International Trade Committee on May 10th, 2016

[Voices]

Oh, oh!

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

On that, in terms of the research and development, how much has been done on product modification? Beyond a bottle of maple syrup, you've talked about sugar and the health consciousness and benefits of that. Can it be granulated? Can it be cubed? Is there much work in that area?

[Simon Trépanier]

Basically, about 10 years ago, the Quebec federation of maple syrup started to work with other associations in Canada in Nova Scotia, New Brunswick, and Ontario. We had a lot of subsidies from the federal level through agri-marketing and agri-investment to make sure that we.... At first, we knew that maple syrup was composed of sugar and water, but there was also 2% or 3% of something we didn't know. That is why we invested. It was to find out about the health benefits, which we did find in maple syrup. We hired one of the biggest specialists in North America when it comes to antioxidants and polyphenols. His name is Dr. Seeram, from the University of Rhode Island.

At first, the federal people asked us why we were hiring somebody in the U.S. to do research on Canadian maple syrup. Basically, he found about 60 to 70 antioxidants and polyphenols. He is a specialist in those compounds in food. He did work with blueberry, raspberry, and strawberry associations throughout North America. That is why he has credibility.

When he found what he found, we did some marketing with those issues.

Selling sugar in 2016 in developed countries is very difficult, because we are talking about diabetes problems and weight problems in our populations. How can we convince new consumers to buy sugar? People won't stop buying sugar, but if you give them a better choice, especially a Canadian one, why not? That is why we did invest, with the Government of Canada, in those types of research.

It is not over, because we used that research to do marketing and promotions, but in the end, we also have to find other ways to bring the news.

It worked in the past. Look at last year, 2015, which was a record year for the export of maple syrup to the world. We are quite sure that it was because we invested.

One problem we had a few years ago was that the previous government asked us to invest in marketing in new countries, especially the ones from the BRIC. When we compared those four countries, we chose to invest in India.

To start working with a new country where nobody knows about maple syrup was very difficult. Sometimes it is better to invest in countries that already know what maple syrup is, because it is easier to double the consumption with consumers who already know the product than with consumers who don't know about the product at all.

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

To add to that question, do you ever partner or work in co-marketing with other industries? For example, when we were in the west, we heard from the pulse associations. They also promote their product in terms of the health benefits.

Is there an opportunity, or have you pursued the opportunity, of working together with a market in the agri-food area in co-marketing for health benefits, especially in a market like Japan, with a growing middle class?

[Simon Trépanier]

We did not talk to other commodities, but maybe it can be done. One thing that is quite certain is that in Canada, because 90% of the maple syrup is coming from Quebec, the other associations don't have much money to invest. They did not invest much. They are all doing some marketing in their own provinces, their own jurisdictions, but when we are talking about investing in promotion elsewhere, they don't have enough producers to pay for that.

That is why, in the end, it is difficult to have a strong Canadian maple syrup group.

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

Thank you.

My next question is for Mr. Groleau. It is quick.

[The Chair, Liberal, Mark Eyking]

It would have to be very quick.

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

When do you foresee a Quebec market in terms of growing hydroponic lettuce and other produce?

[Marcel Groleau]

Greenhouse production in Quebec is growing. While not necessarily hydroponic, production is increasingly focused on organics, so it's organic greenhouse production. Right now, the demand for organic products is higher than the demand for hydroponic products.

[The Chair, Liberal, Mark Eyking]

Thank you.

We are going to move over to the Conservatives.

Mr. Van Kesteren, you are up for five minutes.

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

Thank you, Mr. Chair.

Thank you all for being here. This is very informative. I didn't know that about maple syrup. It's interesting.

We too have a large collection of greenhouses in Leamington—I'm sure you're aware of that—that I understand there's a new market for those products.

I guess I'm a little bit of a hippie farmer. I'm actually not a farmer by trade, but I have a small farm and I do enjoy it. I wish I could just live on a farm, as well.

I have an affinity and I have a little bit of sympathy for what you're saying, Mr. Bourbeau, with regard to the dairy industry. I have to tell you, too, that my oldest son would go into dairy in a heartbeat, if he could. One thing stops him, and that, of course, is the quota system.

In light of that, I know our former agriculture minister—he's a member of this committee but couldn't be with us this morning—would always point out that when we came into power in 2006, there was a crisis in agriculture. Agriculture was defined as waiting for the cheque in the mailbox. Farmers really did need that support. We made a conscious effort as a government to move that direction away from support and toward the marketplace. We've been, I think, fairly successful, but not in dairy, it appears. At least that's what you're telling me, and that's what I'm hearing as well.

First, how can we move the dairy industry so that it reflects more of what's happening in the rest of agriculture? For instance, in Mr. Hoback's part of the world with the grains, and in my part of the world with the grains and also some of the vegetables, we've seen...I'm not saying no challenges, but there's a renewed optimism and there's a vision that there's so much potential and we're seeing so much innovation. How can we see that same result in the dairy industry?

Second, how can we give people like my son the opportunity to get into the dairy industry and somehow bypass that enormous cost of supply management?

[Alain Bourbeau]

Thank you for your question.

As I was saying earlier, agriculture is a very capital-intensive sector. To produce $1 in income, you easily have to invest $7 or $8. This is not like in the service sector where you can start a company with a few dollars.

The Canadian dairy sector is marked by its great stability. I invite you to look at the document I submitted to you. In appendix 2, one of the tables shows how farm prices in Canada are behaving in comparison to those in the United States. The diagram shows the characteristics of the Canadian dairy sector and the American dairy sector. On the Canadian side, the producers’ income is very stable. On the American side, it is very unstable. For business people, instability means a lot of risk. If production prices are unstable, your son will have much more difficulty obtaining financing because his income is no longer predictable. In addition, when risk is high, interest rates are very high. So we have to consider the Canadian supply management system essentially as a way of managing risk.

As for innovation, I have to insist that, in the last 30 years, the system has been constantly evolving. There is often a tendency to think that it has remained static but, each year, the industry makes great efforts to come together. We bring together discussion groups and we also have ways to come together with our buyers on the topic of production on a Canadian scale. So there is interaction. We ourselves are investing in research, in collaboration with universities. In Quebec, the major processors are particularly involved in research. That cohesiveness is where a lot of innovation starts. From that perspective, the Canadian dairy sector compares very favourably to other dairy sectors around the world. It truly is characterized by the predictability and the stability of its income, factors that contribute to its development.

In conclusion, I would say that we need all the various forms of agriculture in the world in order to meet the needs of the population in the coming decades. They cannot all have the same model as American agriculture or New Zealand agriculture. We need agriculture such as we have in Canada, distributed over the huge territory of a big country. If we want that agriculture to survive, we need an agricultural policy like the one currently in place.

[The Chair, Liberal, Mark Eyking]

Thank you, sir. We have two short sessions now.

You have three minutes, Madam Lapointe.

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

Thank you very much, Mr. Chair.

Mr. Groleau, my question to you ties in with what Mr. Bourbeau said.

Earlier, you talked about the OECD and said that investments in research and development had gone from 2.16% to 2.37% while Canada’s investment had gone down. I can’t remember over how many years anymore.

In other countries, has there also been a reduction in research and development investments? Is Canada the only country to have reduced its investments in this area?

[Marcel Groleau]

The 2.16% to 2.37% figures represent the average of OECD countries, which includes 30 or so countries, if not more. It is quite a significant group of countries. In Canada, investment went from 1.99% to 1.61% between 2004 and 2014. That is substantial.

More concretely, I explained that, given the size of our agri-food sector, if we want to catch up to the OECD average, Quebec would have to invest $85 million more per year in research and development. That is for Quebec only; I do not have the figures for Canada. For Canada, it is at least three or four times that amount.

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

I had that figure.

You talk about the OECD average, but we are not able to say whether any other countries have done what we did and dropped—

[Marcel Groleau]

Europe and the United States especially are investing much more than we are in research and development. Canada made the choice a few years ago to reduce investment in this area. A number of research centres and experimental farms were closed and the activities in other centres were significantly reduced. Clearly, there are long-term repercussions on the productivity of the companies, which depend on the research done in those places.

The research farms were strategically located. For example, in Kapuskasing, one farm was conducting research specifically focused on production in the north and on ways to improve productivity under those conditions. Other research was taking place more in the dairy sector. Those farms play an important role and their support has been greatly reduced.

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

Thank you very much.

This is very interesting and gives us ideas for solutions. In fact you are all giving possible solutions. I am pleased to hear that you were consulted when the negotiations took place. We have heard from a number of witnesses, the majority of whom have told us that they were not invited to provide their points of view at the outset.

[Marcel Groleau]

We have always been very close to the negotiators. It is also every group’s responsibility to become involved and to invite the negotiators to provide information on the status of the negotiations. It is everyone’s responsibility.

Another element is at play in import control. This is this reciprocity of standards. More and more, Canadians have societal requirements. They are in areas like animal welfare, the environment, the workers, the minimum wage, and so on. We do not impose any reciprocity of our societal norms on the products we import. That makes things more and more difficult.

Take milk-fed veal, for example. Under the agreement with Europe, Canada is going to import more meat from Europe. The Dutch are very big in milk-fed veal. They have already opened offices in Montreal. The same calf in Canada costs $150 in order to be competitive with the Dutch in our market, especially the American market. However, the Dutch have access to antibiotics that are banned in Canada and they continue to use them. But we are going to import that veal as if there were no issue.

I could give you other examples. There is American pork coming into our market. There are also strawberries from California where they use fungicides that are prohibited here. This is all going to be providing competition in our markets. There really is a problem with the reciprocity of standards, and we are not even talking about animal welfare, and things like that.

I am asking the committee to look into this matter because it is really important.

[The Chair, Liberal, Mark Eyking]

Thank you, sir.

We're going to move over to Mr. Hoback.

[Randy Hoback, Conservative, Prince Albert, SK]

Thank you, Chair, and thank you, panel.

Maple syrup excites me, and that is the reason I say, Chair, that we should talk to Tim Hortons and accept their apology about not having maple syrup, and maple syrup blend, with the iced cappuccino. We should write a letter to Tim Hortons on that for sure.

I have a quick story before my question. I was down in South America. I used to work for Case on the New Holland side, and I took maple syrup with me as a gift wherever I went. There was one sugar cane farmer just outside of Ribeirão Preto, and I gave him a bottle of maple syrup. He didn't know what it was. He wasn't sure. He asked what he should do with it, and I said, “Well, put it in your coffee”. Two weeks later he emailed me and asked if I could send him some more of that maple syrup because he didn't like his sugar anymore and wanted maple syrup in his coffee.

I look at that, and I see all the examples of where we can use that as a sweetener around the world and how people embrace it. I think the industry is an untapped gem that has lots to go to. That's my little story about maple syrup. When I travel I take salmon, maple syrup, and of course blueberries from Saskatchewan, or Saskatoon berries, with me to give away as gifts.

To finish off with a question, I want to stress the importance of this deal with the dairy sector and the compensation factor. You talked about the impact it's going to have on your sector and on the smaller farms especially. You really laid out the argument to have a proper compensation package, because they are going to get hurt, and I think it's the responsibility of government to mitigate that loss as much as it possibly can.

As a final word—because I know the chair is going to cut me off here quickly—how important is that compensation, and not seeing it in the budget, and not knowing if it's there? How alarming is it to you and your producers that it may not be coming?

[Alain Bourbeau]

Thank you for your question.

Actually, our members were very concerned when they found out that those programs, announced in October, would not be implemented. We are told that they are not cancelled, but they are being reviewed. Our president, Mr. Letendre, and myself were invited to take part in a consultation at the end of January or the beginning of February. On that occasion, we were shown the basis on which those programs were designed. We were asked to submit our comments, which we did. We were told that a report would be produced at the end of February or the beginning of March. As yet, we have received nothing.

You are right; it is a major concern for us, because these agreements are going to be ratified, probably in the coming year. In the case of the CETA, we are talking about 2016, with the first imports supposed to be arriving here in 2017. The timeline for the TPP is similar.

Apart from the compensation, something else may be very disruptive for the industry. We do not know how the additional tariff quotas are going to be administered. We would also like to get information from the government as quickly as possible. We would like to know who is going to be holding those tariffs, how they will be administered and how it will all be managed and distributed, so that we can try and minimize the impact on the stability of the industry.

So, yes, we are very concerned about the lack of any signals. We hope to receive them as quickly as possible

[The Chair, Liberal, Mark Eyking]

Thank you, Mr. Hoback.

That wraps up our third panel. I thank all the guests for coming here and for the good information when you were going back and forth with the MPs.

We will break for half an hour and then come back at one o'clock. I still encourage those of you in the audience who want to say a few words or make comments in our last panel to register at the front.

Thank you very much.

[The Chair, Liberal, Mark Eyking]

We're going to get started with our final panel from Montreal. We're continuing our House of Commons trade committee's consultation process on the TPP.

For our last panel, we have Bombardier, the Conseil de la transformation alimentaire du Québec, and Enerkem.

From Bombardier, we have Pierre Seïn Pyun. Welcome.

Sir, you may start. You have five minutes to give us your take on the TPP.

[Pierre Seïn Pyun, Vice-President, Government Affairs, Bombardier Inc.]

Thank you, Mr. Chair.

I propose to make my comments in both official languages, if that's okay with you.

I will give my presentation partly in French and partly in English.

Thank you for giving us the opportunity to offer you our perspectives on the Asia-Pacific region and, more specifically, on the Trans-Pacific Partnership agreement.

I would like to thank you for the opportunity to present to you our perspectives on the trans-Pacific partnership.

I thought that before doing so, I could say just a few broad words on Bombardier.

As you know, Bombardier is headquartered here in Montreal. Actually, our corporate office is located just next door. We're the only manufacturer of both planes and trains.

We have four business units. Bombardier Transportation is our rail division. We also have three business units on the aerospace side of our business, namely business aircraft, commercial aircraft, and aerostructures and engineering. Our two sectors of activity, aerospace and rail, are about the same size in terms of the number of employees.

We have around 70,000 employees around the world, including 24,000 employees here in Canada, and it's the same in terms of revenues generated by those two sectors, aerospace and rail transportation.

I think from our perspective, we should look at the TPP in the broader context of growth and opportunities in Asia. There's no question for us. Asia-Pacific is a growing region, a very significant market. Currently we derive around 13% of our revenues from the Asia-Pacific region. We have around 3,500 employees in the Asia-Pacific region, and we have a significant presence in almost every TPP country. Of course, that would include the U.S. and Mexico.

I won't go into a lot of details, but in the U.S. we have around 6,000 employees, four manufacturing sites, numerous service centres, and a large number of suppliers in almost every state of the U.S.

In Mexico, we have around 3,500 employees. We have manufacturing sites for both rail and aerospace.

In Australia, we have around 1,000 employees. We have a very strong rail presence, with manufacturing and service sites in Dandenong in Melbourne and also Brisbane. We have over 200 aircraft in operation in Australia. They are commercial and business aircraft.

We have a strong presence in Singapore as well, with around 200 employees. It's our service hub for aerospace for the region, with a maintenance centre that we own and operate in Singapore, and we've been involved in metro and signalling projects.

Malaysia is the regional headquarters for our systems division in rail. It's based in Malaysia. We have close to 100 employees and we've been involved in transit projects for Kuala Lumpur airport through the Kelana Jaya line in Kuala Lumpur, just to give you a couple of examples.

The numbers in our market forecast for the region across our business unit are quite staggering. For rail transportation, we anticipate, in the next three years, a market around the size of—in terms of accessible market—$24 billion U.S., and that would include rolling stock projects, signalling projects, and services projects.

For commercial aircraft between 60 and 150 seats, the categories in which Bombardier competes, we anticipate in the next 20 years a market for around 1,100 aircraft in the region, and that excludes China and India. For business aircraft, we anticipate a market of around 350 business aircraft in the next 10 years in the region. Again, that forecast excludes China and India. We have separate numbers for those countries.

Certainly for us there are very significant drivers for the market in the region, and I will name two: the growth of the middle class and the urbanization rate in the Asia-Pacific region. According to some sources, by 2050 Asia will have 50% of the world's population and 50% of its GDP. Of course, air traffic growth tracks very close to GDP growth, and with urbanization, you of course have increasing demand for urban transit projects, including rail projects.

Currently the U.S. and Europe represent close to 60% of air traffic in revenue passenger kilometres, but there will be a shift in the years to come, and Asia is expected to become the first region in terms of air traffic growth by 2030, using the same measure.

Of course, currently there is softness in some of those countries. I mean, China has a new normal growth rate of around 7% or 6% instead of the double-digit growth that we've seen in the last years, but looking at the long term prospects, I think the projections are still extremely impressive in terms of growth in the region. The economy is certainly shifting from an investment—