International Trade Committee on Feb. 25th, 2016

[Kyle Peterson, Liberal, Newmarket—Aurora, ON]

Thank you, Mr. Chair, and thank you, panellists, for being here. We appreciate your contribution and your insight into these complex industries. They play an integral part in the Canadian economy, so we appreciate your being here.

I have a few questions.

Mr. Dungate, you spoke about other barriers that your industry faces. I'm looking not necessarily at TPP-specific ones, but what sorts of barriers has your industry been facing over the past few years, whether or not they are addressed by the TPP? You talked about import circumvention and things like that. How significant are these barriers to your industry?

[Mike Dungate]

They are absolutely key. As we said, this is a package and we worked hard. It was clear that we needed....

The whole part about a supply management system is not that we don't import chicken. We import a significant amount of chicken. The point is to know how much of it is coming in, because then we can do our production accordingly and are going to try to drive the market. But if it's circumventing it, that destabilizes what we're trying to do in market terms.

Certainly somebody can bring in chicken, keep it in our market for four years, and export it whenever they want. Even if they were going to re-export it, they are putting it into our market when it's opportune for them and then re-exporting a lower-value product at a time that's opportune for them, whereas we're working on an eight-week production cycle. It's completely out of line.

Our point—and we met earlier this week with François-Philippe Champagne—is that we were at the point concerning the duties relief program with the previous government last May that it was set. It was going to be done. It was to take all food products out of it, because that is not a perishable product program.

We would like to see this in the budget. It's a no-cost measure, and in fact it will support an industry and allow us to contribute more.

[Kyle Peterson, Liberal, Newmarket—Aurora, ON]

That's good.

The TPP doesn't really address that barrier, then, at all.

[Mike Dungate]

No. The TPP will not address that barrier at all. From a non-tariff barrier perspective, there still are barriers from a meat perspective. For example New Zealand doesn't import any chicken, and it isn't because of tariffs. It's because they just don't allow it in.

[Kyle Peterson, Liberal, Newmarket—Aurora, ON]

Right. It's outright banned.

Just let me understand the supply chain of your industry. Your organization also represents the processors as well as the farmers. Is that correct?

[Mike Dungate]

I won't say we represent the processors; we have processors on our board. We work closely with the processors in a value-chain approach, and I think they would share the perspective on these issues that we have.

[Kyle Peterson, Liberal, Newmarket—Aurora, ON]

I would think they would.

When we're importing chicken in Canada, is it a processed product that we're importing, or is there raw chicken coming in, concerning which Canadian processors can take a value-added role, even if we're importing more? Or is it coming in already processed?

[Mike Dungate]

This is part of what we call tariff rate quota administration. Really, the importers are grouped as processors, distributors, food service—there are different pools in it.

There is a lot of value added that comes in. There is a benefit. To be clear, we're not trying to stop the imports there that are certain, that we know are there, that provide some value-added.

[Kyle Peterson, Liberal, Newmarket—Aurora, ON]

Okay.

[Mike Dungate]

There are some that go direct to store shelves, absolutely.

[Kyle Peterson, Liberal, Newmarket—Aurora, ON]

Thank you for that.

I have one last question on the quota and...indemnification, I guess, for lack of a better word.

I think the previous government indicated that a quota will not be devalued by the TPP. Do you agree with that economic assessment? Have you done one of your own? It seems to me intuitively that the quota must be valued less, if it's moving into this more open market.

[Mike Dungate]

Are you talking about production quota value?

[Kyle Peterson, Liberal, Newmarket—Aurora, ON]

Yes.

[Mike Dungate]

It's a tough one to get a handle on, mainly because the price of quota varies from province to province from sale to sale. There's not an open exchange where it can happen in the chicken sector.

Our point is that our job in supply management is neither to increase or decrease the value of that quota. Our job—I would call it my job—is a cash flow business job, not an equity appreciation job. If we're doing our job properly, we would hope there's stability there.

[Kyle Peterson, Liberal, Newmarket—Aurora, ON]

I think you indicated in your presentation that the—

I'll come to you, Ms. Emond, I'm sorry.

Actually it's a good segue, because I want to know what your appreciation is of the indemnification—whether it's to offset a devaluation in the quota, or how you see it working, or whether you think your quotas will even be devalued.

[Caroline Emond]

First, can I answer the first question—

[Kyle Peterson, Liberal, Newmarket—Aurora, ON]

Sure.

[Caroline Emond]

—on circumvention? Obviously that also applies to dairy. This duty deferral program has been detrimental for all supply management commodities. In dairy it's been causing major problems because if chicken after four years is not nice, I can tell you it's the same thing for dairy products. This is not helping. This has to go. This is clear-cut for everybody in the agriculture business.

What's important for this committee—because you said there's no link with the TPP—is that creative circumvention of imports is part of this role, as well as that of your committee. I can tell you there are a lot of creative people out there. We faced the pizza kit crisis we had, and the butteroil-sugar blend. They do the same thing. Put a little sugar in cream and it's not cream anymore. There are all kinds of ways. When we talk about granting access it's important you keep in mind that border control is important. People will find any way to play with them and that is detrimental to us. Contrary to a lot of industries, we do control our production to make sure we respect the demand. If we can't read the demand then obviously that's not happening. I think this is part of the role of the committee.

To answer your question on the quota values, we believe with the information we have that this part of the compensation package is probably not the one that will be helping the farmers directly. We would rather see that money devoted to the revenue loss. According to our calculations, and we need to remind you, it's not only the dairy package. It's all supply management packages. The $4.2 billion is not for dairy. It's for the five commodities. In our case it includes CETA and TPP, and it lasts for 10 years for five commodities. The numbers look big, but I can tell you that the loss of revenues are big.

[The Chair, Liberal, Mark Eyking]

Thank you very much.

We're going to move on to the NDP, and Ms. Ramsey.

[Tracey Ramsey, NDP, Essex, ON]

Thank you.

First of all thank you so much for everything that your organizations do. Supply management is so important to Canadians, so thank you for advocating on behalf of the farmers you represent.

To be sitting here having a conversation about opening our supply-managed dairies and expanding our chicken imports weighs heavily on me as a consumer and as a Canadian. To support producers and supply-managed sectors during the implementation of the TPP and the Canada-European Union Comprehensive Economic and Trade Agreement, the federal government has announced an assistance package composed of a $2.4-billion income guarantee program, a $1.5-billion quota value guarantee program, a $450-million processor modernization program, and a $15-million market development initiative.

Are the proposed amounts sufficient to offset any negative impacts of the TPP and CETA, and help support Canada's dairy and chicken sectors?

[Caroline Emond]

First, I must tell you you're not alone in wanting Canadian products. We had a campaign during TPP: Canadian milk matters. There were more than 215,000 letters that were sent across the country to most of you in support of Canadian dairy farmers. They like the Canadian products because they trust the farmers and they know we have the highest standard possible. I think it's important to know you're not alone.

Second, the calculations, the estimates made by the government at the time were made, I would say, more on the safe side of the calculations. The thing is that we don't know which products will be coming in. In the case of dairy, for example, we could bring in milk at 2%, but in the regulations you can go to 6%. Depending on which products are coming in, obviously.... If it's 6% milk, I can tell you the impacts are much bigger and that's why we have a range like that. Depending on the type of product coming in it impacts on the loss because we measure in terms of butter fat.

It's not an easy one. You can say, “This is it”, but I can tell you that for CETA and TPP for five commodities over 10 years, definitely, it's not too much.

[Tracey Ramsey, NDP, Essex, ON]

In addition to Mr. Van Kesteren's question, I would like to ask specifically if you've had any indication from the current Liberal government that they will honour the compensation package that was offered.

[Caroline Emond]

We have heard in the House of Commons in an answer to a question by the minister saying he supports compensation. That's all I can say.

[Mike Dungate]

We got a letter from Minister MacAulay stating that the government supports, knows that compensation is important, and all that. They're going through a process of determining whether they're going to sign. They're looking at it, they've told us, together. There's no compensation if you don't sign, so—

[Tracey Ramsey, NDP, Essex, ON]

There's no hard yes and we are absolutely going to offer that.