Evidence of meeting #10 for International Trade in the 41st Parliament, 2nd session. (The original version is on Parliament’s site, as are the minutes.) The winning word was ceta.
A recording is available from Parliament.
Vice-President, Policy, International and Fiscal Issues, Canadian Council of Chief Executives
To my mind, that's the focus of this committee.
NDP
Jasbir Sandhu NDP Surrey North, BC
Ms. Campbell, you pointed out that tariffs are a tax on consumers. Recently the Conservative government removed 70 countries from a tariff reduction list. That's going to add some taxes on consumers.
Would your council oppose that tariff that's been increased by the Conservatives?
Vice-President, Policy, International and Fiscal Issues, Canadian Council of Chief Executives
I certainly didn't think it was an ideal move, no.
Anything that increases tariffs we think is not an ideal move. I believe that this increase was to perhaps create some negotiating leverage for our negotiators who are undertaking negotiations with India, for example, and to encourage countries such as China to come to the negotiating table at the WTO. And I would encourage us to consider how we may look bilaterally at our relationship with China.
But I agree with you. I think increasing those prices was not an ideal policy choice.
NDP
NDP
Jasbir Sandhu NDP Surrey North, BC
You listed a number of winners, the sectors that are going to win with CETA. Are there any losers that you can think of?
Conservative
Vice-President, Policy, International and Fiscal Issues, Canadian Council of Chief Executives
No.
Thank you for the thoughtful questions.
Conservative
Ed Holder Conservative London West, ON
Thank you, Chair.
I'd like to thank our guests for being here today.
Mr. Keon, I've heard your testimony and your responses to some of the questions. I'm not sure if you're a glass-half-full or a glass-half-empty kind of guy, because your comments confuse me a little.
First you talked about the $2.8 billion potential increased costs, and then, when you were challenged on it, you suggested that it could be $1 billion and not implemented for the next 10 years. If you're going to make a comment like that, my own suggestion would be that what was then might have been then, but to keep it current is I think more helpful for the committee and perhaps for others you speak to.
Second, you said twice that implementation is critical. I think we get that. From where we came to where we are, and even where the Europeans came in from, I'm not sure why you'd presume that implementation wouldn't be done the right way. I have great confidence, as I heard Ms. Campbell talk about, in terms of our committee and all they have done, especially with regard to where the Europeans had come from.
I guess the third thing, though, or the other side, is that it's your expectation that litigation will be reduced, so that'll be a good thing for your industry, for your plea, from where the European position was to where we are, and also, there's an export exception.
Here's my question of you. I know how a lot of various industries in Canada often will compete with each other and with other jurisdictions across the country, across the continent, or across the world, but I'm not as well versed about how it works within the generic world. Does that export exception give the generic companies in Canada an opportunity to sell their products? What does the fact that it's been put in place mean to your industry?
President, Canadian Generic Pharmaceutical Association
Thank you for your questions.
I was asked about costs, so I answered.
On the implementation, we're also very confident that it will be done correctly, and that's why we presented the comments we did.
President, Canadian Generic Pharmaceutical Association
In terms of the exports, it is an extremely competitive world market for generics. What is absolutely critical is when you can get to market.
Patent increases diminish the competitiveness of the domestic generic industry. The patent export exception that has been negotiated and committed to is an important mitigating factor that should help the generic industry maintain its competitiveness and its ability to export.
Conservative
Ed Holder Conservative London West, ON
I'll come back to what Ms. Campbell said, which I think is true: were it not for the patent drug companies, you wouldn't be here. I think it's that kind of yin and yang, that relationship between each other, such that somehow you make it work.
Ms. Campbell, I have a quick question for you. There's speculation that corporate Canada has sat on the sidelines in terms of investment over time, perhaps as a result of the recession. I'm not sure if you can comment on that, but I'm wondering, to what extent does CETA make corporate investment from Canadian companies.... Does it make us much more optimistic that they or you will do that?
Vice-President, Policy, International and Fiscal Issues, Canadian Council of Chief Executives
We have a very healthy economy. We have regained all the jobs—full-time, good-quality jobs—lost in the recession. I would not characterize that as corporate Canada sitting on the sidelines whatsoever.
We've had an extremely volatile period over the last few years. Look at households. I'll just speak for myself. My husband and I were making decisions about whether to buy a new car. We're holding back. We're being conservative with our money. I know it's a little folksy, but it's the same thing you're seeing with large firms as well. They're waiting to deploy their cash for when they see solid investments that they know will improve their product offerings and create a product that consumers want.
What I would say is this. Certainly, access to a market of 500 million additional savvy consumers provides more opportunities for Canada. We know that we can't have the economy and the jobs we have now unless we're open to providing our products to the world. It really is up to business, innovators, and entrepreneurs to seize the moment. I will say that absolutely. I think the government has created a huge opportunity here, and it's up to Canada to seize it.
Conservative
The Chair Conservative Rob Merrifield
I want to thank you very much. This has been a spectacular panel.
For the generic industry, I'm pleased to see that you're looking at the opportunities CETA provides you, as well as some of the challenges. I'm very confident that the opportunities will outweigh the disadvantages.
Thank you very much to the Canadian Council of Chief Executives. You were very positive. Thank you very much for your testimony.
With that, we'll suspend very briefly as we set up the next panel.
Conservative
The Chair Conservative Rob Merrifield
Our witnesses are in place. We have with us from the Canola Council of Canada, Jim Everson, vice-president, government relations. Thank you for being here. You've been before our committee many times.
We have from the Canadian Aquaculture Industry Alliance, Ms. Salmon, executive director. Some of the committee members are wondering if you got that job because of.... You've heard that before, haven't you?
Ruth Salmon Executive Director, Canadian Aquaculture Industry Alliance
I have, and it's true.
Conservative
Jim Everson Vice-President, Government Relations, Canola Council of Canada
Thank you very much, Mr. Chairman, and thank you to the committee members for having the Canola Council here today to talk about CETA. It's a pleasure to be here and to share with you how the Canola industry will benefit from the comprehensive economic and trade agreement with the European Union. It represents an opportunity to improve our market access and improve predictability around the regulation of biotechnology.
First I'll say a little bit about the Canola Council of Canada. The council is a value-chain organization representing the entire canola sector in Canada—the 43,000 canola growers, seed developers, the crushers that process seed into oil and meal, and the exporters who export canola for processing at its destination. The Canola Council is the vehicle through which the industry comes together to set objectives and implement plans for the entire sector.
For some basic numbers on our industry, canola returns the most income to farmers of any agricultural product in Canada. It contributes $19.3 billion to the Canadian economy annually, and supports 249,000 jobs. Our industry has doubled production in the last 10 years. This year a record 16 million tons were grown by Canadian farmers. This expansion has brought with it significant investment in rural communities. For example, there has been more than $1.6 billion invested in crushing and processing capacity in the last six years, which reflects confidence in the opportunity provided by the sector.
Importantly, this income and economic impact is generated mostly as a result of international trade. Canola export of the seed, oil, or meal brought in approximately $9.6 billion in exports in 2012. Just to put that in context, Canada's overall agrifood and seafood exports were $48 billion in 2012. Canola represents 20% of this value.
Since we export more than 85% of what we produce, we are very reliant on predictable access to markets. This is why agreements like CETA and others are so important to our industry. Our industry succeeds because we are competitive internationally. We've done best in markets that are free from tariffs and non-tariff barriers. Government, through diplomacy and trade negotiation, has a big role to play in growing and maintaining our market access. Efforts by the government to conclude CETA, particularly by agriculture minister Gerry Ritz and trade minister Ed Fast, are critical for the Canadian canola industry to continue prospering from international demand.
Let's talk a little bit about what CETA means directly for canola. Firstly, eliminating tariffs on canola oil will help us increase exports by up to $90 million. Eliminating tariffs on canola oil means our canola crushers and oil exporters will have privileged access to Europe. This increased access is occurring at an opportune time, as I illustrated with the $1.6 billion invested recently in crushing capacity in western Canada.
We're already serving the European market, and tariff-free access on oil will allow us to ship more value-added product. Our canola oil is a valuable feedstock for EU biodiesel production, reducing greenhouse gas emissions by 90% compared to conventional diesel. With the tariff-free environment now, our industry is well positioned to serve a larger portion of this market.
Secondly, CETA includes important provisions for biotechnology. The EU's regulatory system for biotechnology creates risk for exporters and creates uncertainty for seed developers looking to introduce new seed traits. Biotechnology is the key to making Canadian canola growers competitive in world markets, but the EU's regulatory environment creates real barriers to trade and innovation.
CETA includes provisions for cooperation in the area of biotechnology, and this is a significant development for our negotiators. CETA will enhance the existing forum for discussing issues around biotechnology and their impact on trade. This will help improve cooperation among regulators in areas of science-based approvals, low-level presence policies, and the minimization of trade impacts of regulatory practices.
This is a long-term opportunity. The success of this provision will depend on the ability of the two governments to arrive at solutions. We are hopeful that these working group discussions on low-level presence policies will reduce the potential for low levels of approved biotechnology traits to cause trade disruptions. This has the potential to significantly reduce risk for exporters, and thereby increase returns producers earn from the market.
Lastly, alongside CETA the Government of Canada was able to secure a commitment for the timely and efficient processing of canola trait applications. Canada's canola sector adheres to a voluntary market access policy to respect the regulatory requirements of our export markets.
New genetically modified seed traits are not introduced into Canada until they are approved in our major export markets, including the European Union. Commitment by the EU to process applications in a timely manner will help facilitate innovation by bringing predictability to seed developers and giving growers access to new technology earlier.
In conclusion, I thank you for the opportunity to explain the benefits of CETA. The canola industry supports the Government of Canada's sustained commitment to improve market access through ongoing negotiations. This includes seeking a multilateral solution through the WTO, the best solution for free, fair, and predictable trade. It also includes completing agreements with Korea, Japan, and the Trans-Pacific Partnership, and it includes increased engagement with China and the implementation of the Canada-European Union free trade agreement. These efforts will have major benefits for the 249,000 people supported by the canola industry from coast to coast.
Thank you very much.
Conservative
The Chair Conservative Rob Merrifield
Thank you very much.
We'll now move to Ms. Salmon. The floor is yours.
Executive Director, Canadian Aquaculture Industry Alliance
Thank you very much, Mr. Chairman. I really appreciate the opportunity to be here.
I'll just say a few words about our association. The Canadian Aquaculture Industry Alliance is a national industry association here in Ottawa. We represent the interests of Canadian aquaculture operators, feed companies, suppliers, as well as provincial finfish and shellfish associations. The majority of my comments this morning will be focused on farmed seafood, but I thought it would be useful to give the committee an overview of the EU market for all Canadian fish and seafood.
The EU is the largest seafood import market in the world. It's a growing market and it's characterized by high-value niches. Canada's fish and seafood exports to the EU are currently in the area of $400 million. These exports have attracted an average tariff of 11% in the past, with some tariffs as high as 25%, obviously making access difficult.
With CETA, 96% of tariff lines will become duty-free immediately and others will be duty-free within seven years. This will certainly open up large new opportunities for seafood including farmed seafood. The next slide is basically a look at the current situation analysis for farmed seafood products exported to the EU. Along with the limited potential to increase farmed seafood production right now in Canada, serving any new markets requires diversion of products from existing markets. When you add the high tariff rates to this supply limitation, you can see why the EU has not been a priority export market in the past. However we do have some very limited opportunity or have had limited opportunity with high-value niche products like oysters, value-added mussels, caviar, and farmed sablefish. Here's a list of some of the products we currently export to the EU, both in finfish and in shellfish.
So what's the near-term opportunity? When CETA is fully implemented, those companies that are doing business in the EU now will be looking to expand. While competition in seafood is intense, the demand for seafood is growing in the EU. Canada certainly has a reputation for consistent high-quality farmed seafood products, so it's a very good foundation to work from. However, if the Canadian industry is allowed to grow, the EU will become a natural new market for high-end farmed seafood products.
I want to spend a minute talking about the global trends and seeing where aquaculture fits in. The global population will exceed nine billion by the year 2030. We also know that land and freshwater resources are becoming scarce for increased food production. Aquaculture is the fastest growing food industry in the world, with an annual growth rate of 6% to 7%. That growing population, along with what is certainly an increasing awareness of the health benefits of seafood, creates a very strong market demand for farmed seafood now and into the future.
I'll just take a minute to talk about what the industry in Canada looks like right now. We're currently valued at $2.1 billion. We employ about 14,500 full-time workers across Canada, most of those in rural and coastal communities. We farm in every province and the Yukon. We're one-third of the value of fisheries production and, similar to the case for canola, we export the majority of what we produce.
Over the past 10 years, our story has been different from that of other commodities. Canadian aquaculture is making a contribution to the economic and social fabric of the country while contributing to the world's protein requirements, but we have the potential to do so much more. Canadian aquaculture grew rapidly from the early eighties to the end of the nineties, but since that time, even considering pockets of growth in some areas of the country, overall industry growth has basically been stagnant. Despite our enormous competitive advantages, Canada's share of the world's farmed fish market has fallen by 40% during the past decade. Canada now accounts for only 0.2% of global aquaculture production.
This stagnation has taken place while other producers in New Zealand, Norway, Scotland, and Chile have raced ahead. As a result, our rural communities are forgoing greater prosperity, our food processors are losing out on export opportunities, and our economy is missing out on potential growth. Not only is this a missed opportunity for Canada, it's a missed opportunity for the world. Seafood is one of the most highly traded food commodities, and globalization only underscores the opportunity and the urgency for Canada to increase its competitiveness.
The obvious question is, why have we flatlined? The principal challenge confronting our sector is the complicated set of regulations that restrict growth and limit investment. Our industry is regulated by the Fisheries Act, which is a wildlife management act never intended for an innovative food production sector. This is a piece of legislation that dates back to Confederation, when commercial aquaculture in Canada did not exist.
In addition, rapid development of the sector in the 1980s and 1990s resulted in a myriad of federal, provincial, and local regulations, many of them implemented before commercial-scale aquaculture was a significant activity. As a result of this patchwork approach, many of these policies and regulations are reactive and inefficient. Together, they create an overarching policy framework that retards competitiveness, obscures certainty, and stalls growth. Unfortunately, most governments to date have been slow to modernize and streamline this regulatory framework.
Discussion about the need for a new regulatory and legislative framework is not new. Numerous reviews, numerous standing committee reports and studies have been done over the last 30 years that highlight the inappropriate and onerous legislative, regulatory, and policy environment here in Canada. In response to this, our association recently launched a comprehensive national aquaculture development strategy to address the vast and complicated structure of legislation, regulations, and policies that negatively impact the development of our industry.
This slide shows you the result of recent discussions with some of our finfish and shellfish members who are interested in investing and growing their aquaculture businesses in the short, medium, and longer term. Projected growth is based on the assumption that we will achieve improvements to the regulatory, legislative, and policy environment. This projected growth not only positively impacts employment and economic activity for rural and coastal communities, but also allows us to capitalize on trade agreements such as CETA.
In summary, our association certainly supports and applauds the federal government for CETA. However, our industry requires increased growth and competitiveness to take significant advantage of this market opportunity. Our industry offers tremendous opportunities for Canada. Working together with government, we can renew a vibrant aquaculture industry in Canada and unlock the full range of economic, environmental, and public health benefits that flow from a competitive, sustainable, and growing farmed seafood sector. That work, together, will require regulatory reform, a national aquaculture act, and a vision for growth.
Thank you very much, Mr. Chairman.
Conservative
The Chair Conservative Rob Merrifield
Thank you very much for your presentations, both of you.
We'll now move to question and answer.
We'll start with Monsieur Morin.