International Trade Committee on Oct. 2nd, 2014

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

Yes.

[Derek Butler]

No. That's a good question. Because our numbers are so low at present, I suspect we have not, but I could look at that for you and see.

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

Okay, so you didn't see a change in your numbers and sales to South Korea?

[Derek Butler]

We didn't, because there's such a small market share right now, unlike the pork industry, which had a large share of the market sales, particularly on the bellies. We don't have that. We only sell $12 million worth.

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

Okay, great. Thank you.

Thank you, Mr. Chair.

[The Chair, Conservative, Randy Hoback]

Thank you, Mr. Pacetti. We'll now go to Mr. Payne and Mr. Cannan.

We'll go to Mr. Payne first.

[LaVar Payne, Conservative, Medicine Hat, AB]

Thank you, Chair, and thank you to the witnesses for coming. It's very interesting. Of course, I was looking at the charts, as was my colleague, Mr. Richards. It's quite intriguing to see the drop in exports.

I know Mr. Pacetti was asking about the tariffs. How long will it take for you to catch up to the U.S., or will you ever catch up in terms of reduction in tariffs?

[Martin Rice]

If we can get this in place for January 1, we would be disadvantaged by 15%, and we would stay there for two more years. Then we would see that eliminated over the next three years. Our disadvantage would go from 15%, then to 10%, then to 5%, and then to zero after five years.

[LaVar Payne, Conservative, Medicine Hat, AB]

Will we actually be at zero tariff in five years then?

[Martin Rice]

Yes.

[LaVar Payne, Conservative, Medicine Hat, AB]

That's obviously an important aspect.

[Martin Rice]

It is for our major export of frozen pork. For the fresh, chilled pork, it's over a longer period. I think it may be 10 years. That market has been found to be quite a bit easier to deal with, but it's a much smaller market.

[LaVar Payne, Conservative, Medicine Hat, AB]

You talked about the bellies being the big money-maker. How does that fit into this whole tariff reduction, and will you be able to get back into that market in South Korea?

[Martin Rice]

That is where we are at a severe disadvantage right now, with that 10% or 15% tariff differential. With each 5% gain back, we would become much more competitive, and certainly be able to compete with the rest of them on equal footing after five years.

[LaVar Payne, Conservative, Medicine Hat, AB]

That's an important aspect to know.

Mr. Butler, you also talked about the high tariffs. Do you have any suggested numbers for tariff reductions that would help your seafood industry, and over what period of time?

[Derek Butler]

That's an excellent question, but unfortunately I don't. This has been such a small market. As I said earlier, it's about $12 million, so it's very small.

What's important here is the opportunity to grow that market share, and then the impacts you can have in other markets by diverting very small volumes, in effect shoring some markets on very small volumes.

If you look at snow crab, we sell 30% to Japan roughly speaking and 70% to the U.S. Imagine if a very small volume went to South Korea and what that might do in those other markets to produce more market returns. That's what South Korea represents mostly.

[LaVar Payne, Conservative, Medicine Hat, AB]

Thank you.

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

Thank you to our witnesses. It's good to have you back again, Mr. Butler, and our friends from the pork industry. It's always good to “put pork on your fork”, as they say.

I grew up in Edmonton. My father spent 45 years at the Gainers meat-packing plant, so I've seen many processed meats. It's very important not only for the Prairies but also across Canada.

As for the trade agreement, I had the pleasure to be with the Prime Minister, Minister Fast, and Minister Moore, and others who were in Seoul, Korea at the time. There were representatives from the seafood industry from British Columbia, and right across the country to our friends in the Maritimes.

Mr. Butler, maybe you could share the impact. We've been able to compete in lobster even with the tariffs. What will it mean by lifting the tariffs and the potential increase for the seafood industry in the Maritimes?

[Derek Butler]

The impact is huge. The seafood industry is one of the largest private sector employers in Atlantic Canada, particularly in Newfoundland and Labrador, mostly in rural communities.

When you go into a marketplace—and we're not unlike the pork industry in that sense, as the margins are very thin—and have a product you want to sell and someone says that the tariff on that, the extra tax that you're going to pay, is 10%, 15%, 20%, up to 47%, you're basically taken out of the game in terms of your volumes. That's been our challenge in South Korea.

As your colleague asked earlier, do we have the particular numbers on the species lines? I don't, but clearly we are prejudiced by high tariffs in a very discerning marketplace where there is a large, growing number of consumers, middle-class consumers, who can afford seafood and have high consumption rates.

I think the opportunities are great. If we double it even to $24 million, or we can triple it or quadruple it to $100 million, then we're talking big numbers. That's 10% of what we sell.

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

Mr. Rice, in your opening comments you alluded to the fact that in the two years since the KORUS agreement with the U.S., your industry has lost $157 million.

[Martin Rice]

That's right.

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

How long do you think it will take you to regain that? Do you think you'll regain it, plus some?

[Martin Rice]

That $150 million is somewhat larger than you would typically see, just because of that disease situation Korea had two years before that. However, we are not seeing all of these very well-developed business relationships totally disappear; we are not starting out from square one as we get back on our feet.

I think if we can recover $20 million or $25 million a year in sales, such that we're back to a quarter of a billion dollars after the agreement is fully implemented, I would see it growing from there on.

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

You mentioned that you're going to work with South Korea to get this agreement ratified through their legislation. Are some of your contacts from the industry working with the government officials right now? When President Park was recently here, I know that the concern obviously was the disarray for the last several months after the horrific accident they had in the waters there. Have you seen some calming of the seas in foreseeing some support coming from the legislators and your contacts in South Korea?

[Martin Rice]

We don't have contacts directly ourselves with legislators, other than the few who have come to Canada in the recent couple of years, but there are well-developed relationships with the Korean industry. I think we'll be reaching out to the Korean suppliers and to the Korean meat industry, I guess, where we could be of any help to them getting the agreement through.

We're not expecting it to be as contentious, though, as some of our other trade agreements have been, because it's not really a case of a new agreement that's going to displace domestic production and so on. It's more a matter of them having equal terms for all of their major suppliers.