International Trade Committee on Oct. 23rd, 2012

[The Chair, Conservative, Rob Merrifield]

I'd like to call the meeting to order.

We're continuing our study with regard to a comprehensive and high-level economic partnership agreement with Japan. We're looking forward to being in Japan next week as a committee.

Today, we have three witnesses with us in the first hour and three in the second.

The first witnesses we have today are: from the Canadian Vintners Association, Dan Paszkowski; and Lyne Noiseux, president of Posiflex Design Inc. Thank you for coming.

By video conference we have Aaron Moore from Brian Moore Log Homes. We're trying to make the connection with Aaron and expect that will happen very soon.

We'll start with the presentations. Aaron will be our third presenter so, hopefully, the connection will take place before we get to him.

With that, Dan, the floor is yours.

[Dan Paszkowski, President and Chief Executive Officer, Canadian Vintners Association]

Thank you very much, Mr. Chair, and good afternoon.

As the president of the Canadian Vintners Association, better known as the CVA, I'd like to thank all members for this opportunity to provide our industry's perspectives on the proposed Canada-Japan free trade agreement.

The CVA is the national voice of the Canadian wine industry, representing wine companies accounting for more than 90% of the wine produced and sold across Canada. Wine is increasingly becoming the beverage of choice in Canada and presently accounts for 30% of the beverage alcohol market, up from 18% only 20 years ago. Today the Canadian wine industry represents 11,500 direct jobs, 1,000 independent grape growers, 450 wineries, $2 billion in domestic liquor board sales, and $28 million in export wine sales.

Japan is the most developed and competitive wine market in Asia. In 2011, Japan imported 145 million litres of wine valued at $878 million, a growth rate of 14% over the previous year. Japanese wine imports have increased by roughly 16% in the five-year period 2006 to 2010, and are predicted to grow by a further 18% between 2011 and 2015.

Japan is Canada's eighth largest export market for wine. A free trade agreement with Japan would benefit the Canadian wine industry if tariffs are eliminated, internationally accepted wine-making practices are recognized, and genuine Canadian icewine and geographical indications are protected from the growth in counterfeit products.

Canadian wine exports to Japan by sales value are as follows: icewine, 59%; table wine, 24%; and sparkling wine, 17%. By export region, Ontario represents 75%, British Columbia represents 18%, and Quebec represents roughly 7%.

Removal of Japan's tariff and non-tariff barriers would benefit Canadian wineries and the growth of wine exports. The import tariff on wine is a 15% ad valorem with a maximum of $1.57 Canadian per litre, whichever is less, and a minimum customs duty of 84¢ per litre. Sparkling wines are subject to a tariff of $2.28 Canadian per litre.

Given the differential tariffs in place, Canadian wines can face higher tariffs than wine imported from other countries. For example, Chile is a principal competitor for Canada on the world wine market, but has successfully negotiated the elimination of its wine tariff under its free trade agreement with Japan. With a lower, phasing-out tariff rate, Chilean wine imports into Japan have increased significantly since 2007, capturing a greater market share. There has been a 23% compound annual growth rate since the signing of the free trade agreement with the Chileans. A free trade agreement with Japan must include the phasing out of wine import tariffs.

Japan's regulatory system for oenological practices, including additives and processes, can be difficult to navigate and can represent a costly barrier to trade. To address this concern, Canada is an active participant in the APEC Wine Regulatory Forum to help promote regulatory alignment in the Asia-Pacific region, to help remove costly, unnecessary, and burdensome regulatory obstacles with respect to oenological practices, definition and/or description of products, labelling requirements, and methods for analyzing, assessing or certifying wine products. Mutual recognition of oenological practices and processes and product specifications, as well as a process to address new practices or modifications to winemaking practices, should be part of the Canada-Japan FTA.

Icewine is Canada's flagship wine product. It has garnered global recognition and prestigious international awards. It has helped build Canada's reputation as a wine-producing country, supported the growth of our world-class table and sparkling wines, and helped develop our burgeoning wine country tourism industry.

As with many successful products, genuine Canadian icewine and our legitimate wine businesses have been harmed by the proliferation of counterfeiting on a global scale. Adequate protection and enforcement is a key condition for nurturing the success of Canada's icewine industry. To protect Canadian interests and to assist Japanese authorities in protecting their consumers from counterfeit products, it is essential that icewine be defined in the free trade agreement with Japan as “wine made from grapes naturally frozen on the vine”. This would parallel Canada's commitments under the Canada-European Community Wine and Spirits Agreement and the World Wine Trade Group labelling agreement. It would also be in line with the commitment of both Canada and Japan to the Anti-Counterfeiting Trade Agreement to enhance international cooperation and support effective international standards.

Finally, all wine-producing countries strive to protect names that identify wine as originating in a territory where a quality reputation or other characteristic is attributable to its geographical indication, for example, appellation regions such as Prince Edward County, Niagara, the Okanagan Valley, or sub-appellation regions such as Niagara-on-the-Lake, or the Gaspereau Valley in Nova Scotia.

These geographical indications for wine should be protected in the Canada-Japan agreement. Further, these geographical indications should not be allowed to describe or present a wine not originating in Canada, whether or not it is accompanied by expressions such as “kind”, “style”, “type”, “imitation”, or the like, to safeguard the distinctiveness and reputation of our wines.

Thank you. I'd be more than happy to answer any questions.

[The Chair, Conservative, Rob Merrifield]

Thank you very much.

Before we go to Aaron Moore....

Aaron, can you hear us all right?

[Aaron Moore, Owner, Brian Moore Log Homes]

Yes.

[The Chair, Conservative, Rob Merrifield]

That's fine. We have one presenter before you, but I just wanted to introduce you to the committee, and I wanted to check your sound system. Everything sounds good, so we will now move to Posiflex Design Inc.

Lyne, the floor is yours.

[Sébastien Tardif, Vice-President, Sales and Marketing, Posiflex Design Inc.]

Good afternoon, everybody, and thank you very much.

I'm Sébastien Tardif with Posiflex Design. I will speak on behalf of Lyne.

[The Chair, Conservative, Rob Merrifield]

Please go ahead. I wasn't sure exactly who was presenting.

[Sébastien Tardif]

I was hiding behind the counter.

[The Chair, Conservative, Rob Merrifield]

The floor is yours.

[Sébastien Tardif]

Thank you very much. I'll try to give you a quick picture.

Posiflex Design is a company that works to create innovative and ergonomic solutions to help workers in many fields. Our experience in the past couple of years has been directed toward the dental industry, from where the initial demand was sent to us.

Literally billions of dollars are spent every year with respect to musculoskeletal disorder prevention or problems. A lot of money is spent in order to replace or train people. A lot of people have either stopped production or stopped working.

Ms. Noiseux is the designer of all the products that we have on the market. All of the products that we create come from and follow up on ergonomic studies that were performed. Specifically, our flagship product, the first product we put on the market, which is called the free-motion elbow support, came from a study that was requested by the health and safety association.

It was directed to dental people, because they realized that they had a lot of claims from these particular people in the workforce and also realized that most of the problems were created by the upper body not being supported. They contacted Ms. Noiseux and asked her to create a solution. The elbow support, which we have here, was created. I invite you to check it out later, after the presentation. Clinical studies with electromyography followed to demonstrate and prove without a doubt that using this technology would help eliminate or alleviate any problems people may have.

That said, we've also realized that the elbow supports that were created were also very useful for other people in other markets or other types of work, such as cardiologists, who use this when they do ECGs. There are also people working in artwork restoration who use this. Lately, we also have a lot of people using it in medical labs. These people spend their days working with their upper body unsupported.

It has allowed us to provide a solution for a lot of people. Some people have been able to return to work, and also, for a large majority, injuries can be prevented with this.

Along with that, for about a year now, we've been using a new technology that was developed with a partner and also with the CNRC in Boucherville, in Montreal. We call it skin foam technology. It's a very neat and unique urethane that we actually build the product with now, which marries to or allows for all of the body forms.

With this, we can actually build chairs. This technology allows us to go into sectors such as those where disinfectants are used, because it is totally resistant to all fluids and all disinfectants. We can make any shape or form with it. It does open up a lot of opportunities for people who want to do things that look different or for a certain sector.

One of the things we like to do and work very hard at is to take this knowledge, this technology which was invented here, and export it elsewhere. That said, we are now exporting some of the products, very modestly, but we have started now in France. We have users in different parts of the world. In Taiwan, there are some dentists who went back to work soon after shoulder surgery, as they could use the elbow support to help them do their work. This is the type of product that our company has developed.

We are local—

[Ed Holder, Conservative, London West, ON]

Mr. Chair, I would never ever show disrespect to our guests, but in the spirit of trying to ensure that we ask questions relating to our discussion on Japan, I wonder if I could direct, through you, the parts that could relate to this. I'm not sure where this is going, where I can ask sincere questions about Japan.

[The Chair, Conservative, Rob Merrifield]

Let's see where he goes.

Go ahead.

[Sébastien Tardif]

Okay.

We've seen there is a large number of possible users of this technology in the Japanese market. There are over 200,000 potential users, but there are also large corporations that manufacture. They do precision work. They could use this type of product or this technology in their factories. Some of them also manufacture equipment, so they could use it in their own factory or include it with their equipment and sell it to the end user in different markets.

I'm not sure if that has helped to go toward the direction with Japan. There are different companies that have a large capacity for using this product as well as for offering it to their clients throughout the world and encouraging them to use this technology.

[The Chair, Conservative, Rob Merrifield]

Thank you very much. I'm sure it will stimulate some questions as we move forward.

Before we get into that, we have, from Brian Moore Log Homes, Aaron Moore, owner.

Aaron, the floor is yours.

[Aaron Moore]

Thank you.

How many minutes do I have?

[The Chair, Conservative, Rob Merrifield]

Five minutes. I won't cut you off if you go to six, but I will if you go to seven.

[Aaron Moore]

All right, I'll try my best.

I'd like to thank the committee for getting our opinion on trade with Japan. I'm here representing two groups, one is Brian Moore Log Homes, of which I'm a part owner. It's a father and son business. We have 15 employees. Three of them are Japanese and they've been able to assist us in our export to contractors in Japan.

I also happen to be the president of the BC Log and Timber Building Industry Association. Our industry in British Columbia has about 120 producers of log and timber frame homes. We are one of them, and many of our members are exporting products to Japan. It's been a very active market for us for about the last 20 years.

In Japan approximately 2,500 log homes are built every year. British Columbia claims a significant share of that, so we see it as a very important market for us. It provides good economic diversification. I know many companies that export to Japan, and considering what has happened in the U.S. recently, it has been nice to have other sources of revenue. We also think there's an increased opportunity to rebuild housing, unfortunately due to the tsunami.

There are a couple of technical barriers to trade that I want to make you guys aware of.

Currently our clients are paying a 3% to 6% tariff on our products. They can avoid the tax if they bundle it into a kit home, which would include doors and windows and roofing materials. Most of the time our clients are not able to do that. They're contractors, so they're packaging materials in Japan as part of their value to their customers.

Right now we're being penalized. I think it's somewhat unfair, because we're providing a high-value product to our customers. There are some substitutes in Japan. They make log homes out of cedar called hinoki there, but it's a very small log. It also doesn't have the same insulating values. We're offering a premium product. I don't see it being a huge competitor to us.

Something else I'm concerned about in the Japanese market is that we end up with some of the regulations that the European Union has right now. I like the status quo that we have for the declaration process in Japan. If Japan were to follow the European road, we would have issues. Something we have to do in Europe is phyto certification; we have to have the Canadian Food Inspection Agency look at every product we export.

Another regulation that will be coming on line in the EU is the European Union timber regulation. It will come into effect in July 2013. They're going to be asking Canadian exporters to declare that we're using legally harvested trees. That's definitely the case in British Columbia. That's definitely the case in Canada. Although it's just another regulation, it's another impediment to trade, and we would like to avoid that happening in Japan.

The last thing is I want to make sure we don't see any more permit regulations in Japan. Their building code is very favourable to us right now. They've adopted stick-frame construction techniques. There's no reason that we are not able to comply; however, in Europe, the CE markings they require are an impediment to trade for kit home manufacturers. Kit home manufacturers are not log home manufacturers. However, we're very concerned that our industry could be targeted next.

In summary, as part of any trade negotiation with Japan, we would certainly like to see a reduction in the tariffs to zero. The other point is that we really like the regulatory status quo right now, as far as the paperwork required and any kind of manufacturing standards they require are concerned.

[The Chair, Conservative, Rob Merrifield]

Thank you very much.

You hit bang on five minutes. Congratulations.

We'll start with our questioners.

Madame Papillon, the floor is yours.

[Annick Papillon, NDP, Québec, QC]

Thank you, Mr. Chair. I also want to thank our witnesses today.

First of all, I have some questions for Mr. Moore about the forest industry. I saw on your website that you were the first log home builder in British Columbia to receive FSC certification.

Could you tell us whether that certificate is popular in your sector across Canada? In fact, I believe that is a very important feature for the Japanese, is it not?

[Aaron Moore]

I'm not sure I understand the question. Yes, it is true that we were the first log home builder in British Columbia and in Canada to receive FSC certification.

I missed the last part of your question.

[Annick Papillon, NDP, Québec, QC]

Would you say that this certification is quite popular in your area? I think it is a very important, key element for the Japanese, is it not?

[Aaron Moore]

We hope so.

We're an early adopter of the FSC standards in British Columbia.

Right now, there's a barrier to adoption with FSC. If you're going to participate in the program, the audit review process is expensive. If you go it alone, you're paying about $5,000 every year for audits. We've done it under a group called Ecotrust, which is a non-profit organization. Their fee for us to participate is $1,500 a year. They do group audits.

We have found a way to make it affordable, although we are struggling with trying to find demand for it. We've done a couple of FSC homes with clients. It's something that we have had to advocate for. In both cases they weren't willing to pay the full premium for the products, so we ate part of the expense of providing them logs out of an FSC forest.

I know there's some general awareness about it, but it doesn't seem to be a decision criterion yet.

[Annick Papillon, NDP, Québec, QC]

You are among those who have told us they find the current regulatory scheme suitable. So you hope the status quo continues as far as regulations go.

But haven't you had any problems? We've had developers tell us they could not get the right answers about the regulations from Canadian services.

Have you ever used the services of Canadian government trade commissioners?

[Aaron Moore]

We use a number of industry resources to help us comply with trade regulations. The wood sector here in British Columbia has a pretty good resource base. When it comes to the European Union, Forintek has been very helpful in our addressing of the new energy codes. All Forest Solutions is another organization that has helped us understand some of the regulatory issues that are coming down the pipeline in Europe.

So far there really hasn't been anything in the Japanese market that we're concerned about. Our concern is that any time a large market adopts new standards, other companies tend to follow.

[Annick Papillon, NDP, Québec, QC]

Thank you for that clarification.

I would also think we should highlight the fact that a law was introduced in May 2010 to promote wood usage in public buildings. I assume the law applies to your business as well. How has it affected your industry? Is the infrastructure there to meet that requirement?