International Trade Committee on April 20th, 2016

[The Chair, Liberal, Mark Eyking]

Good morning to everybody in the room. It's great to be in the middle of the prairie provinces, Saskatchewan. I welcome everybody to the Standing Committee on International Trade, from the House of Commons.

Our committee in Ottawa deals with all trade. We're dealing with the European trade agreement, which we are finishing up. We have softwood lumber issues. There are many issues, but right now the biggest challenge in front of us is the TPP. As many of you in this room know, it's worth $1 trillion. It involves some of the biggest trading partners in the world, and as we hear across the country, it affects everybody. It affects all Canadians. One way or another it will have some impact, whether you're buying goods or selling goods.

We embarked on travelling across this country. We're going to be visiting all 10 provinces over the year. We're probably going to do the territories via Skype. We've already heard quite a few witnesses in Ottawa, and we're going to be hearing more when we go back.

We're also open to public submissions. I think right now there are over 15,000 submissions that have come in. We've extended the deadline until the end of June. Through the summer break, our analysts will be bringing them all together and translating them for us, to be ready when we come back after the summer.

After meeting with Canadians and drafting the report, we're hoping to have it in the House before the end of the year. Then the rest of the MPs will deal with it in the first part of the year, and probably sometime next year there will be a vote in the House.

That being said, we have 10 members of Parliament on our committee from right across the country. Starting from the west coast, we have Mr. Dhaliwal, he's from British Columbia. We have two MPs from Saskatchewan here, Mr. Hoback and Mr. Ritz. From southwestern Ontario, we have Mr. Van Kesteren and Ms. Ramsey. From the Toronto area, we have Mr. Petersen and Mr. Fonseca. From the Atlantic coast, we have Ms. Ludwig and me, Mr. Eyking. She's from New Brunswick and I'm from Cape Breton, Nova Scotia.

On that note, we'll get going. We have arranged it so that we have four panels an hour and three sets of witnesses. It's worked quite well so far. Today we have witnesses, some of whom I've met.

We have the Saskatchewan Pulse Growers, the Saskatchewan Canola Development Commission, the Saskatchewan Cattlemen’s Association, and the Saskatchewan Barley Development Commission.

There are five minutes for each group, and we're going to start off with the Saskatchewan Pulse Growers.

Mr. Wiens, you have five minutes. Who's with you, sir?

[Tim Wiens, Chair, Saskatchewan Pulse Growers]

Carl Potts is with us. He's our executive director.

[The Chair, Liberal, Mark Eyking]

Welcome.

[Tim Wiens]

Mr. Chair and committee members, thank you for the opportunity to speak to your committee today. My name is Tim Wiens, and I am a farmer from the Herschel area. Herschel is a small town of about 20 people about 150 kilometres southwest of Saskatoon. I am also chair of the Saskatchewan Pulse Growers.

Thank you for visiting Saskatoon. We are pleased to speak to you today about the TPP. I know that some of your committee members have met with the pulse industry when we were in Ottawa in March.

Canada is the largest supplier of pulse crops to protein-hungry markets around the world. In 2015, Canada exported over $4.2 billion in pulses, $2.5 billion of which were from Saskatchewan lentil exports alone. This is on par with the value of both canola seed and non-durum wheat exports from Saskatchewan.

Canada is the world's largest producer and exporter of peas and lentils. Each year, Saskatchewan production accounts for 60% of Canada's peas and over 95% of Canada's lentils and chickpeas. Although we export to more than 100 countries, our key markets are concentrated in just a few. Ninety percent of our yellow pea exports go to just three countries, and 85% of our red lentil exports go to just five. As we produce more, we need to create and diversify markets for our products.

TPP provides an opportunity for market growth, diversification, and a reduction of market access risk. Members of the TPP are some of Canada's largest trading partners for pulses. In 2015, Canada exported approximately $383 million or 458,000 tonnes of pulses, pulse flours, and pulse fractions to TPP members. Combined, TPP members would be Canada's third largest market for pulses.

For us, ratification of the TPP accomplishes three things. First, it is an opportunity to reduce or eliminate tariff and non-tariff barriers to trade. While Canada enjoys duty-free access for pulses to a number of TPP countries, Japan and Vietnam are markets that face import duties, and those would be reduced over time.

Second, the Canadian pulse industry would suffer severe consequences with respect to its competitiveness if Canada did not implement the TPP. Two of the Canadian pulse industry's largest competitors, Australia and the United States, are TPP members who would benefit from duty-free access while Canadian growers continue to face tariffs into TPP countries.

Third, it has the potential to improve the alignment of trade tolerances between TPP members for the use of technology in food production. This is what I want to focus the remainder of my comments on.

Unfortunately, misaligned approvals and maximum residue limits for crop protection products threaten several important things: our access to key markets, the ability that I have to effectively utilize technology on my farm, and food security in food-deficit regions of the world, where predictable trade is necessary to make food available 365 days a year. The zero or near-zero default tolerances that are commonly applied today by countries, as they wait for tolerances to be established or for other reasons have missing MRLs, are not based on science. Future testing technology that is cheaper, easier, and more sensitive will disrupt trade and add to price volatility in markets with zero or near-zero tolerances.

The Canadian pulse industry is a strong supporter of both bilateral and multilateral efforts to reduce barriers to trade. The TPP is an opportunity to improve the predictability of trade between TPP members concerning trade tolerances for technology used in crop production. It is critical that scientific committees created under the TPP be utilized to align pesticide maximum residue limits and policies on how low-level presence of GM crops will be addressed.

The TPP must be utilized to develop a dialogue on recognition of scientific standards. Canada must show leadership to develop a politically, technically, and commercially workable domestic RSS policy. Sound science-based processes can travel across national boundaries.

In closing, from our perspective, Canada must ratify the TPP. Without ratification, Canada could be at a significant tariff disadvantage to exporting nations like Australia and the United States. The TPP also creates the opportunity to make tangible improvements to align trade tolerances.

This is the end of my remarks today. We have Carl Potts, our executive director. We would be glad to answer any questions you have.

[The Chair, Liberal, Mark Eyking]

Thank you, sir. Thank you for your presentation, all on time.

Now we'll move over to the Canola Development Commission, and we have Terry Youzwa.

[Terry Youzwa, Chair of the Board of Directors, Saskatchewan Canola Development Commission]

Thank you, Mr. Chair.

On behalf of the Saskatchewan canola farmers, I'd like to thank you for the invitation to appear before the Standing Committee on International Trade.

For canola farmers it's simple. We are excited about the opportunities that the Trans-Pacific Partnership holds for agriculture. As producers in the largest canola-producing province in Canada, Saskatchewan farmers rely on international trade to generate our farm income, and the TPP is integral to our long-term viability.

I'm Terry Youzwa. I farm just a two and a half hour drive northeast of here. Also with us today is Janice Tranberg, our executive director. We represent more than 26,000 levy-paying producers who rely on trade to generate our income.

Our mandate is to grow producer prosperity through advocacy, research, and market development. Nipawin and the surrounding area is an important centre for agriculture in the province. It's home to a large concentration of canola farmers and one of the province's canola processing plants.

Without access to international markets, there would not be a canola sector in our province anywhere near this exciting. Over 95% of what we grow here is exported, with about 60% of it destined for TPP markets. In 2015, Saskatchewan sold just shy of $3 billion of canola to TPP members, which amounts to more than 60% of our production. Canola is exported as seed or further processed and sold as oil or as meal for livestock.

The canola industry contributes $19.3 billion to the Canadian economy, of which $8.2 billion comes from Saskatchewan. In addition, canola is consistently one of the highest revenue generators for farmers in our province and across the country. The economic contribution from the canola industry could grow further under TPP.

With the removal of tariffs to Japan and Vietnam, the value of canola exports would increase upwards of $780 million a year, which equates to about a million additional tonnes of oil and meal. Japan is already one of our top four canola customers, and we look forward to further interacting with the market.

The current Japanese tariff structure restricts exports of oil and meal, as the tariff on seed is zero, yet on oil it is roughly 15%. As a result, Japan buys canola seed and then crushes it themselves into oil and meal. Once implemented, the TPP will assist in addressing this imbalance and shift our exports from a primary commodity to a value-added product, keeping valuable jobs here at home in Canada.

This is particularly important for Saskatchewan, as our province has considerable processing capacity. There's a processing facility near my farm, as there is in a number of other communities in Saskatchewan, western Canada, and Canada. It provides an important delivery option for farmers outside the traditional grain elevator system and has driven increased canola production in our areas.

Ensuring a viable domestic industry helps maintain healthy communities for our families and creates job opportunities for Canadians. The facility at home is the largest private sector employer in our town. There are three other crushing facilities, as well as a refinery, in Saskatchewan that provide the same benefits in and around those communities.

Another core benefit of the TPP, and equally important, is that it keeps canola farmers competitive. We compete directly with U.S. soybeans and with Australian canola farmers for access to the Asia-Pacific, particularly into Japan.

Canada's membership in and ratification of TPP ensures a level playing field for Canadian farmers. Should the agreement go into effect without Canada, it would be a significant detriment to our industry. Overnight, Canadian canola would become more expensive than the product of such competitors as U.S. soybean producers. Already this is the case with Australian canola, since an economic partnership agreement between Australia and Japan went into effect in January 2015.

In addition to the tariff benefits, the TPP is different from traditional free trade agreements. The agreement contains provisions that commit TPP members to increase co-operation, to exchange information, and to rely on transparent processes related to crops produced using modern biotechnology, such as canola. This provides a platform to advance and to proactively address many uncertainties the canola sector faces.

Some of our largest market access issues relate to biotechnology, specifically varying approvals for biotech crops in our export markets. Currently there is a lag in approvals for many biotech varieties that have already been approved for use in Canada. Not only does this cause potential problems for international trade, but it reduces access to new innovations for our Canadian farmers.

Through our strategic plan, the canola sector has set big goals for increases in production, exports, and domestic processing. These market value opportunities will only be realized with open, stable trade relationships. We have ambitious plans for our industry and feel strongly about the role that canola is playing and can play for agriculture in Canada. The successful implementation of TPP and similar agreements, such as CETA, are core to farmers' success.

In conclusion, agriculture, and more specifically canola, plays a pivotal role here in Saskatchewan, western Canada, and Canada. The expanded market opportunities from TPP will ensure that canola remains the number one crop for western farmers. A strong value-added sector propels the growth of the canola sector in Canada both for our farmers and Canadians more widely.

Thank you. We'd be happy to take questions.

[The Chair, Liberal, Mark Eyking]

Thank you, sir.

Thank you both for being here.

Now we're going to move on the the Saskatchewan Cattlemen's Association, with Ryan Beierbach and Ryder Lee.

Go ahead, please, for five minutes.

[Ryan Beierbach, Chairman, Saskatchewan Cattlemen’s Association]

Good morning, committee members and staff.

I'm pleased to be here representing the Saskatchewan Cattlemen's Association, and Saskatchewan's more than 18,000 beef cattle producers.

My name is Ryan Beierbach. I'm the chair of the Saskatchewan Cattlemen's Association board of directors. I ranch near Whitewood, Saskatchewan, along with my wife Tania and our three children.

Ryder Lee is with me. He is the SCA's CEO.

I am aware that this is the third day of your western tour. You have probably heard some of the things I will say today. Please recognize that this repetition reflects the consistent support of cattle producers for the Trans-Pacific Partnership as well as producers' recognition of the need to expand and improve market access.

If Canadian market access does not continue to grow along with that of our beef-exporting competitor nations, then cattle producers in Canada will be left behind, and this will show in reduced profit levels for producers like me and those I represent.

The trade opportunity presented by Asia and its growing population, along with its growing wealth, seems well understood today. The TPP is another step for Canada to access that market. I'd like to reinforce this point.

I'd also like to reinforce the point that this agreement is about keeping pace with our competitor beef-exporting nations. My base fear about the TPP is that it will not be implemented. If the TPP is not implemented, then Canada will lose out on the Japanese market. Japan was a $100-million export market for Canadian beef in 2014. That was revenue from almost 19,000 tonnes. In 2015 that number was down to 14,000 tonnes, worth $93 million. That is a 24% drop in tonnage. This trend will continue to worsen without an improvement in Canada's access to Japan.

Australia already has negotiated a free trade agreement with Japan. They enjoy an 11% tariff advantage over Canadian beef. Imagine competing with a wholesaler who starts with an 11% differential in purchasing options.

The worst part is that this gap will widen if Canada does not get improved tariff treatment. Once the TPP is implemented, the Japanese tariff on Canadian beef will immediately match the rate for Australia and will reduce to 9% over 15 years. We feel that this could provide opportunities to double or nearly triple our exports, to $300 million. Without the TPP or a bilateral agreement with Japan, Canada will likely lose around 80% of the value of our beef exports to Japan.

This drives home a key point that I want to leave you with today. For beef exports to Japan there is no status quo. We either implement an agreement and take advantage of the new situation or we do not implement and we can say goodbye to nearly all of our existing exports to Japan.

I would also like to remind you that this Japan competition isn't just between us and Australia. Mexico, New Zealand, and the United States are also members of the Trans-Pacific Partnership, and they are significant beef exporters. I would not like to consider Canada's being part of the 38.5% tariff while our major competitors take over the high-value Japanese market. I want you as a group to understand how much of a disappointment and real cost that would be to me and the Saskatchewan beef cattle producers I represent.

Looking beyond Japan, the TPP presents some other opportunities. The signatories include Vietnam, which we believe will become more and more important as their population moves up the prosperity ladder. When people have more disposable income, they tend to spend some on improved diets, including more beef. Vietnam has a tariff of 15% to 20% on beef cuts, and those will be eliminated three years after implementation. They will also eliminate their 10% tariff on offals over five years.

We also need to consider future signatories. Many countries have indicated an interest in joining. It is those who are in at the start who will be able to dictate the cost of entry for new signees.

One country presenting opportunity is South Korea. We already have a free trade agreement with Korea, but so do the United States and Australia. All three countries have similar tariff phase-out periods, but Canada is three years behind the United States and one year behind Australia. All three will eventually get to zero, but we believe the TPP can be used to speed up the phase-out. We think the price of admission for Korea into the TPP should include tariff elimination on Canadian beef to match the rate U.S. beef receives.

Thank you for the opportunity to present. We're glad to answer any questions.

We wish you safe travels.

[The Chair, Liberal, Mark Eyking]

Thank you, sir, for the presentation.

We are going to move over to the Barley Development Commission. We have Jason Skotheim and Jillian McDonald.

McDonald? Do you have any relation to any Cape Bretoners? Half of our phone book is McDonalds.

[Jillian McDonald, Executive Director, Saskatchewan Barley Development Commission]

McDonalds are everywhere.

[The Chair, Liberal, Mark Eyking]

Welcome, both of you.

You have five minutes. Go ahead.

[Jason Skotheim, Chair, Saskatchewan Barley Development Commission]

Thank you very much for the opportunity to come and speak on this very important aspect.

My name is Jason Skotheim. I farm north of Prince Albert with my brothers. I am also the chair of the Saskatchewan Barley Development Commission, or SaskBarley, as we call it.

SaskBarley is a producer-elected and directed commission that ensures that the approximately 7,500 barley producers have the resources and representation to strengthen Saskatchewan's competitive advantage and ensure that producers' and Saskatchewan's interests are protected.

Our mission is to ensure the long-term profitability and sustainability of barley production for Saskatchewan farmers. SaskBarley is in full support of Canada's participation in the TPP, and we urge the government to sign and ratify the agreement at the earliest opportunity.

The TPP offers a multitude of long- and short-term benefits to the Saskatchewan barley industry. A commitment to the TPP would be investment in the long-term future of barley production. It would provide significant opportunities and benefits for the entire barley value chain in western Canada by way of reduced or eliminated tariffs, markups, and country-specific quotas for feed and food barley, malt, and processed beef and pork products that use barley as an input.

I'll use Japan as an example. Japan typically imports about 330,000 tonnes of barley a year from Canada. Approximately 250,000 tonnes of that barley is used for feed purposes. Last year that number dropped, as Japan began sourcing these commodities from countries that offered cheaper prices due to fewer regulatory constraints.

Currently, there is a tariff of $113 per metric ton for Canadian feed barley entering the Japanese market. This number would be reduced to zero once the TPP was implemented. This would allow Canada to become more competitive within the Japanese market, and could increase the value of Canadian feed barley exports to Japan by up to $25 million.

The TPP would also see barley preparations and flour become duty free immediately in Japan on TPP-wide tariff rate quotas, TRQs, of approximately 400 tonnes, growing to 615 tonnes over five years. Canada currently exports about 100,000 tonnes of food barley a year to Japan.

For malt barley, the TPP would increase the TRQs for Canadian malt barley immediately to 4,000 tonnes for roasted malt and 89,000 for unroasted malt.

The TPP would increase the exports of Canadian livestock, as you just heard from the cattlemen’s association, which would increase the domestic demand for feed barley.

The Canadian Pork Council has estimated that the TPP agreement could increase the demand for Canadian pork in the amount of 1.2 million extra hogs a year. These factors translate into improved access to the Japanese market, which could boost the value of Canadian barley exports by tens of millions of dollars a year, possibly for an additional 400,000 to 500,000 tonnes of Canadian barley and an additional $100 million in increased annual revenue to Canadian barley producers.

Saskatchewan represents approximately 35% of barley production in western Canada. These increases would mean millions of dollars of additional barley exports from Saskatchewan. With a reliable transportation system, this could potentially mean an extra 150,000 tonnes of barley produced a year, either as a crop or as a value-added input.

If the TPP agreement is not ratified, Saskatchewan barley producers and the related value-added industries will be placed at significant risk. We will not be able to maintain our current market export share due to the increase in competition from countries such as Australia and now the Ukraine. It is estimated that we would lose approximately 50% of current sales of barley producer revenue into Japan, valued at over $50 million or 250,000 tonnes of barley equivalent.

Beyond the Japanese market, the TPP would open up trade to many other markets. Tariffs would be eliminated for food barley and barley preparations, as well as feed barley, into the other 11 TPP countries. In Vietnam, the current 5% tariff on roasted and unroasted malt would be eliminated within three years.

The benefits to the Saskatchewan barley industry are our top priority. We want to ensure that barley stays within the farmer's rotation. The TPP would also benefit the entire Canadian agriculture sector, and in turn the Canadian economy, by increasing market opportunities for all the crops Canadian farmers grow.

This increases the sustainability of the farming industry, as farmers need a variety of options of profitable crops in their portfolios in order to maintain their rotations and produce the high-quality crops Canada is known for, while still maintaining a successful and profitable business.

Maintaining a sustainable future for the agriculture producers of Canada means nurturing and growing a sector that has been driving the Canadian economy for the last 25 years, including times when other resources such as oil are fluctuating.

Agriculture has been consistent in terms of exports and job creation. Today, one in eight Canadian jobs are related to agriculture—

[The Chair, Liberal, Mark Eyking]

Sorry, sir, if you could wrap it up in the next half minute, that would be great.

[Jason Skotheim]

On behalf of the Saskatchewan barley industry, we believe signing the TPP would be an investment for the future and we hope Canada ratifies this.

[The Chair, Liberal, Mark Eyking]

You didn't have to wrap it up that quick, but that's fine. Thanks very much.

We'll start the questioning. We're going to start off with the Conservatives.

Mr. Ritz, you have five minutes.

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

Thank you, Mr. Chair.

Thank you all, ladies and gentlemen, for your presentations today.

There is a very strong theme running through all of your presentations to get the job done. There's a lot of concern out there, and I share it, that somehow we're going to drag our feet and wait for the Americans.

Do you think that's a good idea, or should we plow ahead on our own and get the job done sooner rather than later, through ratification?

[Terry Youzwa]

I think there's an advantage to going first rather than lagging and being second. The U.S. is further ahead than Canada in working on a bilateral agreement with Japan, and I think any additional pressure we can apply to push them along towards ratification would be an effective strategy. Delaying and watching from the outside while the U.S. and Japan have their own bilateral agreement, I think would be a worst-case scenario. We certainly need to work collectively with other countries to get this deal done in as timely a manner as possible.

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

Good. Thank you.

[Carl Potts, Excecutive Director, Saskatchewan Pulse Growers]

I would just echo those comments. I think, as Mr. Wiens mentioned in his comments, we stand to lose market share in those countries if the U.S. and Australia do proceed without this. It is important for Canada to take leadership on the TPP to make sure this deal gets done.

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

The one thing you all did very well was outline the dollar value, especially for the premium market in Japan, the growing market in Vietnam, and of course for some of the other countries that may be joining in. That's good. That's quantifiable.

Have you done the same thing with jobs that will be gained or lost? Should we not do this? Do you have an actual job count as well? Can that be done?

[Janice Tranberg, Executive Director, Saskatchewan Canola Development Commission]

We took a quick look yesterday. There are no specific numbers, but we did some extrapolations.

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

Everybody's using computer models and sort of second-guessing.

[Janice Tranberg]

Yes, that's what we did, with some extrapolations.

For canola, if you consider the value-added processing that would be gained, right now in Saskatchewan we have a Cargill plant that crushes 4,500 tonnes per day and employs about 100 people. We know there are 14 crushing plants across Canada, so if you extrapolate from that, in total they employ about 222,000 people.

If you take that number, and then you say that, through TPP, we could increase our crush capacity by approximately 1,000,000 tonnes, that translates as about 22,000 additional potential employees across Canada. That's just an extrapolation.

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

Has anybody else done any work in that regard?

[Ryan Beierbach]

Yes. We have a multiplier based on research that says that 26 to 27 workers are employed for every million dollars in cattle sales, so if we're looking at increasing sales from $100 million to $300 million, that would mean somewhere between 5,200 and 5,400 jobs.

I know that on an individual farm level, if cattle producers are more profitable they hire more workers.