Thanks very much, Mr. Chairman. Good morning, ladies and gentlemen.
On behalf of the malting industry and its members, we appreciate the invitation today to highlight briefly for you the importance of an economic partnership agreement to strengthen our trading relationship with Japan.
For those of you who are unfamiliar with perhaps the significant economic contribution our industry provides to both farmers and the Canadian economy, let me first describe to you who we are, what we do, give a brief historical perspective on the evolution of our industry, and tell you why, in our view, an economic partnership agreement with Japan is critically important to our industry, our brewing customers, and our Canadian malting barley producers in western Canada.
Canada's malting industry is comprised of four companies. They include the Canada Malting Company, which has plants located in Calgary, Thunder Bay and Montreal; Prairie Malt Limited, which is located in rural Saskatchewan in a small town called Biggar, which is approximately about one hour west of Saskatoon; Rahr Malting, which is situated in a small rural Alberta community located northeast of Red Deer in a town called Alix; and finally we have Malteurop, which is a plant located in Winnipeg.
Canada's malt industry is the second largest world exporter of malt. We are second only to the European Union. Almost two-thirds of our value-added production goes into the highly competitive export market destined to brewers in over 20 countries. We are the largest customer for Canadian malting barley and historically purchase approximately 1 million to 1.1 million metric tonnes annually from farmers via what used to be the Canadian Wheat Board. Historically, our industry accounts for almost 60% of all malting barley sold by the former Canadian Wheat Board every year.
Today approximately 70% to 75% of all barley grown in western Canada is comprised of malting barley varieties with selections and quality parameters greatly influenced by seasonal weather conditions.
In our view malting barley is a specialty crop, and it provides significant economic returns to Canadian barley farmers.
Between 1985 and 1995, we invested over $300 million in building two new plants and greatly increased capacity at several others. We went from exporting just 40,000 tonnes of malt annually to almost 600,000 tonnes during that ten-year timeframe, and since 1995 we've kind of stuck at that number.
Just as an economic note on the domestic side as far as the supply of malt for the Canadian brewing industry is concerned, to give you quick snapshot, we buy about $100 million worth of barley from western farmers just to supply the manufacturing of malt for the Canadian brewing market. That $100 million translates into about $2.5 billion in federal and provincial excise tax just on the tax on a case of beer—so just keep that as sort of a Google reminder.
Our malting members have a long and treasured trading relationship with our Japanese brewing customers. Japan is our largest overseas market and comprises approximately 25% of our entire export business. Japan looks to Canada for purchasing approximately 160,000 tonnes of malt, which is equivalent to about 200,000 tonnes of malting barley annually.
Japanese brewers are not only our customers, but in fact, some of them are also our partners. Japan continues to provide a long-term focus in Canada by investing in our producers and in our barley breeding effort programs. Quite simply, I think it's fair to say that our supply arrangements can be viewed in many ways as a partnership. They recognize our commitment to quality and customer service—our reputation is based on this foundation—and we make every effort to ensure our Japanese customers have security of supply, which is a critically important factor in our business trading relationship with them.
The Japanese brewing industry and their consumers provide significant value to the Canadian malting industry and our Canadian barley farmers. Any loss in our ability to provide a high-quality, reliable, and secure supply of malt at competitive values would be detrimental to our industry, which is currently experiencing difficult times competing and maximizing capacity utilization in today's highly competitive global marketplace.
As a partnering country, we recognize and respect the sensitivities that Japan has within its agricultural sector.
It is our hope that as the negotiations unfold, preferential access for Canadian malt can be made a priority and managed in such a way so as to recognize some of the domestic constraints that are currently faced by the domestic brewing industry in Japan.
Our key message to you today in terms of Canada's international trading agenda priorities is simply about three or four points.
First, Canada's export success and future prosperity is contingent upon the government's recognition and vigilance in ensuring Canadian export interests are not put at a disadvantage vis-à-vis our competing suppliers, such as the European Union, Australia, and the United States.
Second, particularly in light of the aggressive and successful bilateral trade negotiations some of these countries have had with countries such as South Korea, Thailand, and other Pacific Rim countries, these preferential trade agreements will impact on our future ability to remain competitive. In our industry environment, where margins continue to be narrowed, any competitive disadvantage puts our industry at further risk.
Third, this is quite critical and it doesn't refer only to Japan, but negotiations, particularly with South Korea, must be re-engaged and re-engaged soonest. Based on some of the information we received yesterday, that doesn't seem to be quite likely at this point.
An economic partnership between Canada and Japan is extremely critical, particularly in light of the risks associated with preferential access that may be given to competing countries if Canada is not—and I repeat, if Canada is not—included in the Trans-Pacific Partnership negotiations and Japan is allowed entry.
Finally, Japan is a highly respected and valued customer to us. It is an extremely important and critical market for our Canadian malting plants. Our malt exports drive value on all barley exports. We need to ensure that we protect and nurture our brewing partnership interest in this market.
Thank you for your time and consideration today. I look forward to any questions you may have at the end of the discussions.