International Trade Committee on Sept. 27th, 2016

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

I'm curious. We talk about tonnage in tomatoes, and how that's from 20 to 40 to 45. What's the tonnage in potatoes within the last 20 years?

[Reg Phelan]

One of the problems we're having here now is that our yields are starting to decline a bit. This is what the big processors are saying. They're saying they want to dig deeper wells so they can put more irrigation on. In terms of what's happening there, a lot of times when the soil gets mined out, the yields are going to decline and the quality will decline too. That's one of the aspects we're having to work with here, and it is a major problem.

[The Chair, Liberal, Mark Eyking]

Thank you.

I think the federation wanted a very quick response, and then we will wrap it up.

[Mary Robinson]

Yes.

Coming from a potato-producing area and farm, I'd have to say that with plant breeding and genetics as they are, and with improved conservation and everything else that we do on our farms—improved agronomy, site specific, everything—generally we are seeing yields not decline.

On my farm, we do not irrigate. I'm one of six who owns my farm; I'm not the only one. We don't wish to irrigate. We don't grow for a processor. We grow for table. Our yields are either steady or increasing year over year. A lot of it is Mother Nature. Some people aren't looking for increased yield; they're looking for a different product.

We have the Little Potato Company growing small potatoes. That means they do it in a shorter time frame and they take off a lower yield. It's in the farmers' nature to want the most per acre, but the bottom line is different than that.

[The Chair, Liberal, Mark Eyking]

Thank you.

Panellists, you gave us a good introduction to agriculture in P.E.I., a good snapshot. I noticed a lot of interest in agriculture from our panellists. We're going to have other farm groups here this morning and we'll be able to ask some questions.

Thank you very much for coming. You're welcome to stay. We have many more sessions to go here this morning.

Since we're over time a bit, we're just going to break for about five to 10 minutes and then get back at it. I'd appreciate it if MPs don't take off too far.

We'll suspend.

[The Chair, Liberal, Mark Eyking]

We'll reconvene the meeting.

Welcome anybody who's just arrived, and especially our new panellists for our second panel.

My name is Mark Eyking, and I'm the chair of the House of Commons trade committee. We have most of our committee with us. We had to leave some in Ottawa to take care of things back there. Many of our MPs are from right across the country.

We are a very busy committee. We're dealing with trade, and Canada is a big trading country. We're dealing with CETA right now. We're dealing with softwood lumber, and we're dealing with agriculture issues with the United States. But our main focus is the TPP. As you are well aware, the TPP involves over 12 countries, 40% of the world's GDP, 800 million people, so it's a big deal. As many of you may know, it was brought up pretty strongly last night in the U.S. debate, so it's a hot topic.

We knew that it was very important. Our committee embarked on this study at the first of the year. We've gone through seven provinces now, and we're going to finish up with the Atlantic provinces this week. We've talked to the territories by video conference. We have had a lot of input. We've had over 125 briefs, 265 witnesses, and 20,000 emails, and they're still coming in.

We're planning on wrapping up our study at the end of October. Then we have to put a report together for the House of Commons. We hope to have that presented by the end of the year, or the beginning of next year.

There is a big interest and we see this as we go across the country. I think as Canadians know more and more about it, that's why they're providing their input.

We welcome the panellists here for our second hour. First of all, we have translation. I think it's channel one for your headphones, but I'm not sure. If you can, try to keep your presentation to about five minutes. Also, MPs try to keep it to around five minutes. If we do it that way, we can often get our input in here and it goes well within the hour.

Without further ado, I'm going to start off with Jordan MacPhee from the Environmental Coalition of Prince Edward Island. Go ahead, sir.

[Jordan MacPhee, Board Member, Environmental Coalition of Prince Edward Island]

It's nice to see you again, Mark. I don't know if you remember, but I met you in March last year. I was part of a little contingency with the NFU Youth. We met when you were still the opposition critic. I don't know if you remember, but nice to see you again.

[The Chair, Liberal, Mark Eyking]

Yes. It's good to see you, sir.

[Jordan MacPhee]

The Environmental Coalition of P.E.I. or Eco-PEI, is a non-governmental organization that was established in 1989. The focus of our organization's work is public education, community events, and advocacy on issues related to P.E.I.'s environment and the use of our natural resources. The issue of trade falls under this focus.

It is Eco-PEI's position that Canada should not ratify the Trans-Pacific Partnership, or TPP. The central reasons for our stance against the TPP are: one, it will place further stress on already strained environmental systems in Canada and P.E.I. in exchange for minor economic benefit; two, the investor-state dispute settlement mechanism, or ISDS, would allow corporations to sue the government for federal and provincial policies, and the TPP will weaken our ability to effectively legislate environmental controls for the interests of Canadian citizens; and three, Canadian taxpayers will become financially responsible for legal challenges initiated by private interests against federal and provincial legislation, including but not limited to environmental law. Together, these will have the ultimate effect of undermining Canada's sovereignty in favour of corporate interests.

The TPP seems to be part of a trend in recent decades and reflects the willingness of western governments to erode their democratic institutions for the potential prospect of economic growth at any cost without critical concern for the consequences of that growth. We are not against free trade itself, but before a country signs on to any agreement, it is crucial to consider how and to whom the benefits and costs of that agreement are being distributed, and whether the overall deal is beneficial to Canadians and society as a whole. It is our understanding that the TPP will concentrate most of the benefits to a few certain groups while funnelling most of the costs and the negative consequences to the majority, all the while weakening Canadian legislative authority.

We would like to provide the committee with some context of our local economic and environmental situation in P.E.I. in order to illustrate how the TPP, if ratified, might affect us as a province. According to the Government of P.E.I., roughly 12% of our economy is based in the agricultural, fishing and food processing sectors. Islanders are aware of some of the environmental pressures caused by the agricultural industry. It's a sensitive topic on P.E.I., as almost everyone knows a farmer as a friend or family member.

These pressures include the heavy use of nitrogen fertilizers and pesticides, the leeching and runoff of these chemicals into groundwater and nearby streams, the erosion of fertile top soil from island farms, damaged soil that is less productive and less able to retain moisture, and the resulting increased demand for greater and greater quantities of island groundwater for irrigation.

We want to make it completely clear that Eco-PEI is not against island farmers. We understand the economic pressures that farmers are under today and the realities they must face in order to make a living. Many farmers are responsible for hundreds of thousands or millions of dollars in capital infrastructure investments and it is impossible for them to suddenly switch to a new model of production.

However, the TPP is not an answer to farmers' problems, as we have seen with free trade agreements in the past. According to Statistics Canada, since the Canada-U.S. Free Trade Agreement was signed in 1987, farm exports have increased threefold over this time but total outstanding farm debt on P.E.I. has risen from $159 million in 1987 to $748 million in 2015, a fourfold increase in less than three decades. This trend of rising exports and rising farm debt is similar all across Canada, with farm debt rising from $23 billion in 1987 to $91 billion in 2015, also a fourfold increase.

If Canada ratifies the TPP, it would increase P.E.I.'s economic dependence on the export of industrial agricultural products, which would further entrench island farmers in a production system that is already causing harm to the environment's systems we depend on to grow our food. At the same time the economic incentives for young people to get into farming are almost non-existent. Speaking from my own experience as a young person on P.E.I. who is trying to start a farm business, I know how difficult it is to manage the financial difficulties and other hardships of starting a farm even on a small scale.

As a country we need to think about the future of industries and the upcoming generation trying to build an economy that actually understands the ecological limits to growth. The TPP does the opposite. The hope would be that the TPP would substantially benefit Canada economically, but even proponents of the TPP estimate there will be minor economic benefits in terms of projected GDP growth if Canada were to ratify. According to a January 2016 working paper by the Peterson Institute, written in favour of the TPP, the projected GDP gain for Canada by 2025 is estimated at 0.9%, one of the weakest gains among potential TPP signatories. Those who are less optimistic, such as Dan Ciuriak, the former deputy chief economist at Foreign Affairs and International Trade Canada, has estimated net gain at only 0.1% of GDP by 2035.

In either of these cases, the benefits pale in comparison to recent deficit projections announced by this federal government, and in comparison to Canada's GDP as a whole, they are little more than a rounding error.

Our final central concern is with the investor-state dispute settlement mechanism, also known as the right of foreign corporations to sue otherwise sovereign governments through private tribunals.

In March 2015, a NAFTA tribunal oversaw a challenge by Bilcon, a company that proposed a quarry in Nova Scotia that was denied, and decided against Canada. Bilcon is now seeking $300 million in damages for loss of potential future profits. Donald McRae was Canada's appointee on the arbitrations tribunal. Remarking on the negative effects of ISDS, he said:

Once again, a chill will be imposed on environmental review panels which will be concerned not to give too much weight to socio-economic considerations or other considerations of the human environment in case the result is a claim for damages under NAFTA Chapter 11. In this respect, the decision of the majority will be seen as a remarkable step backwards in environmental protection.

In summary, Eco-PEI's position is that the TPP will place further strains on the environment for little economic return, undermine Canadian sovereignty, and open up the federal government, and therefore Canadian taxpayers, to expensive litigation with private interests. For these reasons, Eco-PEI recommends that Canada not ratify the TPP.

[The Chair, Liberal, Mark Eyking]

Thank you.

We're going to move over to the Prince Edward Island Fishermen's Association. We have with us Mr. Avery and Mr. MacPherson.

Go ahead, sirs, for five minutes.

[Ian MacPherson, Executive Director, Prince Edward Island Fishermen's Association]

Good morning to you, Mr. Chairman, and members of the international trade committee. My name is Ian MacPherson and I'm the executive director of the Prince Edward Island Fishermen's Association. Today I'm joined by our association president, Mr. Craig Avery, who has over 40 years of experience in the commercial lobster fishery.

Traditionally, the lobster harvesting sector may not be directly involved in international trade. However, our intent today is to give the committee an overview of the Prince Edward Island lobster industry from a harvester perspective and the importance of expanding markets over the past several years.

The P.E.I. Fishermen's Association, PEIFA, represents close to 1,300 harvesters on Prince Edward Island. Although our primary species is lobster, our members also harvest herring, mackerel, halibut, bluefin tuna, snow crab, and scallops. The fishery, along with agriculture and tourism, is one of the top three economic drivers of the Prince Edward Island economy.

One of the primary reasons that our organization wanted to present today was to comment on the significant change that has taken place in the lobster industry over the past five years, and how our organization is working diligently to prevent a return to wild price swings of the past. We see market diversification as a key component to an overall strategy that will provide suitable returns to all components of the supply chain. For today's discussion we will focus on export and trade in lobster, although many of our discussion points can be transferred to other species.

As recently as 2012, the price paid to harvesters for lobster was at levels that were significantly lower than prices paid in the previous 10 years. With escalating operating costs, this rendered many fleets in Atlantic Canada unsustainable at prices that were in the range of three dollars per pound. As a result of a gulf-wide tie-up, harvesters made a strong commitment to change their industry. Although a number of programs were in place, such as reducing and retiring licences and increased sustainability measures, the harvesters realized that we were too dependent on several traditional export markets.

Historically, Prince Edward Island has produced much more processed lobster versus live lobster. Past ratios of 80% processed lobster versus 20% live lobster were the norm. We are seeing this ratio lessen due to the addition of more live storage on P.E.I. However, processed product is still the primary market for most of our lobster.

Although there are co-operatives where fishers are involved in both harvesting and production, most harvesters deal with commission buyers who sell to plants on and off the island. In the past two years we are also seeing more harvesters become directly involved in live lobster export.

Many parts of the supply chain have worked hard over the past three years to improve the financial return to harvesters; however, continued work needs to be done. The traditional markets of the United States and Europe continue to be important. However, with the doubling of catches over a recent six-year period, the development of alternative markets is critical. To put this increase in perspective, the lobster catches in P.E.I. increased from 16 million pounds to 30 million pounds during this period. That's an annual number.

This recent expansion of Asian markets over the past five years has been a contributing factor in increasing financial returns to the harvesters. Much of this increase in sales has been attributed to the emerging middle classes in countries such as Korea and China, where items such as lobster were not affordable in the past.

The PEIFA has invested in our own brand that is owned and controlled by the harvesters. Although we are still early in the stages of market development, we are seeing a keen interest from international buyers and consumers who are seeking a more direct connection with the harvesters. From a harvester perspective, it is critical that any trade agreements include clauses that address factors such as resource sustainability, fair labour practices, fair pay components, and conducting fisheries that are not harmful to the surrounding environment.

The PEIFA and Fisheries and Oceans Canada are working on a number of regional initiatives that will contribute to more efficiency in our fishery. The owner-operator model that works in many countries around the world is strong and effective in Canada. Organizations such as the PEIFA strongly support the continuation of these independent businesses. Each of our captains has a significant financial investment in their fleets, which translates into a direct connection with our fishery. It is important that the focus of any pending trade agreements not be solely based on increasing trade volumes. The lowering of the current tariffs are projected to have a positive effect on the Canadian lobster industry; however, the focus of market expansion should be increasing the value of existing exports versus increasing exports at all costs. This will require a slight change in focus from both federal and provincial governments.

In the past, Canada has held a higher global position in exporting seafood than our current ranking. It is important that this be kept in proper perspective so we are not seeking export growth at the expense of resource sustainability.

The PEIFA and our Master Lobster brand are seeking strategic partnerships that will develop into long-term relationships that will benefit Canada and our trading partners. We understand that this does not happen overnight. However, having these goals in mind will greatly benefit Canada in the long term.

Our Canadian oceans are extremely valuable resources that we are privileged to harvest on behalf of the people of Canada. The harvesters of the Prince Edward Island Fishermen's Association take this responsibility very seriously and advocate that the factors of resource sustainability, fair labour, fair payer practices, protection of the environment, and the continuation of the owner-operator fleet be cornerstones of any agreements before they are ratified.

[The Chair, Liberal, Mark Eyking]

Thank you, sir, for that briefing.

We were in New Brunswick yesterday, and we heard from many fisher groups. Many of the concerns and opportunities you raise were raised yesterday. We realize how important an industry it is. Trade deals are important, but how they work out is very important, so thank you for your briefing.

We are going to move to Mr. Greg Donald from the Prince Edward Island Potato Board. Go ahead, sir.

[Greg Donald, General Manager, Prince Edward Island Potato Board]

Good morning, and welcome, especially those who haven't been to P.E.I. before.

My name is Greg Donald. I'm general manager of the P.E.I. Potato Board. The Potato Board is a potato grower organization here in P.E.I. We also represent the dealers and exporters on the island.

I'd like to first hit on the key points relative to this agreement, and those would be that we support the TPP. We certainly support opportunities with countries where we can remove tariffs, level the playing field, and generate opportunities for all sectors, in particular our processing sector, but also for fresh and seed potatoes as well.

I'd also like to highlight that a very important component of the TPP is inclusion of provisions to deal with phytosanitary issues and concerns. That's very important. I know there are examples of trade agreements in the past where, in particular with potatoes, those haven't been addressed. It's very important that this provision has been identified and is going to be there. I'd also raise the issue that we need adequate resources within the CFIA, within the plant health division, to deal with that

I would also point out that we've seen another agreement where issues have come up with tariff rate quotas. Hopefully that's not something that is involved with this agreement.

The last point would be the continuing need for investment in agricultural research, particularly potatoes, and in breeding to better meet the needs of the countries where there are opportunities. Those are the main issues.

This is a little about our industry and the board. The potato industry is the backbone of the economy here in P.E.I. It contributes over $1 billion either directly or indirectly to the economy here, so it's important to us. We have about 200 family farms. We all, and certainly I have had the opportunity to travel to many parts of the world. They are small family farms, not industrial farms. I'm not really sure what the definition of that is, but they are small family farms here in P.E.I. We produce about 2.5 billion pounds of potatoes, which is about 25% of Canadian production. About 60% of our crop goes to processing for french fries, potato chips, and other processed products, 30% for the fresh or table market, and 10% for seed.

For P.E.I.'s total agricultural exports, we have numbers in 2014-15 of about $345 million. Of that total export in dollars, 85% is from potatoes. That's both fresh and processed potatoes, so it's very significant. In the last year, we shipped seed potatoes to eight countries around the world, fresh potatoes to 15 to 20 countries, and processed potatoes to close to 40 countries. Similarly with many other products, the U.S. is by far our largest trading partner of that. Of that, $296 million, 81% of it is to the U.S. There's obviously a relationship with them, and that business is very important to us. Having said that, like any business, it's important that we continue to open doors and grow. Unfortunately, doors continue to close, so it's important to diversity our markets and look for opportunities for growth. That's very important, and we believe that TPP offers that opportunity.

Those are the main things that I wanted to touch on. Again, to summarize the points of interest, the tariffs and the phytosanitary issues are very important, that we have the resources to accomplish that, and furthermore, continued investment in programs like Growing Forward to support good research and development of things like new potato varieties.

Thank you very much.

[The Chair, Liberal, Mark Eyking]

Thank you, sir.

We had a bit of an introduction to the potato industry with Cavendish Farms yesterday in New Brunswick—

[Greg Donald]

Yes, I understand that.

[The Chair, Liberal, Mark Eyking]

Boy, they do a lot of french fries. They're talking about potential in Asia, so we had a good sense of that yesterday. It's good to see you guys here.

We're going to move on now to dialogue from the MPs.

We're going to start off with the Conservatives. Mr. Van Kesteren, you have the floor.

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

Thank you all for attending this morning, and thank you for your hospitality.

Yes, when we—I'm talking Ontario—talk about P.E.I., we think about about potatoes, but we forget oftentimes that the fishery is such a big part of the island as well.

We saw the collapse of the cod industry. How's the state of the lobster industry? You talked about the need and how you've managed that. I'm just curious. How is that? Is it healthy? It is declining? Is it growing? Maybe you could give the committee some direction on that.

[Craig Avery, President, Prince Edward Island Fishermen's Association]

We put a lot of sustainability measures in place over the years with mandatory escape mechanisms. We've increased carapace size. Stocks have been increasing steadily over the last 10 to 15 years. Last year, I think, was a record; the lobster catch in Prince Edward Island was 30 million pounds. This year in area 25, which is fishing right now, it looks like it's going to be a record catch. The stock is in great shape. We've taken all kinds of measures, and I think for the future...the recruitment levels.... We've done studies with DFO, working with fisheries. I think the stock is in the best shape it's every been in.

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

Good. That's great news.

Did you say 80 million pounds?

[Craig Avery]

It was 30 million.

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

Obviously, that doesn't all go to Canada. Maybe you mentioned, but I missed it. How much of that goes to the United States as opposed to Canada?

[Craig Avery]

How much are we exporting?

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

Yes.

[Craig Avery]

It's still around the 70% to 80% range.

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

That would be because of geography, I suppose. It's closer to send it to Boston than to Toronto or something like that.