International Trade Committee on May 11th, 2016

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

That is your answer, Mr. Serinet. Thank you, but I do not agree.

Quebec's economy is changing. We are increasingly looking to globalization, and infrastructure is extremely important. We have announced $50 million in funding for the airport. We are also meeting with the people at the Port of Quebec later today. We have provided $60 million to develop the Port of Quebec.

Mr. Aubut, what is the importance of these major infrastructure components to the future of the Quebec City region?

[Alain Aubut]

You mentioned infrastructure, but in terms of innovation, the government has supported the National Optics Institute, the INO.

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

We are talking about $9 million per year over five years, for 15 years now.

[Alain Aubut]

That's right.

In the case of optics-photonics, nearly 100 per cent of sales are outside the country, in Asia, in particular. Actually, they are selling pieces of something, so for the manufacturing sector, that is very good for the region. This is, indeed, innovation.

There are other sectors as well in research and development, for example, the water industry. At Laval University and the Institut national de la recherche scientifique, the INRS, there are extraordinary projects in this field.

When we talk about globalization, we have to look at all opportunities for innovation. We need to be familiar with the products that have been developed, but, once again, we have to go back to information. We have to determine what channels are the easiest and simplest. With the help of the INO, companies have developed in Quebec that are known around the world, because of their very innovative, high value-added products. I think we can do the same thing in other niches.

Since we are talking about infrastructure, I would like to say something about another project. We met with Mr. Desjardins-Siciliano to discuss an HFT in the in the Quebec City-Windsor corridor. I don't recall who comes from Windsor, but I met him a little earlier. Accessibility and mobility for people is also a very important issue. We are talking about the Trans-Pacific Partnership, but the issue of people's mobility is also very important and the government has to continue investing in infrastructure.

[The Chair, Liberal, Mark Eyking]

Thank you.

That wraps up our first panel for this morning. I would like to thank the witnesses for coming here early and getting us started. We had a very lively conversation. It was great.

Now we are going to break for 10 minutes, and then we will be back with our second panel.

[The Chair, Liberal, Mark Eyking]

Good morning, everyone, and welcome to our trade committee.

Our committee is doing a dialogue and a report on the TPP and how it affects Canadians. We've been travelling across the country. We did the western provinces and now we're doing Quebec and we're doing Ontario tomorrow. We'll be doing the Atlantic provinces and reaching out to the territories in the fall.

With us today we have Fruit d'or. We drove by your place yesterday, and hopefully we can go in and see it.

We also have the pork producers and the poultry producers with us, and I think the manufacturers are with us as well.

Each group has five minutes for a presentation, and then we have a dialogue with the MPs afterward.

We will begin with Fruit d'or. Go ahead, sir.

[Sylvain Dufour, Vice President, Sales, Marketing & Innovations, Fruit d'or]

Good morning, Mr. Chair.

I would like to thank the committee members for having me this morning.

It's a pleasure to appear before you, on behalf of Fruit d'or, about the Trans-Pacific Partnership.

In 2000, my company, Fruit d'or, was founded in Villeroy, in the Centre-du-Québec region—a region where cranberry production has developed tremendously. Thirty-five years ago, it was practically a collection of vacant lots. Today, a visitor would find that nearly 70 cranberry producers have set up operations in the area since then.

Fruit d'or specializes in berry processing—specifically, cranberries and blueberries. The products in greatest demand from us are dried cranberries and dried blueberries. We also produce blueberry and cranberry juices and concentrates. We already sell our products to some 50 countries, so we rely on exports for our company to grow. More than 85% of our earnings are from exports. We export to Asia, the U.S., and Europe—pretty much everywhere.

Fruit d'or has more than 225 employees. They are the people who work in our plants and offices. If the company's producers and suppliers are added to that count, we are talking about nearly 500 jobs directly tied to exports and market development.

I can tell you right now that Fruit d'or supports the Trans-Pacific Partnership. Our industry, berry production, faces protectionist measures, including taxes, on export products. On frozen blueberries, in particular, you'll find such measures in Japan, Vietnam, Malaysia, Australia, and New Zealand. The taxes on processed products are sometimes quite high. Malaysia, a country we're already exporting to, is an example of this.

The United States and Chile are our main competitors. Like Canada, they also produce dried cranberries and dried blueberries. The importing countries already have free trade agreements with Chile and other countries. Earlier on, I was chatting with the people from Desjardins Group, and I gave them an example of what this can entail. Last year, we lost one of our biggest European customers, because of the free trade agreement that Chile has with Europe. We are subject to a 17.6% tax on every pound of dried cranberries we send there, whereas Chile is tax-exempt. As a result, Fruit d'or lost a customer that accounted for $1.7 million in annual sales. Unfortunately, there wasn't much we could do to offset a 17.6% tax. We can find efficiencies, but there's a limit to what can be done.

Quebec agriculture, as a whole, is a topic of frequent conversation. It's a well-known fact that the dairy industry is very big in Quebec. I, myself, come from a family of dairy farmers. My brother is a dairy farmer. We often have lively debates about opening up markets versus keeping the protection structures currently in place. One of the arguments I often bring up is that we have to consider what Quebec agriculture will look like in 10, 15, or 20 years. Will dairy continue to be the driver of agricultural development, or will other kinds of farming take over that role?

The Quebec cranberry industry is a good illustration. Thirty-five years ago, there was no such thing. Today, it employs more than 2,000 people in the Centre-du-Québec region alone. So I think there's an opportunity for many businesses to achieve success in foreign markets, if as many constraints as possible are eliminated.

As far as my own company is concerned, each distortion or barrier that limits access to foreign markets poses its own set of problems. In some countries, such as Vietnam, we have trouble selling cranberries because buyers don't know what they are. It's the first time they are seeing the fruit. If we go to Japan and talk to Japanese people about dried blueberries, it's a different story altogether. There, we hear stories dating back to the Second Word War. Apparently, when American fighter planes were shot down by the Japanese, a basket of blueberries was always found in the wreckage. So the Japanese figured that the pilots had these blueberry baskets because blueberries were excellent for eyesight. That was something I learned in Japan.

That said, as a Canadian executive with a company specialized in berry processing, I can tell you that the image of Canadian products, and of the wide open spaces we live in, gives us a head start in relation to many international competitors. I've been talking to you about the little Quebec wild blueberry, but, as I mentioned, the good old cultivated blueberry is ubiquitous pretty much worldwide and is competing against mine in the marketplace.

So, having products—

[The Chair, Liberal, Mark Eyking]

If you want to finish up, you have a few seconds.

[Sylvain Dufour]

Yes. I'll just take 30 seconds.

Actually, I was just going to say that having products that enable us to compete on equal terms, without trade barriers, means we're quite capable of taking our place and succeeding in international markets.

[The Chair, Liberal, Mark Eyking]

Thank you, sir.

We're going to move to the pork producers for five minutes.

Go ahead.

[David Boissonneault, President, Les éleveurs de porcs du Québec]

Mr. Chair, honourable committee members, good morning.

My name is David Boissonneault, and I'm the president of Les éleveurs de porcs du Québec. I'm here with Ms. Leruste, who is in charge of communications with our farmers.

My organization represents 3,300 pork producers throughout the province. The Quebec pork industry employs 26,500 people province-wide, generating $2.5 billion in economic spinoffs, with benefits for all of Quebec's regions. Quebec is the leading pork-producing province in Canada, accounting for 40% of the country's total production. We represent many slaughterhouse operations in Quebec. Our collective marketing system enables us to slaughter 100% of the hogs raised in Quebec, generating added value and a strong value chain for our regional economies. In all, Quebec exports 70% of its production. Like my colleague also said, we rely heavily on exports. Exports from Quebec account for 45% of the value of Canadian exports. Over the past five years, Canadian pork has been exported to more than 125 countries. That's 9% of the global trade in pork.

Pork meat is Quebec's most exported bio-food, with exports amounting to $1.45 billion in 2015—far ahead of sectors like chocolate, soybeans, and maple syrup. In fact, the pork sector generates a positive balance of trade comparable to that of the lumber and hydroelectricity sectors. In this regard, free trade agreements are crucial to the vitality and dynamism of our industry. That is why Les éleveurs de porcs du Québec welcomes this trade agreement, which encompasses 800 million consumers and 40% of the world economy.

According to various analyses conducted for the Canadian Pork Council, the TPP will mean more than 4,000 jobs and $300 million in exports. If, instead, the agreement is not ratified, our exports and jobs could decline. A recent study, published by the C.D. Howe Institute in April 2016, shows that pork is one of the bio-food sectors that would benefit the most from such an agreement.

Thanks to the agreement, Quebec pork breeders will be able to compete on equal terms with their American competitors. In my opinion—and I agree with my colleague from Fruit d'or in that respect—this is an important consideration. If we're to be competitive, it's essential that we have such tools.

One of the world's major markets is Japan. Already our second largest market, it represents 18% of our pork meat exports. The agreement should allow the Quebec pork industry to maintain its capacity to export pork meat to Japan on terms competitive with those enjoyed by the U.S. industry, our main competition.

All this would also help us position ourselves advantageously in relation to countries that are not part of the agreement, like Brazil and Denmark, which are pretty ferocious players in the export marketplace.

I am thinking, among other things, about Olymel, which has offices in several Asian cities; F. Ménard, which has just invested several million dollars in a plant so it can export more to Japan; Lucyporc, which exports 90% of its production to Japan with its famous Nagano Pork; and Aliments Asta and Viandes DuBreton, which also have a major presence in the export marketplace. It's worth noting that Japan recognizes the high quality of Quebec pork. The most valuable cuts are exported there, making it the most lucrative market for Quebec pork exporters.

Furthermore, the TPP would help build business ties with other member countries, such as Vietnam, a market with 90 million consumers. Vietnam has the second highest consumption of pork per capita, after China. Based on FAO and OECD projections, Asia's economies are set to grow considerably, and in so doing, they're expected to increase their pork consumption by 14% between now and 2020. In terms of tapping these markets, Canada, as a founding member of the TPP, would be able to negotiate the terms of entry for other fast-growing Asian countries interested in joining—countries like the Philippines, Thailand, Indonesia, and perhaps even China.

I was hoping to make a few other points, but I'll wrap up. Let's just say that it would be hard to overstate how important exports are to us.

A sector such as ours depends on trade agreements and market access in very concrete ways. I believe I've made that case with you today. But the government must understand that a comprehensive strategy is needed. Market access is important, but in order to seize the opportunities and maximize our industry's potential, we must have all the necessary tools. Our industry needs major investments in areas like risk management, research, and animal health and welfare. We have some catching up to do in that regard.

It's important to work as part of a comprehensive strategy, and within the framework of the agreements, but it's also important for the government to implement strategies that support the development of our pivotal industry players.

Thank you, Mr. Chair.

[The Chair, Liberal, Mark Eyking]

We're going to move to the poultry producers. Please go ahead.

[Pierre-Luc Leblanc, President, Les Éleveurs de volailles du Québec]

Thank you very much.

I appreciate this opportunity to express our point of view on the Trans-Pacific Partnership agreement.

Our organization, Les Éleveurs de volailles du Québec, brings together 814 chicken and turkey producers in Quebec. In Quebec alone, our industry employs 25,000 people, accounting for nearly $2 billion of Quebec's GDP.

Our organization understands that the signing of a trade agreement like the TPP means major economic spinoffs for Canada. And we have always supported the initiative. At the same time, we have a supply management system, and we've been consistent in our requests that the Canadian government limit the damage that the TPP could cause to supply management.

Canada imports much more chicken than the countries that have ratified the TPP, including the United States. That has an impact on the prospects those these countries can offer. We feel there's a question of fairness here. It's important that the environment in which the agreement is implemented be fair. If the agreement that has been signed is ratified, foreign access to our chicken market is expected to increase from 7.5% to 9.6%. For turkeys, it will increase from 3.5% to 5.5%. This additional access will have major economic consequences for Quebec and Canadian poultry farmers. It could result in the loss of 2,600 jobs and cut $175 million from our GDP.

That would clearly be a major blow to the poultry industry in Quebec, and all other parts of Canada. But the problem could be attenuated by eliminating the circumvention of import controls and implementing a compensation package.

Agriculture Canada announced such measures on October 5, 2015. Specifically, the government announced safeguards and much more stringent border controls. In fact, if those controls are applied, the financial impact on Canadians will be much less serious.

[Martine Labonté, Director of Economic Affairs and Programs, Les Éleveurs de volailles du Québec]

A bit more specifically, I would add that the news release we received from Agriculture Canada on October 5 contained various commitments regarding three import control circumvention techniques.

The first commitment is about the duties relief program. The program enables Canadian processors to import, process, and re-export products if it's done within a four-year period. Currently, 96 million kilograms of chicken come through under that program. That's equivalent to 9% of our production, and it's a major issue for us. We suspect that a portion of those products are not re-exported. A program intended for re-exports already exists. It's called the import for re-export program, or IREP. It's truly intended for supply-managed products. So there's a duplication here, in our view. Removing supply-managed products from this program would really be a disengagement, and we urge the government to maintain its position.

The circumvention involving so-called spent chicken imports is also a very serious problem for our industry. Here is what's happening. Chicken is coming into the country as "spent fowl", when the importation is, in fact, fraudulent. Roughly 10% of our production is imported as "spent fowl." A portion of those imports is legitimate, but another portion is not. Based on the statistics at our disposal, in 2012-13, Canada supposedly imported more spent poultry breast meat than the entire U.S. production of such meat. This is a strong indication of fraud. We therefore ask that this government, in keeping with the announcement made in the October 5 news release, truly put mandatory certification in place for spent poultry imported to Canada—it needs to be certified—and that the government use the DNA tests developed to identify which chicken is spent.

The other import control measure that is needed should address specialty defined mixtures—that is, the use of sauces or dressings in products containing 87% chicken or less. A few businesses are using a subterfuge: they put more than 13% worth of sauce in chicken wing boxes so the product is no longer subject to the same tariff. That's another problem the government should take care of.

I will allow Mr. Leblanc to conclude.

[Pierre-Luc Leblanc]

I'll conclude quickly, because I realize time is running out.

Poultry farmers understand why the TPP was signed. We know the government has worked hard to minimize the impact on supply management. Like our colleagues, we know the agreement will stimulate job creation, and we are not opposed to that. However, to minimize the negative repercussions, border controls will be very important. They can reduce the adverse consequences and create jobs in Canada, which is very important to us. We are pleased with this agreement, but we seek to reduce the negative repercussions through import control. Thank you.

[The Chair, Liberal, Mark Eyking]

Merci. Thank you very much for the presentations.

Our last presenter is from the manufacturers and exporters of Quebec, and we have Monsieur Tétrault.

Go ahead, sir, for five minutes.

[Éric Tétrault, President, Manufacturiers et Exportateurs du Québec]

Thank you, Mr. Chair.

Honourable committee members, Mr. Lebel. Manufacturiers et Exportateurs du Québec—MEQ—is pleased to speak today on behalf of its 900 members in Quebec and more than 20,000 Quebec manufacturers.

As you know, manufacturing is the largest sector of Quebec's economy, and Canada's. It accounts for 12% of GDP. In Quebec, it employs 550,000 well-paid workers in jobs that add value. Now that our natural resource sector cannot act as the driver it was just two years ago, the manufacturing sector's contribution is even more essential to the Quebec and the Canadian economy.

It's quite simple. Quebec's manufacturing sector cannot prosper if it's confined to a small economy such as ours. To grow, we need to export. And we are already doing that. More than half our production goes elsewhere. Sometimes, we're a part of an American manufacturing chain. We also export finished and semi-finished goods worldwide. It's important to understand that manufactured goods account for 75% of all Quebec exports. Although the U.S. market remains a priority for us, more and more Quebec manufacturers are considering opportunities elsewhere in the world.

So we obviously support agreements that will allow the free flow of goods, provided those agreements give our manufacturers access to foreign markets on a basis equal to the opportunities our competitors have to penetrate the Canadian market. On a strict reading of the TPP's provisions, that access is being given. I should also mention that our support for agreements of this kind is predicated on the assumption that they're not brought in merely to support the resource sector, adding obstacles to current agreements such as the one we have in place with our U.S. and Mexican neighbours.

Not surprisingly, MEQ and its national organization, Canadian Manufacturers & Exporters, have asked for and supported the implementation of the Trans-Pacific Partnership. We are the main advocates for this kind of agreement in Quebec, and you can count on us to continue to be so in the years ahead. The PowerPoint presentation that I've attached sets out the numerous opportunities for Quebec, which you no doubt know by heart.

We do have some reservations that I'd like to discuss today. First, there are two reservations about the agreement itself. Obviously, we're concerned about U.S. protectionism as reflected in the Buy American Act, notably with respect to American public procurement. That is the first reservation.

The second reservation is that we would have wanted the international tariff reduction phase to follow the same timeline applicable to American manufacturers, and for an effective mechanism to be put in place to counter currency manipulations that pose a medium-term and long-term threat to us. We saw that sort of thing this year with China, and we hope that the space we carve out for ourselves will be safe from manipulations of that kind, engaged in by certain authorities and countries. Those are our reservations about the agreement itself.

I would also like to share some important reservations we have about the choices we'll be making here, in Quebec and Canada. If we choose well, we will undoubtedly find it easier to overcome the obstacles. So the reservations I'm about to mention are not about the agreement itself, but about the choices facing us in Quebec and in Canada.

I want to emphasize that, although these treaties are positives for Quebec and Canada, they are only a framework. We need to know how to take advantage of that framework. The main prerequisite for that is a strong local manufacturing base. But Quebec does not have that. Compared to businesses elsewhere in the world, Quebec businesses are not particularly competitive. Quebec is ranked tenth in Canada for productivity, and that's mainly because our processes aren't innovative enough. They're not sufficiently automated or robotics-based. And we don't have all the skilled labour we need to be able to count on. We are therefore concerned that this government has made strong commitments to the knowledge economy and green technologies, without, first and foremost, supporting its traditional manufacturing sector.

I will conclude on this, Mr. Chair.

That is why my first reservation is very important. If we want Canada to be able to profit from these agreements, we have to establish a much stronger manufacturing base and resolutely commit ourselves to a culture of innovation, the likes of which has never really been seen before, either in Quebec or in Canada.

My second reservation is about the fact that we have to provide our entrepreneurs with much more education. We therefore need much more support from Canadian authorities than they have provided up to now. We must be able to go and see people in the field. If we want to be competitive, it will take more companies, which will have to be larger, more innovative and more ambitious. It is a role that we are prepared to play in collaboration with the government.

I could go on for hours on this, Mr. Chair, but since you want me to conclude, I will finish here for now.

[The Chair, Liberal, Mark Eyking]

Thank you for the presentations.

Before we open up for dialogue with MPs, I have a question for the manufacturers.

When we drove up yesterday, there was a big complex outside Drummondville where they make buses. What percentage of what they make there would be exported out of Canada?

[Éric Tétrault]

I'd say about 50%.

[The Chair, Liberal, Mark Eyking]

Would most of that go to the United States?

[Éric Tétrault]

Yes. Overall, 70% goes to the United States. Half of our members are exporters.

There is a reputation in Quebec that we are big exporters, that we're world-class exporters, but that's not the case. Seventy per cent of our exports go to the United States. Of these exports, most are $1 million or less ion value. That means we're not exporters per se: we're part of fabrication chains in the U.S.A.

Mexico, which is gaining on Canada in technological advances, is the number two exporter of products to the U.S.A, so it's not going really well for us. We need to become exporters. I think Quebec and Canada have a good chance in the next five to 10 years to become world-class exporters. Never in our history have we had such a good window.

We'll be part of 51 agreements. Canada and Quebec will have agreements with Asia-Pacific, the European Union, and the United States. The U.S.A. doesn't even have an agreement with Europe. We have a great opportunity to become a world-class exporter. I wouldn't believe it if in 10 years' time we hadn't gained some advantage from it.

First and foremost—

[The Chair, Liberal, Mark Eyking]

Thank you. I'm over time.

I appreciate it. The members will be saying I'm taking part of their time. You'll have lots of time to expand on that point.

We're going to start off with questions.

Go ahead, Mr. Lebel.

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

That's not only the U.S.A., but America.

I will repeat what I said yesterday. Mr. Tétrault, I will come back to you in a while, but those who put food on our tables deserve all our respect. They make it possible for our families to grow up with food that is safe.

I want to congratulate you for what you do every day. I know that it is not easy and that the challenges are great. Certainly, I know that the blueberries you were talking about, Mr. Dufour, are the best. I will not ask where they come from. Let's say that they may come from New Brunswick. Ms. Ludwig was telling us about that yesterday. We know how big the challenges are.

My question goes mainly to the hog producers and to Mr. Dufour. How do you react to the fact that the sectors under supply management—milk, chicken and eggs—are being provided with compensation and other sectors are not?

I know that compensation is important, Mr. Leblanc, I will get to you later. Has this caused any squabbling in the world of agriculture? How has it gone over?

[Sylvain Dufour]

My answer is no, it does not bother me at all. Since we started our company, we have always been in a free market situation without necessarily having support or protection programs. What I think is important is to protect the existing rural fabric. Existing companies who have benefited from these protections have been very major partners in rural communities. So, if only to help them make the transition that has to be starting, I feel that we should let those companies do so as smoothly as possible, as Mr. Gagnon from the Caisses populaires, I think it was, said earlier. If those measures allow them to do so and to soften the blows, I am completely in favour and I see no problem with it.

[David Boissonneault]

We have always supported balanced negotiating. Canada is in negotiating mode and I feel that we have to negotiate these agreements strategically. As I was also saying, our global vision has to be a strategic one. How are we going to roll it out and how are we going to profit from it? It is all very well for us to sign all the agreements we can, but if we are not strategic in terms of our agricultural policies, we will not be able to benefit from them. Every other country has a global strategy: the United States, the European Union, every country has strategies. It must all form a whole and not be one single tool. There must be a number of tools. Supply management and more protectionist policies are part of Canada's global strategy.