International Trade Committee on May 10th, 2016

[The Chair, Liberal, Mark Eyking]

Thank you.

We're going to move over to the Liberals. We have Madame Lapointe for five minutes.

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

Good morning. Welcome to the committee. Your remarks are very informative.

I represent the riding of Rivière-des-Mille-Îles, which is home to Deux-Montagnes, Saint-Eustache, Boisbriand and Rosemère. The maple syrup made in Saint-Eustache is some of the best in the country. I'm really glad you're here today. I spoke with the people from the Constantin sugar shack, which I'm sure you're familiar with, to ask them what they thought of the Trans-Pacific Partnership and the new market access.

You said Japan imposed a tariff of 17%, and Vietnam, a tariff of 3%. Are there other countries that would lower their tariffs on maple products?

[Simon Trépanier]

Are you referring to TPP countries or others?

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

I'm referring to TPP countries.

[Simon Trépanier]

Currently, Canada's largest maple export market is Japan, which takes in between 6% and 10% of all Canadian maple exports. It's the priority market for Canada's processors and packagers.

It's also a country that Canada's maple cluster is investing in. Naturally, the other countries are not familiar with maple syrup since production is unique to North America. Through the AgriMarketing program, we really need to invest in those countries to expose them to maple syrup, teach them about its health benefits, and show them that it can be a substitute for sweeteners in the foods and recipes they make. Those efforts are under way. Japan is our biggest market for maple products. We also export to South Korea, albeit on a smaller scale, but I don't think South Korea is part of the TPP.

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

Say the 17% tariff on imported maple syrup and maple products were eliminated. You said Canada already exports between 6% and 10% of its maple products to Japan. Have you calculated how much sales in Japan would increase if the tariff were eliminated?

[Simon Trépanier]

That's a great question. The spinoff would actually be indirect. Allow me to explain.

Would the consumer benefit from a lower price if the tariff were to disappear? Considering the number of intermediaries that necessarily play a role in exporting a product, it's not always a safe assumption that the price will go down. What we can assume, though, is that the intermediary may be in a position to do more marketing or better advertise the product thanks to the drop in cost price. We are assuming that, at the end of the day, the price will drop slightly for consumers and, by extension, lead to more sales.

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

We certainly hope so.

Mr. Groleau, you brought up lettuce earlier. I'd like to know which company you were talking about and which variety of lettuce came out of the research.

Mr. Bourbeau, you talked about agricultural policy. Industrialized countries have different ways of supporting supply management or the industry in question. If you could choose one country that Canada should align itself with, which country would it be?

[Alain Bourbeau]

Thank you for your question.

Around the world, countries support their agricultural industries in one of two ways: through funding or through regulation. Unfortunately, the funding approach doesn't work. In recent decades, the U.S. and Europe adopted funding-based approaches, subsidizing their producers. These are domestic support policies. To a certain extent, domestic support has the same effect that a tariff does. If a country's producers don't make very much because their products are sold at a low price, but their losses are offset by domestic support measures and subsidies, they can tolerate the situation. When a product fetches a low price in a given country, it makes it difficult for exporters to penetrate the market because they have to charge an even lower price for the same product. To some extent, domestic support constitutes a market entry barrier that is equivalent to a tariff. A tariff is a barrier to market entry. These are two different ways to achieve the same objective. That's what Mr. Groleau was describing earlier.

If you're asking me which country we should align ourselves with, I would definitely say one that uses the regulatory approach. That is the approach we have taken in Canada, and it seeks to duplicate a well-functioning market. A properly functioning market balances supply and demand, eliminating the need to manage oversupply. That's the most common problem encountered by industrial farmers. We're caught between overproduction cycles, which result in very low prices and which we are currently experiencing, and shortage cycles, which result in very high prices. The yo-yo effect produced by rising and decreasing prices leads to resources not being used properly and products not necessarily being available when they should be.

Supply management endeavours to reproduce an effective market, in that it maintains a balance between what is needed to meet market demand and what resources need to be leveraged for production. It cuts down on waste and creates price and income stability. That is the clear choice, and the facts bear that out.

[The Chair, Liberal, Mark Eyking]

Thank you.

That wraps up Ms. Lapointe's time. It is well over.

We are going to move over to the NDP.

Ms. Ramsey, you have five minutes.

[Tracey Ramsey, NDP, Essex, ON]

Thank you.

Monsieur Bourbeau, the Quebec federation of milk producers says that its members make approximately $39,000 in average annual income, so these are small business operators.

Can you please tell us what type of loss you predict for these farmers under the signing of the TPP?

[Alain Bourbeau]

There is no doubt that a farm operator in Quebec makes slightly less than the Canadian average. As a result of the Canada-EU trade deal and the TPP, Quebec farms will lose an average of some $30,000 a year on a recurring basis. Given the gradual implementation of the TPP over five years, the loss to farmers will be gradual as well, but at the end of the day, it will amount to about $30,000 a year per farm.

[Tracey Ramsey, NDP, Essex, ON]

That is basically the end of those farms being able to produce anything. I will just say that it puts farmers' livelihood at risk. I think that is fair enough to say.

We have talked about compensation, but whether or not the compensation is on the table at this point is unclear. The current government has said that it will have consultations again with the dairy producers. We don't know what the outcome of that will be.

Say, for instance, that the previous government's amount applies. We are talking about a decade of coverage. After that decade, where will Quebec dairy producers be, with the compensation money gone and continuing on in the TPP?

[Alain Bourbeau]

The coverage offered under the programs announced in October lasts for 15 or so years. In order to offset their losses, producers are essentially going to be underpaid. One of the features of agriculture is the poor mobility of resources. It's not easy for farmers to disinvest from one sector in order to reinvest in another. First, it takes a significant amount of capital. In order to generate a single dollar of income, a farmer can easily spend $7 or $8. So it's very difficult to move capital.

Second, the heritage value of farms is clear. Oftentimes, a farming operation has been in the family for two, three, four, five, or six generations. Operators will put up with undercompensation for long periods before they decide to leave the sector. They may not leave right away after that period of time, but their economic conditions will deteriorate, preventing them from investing in technologies or improving efficiency. In that sense, then, the ability of our farms to compete is at risk.

[Tracey Ramsey, NDP, Essex, ON]

I come from a rural riding, an agricultural riding in Essex in southwestern Ontario, and it's not only about the heritage of the farms but also about food sovereignty and being able to have access. If those farms disappear, we won't have access to local dairy products and local milk anymore in our communities, and that's something that Canadians hold very dear. We take this very seriously.

Monsieur Groleau, you brought us a message of caution today on things we're not doing well at this particular point. We're entering into an agreement of this magnitude without having those things basically stable in terms of the Canadian government being lax on imports. R and D is down. The SMEs aren't able to access.... These are things we hear from many presenters to this committee.

How are we positioning ourselves to enter into an agreement that we are not prepared to be players in?

I just wonder if you can expand your thoughts a bit on where we could see ourselves. You mentioned other countries, I think the U.S. and Japan, that are very well positioned to be able to do these things. You know, we could end up losing greater market share than we have under the current agreements that we have.

[Marcel Groleau]

Actually, because Canada isn't a very competitive country, I think we are lucky to have the U.S. as our neighbour and its market so accessible to us. For example, the falling price of oil has had a significant impact on the entire Canadian economy, and our manufacturing companies aren't even able to pick up the slack despite the low loonie. That makes our ability to compete in a global marketplace even more uncertain.

The Americans are very protectionist in certain areas, including agriculture. The example I often give is this. We buy Florida oranges, and once they go through customs, they can't be sent back to Florida. They have to stay in Canada. That's pretty clear. And yet, we let American companies that import Canadian poultry take advantage of tariff exemptions when they export that same poultry back to Canada four years later. We have no idea which products it will turn up in or who will do the checking. When I talked about Canada's soft approach, this is what I was talking about.

It's clear to my mind that we are beginning to suffer the consequences of underinvesting in research. That's what I was saying earlier. The fact that Vegpro's product is on the market today is thanks to the variety of lettuce it developed.

[The Chair, Liberal, Mark Eyking]

Sorry. Just wrap it up.

We're going to move over to the Liberals and Mr. Peterson for five minutes.

[Kyle Peterson, Liberal, Newmarket—Aurora, ON]

Thank you, Mr. Chair.

I'd like to thank the witnesses for taking part in our meeting today.

I want to talk about maple syrup, a product my son is a huge fan of.

Are we competing with other nations that produce maple syrup, or do we have a unique market niche?

[Simon Trépanier]

Canada produces about 90% of all the maple syrup in the world. The other production is in the United States. There are about 15 states in the U.S. producing maple syrup.

The economy of maple syrup in Canada is completely different from what is going on in the United States. Producers in the States are looking to fulfill their own local markets. Canadians want to export because our population is only 35 million. We are producing for us first, but for other countries too. Between 80% and 90% of Canadian production is exported. Our maple syrup economy is completely different from the one in the U.S.

We have to rely on other markets, then. They're developing their own taps for their own market, so we have to work on other markets, such as the ones that will sign the TPP.

[Kyle Peterson, Liberal, Newmarket—Aurora, ON]

I think the product is a bit unique compared to others. We heard from the cattlemen when we were out west, and they're competing with Australia and other producers in these markets. It seems to me that you don't have that sort of competition in some of these target markets, such as Australia, Vietnam, New Zealand, and Japan.

How would the reduction in tariff open up that market? It seems to me that you already have that market, because there are no other competitors. Would you be able to offer the product at a lower price? Would that be the benefit? Would there be value added here in Canada and Quebec that would make it beneficial to Canada?

[Simon Trépanier]

Maple syrup is not cheap sugar compared to other ones, for sure. Compared to honey, for example, it's about the same price, depending on the quality. In those markets, we have a very competitive price. With lower tariffs, we're going to gain in those markets, for sure.

We have to be concerned about one thing. As Canadians, we all know what maple syrup is. When we go to other countries, sometimes we see on the shelves in grocery stores bottles labelled “maple syrup”, but it's not maple syrup. It's corn syrup. That's especially in China. Everybody's saying “Let's go to China”, but it's probably the worst place to invest in marketing and promotion, because basically we would be helping the United States corn producers who produce corn syrup to export it there and put the maple syrup label on it.

We have to be very careful about developing those new markets, for sure, and that's why we are working with the Americans to protect the maple syrup name in the Codex Alimentarius, which is the UN booklet defining and describing foods. It defines, for example, what is milk and what is honey. We would like to work with the federal government to make sure that maple syrup is going to be listed in the commodities that are available in the world.

[Kyle Peterson, Liberal, Newmarket—Aurora, ON]

Thank you for that clarification.

Monsieur Bourbeau, in your deck there's a comparison to Australia, which deregulated its dairy sector with grave consequences. Do you feel that the TPP keeps your sector regulated, or is there some deregulation contained within the TPP?

[Alain Bourbeau]

We realize the Canadian government made a very laudable effort to keep the supply management system intact. Let's not forget, supply management is an agricultural policy, and because of that, its key levers were maintained. As Marcel pointed out earlier, one of the things that makes this regulatory approach so effective is the strict border control it provides for. Ms. Lapointe asked me about that.

The other countries we deal with are very serious when it comes to import controls, especially on food products. Yes, the supply management policy remains intact and that can continue under the TPP, provided that the Canadian government delivers on its promise to make sure that the trade agreements it signs are fully respected and that the product volumes coming into Canada are limited to what is set out in the agreements.

Bear in mind that Canada is one of the most open dairy-producing markets in the world. We import a lot more dairy products than the Europeans or the Americans. They import very few dairy products because they have such generous domestic support policies in place, and those policies, strictly speaking, constitute a barrier to market entry.

[The Chair, Liberal, Mark Eyking]

That's it, Mr. Peterson. That wraps up your time and finishes the first panel.

We're going to the second panel now, starting with the Liberals for five minutes.

Madam Ludwig.

[Karen Ludwig, Liberal, New Brunswick Southwest, NB]

Thank you.

I represent the riding of New Brunswick Southwest. We too have delicious maple syrup.