International Trade Committee on April 21st, 2016

[The Chair, Liberal, Mark Eyking]

It is a busy time for you, then. Thank you for coming in your busy time.

We are going to move over to the Manitoba Building Trades and Sudhir Sandhu. Go ahead, sir, for five minutes.

[Sudhir Sandhu, Chief Executive Officer, Manitoba Building Trades]

Thank you very much.

Good morning, and thank you for the opportunity to make a submission before this committee. Thank you for travelling to Winnipeg to hear us.

Manitoba Building Trades represents 13 skilled trade and construction unions. Our membership includes roughly just over 7,000 skilled trade and construction professionals in Manitoba. Of course, we're part of a national network that includes over half a million Canadians who build essential infrastructure from coast to coast to coast.

Manitoba Building Trades, I'd like to make it very clear, is not at all opposed to trade agreements that open new markets for Canada and indeed expose Canadian enterprise to fair competition. Trade agreements that include reasonable reciprocity and fair trading provisions for all parties can serve to strengthen our economy. Our submission today focuses specifically on labour mobility and temporary work entitlements as contained in chapter 12 of the TPP. The rest of my comments will be associated with these provisions.

Chapter 12 provides for entry of persons engaged in any occupations that fall within national occupation classification codes 0, A, and B. Virtually all of the hard-working Canadians we represent fall under groups 72 and 73 of category B of the NOC codes. In the past, Canada has utilized the temporary foreign worker program to supplement the Canadian workforce on an as-required basis and upon determination that there is indeed a shortage of a particular category of workers that cannot be satisfied domestically so that Canadian workers will not be displaced. Under NAFTA, for example, mobility provisions provided for entry of a very select category of professional designations or specialized skills.

The TPP is very different indeed. It imposes no such requirements. It opens the Canadian labour market to a larger group of trading partners. To our knowledge, the entry rights are very liberal. We have not noted any restrictions related to adverse employment impacts in Canada with the limited exception of using foreign workers where there's an ongoing labour dispute. In effect, we read chapter 12 as an open door to the Canadian labour market, with Canada only having the ability to ultimately delay entry or delay the issuance of permits. Beyond that, any applicant has final recourse before the dispute resolution mechanisms provided for under chapter 28.

That process of international trade arbitration and those tribunals are very much like labour arbitration. They operate much differently. Being quasi-judicial in nature, they do not uphold or live by or work under the same kind of stringent rules that would apply in the courts, for example. That places Canada at a significant risk of adverse decisions when it has elected to deny applications.

There are a few other comments we'd like to make respecting just the labour market impacts and the impacts on the Canadian economy in general. Our review of chapter 12 as well as other TPP provisions suggests that Canada's construction and skilled trades workforce will face adverse impacts, with the magnitude of these impacts growing over time. We'll explain how.

We also submit that eased entry is contrary to Canada's economic interests in terms of both employment and the ability to leverage infrastructure projects, on which Canada is about to launch a very significant program. As far as industry impacts and the unionized industry are concerned, there are really two components to the construction industry, the unionized and the non-unionized. The unionized industry carries the bulk of the workforce training initiatives that go on in Canada. Next to the community college system in Canada, we are the largest investors in training and education and development of the skilled workforce that is required today and that will be required in the future.

How does easing entry affect that? Well, it starts to remove those work opportunities that are essential. For skilled workers the workplace is the classroom. Our members do not, and the people we represent do not, go study for three years and then enter the workforce. The component is 80% on the tools, hands-on experience, learning in the work environment, and only about 20% in the classroom. It is essential that we have a roster of effective training opportunities for young Canadians to enter the professions. That is not only essential for today but for meeting future demands.

As I referenced, Canada has just announced a very significant infrastructure program to get Canada working again. We will need skilled workers today—

[The Chair, Liberal, Mark Eyking]

Excuse me. You have only half a minute left. Perhaps you could wrap your comments.

[Sudhir Sandhu]

Okay. I will wrap up.

I'll finish by touching on two important issues. Manitoba has the largest urban aboriginal population in the country. This population is underemployed and unemployed. Both Canada and Manitoba are heavily emphasizing training and apprenticeship opportunities to engage this workforce. We are active participants in those initiatives. Our position is that we can enjoy the demographic dividend of engaging a young workforce into the workplace or we can do the exact opposite. We can actually marginalize them and disengage them further.

The other component, just quickly, is that Alberta is a key example of what happens when there's a retraction in skilled trades. Canada has already had to step up with significant supports to support displaced workers. We think easing entry and adding temporary foreign workers to this program with greater ease will only exacerbate the cost to Canada and to Alberta and to the provinces.

For those reasons, we very definitely oppose the labour provisions under chapter 12 of the TPP.

Thank you.

[The Chair, Liberal, Mark Eyking]

Thank you, sir.

Now we're going to move on to the pork producers of Manitoba, which is a big industry. Manitoba is one of the biggest pork-producing provinces in the country.

It's good to have you here. You have the floor, sir, for five minutes. Go ahead.

[Andrew Dickson, General Manager, Manitoba Pork Council]

Thank you. I'm Andrew Dickson and I'm the general manager of the Manitoba Pork Council.

The Manitoba Pork Council would like to thank the committee for this opportunity to express its strong support for the ratification by Canada of the Trans-Pacific Partnership agreement.

The council represents the interests of all pork producers in Manitoba. We were created over 20 years ago under provincial farm products marketing regulations to deliver programs and services to build and develop the pork sector in the province and to represent the interests of producers to all levels of government. We are funded by a compulsory levy on all pigs sold for slaughter and all weanling pigs sold for export out of the province.

We'd like to share some statistics to illustrate our dependence on exports and new trade agreements. According to Stats Canada, there are about 550 farms producing about 8 million pigs, of which 4.5 million are processed in the province. Just over 3 million weanling and feeder pigs are exported, mostly to the United States.

Manitoba is the largest pig-producing and pig-exporting province in Canada, with almost 30% of Canadian production in 2015. The estimated value of pigs produced was $1.3 billion in 2015. Manitoba processes over 5 million pigs, or one-quarter of the hogs slaughtered in Canada. Our processing plants account for just under one-quarter of Canada's pork exports by value in 2015.

The HyLife plant in Neepawa is the largest exporter of pork to Japan of all the plants in Canada. Over 250 million kilograms of pork products were exported to 30 countries around the world, for a value of almost $800 million in 2015. About half were fresh chilled cuts, 40% frozen cuts, and the balance cured and preserved products.

While 25% was sold to the United States, this has been as low as 2%, depending on exchange rates. Japan is by far the largest and most lucrative pork market. Almost half our pork products by value were sold in Japan, though only one-third by volume. Sales of pork products outside of Canada accounted for almost 75% of all sales. As an industry, we are totally dependent on foreign sales.

The sector provides about 12,000 to 13,000 jobs and is the largest part of the food processing and manufacturing sector in the province. We buy the equivalent of 20% of the Manitoba crop as feed grain and oilseed meal. We have plenty of potential to grow the business, with abundant land and water. Our processing sector needs another 1 million to 1.2 million hogs to bring its current processing capacity into line with similar plants in the United States.

For our council, the signing of the TPP agreement on October 5 was a good day for our producers. In 2014, Manitoba exported over 175 million kilograms of pork products to just seven of the twelve TPP members. This was worth $677 million to our producers. The U.S. is our major competitor in international markets, though the EU is a major factor in frozen cuts in the Japanese market.

The key point of this agreement is that we will have the same access to these markets as the United States. We cannot have another blunder, as we did with the South Korea FTA when we belatedly signed on to the same conditions that the U.S. had negotiated. We got left behind in the tariff reduction phase-in period and lost sales in a high-value market. One of our processors in Manitoba indicated they had lost over $70 million in annual sales to one of the leading retailers in South Korea. It will take years to recover our market share in that market.

In terms of direct benefits, we are focused on the potential for an increase in sales in the Japanese market as tariffs are reduced for certain cuts and retail demand increases. The Japanese gate price mechanism is designed to keep domestic pork prices high to protect domestic producers. While pork is the main red meat in Japan, it is relatively expensive compared to Canadian domestic prices. As the protective tariffs are reduced, we should be able to increase sales volumes, especially of lower-value cuts, and regain a bigger share of other cuts and processed products. One study indicated that Canada could increase its sales of pork into Japan by $300 million annually as the tariffs are reduced, and Manitoba will have a major slice of that growth.

In the future, the market in Vietnam, with its 90 million people whose main red meat is pork, will be the major focus for our processors. As their economy continues its rapid climb to prosperity and living standards improve, our experience is that they will increase their consumption of pork, especially among the expanding wealthier middle classes.

The key point we want to emphasize is that Canada must ratify this agreement if the U.S. moves forward to complete its ratification process. If we sit on the sidelines and twiddle our fingers, our producers will be the ones who suffer directly. To lose the Japanese market to the United States would be the largest calamity to hit the pork sector in a generation. We would have to shrink the industry dramatically, with major layoffs in the processing industry and the abandonment of a significant part of our farms and stock. The economic future of places such as Brandon and Neepawa would be in peril.

The consequences of not being a full partner will affect ordinary people in communities here in the Prairies. This will not be something to shrug off and pretend nothing was lost.

We want to end on a positive note. From its foundation, Canada has been a trading nation. We know the importance of leading the world and breaking down the barriers to trade in goods and services. The TPP agreement will open up new markets and allow Canadian farmers and our food processing sector to play to our inherent strengths for the betterment of all Canadians.

Thank you for your patience and for listening to our presentation.

[The Chair, Liberal, Mark Eyking]

Thank you, sir.

Thanks to all our panellists.

The chair doesn't usually ask questions, but I have a question for you, Mr. Dickson. It's about the feed. You must use a lot of feed to produce that much pork. Is it mostly from Manitoba? Where do you get most of your ingredients for your feed mix?

[Andrew Dickson]

We will buy across the Prairies and into the midwest of the U.S. for corn, grains, and oilseed meal, like soy meal and canola meal. We buy about 2 million tonnes a year to feed our pigs in Manitoba alone.

We are very price sensitive. As you know, two-thirds of the cost of a finished pig is the feed cost. We will buy stuff from North Battleford, all the way down to outside Minneapolis. It's a very competitive market.

[The Chair, Liberal, Mark Eyking]

Thank you, sir.

We're going to start the questioning from the MPs here. We're going to start with the Conservatives for the first five minutes.

Mr. Maguire, you have the floor.

[Larry Maguire, Conservative, Brandon—Souris, MB]

Thanks very much, Mr. Chair, and thank you to each of you for your presentations this morning.

I've had a lot of calls in the last couple of days. I was going to mention this to François of the Manitoba Pulse and Soybean Growers this morning. I've had a number of them indicate to me that there's a new pulse in Manitoba in the last 30 hours. I just wanted to see if you could concur...with the amount of pulse that you're using. You mentioned that to me.

Mr. Chair, that's quite a sidetrack.

I was going to follow up on what the chairman has already asked of you, Mr. Dickson. You're at 20%, you've indicated, in terms of the amount of grain grown in Manitoba that goes through your industry, never mind what the beef industry uses in this province. We've talked about the expansion of both of those. Coming from Brandon myself, I'm concerned about what happens if this agreement isn't signed and doesn't go forward, and the opportunities lost in this whole industry.

I know what it would do to western Manitoba's economy, never mind all of Manitoba's economy, and they're extended into the other areas. If it didn't go forward and we were not able to export more hogs, there would be 3,200 or 3,300 jobs lost in just those two plants, and that's within the walls, never mind the transportation of product in and out of those areas.

Could you elaborate on job creation and the importance of this agreement?

[Andrew Dickson]

The key thing here is that we don't want another experience like South Korea. If the United States moves forward and ratifies this agreement—and they have these preferential changes in tariffs and so on, and we don't have them—our processors who market into Japan will be at a significant disadvantage and we will lose our share of that market.

The Japanese price for pork in the supermarket is about twice what people pay in Canada. It is a very lucrative market for us. We send high-quality products there. We bring high-value products there. We take grain and oilseed meal, which is worth maybe 10¢ a pound, and we convert it into meat that sells for about $1 a pound. We are a high value-added business.

It is not just Brandon and Neepawa. There is a major plant here in Winnipeg, and all its product comes from the plant in Brandon. It is not as though it comes from mid-air. There are 1,400 jobs in that plant, and they would be at risk. We are very concerned that if this agreement.... We have to be in partnership with the United States on this issue.

We have major threats across the world into the Japanese market. For example, I talked to a Danish company. When the Arctic Ocean becomes open for transportation, they will be able to ship by container-load fresh chilled pork from Europe, around the Russian coast, into the Japanese market. They will be able to do it in enough time that they can actually put chilled pork on the shelves in Japan. That would be a major competition factor for us, so we cannot be on the outside of these things. There are major threats to us from other competitive forces. This is an agreement that would shelter us from some of that.

[Larry Maguire, Conservative, Brandon—Souris, MB]

I just wanted to ask Heinz and you about the number of jobs created. The beef industry has some pretty high tariffs on products going into Japan, as pork does as well. Can you indicate the size of those tariffs today? Correct me if I am wrong, but I think it's 38%.

[Heinz Reimer]

Yes, it is 38.5% to Japan.

[Larry Maguire, Conservative, Brandon—Souris, MB]

Removing that, over a period of time, is certainly what your growers are looking at.

[Heinz Reimer]

It would make a big difference to us to bring that down. Thirty-eight per cent is a lot of money to give away, or however you want to say it. If we can increase our product price, 38% of the whole animal wouldn't be a 38% increase, but any bit of money would definitely help producers.

[Andrew Dickson]

For pork, there's this gate price system in place, which is designed to hold the Japanese domestic price high. On products coming in, there are different types of products that are affected by the different tariffs on this gate price. It's complicated. Certain products that are over the gate price currently pay a 4% or 5% tariff. That will come down.

Below the gate price, which adds about $5 or $6 a kilogram, that will come down to about 50 cents over about nine years. The domestic price will stay in place, so there will be an attempt by the Japanese market to keep prices high. Our processors will probably want to keep that high, because we gain from that.

Over time, with competitive pressures, the price will slowly come down. When prices go down, consumption tends to go up, because you can eat more now that you can afford to pay for it. In the long run, over the next 10 years or so, we should be able to increase our sales into the Japanese market, especially on things like some of the cuts that we have to sell into other markets, which are lower priced. We can move them into the Japanese market.

[The Chair, Liberal, Mark Eyking]

Thank you. Mr. Maguire. Your time is up.

We're going to move over to the Liberals, and Mr. Fonseca for five minutes. Go ahead, sir.

[Peter Fonseca, Liberal, Mississauga East—Cooksville, ON]

Thank you, Chair.

Thank you to the panellists.

I have to say, this public consultation process that we've been having across the west now—we'll be doing the whole country—has been so informative to this committee. We wish we could meet face to face with all Canadians, but we do have other opportunities through our web portal, etc.

You represent a lot of people. I would like to ask each of the panellists if you could tell me how many people you represent from your organization in particular. Could each of you just let me know that in numbers?

[Heinz Reimer]

We represent roughly 7,000 beef producers in Manitoba.

[Sudhir Sandhu]

In our case, we are the quintessential Canadian middle class. We represent about 7,000 Manitobans.

[Andrew Dickson]

We're a little more complicated. We're highly integrated, so we have a lot of employees in our companies. All the processing plants are on my board of directors, and we employ directly and indirectly about 13,000 people who make their living essentially out of the pig business in this province alone.

[Peter Fonseca, Liberal, Mississauga East—Cooksville, ON]

Just here on this panel we're talking about tens of thousands of people who are represented by you. You're the voice for them here and you were able to make your presentation. We also hear similar themes across the country, but they are regional nuances.

I want to ask Mr. Sandhu this. With a lot of the growth that would come from a potentially ratified TPP here in Manitoba, there would be a lot of infrastructure that would be built, on the farms, roads, bridges, grain elevators—we've heard it all. Would that employ a lot of your members? Would that bring a lot of jobs?

[Sudhir Sandhu]

Absolutely. That is essentially why our concern comes into looking at increased competition on the construction side. We've always talked about offshoring employment. This is really onshoring employment. We have some legitimate concerns about the extent to which a global entity, a global construction organization, will invest in long-term training and development in a local market. They have no incentive to do so. They want to move from project to project, build the project, and move onto the next one. That leaves a huge gap in terms of investing in that training and development, and making sure we have a workforce to satisfy exactly those kinds of opportunities that may arise.

We have to protect those middle-class opportunities for hard-working Manitobans, and Canadians, quite frankly, because we draw on a national network to be able to build Canada. If those job are gone, then it would be a great irony to see Canada investing in an infrastructure program that leaves Canadians on the sidelines, while a temporary foreign workforce has easier access to our market. By the way, by corollary, we don't have similar access in a number of cases.

[Peter Fonseca, Liberal, Mississauga East—Cooksville, ON]

Yes, we want those jobs to be homegrown. We want to be able to keep them here.

One of the things with the TPP, in the 12 countries, is that we have very different standards. Here in Canada, we have very high 21st-century standards, and you have some countries within the TPP, when it comes to labour, that have standards that are abysmal. We've heard of child labour, human trafficking, and very low wages. Can you speak to that?

[Sudhir Sandhu]

We've had a number of examples in Canada itself. It seems inconceivable that a contractor that's going to build a major infrastructure product in Canada will bring a workforce with them. We've already had a number of instances: the Sinopec incident in British Columbia, as well as the RAV line. Astaldi, in building a major hydroelectric project in Newfoundland, very strongly expressed an opinion that it would be easier for them to bring in a Spanish workforce rather than have to work for the Canadian system. It becomes an issue of familiarity.

Again, we talked about reciprocity, and we talked about fair transference. When it comes to labour, there's always a high incentive. With products, there's very little leverage. With human beings, for example, in the Sinopec case we heard a lot of anecdotal issues where, in the Canadian context, they were being paid local market rates. They were depositing that money back to bank accounts in a very different jurisdiction and that money was not actually making it into the hands of the people who were doing the work. That's problematic.

I think a presenter in the earlier panel talked about compliance. We have no enforceability, and we have no capacity to comply. We do here, but we cannot transfer those requirements to other jurisdictions. We have no leverage.