Thank you very much.
On behalf of Cereals Canada, I want to thank the committee for the invitation to appear before you. This is a critically important issue for us. The free flow of goods both within Canada as well as to our international customers is critical for the growth and competitiveness of the Canadian cereal sector.
I am the president of Cereals Canada. I've had the privilege of meeting a number of the committee members. However, Cereals Canada is still a relatively new organization, so I would welcome the opportunity to elaborate on our vision, mission, and structure, as outlined in the brief that has been circulated to members.
Just in summary, Cereals Canada strongly supports Canadian ratification of the Trans-Pacific Partnership. Fair and free access to international markets is a critical component for achieving our mission of long-run economic stability for our industry.
The countries in the TPP represent an enormous opportunity for export growth for Canada. The region is the destination for 65% of Canadian agricultural and agri-food exports. Many of the countries in the TPP are growing rapidly in both income and population. Being part of this agreement means that Canadian farmers and companies would be at the front of the line to meet this surging demand.
It is also important to recognize the cost of being left outside of the TPP. Consider the markets that Canada will lose if our competitors in the U.S. and Australia gain preferential access to countries like Japan, Malaysia, Mexico, Peru, and Chile. Canada's TPP participation means we will not be shut out of these critical agricultural markets. Canada simply cannot afford to be left out of this agreement.
I would like to go into a little more detail on what is at stake, and the potential benefits and costs.
The 12 countries involved in this Asia-Pacific deal make up 40% of the world's gross domestic product. Canada is a trading nation. We cannot afford to take a back seat in 40% of the world's economic activity.
There is much to gain. Incomes in the Asia-Pacific region are rapidly rising. The region is expected to contain two-thirds of the world's middle class by 2030. Trade between Asia-Pacific countries is growing faster than any other region in the world. Countries in the TPP are not just importing more, they are importing higher quality. This is an ideal opportunity for Canadian farmers and the entire agriculture value chain. We are very good at supplying growing economies with high-quality food.
I'd like to give you a couple of examples. First, there is the potential growth arising from an overall increase in agricultural exports to the region. For wheat alone, initial estimates show a potential growth of 20% above the six million tonnes that we currently export into that region. This is just wheat. In addition, Canadian barley producers could export an additional 400,000 tonnes to 500,000 tonnes of barley and various valued-added forms, which is worth about $100 million.
There are also potential gains of market share for Canadian product. For example, at the current time, the opportunities for Canadian cereal grain exports into Vietnam are quite limited. A big part of the reason is the fact that one of our major competitors, Australia, has a trade agreement with Vietnam, giving its farmers better access than Canadian producers. Canadian participation in a ratified TPP agreement would correct this disparity.
Just as there is much to gain, there is much to lose. Asian-Pacific countries are top buyers of Canadian grains and oilseeds. For example, Japan imports about 1.5 million metric tonnes of high-quality Canadian wheat every year, and it pays a premium for that. It is one of our most consistent customers. What happens to this market if competitors like the U.S. and Australia gain preferential access?
Being left out of a ratified TPP agreement could result in a 50% reduction in Canadian wheat exports to the region. We simply cannot afford to let this happen. The difference between the potential gains of participating in the TPP and the cost of being left out of the agreement is about 4.3 million metric tonnes annually. This is worth between $1.5 billion to $2 billion every year. That does not even consider the potential gains in market share in countries like Vietnam.
Patti mentioned this as well, but it is important to note that the benefits of the TPP deal go beyond just tariffs. It is also about solidifying the rules for sanitary and phytosanitary conditions of trade and establishing dispute resolution processes. It is important to discuss science-based trade. Historically, trade negotiations have focused on tariff and quota barriers, and that is critically important. However, going forward, sanitary and phytosanitary rules are going to be just as important as tariff barriers, if not more important.
All governments feel from time to time political pressure to restrict trade. In the past, tariffs and quota have been the tools of choice. Those are always bad for Canadian agriculture. As these barriers are removed through negotiations, however, governments will turn to other means, such as hiding behind unscientific health and safety rules. It is absolutely critical that sanitary and phytosanitary rules be included in these negotiations. It is unacceptable to our industry to see tariff walls come down, only to be faced with unscientific restrictions that are just as impermeable.
Science-based rules—