International Trade Committee on Oct. 2nd, 2014

[The Chair, Conservative, Randy Hoback]

Thank you to you, Mr. Butler, and a special thank you. I understand that you agreed to provide this information as of 9 o'clock last night. You did a very good job of putting it all together on such short notice.

We'll go to my first colleague here, Mr. Morin.

You'll have seven minutes.

[Marc-André Morin, NDP, Laurentides—Labelle, QC]

Good afternoon, Mr. Vincent.

I am very proud of our Quebec producers. I'm sure they are among the most dynamic in the country.

I live in a rural region, and I have noticed a decrease in the adverse environmental effects of hog production. Significant investments have led to great improvement. Our sense of smell is still somewhat affected when we drive on the highway, but much improvement has been achieved. The product has been adapted to demanding markets, and quality has increased considerably.

I am wondering what the shot-term benefits of signing the agreement will be, aside from helping you recoup some of the losses you suffered when your competitors signed agreements directly with Korea.

[Jean-Guy Vincent]

Thank you for the compliments. I served as president of the Fédération des producteurs de porcs du Québec—Quebec's federation of hog producers—for five years, so I am happy to accept the compliment.

I want to say a word on producers from other Canadian provinces. If you have read La Terre de chez nous lately, you know that we held a meeting with U.S. and Mexican producers. All producers, regardless of where they live, are in the same position. We all want to improve our products and meet our fellow citizens' demands. Thank you very much for your compliments, as they are always nice to hear.

Regarding free trade agreements for our sector, it should be understood that we export 70% of our production. There is political instability around the world, and currencies are fluctuating. As a result, having access to markets gives us openness and stability

A new generation is prepared to take over in our industry. As you mentioned, succession in the pork industry has experienced some difficulties in the past. We want the political spectrum to continue to ensure the future of this sector and of our producers.

[Marc-André Morin, NDP, Laurentides—Labelle, QC]

Unfortunately, I don't have much time.

We support the agreement because we know how important it is for your members. Do you think it is realistic to assume you will be able to easily regain your share of the market, in the very short term, as soon as the agreement has been ratified?

Companies involved in supply chains have signed agreements with U.S. or Australian companies. Realistically, what proportion of the market do you think you will be able to regain the day after the agreement has been ratified by the two countries?

[Jean-Guy Vincent]

I want to thank the political parties that are working together to ensure the progress of Canadian agriculture. Aside from political parties, the political spectrum plays a part, as I mentioned. We thank you for this support, and we also thank the government, which led those negotiations.

We would very much like to see immediate results in the wake of such an agreement. We just lost the Russian market. As I said in the beginning, the Korean market was important. We will regain the market share we had before the agreement was signed, but it will take some time for us to regain it fully.

[The Chair, Conservative, Randy Hoback]

A minute and a half.

[Marc-André Morin, NDP, Laurentides—Labelle, QC]

Would you need assistance or any resources to restore the trade relationship you had with your clients?

[Jean-Guy Vincent]

Regardless of the farming sector they operate in, farmers are always vulnerable. No matter where they are in terms of time, governments have to recognize that reality and establish programs. As you said, programs are needed to help people in case of difficulty.

This is a multi-billion dollar economic sector. We appreciate the support political parties have given to the agricultural sector, especially the pork industry.

[Marc-André Morin, NDP, Laurentides—Labelle, QC]

I don't want to be mean, but it would have been nice if the government had seen this coming and helped you absorb the blow or, at the very least, warned you about it.

I know some farmers, and I know this is very difficult for them.

[The Chair, Conservative, Randy Hoback]

A quick answer please.

[Marc-André Morin, NDP, Laurentides—Labelle, QC]

Their profit margins are virtually non-existent.

[The Chair, Conservative, Randy Hoback]

Thank you.

We'll move on to Mr. Richards, for seven minutes.

[Blake Richards, Conservative, Wild Rose, AB]

Thank you very much.

To begin with, I'll direct my questions to the Canadian Pork Council, partly because that is my background. I would ask whichever of you feels it is appropriate to answer.

I spent the first 20 years of my life on a hog farm. For many of those years, I worked on the hog farm before and after school. How many hours I worked before and after school depended on whether or not we had a hired man. Sometimes it would be long hours, so I appreciate the work you do.

I have seen the handouts you provided. I looked at the chart, and between 2011 and 2013, there was about a two-thirds drop in the value of your exports to South Korea. That is something I think any member of this committee would be concerned about, and we want to do everything we can to try and see that turn around, obviously.

I know you talked about this in your opening presentation, but it wasn't clear to me. Would you say this drop is directly attributable to some of our competitors having that preferential access, and would that be wholly or partially responsible for this two-thirds drop?

[Jean-Guy Vincent]

We need to recognize that when Korea chose to negotiate first with the United States and the EU, that had an impact for us in Canada. I will ask Martin to give the statistics about the impact in Canada.

[Martin Rice]

2011 was an exceptional year for total exports due to a foot-and-mouth disease outbreak in South Korea in late 2010. We certainly wouldn't attribute the entire decline to that, but this year, for example, where our exports are down almost 20% and Korean imports are up 13% to 15%, I think the only thing that would explain that would be the absence of a free trade agreement for Canada, and its competitors having free trade agreements.

[Blake Richards, Conservative, Wild Rose, AB]

I took from your remarks that you're obviously supportive of the agreement and you want to see it implemented as quickly as possible. I assume that would be probably the prevailing view of the vast majority of your members.

[Martin Rice]

And the meat processors, very much, and the exporters, and the entire industry.

[Blake Richards, Conservative, Wild Rose, AB]

Obviously we can get some sense as to what you're hoping to get from the agreement in terms of economic benefits. Can you give us a sense as to what exactly you expect five or ten years into the agreement in terms of economic benefit for your members? How much extra income would we expect to see them realize through this agreement five or ten years down the road?

[Martin Rice]

We look to some work that our U.S. counterparts have done on the importance to them of their free trade agreement with South Korea. They have measured it at $10 a hog. We've always found that to be quite staggering. But even if it's half of that, which I think is quite likely, If you've got 25 million hogs being produced in Canada for processing you're talking about $125 million a year. We have a price that is established very much by the U.S. market. If our processors and exporters cannot get the same value for the carcass due to the loss in Korea of certain cuts that really have few other markets, that's a loss we can't make up other than by accepting a lower price for our hogs. That's what we would have to do.

[Blake Richards, Conservative, Wild Rose, AB]

I think you've just answered the next question I had. I think you were in the room for the previous panel. Mr. Masswohl from the Cattlemen's Association was talking about those cuts, offals and other things, that there's no market for here in North America. Certainly a place like Korea is an example of a market for some of what would otherwise be waste product. I think I just heard you say that's certainly the case in pork as well; you have cuts that you're able to get better value for because you're going to use more of the hog. Is that in fact true?

[Martin Rice]

That is true. In fact, a big export is bones for Korean soup, and other parts of their foods market.

We also have probably the best market in the world for the bellies. That's what we take our side bacon from. Korea uses bellies and that is its most valuable cut. If you lose that market then you're losing what is the best market for that cut in the world.

[Blake Richards, Conservative, Wild Rose, AB]

Would you see this agreement then as opening up further opportunities for you in the Asian markets, and what kinds of benefits do you think you'll see from that? There are obviously other markets for some of those lesser used cuts and bones and things like that. Also I would assume that if you can get access to other Asian markets this is kind of a starting point to that. You would see future economic benefits in some of those other markets as well. Would you see that as having huge potential for your producers?

[Jean-Guy Vincent]

Yes. It's an opportunity that a free trade agreement opens the door in markets and here. The new negotiation between Canada and Japan is moving forward. We hope that Canada will conclude a new free trade agreement with Japan.

[The Chair, Conservative, Randy Hoback]

Thirty seconds.

[Blake Richards, Conservative, Wild Rose, AB]

I'll just really quickly ask Mr. Butler about the benefits that you think you would see for your industry five or ten years out. What kinds of economic benefits, what kind of extra income do you think this would provide for some of your members as we go forward?