Evidence of meeting #40 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 zealand.
A recording is available from Parliament.
Liberal
The Chair Liberal Mark Eyking
Good morning, everybody. I call the meeting to order.
I see a large slate of witnesses today. Sorry; we're a little late. As you know, what happens on the Hill sometimes rules how we operate throughout the day. We had some votes up there.
Go ahead, Mr. Hoback.
October 25th, 2016 / 11:10 a.m.
Conservative
Randy Hoback Conservative Prince Albert, SK
Mr. Chair, I'd like to move a motion at this point in time before we get started in light of the guests that we will have a bit later this afternoon. I do apologize to the witnesses who are here, but hopefully we can deal with it quickly and then move on to the witnesses.
I move:
That the House of Commons Standing Committee on International Trade immediately hold a meeting on the Comprehensive Economic and Trade Agreement in order to receive an update from the Minister of International Trade and officials on the breakdown of talks between Canada and the European Union.
After what's happened last week and on the weekend, I think it's very important that the committee be brought up to speed and that the minister be brought in front of the committee, with officials, and that we schedule a meeting post-haste to do that.
Liberal
The Chair Liberal Mark Eyking
I think the motion is pretty self-explanatory.
Do we have any more comments? Does anybody oppose it?
Liberal
The Chair Liberal Mark Eyking
All right. Are you ready to go?
Does everybody understand the motion?
(Motion negatived [See Minutes of Proceedings])
Liberal
The Chair Liberal Mark Eyking
The motion has been defeated.
We'll move on to the rest of our meeting.
Again, welcome.
Our witnesses know we're dealing with the TPP, a very big agreement that has an impact on all Canadians, whether you're a consumer or you're in business.
Our committee has been travelling across the country and holding consultations. We did the territories and provinces. Many stakeholders have come before us so far, and of course many individuals. We have over 20,000 submissions from individuals. We had an open microphone at all our meetings, so we have had quite a bit of input.
We're hoping to finish our submissions by the end of this month, and we'll move on to prepare a report for the House of Commons.
Without further ado, I have a list here, and we'll get right into it. We have two official languages, so we have translation.
If you're not familiar with the process, I'd like to keep it to around five minutes for each group or each individual. We're going to go through all the individuals and we then will proceed to interaction with the MPs.
We're going to start by welcoming, via video conference, Alex and Jeronim.
Can you hear us?
Alex Izurieta Senior Economist, United Nations, As an Individual
Honourable members of the committee, we want to thank you for offering us the opportunity to discuss the findings of our study.
This is an empirical analysis using the United Nations global policy model—“GPM” henceforth—conducted as part of a memorandum of understanding between UNCTAD and GDAE-Tufts University. As such, it should be understood as an academic exercise, not necessarily representing the views of the institutions with which the authors are associated.
In Canada we project that TPP will have virtually no effect on GDP growth and a negative effect on employment, leading to the loss of approximately 60,000 jobs over 10 years.
Our study is different from other model-based studies of the TPP for three reasons.
First, the model that is used, the UN GPM, is not a specialized global trade model, but rather a trade, macro, finance, and policy model of the world economy.
Second, the GPM is not based on the full employment and general equilibrium assumptions of standard trade models.
Third, we focus on aspects of macro-financial adjustments ignored in the standard models. As a matter of fact, most standard trade models do not incorporate macroeconomic dynamics, do not incorporate markup pricing or other frictions, do not capture the role of fiscal or monetary policy, and do not even have a financial sector.
The first difference with studies using standard trade models should be properly understood. International trade is a core part of the GPM, but this model considers import and export equations disaggregated into four main categories: manufacturing goods, primary commodities, energy, and services. Meanwhile, standard trade models usually consider many subsets of traded goods.
Whether trade in these models is better handled depends on various aspects. For example, despite their greater diversity in products, their estimates—that is, the factors that determine the magnitude of cause-effect relationships—are for the most part imposed parameters. Meanwhile, in the GPM these factors are estimated by econometric techniques using data spanning various decades.
Also, as most of the changes contemplated in the TPP are not tariffs per se, but rather non-tariffs and a large number of costs, institutional changes, and regulatory changes, it could be argued that the standard assumption that all such changes are equivalent to tariffs is unreasonable.
Nevertheless, to allow for a useful comparison between our study and those carried out with standard trade models, we took the findings of the latter about trade volumes as our starting assumption. To be clear, we built our projections assuming that standard models are correct about the impact that the TPP will have on trade volumes. If there is a heroic assumption in our work, it was this.
This brings us to our second difference: in the GPM we do not assume that full employment will necessarily be maintained after changes in specialization, preferences, and prices resulting from competition and freer flows of capital. These potential effects of TPP can leave employment, capital, and skills unutilized.
Likewise, in the GPM we do not assume that all savings generated by changing spending and portfolio patterns are fully invested in fixed capital. Neither do we assume perfect competition, and therefore, in the GPM, increases of efficiency or productivity do not translate fully into reduced prices for consumers.
In brief, in the GPM, unemployment can be a lasting effect—called hysteresis in the literature—excess savings can be transformed into speculative finance when demand is weak, and greater profits or markup margins can prevail over benefits for consumers.
Finally, the third difference between our study and standard ones is our focus on non-trade effects of trade and investment treaties, such as deregulation of trade and finance, profit protection, and limitations of government policy sovereignty. Hence, we analyze the impact of TPP on income distribution, aggregate spending and demand, tax rates, and government expenditure on goods, services, and social protection.
We find that GDP growth is not unambiguously positive, as claimed by studies based on the standard model. Jobs are lost in meaningful numbers among TPP members and non-TPP members. Domestic and global income distribution deteriorates as profit shares increase.
Our detailed results, assumptions, method, and the technical aspects of the model are discussed in our paper and in a series of technical studies referenced in it.
Thank you very much.
Liberal
The Chair Liberal Mark Eyking
Thank you, gentlemen. I guess it's evening where you're at.
I'll stick with the video conferencing in case we have some technical difficulty. We'll move over to Canadian Doctors for Medicare.
Dr. Mehta, go ahead, sir.
Dr. Chetan Mehta Member, Canadian Doctors for Medicare
First off, I'd like to thank the Standing Committee on International Trade for inviting me. My name is Dr. Chetan Mehta. I'm a family and addictions medicine physician who works at Queen West Community Health Centre and for the addictions medicine service at Women's College Hospital.
I'm speaking today on behalf of Canadian Doctors for Medicare, or CDM. CDM is committed to evidence-based policy reform that advances publicly funded health care and systems that treat patients based on need, not their ability to pay.
Our organization is concerned about TPP's impact on the health outcomes of Canadians. Today, even without the ratification of TPP and CETA, many of them face severe barriers to accessing the medications they desperately need. Many of these issues that Canadians face are determined by forces beyond their control, by policy and trade decisions made by government, corporations, and panels such as yours.
We've highlighted three provisions in the trans-Pacific partnership agreement that have the potential to negatively impact the health of our patients.
The first is that the TPP's extension of patents to medical procedures constitutes a most significant divergence from existing medical and legal structures. Currently procedures such as laparoscopic surgery or interventional procedures are protected from patent restrictions, giving the medical community instant access to the best techniques that are available. Under TPP, new techniques would be subject to patents, meaning that the next breakthrough—the next laparoscopic surgery, for example—could be hidden behind legal and political barriers and rendered less accessible as a result.
Many of these services have the potential to save lives. This kind of patent reform could significantly affect allied health professions as well—for example, dentistry, physiotherapy, or respiratory therapy—that are increasingly linked to hospital care. There is little doubt that the quality of Canadian health care overall would suffer as a result, both from patients being blocked from accessing the appropriate services and Canadian innovation being hampered.
The second provision, the strengthening of patents for new pharmaceuticals, has received the most attention, and for good reason. It could have a profound impact on those who rely on medications, especially those without drug insurance plans. The TPP allows drug companies to extend the term of a new patent by five years or more, depending on whether delays in the patent approval process are considered “unreasonable”. Similar provisions have appeared in other trade agreements, but TPP weakens their required justification for an unreasonable delay, opening up new opportunities for patent extension and further delay regarding the development of generic alternatives.
Generic drugs are essential to health systems globally. For example, MSF lobbied to have the cost of HIV medications brought down by 99% through the introduction of generic alternatives; these generic manufacturers still made profits. By extending patents, we delay the development of generic drugs, and we do so at a massive cost to the patients who rely on them. The TPP's patent provisions are corporate interests with no proven benefits to public health.
Recent history has shown that longer patents actually decrease R and D. When patents were extended to 20 years in 1989, the pharmaceutical industry's promise was to increase R and D budgets to 10% of overall spending. Instead, R and D has dropped to as little as 3%, while marketing budgets to doctors have grown. The end result has been that increased patent protection delivers more profits but less innovation.
I'm happy to discuss my case study of hepatitis C drugs. It shows that these new drugs currently cost $80,000 to $150,000 per course of treatment, per person, in the Ontario health system. The risk to public and private insurers is significant today, and it would be worse under TPP.
Our final concern is the weakening of government regulatory powers under TPP. You may know that this occurs through a process called ISDS, which has been discussed at length. ISDS claims allow corporations to challenge foreign government policies that diminish, or have the potential to diminish, their earnings.
ISDS claims are not new. What is new is the emphasis on potential losses. The TPP's ISDS provisions can be launched by corporations on the basis of alleged financial losses, not proven financial losses.
Along with existing structural flaws, these details further erode state regulatory powers in the realm of public health and Health Canada and potential medical device and drug safety. While these developments certainly unfold in front of small asymmetric tribunals, their effects are felt by patients across the country, patients directly exposed to corporate decision-making when public health regulation is blocked.
The TPP carries with it the potential to compromise and jeopardize the health and lives of patients. It does so by blocking access to innovative techniques, creating barriers to medically necessary drugs, and strengthening the means by which multinationals can avoid and deter regulation, even if that regulation is designed to benefit Canadians and save lives.
For these reasons, and for others not dealt with here, we urge the federal government to subject the trans-Pacific partnership to a rigorous and transparent health impact analysis, and ask that the results be made available to all Canadians.
If we are going to ratify a trade agreement with sweeping health implications that touch the lives of us all, we should be clear about the consequences.
Thank you very much.
Liberal
The Chair Liberal Mark Eyking
Thank you, Doctor.
We're going to move to the panellists who here at the table with us.
We're going to go to the Barley Council of Canada first, and Philip de Kemp.
Go ahead, sir. You have the floor.
Philip de Kemp Executive Director, Barley Council of Canada
Mr. Chairman, ladies and gentlemen of the committee, thank you for the invitation today.
Some of you obviously have met me before in my capacity as executive director of the Barley Council and the malt industry, but also as a quite important participant within the Canadian Agri-Food Trade Alliance, CAFTA. I appreciate your time today.
The Barley Council of Canada is led by farmer and industry members and serves as a national voice for Canada's barley industry. Our council comprises all provincial and regional barley producer commissions and grain councils. These organizations have a vested interest in barley as Canada's third-largest crop. They represent about 23,000 barley farmers from coast to coast.
The council also comprises strong advocates and participants from Canada's beer and malting industry, the cattle-feeding industry, grain exporters, and finally, barley research and seed development industries.
As a representative for Canada's barley value chain, we focus our mandate on enhancing Canadian barley in research and innovation, market development and international trade opportunities, market access issues, and finally, best management practices. The health and viability of our industry rely significantly on our ability to grow and expand export opportunities both for bulk feed and malting barley and our ability to meet the needs of our domestic value-added industries, which rely on top-quality barley in their operations. This primarily applies to Canada's malting industry, which is the second-largest exporter of malt in the world and buys more than one million tonnes of malting barley annually.
Further down the value chain, our Canadian beer industry, as reported by the Conference Board of Canada about 12 months ago, generates more than $5.8 billion in federal and provincial tax revenue via sales tax, excise tax, corporate tax, municipal tax, and employment tax. This revenue is created only from the purchase of about $75 million worth of Canadian barley. These levels of multipliers, I guess, are probably unparalleled anywhere in any other Canadian sector, given that you have $75 million of Canadian barley from Canadian barley farmers generating $5.8 billion in tax revenue for Canada. I don't think you're going to see a better multiplier anywhere.
Finally, our industry also relies on the strength and the growth of our beef and hog sectors. These sectors purchase about two-thirds of the roughly 8.5 million tonnes of barley produced in Canada.
Given our industry's reliance on exports through bulk barley sales or domestically value-added and processed malt and beef and pork for export, it should come as no surprise that our industry strongly endorses and supports Canada's negotiated agreement within the trans-Pacific partnership. For Canadian barley, the TPP will provide significant opportunities and benefits for the entire value chain.
For example, in Japan alone, reduced or eliminated tariffs, mark-ups, and country-specific quotas for feed, food, barley, and malt, coupled with the enhanced opportunities for additional exports of processed beef and pork, translate approximately into the sale of an additional 400,000 to 500,000 tonnes of barley valued at between $75 to $100 million in the producers' pockets.
Alternatively, without the ratification of the TPP, our record of feed barley sales into Japan will continue to be at risk, as demonstrated currently by our loss of about 250,000 to 300,000 tonnes of feed barley to Japan. This could partially be due to Australia's current bilateral trade agreement with Japan, which has eliminated tariffs, giving Australian feed barley a current competitive advantage.
We recognize that the political discourse surrounding support of the TPP within the confines of the U.S. election may perhaps be the deciding factor as to the outcome of the TPP. However, if that is the case, we believe it becomes increasingly important that Canada show international leadership on this agreement. We need to stand with our TPP trade partners and show that we acknowledge the agreement and will stand with our signatory commitments regardless of what happens as a result of the U.S. election. This step may perhaps be symbolic, but it does show Canada's continued commitment to our other trading allies in that region.
The majority of Canada's agricultural industries have always led the way in advocating and supporting expanded global trade opportunities, and I believe our global success and export record over the past several decades speaks for itself.
We can walk the talk. We can and will deliver on our export capabilities, as we have always said we would do, and we've always continued to do. Overall, the TPP is a good deal for Canadian barley and for Canadian agricultural exports as a whole.
In closing, Mr. Chairman, I would like to take this opportunity to personally thank some of the people who have been instrumental in getting this deal at least to where it is today. Former ministers Ed Fast and Gerry Ritz, thank you for your service and support to enhance Canadian agricultural export opportunities during the TPP negotiations.
As well, we would like to acknowledge and thank our chief negotiator, Kirsten Hillman, and our Agriculture Canada team, including Frédéric Seppey and Denis Landreville, all of whom worked extremely hard to get the best deal possible for Canada. Thank you for your dedicated service.
Liberal
The Chair Liberal Mark Eyking
Thank you, Mr. de Kemp. Thank you for being here on behalf of the growers today.
We're going to move over to the Canadian Association of Railway Suppliers. We have Jerry Giroux and Sylvia Newell. Thank you, and welcome.
You have the floor.
Jerry Giroux Chairman, International Trade Committee, Canadian Association of Railway Suppliers
Thank you Mr. Bourgault, Mr. Chair, and committee members.
My name is Jerry Giroux, and I'm the chairman of the international trade committee of the Canadian Association of Railway Suppliers, known as CARS. My sincere thanks for the opportunity to present on behalf of CARS. We greatly appreciate the consultation, and we welcome the chance to share our thoughts on the trans-Pacific partnership from the perspective of our association.
With me is Sylvia Newell, the executive director of CARS.
CARS is a member-driven association representing a diverse group of companies that are involved at all levels within the Canadian freight, passenger, commuter, and urban light rail segments. We supply both products and services through our 140 members.
CARS has long advocated for the removal of trade barriers that inhibit the ability of Canadian rail suppliers to access more global markets. The ability to access the rapidly expanding Asia-Pacific region would be an excellent opportunity for our members. With these objectives in mind, we believe the TPP has the potential to provide our members with increased export opportunities.
The world rail supply market accounted for a record level of approximately $232 billion in 2015. Growth of the worldwide rail supply market is expected to be 2.6% per year and reach $268 billion in 2021. These projections were the findings of a worldwide market study conducted by Ronald Berger and commissioned by the European Rail Industry Association. It is worth noting that compared to the last study, which was two years ago, the world rail supply market has achieved a substantial growth of 3%, largely driven by the Asia-Pacific region.
CARS generally feels that the TPP has the potential to provide an effective way to access the Asia-Pacific region and the potential to eliminate tariffs on industrial goods. It has the potential to provide increased use of international standards and regulations, predictable access to government procurement contracts in a new and harmonized procurement provisions among NAFTA signatories, and easier movement for business purposes to the benefit of the consulting and engineering segments of our association.
In addition, a secondary benefit of the TPP to our members is the potential growth of commodities and merchandise, which results in a volume increase of goods transported on our railways and increased requirements for railcars, locomotives, and rail infrastructure to support increased exports to the Asia-Pacific region.
We've researched the TPP—I didn't read all 5,000 pages—and how it relates to the Canadian rail suppliers segment. We were able to find the TPP government procurement provisions that do cover Canadian rail equipment, but we're unclear within the TPP text how you are addressing the Canadian rail community. We see subsections for auto, agriculture, and construction, but rail just doesn't even seem to be on the radar screen.
While CARS' members generally support the TPP, there are concerns about how the TPP could disrupt our members' North American businesses. Open trade with low-wage countries in the TPP could have unintended consequences for existing Canadian rail manufacturing suppliers.
Here's a little story. Although China's not currently in the TPP, they are an example of a low-wage country that can disrupt the Canadian rail supply. Recently, a Chinese firm invested in a Moncton, New Brunswick, facility to manufacture railcars. The firm has a similar investment in the United States, where recently 47 senators sent a letter to President Obama accusing this firm of dumping steel fabricated rail assemblies into the U.S. through this newly created railcar builder.
Canada has a world-class railcar manufacturer in Hamilton, Ontario, that creates thousands of direct and indirect jobs in Canada. The example of this Moncton facility expresses our memberships' general concern about achieving a fair trade of manufactured goods with any trading partner that may have a largely differing labour, environmental, or tax-law environment. There are countries within the TPP that could cause similar disruptions.
Another concern expressed by our membership relates to currency manipulation, which in many instances is a very significant trade barrier in our space, and it's a risk that Canadian companies face in selling into international markets.
When countries intervene in currency markets to depress the value of their currency to increase export competitiveness for domestic manufacturers and increase imports, they are creating an unfair playing field.
In the context of the free trade agreement, currency manipulation can completely offset the benefits of these tariff reductions by simultaneously creating an unfair export subsidiary or import surcharge. World-class rules have long obliged countries to refrain from currency manipulation because of the potential to distort trade, yet despite these rules being in place at the IMF and the WTO, no multilateral enforcement actions have taken place in the seven years of this global economic system having been in place.
Chairman, International Trade Committee, Canadian Association of Railway Suppliers
Jolly it up?
Liberal
Chairman, International Trade Committee, Canadian Association of Railway Suppliers
Quickly then, one of the real threats we see is a lack of understanding. Probably 95% of our membership couldn't name the countries in the TPP. We are urging you to bolster up your trade commissioners and get the messages out.
How do Canadians, SMEs especially, benefit and access and take advantage of these opportunities that may present themselves through TPP? CARS is hosting a seminar at the Royal York Hotel next month, and we're bringing in EDC, global trade commissioners, trade lawyers—you know, for CanExport provisions—and addressing our membership. We is really trying to bring this to the fore.
Regarding Buy America, our guys are creeped out by the Buy America provisions that would potentially stomp on any deal you have. Frankly, my bookie says that the U.S. isn't going to ratify this thing anyway. It kind of makes you wonder. If it's a yea or nay thing with us—if we either have to say yes or no—are we going to have to rewrite this thing after seven years of your painful work?
In closing, we feel that....
We're behind. Thank you for your time.
Liberal
The Chair Liberal Mark Eyking
Thank you, sir. I didn't mean to cut you off. We have so many witnesses.
I'll just let you know that we have your submission. It will be submitted around, and it will be in the text anyway. Thank you.
We're going to move on now to the Canadian Vehicle Manufacturers' Association, and we have Mark Nantais.
Go ahead, sir.
Mark Nantais President, Canadian Vehicle Manufacturers' Association
Thank you very much, Mr. Chairman, and good morning, honourable members. Thank you very much for the opportunity to provide our perspective on the negotiation of the TPP.
For 90 years, the CVMA has represented Canada's leading manufacturers who assemble vehicles here in Canada. Our members include FCA Canada Inc., Ford Motor Company of Canada and General Motors of Canada Company, and together these companies are responsible for approximately 60% of all Canadian production. In fact, they're are also the largest multinational companies in the world, exporting their vehicles to 100 countries around the globe.
The CVMA is supportive of fair and balanced trade agreements that offer real opportunities and benefits to Canadian automotive manufacturers. CETA is an example of one such agreement. I have to say that we greatly appreciate the efforts the government has made, especially over the last few weeks and days, and are hopeful that the European Union can work towards consensus and a successful conclusion.
Our Canadian plants are among the most productive in North America, and are consistently producing award-winning quality vehicles. Company investments in Canada support the entire value chain, from parts manufacturing to research and development that leads to exciting technology advancements.
Auto manufacturing and its contribution to Canadian international trade is a foundation for economic growth, as it contributes to a prosperous economy and sustains many middle-class jobs.
For instance, exports of motor vehicles and parts totalled $87 billion last year. Vehicles are Canada's second-largest export. Ninety-seven percent of those vehicles produced in Canada are exported to our primary market, the United States, for sale and for transshipment to countries across the globe. Auto manufacturing supports 115,000 direct jobs in communities and 500,000 direct and indirect jobs across Canada. For every assembly job, there are seven to nine other jobs created in the economy. We don't know of any other manufacturing sector that has such a high job multiplier. Finally, the industry made direct contributions of over $18 billion to the GDP in 2014.
In our conversations with government regarding the TPP, we have been consistent in our recommendations and we believe that they are necessary to create the proper foundation for free and open trade in automotive goods.
First, we have specifically recommended that there be the same terms and outcomes between Canada and the United States with respect to automotive trade, due to the highly integrated nature of the U.S. and Canadian auto industries.
Second, a long and back-ended tariff phase-out for Canada's auto tariffs on Japanese imports of cars and trucks, commensurate with the timeline for phasing out tariffs secured by the United States, is absolutely necessary.
Third, we recommend the inclusion of strong and enforceable currency disciplines to ensure that market access provisions are not undermined by a country's inclination to manipulate its currency, given the intersection of trade and finance.
The final text of the TPP did not provide similar outcomes for Canada and the United States, nor did it address currency manipulation.
Recently, the Office of the Chief Economist at Global Affairs Canada released a report entitled “Economic Impact of Canada’s Potential Participation in the Trans-Pacific Partnership Agreement”. It states:
The sector that will be affected most by the erosion of NAFTA preferences is the automotive sector. ...Canadian automotive production will experience a decline.
Likewise, the United States International Trade Commission's report on TPP concludes that Canada's elimination of tariffs on automotive parts will primarily benefit Japanese parts exports.
Accordingly, we submit that there are two key provisions that must be addressed in the TPP: first, the tariff schedule misalignment with the U.S., and second, currency manipulation measures.
The material differences with U.S. terms for automotive tariff phase-outs will compromise the economic rationale for auto assembly and supply chain investments to be made in Ontario and Canada and undermine the hard-won historical benefits of regulatory, infrastructure, and supply chain integration and the alignment between the Canadian and U.S. auto sectors.
Canada accepted an accelerated tariff phase-out over five years, and that is five times faster than the auto tariff phase-out that was agreed to in the United States, which was 25 years for cars and 30 years for trucks. Both of the U.S. tariffs are back-end loaded.
The TPP, as it currently stands, fails to recognize North American integration for the automotive manufacturing industry. Automotive manufacturing operates as an inextricably linked industry as a result of our historical development under NAFTA and the Auto Pact prior to that. Automotive trade under NAFTA is one of the most successful trade relationships in the world, accounting for $100 billion in two-way trade annually between Canada and the United States, which is more than 20% of the total trade between the two countries.
As a result of this high degree of integration, it is critical that Canada achieve the same auto provisions in the TPP as the United States. Trade should facilitate a level playing field, not skew trade in favour of imports.
In closing, as it currently stands, the terms of the TPP will not increase auto exports in any meaningful manner unless the tariff phase-out schedule and currency concerns are addressed.
As supporters of new trade opportunities for our vehicles produced in Canada, we would appreciate your assistance and advice on what options would be available to address the shortcomings of the TPP auto-related terms going forward. We remain interested in open dialogue to address these concerns that I presented this morning, and we wish to explore potential solutions.
Mr. Chairman, thank you very much, and I would certainly be willing to answer any questions members may have.
Liberal
The Chair Liberal Mark Eyking
Thank you, sir, for coming.
We're going to move to our last group of witnesses here.
We have Arnold Drung and Ron Davidson from the Canadian Meat Council.
Go ahead, folks; you have the floor.
Arnold Drung Member of the Board of Directors, Canadian Meat Council
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.
Liberal
The Chair Liberal Mark Eyking
Thank you, gentlemen. That wraps up our presenters for this morning.
We're going to move into dialogue with the MPs. I would like to welcome the member from Jonquière, Quebec. Welcome, Madam Trudel, to our committee.
We're going to start off with the Conservatives. Mr. Ritz, you have the floor for five minutes.
Conservative
Gerry Ritz Conservative Battlefords—Lloydminster, SK
Thank you, Mr. Chair.
Thank you, all, for your presentations today. They are always very helpful.
I want to start with the gentlemen presenting from Geneva this morning—or afternoon or evening, whatever it is over there.
I was quite taken aback when one of the first things that were presented was a disclaimer about both of the organizations you represent. You are creating a distance between yourselves, your report, and them. Who commissioned this study?
