International Trade Committee on Oct. 23rd, 2012

[Dan Paszkowski]

Again, we attempt to do this with all major trade partners. We have done this with the Europeans. We have done it with the World Wine Trade Group. Canada, as do other countries, puts scientific rigour behind the approval of use of different additives, processing aids, different processes that we use that are internationally accepted. When we enter into agreements, our hopes are that those practices will be accepted into the exporting country.

Currently there are additives, such as copper sulphate, I believe, that are not approved for use in Japan. It has been a challenge for a number of countries to get that approval in place. That's one example of a whole list of additives that can be used, that could block the ability of your wine from entering into that particular marketplace, even though it has received positive approval by Health Canada and by a number of other scientific bodies.

What we're hoping for is that we accept their practices, they accept our practices, and the wine flows freely between the two countries.

[Ron Cannan, Conservative, Kelowna—Lake Country, BC]

It seems like a low-cost and reasonable request.

I'm just wondering, if we are able to successfully ensure that these non-trade barriers are in place and remove the tariffs, what would be the anticipated increase in volume the Canadian wine industry could expect from this economic cooperation agreement with Japan?

[Dan Paszkowski]

Currently our exports to Japan are relatively small. As I mentioned, they're our eighth largest trade partner. We're not a large exporter, but the market in Japan is becoming very, very interesting. You're looking at 86% of the Japanese population who drink wine regularly, at least once per month, and 64% of Japanese wine drinkers base their decision on price. Beyond price, they look at the countries and regions of origin. If we address the tariffs, we address the price. If we address geographical indications, we address their selection point.

With the growth in youth who have an interest in wine in Japan, we see it as an extremely interesting market. Right now it's more geared toward your typical Bordeaux old-world types of wine, but as the youth become more educated, as they are, they can become more liberal in terms of the types of wines they're willing to select. We believe that's a huge opportunity for Canadian wines.

[The Chair, Conservative, Rob Merrifield]

That's very good.

We'll now go to Mr. Easter. He'll be talking about potato wines.

[Wayne Easter, Liberal, Malpeque, PE]

That's a good word; I like that: it's more liberal.

Anyway, Mr. Paszkowski, partly on the same point Ron raised, and something you mentioned several times in your paper, beyond the trade agreement itself is the counterfeit problem. I guess one of my pet peeves with the government on trade agreements is that they seem to be agreements on trade for trade's sake. I think we really need a strategy around agreements in other areas, whether it's eliminating counterfeit wines, whether it's adding value to manufacturing in Canada, whatever it might be, which in the end would make the trade agreement beneficial to Canadians.

Where do most of the counterfeit wines come from, specifically in terms of countries? You mentioned the icewine in Quebec. Where do they come from, and what can be done to counter that problem in other areas of policy, not necessarily trade?

[Dan Paszkowski]

The vast majority of the counterfeit products are coming from Asia. That's where we see them showing up in the marketplace. They aren't just showing up in the back streets of major metropolitan centres. They're showing up in high-level retail stores, in five-star hotels, and five-star restaurants. That adds additional supply to the marketplace, which puts a damper on the price of a unique product that can only be produced in very few parts of the world. Of greater concern is what is inside those bottles. Is it water mixed with sugar? Are there other chemicals added to that product?

In today's age of social media, if somebody got really sick or died from a product that was not icewine, but it was viewed as icewine, the media would have a significant negative impact on our ability to build our product back to where it is today. It's a serious concern from a health and safety perspective as well.

[Wayne Easter, Liberal, Malpeque, PE]

I understand the concern, but how do you deal with it either in a trade agreement or from a government perspective with, in this case, Japan, to try to lessen that problem of counterfeit wines? I think it is real. We hear that a lot.

[Dan Paszkowski]

Currently the difficulty we've had is not in the support from the international trade department and the post to try and identify these fake products in retail markets, and they tell us, and we test the products. There is no international definition in many countries. Canada, being a superpower in icewine, does not have a definition of icewine. We're almost there. We're waiting for theGazette part I to come out, and then hopefully we'll have that in place.

Once we have that in place, we'll be able to negotiate that definition into multiple trade agreements. Once it's a regulated definition in Japan and Korea, etc., they'll have the enforcement powers to stop and destroy any products they identify that are not genuine icewine.

[Wayne Easter, Liberal, Malpeque, PE]

I want to come back to you in a minute if I have time.

Mr. Tardif, are you in the Japanese market now?

[Sébastien Tardif]

No, we're not.

[Wayne Easter, Liberal, Malpeque, PE]

You're not. Do you anticipate that, or are there barriers now to products getting in there that you would expect a trade agreement to eliminate?

[Sébastien Tardif]

Not for the moment. We have started to make contacts with some people in Japan, and there do not seem to be any so-called barriers as you may have with other people.

[Wayne Easter, Liberal, Malpeque, PE]

There are no tariffs that you're aware of.

[Sébastien Tardif]

There's no tariff because even though it's a unique device, it's considered to be furniture. It doesn't go in people's mouths, so it doesn't have to have the CE set-up, or a special set-up.

[Wayne Easter, Liberal, Malpeque, PE]

In terms of your original research or investigation into the Japanese market, are you satisfied with the assistance you're getting from whoever it may be, Foreign Affairs and International Trade Canada, or do you think there's more that has to be done in that area to give Canadian businesses the opportunity, one, to understand, and two, to get into the Japanese market, and three, to support them there?

[Sébastien Tardif]

We understand from experience that it may take long to get there, but with respect to everybody, sometimes it's even difficult to get people to realize there's an issue in Canada about musculoskeletal disorders, even though there's been a lot of dollars spent on it. On the aspect of your question directly, no, we have not encountered anything that prevents us from bringing this technology over there.

[Wayne Easter, Liberal, Malpeque, PE]

The last question I have relates to the non-tariff barriers on wine, as well the issue that Ron also touched on.

Can you give us an example of what those are and what has to be done in a trade discussion to make sure they don't remain a barrier?

[Dan Paszkowski]

As I mentioned, there's the opportunity for mutual acceptance of oenological practices so we don't need approval or certification, which would reduce the cost of selling wine into Japan. There's a long list of winemaking practices.

[Wayne Easter, Liberal, Malpeque, PE]

Is that an international standard that's agreed to by, say, other winemaking countries than Canada?

[Dan Paszkowski]

Yes. For example, we signed an agreement with Europe and with the World Wine Trade Group. We accept the practices that have been put in place. We accept the chemicals that are added in their winemaking process, based upon the sound scientific rigour that has been undertaken, and wine flows freely between the two countries, and they accept ours as well. In most cases, they're not identical but they're very close.

One of the issues that we have in Canada is that the approved list of additives and processing aids for use by winemakers in Canada is significantly lower than would be the case in Australia, New Zealand or South Africa. Even though all those wines are flowing into Canada, are being sold in Canada and we're consuming them, our winemakers can't use those tools in their tool box. A large part of that is because we're a small industry; we're a small organization. We don't have deep enough pockets to get some of these products approved in Canada. We're working on it but, hopefully, we'll be able to get some of those taken care of sooner rather than later. That's been one of the challenges. However, all of the additives and processing aids that are approved by other countries undergo scientific rigour to ensure that health and safety is protected.

[The Chair, Conservative, Rob Merrifield]

Thank you very much.

Mr. Keddy, seven minutes.

[Gerald Keddy, Conservative, South Shore—St. Margaret's, NS]

Thank you, Mr. Chair. Welcome to our witnesses.

Mr. Paszkowski, it's nice to have you here again. We always enjoy bringing the wine industry to committee any chance we get. There will be samples later, right?

I'm a little surprised at the strength of the Japanese wine industry. It's a $878 million--almost a $1 billion--industry that is growing, 14% over the previous year. There's obviously a lot of potential.

I have some concerns over some of the issues you've raised. One of them is on additives vis-à-vis Canadian wine versus that of our competitors. However, I would argue, especially in the Japanese market, because it is a very demanding, very science-based marketplace, that it may actually be a competitive advantage to have fewer additives in Canadian wine that's destined for the Japanese market. Have you found that to be the case?

[Dan Paszkowski]

Currently, we do have fewer additives than the wine of any other country shipping into Japan, simply by virtue of the length of our list. l wouldn't view it as a competitive advantage to have fewer. Our winemakers simply have fewer tools in their toolkit to produce the wine. All of the additives that are included in any wine produced in the world are completely safe for human consumption.

[Gerald Keddy, Conservative, South Shore—St. Margaret's, NS]

It's not the so-called organic label that's going to make a difference in the Japanese marketplace. The same wine that's coming out of Australia into Canada is the same wine coming out of Australia and going into Japan. Okay.

How close are we to actually gazetting the definition of icewine? It would seem to me that this needs to be in the early part of these negotiations so our trade representatives and our chief negotiator in particular can have an opportunity to, first of all, understand it, and second, make sure it's represented in these negotiations.

[Dan Paszkowski]

In January 2007, Canada signed a labelling agreement with the World Wine Trade Group. The deadline to ratify the labelling agreement for icewine is December 31 of this year. At this point, I don't think we're going to make that deadline. However, if we have the legislative process in place, we should be able to get that definition finalized in the early part of 2013, which would suffice for the World Wine Trade Group, I believe, and provide us with the time required for negotiators to get this into the Canada-Japan agreement.