International Trade Committee on May 10th, 2016

[The Chair, Liberal, Mark Eyking]

If you want to wrap it up, we'd appreciate it.

[Pierre Seïn Pyun]

The economy is shifting from an investment-led trade-focused one to a consumption-led one.

I'm going to conclude my opening remarks by giving some broad views about the TPP.

We certainly welcome the TPP. We believe the areas covered are quite exhaustive and reflect the realities of the current economy, which is very much knowledge-based.

I was trying to demonstrate our presence in the region. We do more than export goods from Canada to the region. We have invested in the region. We're participating in value chains in the region. We're providing services in the region. We're also employing people in the region. Our relationship with the region is multi-faceted.

I think the TPP negotiators have placed a significant emphasis on new and emerging trade challenges. You can look at the areas covered: non-tariff barriers to trade, state-owned enterprises, regulatory coherence, digital economies, intellectual property, goods and services, investment, dispute settlements, bribery and corruption, culture, trade and environment, electronic commerce, corporate social responsibility, and government procurement. There are many areas already present that will help in providing a supportive framework in the region for a company like Bombardier to continue to grow going forward.

I will wrap up there, and, if you have any questions, I will be pleased to answer them. Thank you.

[The Chair, Liberal, Mark Eyking]

Thank you very much. It's very impressive how much your company does around the world.

We're going to move to Marie-Hélène Labrie.

Please go ahead. You have five minutes.

[Marie-Hélène Labrie, Senior Vice-President, Government Affairs and Communications, Enerkem]

I'll give my remarks in both French and English.

Thank you very much for inviting us to give our point of view about the Trans-Pacific Partnership agreement.

Enerkem is a technology-based SME that produces biofuels and green chemicals from waste materials. With our exclusive, clean technology, we convert those non-recyclable waste products into methanol, ethanol and other secondary chemicals that can be used in everyday products. Enerkem has its headquarters in Montreal, a full-scale commercial plant in Alberta and a demonstration facility and pilot plant in Quebec.

The company is currently developing biorefineries in Canada and elsewhere in the world using its modular fabrication approach. Enerkem's technology and plants contribute to the diversification of the energy supply, to the reduction of greenhouse gases and to the manufacture of greener products, while providing an alternative to landfilling and incineration. We are also proud that we were selected by the World Intellectual Property Organization, at France's Institut national de la propriété industrielle, to take part in Solutions COP21 in Paris, an event that highlights innovative solutions in the fight against climate change from all around the world. Enerkem was invited to represent Canada.

Enerkem is just beginning its commercialization stage. Our plan for growth involves exporting our products and our technology to selected countries. With a view to partnerships in order to develop Enerkem plants overseas, therefore, we are interested in the agreement and its impact on green technology companies like ours.

Enerkem is currently in discussions with customers abroad interested in buying our products, and we're also developing partnerships to build Enerkem's facilities abroad. Many of the countries included in the TPP are looking for clean technologies that will enable them to achieve their greenhouse gas emission reductions goals and help transition to a greener economy.

We support the TPP because it opens key markets for the development of Enerkem's projects by facilitating the export of Enerkem Canadian manufactured technology to these markets.

Enerkem's modular and standardized approach to building facilities involves manufacturing many prefabricated modules in Canada and shipping them to the site of the facility we plan to build in partnership with key local industrial partners. Several prospective locations in Enerkem's expansion plan are located in countries that have signed the TPP.

The reduction in tariffs, combined with the robust provisions the TPP is expected to offer on the protection and enforcement of intellectual property, will be key in supporting our international growth strategy. We understand that these IP-related provisions will provide greater confidence when entering markets and exporting our proprietary technology.

Enerkem has begun production at its full-scale commercial facility in Edmonton, Alberta. We will also break ground on our second commercial facility in Varennes, Quebec, in the coming months. Both of these pioneering facilities will have the ability to produce biofuels and green chemicals, which can be sold locally or exported to international markets, where they yield a higher value, given their favourable carbon footprint.

By reducing tariffs, the TPP will facilitate Enerkem's access to these markets and their associated premiums. This access will provide Enerkem with the opportunity to better compete globally. Opening key markets for the sale of Canadian-produced green chemicals is another reason we support the TPP.

If we understand it correctly, there is nothing about the energy sector in the agreement. It is not clear whether biofuels are included.

Biofuels are chemical products used as a source of energy in our vehicles in order to reduce GHGs and the dependence on petroleum, and to diversify fuel sources. We feel that it would be desirable for biofuels to also be part of the agreement, because a number of countries have legislation requiring a minimum amount of renewable fuel in gasoline. Some of them are parties to the agreement. They may represent useful markets for Enerkem and other Canadian biofuel producers.

The United States is the prime export market for biofuels today. That being the case, it is important for Canada to be more competitive with its policies on advanced biofuels. These new-generation biofuel, such as those Enerkem produces, use non-conventional raw materials—they do not use corn to produce ethanol, for example—and look to innovative technologies to convert those materials into biofuels. Canada is a little behind in this; a number of countries offer a more favourable environment for investment in this growth sector, through the tax system or by other means. So Enerkem will continue to make its vision known to the government in the coming months.

In conclusion, Enerkem is in favour of the Trans-Pacific Partnership agreement because it opens more markets for Enerkem, whose clean technology and green products are in demand in those countries and because it should help to protect our intellectual property to a greater extent when we build plants abroad. Thank you very much.

[The Chair, Liberal, Mark Eyking]

Thank you, and thank you for being concise with your time.

Joining us is another group of witnesses. From the Conseil de la transformation alimentaire du Québec, we have Sylvie Cloutier and André Coutu. Welcome, both of you.

You have five minutes for your submission to our panel.

[Sylvie Cloutier, Chief Executive Officer, Conseil de la transformation alimentaire du Québec]

Thank you very much.

Thank you for inviting us and for giving us the opportunity to provide you with our point of view about the TPP.

The food industry is the largest in Quebec. Its output is in the order of $24 billion and it represents 16% of manufacturing shipments. It is also the largest manufacturing sector in Quebec, with shipments totalling $105 billion, representing 17% of manufacturing shipments and 2% of Canada's gross domestic product. It also employs 246,000 Canadians.

The sector is also the largest manufacturing employer in Quebec, with 62,000 direct jobs and 100,000 indirect jobs, distributed among 1,600 companies.

The sector's exports were in the order of $7.5 billion in 2015. Quebec's trade balance in the area has remained positive for 15 or so years, except for 2009. However, imports reached $7 billion in 2015 and are increasing annually, with an ever-greater proportion of processed products.

Globalization and the opening of markets bring with them huge opportunities for the Quebec and Canadian food processing industries. The growth of cross-border business is indispensable for the food processing industry if it wants to remain competitive, dynamic, successful, and profitable.

The Trans-Pacific Partnership will provide Canadian companies with easier access to a market of some 800 million consumers, or almost 40% of the world's economy. Following in the footsteps of the agreements with the European Union and South Korea, the TPP will greatly enhance Canada's presence in international markets, the most significant way in which companies can hope to grow. Canada must be part of this partnership; without it, Canadian companies would be at a major disadvantage. Canada must remain an economic player of primary importance in a globalized market that is more and more competitive.

The Conseil de la transformation alimentaire du Québec, CTAQ, believes that the TPP is potentially very beneficial. The future of the food sector depends directly for its growth on our ability to export.

Thank you. I will now make way for my colleague.

[André Coutu, Chief Executive Officer of the Agri-Food Export Group Québec-Canada, Conseil de la transformation alimentaire du Québec]

Good afternoon. Please excuse us for being late. We were half way through a club sandwich downstairs when the clerk told us that we had to come up. So here we are.

My name is André Coutu. I represent the Groupe Export Agroalimentaire Québec-Canada, which specializes in agri-food. In Quebec, we have 400 companies in the sector. We are certainly the Government of Quebec's “muscle” in terms of exports. We also hold shares in SIAL Canada, SIAL Montreal and SIAL Toronto. Those are major international agri-food showcases.

I have prepared a summary of our 2015 manufacturing sales in Canada. It will only take a few minutes.

On page 2, you can see that our foreign sales come to $108 billion, with 24% of that going to Quebec, 42% to Ontario and 14% to Alberta.

The growth in food exports in Quebec added 2,050 jobs and $474 million to the GDP in 2015. Clearly, it is a major source of job creation and revenue. So it will come as no surprise that the Groupe Export Agroalimentaire Québec-Canada is in favour of free-trade agreements, whether with Europe or with the rest of the world.

On page 4, you will see that Quebec's main exports come to $7.5 billion in foreign sales, 72% of which come from the American market. We talk about the American market as if we dominate it, but that is not quite correct. We only know a small part of it. We have to continue our efforts in that market.

On the next page, you will see that Quebec's food imports, valued at $7.5 billion, are increasing. We can thank our lucky stars that the United States saved our bacon, if you will, last year. Our sales to that country increased by 23% last year, while our sales to the rest of the world decreased by 20%. For the European Union, the decrease was 54%, as a result of which we are accumulating a huge deficit; for Japan, it was about 9%.

On page 6, you can see that our trade deficit with Europe is now up to $1.7 billion. So it is important that we look for new ways to counter that trend. I will come back to that later.

[The Chair, Liberal, Mark Eyking]

Thank you, sir.

You're joined here by Raymond Dupuis.

[André Coutu]

Yes. Raymond is our vice-president and also an economist with Groupe Export.

[The Chair, Liberal, Mark Eyking]

Welcome also, sir.

That wraps up the presentations from the witnesses.

We'll start off with a round of questioning and dialogue with the MPs. Monsieur Lebel will start off for the Conservatives.

Monsieur Lebel, you have five minutes.

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

Thank you, Mr. Chair.

Ladies and gentlemen, thank you for joining us this afternoon.

First, I must apologize for the fact that I am going to have to leave. This is not for lack of interest, but because of another meeting in Quebec City at 4:00 p.m. I am grateful to those who allowed me to be at this table. I have enjoyed it very much.

With that out of the way, Ms. Labrie, earlier, you talked about an agreement on biofuels. We agree that it is important for us to sign it. For the United States, we are talking about 72% in one area and 75% in another. We cannot be left out of a global market that includes the Americans. The United States has 350 million people and we only have 35 million. We have always worked in the best interests of Canadians and we are going to continue doing so.

You talked about biofuels earlier. If the agreement is not quite clear, what do you recommend we add, so that the work is done right?

[Marie-Hélène Labrie]

We already have a free-trade agreement. As for biofuels, the goods move very easily from country to country.

Perhaps what I was talking about did not fall within the agreement. Now that we have solved the problem of access to this market, there is an imbalance in the policies on new biofuels at three levels.

The United States has specific legislation on cellulosic biofuel set out in the renewable fuel standard program. Thanks to the Conservative government, we have federal regulations that established the federal standard of a minimum of 5% ethanol in gasoline. However, we have not established a distinction between the new generations and conventional biofuels. A change is occurring elsewhere in the world toward new technologies that use different raw materials, namely, forestry and agriculture residues and waste materials, like we do. So there is an imbalance because we have an integrated biofuel market, but with different policies.

The second level has to do with tax incentives. In the United States, $1.01 is given per gallon of cellulosic biofuel produced. So we are seeing that investments are increasingly going to the United States because there are these incentives to present this capital and to build an infrastructure to produce cellulosic biofuel.

At the third level, they have a lot of loan guarantee schemes to stimulate these capital investments by the private sector. What we're talking about here are industrial innovations and large factories.

Let's take the example of a factory like Enerkem in Edmonton. That's our factory. We're talking about a private investment of over $100 million. These factors can be profitable, but they require a major capital investment. When we talk about new technologies, obviously, it's the stage we call the “valley of death”. They reach the point of being ready to be put on the market, and the first factories are always more difficult to finance.

In this sense, perhaps it would be good to work with the free-trade agreement to ensure that there is no imbalance. That's really the holistic approach that I was presenting.

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

Mr. Pyun, I recently had the pleasure in the House of Commons of speaking about Bombardier and applauding them. I won't repeat what I said, but I want you to know that.

A little earlier, you gave a convincing presentation on Bombardier's importance for the global market and for the developing market. What would the impact be for your company if there was no agreement like this and if Canada did not have one, but your competitors did?

[Pierre Seïn Pyun]

As you mentioned, Bombardier is very focused on markets outside Canada. Canada is obviously an important market. It's our operations base, and it represents about 7% of our revenues. So market access is critical for a global company like Bombardier. Our competition is global. There are a few players in the rail sector and a few in the aerospace sector, but they are big players. We are constantly going head to head with them no matter what market we are doing business in.

The value of the TPP for us is that of a base that can be expected to grow. That is how we understand it. Several areas are covered. There may be areas where we could grow more. I understand that there are defensive and offensive interests. I think a balance has been achieved, but it is certainly a good basis for growth.

It is sometimes difficult for companies to get a feel for that group of countries. For us, in fact, Canada's entry with NAFTA members was critical. We could not be excluded from that agreement. It's an opportunity to strengthen the North American platform and preserve our privileged access to the NAFTA market. There was definitely interest at that level.

Furthremore, I think things changed when Japan entered the agreement. There are offensive and defensive interests with respect to Japan. We are very active in the aerospace sector in Japan, but less so in the rail sector. We have about 70 regional aircraft in operation in Japan, and many of our clients are subsidiaries of All Nippon Airways and Japan Airlines.

The rail market is extremely competitive. We understand that some countries are interested in joining the TPP. They include Indonesia and territories like Taiwan and, possibly, China and India. So I think it's possible that this is becoming a model for trans-Pacific trade. We think that Canada cannot allow itself to be excluded from this group because of the potential it represents.

[The Chair, Liberal, Mark Eyking]

Thank you. That wraps up your time, Mr. Lebel.

We're going to move over to the Liberals and Madam Lapointe. You have five minutes.

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

I'd like to thank the witnesses for being with us today. I appreciate the fact that they all represent different interests, but that they all seem to agree.

Mr. Pyun, we have already met. You spoke about Bombardier, both about trains and aircraft. You said that a lot is invested in Asia. I imagine you see that there is an advantage to ensure that what is produced here in Canada is exported.

In your opinion, which division has the best market? Is it rail? Is it the C Series aircraft? What opportunities are there in this regard?

[Pierre Seïn Pyun]

I will give you a fairly simple answer.

In my opening comments, I mentioned that we were active in all activity sectors in Asia-Pacific. Obviously, if we look at countries individually, we are more active in rail. I gave the example of Japan, but there are other countries, including Australia, where we are active in both sectors.

When assessing the market projections for Asia-Pacific, whether for rail or commercial or business aircraft, the opportunities in the region are immense. I hesitate to identify one sector as having the most potential.

I mentioned the engines of growth in Asia-Pacific, that is the urbanization and growth of the middle class. The figures for the future are extremely impressive. The middle class will grow from two billion to five billion people by 2030. Asia will have 66% of the world's middle class population and will make up 59% of middle class consumption. These figures are currently 28% and 23%.

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

Mr. Pyun, I am trying to share the time I have with the other witnesses.

[Pierre Seïn Pyun]

These are engines of growth for aerospace and rail transportation.

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

I imagine that these will be engines of growth for everyone here in Canada. The growth of the middle class will be good for everyone.

Ms. Labrie, I would like to thank you for being with us today. What you are doing is very interesting.

You said earlier that the prospect was increasing since Asia is an enormous potential market. Do you have an idea of the market you are able to join? Have you done a study on what it might bring you in exports or investments in the region?

[Marie-Hélène Labrie]

Our business model is based on two things.

We try to develop factories in these countries. We are already in discussions with some industrial partners. Here, we are talking about exporting our technology and investing in partnership with local investors in some factories. Some countries are more favourable in this respect.

In general, the issue of waste management is an issue for all these countries. As for biofuels, seven countries that signed the TPP already have regulations on renewable biofuels. So there is already demand for our product.

Our model also enables us to manufacture in Canada and to sell and export our final product from our factories. For example, factories in Alberta might have an export market and a local market where our biofuels might be used to reduce Canada's greenhouse gas emissions. There might also be good markets for the export of our products. In that respect, seven of these countries represent a favourable market for the final product.

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

Thank you.

Mr. Coutu and Mrs. Cloutier, welcome.

Five minutes to ask questions isn't much time.

I find the agri-food market very interesting. You should know that I worked in that area before getting into politics.

You spoke earlier about the Salon international de l'alimentation. I'd like to mention that I was quite involved in that previously. It's a great showcase for all our products and for everything we want to import. However, it's always important to make sure to have more exports.

Among the companies you represent and that export around the world, which ones and what kind are the most successful when it comes to exports? Is it related to certain products or how a company works to sell outside the country? Does it have to do with marketing?

[The Chair, Liberal, Mark Eyking]

You only have half a minute, so let them answer the question.

You have half a minute to answer.

[André Coutu]

Certain sectors, like pork, for example, are bigger than others. It's one of the major exports. Maple syrup is also obviously an important platform. As surprising as this may seem, we export cocoa through Barry Callebaut in Saint-Hyacinthe. Soya is another big export abroad. We're talking about millions of dollars here.

What distinguishes one exporter from another are the human and financial resources. You need to have good goals for good markets, and you need to dedicate the time required.

[Sylvie Cloutier]

Canada's reputation in agri-food is widely recognized around the world. This has particularly been the case in recent years with the crisis in Japan. Canadian products are seen as safe products and good to export. Canada has an enviable international reputation when it comes to food.