Evidence of meeting #50 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 wine.

A recording is available from Parliament.

On the agenda

MPs speaking

Also speaking

Barry Sutton  Vice-President, International Sales, Maple Leaf Foods Inc.
Ray Price  President, Canadian Meat Council
Jacqueline Sava  Director of Possibilites and Founder, Soak Wash Inc.
Pablo Garrido  Owner, Savia Wine Agency
Chris Wilkinson  Director of Sales and Operations, Soak Wash Inc.

4 p.m.

Conservative

The Chair Conservative Rob Merrifield

Go ahead.

4 p.m.

President, Canadian Meat Council

Ray Price

From the standpoint of the Canadian Meat Council, it's critical for us to be involved in these things. We've narrowed down our main priorities for this year from ten to three, and trade is one of those. That's one of the reasons I'm here. We're spending more time on trade, because it is so critical to our industry.

We appreciate the ability to talk with the committee and also to whoever else will listen to us on how important trade is.

4 p.m.

Conservative

The Chair Conservative Rob Merrifield

We think trade is important here too. It's 100% of our time.

Go ahead, Mr. Easter.

4 p.m.

Liberal

Wayne Easter Liberal Malpeque, PE

Well, not quite 100%.

Welcome to both of you gentlemen. It's good to have you here.

Both of you mentioned Korea and the concerns on where negotiations are. I couldn't help but look at members on the government side when you were raising those concerns. They almost sank in their chairs because we've raised those concerns with them so many times.

I want to put on the record again that we are at risk of losing a $1 billion market for beef and pork. I would suggest that somebody please talk to Jim Flaherty. I think that's where the opposition is coming from. In any event, it's just to make that point.

On the pork situation mainly, to start, Barry, I have been in the Brandon plant and I will say that if there's anything above world class, that operation is it. It is an unbelievable operation. It's worth people's time to go through.

One thing I don't know is you mentioned the special cuts in Japan, and this is maybe on beef as well. In the Canadian market, when you're looking at beef you're looking at high-end cuts, roasts, T-bones, etc. Do the Japanese, as the Chinese do, use everything in the animal and make it much more valuable to be in that market from the point of view of the sale of the whole animal, versus us in Canada?

4 p.m.

Vice-President, International Sales, Maple Leaf Foods Inc.

Barry Sutton

In the case of pork they would use some of the cuts that we wouldn't traditionally consume in Canada or North America, but they're more on the higher end, premium cuts. Other markets such as China, Taiwan, the Philippines, would help us balance out.

What's important to the Canadian industry, and I'm sure it's the same in the beef industry, is that access to many markets allows us to get the best value out of a Canadian animal that we can, so we tend to look at the markets that would give us the best return on the entire animal. Some of the higher-end cuts that we would process and prepare are in the form of chilled pork, which is very high value—a 55-day shelf life for table meat in Japan—would be directed toward that market for the best return. Other items like stomachs, lungs, rectums, etc., would go to the Chinese market or the Taiwanese market.

4:05 p.m.

Liberal

Wayne Easter Liberal Malpeque, PE

Thank you.

When it comes to moving product to Japan, I know from the canola industry in Prince Edward Island, we don't have a big acreage but certainly Japan is our key market. They are exceptionally fussy. They come over and inspect fields that are close by to make sure there's not a GMO crop close to the non-GMO ones, etc.

This relates to the food safety question. I do believe the Japanese assure themselves that the plants these products come out of are meeting the very high standards they want an export nation to meet. Is that correct?

4:05 p.m.

Vice-President, International Sales, Maple Leaf Foods Inc.

Barry Sutton

Yes. I would say they want to get in front of problems rather than react to problems, so they put a lot of front-end work into making sure that whoever they're buying from can meet the standard before a problem occurs.

4:05 p.m.

Liberal

Wayne Easter Liberal Malpeque, PE

Is it the same with beef, Ray?

4:05 p.m.

President, Canadian Meat Council

Ray Price

Yes, I believe that's the case. The Canadian beef market isn't as developed as the pork market is, but yes, I would say they're very important. The linkage to the individual plant's very important.

4:05 p.m.

Liberal

Wayne Easter Liberal Malpeque, PE

I want to come back to the 20-month animal because I do think that's a problem. I know for a fact that the government is trying to negotiate that away.

In layman's language, can you explain why it's a complication for our market in terms of meeting year-end supply as a result of the 20 month, and how important it is to rid ourselves of that obstacle?

4:05 p.m.

President, Canadian Meat Council

Ray Price

I'm a farmer first, so I know the cattle side of it better than I know the beef side. I do have some exposure on the beef side. Of course, I know Japan fairly well.

What happens in Canada generally is that calves are born in the spring, they're fed, and they go to slaughter between 14 and 20 months of age; that would fit into the bracket. If the same cattle that are born in the spring cannot make it in 10 months, you have January, February, March, which means the cattle are either 9 to 12 months old, which is too young, or 21 to 24 months old, which is too old for the Japanese market, so there's a gap in available cattle. I can't remember the statistics, but it's something like less than 10% of the cattle available at that time would fit the Japanese criteria.

4:05 p.m.

Liberal

Wayne Easter Liberal Malpeque, PE

That impacts our ability to supply a grocery store chain 12 months of the year, and therein is the problem. It's not in getting into the Japanese market as much as it is not having the credibility of the same quality and type of supply for year round. That's the bottom line.

4:05 p.m.

President, Canadian Meat Council

Ray Price

That's right. Our experience in the Japanese market, and I expect it's the same for others who are there, is that it's a very relationship-driven business. You make a deal and it's a 12-month or a long-term deal and they don't go away quickly as in other markets that are just price-driven markets and they'll buy from whoever is the cheapest at the time. In Japan it's a very relationship-driven one.

4:05 p.m.

Liberal

Wayne Easter Liberal Malpeque, PE

The other area that's of concern—and I'm not sure if this will be done, Mr. Chair, with the FTA or not—is the safeguard duties on the products. Could you explain why that causes us problems?

I expect I'll run out of time, but on another issue, the committee is travelling to Japan. Do you have any suggestions on what we should seriously look at or relate to the Japanese in terms of our discussions?

There are two points, the safeguard duties and whether you have any advice for us.

4:05 p.m.

President, Canadian Meat Council

Ray Price

We'd be happy to go with you and show you around; that would be great.

4:05 p.m.

Liberal

Wayne Easter Liberal Malpeque, PE

If you're paying for the trip, we'd love it.

4:05 p.m.

President, Canadian Meat Council

Ray Price

We have to pay for our own trip.

On the safeguard, it's a complication any time market dynamics change. It's a snap-back mechanism that pushes up the tariff to 15% to 20% once it goes above a certain volume. It's a very complicated system, but effectively, it happens on a quarterly basis. It would make it almost impossible for imports to get in for a three-month period. That disrupts the flow of trade internally. The Japanese traders and consumers don't like it because all of a sudden it's shut off. Of course the providers of the product don't like it because it's disruptive.

It has happened a couple of times over the last 10 years or so. The volume of trade has moved up at a level that it hasn't impacted yet, but it's certainly a concern if we had a big volume move into Japan for any reason that they would actually hit.

I believe in the past the Japanese government has suspended the safeguard when it's going to be too disruptive. I'm hoping that discussion point would be to just not do it on this. If you've got it, everybody wants it to happen. Let's just suspend the safeguard.

4:10 p.m.

Vice-President, International Sales, Maple Leaf Foods Inc.

Barry Sutton

If I may add to that, it's highly manipulated. It kicks in when you have a three-month average above the previous three-year average for the same quarter. If you ship 119% or higher than you have been shipping, it will kick in, and it drives the gate price up in pork from roughly 524 yen to 653 yen. It will drive the price up and create problems for export.

What the Japanese importers do is quickly recognize the period and they'll work around the period. They'll load up their storage—the Japanese government subsidizes the cost of storage—and all of a sudden there will be a flood of pork hitting the market right after.

Our negotiators have approached the Canadian pork industry and asked for advice on issues such as the gate system and how we should approach it, and on handling the safeguard, and what would we replace it with. We're in the process of preparing our recommendations.

4:10 p.m.

Conservative

The Chair Conservative Rob Merrifield

Thank you very much.

Mr. Holder.

4:10 p.m.

Conservative

Ed Holder Conservative London West, ON

I'd like to thank our guests for being here today.

Mr. Chair, before I get into some of my comments, Mr. Price provided a lot of statistics. I was getting writer's cramp trying to keep up and then I stopped. It would be useful—because I'm also mindful that with translation, recording, and the like—if that information could be made available to us. I wonder, perhaps as a matter of better habit, if we could ask our guests in future to ensure that this kind of information is prepared in advance, obviously bilingually, and with what is necessary to be done. It would be helpful particularly with the kind of information that has been provided, which is very valuable, if it could be presented to us.

4:10 p.m.

Conservative

The Chair Conservative Rob Merrifield

Mr. Price, if you can give it to us, we'll get it distributed.

4:10 p.m.

President, Canadian Meat Council

Ray Price

Certainly.

4:10 p.m.

Conservative

Ed Holder Conservative London West, ON

Thank you for that.

Mr. Sutton, I appreciate your comments. It's not the first time we've heard about the importance of Japan as an export market for Canada and certainly in pork, as you've mentioned.

I have a couple of questions, and maybe this question is for both of you.

I'm sure that the standards you present when you export your products have to be consistent in all countries you would export to, Japan being one of them, but they would be consistently high in terms of the quality of product. I'm trying to understand what makes Japan a stronger, better, more valuable financial market. I heard the reference that in Canada a pig is worth $130 and it's worth $430 in Japan. Can you help me understand? That's pretty clear math, but why is Japan such a better market than all the other countries, when the standards are the same?

4:10 p.m.

Vice-President, International Sales, Maple Leaf Foods Inc.

Barry Sutton

To talk about the standard, you have to separate specification from sanitary and phytosanitary, which is a floor. Canada ships at a very high standard worldwide, and that would go to all countries when it comes to items like food safety. Where the Japanese differ would be on the tolerance for specifications. They require a very tight shape and size. Their portion control standards would be among the highest anywhere in the world. They would be the highest on a consistent basis. Japan needs those tolerances for a variety of reasons. It's the way their retail business works, their manufacturers work. They understand the cost of labour. If they can remove that cost of labour in Japan by having high-end suppliers produce back in their country of origin, they'll pay a premium to get that done.

4:10 p.m.

Conservative

Ed Holder Conservative London West, ON

Mr. Price, you made reference to lamb and bison as being growing or important export markets for us. I'll be honest with you that I had not realized bison would be such a booming business. Can you comment on the size of that business and what the potential is for export to Japan?