Evidence of meeting #108 for International Trade in the 42nd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was canola.

A recording is available from Parliament.

On the agenda

MPs speaking

Also speaking

Scott Sinclair  Senior Research Fellow, Canadian Centre for Policy Alternatives
Brendan Marshall  Vice-President, Economic and Northern Affairs, Mining Association of Canada
Leah Olson  President, Agricultural Manufacturers of Canada
Gene Fraser  Vice-President, Global Sales and Marketing, MacDon Industries Ltd.
Brian Innes  Vice-President, Public Affairs, Canola Council of Canada
David Adams  President, Global Automakers of Canada

9:40 a.m.

Liberal

Peter Fonseca Liberal Mississauga East—Cooksville, ON

The reason I asked the question is that we had the CME in and they were telling us that Canada lacks those mid-sized companies. We may have one or two, or a few large companies, but everybody else is really small, five to 10 people. For your members, what would be the average size, and do you have any of those mid-sized, 50, 100, 200-type employee companies?

9:40 a.m.

President, Agricultural Manufacturers of Canada

Leah Olson

Most of our members would be in the 50 to 100—

9:40 a.m.

Liberal

Peter Fonseca Liberal Mississauga East—Cooksville, ON

They would be in the 50 to 100 range. They say that's where the opportunity is for more of the exports.

9:40 a.m.

President, Agricultural Manufacturers of Canada

Leah Olson

Yes, and that is where our industry is quite different. In Ontario for example, in 2017, Ontario-based agricultural equipment manufacturers broke the record, with $773 million worth of implements being exported. That's the largest coming out of any province, so there's a very big group, specifically in southwestern Ontario, that does exceptional manufacturing and they have from 20 up to 100 employees.

9:40 a.m.

Liberal

The Chair Liberal Mark Eyking

We will have to cut it.

Go ahead, Mr. Fraser, for the last comment.

9:40 a.m.

Vice-President, Global Sales and Marketing, MacDon Industries Ltd.

Gene Fraser

From the standpoint of the size of companies, ours is in the range of 1,400 to 1,500 people. We just hired 42 students this week. They've started and are all bright-eyed and bushy-tailed, coming to work for the first time, and they're going to be working through the summer with us. These sizes of companies, the ones we're talking about it, have vastly changed the median for the manufacturers association.

9:40 a.m.

Liberal

Peter Fonseca Liberal Mississauga East—Cooksville, ON

Thank you.

9:40 a.m.

Liberal

The Chair Liberal Mark Eyking

Thank you.

That wraps up our dialogue with MPs.

Thank you, witnesses, for coming for this first half of this morning. They have been good presentations, good dialogue and you're welcome to have a copy of our report. It will be done after we return from our visit from South America.`

I have to leave the chair after this meeting. I'm going to present our report to the House, and Mr. Peterson is going to take the chair.

I'd like to welcome the member for Laurier Sainte-Marie. It's good to have you with us. I hope you're staying for the second half.

9:40 a.m.

NDP

Hélène Laverdière NDP Laurier—Sainte-Marie, QC

Thank you, Chair.

9:40 a.m.

Liberal

The Chair Liberal Mark Eyking

Good.

We'll suspend for a few minutes and then we'll get back at it.

May 3rd, 2018 / 9:45 a.m.

Liberal

The Acting Chair Liberal Kyle Peterson

We'll resume our study here today.

Welcome to our witnesses.

We have Brian Innes, from the Canola Council of Canada—it's good to see you with us again; and David Adams, from Global Automakers of Canada—it's good to have you with us, too.

I think you have been briefed. I believe you've both presented before. You have a five-minute introductory statement, and we'll start with Mr. Innes.

9:45 a.m.

Brian Innes Vice-President, Public Affairs, Canola Council of Canada

Thank you very much, Mr. Chair, and thank you to the committee for the invitation to be here today.

It's always a pleasure to share how the canola industry can prosper from more open, free markets. Today our particular comments will focus on how we can eliminate barriers in Mercosur, as well as how Mercosur compares with other high-priority opportunities in Asia.

Before I start, I'd like to briefly describe the Canola Council. We're a value-chain organization representing the whole canola industry, from the 43,000 Canadian farmers to seed developers, to processors who crush the seed to make oil for humans and meal for livestock, as well as the exporters who send canola for processing at its destination.

International trade is definitely the lifeblood of our industry. More than 90% of everything we grow in Canada is exported in one form or another. We have a plan to export even more. “Keep it Coming” is our industry's strategic plan to increase demand for canola oil, meal, and seed, and to meet this demand through sustainable production and yield improvement, achieving 26 million metric tons of production by 2025.

To put that in perspective, it means that when we achieve that plan we'll add $4.5 billion worth of exports in order to meet Canada's $75-billion target for agrifood exports by 2025. To do this, we need to keep eliminating barriers to trade and we're very appreciative that the committee is focusing on how we can do that.

Now I'd like to focus on our perspective as to how Mercosur compares with other opportunities in Asia for our sector. While we support eliminating trade barriers wherever they exist, the canola industry does not see Mercosur countries providing significant export opportunities for our sector. We do see incredible growth opportunities in the Asia-Pacific region.

For example, implementing the comprehensive and progressive agreement for trans-Pacific partnership could increase our value-added canola exports by $780 million per year.

When the CPTPP is implemented, the industry can recover from our current competitive disadvantage. For our exports to Japan, we're at a 7% disadvantage compared to Australian canola oil. Australia has an agreement with Japan, and Canada does not.

Similarly, a trade agreement with China would bring significant growth opportunities for canola. Our industry estimates that eliminating tariffs on canola into China would support an additional 33,000 Canadian jobs and bring an extra $1.2 billion worth of value from our exports, so we encourage Canada to start negotiations with China so we can bring more jobs and growth here to Canada. As we pursue negotiations with Mercosur, we must ensure that the CPTTP is implemented and negotiations with China proceed.

Now that negotiations with Mercosur countries have started, however, we should use these discussions to eliminate barriers facing our exports. As the wealth of Mercosur economies grows, their demand for our healthy oil will grow as well. A trade agreement should eliminate the tariffs that currently face our products. For example, our oil has a tariff of 10%, and our meal has a tariff of 6%. Eliminating these tariffs will help us grow our value-added exports from Canada.

An agreement with Mercosur also presents an opportunity to reduce non-tariff barriers facing our exports. Many similarities exist between the agricultural exports of our country and the agricultural exports of Mercosur countries. As large grain and oilseeds producers, we both export most of what we produce and face many of the same barriers in our export markets, barriers related to the spurious use of sanitary and phytosanitary measures, as well as barriers related to biotechnology. A free trade agreement between Canada and Mercosur has the potential to build momentum for disciplines in these areas, between our countries and beyond.

In closing, canola has grown to a Canadian success story because we have had access to international markets free of tariff and non-tariff barriers. We're excited to help meet Canada's target of $75 billion in exports, and eliminating more barriers is what's going to help us get there. Focusing on ratifying the CPTTP, advancing trade talks with China, and eliminating barriers in Mercosur are important steps to help us get there.

We hope we'll have success in this endeavour, so that we can continue to provide excellent opportunities in terms of Canadian jobs and the 250,000 Canadians who are currently employed by the canola sector.

Thank you very much.

9:50 a.m.

Liberal

The Acting Chair Liberal Kyle Peterson

Thank you, Mr. Innes. We appreciate your input as always. Thank you for being right on time.

Next up we have Mr. Adams for five minutes, please, sir.

9:50 a.m.

David Adams President, Global Automakers of Canada

Mr. Chair, thank you very much.

Honourable members, I appreciate the opportunity to appear before the committee today. The Global Automakers of Canada is a national trade association, representing the Canadian interests of 15 of the world's most respected automakers.

The GAC advocates for sound public policy to support a competitive and sustainable automotive market in Canada. Our members are committed to meeting the mobility needs of Canadians by providing greater consumer choice, offering leading-edge safety and environmental technologies, and eliminating unnecessary regulatory and trade barriers.

In 2017 the members of the association sold a record 1,160,000 vehicles, representing 57% of the Canadian automotive market. This represents growth in sales of 5.5% over 2016's record year. Two of our members actually produced 43% of the vehicles built in Canada. Importantly, these two member companies, Toyota and Honda, were respectively the largest and the third-largest producers of vehicles in Canada in 2017. Additionally, fully 58% of the vehicles sold by our member companies in Canada were built in the NAFTA region, demonstrating a commitment to building where they sell.

Our members have been at the vanguard of the introduction of advanced technology vehicles, whether the technologies be environmental, such as conventional hybrids, plug-in battery electric vehicles, pure battery electric vehicles, or hydrogen fuel cell electric vehicles, or vehicles incorporating the latest advanced driver assistance systems and increasingly high levels of automation.

At the outset, it's important to note that the Global Automakers of Canada has been fully supportive of all rules-based, trade-liberalizing agreements, despite the composition of our membership, which includes Japanese, European, and Korean manufacturers. This was the case with NAFTA, the Canada-Korea FTA, the Canada-EU CETA and, most recently, the CPTPP.

Our position is no different with respect to the proposed Canada-Mercosur FTA. Free trade with the Mercosur countries continues the trade diversification strategy that has been the hallmark of both the current government and the previous one. For the automotive industry in Canada, trade diversification is very important.

The five American and Japanese vehicle manufacturers currently producing vehicles in Canada established their operations to take advantage of sectoral free trade between Canada and the United States. It goes back more than 50 years, to the days of the Auto Pact. Sectoral free trade evolved into the Canada-U.S. Free Trade Agreement in the late 1980s, which evolved further into the North American Free Trade Agreement of the 1990s.

That short history of Canadian automotive production is simply to underscore the fact that from a vehicle production perspective, all plants in Canada were established to take advantage of the economies of scale of larger production runs for the North American market, such that roughly 85% of Canadian vehicle production is exported, and the vast majority of that to the United States.

With the resurgent automotive industry of the last few years, the North American market has absorbed virtually all the vehicles that can be produced from Canadian facilities. However, should access to that North American market become less certain or constrained, then the importance of having fair and unfettered access to other markets, such as the Mercosur countries, could be very important.

Right now, however, tariffs for vehicles and parts going into the Mercosur countries are in the 30% to 35% range, which is higher than almost anywhere else in the world. Such a high tariff structure has allowed countries like Brazil to become the eighth leading producer of vehicles in the world, producing almost three million vehicles in 2017. This is almost a million vehicles more than Canada, which ranks as the 10th largest producer in the world.

The Brazilian market is well represented, with more than 13 global manufacturers producing vehicles there. Under a Mercosur FTA, though, the elimination of tariffs on vehicle parts and supplies could present opportunities for Canadian parts makers and advanced technology companies. This may be particularly true for the technologies of the present and near future related to connected and automated vehicles and artificial intelligence, where Canada has expertise and a comparative advantage.

Finally, an FTA with the Mercosur countries would expand the Americas trade bloc. This, we believe, would make the whole of the Americas more resilient to the threats posed by China, which is currently producing roughly a third of the 100 million vehicles of global production.

With that I'll end my comments, and I look forward to your questions. Thank you very much for your time.

9:55 a.m.

Liberal

The Acting Chair Liberal Kyle Peterson

Thank you, Mr. Adams. I appreciate your comments, and you were right on time as well, so that's always appreciated by the committee.

Just before we start, I want to say welcome to a new member.

We welcome, Ms. Laverdière, from the riding of Laurier—Sainte-Marie.

Welcome to our committee, which is in my opinion the best parliamentary committee.

I think we're going to start with Mr. Carrie, for five minutes, please.

9:55 a.m.

Conservative

Colin Carrie Conservative Oshawa, ON

Thank you very much, Mr. Chair.

I want to thank the witnesses for being here.

I thought maybe I could start off with Mr. Adams. You mentioned the importance of diversification, and right now there are a lot of talks ongoing about NAFTA, of course. In the timeline we're in right now, should other free trade agreements be a higher priority than the Canada-Mercosur free trade agreement? What would be your thoughts on that?

9:55 a.m.

President, Global Automakers of Canada

David Adams

I think right now that in the entire automotive industry, and I would suggest probably most of the industries, the focus is on the renegotiation of NAFTA and getting that agreement right. Certainly that's been the fundamental agreement under which the automotive industry in Canada has operated for the last almost quarter-century. I think it's important that the treaty get renegotiated in a way that is beneficial not just to the United States but also to the Canadian and Mexican automotive industries as well. That would be the clear priority.

10 a.m.

Conservative

Colin Carrie Conservative Oshawa, ON

All right.

If we're going to be able to move forward with a successful Mercosur agreement, I was wondering this. We've heard about the technical barriers and such things that these countries put on Canadian firms. Are you able to give us some more examples of what these technical barriers might be and how we could address them in the agreement between Canada and the Mercosur countries?

10 a.m.

President, Global Automakers of Canada

David Adams

I've looked at some of the testimony. I think other witnesses have maybe touched on some of the barriers that do exist. All I would say to that is that I think that is part and parcel of any negotiation: to recognize that you're not only talking about tariffs, but you're talking about other things like standards and other tax regimes and that sort of thing that can be trade barriers. There's no point in negotiating a free trade agreement that only addresses tariffs if the other structure around that is resistant to opening up markets.

At the same time, I would say that we need to be cognizant of our own backyard as well. I think as we've expanded our trading agreements, implemented the CETA, there's an opportunity there that exists; and for our members, the ability to bring advanced technology vehicles, for instance, into the Canadian market is sometimes constrained because of the requirement that those vehicles must meet CMVSS or FMVSS motor vehicle safety standards, which Canada and the United States have developed. A large chunk of the rest of the world adopts UNECE standards, which are different from Canadian or American standards, but they're only different. So let's be careful about pointing a finger when we may have fingers pointing back at ourselves.

10 a.m.

Conservative

Colin Carrie Conservative Oshawa, ON

One of the witnesses before you said—I think I wrote it down here—“trade begins at home”. When I look at the automotive industry here in Canada, I think home is Canada, the United States, and Mexico.

You kind of touched on it a little bit, but what kid of potential do you see for the members of NAFTA as far as the opportunities with Mercosur are concerned? Is it a large potential that you see, or what kinds of opportunities do we have down there?

10 a.m.

President, Global Automakers of Canada

David Adams

I would characterize it personally as somewhat niche, for automobiles anyway. I think for automotive parts it's probably a different story. As I mentioned in my remarks, some of the advanced technologies that will be built into the vehicles of the coming decades are probably more of an opportunity. Again, that needs to be addressed for access for that technology into that market.

You look at that market right now. Brazil, for instance, I think has 14 different manufacturers, American, European, and Asian. So you do look at that and ask what the opportunity is for Canada, whether it's Toyota, Honda, Ford, GM, or Chrysler, to export into that market when those manufacturers are already there.

10 a.m.

Liberal

The Acting Chair Liberal Kyle Peterson

Thank you for that.

Before we continue, I want to take a couple of seconds to recognize some students here from Havergal College in Toronto.

Welcome to the trade committee. It's great that you're taking an interest in the trade committee. I think I speak for all of the committee members when I say we need more young people in trade and more women in trade. It's great to have you here today with us.

Welcome. We hope you enjoy the rest of the proceedings.

On that note, we're going to move to the Liberals, to Mr. Dhaliwal, for five minutes, please.

10 a.m.

Liberal

Sukh Dhaliwal Liberal Surrey—Newton, BC

Thank you, Mr. Chair.

I would also like to commend the college students for being here today and welcome them as well.

My question goes to the Canola Council of Canada.

Your website states that your mission is:

to advance the growth and profitability of the canola industry based on innovation, sustainability, resilience and the creation of superior value for a healthier world.

You mentioned only two of the countries, Japan and China, with which we are at a disadvantage compared with Australia. Do you see any advantage to signing this agreement that will fulfill that mission? Besides China and Japan, what are the other countries we should be looking into, and why?

10:05 a.m.

Vice-President, Public Affairs, Canola Council of Canada

Brian Innes

I'll start by saying that we don't see significant opportunity in Mercosur, because they produce many of the same things we do and are very competitive large exporters of oil and protein already.

That being said, so is the United States, and yet they are our largest market for canola. If we are as a country embarking on negotiations, we should try to get rid of barriers wherever they exist.

We see much more opportunity in Asia, where the protein and oil from the world is going. Whether it's from South America or North America, the oil and the protein that we produce from our crops is primarily being exported to Asia.

The two countries I mentioned, Japan and China, represent the largest opportunities. Other opportunities exist in the trans-Pacific partnership in countries, such as Vietnam, that are importing much larger quantities of protein to feed their livestock, as well as high-quality oil.

Other countries throughout the Asia-Pacific region offer opportunities; for example, India. If that trade situation were stabilized, if we did not face extremely high and unpredictable tariffs and very unpredictable non-tariff barriers, there could be opportunity in India, as well.

10:05 a.m.

Liberal

Sukh Dhaliwal Liberal Surrey—Newton, BC

You mentioned India. How do you see Australia and Canada? Are we at a disadvantage, or are we on the same level playing field with Australia?