International Trade Committee on May 10th, 2016

[Guy Jobin]

The Board of Trade of Metropolitan Montreal holds many awareness-raising workshops on foreign markets. We actually started doing that about 15 years ago, when 82% or 83% of our exports were headed to the United States. We were too dependent on our neighbour.

We hold about 15 workshops annually to raise awareness of foreign markets. It's a half-day training session for interested entrepreneurs. We always have between 30 and 50 participants. We talk about business opportunities in markets—Japanese or other. Afterwards, during the second part of the day, Quebec companies that do business in those countries come tell us about their experience, successes and failures. So there is some interaction, and that really helps companies get to know those markets and all their potential.

[Linda Lapointe, Liberal, Rivière-des-Mille-Îles, QC]

Have you been able to determine whether the SMEs that had participated in those workshops have increased their exports?

[Guy Jobin]

Prior to each mission, we organize information seminars to gauge companies' interest in participating in a trade mission. Every year, we organize a dozen trade missions abroad. We have gone to Japan, Mexico and other countries around the world. We use those seminars to present entrepreneurs with business opportunities and give them a chance to join the mission if they are ready to do so. We usually bring between 8 and 20 companies per mission. Recently, we organized a mission to China with 71 participants, exceptionally, but that's not the norm.

[The Chair, Liberal, Mark Eyking]

Thank you. That wraps up your time.

We're going to go over to Mr. Van Kesteren for three minutes.

[Dave Van Kesteren, Conservative, Chatham-Kent—Leamington, ON]

Thank you, Chair.

Thanks to all of you for being here.

I have a couple of questions for the chamber.

In 2008, with the downturn, you lost quite a market share to the U.S., as did the rest of Canada. However, you did not recover as much as the rest of Canada did. I'm wondering what market share you lost and why you lost it. That's my first question.

Second, I want your comment. Should the agreement take place, what would it do to your service industry, which is, as you said, 73% in Montreal, and what possibilities would open for your chamber members?

Those are the two questions, one with two parts.

[Guy Jobin]

I don't have exact figures in terms of our market shares, but I can tell you what we are doing to help our members. We are now organizing more trade missions to the United States. In 2008, we stopped organizing missions to the U.S. because the news was not very good. We rather invested our efforts in markets that were doing better and in welcoming buyers to Montreal.

It is not easy to regain market shares, but we are working on it regularly by organizing missions to the U.S. customs. Five time a year, we bring about 150 exporters to the border to spend a day there, meeting customs agents and learning to understand the process. It is important to help them understand the process a product goes through at U.S. customs if we want to facilitate the movement of goods across the border.

In terms of services, we organize missions to position our industries. We will soon have missions to New York, for engineering, and there will also be some for construction, and so on. The New York market is and always will be very important to us. We want to regain our market shares there, while opening ourselves up to other countries and other important markets, of course.

[Charles-André Major]

I don't have the figures with me, but with regard to diversification, Quebec's exports to China grew significantly during this period. On the other hand, we have not yet been able to recoup the drop in exports to the United States and we are concerned about that. We are opening new markets. During the same period, we have focused on China in particular.

Montreal's GDP for the export sector is very closely linked to the performance of the aeronautics industry. There is a real peak during the years when a contract is signed. If the C Series takes off, and we encourage the federal government to support Bombardier, you should see a significant increase in exports from the Montreal area.

For the service sector, the whole engineering consulting sector, especially trains, rail equipment and environmental services, is expected to have significant financial spin-offs as a result of the agreement with Asian countries. I am thinking of countries that require significant infrastructure renewal or expansion owing to rapid demographic growth. Similarly, since the populations of certain countries are very young, there is a great need for public infrastructure. For our entire service sector related to infrastructure, Montreal is in a good position with its world-class firms.

[The Chair, Liberal, Mark Eyking]

Thank you. That wraps up our panel.

Thank you, witnesses, for coming in this morning. It's our second session. We're going to have a another couple of panellists.

We're going to break for 10 minutes now and go at it again.

[The Chair, Liberal, Mark Eyking]

Now we're going to commence our third panel in Montreal this morning, continuing with our committee's work and having a dialogue with Canadians on the TPP.

This morning we have with us lots of representatives of agriculture, which I think is good, being a farmer. We have the Fédération des producteurs acéricoles du Québec, the Producteurs de lait du Québec, and the Union des producteurs agricoles.

We have three groups. Each group will have around five minutes for a presentation, and then we'll open up a dialogue with the MPs.

We're going to start off with the Fédération des producteurs acéricoles du Québec. Who's speaking first, Serge or Simon?

Go ahead, sir.

[Simon Trépanier, Chief Executive Officer, Fédération des producteurs acéricoles du Québec]

Hello, Mr. Chair, honourable members of the committee.

My name is Simon Trépanier and I am the chief executive officer of the Fédération des producteurs acéricoles du Québec. With me is Serge Beaulieu, our president. We have a short presentation so I will read it out. It summarizes our position on developments relating to the TPP.

The elimination of tariffs is desirable for maple syrup products from Quebec and Canada. The Fédération des producteurs acéricoles du Québec has responded favourably to the signing of the Trans-Pacific Partnership, which will eliminate tariffs on exports of maple syrup products and other maple products to signatory countries.

Canada is the world leader in maple syrup exports. Japan is the second largest importer of Canadian maple syrup products, after the United States, which is the second largest market.

From 2012 to 2015, Quebec exported an average of $200 million in maple syrup products to TPP signatory countries. They are an important market for maple syrup products from Canada and Quebec. The Fédération had long called upon federal authorities to eliminate tariffs since they restrict export volumes.

For Japan, for instance, customs duties are over 17%. They will be eliminated in the medium term. For Vietnam, customs duties are 3%, and they too will be eliminated when the agreement comes into effect. In our opinion, the agreement will enable maple syrup and maple sugar producers in Canada to exploit the tremendous potential of these markets. Moreover, Quebec and Canada will remain the leaders in this sector. Let us recall that 90% of Canada's maple syrup products come from and are processed in Quebec. This province will certainly derive the greatest direct benefit from the signing of the agreement.

I would like to briefly mention the federal government's support for the maple syrup industry through the AgriMarketing program, which allows us to make targeted investments in marketing and product development in a number of countries, including Japan, which is the second largest export market for Quebec and Canadian producers. This federal support must continue to enable us to benefit from the signing of the TPP.

In closing, I would like to point out that many maple syrup producers in Canada are also subject to supply management. We are sensitive to their request that supply-managed markets not be upset too much in the application of the TPP.

The president and I will be pleased to provide further information in response to your questions.

[The Chair, Liberal, Mark Eyking]

Thank you very much, sir, and thank you for your leadership on maple syrup across the country as the biggest producers and the biggest marketers.

We're going to move over to the Producteurs de lait du Québec. We have Alain Bourbeau.

Go ahead, sir. You have five minutes.

[Alain Bourbeau, Director General, Fédération des producteurs de lait du Québec]

I would like to thank the members of the committee. I am pleased to appear before you today.

The Fédération des producteurs de lait du Québec represents the province's 5,600 farms. The Fédération plays an important role in the economy. We have sales of $2.4 billion, or 3 billion litres of milk. The Fédération also makes an important contribution to the Canadian economy with respect to employment and the GDP.

Quebec's dairy processing sector is also very strong. It produces over 80% of yogurt in Canada and over 50% of cheese. It is also a leader in organic products.

I will very quickly provide some background on the trade agreements and agricultural policies.

First, I would like to point out that all industrialized countries have policies to support their agriculture. In the dairy sector, Canada has chosen supply management, a unique policy in the world, just as the agricultural policies of other countries are unique. The U.S. Farm Bill is unique. The common agricultural policy of the European Union is unique. Switzerland also has its own policy. So every country has its unique features.

Canada has always been able to sign free trade agreements that maintain the specific aspects of its agricultural policy, as all industrialized countries do. The concessions made in the two recent trade agreements, CETA, the Canada-European Union Comprehensive Economic Trade Agreement, and the TPP, as well as certain inappropriate administrative decisions have, however, weakened Canada's dairy production industry.

Your committee is interested in the impact and consequences of the TPP. To better understand the outlook and degree of impact, let us recall certain elements of CETA which date from 2013.

In order to conclude the agreement, Canada made a major concession. It guaranteed access for 17,700 tonnes of cheese, 16,000 of which are very likely in the fine cheese sector. That represents between 20% and 30% of the market, weakening the industry greatly. These 16,000 tonnes are in addition to a concession of 20,400 tonnes that was already made under WTO agreements. This additional concession will clearly dramatically weaken Canada's dairy industry.

It will also have a major impact on producers. The amount of this additional concession can certainly not be made up by natural market growth, which is just 1% per year. As a result, CETA has led to a clear decline in Canadian market share for milk producers.

The TPP has a similar effect. To conclude this agreement which, we admit, benefits all Canadians, our country chose to make significant concessions guaranteeing 3% to 4% access to member countries. Canada's concessions in the dairy sector are proportionately greater than those offered by the other countries.

We are often asked if Canadian producers could gain market share by increasing exports. It should be noted that—and we will probably have the opportunity to talk about this later—the world market for dairy products is relatively marginal, given that just 7% to 8% of world dairy production is traded internationally.

This market is largely dominated by certain countries, the European Union, Oceania and the United States, which have huge processing capacities and whose production is supported by very generous agricultural policies. Moreover, these policies have been excluded from the negotiations. I can return to this during the question period.

While some gains can certainly be made in value-added niche markets, they are far less than the concessions made.

With respect to this agreement, which will very likely be supported by the whole country, we are asking for a positive sign to Canadian dairy producers, namely, that a first serious compensation program be established, for both for CETA and the TPP, as the previous government had started doing in October 2015.

Canadian producers' losses under these agreements are estimated at $400 million per year in perpetuity. We are therefore asking the government to maintain the focus of these programs, which have not yet been re-confirmed. I am referring in particular to the income guarantee program, which is valued at $2.4 billion and which will make up for part of these losses. The second program, valued at $1.5 billion, will also have to be re-oriented. It was intended to compensate for a loss in quota values.

In our opinion, this compensation is not relevant since there should not be any value losses in this respect and since the program was primarily intended for people leaving the industry. We are therefore requesting that this amount be maintained, but that the program be directed to people who will be staying in the industry.

I will be pleased to answer your questions.

[The Chair, Liberal, Mark Eyking]

Thank you, sir, for your brief submission.

We're going to move over to the Union des producteurs agricoles. We have Marcel Groleau and Marie-Ève Bourdeau.

You have five minutes folks. Go ahead.

[Marcel Groleau, General Chairman, Senior Staff, Union des producteurs agricoles]

Hello and thank you for inviting us here today.

The Union des producteurs agricoles represents all agricultural producers in Quebec. It is made up of affiliated organizations, including the Fédération des producteurs de lait du Québec and the Fédération des producteurs acéricoles du Québec. I will not repeat what my colleagues have already said. Instead, I will make more general comments on international trade agreements, including the TPP.

For a number of years, I have participated in Canada's negotiations, both with the WTO and with respect to the TPP. It should be noted that each country has its own objectives in these negotiations: opening foreign markets and protecting their own market. In the case of the TPP, it was primarily the United States and Japan that sought to achieve these objectives. Canada also had market access objectives, specifically in the meat and maple products sectors. We also wanted to protect our supply-managed sectors, including culture and health services.

Despite the losses, the pressures exerted on Canada and the concessions made in supply-managed sectors, I would say that the 18-year agreement was viable for Canada and its supply-managed sectors. It will be viable, however, if Canada effectively controls its imports and if it behaves like the United States and the other countries. Canada will have to exercise the strictest control, while also protecting and encouraging the development of its industry.

Consider for example the issue of diafiltered milk and duty relief, which is causing very serious problems for the poultry industry. The Canadian industry is losing hundreds of millions of dollars because the federal government is lax in controlling imports, which is not the case for the United States or Japan. Since we have access to these markets, we know very well how these countries behave.

With respect to market access, research and development are important. According to Statistics Canada, $32 million less was invested in research in the agriculture sector between 2008 and 2015, and $60 million less was invested in the food processing sector. According to the OECD, investments in R and D relative to GDP dropped from 1.99% to 1.61% during that same period, while those investments for the agri-food sector for all OECD countries rose from 2.16% to 2.37%.

The Union des producteurs agricoles and the Conseil de la transformation alimentaire du Québec showed recently that, to keep up with the average of OECD countries, Quebec alone would have to invest $85 million more per year in research and development. We can open up new markets, but if we are not competitive owing to insufficient R and D, it will be to no avail. In the meat sector, for example, where efforts are being made to open markets, Canadian pork production dropped from 31.3 million to 25.7 million head from 2007 to 2013.

In other words, while new markets are being opened, production is decreasing, except in Quebec where it is steady. In the beef sector, production dropped from 5.2 million to 4.1 million head from 2007 to 2013. Opening markets, signing agreements and boasting that we are active in international markets, that is all well and good, but our producers will not be in those markets if our country is not competitive.

I would like to raise another matter: the decrease in the amounts invested in risk management in the agriculture sector. Between 2012 and 2013, when we moved from Growing Forward 1 to Growing Forward 2, Canada reduced its investments in the AgriInvest and AgriStability programs by $290 million.

In other words, risks to producers rose while R and D investment fell. Ultimately, opening markets will not benefit our economy unless our government takes action on competitiveness.

[The Chair, Liberal, Mark Eyking]

Thank you for those presentations.

Now we are going to move on to questions from the MPs. We are going to start with the Conservatives for five minutes, and we have Mr. Lebel.

[Denis Lebel, Conservative, Lac-Saint-Jean, QC]

Thank you, Mr. Chair.

Thank you, ladies and gentlemen, for being here today and for the work you do. Feeding Canadians and people around the world is a most worthy endeavour.

[The Chair, Liberal, Mark Eyking]

Just a moment for translation.

[Denis Lebel, Conservative, Lac-Saint-Jean, QC]

People who are feeding our population.... No, I will stay in French.

[A voice]

We understand anyway, Denis.

[Denis Lebel, Conservative, Lac-Saint-Jean, QC]

I am just kidding.

What I am saying is serious and I firmly believe it. It summarizes the thinking and philosophy underlying the approach we should be taking to agriculture. Feeding our population is a most worthy endeavour. Of course, we must work together to build a better future. Everyone is subject to rules, but we are here to try to help and support you. I salute your work.

Mr. Groleau, you mentioned a drop in pork production. The following question comes to mind: has social acceptability played a role in this? Is this drop in production related to drop in social acceptance? Everyone wants pork, but no one wants to see the pig farms. There is a social acceptability problem. Does this account in part for the drop in production?

[Marcel Groleau]

No, that was not a decisive factor. We should at least have maintained our position. This problem is really due to a drop in support for risk management.

[Denis Lebel, Conservative, Lac-Saint-Jean, QC]

Thank you, Mr. Groleau.

Mr. Bourbeau, I would like to provide a slightly different explanation of what you said earlier. Canada chose to sign the TPP. The countries we negotiated with requested access to our market. Canada did not come to the negotiation table saying that it would give up its duties on milk. That is not what happened. I simply wanted to give a different explanation.

Our partners requested access to a larger share of our market. You were there and you know very well what the starting position was. The Americans wanted this much and ended up with that much.

My question is for Mr. Bourbeau and Mr. Groleau. What direction should we take in research? You talked about research for the future. I am from a nordic region. There was mention of our nordic climate as regards our products. In view of climate change, I think this will become even more important. You have cut research, but we would like to see more of it in the future. What areas should we focus on to counter these impacts on our markets? How can we use research to open our markets and become more competitive?

[Alain Bourbeau]

I'm going to focus on two issues. On the technical front, any research that could help us work more efficiently or lead to genetic improvements is certainly welcome. Canada has already established its international reputation in genetics. As for production efficiencies, we have access to academic expertise. I was told that more than 75% of researchers would be retiring within the next 5 years. That means we are going to lose considerable research wealth.

Briefly, I'd like to discuss market development. The idea is to conquer markets around the world and export as much as possible, but to do that, you need value-added products. Unlike my maple counterparts' sector, the global dairy market is overrun by surpluses owing to a widespread lack of strict production.

Prices are subject to the ups and downs of available supply. In order to conquer a market, you need the necessary know-how. Certainly, the U.S. market, for example, holds potential, but not in the case of skim milk powder or popular brand-name products.

In Canada, when consumers buy cheese that costs $50 or $60 a kilogram at retail, the producer gets just $7 or $8. The threshold is not tied to the value of the milk but, rather, to market knowledge. You need to have distribution networks and access to major retailers, who are very demanding and greedy, in order to market your products. That marketing know-how is essential to our sector's strategic development.

Regardless, to think that Canada is going to become a leading dairy exporter in the short term is to have very little understanding of the global dairy economy.

[The Chair, Liberal, Mark Eyking]

Please give a very short answer.

[Marcel Groleau]

The research has focused on scientific clusters. At the national level, the private sector has to make an investment in order for the government to contribute to the research cluster. Much of the research that was happening in federal centres and experimental farms has ceased.

I'll give you an example. In Quebec, a variety of lettuce was developed thanks to research funding provided by one of Agriculture and Agri-Food Canada's horticulture research and development centres. Advancing Canadian agriculture and agri-food, or ACAAF, was one of the programs available, in addition to others. In partnership with the community, Quebec producers administered the research funding, under the federal government's leadership. The research was more focused on specific needs at the local level. The new variety of lettuce was more resistant to the effects of extreme heat. There is now a company exporting the lettuce to the U.S. and even growing it there in order to meet customer demand annually. It started with that research.

That research would've never happened in a scientific cluster, which requires the involvement of Canada's entire horticulture community. So it's necessary to refocus research on needs that are more specific than what is currently possible through scientific clusters.