International Trade Committee on Feb. 25th, 2016

[The Chair, Liberal, Mark Eyking]

Good morning, everybody.

She's been a rough wet night and morning, but it's good to see everybody here.

We're going to try to have this meeting structured a bit like the last one. I'm thinking that we'll have our first round. We'll probably do 50 minutes. Then, if the other guest witnesses are here, we'll go right to them. Then we'll try to save the last 15 minutes for new business.

Is that in agreement with everybody?

[Some hon. members]

Agreed.

[The Chair, Liberal, Mark Eyking]

Our main topic today is agriculture. That's dear to many of our hearts, especially with our former minister here.

To start off, we have the Canadian Agri-Food Trade Alliance here today, and the Vintners Association.

If you folks are ready, we usually try to keep our presentations tight, so we have lots of room for questions. I'm sure you've done this before.

We're going to start off with the Agri-Food Trade Alliance.

Ms. Citeau, go ahead.

[Claire Citeau, Executive Director, Canadian Agri-Food Trade Alliance]

Thank you, Mr. Chair.

On behalf of the Canadian Agri-Food Trade Alliance, or CAFTA, which is the voice of the Canadian Agriculture and Agri-Food exporters of Canada, I thank you for having invited me today to speak to you about the Trans-Pacific Partnership.

CAFTA is a coalition of national and regional organizations that seek a more open and fair international trading environment for agriculture.

Our members represent farmers, producers, processors, and exporters from major trade-dependent sectors including the beef, pork, grain, oilseeds, sugar, pulse, soy, and malt sectors. Together that's roughly 80% of Canada's agriculture and agrifood exports, about $50 billion annually in exports, and an economic activity that supports hundreds of thousands of jobs across the country.

As you know, Canada has one of the most trade-dependent agriculture sectors in the world. We export over half of everything that we produce, and 60% of that goes to TPP markets. CAFTA strongly supports the TPP and believes that it is integral to the future viability of Canada's export-oriented agriculture sector. It is essential that the TPP be ratified and implemented quickly.

The TPP region represents a market of 800 million people and absorbs 65% of our exports. It includes some of our top trading partners: the U.S., Mexico, and Japan. But it also includes some of our largest competitors: the U.S., Mexico, and Australia. Some signatories already do have trade agreements with one another.

Specifically, Japan is our third priority export market and a premium market that demands $4 billion per year in Canadian agrifood products. That's roughly 10% of our total agrifood exports. TPP countries also include fast growing markets in Asia such as Vietnam, Singapore, and Malaysia.

Additional access to the U.S., Japan, Vietnam, and Malaysia appears to be the major market gain for Canadian agriculture and agrifood exporters under a ratified TPP. Tariffs will be removed or phased out of a number of export commodities in key markets. Outcomes are significant for Canadian agriculture and agrifood exporters despite the fact that the U.S. and Japan remain highly restrictive on their sugar market.

I would like to share with you a sample of CAFTA members' projections of the opportunities that seem to be provided in the TPP. For canola these include better trade security, more value for their products, and increased exports by up to $780 million per year. For pork producers, the opportunities are preferential access ahead of non-TPP competitors and the ability to compete in the billion-dollar Japanese markets, where exports could climb to $300 million. Canadian beef producers expect to double or triple annual exports to Japan to nearly $300 million. Canadian barley producers could export an additional 400,000 to 500,000 tonnes of barley in various forms, worth about $100 million.

The TPP will create new opportunities, provide a secure trading environment, level the playing field, and preserve current exports for a lot of our products. This applies to our 1.5 million tonnes of premium wheat exported to Japan; our $2.3 billion in grains and special crops going to Japan, Malaysia, and Singapore; our $884 million in soybean exports to TPP markets, and our $340 million in pulse exports to TPP markets.

As for Canada's sugar and sugar-containing products, the TPP provides welcome, though small, increases into the restricted U.S. market. The industry is currently looking at doing an analysis of what the opportunities in Japan, Vietnam, and Malaysia will mean for their sector.

Beyond tariffs, the TPP also sets a new Asia-Pacific framework for trade with rules to increase co-operation and transparency on non-tariff barriers related to sanitary and phytosanitary measures, biotechnology, and plant health.

We recognize that this agreement may do more for some than others and will certainly not eliminate all tariff barriers in the region, but all our members are united in supporting the TPP as a significant improvement on the status quo for all Canadian agrifood exporters and our broader economy in general.

Overall, the TPP preserves our privileged access to our number one trading partner, the U.S. It secures unprecedented access to fast-growing Asia-Pacific markets, and it provides an opportunity to enhance our competitive position in the region and obtain more value for our products. It also provides an opportunity to negotiate the terms of entry of potential future countries such as South Korea, Taiwan, Thailand, the Philippines, and others.

Most importantly, the TPP puts us on an equal footing with our global competitors in the region. Canadian agriculture cannot afford to relive the destructive experience of South Korea, which saw a billion-dollar market virtually cut in half overnight when our competitors, namely the U.S. and Australia, had access to this market and we did not.

Ultimately, if we're not part of the TPP and other signatories are, we will fall behind, so the best way to implement the TPP quickly is to ratify it quickly. The TPP will substantially increase opportunities for hundreds of thousands of farmers, producers, and exporters who depend on trade. Without such an agreement, Canada would be ceding market share to global competitors in the region.

Thank you.

[The Chair, Liberal, Mark Eyking]

Thank you very much for that presentation.

We're going to move on to the Canadian Vintners Association and Mr. Paszkowski.

[Dan Paszkowski, President and Chief Executive Officer, Canadian Vintners Association]

Good morning. My name is Dan Paszkowski. I am the president and CEO of the Canadian Vintners Association, better known as the CVA. I'd like to thank everybody for the opportunity to provide the Canadian wine industry's perspective on the Trans-Pacific Partnership agreement.

As the national voice of the Canadian wine industry, our members are engaged in the entire value chain, including grape growing, farm management, grape harvesting, wine production, bottling, retail sales, research, and tourism.

Canada is a premium global wine producer, skilfully producing high-quality table wine, sparkling wine, and icewine. Canada's wine industry is robust and growing, contributing $6.8 billion to the national economy, supporting 31,000 jobs, and attracting more than three million tourist visitors every year.

Canadian vintners are actively engaged in the global economy, with $74 million in export sales shipped to 40 countries in 2015, up from $20 million in 2005. From Nova Scotia to British Columbia, vintners support a competitive and fair global trading environment, recognizing the numerous benefits to industry, customers, and the greater economy.

Under the TPP agreement, the Canadian wine industry widely anticipates developing preferential relationships with our largest trading partners, providing enhanced access to 800 million consumers, and nearly 40% of the world economy. While roughly 96% of our TPP wine export value is currently exported to the United States, Asia-Pacific consumers are rapidly increasing their interest and demand for premium wines, providing important new market potential for Canadian vintners.

TPP members are responsible for 98% of Canada's current wine export volume, in part because Canada already appreciates tariff-free access with the United States, Mexico, Chile, and Peru. Nonetheless, the proposed agreement will offer immediate and tangible benefits to the Canadian wine industry, reducing costly tariffs, providing greater protection for authentic icewine, and streamlining complex technical and administrative barriers to trade.

If Canada were excluded from the TPP, the sole benefit of these negotiations would go to some of the world's most ambitious wine-exporting countries, namely, Australia, Chile, New Zealand, and the United States, leaving Canadian vintners significantly disadvantaged.

Most importantly, today I want to emphasize that our export growth realization is tied to our domestic success. The Canadian wine industry is firmly rooted in Canada, yet our domestic market share is a mere 32%, 10% of which is for our premium wines, the lowest of any wine-producing region in the world.

For the Canadian wine industry to reach its full potential, decision makers and political leaders must recognize that TPP countries already represent 46% of total wine volume imported to Canada. Combined with CETA, this amounts to 89%. Our competitors are eager for even greater sales, investing millions annually to market their products in provincial liquor boards. Last week, The Globe and Mail reported that New Zealand wine export sales to Canada were up 18% in 2015, surpassing 92 million, and this is before the full implementation of import tariffs when the TPP enters into force.

All eyes are on Canada. We are the second largest wine-growing market in the world, with wine consumption growing three times faster than the global average. Canada is the sixth largest wine importer in the world and over the past decade, imports have captured 75% of Canada's 150 million litre wine sales growth. Looking ahead, Canadian wine demand is expected to grow by 50 million litres, or 11%, by 2018, making our country increasingly attractive to our import competition.

The Canadian wine industry looks forward to the removal of tariff and non-tariff barriers to trade with TPP countries, but given the front end competitive benefits that this agreement offers our competitors, ratification must include federal support to help the wine sector adjust, take advantage of, and prepare for trade agreements like TPP and CETA.

With 685 grape wineries operating across Canada, our future success in the global market remains intricately tied to our growth and success at home. A competitive tax system, support for private infrastructure investment, and the removal of interprovincial barriers to wine trade will help stimulate innovation and business investment, enhance our competitive position, capture greater domestic share, and help take advantage of these emerging export opportunities.

Thank you for your time. I look forward to your questions.

[The Chair, Liberal, Mark Eyking]

Thank you very much.

We'll start off our first round. Each presenter has six minutes and we'll start with the Conservatives.

Mr. Van Kesteren.

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

Thank you, Chair, and thank you all for coming.

I want to begin with a clarification. Ms. Citeau, you mentioned the drastic reduction or the effects of South Korean trade, but that, of course, has been changed and corrected since we signed the free trade agreement with South Korea.

[Claire Citeau]

We haven't regained what we had—

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

What I'm saying is that we now have the same footing and the same advantage as do other countries in the region.

[Claire Citeau]

I think for some of the products the phase-out periods are taking 10 to15 years. Over that time until we get to that end point, which might take 10 or 15 years for some of the products, we'll remain at a disadvantage over some of these tariffs. Australia and the U.S. have an advantage over us.

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

Thank you.

My region, southwestern Ontario, has a vast array of different agricultural products. I'm pleased to hear you're excited about this, as am I. Not only do we grow products—I think we're first in soybeans, in corn we're very close, we're one of the tops in wheat, and then there are a number of vegetables—but we're also the largest greenhouse growing area in North America and not just Canada.

I wonder if you've been in contact with the greenhouse industry, and I wonder if you could tell this committee what effect it will have on that industry when we ratify this agreement.

[Claire Citeau]

I can only speak for the commodities that we represent. In principle for our commodities we rely on trade. We export over half of everything we produce. That's 50% of our beef, 70% of our pork, 75% of our wheat, 90% of our canola, and 40% of our processed food products. With the demand for some of the high-quality Canadian products, we see a lot of opportunities internationally to grow, but we'll leave the other sectors to speak for themselves.

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

Yes.

In a country like Japan there's a robust trade and industry involved with soybeans. I believe it has to do with non-genetic, modified...GMOs. There are a number of farmers in my area that do produce for Japan. How will that impact their situation and will that prove to be a boom for them as well?

[Claire Citeau]

I can't speak in detail for soybeans specifically. I'll let Soy Canada, our member, speak to that in more detail.

What I'll say about Japan is that it's our third export market, and it does over $4 billion in exports of Canadian products annually. What's important to know about Japan is that it is a high-value market. For a lot of our products, and pork in particular, if we were to lose access to that market we could not find the same value for our products in other markets. It's very unique in that sense. It's a high-value market for a number of products like pork, but wheat and sugar as well. It is our largest predictable market for canola seed, the largest market for malt and pork, and the fourth largest market for beef as well.

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

This will be an advantage because there are still tariffs that are charged on those products, and they will be removed.

[Claire Citeau]

That's correct.

Australia does have an advantage in Japan because they already have a free trade agreement with Japan. The longer the TPP drags, the longer we fall behind. It's important for us that this agreement be ratified and implemented quickly.

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

I'm surmising, and I suspect this is true, that since Australia is in the southern hemisphere we would have the advantages of a northern hemisphere nation for producing the crops when they have their winter. Is that correct?

[Claire Citeau]

I think on that I'll let the specific crop producers and representatives speak for their own commodities. What we are seeking in the TPP, and in market access in general, is a level playing field. The TPP will do that for us once implemented.

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

Dan, it's good to see you. Of course I'm on a role of bragging about southwestern Ontario. I'd point that out that Pelee Island of course is our pride and joy when it comes to the wine industry. We produce some unique wines there as well, as there are in other regions in the nation. I'm always amazed that within our own country, like with Air Canada for instance, that they're not serving Canadian wines. You're absolutely right. We do have some excellent wines.

I wanted to ask you about last year, and it doesn't pertain to TPP. Last year we lost a lot of our vineyards. How is that progressing? What stage are we at with growing the new wines and the new vines? How's that coming?

[The Chair, Liberal, Mark Eyking]

We have only a little time. We'd appreciate a short answer if you could.

[Dan Paszkowski]

There was a cold snap in your part of Canada where the frost killed the vast majority of the vines. They have now been replanted. It takes an average of three years before a vine matures to the point where it can produce wine again. The process is well under way.

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

Just in time for the TPP.

[The Chair, Liberal, Mark Eyking]

Thank you Mr. Van Kesteren.

Thanks for those answers.

We're going to move it over to the Liberals for six minutes.

Madame Lapointe.

[Linda Lapointe, Liberal, Rivière-des-Mille-Îles, QC]

Thank you, Mr. Chair.

Thank you for being here with us this morning, Ms. Citeau, we appreciate it. The agri-food and wine sectors are sectors that inspire me a lot.

Ms. Citeau, in your statement, you said this: “We recognize that this agreement does more for some than others [...]”. You talked about the sectors that would benefit more. In your opinion, which sectors would be adversely affected by the signing of the TPP?