International Trade Committee on June 5th, 2012

[The Chair, Conservative, Rob Merrifield]

I want to thank you very much, Mr. Tak and Mr. Ilasz, for the great testimony and great questions. I believe you've helped our committee get a better grasp of a situation, a potential, that is there for an economic partnership agreement with Japan.

With that we'll suspend and set up for our teleconference in our next segment.

Perhaps we'll be able to try some of Mr. Ilasz's—

[Ken Ilasz]

There you go.

[The Chair, Conservative, Rob Merrifield]

He has us actually intrigued with what kind of a product he's selling. With that we'll suspend.

[The Chair, Conservative, Rob Merrifield]

I would ask members to take their seats and we'll call the meeting back to order.

We'll start our second hour of presenters as well as questions and answers. With us, I believe, both by video conference, we have from the Government of British Columbia, Dana Hayden, deputy minister from the Ministry of Jobs, Tourism, and Innovation.

Dana can you hear us?

[Dana Hayden, Deputy Minister, Ministry of Jobs, Tourism and Innovation, Government of British Columbia]

Yes, I can hear you, thank you.

[The Chair, Conservative, Rob Merrifield]

Perfect, we just wanted to test that.

We also have, from the Grain Farmers of Ontario, Henry Van Ankum. Can you hear us, Henry?

[Henry Van Ankum, Chair, Grain Farmers of Ontario]

Yes, I can hear you.

[The Chair, Conservative, Rob Merrifield]

Very Good. Our communications are up and you also have with you, Erin Fletcher, manager of public affairs. We can't see her, but nonetheless we know she's in the room.

[Henry Van Ankum]

Yes, she is.

[The Chair, Conservative, Rob Merrifield]

Henry, we'll start with your presentation first. The floor is yours, sir.

[Henry Van Ankum]

Good morning. Thank you, Chair, members of the committee, and staff, for providing Grain Farmers of Ontario the opportunity to speak about the opportunities for Canada's farmers that will be gained through greater trade with Japan.

I am Henry Van Ankum, a farmer from Alma, Ontario, and the chairman of Grain Farmers of Ontario—a farm organization representing the 28,000 corn, soybean, and wheat farmers from Windsor to Cornwall, and as far north as Thunder Bay. Our members produce over nine million tonnes of grain on five million acres. Our production generates $2.5 billion in farm gate receipts, results in over $9 billion in economic output, and over 40,000 Canadian jobs.

In the Canadian context, Ontario is the largest agriculture province, with $9.3 billion in sales. In grain production, we are the third largest producing province after Alberta and Saskatchewan. Ontario exports grain to many regions of the world, with soybeans being our largest export crop. For more information, please refer to the pages of the handout you've been provided with.

As you can see by the map on the third page, Japan is our second largest market for soybeans after the EU. However, quantities can be deceiving when it comes to soybeans. There are distinct value-added differences between Europe and Japan when it comes to market needs, and Japan is a significantly higher value market on a per tonne basis for Canada.

In Ontario, farmers produce two types of soybeans: crush beans and food grade soybeans. Soybeans for the crush market are processed domestically into two products: soybean meal to feed livestock, and soybean oil for food products like cooking oil and industrial products such as lubricants, paint additives, and biodiesel.

These high-yielding soybeans are produced in high quantities across the province, require less on-farm management than food grade soybeans, and are sold at world market prices. These crush beans, as we call them, are the majority of our exports to the EU.

The food grade soybeans produced in Canada set us apart from the rest of the world in the eyes of the Japanese. Food grade soybeans are exported as a whole bean, typically in containers or bags, and are used for popular Japanese foods such as tofu, miso, and natto.

Canada's 350,000 tonnes of soybeans sold into Japan in 2011 represents an approximate 38% share of the Japanese food grade market. Soybean exports to Japan return over $200 million annually to the Canadian economy.

Canadian soybeans are known to be the highest quality in the world because of the care our farmers take to produce them, and guarantee their quality and consistency. Japanese buyers are particular, and our value chain has adopted a management protocol called the Canadian identity preserved recognition system, or CIPRS, created by the Canadian Grain Commission to communicate our quality commitment to our buyers. Canadian farmers are paid a premium to meet all of the expectations for crop management, segregation, and end-quality, as outlined in a buyer's contract.

Typical farm protocols, in a food grade soybean contract for Japan, will include the use of certified seed, mapping of fields to identify the location of the soybeans for the buyer to inspect at any time during the length of the contract, tracking of all product applications, clean equipment, and a GM-negative sample taken at the elevator upon delivery.

When trade missions visit Japan, or the Japanese tour Canadian farms, it is the soybean handling protocols that are of greatest interest to Japanese buyers. On the last mission to Japan in February of this year, we learned the Japanese food companies are very happy with the quality and consistency of the Canadian soybeans they are receiving.

As I said, Japan imported 350,000 tonnes of Canadian soybeans in 2011. This is a number which has steadily grown since 1965, when the first shipment of Canadian soybeans was sent. The majority of the Canadian soybeans sold to Japan are from Ontario and Quebec, while production in Manitoba is steadily growing also.

Other major exporting regions of food grade soybeans to Japan are Argentina and Brazil. The U.S. is the largest exporter of soybeans to Japan. However, 85% of these exports are for the lower value crush market. U.S. food grade exports to Japan are declining due to an increase in the preference for Canadian soybeans by Japanese buyers.

Another opportunity for Canadian farmers is in natto bean production, smaller soybeans that are used for a traditional fermented dish. Japanese processors are interested in switching from using Chinese beans to Canadian suppliers. Over the past seven years, the Japanese have steadily increased their use of Canadian beans over Chinese imports. The reason is the consistently high quality of Canadian natto beans we are able to deliver year after year in contrast to the inconsistent quality of the Chinese natto beans.

The last chart in the package illustrates the growth of the soybean industry in Canada over the last 10 years, especially with respect to export markets. Both yield and acreage have increased over this timeframe. Soybean yields have increased from an average of 32 bushels an acre in 1981 to over 45 bushels an acre in 2010. The acreage of soybeans in Ontario has also increased over this time period from 680,000 acres in 1981 to 2.4 million acres last year. This chart illustrates quite well the ongoing need for international market development.

Japan is a significant market for our farmers and one that returns high premiums to the farm gate. There are few trade barriers today between Japan and Canada, and our organization encourages participation in both a free trade agreement and the Trans-Pacific Partnership agreement to ensure there are no barriers imposed in the future. We are pleased with the efforts to increase trade with Japan additionally because it will provide a positive opportunity for other Canadian commodities, namely pork and beef, where we can increase our opportunities for feed sales here in Canada.

In the future, we encourage the Canadian government to pursue trade agreements with other Asian countries as well as Japan, including China, Thailand, Taiwan, Vietnam, and South Korea, where there is significant export growth potential. South Korea especially has very high tariffs on soybeans.

In closing, I thank you for the opportunity to speak with you today. A free trade agreement has the potential to increase exports of Canadian agricultural goods, both soybeans and livestock, to Japan, which is good news for Ontario's farmers. An increase in the demand for Ontario's higher value production will result in job creation and the growth of our economy.

I will do my best to answer any questions you may have.

[The Chair, Conservative, Rob Merrifield]

Very good.

Thank you very much.

We'll now move to Dana Hayden's presentation. The floor is yours, madam.

[Dana Hayden]

Thank you very much, Mr. Chairman.

I am Dana Hayden, the deputy minister of the Ministry of Jobs, Tourism and Innovation in the Government of British Columbia. It is certainly my pleasure to be here on behalf of the B.C. government to speak with you on the topic of the Canada-Japan economic partnership agreement. I would like to provide the province's perspective on these negotiations, a little bit about our interests, and of course, answer any questions you have.

I also have with me today Don White and Janna Jessee, whom I may call upon from time to time to help answer your questions.

The province appreciates the opportunity to appear before the committee. We are very pleased to see the committee is taking on this important study. B.C. is also very pleased that Canada is engaging in the Asia-Pacific free trade negotiations. For a trade and investment-dependent country like Canada, we need to keep up with other countries that have already concluded free trade negotiations with Asian partners. However, Canada doesn't yet have any formal bilateral free trade agreements with Asian countries, and it's absolutely essential that Canada sign-off and implement one in Asia.

As you know, British Columbia is Canada's Pacific province. B.C's jobs plan, our economic strategy, is called “Canada Starts Here”. There is a reason for that. British Columbia is the entry point for most imports from Asia and most exports to Asia. We believe British Columbia represents a huge opportunity for Canada as a whole in terms of trade negotiations and agreements with the Asia Pacific.

We also have long and exceptionally strong ties with Japan that extend well beyond our economic interests, though they include them. We share strong cultural ties. The Japanese-Canadian community in B.C. stands at 41,000, based on 2006 census data. Almost half of Canada's population of Japanese ethnic origin lives in B.C., which is more than any other province. These cultural ties are strengthened by students who come to study in B.C. from Japan. In 2009-10, there were 11,100 Japanese students who attended B.C. schools and institutions, and they contributed approximately $160 million to the B.C. economy.

Japan is British Columbia's largest market in Asia and for international visitor entries as well. In 2010, more than 127,000 people arrived in B.C. from Japan, which is about 54% of all Japanese visitors to Canada. Of those, 105,427 visitors stayed overnight in British Columbia at least one night, and spent an estimated $125 million. From a cultural, tourism, and education perspective, Japan is a very important market for B.C.

In terms of goods, Japan is our third largest export market behind the U.S. and China, with 14% of British Columbia's goods and exports shipped to Japan. B.C. is the largest exporter to Japan amongst the provinces and territories. In fact, B.C. exports to Japan represented 44% of the Canadian total. The importance of B.C.'s relationship with Japan was reinforced by our premier's recent mission to Japan, which yielded 25 business deals and partnership agreements, valued at more than $500 million.

It is because of these ties and the potential for them to be even greater that the province has been pressing the federal government for many years to seek closer economic relations with Japan.

Canada as a whole stands to benefit enormously from a free trade agreement with Japan, with a potential increase in GDP of an estimated $3.8 billion U.S. to $9 billion U.S. It is unclear how this will translate at the regional-provincial level, but it does suggest that British Columbia has a great deal to gain. That is certainly our perspective on a trade agreement with Japan.

B.C. already has good trade relations with Japan. I have given you an example of the value of the exports and the cultural connections we have with Japan, but there are a number of ways that a free trade agreement with Japan could improve market access for B.C. producers of goods and services.

The province is particularly hopeful that a free trade agreement would reduce the number of non-tariff barriers that affect products such as wood building materials, beef, and tree fruits.

A free trade agreement would significantly reduce or eliminate remaining tariffs, including those applied against a wide range of forest, seafood, and agrifood products. It would improve market access for service providers by, for example, removing restrictions on air services and removing commercial presence requirements. A free trade agreement would improve access to procurement opportunities beyond the access currently enjoyed through the agreement on government procurement.

We also are very interested in LNG exports to Japan, and it was a priority of our premier on her recent mission there. We believe that a free trade agreement with Japan would provide British Columbia and other provinces, such as Alberta or Saskatchewan, with natural gas resources with the opportunity for increased investment in our provinces because Japan is very interested in LNG imports to supplant their nuclear capability after their earthquake and tsunami challenges of last year.

The Province of B.C. is initiating broad consultations and we’re doing our own analysis to determine where to focus our efforts as negotiations get under way. The examples I've given you are top of mind for us, but as we proceed with discussions with our own stakeholder groups in British Columbia, I'm sure we'll be able to identify more.

While we don't yet know the shape that the negotiations will take, B.C. is looking forward to being a full and active participant in the negotiations. We have greatly appreciated the federal approach to the CETA, the Canada–European negotiations, where the provinces were in the room during negotiations, and we'd like to see this sort of a model continue.

I'd like to thank you very much for this opportunity. I would be happy to answer, or try to answer, any questions that you might have.

[The Chair, Conservative, Rob Merrifield]

Thank you very much, both of you.

We'll now move to the question and answer part of the meeting.

We'll start with Mr. Davies, for seven minutes.

[Don Davies, NDP, Vancouver Kingsway, BC]

Thank you, Mr. Chairman.

Thanks to both witnesses for taking time to share your opinions with us today.

Ms. Hayden, I'm from British Columbia and so I'm going to address some questions to you. There has been some modelling done at the federal level about what the benefits may be of an economic partnership agreement with Japan. Has the Government of British Columbia conducted any analysis on the costs and benefits of an EPA between Canada and Japan for the province of British Columbia?

[Dana Hayden]

We have not yet undertaken that work. We intend to do it. It will be informed by the consultations we are undertaking with a number of stakeholder groups in British Columbia so that we are better informed when we do that modelling, but we haven't yet done modelling.

[Don Davies, NDP, Vancouver Kingsway, BC]

Thank you.

I appreciate that some of your remarks are, as you put it, top of mind at this point. You've identified some sectors or industries in British Columbia that you feel may benefit from this agreement.

Are there any sectors or industries in British Columbia that the government feels might be negatively impacted by an EPA between Canada and Japan?

[Dana Hayden]

I guess it depends on the consultations we have within British Columbia and what we hear from our stakeholder groups. To choose one example, during the Canada–European trade negotiations, the issue of procurement has been one that has been sensitive to a number of particular municipalities in British Columbia. So, depending on the framework of the agreement with Japan, we obviously would like to see access to their procurement market, but it would depend on levels. I use that as an example.

As I said, we have not yet been able to undertake the consultations we need with our stakeholder groups in B.C., so I wouldn't preclude somebody coming up with some other area of sensitivity, from their perspective.

[Don Davies, NDP, Vancouver Kingsway, BC]

Okay. We heard testimony about Japan pursuing a policy of adding value to its exports. I think it may be common ground among people in this room that Canada should be doing likewise.

We are aware that British Columbia exports raw logs to various jurisdictions, which raises the question of whether we can do a better job of encouraging the adding of value to our exports. Does the Government of B.C. have a strategy to try to encourage the adding of value to our raw or barely processed resources before we export?

[Dana Hayden]

In British Columbia, there are two types of log export controls. There are federal log export controls on privately held land, which is a fairly minor component of B.C., probably less than 1% of land.

From provincial crown land, which is about 94% of crown land, we have an export policy that requires any exporters to do two things. First, they have to advertise, at a market rate, any logs they propose to export before the logs are approved for export. There's one exception, which I'll go into in a minute.

The second thing that log exporters are required to do is pay what is called a fee in lieu of processing. A fee is charged to exporters to ensure that there is a disincentive, if you will, to exporting logs prior to their being processed.

[Don Davies, NDP, Vancouver Kingsway, BC]

Can I just interrupt, Ms. Hayden? Can you give us an idea of how many raw logs are being exported? Sorry to interrupt you for that, but maybe you could put it in context.

[Dana Hayden]

I don't have the exact numbers in front of me.

I know the amount of logs has increased in the last couple of years, primarily because of high prices in Asia. So there is interest, obviously, in Asia, and frankly, a little bit into the U.S. for logs.

There is one exception we do have. I did say there was an exception to having to advertise, and that is, there are a couple of areas on the north coast of British Columbia where the province has, through order in council, identified a geographic area from which log exports can take place. That's primarily based on the fact that there are no processing facilities in those areas. Even if we wanted to have them processed in B.C.—and we would prefer the logs were processed in B.C.—to the extent there are no processing facilities, there is considerable employment that is created through the harvesting and development of forest areas that would otherwise not be realized.

So in certain instances the government will identify geographic zones where there are not processing facilities, where, in fact, the primary economic activity might be logging.

[Don Davies, NDP, Vancouver Kingsway, BC]

You mentioned the LNG issue. Has the Government of British Columbia come out with their public policy on their position on the Enbridge pipeline? If so, can you tell us what that pipeline position is?

[Dana Hayden]

British Columbia has not yet done so.

[Don Davies, NDP, Vancouver Kingsway, BC]

Okay.

If I could, I also want to talk a little bit about the grain industry.

Mr. Van Ankum, is there an issue with GMO products in Japan? If so, can you explain a little bit about how that might play into our negotiations with Japan?