Evidence of meeting #30 for International Trade in the 42nd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was industry.

A video is available from Parliament.

On the agenda

MPs speaking

Also speaking

Fred Gorrell  Assistant Deputy Minister, Market and Industry Services Branch, Department of Agriculture and Agri-Food
Alexander Lawton  Director, Trade Compliance, Canada Border Services Agency
Robin Horel  President and Chief Executive Officer, Canadian Poultry and Egg Processors Council
Yves Ruel  Manager of Trade and Policy, Chicken Farmers of Canada
Caroline Emond  Executive Director, Dairy Farmers of Canada

Noon

Liberal

The Chair Liberal Mark Eyking

—but we want to hear from other stakeholders and our time is up.

Before I let you go, Minister, I'd like to recognize everybody in the room who came here today, the media, and especially our old friend, Mr. Barry Wilson, from The Western Producer. It's good to have you here, sir, keeping an eye on us as usual.

Thank you, Minister, for coming and dealing with all the questions that were thrown at you today.

We're going to suspend now and we're going to hear from the producers in a few minutes.

September 20th, 2016 / noon

Liberal

The Chair Liberal Mark Eyking

We have just under 40 minutes here, and I think this is a good segue.

We had the minister come in, and now we have the stakeholders dealing with this topic coming in. Today we have with us the Canadian Poultry and Egg Processors Council, the Chicken Farmers of Canada, and the Dairy Farmers of Canada.

I'm going to start off with the poultry. If you can keep your time as tight as you can so we can get some questions in, I would appreciate it.

Robin, welcome, sir. You have the floor.

Noon

Robin Horel President and Chief Executive Officer, Canadian Poultry and Egg Processors Council

Good morning. Thank you.

My name is Robin Horel and I am the president and CEO of the Canadian Poultry and Egg Processors Council. I thank you for the invitation to provide to the committee and other interested parties our perspectives on the Canada Border Services Agency's duties deferral program as well as the border circumvention issues with spent fowl.

Our organization, CPEPC, is the national trade organization for Canadian chicken and turkey processors, hatcheries, egg graders, and egg processors. Now in its 66th year, our council has member companies in every province of Canada. In addition to representing the interests of more than 170 Canadian poultry processors, egg graders, and processors and hatcheries, we have over 50 national and international industry partners who have joined us as associate members. To put it simply, my members buy live chickens, live turkeys, table eggs, and broiler hatching eggs from supply-managed farmers.

CPEPC member companies work within the supply-managed system for chicken, turkey, eggs, and broiler hatching eggs. Our members support the system, and we are committed to building the long-term competitiveness of the Canadian poultry industry. A foremost priority is to modernize the supply management system to ensure continued broad consumer support and mitigate processor risk and to better respond to market pressures and the competitive environment. The goal of the system for Canadian consumers is to ensure that they receive safe, local, high-quality poultry products while farmers receive a fair return for their efforts, all without government subsidies. The goal for my members, who purchase live chicken, turkey, eggs, and broiler hatching eggs from supply-managed farmers, is to have a fairly priced, dependable supply of the right product at the right time.

As the members of your committee know, supply management depends on three pillars: producer pricing, production planning, and import control. It is our belief that the import control pillar is being circumvented. We are on record with government as supporting efforts to intensify ongoing anti-circumvention measures that will enhance our border controls. For our industry these measures include preventing importers from circumventing import quotas by adding sauce packets to chicken products, eliminating imports of broiler chicken labelled as spent fowl, and excluding supply-managed products from the Government of Canada's duties deferral program.

This committee is concerned with two of these three measures: CBSA's duty deferral program as well as the issue of imports of broiler chicken labelled as spent fowl. The spent fowl issue is one that affects the chicken sector only. The duty deferral program can apply to all supply-managed poultry commodities but currently affects the chicken sector more than the other supply-managed poultry sectors.

I'll first refer briefly to the duty deferral program. CPEPC and our members support programs that contribute to the creation of jobs and innovation in the Canadian poultry industry. That includes programs that allow Canadian manufacturers to purchase raw chicken at internationally competitive prices, add value in Canada, and re-export that product. CBSA's duty deferral program is designed to do that, but so is Global Affairs Canada's import for re-export program managed by the trade controls policy department. The import for re-export program, IREP, is especially designed for products subject to tariff rate quotas and in our opinion is the correct vehicle for this type of activity for our industry. Therefore, CPEPC favours exclusion of supply-managed poultry products from the CBSA's duty deferral program.

That being said, it should be noted that industry requires an import for re-export program that is user-friendly for Canadian companies in the poultry sector in order to encourage economic activity in Canada while protecting our industries from potential TRQ circumvention. Therefore, the timing of elimination of poultry products from the duty deferral program must allow for any necessary changes to IREP. Companies currently using duty deferral will need adequate notice in order to allow for a smooth change to IREP. Our goal must be to ensure there is no impact on legitimate business.

I now turn to spent fowl. In the chicken industry, spent fowl is the term used for laying hens, either table egg-laying hens or hatching egg layers, that have reached the end of their productive life and are slaughtered, with the meat being used for many further processed chicken products. The properties of the meat make this product preferred for many processed products. In addition, this product is usually a much less expensive raw material for processed products.

Spent fowl is not part of the supply-managed chicken sector in Canada, which means that spent fowl can be imported into Canada tariff-free. I need to be clear about this. CPEPC and our members support the import of spent hens and spent hen meat because it contributes to the creation of jobs and innovation in the Canadian poultry industry. Canadian companies are among world leaders in producing many of these products for Canadian consumers and for consumers worldwide.

Our concern is with the broiler product that is labelled as “spent hen” and imported into Canada, thereby circumventing border controls. This fraudulent activity results in illegal meat on the Canadian market. The result is depression of the Canadian market, loss of opportunity for Canadian farmers to grow additional broilers, and for Canadian processors to process that product. We applaud what we understand is a current concentrated effort to address specific incidents of fraudulent imports of these products. However, on an ongoing basis we believe we need mandatory certification of the spent hen product for import into Canada as well as use of DNA testing.

In conclusion, our members operate within the supply-managed value chains. These systems have benefits and our members support them. We are, however, concerned with fraudulent import activity, and we support intensifying anti-circumvention measures that will enhance border controls. For our industry, these measures include certification and DNA testing to eliminate imports of broiler chicken labelled as “spent fowl” and excluding supply-managed products from the Government of Canada's duties relief program and putting them into IREP where they belong.

I'm looking forward to answering questions from the committee members on these two issues.

12:10 p.m.

Liberal

The Chair Liberal Mark Eyking

Thank you, Mr. Horel.

We're going to move over to the Chicken Farmers of Canada.

Mr. Ruel, go ahead, sir.

12:10 p.m.

Yves Ruel Manager of Trade and Policy, Chicken Farmers of Canada

Thank you, Mr. Chair and members of the committee.

I am Yves Ruel and I am the manager of trade and policy for the Chicken Farmers of Canada.

I would like first of all to thank you for inviting us to debate the important issue of import circumvention, in particular the case of spent fowl and the duties relief program.

To begin, we will provide a brief overview of our industry and our organization.

We represent 2,700 Canadian chicken farmers in every province. Our industry, which includes both farmers and processors, helps sustain 78,000 jobs. Every year, we pay $2 billion in taxes to the various orders of government.

Canadian chicken farmers are proud of their ongoing contribution to the country. We want to continue contributing to its growth. To maintain our success in recent years, however, an essential pillar of supply management must be strengthened, namely, import control, which is the reason for your hearings today on spent fowl and the duties relief program. These are very important topics.

I will now talk about spent fowl.

On spent fowl, we've seen over the years an increasing volume of chicken broiler meat being illegally imported into Canada as spent fowl. It was in 2012 that we saw for the first time pretty strong evidence of that, when the volume of imports from the U.S. represented 101% of the U.S. slaughter volume. As you can understand, this is not possible. First, they consume some fowl meat in the U.S., and they export to other countries than Canada, so it's impossible that we imported 101% of their entire supply. The problem kept going after 2012. You have the graph that was circulated that shows the annual imports. The data suggests that the problem is increasing in 2016.

From the beginning of the year, so for the first seven months that we have official data, the imports represent 114% of the U.S. fowl production. If we were to continue at that pace, this year we would import 118 million kilograms from the U.S. This is 32% more than last year. That's based on the first seven months of data.

We have some preliminary numbers for August, and those numbers show a decline for the first time in years. You've heard from other committee members that there's been increased enforcement by various agencies, and that probably explains the decline that we've seen in August. If the decline in August imports is the result of the increased surveillance, this again provides further evidence that mislabelled chicken is being imported to Canada.

These illegal imports not only undermine our economic contribution to the Canadian economy, but they are also a threat to food safety. In the event that there was a product recall, it would be impossible for CFIA to properly advise Canadian consumers. When they claim that they ship spent fowl to Canada, if chicken is the real product in the shipment container, they would never know in the event of a product recall what was really in the box. They are all labelled as spent fowl.

Chicken farmers are not opposed to the legal importation of spent fowl, but we want an end to the fraudulent imports that we've seen. Based on our conservative estimates, we believe that about 37 million kilograms were imported illegally last year; we figure that about 40% of the imports are illegal imports. That represents 3.4% for domestic production. If we were to produce this in Canada, that would mean the creation of close to 2,800 jobs, and all the other economic benefits for the Canadian economy.

As mentioned by previous witnesses at your committee in August, there are no means to visually distinguish broiler meat and spent fowl. That's why we've worked with Trent University to develop a DNA test. Trent specializes in non-human DNA, and they have expertise that they were able to develop for the poultry industry. They can clearly distinguish between broiler meat and spent fowl meat. We know that currently the government is in discussion with Trent to find out more information about this test.

On the spent fowl file, the Chicken Farmers of Canada recommend, first, that mandatory certification for all spent fowl imports be put in place. That would complement the U.S. voluntary program. Also, we recommend that the DNA tests be incorporated as a means of verification for the efforts by CBSA and CFIA. As was mentioned by the minister earlier, the Canadian and American processors are both supportive of the efforts to resolve this matter.

On the second point of your study today, the duties relief and duty drawback program, I think it's important to mention, as my colleague Robin mentioned, that this program was not designed for perishable agricultural goods such as chicken. First, the program has a four-year timeline, which obviously exceeds the shelf life of even frozen chicken products. Second, the program allows for product substitution. This would imply that high-value chicken products can be imported and low-value are re-exported, or that even spent fowl could be re-exported.

Also, the duty relief program allows marinated products. The reason we saw the increase in the use of the DRP.... It started in 2012-13 when Global Affairs Canada, under the import to re-export program, decided to ban marinated products. All the users of marinated products moved to the DRP, and that's why DRP had such a sudden increase.

12:20 p.m.

Liberal

The Chair Liberal Mark Eyking

Sorry, Mr. Ruel, but you're going to have to wrap up. We're way over time. If you could wrap up your comments, I'd appreciate it.

12:20 p.m.

Manager of Trade and Policy, Chicken Farmers of Canada

Yves Ruel

Thank you.

As a result of that, when we combine both programs, IREP and DRP, there's an increase of 35% since 2001, and that's an impact on our industry. Last year the imports under DRP reached 96 million kilograms, which is 9% of our production. As you've heard, CBSA also increased its enforcement activities, which probably explains a small decline in the first months of 2016. Once again, it shows that when there's increased enforcement, there's a decline in the use of those programs, which provides further evidence that the program is creating disruptions in the Canadian chicken market.

We recommend that chicken be made ineligible under the DRP. There's already a program administered by Global Affairs Canada called import for re-export. It's designed specifically for goods subject to import control. It's well crafted for agriculture, so users could use the import to re-export program. This would eliminate all program duplication and reduce government cost. We think it's the best way for the industry to go.

In conclusion, we think that by closing those loopholes on spent fowl in DRP, this would generate more than 4,000 jobs, $315 million in contributions to GDP, and $105 million in new taxes every year.

Thank you.

12:20 p.m.

Liberal

The Chair Liberal Mark Eyking

Thank you, sir.

We're going to move over to the Dairy Farmers of Canada for five minutes.

Caroline, you're first.

12:20 p.m.

Caroline Emond Executive Director, Dairy Farmers of Canada

Thank you very much, Mr. Chairman. I will read my text in French, and I will take questions in both languages.

First of all, on behalf of the the Dairy Farmers of Canada (DFC), I am pleased to be with you here this morning. Thank you for your interest in our concerns. I am accompanied by Yves Leduc, the director of our policy and international trade team. He is here to provide additional information to your questions if necessary.

I will give you a short version of our presentation. The complete version is available to you. You may refer to it if you wish.

I would like to draw your attention to the updated figures on the impact of Canada's dairy industry. Our new figures are provided in the complete version. The industry contributes $19.9 billion to the GDP and sustains 221,000 jobs across the country, up from 215,000 jobs. This indicates significant growth in the dairy industry in Canada. That is something worth noting.

Let me be clear upfront, DFC has never opposed Canada's trade strategy. Our position is simple: the dairy sector should not have to pay the price for our nation's trade agreements. Contrary to what some may believe, Canada is not closed to dairy imports. In 2014 and 2015, we imported approximately 900 million dollars annually in dairy products. Total imports are estimated at over 10% of our market.

The minister referred earlier to the long-term situation. Farmers are perhaps indeed concerned that part of our market might slip away. The future of the industry depends on a strong market. This 10% is more than the U.S. and New Zealand, and does not include the 2% under CETA, or the additional 4% of access that will be granted as a result of the TPP.

Preventing tariff circumvention is very important for preventing imports. We would like to remind you that worldwide, with the exception of a few countries that continue to overproduce and flood the market, the production of the dairy sector remains focused on serving domestic needs. Only 9% of the total world milk production is traded on the world markets. The government's role is to ensure that the third pillar of supply management, border controls, is effective. In order to adjust national production, we need to know the level of imports.

I would like to say a few words about the duties relief program. It was designed, as my colleagues have said, for manufacturing sectors, not agriculture. It allows up to four years for re-export, which of course does not apply to fresh products. This directly impacts our production planning, which disrupts the management of our system. There is a glaring lack of transparency in this system, as compared to the import for re-export program, or IRP, which was created for supply-managed products.

The exclusion of dairy, poultry, and egg products from the duties relief program is the simplest solution. This has been under review for years, and a decision was announced on October 5, 2015. Unfortunately, this was never implemented due to the change of government. We understand that the proposed solution is supported by the current administration and is simply awaiting approval.

When it comes to the issue of diafiltered milk, at this point, I'm truly at a loss for words. Between 2011 and the election in 2015, Dairy Farmers of Canada had 59 communications with the previous government on diafiltered milk. After the election, we re-started the process with the current government. Over the past year, we have had numerous and ongoing meetings with the staff of various ministers' offices, as well as consultations and meetings with partners and MPs.

On February 2, 2016, we had a lobby day where we discussed diafiltered milk and various other topics with over 150 MPs. On March 9, 2016, we presented and answered questions on diafiltered milk for two hours before the Standing Committee on Agriculture and Agri-Food.

On April 21, there was a full opposition day in the House of Commons, devoted entirely to diafiltered milk. We consulted with the government both before and after 3,000 farmers came to a rally on the Hill on June 2.

We have heard numerous questions and answers about diafiltered milk from all parties during question period in the last session. I don't know what more I can tell you about this at this point. We will answer your questions if you have any.

In conclusion, I can tell you that we have seen numerous examples of creative tariff circumventions such as the pizza kits, butter, oil and sugar blend, salt or sugar added to cream to avoid tariffs, and food preparation allegations.

These illegal actions have cost our farmers millions of dollars in losses, and it took years to get a resolution on these files from the government. All government departments and agencies must play a proactive role to ensure proper classification, proper inspection, and proper and transparent advance rulings.

In putting pressure on our Canadian government recently, all our international trading partners are seeking is complete access to our Canadian market. Some people, like me, still believe in the right of a country to food sovereignty, and to enforce its own domestic regulations.

In Canada, we have a sustainable dairy sector, without government subsidies. Other countries are envious of the stability of our system, particularly at a time when the global dairy market is hurting worse than it has in years.

We can't blame other countries for being scared of a thriving Canadian dairy sector, but they cannot blame our government for wanting to protect Canada's food sovereignty. All we are asking is for the government to play its role, while respecting our existing international trade commitments.

As you heard earlier, the government can also support the dairy industry through investments in innovation and research. What was not mentioned is investment in infrastructure in order to improve processing and drying capacity, thereby strengthening our dairy industry.

The government can play a role and our sector will continue producing the high-quality milk that Canadians prefer. Canada and Canadians benefit from a strong dairy industry.

Thank you, Mr. Chair.

12:30 p.m.

Liberal

The Chair Liberal Mark Eyking

Thank you very much, Ms. Emond.

We are under a bit of a time constraint. We have enough time for one four-minute slot for each party. We're going to go with the Conservatives to start off.

Mr. Ritz.

12:30 p.m.

Conservative

Gerry Ritz Conservative Battlefords—Lloydminster, SK

These discussions have been going on for a number of years. As you pointed out, Caroline, we've identified the problem and we've identified the solutions. Now it's time to pull the trigger and actually put them in play.

When I was the minister in my past life, there were a lot of discussions going on. We had charged the four different departments that were involved, and you had meetings with all four of them as well, on what the solution should be. We were well on our way to making that happen. Are the discussions you're having now starting back at zero, or are you starting where we left off at about three-quarters of the way to completion?

12:30 p.m.

Executive Director, Dairy Farmers of Canada

Caroline Emond

You're putting me in a very difficult position, Mr. Ritz.

The thing is that sometimes we do feel that we're starting over again. That's what I mentioned in my presentation. Everybody knows the issue now. Everybody knows potential solutions. Now is the time for action. I agree with the minister that we all want a sustainable dairy industry, but a sustainable dairy industry means acting now. Right now farmers are affected. We're losing money. It's important to understand, as I said in my presentation, that a healthy dairy industry is healthy for this country because this industry is at the heart of our rural communities. Although we don't talk a lot about agriculture, agriculture is the backbone of our economy.

12:30 p.m.

Conservative

Gerry Ritz Conservative Battlefords—Lloydminster, SK

Absolutely.

12:30 p.m.

Conservative

Randy Hoback Conservative Prince Albert, SK

In the last hour, I asked the minister about timelines, and he emphasized how important it is to see some resolution. In your meetings with the minister, was there any mention of timelines or goals with respect to when they're going to have this completed?

12:30 p.m.

Executive Director, Dairy Farmers of Canada

Caroline Emond

I wish we had, but no. I mentioned the lobby day that we had in February. We've been asking for investment in processing capacity as well. We've raised five issues and now we're looking for solutions. The producers want to go back to producing milk. They don't want to be on the Hill all the time.

12:30 p.m.

Conservative

Randy Hoback Conservative Prince Albert, SK

On spent fowl, are there timelines or commitments on timelines to get this resolved?

12:30 p.m.

Manager of Trade and Policy, Chicken Farmers of Canada

Yves Ruel

No, unfortunately we are not aware of any specific timelines. We heard recently that there was some discussion with Trent University on the DNA test. We've seen a decline in the imports number, and we've heard of some increased verification on the imports of spent fowl, but I am not aware of any progress on import certification or DNA.

12:30 p.m.

Conservative

Randy Hoback Conservative Prince Albert, SK

Robin.

12:30 p.m.

President and Chief Executive Officer, Canadian Poultry and Egg Processors Council

Robin Horel

To add to that, the increased enforcement is obvious. It's obvious because my members are talking to me about what's happening. It's obvious because the numbers on spent fowl, for example, are going way down. By the end of June, we were operating at somewhere around a 50% increase from last year on boneless breast meat, which is the biggest issue for us. In July, one month versus one month, we were only plus 19%. In August, we were minus 50%.

Something is happening. That's great. Every meeting I have with any officials I tell them how happy we are with the enforcement, but with respect, we've had some increased enforcement in the past, maybe not to this extent, and when it goes away, things come back. We need something in the longer term.

12:30 p.m.

Conservative

Randy Hoback Conservative Prince Albert, SK

Let me ask you one question. Is that because of avian influenza in the U.S. and that it's down, or is it because the government's actually doing something about it?

12:30 p.m.

President and Chief Executive Officer, Canadian Poultry and Egg Processors Council

Robin Horel

No, it's the latter. It has nothing to do with avian influenza.

12:30 p.m.

Conservative

Randy Hoback Conservative Prince Albert, SK

Are you sure about that?

12:30 p.m.

President and Chief Executive Officer, Canadian Poultry and Egg Processors Council

Robin Horel

Absolutely.

12:30 p.m.

Liberal

The Chair Liberal Mark Eyking

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

Go ahead, Mr. Peterson.

12:30 p.m.

Liberal

Kyle Peterson Liberal Newmarket—Aurora, ON

Thank you, everyone, for being here today. It's a very fulsome presentation, and we appreciate it. I understand that you've been making these presentations to different players in the government for quite some time, so we appreciate your patience in doing it one more time.

I have a question, first of all, for our chicken friend, Monsieur Ruel, and perhaps he can pipe in. We were doing TPP consultations as a committee and we had a brief submitted to us by Concord Premium Meats Ltd. In that brief they claimed that Canadian chicken farmers are unable to or are uninterested in supplying them with chicken for exports that will keep them competitive in the marketplace. The only cost-effective program they can use to export is the duty deferral program.

I'm wondering if you can comment on that. I'll give you a chance to address that because this is something that we've received from one of the stakeholders.