Evidence of meeting #59 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 indian.
A recording is available from Parliament.
Conservative
The Chair Conservative Rob Merrifield
I call the meeting to order.
We want to thank our witnesses for coming forward. We certainly appreciate your input into the comprehensive economic partnership agreement with China.
Mr. Pomerleau, you are no stranger to the committee. Thank you for being here. You're from Canada Pork International. Then, from the University of Calgary, we have Eugene Beaulieu. Thank you for being here.
We will yield you the floor first. We look forward to your intervention. The floor is yours, sir.
Professor Eugene Beaulieu Professor of Economics, University of Calgary
Thank you very much. It's a pleasure to be here. Thank you for inviting me. I am an economist, and I am with the School of Public Policy at the University of Calgary.
I think you just said the CEPA “with China”, but I think you meant India. I hope you did, because that's what I—
Conservative
The Chair Conservative Rob Merrifield
Yes, I'm sorry about that. That's coming some time in the future, but let's deal with India first.
Prof. Eugene Beaulieu
I was invited here largely because of a recent communiqué I wrote for the School of Public Policy, which addressed this issue of Canada-India trade. I would just like to state my position and make a few comments. Then I will open the floor for questions.
I do argue that Canada should push hard for an agreement with India. Evidence is clear that this kind of agreement will facilitate and enhance our economic relations, not only with India but with Asia.
Prof. Eugene Beaulieu
CEPA fits with our global commerce strategy. I know that the global commerce strategy is being updated and renewed and maybe improved upon, but it's important that we pursue our trade interests and our trade strategy in accordance with an overarching strategy. One of the concerns I have is going out there and just signing agreements with any country that might be willing to sit down with us. We want it to fit our strategy.
I also argue that we don't want to oversell the effect of an agreement such as this. It's sometimes simple to make overstatements of how effective this will be or the impacts it will have on Canadian jobs, and that kind of thing. I would argue that Canadian commercial interests are driving our policy to get more involved with India, rather than the other way around. Canadian trade and investment with India has increased significantly, and that has led to more interest. But as I said in my first point, having an investment and trade agreement with India can facilitate the trade that's already growing and expanding. It will not drive that trade.
Finally, I think it's really important that we continue along this path of fostering strong relations at the government and at the commercial level with Asia, and with India, in this case, in particular. There's clear evidence that it's very tough work. It's difficult work for firms to start new markets. It's important to have networks and it's important to have relationships. There's one area where the Government of Canada can support that, and that's by having people on the ground having and developing networks. It is a difficult job. That is a capacity that we have and should continue to foster.
I just have a couple more comments on those positions.
I argued in a recent communiqué that was published by the School of Public Policy that it seems like a slam dunk that we should have a mission to India and an agreement with India. India is large, it's rapidly growing, and we share a lot of common ground in terms of democratic and colonial histories.
For those reasons, it seems like a really strong case for a mission there—at the time I was talking about the mission—but also for an agreement, but there are things working against the effectiveness of these kinds of agreements, and one of them is distance. India is a long way away, and there's very clear economic evidence, empirical evidence, that distance continues to matter. Of course, costs have come down in travel and communication, but distance is vital and it's important. Therefore, even if we sign a trade agreement with India, it's still going to be far away; it's still going to be a challenge to do business there. Again, it's not going to spur trade and investment, but it will facilitate it.
I mentioned the networks being important. Again, there's a lot of empirical evidence that these are important things. One of the rationales for our reaching out more to India was that there is a large Indian diaspora. Some people made arguments that there were good political reasons to go to India, but there are also very good economic reasons. There's evidence that migration stocks, the number of immigrants in countries, can drive trade and investment. That's because of the network effect that I spoke about earlier.
So relationships matter, networks are important, and having strong relationships and building these relationships are important. The long history we have with migration from India, and again, some of our colonial past, shares a strong argument for fostering this kind of trade agreement going forward.
The last point I'd like to make is that there are a lot of challenges that remain in our relationship with India. It's a complicated relationship and it will continue to be that way. But I think the recent Harper FDI policy may actually give us a little bit more leverage with India. India is paying attention to us. India noticed this recent decision on Friday to allow state-owned enterprises to invest in Canada. They noticed very clearly that we stated strongly that the future of such deals will only occur under exceptional circumstances.
I think India took notice of Canada, maybe for the first time—maybe even more than when the recent trade mission visited India. I think they really noticed Canada on Friday.
I would say strike while the iron is hot. We have an opportunity now to push hard. India has noticed us, and maybe this is a good time to push hard to try to get an agreement done.
Thank you.
Conservative
The Chair Conservative Rob Merrifield
Before I pass it on to Mr. Pomerleau, let me note that you said they “noticed” us. Is it in a positive way or a negative way?
Prof. Eugene Beaulieu
I think it's largely in a positive way. One of the challenges was just in getting noticed. India has a lot of interests. Canada is not high on the agenda. We are very much in the press in India, and I think a lot of their government officials really took note of.... One of their interests in us is in our resources; one of the interests they have is increasing that relationship. They did notice us, and I think it is positive, because before, they weren't noticing us very much.
Conservative
Jacques Pomerleau President, Canada Pork International
Good afternoon, and thank you.
This time you have no vote to cancel the meeting.
Conservative
President, Canada Pork International
In any case, it's a pleasure to be here and to talk about India. But talking about Asia, I'm quite sure that you'll see more of us in the next while, when you will be talking about Japan and China—in the very near future, I think—and maybe the European Union. I expect we will be back here to talk about those agreements.
Today is in regard to India. First, although I think you start to get to know who CPI is, let me say that we are the export market development agency of the Canadian pork industry. We were established in 1991. This is a joint initiative of the Canadian Pork Council and the Canadian Meat Council. It has be made clear that our organization deals primarily with market access issues, the promotion of Canadian pork abroad, providing market intelligence, and as well, working on other significant export-related issues, be it transportation or those that are of direct interest to our membership.
Although a significant portion of the population in India will not consume pork for religious or lifestyle reasons—there are about 200 million Muslims and 300 million vegetarians in India—the majority of the population is still not averse to eating pork. This leaves perhaps 600 million people—quite a few, a much bigger number than the Canadian market, that's for sure. The offer for pork products is extremely limited in Indian stores, with only a small number of specialized shops offering some.
While visiting India a few weeks ago, the Federation of Indian Food Importers indicated that three shops represent about 80% to 90% of all the pork sold in Delhi. The only government-approved slaughterhouse for pork is located in Chandigarh, which is about a three-hour drive north from Delhi—and where Canada has a consulate, by the way.
Most pork found in local stores would be slaughtered locally, sometimes in less than ideal conditions, especially if you're aware of how this is done in India. Most pigs are raised in small, backyard operations, with limited control on their food intake—which means eating whatever they can find. There is a limited selection of prepackaged pork, bacon, ham, and sausages, with similar chicken-based products offered alongside.
During our visit, the federation organized a round table with several importers and distributors of imported food products. The participants confirmed their strong interest in importing Canadian pork. CPI provided a general indication of the price for some Canadian cuts, and they confirmed that these prices were competitive. In spite of the import duty of 37% currently charged on imported pork and the VAT of 5% collected on raw meat and of 12% on processed products, they all indicated that they would be able to find markets for the Canadian products.
The participants in the meeting provided a perspective on the Delhi market. We have to be aware that in India, because of the transportation difficulties the big markets do not communicate with one another—between Mumbai and Delhi and Chennai and those places. So you have to look at very specific markets, one by one.
While some of them were confident that they could import a full container of pork, some participants, especially from smaller firms, indicated a preference for a consolidated shipment equally divided between pork, processed pork products, and seafood. So there's also an interest in seafood from the same buyers.
In recent years, we also have had the opportunity to meet the buyers of the major Indian hotel chains, such as Taj Mahal and Oberoi. Without exception, they always mention their interest in Canadian high-quality pork products. We believe that given access to the Indian market, the Canadian pork exporters could achieve good results.
We're also aware that some product has been shipped directly to India from Canada; if you take a look at the Canadian stats, what is presented as Canadian pork exports to India is real, although there are no export certificates. I never ask how it got in there, but it did and still does.
Our industry has been trying for years to gain access to India—I mean official access to India—without success, as it has been very difficult for the CFIA to get its Indian counterparts to negotiate a workable export certificate for Canadian pork products. Since the announcement that the two countries will start negotiations for a trade agreement, we sense that the Indian veterinary authorities are now more open to conducting such discussions.
In light of the above, the Canadian pork industry is requesting the Canadian negotiators to seek the following. First is a firm engagement on the part of the Indian authorities to undertake negotiations toward a resolution of the various sanitary issues within a set timeframe. As a matter of fact, we've been talking to India for over 10 years without any success.
These negotiations should include the following issues: an agreement on export conditions related to societal norms prevailing in India, which means requirements related to religious practices, such as the requirement for the absence of ruminant proteins in the feed given to pigs; the development of an export certificate for Canadian pork being shipped to India; and finally, a system-wide approval of the Canadian meat inspection system.
The final thing is tariff-free access without a quota for pork, offal, and processed meat products as classified under chapter 2 and chapter 16 of the harmonized standard codes.
Thank you very much. I'm open to all questions.
Conservative
The Chair Conservative Rob Merrifield
Thank you.
We'll now move to the question and answer portion of the meeting.
We'll start with Mr. Davies. You have seven minutes.
NDP
Don Davies NDP Vancouver Kingsway, BC
Thank you, Mr. Chairman.
Thank you to both witnesses for being here.
Mr. Beaulieu, I would like to start with you.
Overselling questionable numbers, ideology, and rhetoric characterizes the whole concept of trade in our country a bit too much, so it's refreshing to hear some number-based common sense.
You asked a question in your article: what can Canada really expect from these negotiations? And you answered: unfortunately, not much.
I want to start by asking you this. Have you done or seen any economic modelling regarding the economic impact of a trade deal with India?
Prof. Eugene Beaulieu
No, I have not done any myself.
I looked at the Canada-India joint committee report. That's the only document I've seen. I haven't seen an economic analysis of this.
NDP
Don Davies NDP Vancouver Kingsway, BC
Okay.
Were there some economic numbers in that assessment that seemed to indicate what Canada might benefit from?
Prof. Eugene Beaulieu
When I read that document there were some numbers in terms of goals or objectives, like doubling trade and things like that.
If you look at the data without an agreement, we have been doubling trade and we've increased trade a lot. It's hard to argue that the agreement itself is going to generate a big bang in trade. There's a very loose connection between a trade agreement and actual employment or jobs. One of the things you see a lot are comments that it's going to generate jobs. The economic evidence on job creation from trade agreements is that there's not a big employment effect—maybe in the short run, but not in the long run. There's potentially some economic growth effects and that kind of thing that in the longer term can translate into a stronger economy. On actual employment effects, it's fairly dubious to make arguments that it's going to generate jobs.
I don't know if I answered your question.
NDP
Don Davies NDP Vancouver Kingsway, BC
Yes, I think you did. Thank you.
You point out that from 1995 to 2004, there was a clear change in Indian exports and imports, moving decidedly away from North America. Certainly, the United States has slipped a number of positions as India increases its imports and exports with other countries, namely, China, who's now India's largest partner, the United Arab Emirates, Saudi Arabia, Switzerland, Iraq, Germany, and Australia as well. I also note that Canada doesn't make the top 10 list with India.
You've pointed out the distance, and I'm also conscious of the cost of energy rising over time. I think it's a pretty obvious conclusion that in the next 20 to 40 years, energy will probably be more expensive, not less.
Do you see a continuation of this trend of India increasing its imports and exports to other countries as opposed to North America, which, as you pointed, is some distance away?
Prof. Eugene Beaulieu
Well, I'm not going to comment on the direction of the cost of energy, but definitely the impact of distance relates not only to how much it costs to get goods to market, but also to networks and relationships.
Communication and transportation costs have come down. Whatever happens with the price of oil, the logistics and the time and the cost of getting goods to a far-off market I don't think is going to change in a big way.
NDP
Don Davies NDP Vancouver Kingsway, BC
Right, and you point out that “the two countries are not what one would consider ‘natural’ trading partners”. You point out that “the relatively low levels of economic integration are not the natural result of significant protectionism or policy-induced barriers to trade”. You point out that India has actually done a fair bit of liberalization through the requirements of the WTO in the 1990s.
But you've said “Barriers have already come down significantly, and Canada's trade and investment relations with India have grown, but have lagged behind India's relations with larger and closer countries”. You point out that trade negotiations—to use your words—“seem to be going nowhere, fast,” and that “One of Canada's goals is to improve Canadian market access to India, something India has no interest in”. I'd like you to comment on that.
You say India is an active user of trade and investment policies designed to achieve domestic goals. India is not prepared to move further on these issues currently, and any improvement Canada can get is hard-fought. You also say that Canada is interested in negotiating the liberalization of services and procurement, but “these are off the table as far as India is concerned”.
Given that description, it would seem to me your conclusion is that while CEPA with India might be desirable, you don't see any hugely significant gains coming out of that.
Prof. Eugene Beaulieu
Yes, I still stand by that. Again, the distance and economic size is a very important driver of trade relations. Why do we trade so much with the U.S.? We like them and everything, but they're very close and they're very big, so it's just a natural.
India is trading with China and other Asian countries, and Iran and other large countries close to it are driving India's trade. When India started liberalizing, it started trading more with closer, larger countries, and Canada was not really on its map. That's changed a bit, and India is actively pursuing trade and investment agreements with a lot of countries. Again, I think it's pretty clear that we're well down on the list of India's priorities.
In terms of…what was the other point you mentioned?
Prof. Eugene Beaulieu
Oh, right.
So they have different interests. We've heard again today that we want market access, not just in goods but in services and other industries. If you look at the most recent WTO report on India's trade policies, even though they talk about being liberal and liberalizing their trade and investment, it is an active tool of theirs. It's part of their development strategy. They use those tools to their benefit and they're not going to give them up easily.
I think some of the things we want, India doesn't want to give up. India does have other interests. I just think we're not high on their priority list. It's possible that things may have changed, maybe partly with the trade mission, and also with the recently announced CNOOC deal and Canada's policies towards state-owned enterprises. I think we did get their attention. So maybe things can improve in terms of their being interested in talking to us.