International Trade Committee on May 10th, 2016

[The Chair, Liberal, Mark Eyking]

Good morning. I call the meeting to order.

My name is Mark Eyking and I am the chair of the Standing Committee on International Trade. My riding is in Cape Breton.

That's as far as I'm going in French. I'll go in English from now on, but everybody has translation.

I also welcome Mr. Lebel to our committee. It's good to see you with us.

Our committee is a very active committee. We have a lot on our plate in this parliamentary session. We're dealing with the finishing up of the CETA agreement with Europe, we have softwood lumber issues, and right now we're doing TPP.

As everybody knows, Canada is a trading nation, and the TPP is a really big issue. It's a trillion-dollar trade agreement. It will affect many businesses and organizations and every Canadian. That's why our committee has been meeting with stakeholders and going across the country.

We've already visited five western provinces a couple of weeks ago. This week we're going to do Quebec and Ontario, and in the fall we'll do the Atlantic provinces. We'll also touch base with the territories. Of course, what is most important is that we're going to be talking to Canadians.

Today is going to be our first meeting. We will have three or four panellists, but our last panel will be open to anybody in the audience who has comments.

We have a very busy year, and we'll be putting our report forward to Parliament.

We're also taking submissions right up until the end of June from Canadians who cannot visit us or cannot be with us. We have more than 10,000 submissions right now, and there are more to come. Anything MPs hear out on the ground will also be accepted in our report.

We have a lot of work ahead of us, but we're very happy to be here in Montreal, where my favourite hockey team is, the Montreal Canadiens. It's good to be here, and I wish I could see a game while I'm here.

Of course, I'm going to get into trouble for saying that when we go to Toronto later on in the week. There has always been a rivalry there.

[A voice]

They don't have a team.

[Some hon. members]

Oh, oh!

[The Chair, Liberal, Mark Eyking]

They don't have a team? Okay, we won't go there.

This morning on our first panel we have three groups of witnesses. We have Agropur. We have the Fédération des chambres de commerce du Québec. We also have the Quebec Association for the Taxation of Financial Transactions for the Aid of Citizens.

We'll start with Agropur. We have with us Dominique Benoit and Serge Riendeau. Welcome.

If you can keep to five minutes, we'd appreciate it, so that we'll have lots of time for interaction with MPs.

Go ahead, gentlemen.

[Dominique Benoit, Senior Vice-President, Institutional Affairs and Communications, Agri Foods, Agropur cooperative]

Thank you.

Good morning, everyone. We'll make our intervention in French, but we'll be available to answer questions in both French and English as required.

Members of the House of Commons Standing Committee on International Trade, thank you for giving us the opportunity to comment regarding the draft agreement on the Trans-Pacific Partnership. Our intention in the next few minutes is to talk about Agropur cooperative, Canada’s supply management system in the international context, and the draft agreement of the TPP. We will finally give our point of view on diafiltered milk imported from the United States.

Agropur is a dairy cooperative owned by 3,367 dairy producers in Quebec, Ontario, Nova Scotia, New Brunswick and Newfoundland and Labrador. We have annual sales totalling nearly $6 billion. In Canada, 30% of the milk is processed in Agropur's plants. We have 28 plants in eight of the 10 provinces. Our 6,000 employees and 5,000 dairy producer families contribute to the economic vitality of many communities across the country.

Over the past few years, we have invested more than $1 billion in our Canadian facilities, our plants, our head office and the acquisition of six Canadian companies. We have also merged three co-ops, including in Nova Scotia and New Brunswick, in order to better meet our Canadian customers' needs. In addition, we have a presence in the U.S., where 44% of our sales are generated.

I will now talk about supply management.

Last year was a year of mobilization at Agropur. We played an important role as an ambassador for our industry throughout the year. During the Trans-Pacific Partnership negotiations, we energetically defended the supply management system. We believe that the leadership and mobilization of all stakeholders who believe in the supply management system gave the federal government the support it needed to be able to defend supply management against other countries that wanted it to be entirely dismantled.

I will now briefly tell you about a study on supply management in Canada produced by Boston Consulting Group (BCG), which we circulated. The study made it possible to compare the Canadian system to that of a number of other countries in the world, particularly countries adhering to the Trans-Pacific Partnership, New Zealand, Australia and the U.S., as well as European countries.

We feel that this study is very thorough, professional and credible, and that it advances a different point of view than the Conference Board of Canada and similar organizations that are not in favour of supply management. In essence, the BCG study shows that dairy production continues to be widely supported around the world, whether in the U.S. or in New Zealand. The study also shows that no country has managed to make a success of dairy industry without massive government support, whether on the financial or regulation front. Let me give you a few examples.

Australia has completely deregulated its industry. And its dairy production has been falling.

[The Chair, Liberal, Mark Eyking]

I'm sorry.

You have about half a minute, so you will have to wrap up as best you can.

[Dominique Benoit]

Australia's dairy production has dropped significantly since the deregulation.

In New Zealand, the monopoly created by the government has helped the industry become a success.

Canada faces the world's largest dairy producer, the U.S., which produces 11 times more milk than us. We therefore believe it is warranted and indeed more important than ever for all of us to work together to protect our industry.

In trade agreements such as the Trans-Pacific Partnership, the federal government has succeeded in maintaining high tariffs at the border, a key requirement for preserving our dairy system. Clearly, we are disappointed because of the concessions made and the significant increased access to the Canadian market provided to our trade partners.

I would like to close my presentation with a significant issue we are facing, diafiltered milk.

The federal government was able to protect supply management against our trade partners. It is now up to the federal government to help us safeguard our industry domestically. To do so, the government must legislate on diafiltered milk, and ensure that cheese composition standards are protected in Canada and enforced. We must protect our industry domestically.

Agropur has imported diafiltered milk until recently. Our intent is to stop as soon as possible. In that context, we once again need the federal government's help to ensure compliance with our cheese composition standards. We don't understand why the government has not taken action on the issue, but it is in the best interests of our industry and people.

[The Chair, Liberal, Mark Eyking]

Thank you.

We're going to move on to the Fédération des chambres de commerce du Québec. We have Yvon Boudreau and Stéphane Forget.

Go ahead.

[Stéphane Forget, Vice President, Strategy and Economic Affairs, Fédération des chambres de commerce du Québec]

Thank you.

Thank you, Mr. Chair and members of the committee, for inviting us to discuss the TPP with you this morning.

The Fédération des chambres de commerce du Québec is a group of 140 chambers of commerce and is the most prominent network of business people and companies in Quebec. Founded in 1909, the FCCQ today represents more than 60,000 businesses and 150,000 business people with activities in every economic sector and across Quebec. The FCCQ is both a federation of chambers of commerce and the Quebec chamber of commerce, the provincial chamber.

On various occasions, the FCCQ has privately and publicly expressed its support for various planned free trade agreements. That is easily understood. In Quebec, international exports account for 25.7% of the GDP, and the sales to other Canadian provinces are responsible for 19% of the GDP. This means that more than 40% of our economy is related to the production of goods and services for markets other than Quebec.

The FCCQ therefore recognizes from the start the importance of agreements that remove tariffs and other barriers that impede access to domestic and international markets for Quebec's goods and services.

The draft Trans-Pacific Partnership agreement seeks to remove 18,000 tariffs. That's significant. Those customs duties and other tariff barriers are affecting a lot of Quebec and Canadian exports. Just think of the metals and minerals, industrial machinery, the agricultural materials, the construction equipment, the pharmaceutical products, and the information and communications technologies, just to name a few.

For the FCCQ, the benefits for our businesses come from better access to external markets and exceed the losses from opening the domestic market to foreign goods and services. Clearly, the TPP broadens the access to some markets and points to new growth prospects for our businesses. But that will not happen by itself. We must take proactive action to be on the winning side of those exchanges.

Free trade agreements are and will be beneficial to the Canadian economy to the extent that businesses can, and will be able to, market innovative, world-class products and services. Government support for innovation is therefore an essential tool for exporting companies. The latest federal budget recognizes it and announces that, in 2016-2017, the government will define a bold new plan in its innovation agenda. The plan must include assistance for businesses aiming at export markets.

The federation is urging the federal government to make its directions known as soon as possible in terms of innovation and measures that will stimulate business investment in innovation. The FCCQ is of the opinion that assistance measures must be more targeted for businesses and investors, in order to promote measures that make it possible to be more productive and compete for new markets.

That is particularly important for the manufacturing sector. Companies in the manufacturing sector have certainly been stimulated by the declining price of oil and the weak Canadian dollar, although we think it is still very modest. However, their sales went up by over 5% in 2014. But those sales are still lower than they were before the recession in 2009 and 2010.

Let's now talk about the importance of keeping small and medium-sized businesses informed.

Large companies are well aware of the challenges of world trade and they have the ability to quickly react to changes resulting from a free trade agreement. In the exchanges that the federation regularly holds with companies, especially small and medium-sized companies, we are noticing significant gaps in terms of information and education about the challenges of the new trade agreements. Without the right information, those businesses are not sufficiently prepared to take advantage of the new markets or to deal with the new competitors on traditional markets.

Until the TPP is ratified, it would be desirable for the Canadian government to devote resources to informing businesses about the short- and medium-term opportunities and challenges presented by the implementation of this potential agreement. The government could benefit from using a network like the federation's to reach Quebec's small and medium-sized businesses.

There is also the issue of the sensitivity of the agri-food sector. As Agropur has explained, the agri-food sector often represents the sensitive part of bilateral or multilateral trade agreements. The TPP is one more instance of that.

The TPP would partially open supply-managed agricultural markets to foreign countries over a five-year period. At the end of the five years, foreign producers will be able to take over up to 3.25% of the dairy market. That percentage will be 2.3% for eggs, 0.1% for chicken, 2% for turkey and 1.5% for broiler hatching eggs.

[The Chair, Liberal, Mark Eyking]

Excuse me. Do you want to wrap it up?

[Stéphane Forget]

Do I have 30 seconds? Okay. Thank you.

Don't forget that the Canada-European Union comprehensive economic and trade agreement also allows for an additional 17,000 tonnes of imported cheese. The federation is in favour of maintaining the supply management system. In light of the economic significance of the agricultural productions in question and the processing of those products in Quebec, FCCQ member businesses in the agri-food sector are nonetheless satisfied by the terms of the draft TPP as a negotiating position, so long as the federal government follows through on the promise of providing compensation to affected businesses.

To conclude, the federation recognizes the importance of the TPP and urges the federal government to be proactive so that exporting companies make the most of this potential agreement.

Thank you, Mr. Chair.

[The Chair, Liberal, Mark Eyking]

Thank you.

We're going to go to Claude Vaillancourt from the Taxation of Financial Transactions for the Aid of Citizens.

[Claude Vaillancourt, President, Quebec Association for the Taxation of Financial Transactions for the Aid of Citizens]

Members of the Standing Committee on International Trade, thank you for your invitation.

The Association québécoise pour la taxation des transactions financières et pour l'action citoyenne (ATTAC), is advocating for the control of the financial sector and for social justice. Our association operates in about 20 countries.

Today, I would like to mention three reasons for abandoning the Trans-Pacific Partnership. Other aspects could be criticized, but the time I have forces me to make a choice.

The first reason is the lack of transparency throughout the process.

This agreement was negotiated in the greatest secrecy. Only business lobbies have been consulted and no real consultation was held with the other groups of civil society. The agreement is several thousand pages long in particularly arcane, very ambiguous, legal language. Furthermore, the economist Joseph Stiglitz, when visiting Ottawa, said that the only thing that was not ambiguous in the agreement was the fact that it was completely ambiguous. So we may wonder whether we are not signing a blank cheque. Conducting independent studies to assess the real impact of the Trans-Pacific Partnership is essential.

The second reason is the investor-state dispute settlement mechanism.

We are talking about a private justice system for businesses. They are the only ones that can sue the government. They have no legal obligation or responsibility. Judges are automatically biased because, given that the lawsuits can only come from one party, that is businesses, the arbitrators have a vested interest in ruling in their favour in order to receive other cases.

Companies can also choose one of their arbitrators, which is quite unusual in a justice system. This dispute settlement mechanism is an important lobbying tool that allows lobbyists to threaten governments with lawsuits, which has turned out well in the past. Even the Canadian government recognized the impact of self-censorship triggered by this mechanism. Let me quote a passage from a report on NAFTA: “On the other hand, it could be that regulations are simply not being brought forward for fear of a Chapter 11 suit.”

In addition, the Trans-Pacific Partnership allows for harmonization, which could actually weaken the sanitary and phytosanitary measures that are in place to protect the people, but that are seen as non-tariff barriers. So the power of governments to regulate, one of the key aspects of democracy, is being directly attacked.

The third aspect is the incompatibility between the Trans-Pacific Partnership and the Paris agreement to fight climate change.

Businesses can sue governments because of environmental legislation that can be considered as a barrier to trade.

Furthermore, by multiplying exports in a way that does not always make sense, this encourages fossil fuel waste on a large scale. It promotes long routes and unlimited transport of goods, when the focus should be on short routes and on stimulating the local economy. However, in the Trans-Pacific Partnership, the stimulation of the social economy is a form of discrimination.

This agreement also promotes an export-oriented agri-food industry that is already responsible for 25% of the greenhouse gas emissions, when it should actually promote local agriculture and greater food sovereignty.

Canadians must really gain a solid understanding of this agreement that will radically change our economy, that will be applied over years and that will affect every economic sector. We should either abandon the agreement because of it is exceptionally broad—and I point out that the four candidates in the U.S. primaries are opposed to the Trans-Pacific Partnership—or we should hold a national referendum. In no case should we avoid a broad and in-depth public debate.

[The Chair, Liberal, Mark Eyking]

I thank you, sir, and I thank all the witnesses for their submissions.

Now we're going to go to the MPs, who are going to ask some questions. We're going to start with the Conservatives.

Mr. Lebel, you have five minutes. Go ahead, sir.

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

Thank you, Mr. Chair.

When NAFTA was signed by the Mulroney government, we were told the end of the world was coming, but nothing happened. Not a single farm was supposed to be left in Quebec. Yet the farms are still there. Quebec is a province with 8 million people, in a country with about 35 million people. We have to see how we can maintain jobs and improve the quality of life. To share wealth, we must generate it.

Let me turn to you, the folks from Agropur. You had front-row seats at the negotiations on this entire process where dairy producers were represented. We will hear from other dairy producers today.

We remember the Americans' request. We must not fool ourselves: the Americans wanted to renegotiate NAFTA through the TPP.

In your view, what was the outcome of the negotiators' work in terms of what the Americans were asking at the beginning regarding the opening of agricultural markets, including those under supply management? What was the outcome?

[Serge Riendeau, President, Agropur cooperative]

We had front-row seats throughout those negotiations. We were even in Hawaii, because that's when things had to be settled.

We were also in Atlanta when the agreement as such was announced. When we met with the minister at the time, Mr. Fast, and his team of negotiators on site, we sent them two messages. We have asked the government not to give additional access to the Canadian market and to control its borders.

We are aware that we can't win everything in the negotiations. In fact, it was announced that there would be access, that our market would be open to foreigners to the tune of 3.25%, a rate that will go up to 3.5% over time. We also talked about controls at the borders. It is important to understand, that in this area, we always get into slightly technical things.

Yes, supply management was kept. However, as Mr. Benoit mentioned earlier, there has been a lot of deregulation around the world. The biggest danger is that the systems are collapsing from the inside, not because of external factors. That is why border control of imported diafiltered milk, which is considered an ingredient once it enters Canada, but when it is produced, it becomes—

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

Allow me to interrupt you. My question had to do with the demand that was on the table and what we have obtained. You must have surely heard about it. What did we get regarding access to the tune of 3.25% in relation to what the American partners were asking for?

[Serge Riendeau]

That is what I said earlier. The other countries were asking Canada to dismantle supply management completely. I also mentioned that supply management was maintained with access to the tune of 3.25%. So the supply management was maintained.

To be able to continue to maintain supply management, the government must enforce the standards that have been in place since 2007 or 2008. We keep coming back to technical aspects. At that time, standards had been set up to determine the percentage of ingredients that could be part of cheese, yogurt and some dairy products. Diafiltered milk is a product designed to bypass the Canadian regulations. The product enters the country as an ingredient, but while it is being manufactured, it becomes milk. So it changes its personality along the way. Those standards are extremely important if we want to maintain a supply management system.

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

It is clear. The issue of—

[The Chair, Liberal, Mark Eyking]

You have just half a minute.

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

The issue of pizza kits was a problem at the time. That was solved. I think everyone is aware of its importance now.

Mr. Forget, you have not talked about aerospace in the greater Montreal area with respect to those agreements. We have the opportunity to be able to build—

[The Chair, Liberal, Mark Eyking]

Excuse me, Monsieur Lebel, your time is up. Maybe that question you have—

That is a good question, but perhaps

you can give to your next Conservative questioner.

We're going to move over to the Liberals now for five minutes.

Madame Lapointe.

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

Good morning, welcome to Montreal. I am the only member from the greater Montreal area on the Standing Committee on International Trade, and it is a great pleasure for me, as well as for my colleagues from elsewhere in Canada, to welcome you.

I have four questions, so I would ask that you answer briefly, because I would like to hear from the various witnesses in turn.

I will start with the Fédération des chambres de commerces du Québec.

Earlier, you said that the information from the government about the existing opportunities for small and medium-sized businesses could allow them to improve their situation.

You also said that you could help them yourselves. How could you do that?

[Stéphane Forget]

Take the Canada-Korea free trade agreement, for example. It was signed almost three years ago. A number of companies are still not very familiar with the terms and conditions of this agreement. The agreement with Europe, which is on the verge of being ratified, is still a mystery for a number of small and medium-sized businesses. You can understand that the same thing is happening with the TPP.

Our suggestion is to be proactive. By that we mean that we must ensure that businesses, the small and medium-sized more so than the big businesses, are well informed and know what they need in terms of compliance, capacity, the type of production required in order to access those markets when the time comes, to be able to move forward and to establish contacts in those countries.

We think a proactive approach needs to be used with the businesses so that they are informed of an agreement when it is being discussed and ratified, not when it has already been signed. That would also enable them to face the competition when it arrives. That is the first part of the answer.

In terms of how we can help them—

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

We will come back to that; two minutes have already passed.

I will now turn to the Agropur representatives. Thank you for being here.

Earlier, you mentioned the deregulation in Australia and New Zealand, in terms of the supply management of milk, and that, despite that, the government had to intervene.

Could you tell me exactly what happened in Australia and New Zealand?