International Trade Committee on April 19th, 2016

[The Chair, Liberal, Mark Eyking]

Good morning everybody. It's great to be in Alberta, in Calgary. You guys have the weather on the west coast. We still have icebergs on the east coast. It's good to be here, and this is the second province our committee is visiting.

Our committee has been doing a study on the TPP and having consultations across the country. We are going to go to every province. This is our second stop. We will probably do the territories through a video conference.

Of course, we're probably going to be talking to some of our trading partners in Ottawa, from some of the embassies; but besides those, we'll also be getting many submissions from the general public. I think last week we had 6,000 and on the weekend it was 10,000, and I think it's up to 15,000 now, so there is a lot of interest out there, and that's good.

We've extended our deadline to the end of June because there's such an uptake. What will happen then is that our analysts will go through those submissions over the summer. These have to be translated and put together for us to go through them upon our return in September.

We are probably also going to do central Canada this spring and then probably Atlantic Canada in the fall.

This is a very ambitious task that we're embarking on, and we're hoping to have our report ready for the House of Commons before the end of the year. That would bode well for the House of Commons, because MPs will want to look at this before we vote on the agreement, which will probably be sometime in the first part of next year.

It would also work well because we'll be more in step with where the Americans are going.

With us on our committee, we have members from right across the country. Yesterday, I started with those from west, but I'll start with those from east today. I'm from the farthest east on our committee. My name is Mark Eyking and I'm from Cape Breton. We have Karen Ludwig and she's from New Brunswick. We have two members from Quebec who are back holding the fort in Ottawa. We have Mr. Lametti and Madame Lapointe. Then we have four members from Ontario, two from the Toronto area, Mr. Fonseca and Mr. Peterson, and we have Madam Ramsey from the Windsor area and Dave Van Kesteren from the south, down in the Leamington area. Of course, we have two westerners with us, Mr. Ritz and Mr. Hoback from Saskatchewan. We're from right across the country.

[An hon. member]

There's one more, Mr. Chair.

[The Chair, Liberal, Mark Eyking]

We have Mr. Dhaliwal from British Columbia. He set us off yesterday.

I'm sorry about that, Mr. Dhaliwal. I have to watch my notes more closely.

The way we're doing it is that we have four panels and we usually have three groups presenting to us on each panel. Then we try to give five minutes for each member to ask questions and have some dialogue. Yesterday it went really well in British Columbia.

That said, we're going to start with our witnesses. We have with us today the Alberta Beef Producers, the National Cattle Feeders' Association, and the Western Barley Growers Association. You're the first panel.

Gentlemen, who wants to start, the beef producers? I'm sure all members here had a good steak last night.

Rich, you may go first for five minutes, sir.

[Rich Smith, Executive Director, Alberta Beef Producers]

Thank you.

On behalf of Alberta Beef Producers, I thank you for the opportunity to make a presentation to you today. Being a somewhat uncommon second-generation Calgarian, I welcome you to Calgary today.

A lot of what I will be saying I'm sure you will hear from others of our colleagues across the country, and Bryan and John this morning, but I wanted to bring you a bit of an Alberta perspective.

Alberta Beef Producers is the democratic and representative organization that speaks and works on behalf of close to 20,000 cattle and beef producers from all sectors of the industry—cow-calf, backgrounding, and cattle feeding—in Alberta. We are an organization of producers, run by producers, working for producers.

With all respect to our colleagues in other provinces, we see Alberta as one of the dominant parts of the Canadian beef industry, with 40% of the cows in Canada, 70% of the cattle-feeding capacity, and 70% of the beef processing and packing capacity. We are the largest single commodity in the Alberta agriculture industry, representing over $4 billion a year in farm cash receipts out of a total of about $12 billion. A third of the farm cash receipts in Alberta come from our industry. Agriculture is the second-largest industry in Alberta, and we think of it as our largest renewable industry as well.

Trade is vitally important to producers in Alberta. Certainly trade is important to the Canadian beef industry. About 36% of Canadian beef is exported. From Alberta, between interprovincial and international exports, 86% of the beef is exported out of this province. You can see that trade is important to the whole industry, but for us it's absolutely vital.

We also look for diversity in trade. Three-quarters of the Canadian exports go to the United States. The United States is our largest and best customer, but it's certainly not healthy for any industry to be so dependent on a single export market.

We see the same challenges in our industry that the oil and gas industry faces. The recent Alberta budget talked about the differential of $15 a barrel between the price of Western Canadian Select oil and West Texas Intermediate oil. In the beef industry we face a similar differential. We call it “basis”, the difference between the price here and the price in the United States. Certainly many factors contribute to the basis, but having more markets and broader access to markets certainly tends to reduce the basis.

For many years, the past seven years, a primary priority of our industry was the repeal of the country of origin labelling legislation in the United States. That was costing our industry close to a billion dollars a year. We spent seven years and $4 million in legal fees on fighting COOL. We certainly appreciated the support we received from federal and provincial governments, the previous government and the current government, with support on COOL. Of course we celebrated with the repeal of COOL in December, and want to be sure we retain the ability to impose retaliation if the United States starts to go down that path again.

With COOL repealed, then of course we're looking to broader horizons west and east—east to the Comprehensive Economic and Trade Agreement with Europe, and west of course to the topic of today, which is the Trans-Pacific Partnership.

The Canadian cattle industry and the Alberta Beef Producers strongly support the Trans-Pacific Partnership agreement, and we want to see ratification of the agreement quickly. We believe ratification of the agreement here will continue momentum towards implementation of the agreement more broadly. Furthermore, if Canada ratifies the agreement, we think it will put us in a stronger position if other countries start to waver in their support for it or try to look at making changes.

Japan was our primary target in the TPP agreement, and really the big win for the Canadian beef industry, because the TPP would put Canada back on a level playing field in Japan with our primary competitors, the United States and Australia. We see it as being very good for the industry and very good for Canada.

Australia has a free trade agreement with Japan. This has created a significant competitive disadvantage for our beef. From 2014 to 2015 there was a 9% drop in the value of our exports to Japan and a 24% drop in the volume of our exports to Japan. This was as a result of the advantage of other countries with that free trade agreement. Without the Trans-Pacific Partnership or some other agreement with Japan, we'll see a continued decline in our exports there.

With the TPP, we believe we could double or triple our exports to Japan to the order of $300 million a year, which would represent a 10% increase in the value of our exports.

Without the TPP or some form of bilateral agreement with Japan, we could lose 80% of the value of our exports to that country. It is a very critical market for us, and we need to continue to be able to be competitive there.

Certainly, there is concern that the TPP might not be implemented and uncertainty over the U.S. position on it. As a result of that, we think that Canada also needs to continue to work towards a bilateral trade agreement with Japan. We started work on a free trade agreement in 2011. We would like to see that continue.

Thank you.

[The Chair, Liberal, Mark Eyking]

If you have a final comment....

[Rich Smith]

Yes, I do have a final comment.

I want to thank you again for the opportunity to present today. I appreciate having the chance to tell you about the Alberta perspective on it and make sure you understand, as I am sure you do, how important the Trans-Pacific Partnership is to the prosperity of our industry and, we think, the future prosperity of Canadian agriculture.

Thank you.

[The Chair, Liberal, Mark Eyking]

Thank you very much, sir.

I see we have some audience here.

We're going to move over to the Cattle Feeders' Association with Mr. Walton and Mr. Weekes.

[Bryan Walton, General Manager, National Cattle Feeders' Association]

Thank you, Mr. Chairman. It's nice to see you here from Atlantic Canada. Maybe we can do a little surf and turf after we're done today.

A bit of what I'm going to say was touched on by Rich Smith, so there might be a little repetition and maybe some reinforcement of points made. Thank you for coming to Calgary.

My name is Bryan Walton. I am the general manager of the National Cattle Feeders' Association. Our members are provincial cattle feeders associations across the country, essentially the feedlot operators. I'm joined today by Mr. John Weekes, who is working with the National Cattle Feeders on trade matters and providing us advice on things such as the TPP. Mr. Weekes is a former Canadian ambassador to the WTO and was the chief negotiator on NAFTA. We get good advice from Mr. Weekes.

To reinforce what Mr. Smith has said here, you are in the heart of cattle country. Between Alberta and Saskatchewan, we have about 80% of the beef herd in Canada. In this province of Alberta, we have about 70% of the cattle on feed. The second largest feeding jurisdiction in Canada is Ontario, with 23% of the fed production. The cows from the ranches that Rich represents come to the feedlots from across the country. Those cattle are in turn shipped to the big plants: in Ontario to Guelph, in the West to Cargill Meat Solutions in High River, and JBS in Brooks. We're pleased to see that a fourth plant, a large plant, is expected to reopen at Balzac some time in July. That's called Harmony Beef.

We also ship live cattle to the United States. A significant part of our production does go to the U.S., but nationally the beef industry counts for about $33 billion in sales of goods and services. We have an integrated system that's been built over a generation. We have a natural advantage with grass. Cattle produced on land that might not otherwise be used, and is unsuitable for cropping, is where it starts. We have the climate, we have the grass, we have the infrastructure, we have the know-how, and the genetics. We have the plants, and now we just need those export markets and market access. That's why this agreement is so important to us. We think we have a great opportunity to excel. We are a sustainable industry, and we are renewable. Put all of that together and you can see why the TPP represents such an enormous opportunity for Canada and Asia. Mr. Weekes will explain that in a bit more detail. I can tell you that you should be proud of this industry, as Canadians, because we're world class. We're innovators, and we are employing modern technology in the production of cattle in Canada.

I thank you for your attention. You have a copy of our written brief that was submitted in advance.

John.

[John Weekes, Trade Consultant, National Cattle Feeders' Association]

Thank you, Mr. Chairman.

Let me make just a couple of additional points. One that I thought I might make is to say something about implementation of the TPP in the United States, because that's been a source of a lot of speculation. Until about two or three weeks ago, I thought it was quite unlikely that the TPP would be approved in the United States this year. Then I went to a conference in Cleveland about 10 days ago, and I talked with some Washington insiders, mostly lawyers, who used to be senior people in the administration. They believe that the chance of the TPP being passed in the lame-duck session of Congress later this year is greater than 50%. I found that quite surprising. I can go into some of this in more detail about what this might mean, but I won't in my initial comments.

I think this is something that Canadian policy-makers should take into account when we're thinking about our approach to the TPP. This may mean that various things will happen later this year, including the United States starting to go around to see how their partners are going to implement it, really looking at how they will try to deal with the problems identified by various congressmen with the existing agreement. I think we need to have our response ready in terms of how we'll react to those sorts of approaches.

This is a classic situation of what happens in competitive trade liberalization. Competitive trade liberalization is a phrase that's been coined to describe what goes on now in the world of trade negotiations. It used to be that we did all of this in the GATT, and then the WTO. Everybody was negotiating at the same time; everybody got the same result at the end. The playing field was relatively even between different players, insofar as market access was concerned. However, now we have a situation, which has been going on for over a decade, in which major trading countries are all rushing to try to negotiate agreements with their major partners that will give a preferential advantage to their suppliers. This becomes a game in which you're either ahead or you're behind.

You've heard some description here about the problem that this poses for the beef and cattle industry. Barriers are still very high in the tariff world in a lot of agricultural products. In Japan, for instance, if its 38.5% tariff on beef comes down very substantially, as it would under the TPP, we would improve our chances for better access to that market. It's a real opportunity. If, however, we don't go along with TPP and our other partners do, then they'll all be getting these advantages and we won't. Our industry will be at a significant competitive disadvantage in the Japanese and other Asian markets.

[The Chair, Liberal, Mark Eyking]

I'm sorry, but you're going to have to wrap up. Your time is well over.

[John Weekes]

I will just say that I also think that working on TPP gives us opportunities for improving the management of a number of files with our two North American partners, and also, of course, in planning the next steps beyond TPP. If we're part of it, we're part of the planning team. If we're not, it's a little hard to be in the game.

[The Chair, Liberal, Mark Eyking]

Thank you very much, both of you, and especially for your insight on what's happening down in the States. It's very concerning for us, to say the least.

Now we're going to go over to the barley growers.

Mr. Robertson, you have the floor for five minutes.

[Doug Robertson, President, Western Barley Growers Association]

Good morning.

My name is Doug Robertson. I'm a farmer from Carstairs, Alberta, and the president of the Western Barley Growers Association. Thank you to the committee for our opportunity to present.

This year will mark our 40th anniversary as a farm organization that concentrates on marketing, trade, and other policy initiatives that concern farmers in the ag industry, especially on the prairies. We're voluntarily funded by a membership of farmers. In 1991, we founded the Alberta Barley Commission in order to expand the use of barley in Canada and encourage increased exports.

We have a great interest in the ratification of this TPP agreement. It's no secret that the Western Barley Growers would prefer to have a comprehensive world trade deal in place. Since that seems elusive, we've encouraged past free trade agreements that Canada has made, which increased agriculture's access to the world markets. Canada is a trading nation. We must export to survive. In fact, we're the fifth largest ag exporter in the world.

Some critics of this TPP agreement have suggested that we already have enough FTAs and we can get by without a more comprehensive agreement like the TPP. We would point out that not only does the TPP enhance our existing FTAs, but our major competitors in the growing Asian market, like Australia and the U.S., already have preferential access, as has been mentioned, and we don't have that. Without the TPP, Canada would be at a bigger disadvantage than we already are in these markets.

We face high tariffs and barriers, not just for barley and other crops, but for our meat exports as well, as you've heard. The WBGA has always been a big supporter of adding value to our crops, which adds jobs at home and revenue from the increased value over the raw material price.

Asia uses a lot more barley in its food than we do in North America, and food use for barley is an important addition to traditional barley markets. This agreement would encourage this expansion by lowering food barley tariffs in Japan by 45% over the next eight years. This is a high-value market and it keeps and expands processing jobs in Canada.

Until now, it's been hard to get prairie farmers to grow a lot of food-grade barley because of the small market for it. This agreement could change that. Health Canada has said that North Americans should be eating more barley in their diets for health reasons, and having additional food barley being produced to meet the established demand in Asia also makes it more available for more products in the North American market.

On the malting side, in Japan both roasted and unroasted malt quotas increased to 4,000 metric tons on the roasted side and 89,000 metric tons on the unroasted malt side. This is good news for our malt barley growers and our malting industry in Canada.

On the feed barley side, Japan typically imports about 250,000 tonnes from Canada per year, but this has been under pressure from our competitors who have better access than Canada does. Canada currently pays $113 per tonne tariff on feed barley going into Japan. This would drop to $0 when the TPP is implemented. Not only would this tariff reduction make Canada more able to compete and regain market share that we are losing, but it would increase the value of that feed barley up to $25 million per year.

On the other hand, should we fail to implement the TPP, we would see at a minimum the loss of 50% of current sales of barley into Japan, valued at over $50 million. That loss is not easily recoverable, especially since some of our main competitors are already TPP members who already enjoy freer access to Japan than we do.

On the feed barley side at home, the TPP would pave the way for increased barley feeding, especially for pigs and cattle. Trade restrictions in the past have really hurt our pork and beef industries. Having a healthy livestock industry in Canada means that off-grade grains, grain waste from processing, and feed grains can be used to add value to that grain through livestock, as well as providing jobs and additional buyers for our crops. Their ability to export their meat products keeps both of our industries healthy, and they are the largest feed grain buyer in our market right now.

The TPP agreement would enhance their access into the growing Asian market. In Japan alone, improved access for our processed pork and beef adds from 400,000 to 500,000 more tonnes of feed barley use in Canada, worth $100 million. That benefits both grain and livestock producers.

In conclusion, agriculture in Canada is a critical industry contributing $100 billion to the country's annual GDP, and one in eight jobs is ag related. Canadian farmers have consistently expanded their production to meet export opportunities when they arose, and the TPP is a great opportunity, which I know we as farmers would be happy to meet.

Ratification of the TPP will ensure the economic health of Canada well into the future, and will encourage future FTAs as well, as has been mentioned.

Trade is something else that I feel is important. It's kind of hard to justify fighting with countries you have trade deals with. I believe that peaceful relationships in this world start and continue with trade.

Thank you.

[The Chair, Liberal, Mark Eyking]

Thank you very much, Mr. Robertson.

I thank all the witnesses for your briefs.

Now we're going to go into questioning. Our question and answer session is five minutes per member.

We're going to start off with the Conservatives, Mr. Ritz, who is no newcomer to agriculture, to say the least. He knows his file.

Go ahead, Mr. Ritz.

[Gerry Ritz, Conservative, Battlefords—Lloydminster, SK]

These gentlemen have forgotten more than I've ever known.

It's great to see the full value chain represented at a panel, because you guys are very synergistic in the way you work. You raise the cow calf, then the barley comes together under the feed lots, and of course then we sell the product overseas. I think that also speaks to the point you made, Rich, on diversity and trade. You talk about our tendency over the years to slide everything south. They had the processing capacity and they sold out the finished goods, but we're seeing some of that change now. We're pulling away from and starting to do more development on our own. I think that's a good thing, but it does take trade deals like TPP, CETA, and so on to make that work. It draws the investments to us for more processing.

You talked about the plant at Balzac opening. I know they're looking with interest at the Japanese market. Of course, everything for Japan has to be age-verified. Sunterra has a Japanese investor I think, and Harmony is looking at that as well. It's important we get this right.

We heard from a few folks so far in different panels that if this were only about tariffs, they'd have no problem supporting it, but the devil is in the details on a number of other clauses. You and I know, and Doug you mentioned this, that rules-based trade is what keeps friends as friends. It's like a good fence. The negotiations on TPP certainly are about tariffs. That's the front line. How concerned are you about non-tariff trade barriers as we saw with country of origin labelling? There are a lot of other issues in TPP, and John you would have seen this too in your negotiations on NAFTA.

How much of a concern is it to you to get beyond the tariff walls and make sure that we have good science-predictable, rules-based trade?

[John Weekes]

As we note in our brief, there have been advances made in this agreement in the area of technical barriers to trade—which are really product regulations and sanitary and phytosanitary measures, which are the same thing, but in the agriculture sector—which quite often have arisen for reasons that are a bit suspect. They're supposed to be based on science, or for the genuine protection of human, animal, or plant health. We think, in certain cases, countries have been tempted to put in place barriers that are more designed to shield their domestic market than meet these legitimate objectives.

We think this agreement moves in the direction not of taking away the right to regulate, but of making it more likely that the regulations that are put in place are designed to achieve their objectives and not inadvertently designed to be protectionist. That's a very important aspect of this undertaking.

[Gerry Ritz, Conservative, Battlefords—Lloydminster, SK]

Absolutely.

You also talked in your response, John, about being in the U.S. and meeting with former Washington insiders, who think there's an opportunity. I've had those same discussions with my former colleague Tom Vilsack and a few others I stay in contact with down there. I'm of the opinion that it's going to take other countries...and I've had discussions with the Mexicans, Japanese, Australians and New Zealanders. They are all bringing their products forward, hopefully this spring. Japan may be backing off a little, but everybody else is in process.

Is it important for Canada to do the same thing, so that we put pressure on the U.S. to move forward?

[John Weekes]

Again, on this, I've sort of swung.... I've begun began thinking that the idea of waiting until after the United States goes certainly makes some political sense in Canada, because you don't have to bite the bullet until you actually see what's happening south of the border.

[Gerry Ritz, Conservative, Battlefords—Lloydminster, SK]

Well, the cat is out of the bag already, though.

[John Weekes]

I think you can make quite a strong argument that if we view ourselves and want to be viewed as a Pacific nation and as a country that's really interested in liberalizing trade in the area, then why are we waiting until the United States implements it? Why don't we go ahead and do it ourselves, if that's what we want to do? Why don't we show that's our intention, that's where we stand?

If the TPP then does not go through in the United States, I think that would put us in a much stronger position for picking up the pieces, with Japan, for instance—

[Gerry Ritz, Conservative, Battlefords—Lloydminster, SK]

I agree.

[John Weekes]

—which buys, by the way, more agrifood products from Canada annually then the entire European Union.

[Gerry Ritz, Conservative, Battlefords—Lloydminster, SK]

It's a premium market.

The other two clauses that are quite interesting to most people are the separate labour and environmental clauses. Agriculture relies on a good strong labour base and also has a great story to tell on the environment. The footprint is a lot lighter now than it ever was before.

Are you concerned about labour standards in an agreement like this? I mean, a high tide floats all boats, and where 80¢ an hour is a good wage in Vietnam, of course, that doesn't even buy you a coffee here. The idea behind those labour standards is to make sure that everybody is trading at the same level, and it's going to raise the labour standards in Vietnam, not lower ours.

[The Chair, Liberal, Mark Eyking]

Sorry, your time is up, Mr. Ritz. If you want to finish up answering in the next round, that's fine.

The time is up, so we'll have to move over to the Liberals and Mr. Dhaliwal.

[Sukh Dhaliwal, Liberal, Surrey—Newton, BC]

Mr. Chair, one thing I'd like to add to my introduction is that this is the city that 32 years ago welcomed me to Canada. I came here speaking very little English at that time, and this has been the place of birth to two of my three children, and also my second degree in engineering and post-grad diploma were from here.