triple our output of canola oil in a period of one year. We have the capacity to do it. We now have a plant that will crush canola to the standards that they require. These are things we can do. We just need to be able to get—

[Ed Holder, Conservative, London West, ON]

So you're good to go, then.

[Allen F. Roach]

We are good to go with that product, and it is a niche product in Japan.

[Ed Holder, Conservative, London West, ON]

Mr. Tiberghien, one of our colleagues asked about the will of Japan to do this, the issue of agri-products being one of the challenges. Frankly, in every deal I've been involved with, that seems to be the primary point at issue.

I have a couple of questions. Based on what Mr. Roach just said with respect to a specific agri-product, what's your sense, based on your experience, as it relates to this particular product—and that might be too specific.

Secondly, and maybe more critically, what's in it for Japan to do this deal? Why do they need this, in your view?

[Prof. Yves Tiberghien]

What I've often heard on the Japanese side is that this is an interesting trade deal. There is not strong opposition in Japan—unusually—because there is this complementarity in agriculture. There is no major risk for Japanese agriculture, but there's a lack of strong backers. So this was the issue for a long time. But in the wake of the visit of the Emperor last year, there has been a will to upgrade the relationship between Japan and Canada, and this is seen as part of that upgrade, that partnership. So there is a window there. That's the big picture.

As to canola, I don't think there will be major opposition, though the refiners of oil in Japan might object. There's an interesting anecdote I can relate. It's not for P.E.I., with its GMO-free canola, but for the bigger amount of canola being exported from Canada to Japan. It is genetically modified canola, and it has been a sensitive question in Japan. Some of the canola seeds would fly off the trucks between the harbour and the refining factory, and then they would grow in the fields and they couldn't be killed by Roundup, because they were Roundup Ready. There were worries in Japan, and NGOs have been active in pointing out that there could be gene flow from the canola to the vegetables growing nearby. So suddenly, sending refined canola, as oil, would remove the problem and you could have NGOs on your side.

[Ed Holder, Conservative, London West, ON]

That's interesting.

[Prof. Yves Tiberghien]

It would be seen as an advantage, right? Having the NGOs backing it and sending support would move politicians. So it can work in different ways.

[Ed Holder, Conservative, London West, ON]

Does the agricultural industry in Japan understand the science of GMOs in Canada? I thought I heard the comment earlier—I certainly did— to follow the science. I wonder sometimes. We get so consumed with pressure groups that will challenge, frankly, what is good Canadian science.

[The Chair, Conservative, Rob Merrifield]

I'll ask for just a very quick answer to that.

[Ed Holder, Conservative, London West, ON]

Thank you.

[Prof. Yves Tiberghien]

It's a big story, but very quickly, the Japanese public mistrusts GMO. They are not sure that we know all the long-term health hazards, and they're worried about environmental contamination. So there is a general unease among the public, like in Europe, and they don't call it a science.