International Trade Committee on April 21st, 2016

[The Chair, Liberal, Mark Eyking]

Good morning, everybody. Welcome to the international trade committee.

This is our fourth and final leg on our western tour. We started in British Columbia on Monday, we were in Alberta on Tuesday, and yesterday we were in Saskatchewan. Today we're in Manitoba.

Our committee is very active and has a lot on our plate. We're dealing with the tidying up of the CETA, the European agreement, and we have softwood lumber. But our main focus now is the TPP, which as everybody knows is a really big deal. It's a trillion-dollar trade deal. It's big, and it affects almost everybody in Canada to a certain extent, whether you're buying products, selling products, or you have services. It's very important that we reach out to Canadians and stakeholders and hear what they have to say about it. It's a very big document; there are 6,000 pages. Very few have gone right through it, but what we hear is most individuals or groups focus pretty well in the document where it has an impact on them, for sure.

After we do the western tour we're going to go back to Ottawa for a week, and then we'll do central Canada, and then we'll follow up in the fall and we'll do eastern Canada. Also, we'll reach out to the territories through Skype to Ottawa to make sure we have every area covered. Besides that, we are also going to take submissions. I don't know if we're popular, or TPP is very popular—either way, positive or negative—but there's a big uptake in interest in that, so our committee is opening up to any individual who wants to make a submission. We extended the deadline until the end of June, and our analysts are going to digest all that through the summer. We'll have to come back in the fall and look at those submissions that were received. I think we're over 10,000 right now, and it's growing. Also, members of Parliament are going to reach out to their constituents to see what they have to say.

It is quite a bit, between going through the draft report and translation, but we're hoping to have this done before the end of the year and to present it to members of Parliament in the House of Commons where they will have a sense of the report and how they will vote in the future on the agreement.

Our committee consists of members from right across the country. From the farthest west, from British Columbia, we have Mr. Dhaliwal; from Saskatchewan we have Mr. Hoback, who is not with us today, but also Mr. Ritz from Saskatchewan; and today joining us is Larry Maguire. Welcome. We're in your home province and it's good to be here. It's good to see you here, sir. From Ontario we have four members. Mr. Van Kesteren is from southern Ontario, and Ms. Ramsey from the NDP is also from the Windsor area. From the Toronto area we have Mr. Peterson and Mr. Fonseca. From the Atlantic coast, besides me being from Cape Breton, we have Mrs. Ludwig from New Brunswick. Also, as part of our committee we have two members from Quebec. Mr. Lametti is the parliamentary secretary, and Madam Lapointe is also from Quebec.

We have a broad group. We usually have three or four panels each day. It depends on the panel. Sometimes we have three witnesses, sometimes four.

On that note, we're going to start off. With us we have three groups. We have Canola Council of Canada, Cereals Canada, and Manitoba Pulse & Soybean Growers. We're going to start off with the Canola Council. Ms. Miller, you have the floor for five minutes. Go ahead.

[Patti Miller, President, Canola Council of Canada]

Thank you very much, Mr. Chairman, and members of the committee. It's a real pleasure to be here today to talk with you about the Trans-Pacific Partnership and what it means to the canola industry.

Canola is made in Canada, but our success really depends on international trade. I know that's a message you've heard from some of my colleagues in Alberta and Saskatchewan previously.

Some of you are familiar with the Canola Council, but for those of you who haven't met us before, we are a value-chain organization representing the entire canola industry, from the 43,000 canola farmers to the life science companies to the grain handlers to the canola processors who transform that crop into oil for human consumption and meal for livestock feed.

Our industry has a plan to meet the world's growing appetite for healthier oils and proteins. Our plan is called Keep It Coming 2025. The plan is to increase demand for canola oil, meal, and seed and to meet this demand through sustainable production and yield improvement, achieving 26 million metric tonnes of production by 2025.

When we developed this strategy about three years ago, the industry was producing about 15 million metric tonnes, just for comparison. It's a significant strategy for growth.

Market access is a critical part of that plan. More than 90% of our production is exported as seed, oil, or meal, and so access to a variety of markets free of tariffs and, equally important, non-tariff trade barriers allows our industry to earn most of the value from international markets. The TPP represents a critical opportunity for the industry to earn more value from those markets.

By eliminating tariffs on canola oil and meal in Japan and Vietnam, our industry estimates that we'll increase the value of our exports by $780 million each year. I'd like to touch on how that impacts each sector of the value chain.

The TPP will support seed developers. Seed developers will benefit as a more valuable crop means the demand for seed innovation will grow. The TPP also includes provisions to make the country's science-based approval processes for new biotechnology trades more transparent, something that's critical to our industry.

The TPP will support growers. Growers will benefit from this agreement as demand for their product will grow and trade will be more stable. More canola being processed in Canada means farmers have more delivery options, and the aspects of the TPP around biotechnology and sanitary and phytosanitary agreements mean that there's more stable trade and less risk.

The TPP will support processors. Of course, that's the main point of benefit as the tariffs on oil and meal will be eliminated. Until now, Canadian processors have been unable to sell value-added canola oil to Japan because of the high tariffs. With TPP, processors will be able to process more seed in Canada.

I think in the past people have talked about the fact that Australia already has a bilateral agreement with Japan, and tariffs have come down. In fact, we are already seeing oilseeds from Australia to Japan increase, and our industry is standing by unable to sell.

The TPP will support exporters. They'll benefit from more stable trade because of the TPP provisions on low-level presence of biotech traits and phytosanitary measures.

The TPP is the first trade agreement to establish a process for when cases of low-level presence occur. This means finding a really small amount of biotech crops, which have already been proven safe, going into shipments. This means that grain doesn't need to cause a significant trade disruption if those traits are found.

Enhanced discipline on sanitary and phytosanitary measures will also prevent unnecessary trade disputes. The world globally is going through significant food and feed safety regulatory reform. China has. We have, and the United States has. Consumers are more and more aware of food and feed safety, and so the sanitary and phytosanitary measures and processes are critical to have stable trade for our industry.

For any of these benefits to materialize, Canada needs to implement the TPP as soon as possible. As I said, we're already falling behind the Australians. Each year that goes by, we fall further behind in Japan. Japan has actually been one of our longest-standing customers in the canola industry.

Let me close by saying that canola has grown to be one of the largest sources of farm income. As a competitive exporter, we contribute more than $19 billion a year to the Canadian economy, and we support 249,000 jobs across the country. Maintaining and growing this prosperity requires that we implement the TPP as soon as possible.

Thank you.

[The Chair, Liberal, Mark Eyking]

Thank you, Ms. Miller—and for being on time.

We're going to over to Cam.

[Cam Dahl, President, Cereals Canada]

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—

[The Chair, Liberal, Mark Eyking]

Do you want to just wrap it up?

[Cam Dahl]

I am at the end.

Science-based rules must be part of trade agreements.

Also required is a robust dispute resolution process that will ensure rapid and independent resolution of any trade disputes resulting from differences in interpretations of phytosanitary rules of trade.

Thank you very much. I would welcome your questions.

[The Chair, Liberal, Mark Eyking]

Thank you, sir.

Now we're going to move over to the Manitoba Pulse and Soybean Growers. We have with us François Labelle and Gord Kurbis for five minutes.

[François Labelle, Executive Director, Manitoba Pulse and Soybean Growers]

Mr. Chairman and committee members, thank you for the opportunity to present today.

My name is François Labelle. I am the executive director for the Manitoba Pulse and Soybean Growers. I have been farming here in the Red River Valley for 30 years.

Our association represents 3,800 producers of soybeans, peas, lentils, edible beans, and fava beans valued at over $800 million. I've been part of this association since 1984 as a founding director. Through the years we have seen tremendous growth, from 68,000 acres of pulses in Manitoba in the early 1980s to more than 1.5 million acres in 2015, and there are forecasts of continued growth in 2016. Since few of our pulses are consumed locally, we rely heavily on international trade to market our crops.

I would like to take this opportunity to build on the TPP-related messages you heard from my Alberta and Saskatchewan pulse colleagues earlier this week, but to add comments on sustainability and food security in the context of the International Year of Pulses 2016.

The challenge is to provide a growing population with sufficient, sustainable, and nutritious food, while significantly reducing health care and environmental costs associated with today's global food system. In order to deliver human, environmental, and economic health outcomes, we will need food production and processing methods that optimize health and environmental outcomes, new technologies for waste minimization, improved supply chain efficiencies, an enabling of global trade regulations, and avenues for poverty reduction through improving food systems.

Global trade regulations will play an important if not critical role. The United Nations sustainable development goal 2b notes the need to “correct and prevent trade restrictions and distortion in world agricultural markets”. The key is that when local production fails to meet the demand for food 365 days a year, regional, national, and international trade fills the gap.

Canada is one of only eight nations that consistently make a contribution to global food security by being a major food exporter. The TPP represents an opportunity to facilitate trade by addressing the non-tariff barriers that are increasing as the international regulatory landscape lags behind new technologies.

Environmental NGOs such as Nature Conservancy Canada and the World Wildlife Fund point out that sustainable intensification is the way agricultural systems will meet the challenge to produce more food without jeopardizing natural resources. Even as sustainable nitrogen-fixing crops that utilize soil bacteria draw nitrogen from the air—a natural process that replaces the need to add nitrogen fertilizer, in many pulse crops—pulses benefit from yield-enabling technologies such as fungicides and herbicides, which are extremely important.

As you've heard, misaligned technology approvals and maximum residue limits or MRLs, for crop protection products threaten access to key markets and the ability of growers to efficiently utilize technologies on the farm. You've also heard that risks are getting higher each year.

With me today is Gord Kurbis from Pulse Canada, director of market access and trade policy, who can specifically address misalignment challenges and the TPP.

[Gord Kurbis, Director, Market Access and Trade Policy, Manitoba Pulse and Soybean Growers]

Mr. Chairman and committee members, I just want to give you a practical trade example of the sort of thing we're talking about here.

A few years ago, as many of you will know, the pulse industry experienced a fairly high-profile non-compliance on MRLs. The issue was that Canadian farmers were using a crop protection product, glyphosate, fully approved for use in Canada. Our exports were fully aligned with international MRLs, but the EU had never gone through the process of establishing a tolerance. Consequently, it applied a near zero threshold of 0.1 parts per million that we couldn't meet and that caused rejections as well as the threat of product recalls off retail shelves. The next year, the EU established an actual tolerance that was 100 times than the default they'd originally been applying.

We expect to see more cases like this in the future, where regulatory misalignment results in zero or near zero thresholds applied. Among the 12 TPP members, the number of countries that have misaligned MRL lists that are not like their neighbours' is 11 out of 12—or five out of 12, depending on how you define the severity of misalignment—and Canada is part of that. Peru, which is the twelfth, has issued a WTO notification to go its own way.

I just wanted to leave you with that example.

[The Chair, Liberal, Mark Eyking]

Thank you to all the panellists for their briefs.

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

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

It's good to see you all this morning. Thank you for your presentations. It's very clear and concise messaging.

We all know that securing a sustainable, accessible food supply is one of the top priorities around the world. From Canada's perspective, the best way to do that is through trade. We produce a tremendous amount of high-quality products, and we also import a lot of our domestic consumption. I fully concur with your analogy that it has to be sound, predictable, rules-based trade.

You also talked about it not just being about tariff walls. Those are always negotiable and are hit and miss. It's about going beyond that to the sanitary and phytosanitary. I wondered if you all want to give a quick description of what you see under the sanitary and phytosanitary lists, just to give us a bit of knowledge in that area.

[Gord Kurbis]

Ideally, countries around the world would have a single global reference for technology—

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

Codex, but it's always behind.

[Gord Kurbis]

Yes, 100%.

An increasing number of countries have their own sort of custom national lists that don't reference Codex. That's what I was referring to with 11 out of the 12 TPP countries. It's a bit astonishing that countries that would have enough in common to get together to negotiate a trade agreement like this would continue to have that degree of misalignment with their technology policies.

[Cam Dahl]

Right.

If I could just add to that, the TPP agreement builds upon the WTO technical barriers to trade as well as WTO sanitary and phytosanitary agreements, so that is a critical element that really has been brought into a trade agreement, I believe, for the first time.

In addition to that basis of science, it's also critically important to have a structured dispute resolution process because we know that we're not always going to agree. Science isn't always a fixed answer, and so there will be disagreements. We need to have a structured dispute resolution process that will allow member countries to resolve those differences and allow trade to continue to flow rather than just putting up barriers, which is what we do today.

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

Right. Canada is a very integral part of the global supply change when it comes to food products. Given the lack of a multilateral agreement under the WTO, countries that have the ability to trade are going to bilaterals and multilaterals like the TPP. To me, we're still focused on a bilateral with Japan as well, but that's sort of plan B. A multilateral agreement is far superior, because then you have the weight of the other 10 countries, with Japan or with the U.S., wherever there's a problem. The whole purpose of a TPP, in terms of sanitary and phytosanitary issues, is to agree on each other's science and then build from that. The idea is to have uniformity, but at the higher level. Whereas Canada has a fairly robust system, some of the smaller countries like Malaysia and Vietnam and even Brunei don't, so they're looking at our science to form a basis and move forward. Do you think we would have the ability to sit down with major agriculturally industrialized countries like Australia and the U.S. and start to harmonize our MRL process? The problem we see with Codex is that it's so far behind that it will never keep up, let alone catch up as we see that ball rolling.

Do you see a role for Canada to play in leading that within the TPP, to make sure that we do have some consensus? A lot of the products are the same country to country.

[Gord Kurbis]

Yes, certainly I see the potential for that, and I think that using the scientific committees created under the TPP is the ideal forum.

I would add a comment that we're getting by on this issue today—

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

But it's a patchwork.

[Gord Kurbis]

It's patchwork, but in the future it's going to be damage control. We're going to add sort of a 10-power microscope on to our ability to detect today's trace levels, but at a much more sensitive level, beyond anything that's biologically significant, and that's going to collide with the zero or near zero thresholds.

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

Yes, where we used to have the ability to test for parts per million, now it's parts per trillion and billion and so on. It really gives a country that wants to play silly buggers with trade rules the ability to do that. We saw that with the flax situation we faced in Europe some time ago. There's no health risk and there's no problem, but....

Patti, you mentioned that, too, on the low-level presence. We all use the same containers, the same railcars, and the same boats. I know that when the flax situation was helped, the first genetic marker we saw was one of a GM sugar cane.... Nobody was looking for flax because we didn't have a GM flax.

Again, it comes back to science.

[Patti Miller]

If I could, for a minute...?

[The Chair, Liberal, Mark Eyking]

I'm sorry. There will be an opportunity because they're going to have another round. Mr. Ritz is way over time here and we have to move on to the next questioner.

We'll move on to the Liberals and Mr. Dhaliwal for five minutes.

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

Thank you to the panel members.

My question is to you all. It's in reference to the Nobel-Prize-winning economist Joseph Stiglitz. He has been a critic of the TPP, and yesterday in a news conference he said there are going to be negative effects of this TPP on employment, particularly when it comes to the middle class and the non-skilled workers.

I would like to know your perspective on that. How would the TPP help the middle class as well as the non-skilled labourers?

[Patti Miller]

Perhaps I could comment on behalf of the canola industry.

Over the last few years, the canola processing industry has invested over $1.5 billion in establishing plants across Canada. We have plants in places like Yorkton, Saskatchewan; Lethbridge, Alberta; and Clavet, Saskatchewan. These are not huge centres, and those plants create employment opportunities in rural Canada.

I referenced the fact that the canola industry, writ large, from producers through to the retail side of our business, employs 249,000 people across Canada. That industry growth is a result of trade. Therefore, TPP is critical for us to maintain our competitiveness, to maintain those jobs, and to create the possibility of even more jobs in the future.

[Cam Dahl]

I think to build upon what Patti said, agriculture and agri-food is the largest manufacturing sector in Canada, and it is absolutely trade dependent. Our opportunity to have growth is dependent upon fair and open access to international markets.

If the TPP is ratified, and we're not part of it, the cost to jobs is going to be enormous, and that will be across absolutely every region of this country.

Further, on the cost to investment, I've heard some comments from some well-known Canadians that agriculture is a 19th century industry. That makes my blood boil because it is one of the most technological industries we have, with the investment in science and research. I can't talk about things like CRISPR-Cas, the new gene editing technique. My brain is not capable of understanding it. It is on the cutting edge. Farmers, using precision agriculture, can place a seed within centimetres of where it was intended to go.