Thanks for the opportunity to make a presentation to you on behalf of the Canadian Federation of Agriculture.
Today we're talking in particular about the possibility of an India-Canada agreement. I think that's part of an overall initiative of trying to open up trade agreements around the world. Actually, I met some of you in Japan recently at the talks there.
For those of you who may not know, the Canadian Federation of Agriculture is a general farm organization representing commodity organizations and general farm organizations from right across the country and representing over 200,000 farmers. Because we represent a number of commodities in a number of different provinces, a lot of the comments I'll be making will not necessarily be commodity-specific in detail, but will give some general areas of interest as we move ahead with discussing India and our trading relationship.
At present, India is the sixth-largest agriculture market for Canadian exports. In the last five years, on average, Canada has exported $503 million and has imported $245 million in agriculture and agrifood products to and from India. Our top exports were peas, chickpeas, lentils, frozen fish, whey, and mustard seeds. Imports included rice, cereal flours—but that is not wheat—tea, oilseeds, and food products. Canada's trading relationship has grown steadily over the last decade, with exports increasing by close to 300%.
The Indian market continues to present tremendous potential for Canadian agriculture. According to the 2011 Indian census, the current population of India is 1.21 billion people. The country added 181 million more people in the last decade, making India one of the fastest-growing markets in the world.
A recent study performed by the India-based National Council of Applied Economic Research predicts that the percentage of middle-class consumers in the country's total population will increase from the current level of 13.1% to 20.3% by 2015-16 and to 37.2% by 2025-26. This growing middle class will create a new and diversified demand for food and food products and increased market access opportunities for Canadian producers.
When assessing the market, it must be recognized that India is one of the top producers of cereals and vegetable products in the world and is a net exporter of agricultural products. Over 50% of the Indian population relies on agriculture for their livelihood. Food self-sufficiency and increased productivity are central policies of the Indian government. As a result, domestic agriculture supplies some 97% of consumption.
While views differ on whether India can sustain this policy, Indian producers are faced with land and input constraints and the need to increase production levels. Already the demand for oilseeds and pulses regularly exceeds production, and imports are required to cover that shortfall.
To ensure a successful trade agreement for Canadian agriculture, it is imperative that negotiators understand both the domestic Indian agricultural policies and the import and export regulations. The Indian market is complex and sometimes difficult to navigate.
The government plays an active role in agriculture and tightly controls domestic production and trade. Depending on the commodity, policies could include setting minimum support prices, state trading, establishing import tariff rate quotas, dictating import regulations, granting export quotas, and issuing export subsidies.
According to the World Trade Organization's 2011 trade policy review, the average tariff protection for agricultural products in 2010-11 was 33.2%, considerably higher than manufactured products at 8.9%. Applied tariffs vary between commodities and the situation in the domestic market. For example, imports of fresh and frozen chicken cuts were subject to a 100% applied tariff, largely to protect the domestic industry. In contrast, tariff rates have been temporarily eliminated for pulses and have been reduced to an average of 9.7% for vegetable oils, to address demand and inflation.
With the majority of the country following a strict vegetarian diet, pulses are a key protein source. India is consistently among the top market for Canadian pulses—for example, chickpeas, lentils, and peas—with sales valued at $632.7 million in 2011.
Pulses have accounted for 98% of Canadian exports to India. Bound tariffs are 50% for peas and 100% for lentils and other pulses. Permanent elimination of import duties for Canadian pulses and a mechanism to address market access issues would be of significant benefit to this important pulse market.
India is also a significant importer of vegetable oil, importing 10.2 million tonnes in 2011-12. While India has not traditionally been a large market for Canadian canola, the elimination of tariffs on canola seed, oil, and meal would greatly assist canola producers in promoting the benefits of canola as an alternative to other vegetable oils and in building a new customer base. The relevant biotech approvals will also be required.
In certain years, market opportunities for wheat have existed. Depending on the production and stock levels, India can both import to cover production shortfalls or export surplus supply. India last imported wheat in 2006-07, when it purchased a million tonnes from Canada.
The government tightly controls the wheat market, setting minimum domestic support prices, issuing public tenders for domestic and import wheat purchases, and controlling export quantities. Given current high levels of stock, the Indian government lifted its four-year export ban in 2011 on Indian wheat and established an export quota. Exports are expected to continue in 2012-13.
While not considered a traditional market for pork, India has a growing tourist industry and an affluent upper class and foreign population, all with the potential to create new niche markets for Canadian pork. The market for imports is currently limited to hotels, restaurants, and institutions as well as importers of processed products. As meat consumption continues to grow and full market access is secured, market opportunities for Canadian livestock will also increase. Pork imports currently face basic tariffs of 30%.
Market access is related not solely to tariffs. Addressing non-tariff barriers related to sanitary and phytosanitary regulations and import measures and establishing a mechanism to discuss future issues are critical outcomes of the negotiations. Without solutions, Canadian agricultural products won't benefit from the liberalization of tariffs. India has, for example, agreed to extend the pulse fumigation derogation granted to Canadian pulses until the end of March 2013.
Canada and India are working to find a more sustainable solution. Ongoing negotiations could be used to address the issue. There are also various sanitary and phytosanitary issues to solve in the poultry and livestock sectors.
In general, Canadian cereals meet the Indian import requirements; however, in the past India has relaxed these measures when imports have been required and tightened them when they have not. Improved transparency and predictability would enhance the attractiveness of the Indian market to Canadian exporters.
The impact of Indian domestic agriculture and trade policies is not limited to India, but it distorts global trade in the respective commodity. One of the contributory factors of volatility in the international sugar market is policy-induced production swings in certain Asian markets, particularly India. Similar to the situation with wheat, India is either an exporter or an importer of sugar, depending on domestic production and stockpiles. Government policies aimed at stimulating domestic production and establishing a pricing stature and relaxing import restrictions or granting export licence all distort the international sugar trade.
Canada doesn't currently export sugar from or import sugar to India, but the U.S. imports a small quantity under a tariff-rate quota.
In conclusion, India's fast-growing market holds future potential for Canadian agricultural producers. Favourable market access conditions, including a mechanism to address non-tariff barriers, and predictable rules of trade would be beneficial to Canadian agricultural producers.
Thank you.