International Trade Committee on Nov. 25th, 2013

[The Chair, Conservative, Rob Merrifield]

Thank you very much.

We'll start our round of questioning with Mr. Chisholm. The floor is yours, sir.

[Robert Chisholm, NDP, Dartmouth—Cole Harbour, NS]

Thank you, Mr. Chairman, and gentlemen, for very interesting presentations.

Frankly, I don't know where to start, but let me start with fish, because there has been, as you've said, Mr. Surette, and I've heard, a lot of excitement expressed by people in the business in terms of getting access to those markets and getting rid of the duties, and so on.

I have a couple of questions. One is on the whole access to resources and what it has been like for your members in terms of finding markets for your products. Where generally are you finding they're selling their products as a whole here in Nova Scotia?

[Marc Surette]

We're slowly but steadily moving from a reliance on the United States. That's been a centuries-old trading route. Europe was great and they're facing the same economic issues that we're seeing in the United States, but as a whole, sales in Europe are still hanging on. We have not seen a drop as we have in U.S. valuation, so to see that happening.... Yes, we're making inroads in Asia, but Europe is still a key factor.

As Mr. Ross said, the cost to get to Europe is similar to getting halfway across the country. It's not an issue. We're shipping lobsters in containers now. We've found ways to maximize how we get things there. The potential there is still stronger and it's certainly going to help alleviate our reliance on the U.S., which is still not where it was even 10 years ago.

[Robert Chisholm, NDP, Dartmouth—Cole Harbour, NS]

No.

What about the price difference between the U.S. and Europe?

[Marc Surette]

Usually you can get a little better price as far as quality products go in Europe. That's a given. We've got members that are producing some great quality shellfish products, for example, that can't get that market in the U.S. and they can't get that market in the Caribbean, but they can certainly get it in Europe. It's the import quotas and it's the heavy duty rates that are really making that difficult for them.

On the flip side of that, they have all along been able to import raw material from European countries duty free and that's been there since time immemorial. Basically, they get the advantage of having that same level playing field, because our products are definitely superior. You have a country like Norway that has an amazing marketing campaign in place, second to none in the industry in the world, and we cannot compete because we don't have that volume. What we do have is high-quality products and we're getting better and better at creating higher quality, higher-end products.

I heard the lady from Halifax Gateway talking about how that drive to Boston to catch a plane sucks value out. It does not. That I wanted to make sure you guys heard. That is part of the route. In Halifax—and I know I'm in the wrong city to say it—they're playing in an awfully big league if they think they're going to compete with Logan and JFK as far as freight service goes. There is absolutely no way. I've been in the fish truck business and have worked with some great people. With the volume that our company alone was putting across the border on a daily basis leading up to Christmas, we're talking about eight to ten planes a day out of Halifax. It's a great goal. I think if we have increased business we can get there, but it's a big dream at this point. We need baby steps.

[Robert Chisholm, NDP, Dartmouth—Cole Harbour, NS]

Thank you.

What about the rules of origin issue? Do you think that's sufficiently clear? I know your members get product wherever they can get it. In terms of lobsters, New Brunswick brings in a lot of lobsters from the U.S. to process.

I had the chance to ask the chief negotiator some of these questions before.

What is your understanding of how the rules of origin are being sorted out?

[Marc Surette]

From the briefing I've received, I don't see that being an issue. The New Brunswick lobsters were an issue. I used to buy those lobsters in the States and bring them to New Brunswick. I know what that business is all about.

I've had some very quick conversations with my friends in New Brunswick who are processing, and they are all for this. They do not see that proving to be any kind of a major issue at this point, but I can't speak on their behalf. I do not have any lobster processing members in my association yet.

[Robert Chisholm, NDP, Dartmouth—Cole Harbour, NS]

What about the issue that came up within the last couple of weeks about European countries, Spain, for example? Part of their interest in this deal was getting hold of resources from here.

[Marc Surette]

As long as DFO stands behind its policies—and we had a test of that in recent weeks, given the fire at Premium Seafoods.... As a one-off we were okay with a foreign vessel, and we were okay with it because the decision had ultimately been made, and there were certainly extenuating circumstances.

The idea of allowing foreigners to come in and actually buy resource access is a concern. It is probably the only real concern that any of us have.

I have not read the entire document yet. I've stayed focused on some of the exporting issues and those have been the focus of my members' wishes.

I am leery, and we can see that they are the worst overfishing countries in the world. Having them inside the 200-mile limit cannot happen. I think our policy is strong enough, and the minister has seemed willing to look at things very specifically. I think our one-off has happened and hopefully we won't see that again. I think it would be something that the industry, as a whole, would stand up to. We have spent too much time trying to get our house in order. We're seeing growth in haddock stocks. Regretfully, cod stocks aren't there, and the WTO says that killing seals and finding products for that is inhumane. Well, I look forward to the first visitors to Sable Island this spring and trust me, it won't be ponies they see, and it won't be white sands they're stepping in when they come off the boat, but I digress.

We need to make sure our 200-mile limit is held. If it has to be done at gunpoint, as we've done in the past, Canada will stand behind that, but we do need to make sure.

We're seeing a greater presence of foreign operators in shore-based businesses now, and that is starting to increase concern. When it's an American partner you're trading with and he's just trying to find a logistical way to manage things, that's one thing, because your sales are still there. But there are people from China who have bought in, in a small community in Cape Island. That's not the way we want to go, because we're going to start cutting out where the money is, and I do not see that as being beneficial either.

There are some concerns with access to resources and with how much investment and how much foreign presence we can have on Canadian soil.

[The Chair, Conservative, Rob Merrifield]

Okay. Thank you very much.

Mr. O'Toole.

[Erin O'Toole, Conservative, Durham, ON]

Thank you, Mr. Chair.

As I said to our first group of witnesses, I would like to sincerely thank each of you for taking the time to appear. It's important for members of Parliament, and particularly for this committee, to get outside of Ottawa and to hear from key stakeholders, many of whom have been involved as partners in discussions with respect to CETA. It's important for us to hear your responses and perhaps see early moves to take advantage of this agreement.

I'll try to ask each of you a couple questions.

First, Mr. Surette, I appreciate your comments and particularly the wider participation of the seafood and processing industries in getting to a good agreement with CETA. You talked about some of the highest tariff rates to hit this industry particularly. Even given its proximity to Europe and our high-value and world-class food industry, it couldn't really break that market with the tariff rates. For frozen lobster it is as high as 16%, and for cooked shrimp it's at 20%. It's hard to compete with those tariff rates right off the top.

Have you heard talk from the processors, the packers, or the fishermen themselves about putting in place the infrastructure to take advantage of what could be a new volume to be sent to Europe?

[Marc Surette]

It has been hinted at, but at this point we're still dealing with Europe. For our industry it's not always growth, but stability is the important factor. We see, certainly in the early stages, this will create stability.

As I said in addressing Mr. Chisholm's question, I don't think we're going to see in the seafood industry any drastic increase in the next five years. I think it'll be slow and gradual. As they did say—the backhaul is what we call it in the industry—there is not the same level of backhaul to come back from Europe. Hopefully, as we move forward, there will be reasons for that to change.

Infrastructure, as far as the plants are concerned, will be business as usual, only it's going to be a different customer. We don't see that in the short term. Long term, perhaps it is going to give us that opportunity to be more fierce with what we have in Atlantic Canada, which is basically world-class wild food. The people I represent make that point abundantly clear in every conversation: we are supplying the last wild food source. We're proud of it. We work hard to do it. To worry about something as simple as lift out of Halifax versus lift out of Boston, which container pier am I going to have to take the fish to today, is not going to be a big concern. Their concern is making sure they have customers they can meet and they have a playing field where their products can be put at a price point that is not going to change. A housewife in Norway or a chef in Paris is not going to change the product they pick simply on price. Canadian quality will stand up, and if it's at the same price as in other countries I think we'll succeed well.

[Erin O'Toole, Conservative, Durham, ON]

We appreciate your enthusiasm. The government feels it took the time to reach a deal that was spectacular on all levels, and particularly strong for Atlantic Canada.

Does your organization and its other stakeholders see an early role for the government in helping your industry prepare over the next couple of years to access that market? You have us here today. What would you like us to be thinking about as we ratify this agreement domestically and try to prepare our economy for it?

[Marc Surette]

It's simple. It's marketing. Canada does not market its seafood, one could say at all, but worst case scenario is we don't do it well. I think the Seafood Value Chain Roundtable has looked at the scope of comparing it to Alaska or Norway, which have some very well-thought-out, very effective marketing programs funded entirely by industry. It takes some start-up, and some organization, but there will be enthusiasm from the industry to see that go forward.

In an ideal world, we'd have people on the ground in various points throughout Europe to address issues, as we saw with the seals, as we've seen in PETA attacking. They don't like the way we catch or transport lobsters. Germany's not a big place for lobster sales, but again, that reaches out and has a negative effect in the long term. If we've got good marketing, with people on the ground to deal with those issues, that would be the next step to help the Canadian seafood industry.

[Erin O'Toole, Conservative, Durham, ON]

I appreciate that. Mr. Surette.

Since you mentioned it, I want you to know the government's already indicated it will be appealing the WTO decision.

One of the added secondary benefits of CETA is, actually, we're going to be establishing with Europe a number of councils that will meet on non-tariff barriers and regulatory issues. It's our sincere hope that over time that will bring more science-based and less PETA-driven approaches to the seafood and seal industry, but also to science and crop life, that sort of thing. That's an added thing I thought I'd indicate.

Mr. Delaney, we've talked about what a win CETA will be for grains and oilseeds in particular. I've talked about that with producers and the industry in Ontario. I was in Manitoba. You broke down the important thing that there's also a win in terms of the feed aspect, that 80% of producers are selling their harvest into the feed network, for cattle in particular. In Nova Scotia or in Atlantic Canada, if you can speak to both, how does your production go? Do your producers here sell in that sort of 80% to the feed market range? What's the breakdown in Atlantic Canada?

[Michael Delaney]

Thank you for that question. I'll try to keep my remarks brief because Neil may want to comment as well.

In general, the Atlantic region is feed deficit. Prince Edward Island finds itself feed surplus, so there are basically structural differences in the region. Nova Scotia has a lot of supply management commodities, and they have a corn forage, soybean interest in farm-fed. New Brunswick is somewhere in the middle. New Brunswick has some farm production tied to potatoes and some livestock production that shrank, so they've been able to capitalize on export opportunities in Quebec for raw product. Prince Edward Island, basically because of the connections with the large potato industry, has a lot of feed grain on the barley side, and more recently in relation to strong prices, has aggressively developed soybeans. It came at a time that our livestock sector in Prince Edward Island, in particular...but the entire region shrank.

To answer your specific question, we're well engaged in the feed market on barley, somewhat engaged in wheat, because we have an opportunity to sell milling wheat to the P&H Milling Group here in Halifax, about 7.5% of their requirements, and it is less so in soybeans because there is no available processing.

That would be my response. I don't know whether Neil has anything to add.

[The Chair, Conservative, Rob Merrifield]

All right, Mr. Shory, you're already into your round because he went over, but go ahead.

[Devinder Shory, Conservative, Calgary Northeast, AB]

Why did it happen to me? Anyway, Mr. Chair, thank you.

Thanks to the witnesses.

Mr. Surette, my first question will be for you. I was going through your October 25 statement about the Canada-EU agreement, and here I will quote you saying, “This is a big, big deal.” Then you went on to say, “We’ve managed to get a deal with the largest market of seafood eaters and that’s just tremendous.” Then you said, “It is a huge undertaking. It makes NAFTA look like a rental agreement.”

We all know that as of today each country has its own set of rules as far as tariffs are concerned and the existing tariffs, specifically on live lobster, run between 9% to 15%, depending upon the country that you deal with. From the agreement, we see that approximately 98% of all EU tariffs would be eliminated on the first day the agreement comes into force.

My question is in terms of CETA, levelling the playing field for your industry, allowing you to do the retailing instead of going through a middleman kind of thing. How is your industry preparing to deal with these new logistics? Have you laid any groundwork and spoken to your counterparts in the European market?

[Marc Surette]

I know that my members are talking to their customers and are trying to find ways in. Some of the larger companies are going to be able to easily transition to having access to the retail market. For others, it will be a little more laborious. Some of them have had long-standing relationships. The companies I represent are long-standing family-owned companies. There are relationships there. I've had the privilege of meeting some of these people on their trips to Canada. There is a willingness to work with them as well, as we get started.

The duty is the big factor. Having the access and trying to get rid of that brokerage fee, which can be anywhere from 10%, 15%...again, it certainly would be beneficial if we could get to a point where we can get in.

Again, going back to my previous statement, a good marketing campaign for seafood in Europe would lend itself to giving us the access that we need. We could ask anything of government, more than what we've already got, and that would be the next step, and with that, a trade mission, perhaps, is a way, or to queue something up with the Brussels show to make that more accessible for more people.

They are generally proud people. They don't want a handout. They just want to have direction. They want to have access to the people they need to speak to. At some point, that would be another step in the right direction, but wheat and shellfish....

[Devinder Shory, Conservative, Calgary Northeast, AB]

I will go back again to my talk with the car driver last night. He was seriously concerned about the labour shortage once the agreement flows in two, three, or four years. Has your industry looked at it from that angle?

I am from Calgary, Alberta. I see that quite a few workers go to Fort McMurray from the Atlantic provinces, and when you have those huge opportunities right here—of course, as of now Alberta has a shortage of skilled workers—I can foresee, based upon my conversation with the car driver last night, that there will be labour shortages here as well, in the Atlantic provinces. Have you considered that? Have you had any serious thoughts about that?

I'd like virtually everyone to answer that.

[Marc Surette]

Well, to be quite honest, we've been dealing with that labour shortage for a considerable period of time.

To give you an example of the people from Nova Scotia who are out in Alberta, a lot of those guys were people who would fish in the stern of a lobster boat this time of year. You can see the wind and weather out there. Fifteen years ago they'd have been out today; they wouldn't have been tied up. Thankfully, safety has come first.

Those guys could make $85,000 a year in 50 to 60 days' work. Given the way the economy's gone, the price of lobster, the value of the U.S. dollar.... The U.S. dollar is what we deal with in fish. That is the currency. All of those factors come in. That $85,000-a-year job now pays $25,000. It's a no-brainer. If we start having a way to increase the value for the products we export—and in Nova Scotia, fish is number one; it's simple—that would increase the value of those jobs, and we should start to see retention of our young people in coastal communities.

I come from a town whose median age dropped by 10 years over the course of five. I'm one of the rare ones of the people I went to high school with—I came home. I'm not working somewhere else.

[Devinder Shory, Conservative, Calgary Northeast, AB]

Let's give the others a chance to make a quick comment.

[The Chair, Conservative, Rob Merrifield]

The others can make a quick comment, and then his time is gone.

[Devinder Shory, Conservative, Calgary Northeast, AB]

On the labour side....

[Stephen Ross]

In Nova Scotia, there's no question about it; there is a labour shortage.

Regarding skilled labour, we've brought in about 45 foreign workers. Most of them are now immigrated or permanent residents. The federal policy over the past six months has slowed immigration down. We have trouble getting people in from India and Asia. Getting people from Ireland and the European countries is somewhat easier because of the immigration rules. We are continuing to try to bring in foreign workers. I know there is also the job skills training thing going on, but that still hasn't unfolded.

We still see a big disparity. When you have 7% unemployment, we find that 4% of the people don't want to work anyway, and the other 3%.... It's difficult to get a fish plant worker in northern New Brunswick to come to Halifax to work. We are struggling with that.