Thank you, Ray.
Members of the committee, it's good to appear before you again.
I will highlight a number of areas that are covered in the briefing note you all have. I'll touch briefly on the importance of trade to Manitoba Beef Producers, talk a little about the opportunities under a new partnership with Japan, and highlight the importance of science-based trade. This fits well with some of the comments Gordon made and I think highlights the importance of these issues that go across sectors. Then I'd also like to touch a little on some of our concerns in the beef industry about being left behind.
First, on the importance of trade, trade and open markets are absolutely critical for beef producers across the country, including here in Manitoba. Approximately 50% of our production is exported, either as live cattle or as beef. Beef producers know first-hand what happens when we lose market access. We are still recovering from the crisis caused when borders closed when a BSE case was discovered in 2003.
The United States is our most important customer, taking up about 73% of our exports. But we have learned the need for diversity. Just as an example, country-of-origin labelling legislation hampered and restricted our trade with the United States significantly. This shows what can happen when politics interferes with markets. We are hopeful that this issue will soon be behind us, but it clearly demonstrates the need for alternative markets.
To move to some specific opportunities from enhanced trade with Japan, exports to Japan have not yet recovered from the peak in 2001, when the value of our exports exceeded $171 million. Restrictions resulting from BSE are the key reasons for our loss in market. I will touch a little more on this in a moment, when I talk about the need for science-based trade.
Japan is an important agricultural market for Canada. Gordon highlighted this as well. We believe there is sufficient room to expand our beef trade, because the high quality of our product meets the needs of Japanese customers. We also know that the percentage of beef supplied by imports in Japan is going to increase in the years to come. We don't expect to fully replace the United States and Australia as Japan's leading suppliers, but we know we can tilt the trade balance in our favour.
Canada faces a stiff Japanese applied tariff of 38%. Further, the potential for the Japanese tariff is actually 50%. This is often referred to as a snap-back tariff. If Japanese imports from Canada increase quickly, the government can increase the applied tariff up to 50%. What is meant by “quickly” is that if there is an increase in any 12-month period of 17% or more, that applied tariff can be snapped back up to 50%.
The applied tariff makes our beef more expensive. The potential snap-back tariff creates business uncertainty for our processors and our producers. Both limit our ability to access the high-value Japanese market. The removal of these barriers would significantly open up the market for Canadian products. This will promote stable growth and development for our industry here in Canada, which in turn will promote the sustainability and growth of our rural communities and further develop jobs in our urban centres.
I'd like to touch a little on science-based trade and reinforce some of the things Gordon mentioned.
Restriction placed in Japan on Canadian beef imports following the discovery of BSE here underlined the importance of science-based trade. Restrictions are outside of the OIE, or World Organisation for Animal Health, guidelines and are still in place. We are working hard to have these reduced and eventually removed. The specific restrictions I'm talking about are outlined in your brief in front of you. In the interest of time, I won't go through the details.
How is that important to trade negotiations? Historically, trade negotiations have focused on tariff and quota barriers, and that's important. We talked about the 38% tariff and the potential 50% tariff. However, going forward, sanitary and phytosanitary rules are going to be just as important as tariff barriers, if not more important.
All governments feel from time to time political pressure to restrict trade. In the past, tariffs and quotas have been the tools of choice. Those are always bad for Canadian agriculture.
As these trade barriers are removed through negotiations, governments will turn to other means, such as hiding behind unscientific health or safety rules. It is absolutely critical that sanitary and phytosanitary rules be included in these negotiations. It is unacceptable to our industry to see tariff walls come down only to be faced with unscientific restrictions that are just as impermeable.
Science-based food safety rules, and other rules of trade such as environmental conditions, must be part of any future agreement with Japan—or any other country, for that matter. Also required is a robust dispute-resolution process that will ensure rapid and independent resolution of any trade dispute resulting from different interpretations of the sanitary and phytosanitary rules of trade.
I'd like to close with some comments about our concerns about being left behind. Manitoba Beef Producers would be remiss if we did not raise a significant concern of our membership—that of being left behind.
It is not a secret that agriculture is a sensitive topic in all trade negotiations. MBP’s members are concerned that Canada and Japan may reach a comprehensive new trade agreement that fails to include significant gains for agriculture—of course, for the beef industry specifically.
This would not be the first time agriculture has been left behind. The Uruguay Round of the General Agreement on Tariffs and Trade, which of course established the WTO, largely ignored agriculture. All attempts to correct this deficiency within the WTO have, to date, failed. If the Doha Round of negotiations, which was designed to deal with outstanding barriers in agriculture, is not dead, well, it's certainly on life support.
MBP implores this committee to not let that lack of progress on agriculture issues transfer to any Canada-Japan negotiations. Our industry depends on trade. We depend on open access. We cannot afford to be left out of any new agreements.
Our competitors, such as Australia and the United States, are also hoping to negotiate greater access, for example through the Trans-Pacific Partnership. The Canadian beef industry cannot afford to be left behind, especially if our competitors are successful in negotiating increased and more secure access to Japan.
Thank you.