Evidence of meeting #20 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 tractors.
A recording is available from Parliament.
President and Chief Executive Officer, Alliance Grain Traders Inc.
The bottom line that we all have to recognize is the reputational issue—
Conservative
The Chair Conservative Rob Merrifield
Excuse me, the time has gone for this round of questioning, but I think you got your point across. You're right, as you said in your first comment, that this is—
Conservative
The Chair Conservative Rob Merrifield
—a very complex issue that could go on a long time. That's why I'm going to cut you off now. But perhaps, Mr. Hoback, who is from Saskatchewan, will pick up on that issue. I'm not sure.
Mr. Hoback, for seven minutes.
Conservative
Randy Hoback Conservative Prince Albert, SK
Seven minutes isn't enough time to talk about the transportation woes in western Canada, and just how serious it's impacting not only your business, Mr. Al-Katib, but farmers in general and through the whole supply chain. It's very disappointing how CN and CP have a lack of vision in western Canada. That lack of vision, and the combination of cold weather, is going to create a lot of hardship on the Prairies, for not only agriculture producers but also processors and people outside the agriculture sector, in the forestry sector, in the potash industry. It's going to have a domino effect right through the whole area. It's going to be a tough grind until we see some capacity built up in that sector. I must feel for you, for sure.
Conservative
Randy Hoback Conservative Prince Albert, SK
But I want to be positive and optimistic, because we'll fix that. I know we will. We'll get that under control. It just won't be quick enough for a lot of people. But it is what it is. We can't build locomotives overnight or hire people overnight. One thing we do have to keep doing is we have to look at the future and look at where these markets are going to be. One thing is that if we can ship stuff east versus shipping it through Vancouver, it's another option that can relieve some of that backlog somewhere in the future.
I'm kind of curious. You have some great opportunities in Europe, in eastern Europe and western Europe. Have you identified opportunities that you may take on with this free trade agreement that you wouldn't necessarily have at this point in time?
President and Chief Executive Officer, Alliance Grain Traders Inc.
As I mentioned, moving further up the value chain, in terms of more processed products, I have a vision of western Canada being a processing centre for agricultural products. The agreement is certainly going to ease access for, let's say, flours, processed food products. We had announced our intention to look at building a pasta plant in Canada. If I look at the EU market today, it has been very significantly regulated, highly tariff-based, quota-based in terms of protection of their local industry. We see there being hundreds of millions of dollars of new opportunity to capitalize on the demand for safe, quality food, which Canada has a very strong reputation in, and it's not genetically modified. In the pulses industry, the lentils, chickpeas, peas and beans are not GMO. We see that being a multi-billion dollar opportunity.
This agreement is going to open that market, and we're planning significant investments to be able to meet that demand.
Conservative
Randy Hoback Conservative Prince Albert, SK
Mr. Janzen, it's great to have you guys here. I used to spend a lot of time in eastern and western Europe when I was with Flexi-Coil and then Case New Holland. I know the Genesis tractor in France had 25% of market share at one time. It was built in Winnipeg. I also know some of the issues we had with homologation, non-tariff trade barriers, the frustrations we had with going through the regulatory process.
You must be relieved that there's going to be a process in place to help you go through that. Have you looked at the agreement in such a way? Do you see some perspective to get that market share back to where it was somewhere in the future?
Chief Financial Officer, Bühler Industries Inc.
We haven't reviewed the agreement, but we're certainly looking at trying to get some additional market share.
In 2000 when Case sold New Holland division to Bühler Industries, it was the U.S. government that decided that Case had to sell one of the divisions. Versatile had to build its entire market from scratch again.
One of the issues we had was New Holland continued to ship in that direction, but Versatile no longer had that market because New Holland took that market and Versatile now had to re-establish itself.
It has been a number of years, and we haven't really been there. Now we're working on that only to find out there are some significant barriers to ship into western Europe versus shipping into eastern Europe, which we do quite a bit.
Conservative
Randy Hoback Conservative Prince Albert, SK
In the same breath that technology has been widely accepted. I know what you're saying, that once you lose a dealer network it's very hard for a manufacturer in Canada to recover that. But the farmers are aware of the product. They know how well it works. So if you have help going through the homologation process and if you have help making sure that if there is a dispute you have a process to resolve that dispute, that's definitely going to be beneficial versus the status quo right now.
Conservative
Randy Hoback Conservative Prince Albert, SK
In light of this agreement, have you seen market share increase to where it has been in the past, or even half of that? What would be the impact on your facilities, on the job opportunities around Winnipeg? Have you looked at this?
Chief Financial Officer, Bühler Industries Inc.
We would certainly be very excited. We have a lot of opportunity to expand the current facility. We don't necessarily have to add any additional square footage because we have the capacity today. We certainly have a very good workforce in Winnipeg to be able to hire. This is the only place that we build the Versatile tractors, both the Row Crop and the four-wheel drive.
Conservative
Randy Hoback Conservative Prince Albert, SK
What about the implement side, the Farm King side: loaders, grain augers, and a whole variety of implements? Would they be tied into your operations in Europe too?
Chief Financial Officer, Bühler Industries Inc.
We sell under the Farm King brand label and we do some shipments of Farm King products into western Europe, although it is on a limited basis right now. We ship some products into eastern Europe. Primarily right now our market is in Australia and New Zealand.
Conservative
Randy Hoback Conservative Prince Albert, SK
Mr. Al-Katib, I'm going to come back to you then.
You touched on the processing of durum on the Prairies and increasing the processing on the Prairies for value added. That would also help our transportation system as we start refining what we put into the train or the boxcar in some cases. How much growth do you think is there in light of this agreement to add more value to products on the Prairies?
President and Chief Executive Officer, Alliance Grain Traders Inc.
Our company is an example where we went from a start-up 10 years ago to $1 billion of export in value-added pulses and grain. We definitely see the opportunity that value-added products are going to move more by truck, container, and intermodal. So it is utilizing a transportation infrastructure that is very different from the bulk grain handling system. We like the eastbound movement as well as a [Technical Difficulty—Editor] westbound traffic.
We think this agreement is a very significant opportunity that's going to lead to billions of dollars of new opportunity in western Canada to be shipping products that are destined for consumers in Europe. We are very competitive when it comes to those products.
Liberal
Massimo Pacetti Liberal Saint-Léonard—Saint-Michel, QC
Thank you to the witnesses for coming today.
Mr. Al-Katib, just to understand, I think you answered the question a little when Mr. Hoback asked you. I am quoting you that you are moving from a food company to a commodity company. What's in the agreement that's going to allow you to—
President and Chief Executive Officer, Alliance Grain Traders Inc.
We've moving the other way from a commodity company to a food company.
Liberal
Massimo Pacetti Liberal Saint-Léonard—Saint-Michel, QC
Okay. So tell me what is in the agreement to allow you to do this.
President and Chief Executive Officer, Alliance Grain Traders Inc.
For instance, if I take pasta as an example, today spaghetti manufactured in Canada is subject to very punitive duties going into Europe. The duties can range up to about 300 euros per tonne, and that would make us unable to access that market from a duty standpoint. When we look just at the ability to compete as western Canadian growers of durum, processing and delivering quality pasta into Europe, we can compete with every European on a level playing field.
In the area of lentils, chickpeas, peas, and beans, the value-added protein, starches, fibres, and flours are subject today to 8% to 10% duties. Those would be reduced over time under the agreement, allowing us to be very competitive on the distribution. We want a level playing field.