International Trade Committee on Sept. 27th, 2016

[The Chair, Liberal, Mark Eyking]

Good morning, everybody. Welcome to the House of Commons international trade committee.

We have been very busy since the start of this session. Of course, our main issue right now is the TPP, but our committee deals with other trade issues as well. We are finishing up on the European trade agreement, but we also have many other issues, especially with the United States. We have softwood lumber and a couple of agricultural issues. The dairy and chicken industries have issues with the States. Our committee is fairly busy, but the TPP is our main focus.

My name is Mark Eyking. I am the chair of our committee. We have members from all across the country. We don't have the full committee here, but we have a good representation. We have Ms. Ramsey and Mr. Van Kesteren from southern Ontario; Mr. Ritz is from Saskatchewan; Ms. Ludwig is from New Brunswick; Madame Lapointe is from Quebec; and we have Mr. Dhaliwal from British Columbia. We have a good representation across Canada.

We landed in your beautiful province last night, and we took a bus ride through, which was nice. It is beautiful country here. I have been here many times, being from Cape Breton and a farmer. You are blessed with your resources and the people you have. We got to taste some of your stuff last night. We had lobster and potatoes, so it was a really good start to our leg here.

We have gone through six provinces so far—seven now. We finished New Brunswick yesterday. We are going to do Atlantic Canada the rest of the week. We are going to Newfoundland and Nova Scotia. We have had video conferences with the territories. We have over 125 briefs, and we have had over 260 witnesses. We are doing a couple of things a little differently from many committees. We are accepting emails from average Canadians on what they think of the TPP. Right now we have over 20,000 emails. We are also doing open mikes in each meeting, where we are hearing a lot from Canadians across the country.

October will wrap up our consultation process, and in November and December we will be putting our report together. After that, it will be presented in the House of Commons.

Thank you for coming. Everybody's input will be reflected in the report we do.

As you could see last night if you watched the debate in the U.S., the TPP came right up there. We are going to do our part in Canada to make sure we have a good report. We are also watching very closely what they are doing down there, because it has a reflection on where we go from here.

We have farmers, or representatives of the farmers, right off the bat here this morning. I am a vegetable farmer from Cape Breton, so I know many of the farmers from P.E.I. I went to agricultural college with many of them. They are good bunch to hang out with.

Without further ado, we are going to start. With us this morning we have the Dairy Farmers of P.E.I., the National Farmers Union, and the P.E.I. Federation of Agriculture.

We usually try to keep each group to five minutes. If it gets to be over five minutes, I will put my light on or give a reminder, and you can wrap up. Then we will open dialogue with the MPs. This format has gone quite well, and everybody seems to get in their five cents' worth.

Without further ado, we are going to start with the Dairy Farmers of Prince Edward Island. We have Mr. Douglas Thompson and Mr. Ronald Maynard.

Whoever wants to go, go ahead, sir.

[Ronald Maynard, Director and Corporate Secretary, Dairy Farmers of Prince Edward Island]

Thank you very much. My name is Ron Maynard. I am a dairy farmer from Prince Edward Island, and I'm the secretary of the Dairy Farmers of Prince Edward Island.

The Dairy Farmers of Prince Edward Island is pleased to appear in front of the committee. It is important to emphasize that the Canadian dairy sector makes a huge contribution to the Canadian economy. It contributes $19.9 billion to the GDP and $3.8 billion in taxes every year. It sustains 221,000 permanent full-time jobs. Dairy is either the top or the second in seven of the 10 agricultural provinces. It is second in Prince Edward Island only to potatoes.

Furthermore, unlike other jurisdictions where farmers' income is heavily subsidized, Canadian dairy farmers receive no direct subsidies and derive their income from the marketplace, a marketplace that would be further diminished by access granted in both the CETA and the TPP agreements.

According to initial government estimates, the sum of access granted was at 3.25%. After running some figures, we think it will probably be closer to 4%. The milk displacement of this agreement will never be produced in Canada and will result in perpetual loss of revenue of as much as $246 million to our farmers and the Canadian economy.

Furthermore, these numbers do not take into account the impact of the CETA. To secure the CETA deal, Canada offered as much as 2% access to the Canadian dairy market as was granted to the European Union. The access granted in this agreement will allow the EU to ship an additional 16,000 tonnes of cheese, an additional 17,000 tonnes of industrial cheese to Canada. The expropriation of the Canadian cheese market granted under CETA amounts to a loss of revenue to dairy farmers to as much as $116 million in sales going into cheese processing annually in perpetuity.

Unfortunately, the combined effect of CETA and TPP will seriously impact Canadian dairy farmers' bottom line year after year. This loss cannot be substituted through exports. As a matter of fact, only 9% of dairy production is traded in the world. Dairy is mostly produced domestically and for local needs.

While we are working on strategies to take advantage of some export opportunities, they remain limited as a result of the WTO panel in 2002, which essentially concluded that export sales at below domestic prices constitute an export subsidy.

[Douglas Thompson, General Manager, Dairy Farmers of Prince Edward Island]

In a similar manner to CETA, TRQ administration is very important to ensure these products are imported in a manner that is coherent with supply management and which helps preserve the stability of the Canadian marketplace for milk and dairy products. This is particularly true for butter since the agreement will prevent the Canadian Dairy Commission from importing the TPP butter TRQ as it currently does for the WTO TRQ. Clarification is needed about who will be able to import as well as the role the CDC can play to ensure that the impacts of the agreement are limited.

While we are pleased with Canada's compositional standards for cheese were preserved in the TPP agreement, we do have some concerns with respect to whether or not Canadian regulations and standards will be applied to imported goods. The growth hormone rBST, for example, is banned in Canada but remains in use in other countries.

In addition, some of the labelling requirements for sugar, sodium, and trans fat content mentioned in the Minister of Health's mandate letter are different from country to country. These have important implications for Canadian businesses, which could be placed at a competitive disadvantage if importers do not face the same regulations. It would also create confusion for Canadian consumers who might struggle with products not made to the higher Canadian standards.

[Ronald Maynard]

After the TPP negotiations were concluded in October 2015, in order to ensure no negative impact on Canadian dairy farmers as a combined result of CETA and TPP.... On compensation for supply management farmers for their losses as a result of TPP, the Government of Canada announced a multiple mitigation measure and a $4.3-billion compensation package to be delivered over 15 years.

It is important to keep in mind that, although the original $4.3 billion, 15-year compensation represented a significant sum, this is a government investment in all of the supply management sectors—chickens, eggs, turkey, hatching eggs, and dairy—to mitigate the CETA and TPP deals. At the time of the announcement, while the government specified that the entirety of the CETA portion of the $4.3 billion was meant for dairy, the government did not specifically say how much of the TPP portion of the package was destined to each of the supply management commodities.

After announcing their intent to consult with the dairy sector on CETA compensation within 30 days in May 2016, the government requested that the Dairy Farmers of Canada submit a framework for compensation for CETA to the Minister of International Trade and Minister of Agriculture, which was done on May 18. To date, the government has still not committed or offered any feedback from the proposal of the CETA package.

In addition to awaiting a commitment on the proposed CETA compensation, the DFPEI and our partners at DFC continue to expect a package geared specifically toward mitigating the effects of TPP, should it come into effect. The $4.3 billion package that was initially proposed to supply management remains a minimum expected of a combined CETA and TPP package.

In conclusion, DFPEI, along with its partners at DFC, has never opposed Canadian trade strategy as long as there is no negative impact to dairy farmers. Our position is simple: a dairy farmer should not have to pay the price for our nation's trade agreements.

While we would prefer not to have additional market access in the dairy sector conceded in the TPP agreement, we recognize that the government fought hard against other countries' demands and pledged to lessen the burden with mitigation measures and a compensation package. The government chose to make concessions on dairy to secure a TPP trade agreement for Canada. The compensation to dairy farmers' revenue lost was part of the compensation the Canadian government was willing to make.

[Douglas Thompson]

There's a couple of things on Prince Edward Island—

[The Chair, Liberal, Mark Eyking]

I'm sorry, you're well over time. If you don't mind, could you wrap it up?

[Ronald Maynard]

That's basically the bottom line.

The other information is that we have 168 dairy farms here on Prince Edward Island. We're talking about losing on average 74 cows. What this will mean is that we have 10 farms that will be out of business because of the loss of milk sales on Prince Edward Island, so that's 10 out of 168. That's our bottom line.

The other aspect of it is that the 17,000 tonnes that's coming in will more than likely be fine cheese. On Prince Edward Island here, our major processor is a cheese processor. Their major product is fine cheeses, basically havarti and feta, so it may affect them to a greater extent than other processors in other places. This is a co-op owned by the producers on Prince Edward Island.

Thank you very much for your time.

[The Chair, Liberal, Mark Eyking]

Thank you to the Dairy Farmers of Prince Edward Island for that briefing.

We're going to move on to Mr. Phelan of the National Farmers Union.

Go ahead, sir.

[Reg Phelan, Regional Coordinator for Region 1 and National Board Member, National Farmers Union]

Thank you.

As was mentioned, I'm with the National Farmers Union. I'm the regional coordinator for the Maritimes and a national board member.

Doug Campbell was supposed to be here with me. Doug's a dairy farmer from the western part of the province. He's likely delayed. It's not often we have traffic jams in P.E.I., but I ran into one myself this morning getting here. There was an accident on the Hillsborough Bridge and they were saying there were a few others around, too. Hopefully, he'll be along shortly.

The National Farmers Union opposes the Trans-Pacific Partnership agreement and recommends it not be ratified by Canada. Our comments will focus on the damage the TPP would do to Canadian supply management systems, particularly for dairy; the harm its procurement rules would do to local food system development; its lack of benefit to other aspects of agriculture; and the unacceptable restriction on sovereignty of democratically elected governments that would result from TPP investor-state dispute settlement mechanisms.

Turning to the TPP and supply management, supply management rests on three pillars: production disciplines, import controls, and cost of production pricing. All three are interlocked, so that weakening one pillar weakens the whole system.

In the first five years of the TPP agreement, the other 11 TPP countries would gain tariff-free access to 3.5% of the current Canadian dairy market, 2.3% for eggs, 2.1% for chicken, and percentages for turkey and broiler hatch chickens also. In subsequent years, there's also provision where tariff-free access to these markets would increase.

The governments of TPP members United States, New Zealand, and Australia have embraced an export-oriented approach to dairy which has resulted in extensive losses for their farmers as world milk prices fell drastically. Instead of disciplining their members to match demand, these countries aim to sell more milk to pry open Canadian markets. However, this will not solve their problem.

Selling more at prices below the cost of production would simply increase the volume of losses, deepen debts, and push farmers out of business. For European farmers now, I think their price is half the price realized by Canadian farmers, so the pressure is on internationally.

Canada's TPP side letter with Australia says:

Canada confirms that Australian dairy products, including those imported under HS Chapter 3504 such as milk protein concentrates, can be utilised in dairy processing in Canada to the fullest extent possible, including in cheesemaking.

Milk protein concentrate imports are highly controversial and are used by processors to replace domestically produced milk. The TPP agreement would require 80% of the fluid milk imports to be processed in Canada.

Canada's side letter with the United States commits both countries to immediately be assessed the equivalency of each other's pasteurized fluid milk safety regulations, with assessment to be done by the end of 2017. Determination of equivalency would open the door to U.S.-produced fluid milk being processed in Canada, even though U.S. regulations allow doubling the somatic cell count, a key indicator of quality and herd health, and of course we don't have BST in our milk here either.

The text of the TPP together with those two side letters would deny Canadian farmers full access to our domestic dairy market and transfer a significant portion to non-Canadian producers. Canadian dairy consumption is growing slowly because changing tastes and aging demographics have resulted in reduced per capita consumption of dairy products. TPP market concessions add on to those given away previously through the World Trade Organization and ratifying the CETA. Each deal chips away at Canadian farmers' share of our domestic market by increasing the amount of tariff-free imports allowed.

The brunt of this market loss in our supply-managed sectors will be felt by young people who aspire to become dairy, egg, chicken, and turkey farmers. Without the market to support new entrants, they will be denied the opportunity. Some retirement-age farmers may be willing to take a payout in compensation for TPP-related losses. The National Farmers Union rejects that option because of injustice to future generations of farmers.

The TPP local procurement rules mean governments and public agencies could not implement programs to purchase local products as a way to support the vitality of local agriculture. If ratified, the TPP, like CETA, would prevent governments from putting local content requirements into procurement contracts. It would require all governments to use a tendering system to give corporations in TPP countries an equal chance to supply these goods and services. If foreign companies are the successful bidders, the jobs, profits, and multiplier effects from filling those contracts would occur outside of Canada.

[The Chair, Liberal, Mark Eyking]

Excuse me, could you wrap up, sir?

[Reg Phelan]

Okay.

Procurement rules unfairly pit locally owned competitive companies against large corporations.

We think there are very clear conflicts between a lot of what was offered, particularly in the ISDS and climate change in Canada. Canada has signed on to the Paris agreement, and we've made a commitment to reduce greenhouse gas emissions to prevent global temperatures from rising. We think the TPP would allow corporations to sue governments for compensation for loss of future profit. I think we need to address climate change, and TPP is going to make this quite difficult.

Trade deals like the TPP are superficially about trade. They are ultimately designed to limited the authority of national governments over their own economies, and to expand the scope of power of multinational corporations. These deals contain ratchet mechanisms, such as the investor-state mechanism, that make it difficult, if not impossible, for countries to roll back concessions to corporations and reclaim democratic control.

Placing these powers into corporate hands by ratifying the TPP would be anti-democratic and contrary to the interests of Canadians, including future generations.

Thank you.

[The Chair, Liberal, Mark Eyking]

Thank you, sir.

We're going to move on to Mr. Godfrey and Ms. Robinson from the P.E.I. Federation of Agriculture.

You have five minutes.

[Mary Robinson, President, Prince Edward Island Federation of Agriculture]

Good morning. My name is Mary Robinson, and I am a member of the sixth generation of my family to farm here on Prince Edward Island. We farm potatoes, soybeans, grain, and hay. I'm also currently the president of the P.E.I. Federation of Agriculture. With me today is Robert Godfrey, our executive director.

We want to thank you for this opportunity to present today here in Charlottetown. We understand this committee has been meeting with folks in cities all across Canada to hear the issues on this topic, and we appreciate being included in the effort.

The PEIFA is the province's largest general farm organization, representing the interests of 80% to 85% of farms across the province. We have approximately 600 farm members, as well as 15 different commodity organizations, ranging from cattle and dairy producers, to potato and strawberry growers, to fur breeders and honey producers. We have great diversity, and with this great diversity in membership comes diversity in the context of trade agreements. We represent both offensive and defensive interests, much like the federal Government of Canada.

[Robert Godfrey, Executive Director, Prince Edward Island Federation of Agriculture]

The PEIFA would like to thank the negotiators for pursuing Canada's interests for both exporter and supply-managed sectors. We understand the pressures they faced throughout the negotiations. The PEIFA is supportive of the outcome of the Trans-Pacific Partnership. Global Affairs Canada's economic impact report, released earlier this month, painted a picture that illustrated the importance of this agreement, an estimated gain of $4.3 billion to Canada's GDP. It also pointed to the potential loss of $5.3 billion if this agreement goes ahead without Canada. It presents an opportunity for Canada as well as an opportunity for our farm community.

The job now is for government to help in ensuring there are real market gains for our exporters. It is also important that the government commit to a compensation package for any losses that our supply-managed sectors may incur as a result of this agreement. This agreement will affect our supply-managed commodities. We will leave much of this to our colleagues, the Dairy Farmers of P.E.I., but we certainly want to echo their concerns.

When it comes to trade, the PEIFA has always been supportive of the supply-managed commodities' position: trade is essential for the Canadian economy, but it should be pursued in a way that provides no negative impacts to supply-managed farms. They should not have to pay the price for a nation's trade agreements. It's that simple.

You will recall that a compensation package was committed to last October, as Ron outlined a few minutes ago. The PEIFA asks that this government commit to do the same. The compensation of supply-managed farmers for revenues lost is part of the compromise the Canadian government was willing to make. The supply-managed sector estimates that the sum of access, and therefore the loss of potential revenue, will be substantial. The dairy industry, one of our largest members and one of the largest of agricultural sectors in P.E.I., estimates a Canadian-wide decline in the economy of $246 million per year. Chicken, eggs, and turkey are also estimating significant losses of revenue with the implementation of the TPP. These displacements of products will be filled by foreign farm operators and will represent real losses at the farm gates of island supply-managed farms. We would hope that an announcement of this package will be forthcoming soon.

In addition, it promised to tighten up the many leaks in the current import regime for supply-managed products. In many cases, these loopholes allow almost as many imports of supply-managed products as do the current TRQs. Our supply-managed sectors would certainly benefit from a more robust system that limits imports to the intended limits.

[Mary Robinson]

On the export side, the real gain for Canada is the equal footing in the Japanese markets we will have with our competitors from the U.S., Australia, and Mexico. However, these gains only come about if Canada is a signatory to the TPP, as Australia already has a free trade agreement with Japan. As you know, if Canada does not ratify the TPP, these gains will be lost to the Australians.

The PEIFA is hearing reports from the U.S. suggesting that Congress wants to amend some of the provisions of the TPP or to introduce other legislation that would alter the TPP. This is not to mention the rhetoric coming out of the presidential election, where both candidates have publicly opposed the current version of the agreement.

It's important for us to remember that often the devil is in the details. Phytosanitary issues can act, and have acted, as a non-tariff barrier for agricultural products. The P.E.I. potato industry, our economy's largest agricultural economic contributor, is especially attuned to this. The PEIFA cautions the Canadian government to keep this in mind as the process moves forward. We ask that the Canadian government remain vigilant throughout the ratification process of the 12 TPP countries, ensuring that no changes are made that would undermine Canada's interests, and specifically those interests related to the ag sector.

Now that Canada has successfully negotiated trade agreements with the EU and the TPP, the PEIFA is advocating that government sit down with industry and develop an overarching export strategy that will identify what is needed for Canadian agriculture, including Prince Edward Island farmers, to take full advantage of these trade agreements.

Finally, we want to assure you that the PEIFA and our national partner the Canadian Federation of Agriculture are ready to work in collaboration and partnership with you and our government to further the interests of Canadian farmers.

Thank you for your time.

[The Chair, Liberal, Mark Eyking]

Thank you to all presenters.

We're going to start off the dialogue with the MPs. We'll begin with the Conservatives. Mr. Ritz, you have the floor.

[Gerry Ritz, Conservative, Battlefords—Lloydminster, SK]

Thank you, ladies and gentlemen, for your presentations. It's good to reacquaint myself with a number of you I have met over the years.

A six-generation farm, Mary, that's fantastic. Keep it going another six; certainly, the ability is there. There's a hungry world, and of course, they all want more Canada. They recognize the great job you do as farmers, and that our processors do in delivering that good, safe quality food product.

Non-tariff trade barriers are always a huge impediment to the stability and predictability of trade corridors. There's been a lot of fuss made that only six chapters of the TPP speak to tariffs, and then there are a lot of other chapters that would fall under that line of non-tariff trade barriers. There are chapters on standards for food safety, so that what's coming into Canada is done at the same standard as ours, not coming in with lesser quality. We began that work a number of years ago, with the beyond the border initiative with the U.S., which made back and forth inputs, veterinary drugs and so on, so much more affordable and accessible in a timely way.

Then, of course, there are labour and environmental standards to make sure that other countries rise to Canadian standards, but not bring us to theirs. It's a very comprehensive trade agreement. Yes, there is give-and-take for the farm sector.

My question for you would be on the point you made. In the U.S. right now with the campaign going on, there's a lot of rhetoric. If the U.S. doesn't ratify it, should Canada continue to push to be a part of the other 11 countries in the TPP?

[Robert Godfrey]

I think we have to work very closely in collaboration with our largest trading partner. I think the idea that the U.S. will walk away altogether is.... I don't know if I want to say it's unlikely, but it depends on who wins, I guess. This is all pure speculation. I would agree with you, that they are our largest trading partner by far, and we would have to work very closely with them.

To ratify the agreement, you need six of the signatories to ratify it and that represents—

[Gerry Ritz, Conservative, Battlefords—Lloydminster, SK]

It represents 85%.

[Robert Godfrey]

—85% of GDP. If the U.S. does not ratify it, that would be a significant hit if that actually happens.

[Gerry Ritz, Conservative, Battlefords—Lloydminster, SK]

There's no stopping the other 11 countries from sitting down and agreeing that that will be set aside and they can move forward. It could be done. I've had those discussions.

[Ronald Maynard]

Right. What I would recommend in that case is to work with the U.S. If the U.S. walked away, I would work with the U.S. on that and I'd probably reignite our FTA discussions with Japan. I think that would put pressure on the other 10 signatories to take a harder look at what's going on and I'd go from there.

[Gerry Ritz, Conservative, Battlefords—Lloydminster, SK]

Yes, I don't disagree with you on that. I'm a little more bullish though, on the fact that we need diversity in our trade portfolio, just as you do in investments. You mentioned the different crops, Mary, and that's why you don't put all your eggs in one basket, literally. That's a terrible cliché, but it's true.

I'm very bullish that we should move ahead with the trade agreements that benefit Canada overall, absolutely, but at the end of the day, I think that it's very important we grow into that Pacific Rim market, because that's where the next move will be.

Over to the Dairy Farmers, gentlemen, thank you for the great work that you do across Canada. There's a little misinformation in some of the stuff that you were talking about. You talked in terms of CETA being 16,000 tonnes and 17,000 tonnes. I don't know where you got those numbers.

[Ronald Maynard]

I'm sorry, that's 1,700 tonnes of industrial cheese and 16,000 tonnes of fine cheese.

[Gerry Ritz, Conservative, Battlefords—Lloydminster, SK]

Yes, I was involved in the numbers. Those are static numbers. There's no indexing of that. That's a finite number, so 20 years from now, that's still what they get, and at the same time as we grow our market, there's the ability to absorb that cheese.

There's no definition that says it's all going to be fine cheese. The buyers and sellers will decide on what the market will take in. I'm also extremely proud of the fact that Canadian cheese makers go to the European shows and win awards. They are starting to develop that marketplace, as well as exporting their cheese into that market. There are offsets that are happening just at the market level.

Cheese competition standards was a huge win. That was in one of the chapters that was supposedly locked and loaded. We couldn't go back into it. We did. We were able to go back into all of those chapters and work with what was in the best interest of Canada.

There are two other...well, there are more than two, but the two that are most prevalent trade irritants are diafiltered milk and spent fowl. There is work being done on that. We've had some hearings. I know Minister MacAulay is trying to get up to speed on that. The point that I made in committee the other day is that the people sitting with the officials are already up to speed. They know what needs to be done in order to change those.

It amazes me that other countries can use those tariff loopholes, if you will, on exports on the WTO agreements, and we can't as a country.