Good morning.
Thank you for the opportunity to speak to the committee with respect to the trans-Pacific partnership.
My name is Arnold Drung. I am a member of the board of directors of the Canadian Meat Council, which represents Canada's red meat industry and has been doing so for 97 years. I'm also the president of Conestoga Meat Packers, which is a producer-owned co-operative pork processing operation located in Breslau, Ontario, with 170 farmer-owners. Accompanying me is Ron Davidson, who is the meat council's director for international trade, government, and media relations.
By way of background, food processing is the foundation of Canada's manufacturing sector, employing more people than auto and aerospace combined. With sales of $24 billion, exports of $5.7 billion, and 65,000 jobs, the meat industry is the largest component of the food processing sector. A meat packing facility is typically either the largest or one of the largest employers and taxpayers in the community.
Competitive access to foreign markets is an absolute necessity for the livestock and meat sector. Exports account for one-half of beef producer income and two-thirds of pork producer income.
Regarding the TPP, exports to the 11 other TPP nations are of paramount importance, amounting to $4.7 billion and accounting for an indispensable 81% of total meat exports. TPP member Japan is the world's largest and most profitable market for pork and third-largest market for beef. Last year, Canadian meat exports to Japan were valued at $1.1 billion.
Second only to the United States, Japan accounted for $944 million of Canadian pork exports, equivalent to 56% of shipments to non-U.S. destinations. The TPP will greatly reduce the impact of the very protective gate price system in Japan. Following the United States, China, and Mexico, Japan was the fourth-largest foreign destination for Canadian beef, accounting for sales of $94 million, equivalent to 14% of shipments to non-U.S. destinations. The TPP will substantially reduce import tariffs from 38.5% to 9%.
Canada is losing competitive market access to the Japanese market as a result of the Australia-Japan free trade agreement. To date, Australian beef producers and processors have accumulated a 7% tariff advantage on frozen beef and a 10% advantage on fresh chilled beef. Market access disparities will continue to increase until they reach 15% and 19%, respectively. Furthermore, European meat packers are urging the European Commission to conclude negotiation of the Japan-EU economic partnership agreement.
Canadian farmers and meat processors cannot relive, in the case of the TPP, the destructive experience of South Korea, when Canadian negotiators retreated from leading to trailing their European and U.S. counterparts. The Canada-Korea free trade negotiations drifted from first to last, and Canadian meat exports plummeted by 64% within two years.
Also of interest are Malaysia, Singapore, and Vietnam, to which meat sales totalled $1.3 million, $12 million, and $5.8 million respectively. Exports to these countries are projected to grow significantly following implementation of the TPP. Additional countries are expected to join the TPP. Terms of access will be established by the initial TPP members. It is preferable to be a founding member rather than to stand in line waiting and then pay for membership at a subsequent date.
The moment that the TPP enters into force, the status quo will no longer exist. To place the risk of non-membership in the TPP in perspective, the $1.1 billion of actual sales at risk in Japan are greater than the up to $1 billion of potential sales under the CETA. Furthermore, failure to participate in the TPP would jeopardize not only $1.1 billion of current meat exports but would also forfeit $500 million in new export potential in Asia. Moreover, whereas the CETA places caps on export potential in Europe, the TPP uncaps sales opportunities in Asia, including in Canada's most valuable overseas markets.
In summary, the loss of competitive access to TPP markets, particularly Japan, would be devastating for Canadian feed grain and livestock farmers, meat industry workers, and the numerous municipalities across the country in which they live, work, and pay taxes. Conversely, participation in the TPP will permit Canada's meat industry to solidify, rather than relinquish, market access parity with other signatories, thereby allowing the livestock and meat sector to expand production, increase exports, maintain competitiveness, increase jobs, enhance economic growth, and slow the hollowing out of rural Canada.
Thank you.