International Trade Committee on April 26th, 2018

[The Chair, Liberal, Mark Eyking]

Good morning, everyone, on this lovely rainy morning in Ottawa. This morning in our meeting we are going to continue on with our study of Mercosur and the potential for a Canada-Mercosur trade agreement. It's our fourth meeting, and we've had lots of good dialogue so far with key stakeholders coming forward. We're very appreciative that three more stakeholders have come forward to us this morning.

We have Air Canada, the Canadian Livestock Genetics Association, and the Mining Suppliers Trade Association Canada.

Welcome, gentlemen. Some of you may have been here before. We like to keep the presentations to five minutes or less, if possible, so that we can leave lots of room for dialogue as we go forward.

We'll start off with Air Canada, my most familiar airline.

[Fittipauld Lourenco, Director, Federal Government Affairs and Ontario, Air Canada]

I'll start by saying thank you for your patronage. I'm sure you all fly Air Canada very often, and I hope you continue to do so.

Hello, Mr. Chair and honourable members of the committee.

My name is Fittipauld Lourenco and I am the Director of Federal Government Affairs and Ontario at Air Canada. I am here to talk about the potential Canada-Mercosur free trade agreement.

First I'd like to tell you a little about Air Canada and where we are.

In 2017, Air Canada transported just over 48 million customers, averaging nearly 132,000 passengers a day. We now offer direct services to over 200 destinations on six continents. Last year alone we launched over 30 new routes, and our team today is 30,000 people strong with 3,000 individuals hired in the last three years alone.

With a strong team, and $9 billion invested in a new fleet that will be the youngest and most fuel-efficient in the world once complete, and which includes new Boeing 787 Dreamliners, 737 MAX planes, and Bombardier C Series planes, Air Canada is well positioned to continue growing and strengthening Canada's position relative to business travel, tourism, and trade, well into the future.

With respect to the potential Canada-Mercosur free trade agreement, Air Canada supports such free trade agreements that allow for greater trade and, therefore, increased business travel and cargo opportunities between Canada and another country.

Air Canada has a strong presence in South America and in two of Mercosur's partner countries, namely Brazil and Argentina, as well as in many associate partners in the region. On the continent at large, we currently offer direct routes for passengers and cargo to Cartagena and Bogota in Colombia; Lima, Peru; Santiago, Chile; Sao Paolo, Brazil; and Buenos Aires, Argentina. While passenger volumes to Uruguay and Paraguay do not yet support direct routes, we continue to look at these as options for the future. It is also important to note that Argentina and Chile will have direct services beginning the first week of May 2018. This comes as a result of dedicating one aircraft to each city, creating two new direct routes.

Free trade agreements such as the one being considered by this committee foster the type of business growth and trade opportunities that support business and provide an excellent foundation for expanding air routes. This creates the right climate for sustainable air travel in the future. Ultimately this means better travel and business opportunities for Canadians abroad.

Thank you for your time. I look forward to any questions.

[The Chair, Liberal, Mark Eyking]

Thank you, sir

We'll move over to the Canadian Livestock Genetics Association, and we have Mr. Michael Hall, executive director.

Go ahead, sir. You have the floor.

[Michael Hall, Executive Director, Canadian Livestock Genetics Association]

Good morning, Mr. Chair, and thank you, committee members, for the opportunity to come today to speak to you.

I'll say a little bit about the Canadian Livestock Genetics Association. We're a not-for-profit trade association of genetic exporters. Genetic exporters in this context means live dairy cattle, frozen semen and embryos, and, in the poultry industry, day-old chicks and hatching eggs. It also includes small ruminants, sheep and goats, live ones, semen, and embryos.

Our exports for dairy alone with the frozen semen, live cattle, and embryos are about $150 million a year worldwide, poultry is about $100 million a year worldwide, and then small ruminants are at $100,000.

The Mercosur region is a fairly significant region for our membership. Brazil is probably one of our fourth largest markets, so total trade in dairy genetics from Brazil, Argentina, Uruguay, and Paraguay would be about $11 million. The associate members would be another $1.5 million. We've been in this region for a long time, and if anybody knows about the trade in animal genetics, it's very much reliant on animal health discussions, protocols, and negotiations to make this trade happen, because you're dealing in live tissue.

One of the concerns that we have is that we've noticed in the past that individual countries will use either the Mercosur rules or those of their own country, depending on what is more favourable. We see that a lot, and they won't even reply. We get a lot of market access issues around that kind of scenario.

We also have issues with many of these countries having unreasonable demands and a very loose interpretation of the trade guidelines that deal in these animal products. Most of that is stipulated by the OIE, the World Organisation for Animal Health, which has a list of trade principles that most countries follow and interpret rather correctly. Other countries use that same list as a book of trade barriers and just come up with any reason not to trade.

We also see a bit of a membership concern with Mercosur. Venezuela is currently suspended. In the past, they suspended Paraguay. I don't know how you get into trade negotiations when members are in it, members are not in it, and all that stuff happens. Plus, they often utilize bilaterals amongst their own countries beyond their own trading bloc.

I want to comment on FTAs in general and what we see from the livestock genetics part of things. While we're very supportive of trade agreements and bilateral agreements around the world to move Canada more to the forefront, we also have some concerns that we don't see being addressed. That's everything from expedited trade dispute settlement mechanisms.... How do we make sure that we can resolve trade issues? We need committed animal health working groups to solve trade issues and SPS issues.

We often have the most difficulty obtaining market access with some of the countries we have FTAs with. Believe it or not, it's almost possible. We often question.... We get into these FTAs, but does it actually trickle down to more market access for us?

Then, finally, I have a statement. Canada does not have adequate resources at the CFIA in order to put in some of these trade agreements, to negotiate the certificates, or to develop the certificates for new trade. Now a lot of this has been downloaded to industry from these countries. They want to come to Canada to do technical tours and things like that. We fund a lot of that, or co-fund with the government, but at the end of the day, we do not have the people within the Canadian Food Inspection Agency to develop these trade protocols and certificates. If we can't maintain the trade we do have, it's really crazy when we get further along the line and open up new markets, shake hands, and do the photo shoot, but then there's no one left at home to put the package together and make it work.

Those are my concerns. Thank you for your time.

[The Chair, Liberal, Mark Eyking]

Thank you, Mr. Hall. That was a very informative presentation.

We're going over to the Mining Suppliers Trade Association Canada. We have Mr. Phil Cancilla.

You have the floor.

[Phil Cancilla, President of the Board of Directors, Mining Suppliers Trade Association Canada]

Good morning, Mr. Chair and members of the committee. I want to thank you for this opportunity on behalf of the Mining Suppliers Trade Association Canada. I'm Phil Cancilla and I'm the President of the Board of Directors for the association.

My opening statement today will provide a brief overview of our association and its members, highlight some of the key findings from a study that we participated in showing how the mining suppliers are an important part of generating employment in the mining ecosystem, and finally, how Canada's engagement on free trade with the Mercosur free trade agreement is important to the Canadian mining supply and services sector.

MSTA Canada is the national voice for the Canadian mining supply and services sector, and for the past 35 years the association has supported its members in connecting them to opportunities to grow their businesses in the mining industry across Canada and around the world. In terms of government activity and decision-making, we hope to serve our members' interest under two guiding principles. The first principle would be the reduction of complexity and uncertainty in doing business through more efficient processes and a clear understanding of timely outcomes. The second principle is to have an increase in access to opportunities to do business. This can be in the form of opening markets or a reduction in barriers to trade. It is this second principle that aligns with Canada's participating in the Mercosur trade agreement.

Our approximately 280 corporate members are located across the country and supply the entire mining industry spectrum from mining exploration, resource development, mine design and construction, mine operations and refining, to reclamation and closure. Most of these companies are small to medium-sized enterprises. I will elaborate more on the demographics of mining suppliers in the second portion of my remarks. Overall it has been estimated that there are approximately 3,700 companies across Canada that consider themselves mining suppliers.

I would like to highlight one important aspect on our focus as an association, which is export. With Canada representing 0.05% of the global population and 1.4% of the world GDP, we are, by all accounts, a trading nation to ensure economic prosperity. It is with that perspective that there is great opportunity for the Canadian mining supplier network by just following the Canadian exploration and mining activities abroad, let alone international mining customers. In the mining industry, the “made in Canada” brand is recognized around the world for its safe, reliable, environmentally sound, and productive solutions.

I now turn to our study. The Conference Board of Canada characterized the mining services sector as a “multi-billion dollar, widely varied industry in Canada and around the world, yet it is a 'hidden' sector that is not directly measured or tracked.” To help better understand and clarify this hidden sector, MSTA Canada participated in a pan-Ontario mining supply and services sector economic impact study.

There are three key findings from this report that I would like to highlight here today. The first finding is that the mining supply sector is a widely varied group of companies that were grouped into three categories: 58% categorized as mining equipment suppliers and services, and 13% categorized as mining contract services. The two categories are what most people think of as typical mining supply. However, it is the remaining 31% that typically get overlooked. These are, for example, financial services, accounting companies, law firms, environmental services, and information technology firms. The second key finding is that almost 88% of these companies surveyed are categorized as small or medium-sized enterprises, and 70% reported exporting out of Canada, so free trade agreements are meaningful to the mining supply and services sectors.

The final finding I'd like to highlight from the study is in terms of direct employment. The mining supply and services sector represents two and a half times as many jobs as the mining companies employ themselves. This is an important point because, as mining is a great economic developer, the mining supply and services sector across Canada is and will be an important generator of jobs.

Our final point is directed toward the Mercosur free trade agreement that contains Argentina, Brazil, Paraguay, and Uruguay. Brazil and Argentina are considered the two most important countries that the Canadian mining supply and services sector targets with its exporting and marketing efforts. We also consider Paraguay and Uruguay potential emerging markets for exploration and mining.

To help understand why, our research has shown that the Mercosur free trade agreement hosts over 538 active exploration and mining projects. In addition, there are more than 61 Canadian-based exploration and mining companies active within the Mercosur member countries, which have ownership in 27% of these active projects. This data shows why MSTA Canada encourages Canada to consider being a member of the Mercosur free trade agreement.

Thank you for your attention.

[The Chair, Liberal, Mark Eyking]

Thank you, sir, and thank you, witnesses.

We're just going to have to hold for one second. We have a bit of a technical problem here.

Maybe we can just suspend for a minute before we have dialogue with the MPs.

[The Chair, Liberal, Mark Eyking]

Let's get back on track here.

We're going to start off with five minutes for the Conservatives.

Mr. Hoback, you have the floor.

[Randy Hoback, Conservative, Prince Albert, SK]

Thank you, Chair.

Thank you for being here this morning.

Of course, I'm going to start off with Air Canada, because if I don't mention the direct route from Saskatoon to Ottawa, my caucus will kill me.

Actually, though, I will say this. When I compare you to other airlines around the world, you're top notch, no question about it. When you added the flight to Rio in Brazil.... I took that flight once. It was brilliant. It's nice to see you looking at those markets a lot more seriously.

[Fittipauld Lourenco]

Thank you.

[Randy Hoback, Conservative, Prince Albert, SK]

I am concerned with Rouge though. When I look at Rouge in comparison to Air Canada, it's not the same game. When you're looking to book a flight and you find out you're flying Rouge you say, dang it, I should have booked Copa Airlines.

I ask you to take that back to your management, because Rouge is not Air Canada. If you think you can substitute Rouge, the way you're operating Rouge for Air Canada—it's under the Air Canada brand—it's deceiving. It's disappointing for sure.

Having said that, I'm interested. You don't run into Panama whereas Copa runs into Panama City. Copa uses Panama for a hub all through Central and South America, and it really gives them a lot of opportunities.

Have you looked at doing something similar to that into Panama City and working more closely with Copa and the Star Alliance?

[Fittipauld Lourenco]

We do work with Copa. The issue, ultimately, is that our interests aren't really aligned. We are trying to hub through our Canadian hubs, YVR, Montreal, and Toronto being the biggest. That's where we see our opportunity.

It's not so easy developing hubs in other countries. Certainly Copa does an excellent job in Panama City. Our entry point into South and Central America really does rely on our hubs in Canada.

[Randy Hoback, Conservative, Prince Albert, SK]

Why not hub out of Calgary? Why use Vancouver? Why do you force everybody in the Prairies to fly two hours one way in Canada in order to hub into—

[Fittipauld Lourenco]

It's an issue of passenger volume. In certain parts of the country, it's very difficult to build the necessary volume to make certain flights feasible.

We operate a hub network. We are a network carrier, so smaller regional airports provide feed into our bigger hubs where we can operate and provide over 200 destinations. We wouldn't be able to do that if we were offering more origin-and-destination flying.

[Randy Hoback, Conservative, Prince Albert, SK]

Okay. That's fair.

Mr. Hall, on one of my first trips down to South America, I was working for a company called Flexi-Coil and it was on a Canadian Airlines plane, believe it or not. There were still ashtrays in the seats, to give you an idea of how long ago that was.

[Kyle Peterson, Liberal, Newmarket—Aurora, ON]

Did you have a cigar?

[Randy Hoback, Conservative, Prince Albert, SK]

I wasn't smoking cigars back then; otherwise, I probably would have.

I was on the plane. I was basically by myself with these two guys from St. Louis, Saskatchewan who were going down to Brazil to sell semen. I found it so hilarious to talk to these two guys. They were down there doing just that, taking Canadian genetics and doing that. I've run across guys like that selling in Ukraine and other places around the world. They love our genetics.

Do you see Mercosur actually creating a more predictable environment to allow that to happen, so you don't have these non-tariff trade barriers popping up or disputes popping up that you don't have a mechanism to settle?

[Michael Hall]

It's hard to say. It's always our hope, truthfully, that things will become more stable and more predictable.

I'll give you an example. We wanted to get an agreement with Brazil to export IVF embryos, in vitro-produced embryos. Brazil came back and said they wanted all our data on the health and safety of these embryos and all this stuff, but the problem with all that was that Brazil pioneered IVF embryos. It was just a roadblock.

At the farm level, the farmers in these other countries definitely want our genetics, but then at the government level it becomes a trade issue for this or that. If you take our sugar we'll take.... We get played off a lot on various things. Ideally there would be a common set of rules they would enforce, but I would raise the concern that they'll use that when it suits and they'll use their own country when it suits.

[Randy Hoback, Conservative, Prince Albert, SK]

But they can do that right now, too.

[Michael Hall]

They do.

[Randy Hoback, Conservative, Prince Albert, SK]

How big would that market be for you, though, if it were smoothly operating so that you could get unfettered access?

[Michael Hall]

Right now, as I said, we're doing about $11 million, but it's a $15 million-plus market. It's enough. They have a sales force that networks out through that whole region—we've been in it a long time—and do market development in there on various levels. Even on the small ruminant side, some of the poorer parts of the different countries are interested in the genetics of sheep or goats to try to enhance the standard of living in rural environments.

We're there. It's a big market.

[Randy Hoback, Conservative, Prince Albert, SK]

Mr. Cancilla—

[The Chair, Liberal, Mark Eyking]

Mr. Hoback, sorry, you're out of time.

[Randy Hoback, Conservative, Prince Albert, SK]

Did you use up my time?