International Trade Committee on Dec. 11th, 2012

[Don Davies, NDP, Vancouver Kingsway, BC]

Thank you.

[The Chair, Conservative, Rob Merrifield]

Thank you very much.

Mr. Keddy.

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

Thank you very much, Mr. Chairman.

Welcome to our witnesses.

I'm going to come at this from a slightly different point of view. I read and listened to your comments. I didn't think they were quite as negative as the official opposition found them, but maybe I just misunderstood them totally.

Mr. Pomerleau, welcome back to committee. It's always good to see you. Part of this discussion is on Indian tariffs and the difficulty of not just entertaining that market, but entering that market. I certainly understand the comments about distance. Without question, your closest neighbours are always going to be your closest trading partners. India is almost equally divided between the east coast of Canada and the west coast of Canada, with the east coast actually being slightly closer. It is about as far away as any market could possibly be for us.

I just want to be clear on your comments on the duty on pork, because I think you said it was 37% duty on top of—and that's what I want to be clear on—5% on raw meat and 12% on packaged meat. Is it actually 43% and 49%?

[Jacques Pomerleau]

The way they do it, there's a duty of 37%, and then on top of that you add a VAT tax of 5% on raw meat and 12% on processed meat. The end buyer will have to pay 49% on the processed products.

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

Exactly. I think that puts the lie to the point that tariffs are dropping. We have a punishing tariff here, a tariff wall, but yet there's still a market. I don't think anyone can make the argument that there are no barriers. That's a significant barrier to trade.

You want to comment there, I can tell.

[Jacques Pomerleau]

In fact, it is not the most significant barrier. The barrier is the lack of a veterinary agreement. We just cannot get them to negotiate. We have been working with the CFIA for more than 10 years now to get access. There's something in India called bureaucracy; let me tell you, it's not easy to get through. Also, there are some remnants of past policies, where India wanted to be self-sufficient at all costs. Some parts of the bureaucracy, especially the ones we're dealing with, have the idea that in this case imports are no good. They are putting blocks and hurdles in our way.

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

But the point I wanted to drill into was the fact that there is a market there, even with the punishing tariff system.

[Jacques Pomerleau]

Yes.

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

I want to go back to our first guest.

There are a number of issues. I'm going to take a little different point of view than the official opposition takes. If we can finally get the FIPA signed by everyone who's involved, it will continue to open those doors that have been closed for some time. It will give us some structures on foreign investment in India. The free trade agreement, which was dead for many years, has been resurrected. It's a long way from being completed, but at least it's been resurrected.

We do have some commonalities with India, including a common language, English. At least one of our official languages is spoken there by millions and millions of Indians. Actually, I think it's the one common language in India.

On top of that, we have some challenges. Those challenges are distance, a protectionist state, at the subnational level especially, and foreign investment policies that are prohibitive.

Here's my challenge to you, sir. If you took Canada's GDP and India's GDP, we have somewhere around $3.7 trillion or $3.8 trillion or $3.9 trillion, and we're doing a couple of billion dollars' worth of trade. When we started this discussion with the Indians when we formed the government, I think we were doing about $6 billion worth of trade jointly. We're above that now, so we're headed in the right direction.

Even with the challenges, what's the potential?

[Prof. Eugene Beaulieu]

Again, I was pretty clear that there is potential. There is huge potential, and I think businesses are discovering that. This is the reason we're trying to foster stronger relations.

Let me be clear. In both the communiqué I wrote and in my comments today, I fully support going forward with this. I think that we want to, that it's important, and that there is immense potential.

As we've heard in testimony today, there are tariff barriers and there is investment protection. I didn't ever say that those things weren't there. I guess one of the things I was a little bit skeptical or cautious about was our ability to get India to move on some of these things.

Perhaps the investment decision on Friday might actually help us in our Indian negotiations on other fronts. There's a potential for this, because they are very interested in that resource part of our economy, for various reasons. But as you've pointed out, and as we heard from Monsieur Pomerleau, India has a complex political system. It's very difficult, it's very bureaucratic, and there are also other issues. It's hard to get progress, so even though they talk about making things happen, maybe they don't happen very fast.

I am skeptical that we're going to get much done, especially since we're not high on their list, but definitely there's potential. Distance is just one of the factors. If you look at the evidence, language is important—these common things work to our benefit. The distance just works a little bit against it.

A lot of my point was that we're expanding trade with them without these investment and trade agreements, but I think that at this stage it's important to do them so that we can facilitate trade. I don't think we're going to drive it, but I think if we don't do it, we're going to continue to have other people with....

So market access is a problem, but again, India is not as interested in relinquishing that as we are in getting it.

[The Chair, Conservative, Rob Merrifield]

Thank you very much.

Mr. Easter.

[Wayne Easter, Liberal, Malpeque, PE]

Thank you, Mr. Chair.

Thank you to both witnesses for coming. Welcome.

Jacques, to start with you first, you talked somewhat of the potential in Korea. In the short term—you've been before this committee—certainly the Korea trade agreement is the one that is crucial to the Canadian pork industry. As you're well aware, the Americans have now implemented their free trade agreement, so we're falling behind.

I wonder whether you have any information you could update the committee with concerning what stage it is at, or whether you would express an urgency that Canada move a little more rapidly in securing a market that is already ours.

[Jacques Pomerleau]

We have to keep in mind that there are presidential elections in Korea on December 19. Because the election campaign was run on anti-free trade agreement lines, we feel that there's a sense of urgency to conclude the Canadian-South Korea free trade agreement before the new president is voted in.

We also realize that because we are lagging behind the U.S. and the European Union, we may not get what we want. At the same time, we have to make sure that we will not be excluded from that market forever if we don't have an agreement; there's a balance here. We are in close contact with the Canadian negotiators.

My plea today would be that we should try to have as good a deal as possible, but as soon as possible, to make sure that we don't jeopardize having any deal at all. We need one, and knowing the situation in South Korea, we need to hurry up.

[Wayne Easter, Liberal, Malpeque, PE]

Thank you.

You're talking about this December 19, eight days away?

[Jacques Pomerleau]

Yes.

[The Chair, Conservative, Rob Merrifield]

I allowed a question on the India study, but—

[Wayne Easter, Liberal, Malpeque, PE]

Well, Mr. Chair, we are the international trade committee, and I think if we should be saying to the government that they'd better get off their butt, then they had better get off their butt. I think that's what Jacques is saying. He's not using my terminology, but I'll use it for him.

Thank you.

In terms of the India trade agreement, who is selling pork in that market at the moment?

[Jacques Pomerleau]

Hardly anybody.

[Wayne Easter, Liberal, Malpeque, PE]

I know there's not a lot of pork eaten, but there is potential.

[Jacques Pomerleau]

Are you talking about Australia or the other countries?

No, the point is that India's Minister of Agriculture and those on the veterinary side are very protectionist. So hardly anybody is in there. What we found out is that there can be a lot of product in India, but it gets smuggled in from Dubai, in whatever ways they can get it in. At the same time, you have to keep in mind that a lot of people are western educated in India and they look at the quality of the products that are offered in their markets. Many of them are wondering when they can get fabulous Canadian bacon, or whatever. That's what we've found out.

India, for us, would be a market of very high-value products, processed products, and we have very few of those markets worldwide.

That's one reason we want to get into India.

[Wayne Easter, Liberal, Malpeque, PE]

So the bottom line is their potential.

I will turn to Mr. Beaulieu. I went through your paper, Eugene, “The Comprehensive Trade Agreement with India: What's in it for Canada?”

Don questioned along the lines of what Canada can really expect from these negotiations. The answer, unfortunately, is not much.

Since this paper was written in November, and by your statements here today, you seem a little more favourable. Given your first response in this paper, I don't think you're against a trade agreement with India. I will say that one of my concerns on all trade agreements that this government is pursuing to date is that they're pursuing them as if it's just for the numbers—let's get a deal.

The history in trade agreements in terms of gaining more income equality, establishing more manufacturing and value added in Canada is not great. In fact, it's absolutely poor. So what do you see from government policy that's needed to gain value from a trade agreement with India?

[Prof. Eugene Beaulieu]

I'm not sure what your points about inequality or employment were.

[Wayne Easter, Liberal, Malpeque, PE]

Well, you should be sure if you look at the numbers.

Income inequality—the gap between the rich and poor in Canada—is growing rapidly, even though we're doing all this trade. Our manufacturing base has been in decline. We're not doing enough in terms of value added in this country. Those are the kinds of things I'm talking about. It's not just about signing a trade agreement. We need a policy that I think establishes an industrial policy in Canada.

But my question to you is this. Given your concerns that we're not going to gain enough out of a trade agreement with India, how do we compensate for that? How do we establish that we do in fact gain value out of a trade agreement with India for Canadians?

[The Chair, Conservative, Rob Merrifield]

Before you answer that, Mr. Easter, do you have the numbers you're referring to?

[Wayne Easter, Liberal, Malpeque, PE]

I can get them for you. I don't have them here.