International Trade Committee on Feb. 4th, 2014

[Yuen Pau Woo]

We work very closely with the ministry and with all interested parties. We've organized a number of events with Minister Fast and with the department, and I've taken part in most of the post-negotiation debriefings that are held by the chief negotiator and her team. We have as much information as is available to us and other parties. The foundation is part of a regional network of researchers. It has counterparts in all the TPP economies that study the agreement and make recommendations. We look forward to getting more information as the negotiations advance so that the export community as well as the public feel confident that this is a deal that benefits all Canadians and all the parties involved.

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

I agree, open and transparent, and it has to go through and eventually be tabled and debated for a few more years before anything comes to fruition, I would imagine, before legislation.

I have just one quick question, Mr. Van Keulen. I agree that industry wants strong, stable, predictable, rules-based policies in place. You mentioned that you want to have access to open markets. So when you're negotiating, what would be the benefits for other countries in doing business with Canada, specifically for the dairy industry? You want access to their industry. In looking at reciprocities, is that something you'd be looking at from your association's perspective?

[Stan Van Keulen]

I think the key is that there has to be a dollar in it. Obviously reciprocity on trade is a good thing. We can't have a garage sale whereby we're selling off our market without getting some benefit back by way of a profit. I think that's the key here right now. If you're going to have trade, there has to be balanced trade and it has to be done in a profitable manner.

[The Chair, Conservative, Rob Merrifield]

Thank you.

Mr. Pacetti, the floor is yours.

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

Thank you, Mr. Chair, and thank you to the witnesses for coming forward.

I have just a quick question to Mr. Van Keulen before I get to Mr. Woo. You stated in your presentation that there's no cost to the taxpayer, yet yesterday you mentioned that Europe thinks your industry is subsidized. Am I correct?

[Stan Van Keulen]

No, some people think we're subsidized because of supply management.

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

Don't the Europeans think that the industry is subsidized?

[Stan Van Keulen]

No, if we sell products on an export market below our domestic price, they consider that a subsidy because we're using our domestic price to subsidize an export price. The WTO ruled against that. That's what I—

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

So would that affect your industry in the TPP negotiations? That's what I'm getting at.

[Stan Van Keulen]

My understanding is that is correct. Most of the countries.... Under our system of supply management, there are certain products that we can export but the moment we export them below our domestic price, they are then considered a domestic subsidy.

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

It'll hold true also for TPP in your opinion.

[Stan Van Keulen]

My understanding is that's correct.

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

Mr. Woo, I'll start with my last question first because you stated that we should be letting China into the negotiations for TPP.

I don't know if I have an opinion on it but I guess it's part of the discussion. Should we not first ask certain things of China so that we are on a level playing field, or should we just say we'll let them trade with us and now let's trade on a free market without duties and subsidies or without duties and tariffs? Where do we start? Can you expand on that a little more?

[Yuen Pau Woo]

China has to go through the same process and hurdles in joining TPP that we went through and we went through a lot of hurdles with such a diverse group already in the membership including, as someone has pointed out, Vietnam, which is an even more tightly controlled economy. I think China understands well the kind of commitment it's going to have to make if it wants to join the TPP.

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

Can you give me an example of what Canada had to do to join the TPP?

[Yuen Pau Woo]

We don't know what the behind-the-scenes discussions were but it took us—I can't remember now—14 months at least to get admission and a number of times we were pushed back. I would imagine we had to make undertakings to aspire to a very high level of liberalization, including in the agricultural sector. This is the same story with Japan as well, and Japan has come back a number of times recently to say they will aspire to a very high level of agricultural liberalization.

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

In discussions with China what would you do? Would you ask them to join in and take their word for it? It's a huge economy that you couldn't just flip on its head overnight. I don't even know how much time it would take to change their philosophy.

What comes first? Do we wait for them, or is that up for discussion?

[Yuen Pau Woo]

No, you look at the track record. The last 40 years have seen remarkable privatization and globalization in the Chinese economy. The Chinese economy in 1980 was 85% controlled by the state sector, today it's only 5%, and continuing in that—

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

Twenty-five per cent?

[Yuen Pau Woo]

Today it's only 5% controlled by the state. State-led production in China is only about 5% of total production. It was the reverse in 1980.

The Chinese government understands very well that if they want to move from a lower middle-income economy to a middle, or upper middle-income economy, they're going to have to liberalize even further. I think there is a realization that one way to do it is to create external pressure on itself, and the way to create that external pressure, within limits, is to join a trade agreement where it's foreign countries essentially putting restraints on your economy so that you have to open it up. That's exactly the strategy they took when they entered the WTO.

It was a very difficult decision they made because there was a lot of domestic opposition, but Zhu Rongji understood that by joining an international system and committing internationally to undertake reforms, such as opening up your manufacturing sector, you can use that as a cover if you will for domestic reforms much more easily than if you did it domestically.

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

Would you impose conditions on human rights and things other than commercial barriers or conditions?

[Yuen Pau Woo]

No, because it's not part of the TPP. It would be unfair. This is what I mean by not trying to put special restraints on China. If in fact human rights have not been part of the discussion so far in the TPP, why would we do that to make a special exception of China?

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

That's why I'm asking. Thank you.

[The Chair, Conservative, Rob Merrifield]

Thank you very much.

Mr. Hiebert, the floor is yours for seven minutes.

[Russ Hiebert, Conservative, South Surrey—White Rock—Cloverdale, BC]

Thank you.

Welcome back, Mr. Van Keulen. You have given me the perception that the Canadian dairy industry in particular, the supply management system, is working well as long as we keep the competitors at the gate, so to speak. You highlighted yesterday the fact that you believe European farmers received about a 40% subsidy. Do you have any idea of what kind of subsidies New Zealand and Australian farmers get from their governments?