International Trade Committee on Feb. 1st, 2018

[René Roy, Vice-Chair, Canadian Pork Council]

Thank you, Mr. Chair.

Hello everyone.

I would like to thank you for the opportunity to appear before the standing committee and provide the perspectives of Canada's pork producers on the matter of a potential trade agreement between Canada and the Pacific Alliance.

I am a producer from Saint-Jules, Quebec, and am here today as a member of the board of directors and second vice chairman for the Canadian Pork Council, the national voice for over 700 hog producers in Canada.

The meat industry is, by far, the largest component of this country's food processing sector. Our producers raise animals from coast to coast, with the largest pork production and processing facilities clustered in Quebec, Ontario and Manitoba. Direct farm gate sales of Canadian pork in 2016 totalled $4.1 billion dollars and created over 31,000 farm jobs in rural Canada. The pork industry is a major contributor to Canada's GDP.

Additionally, food processing creates more jobs than any other segment of the Canadian manufacturing sector. Providing employment for 65,000 workers, meat packing and processing plants are often either the primary or a major employer in towns and cities located across Canada.

The members of this committee are no doubt aware that export markets are absolutely critical to the current and future prosperity of the Canadian livestock and meat sector. Meat processors and exporters must identify foreign markets for more than 70% of Canadian pork.

Therefore, it should not be surprising that pork producers have been ardent and steadfast supporters of all initiatives that contribute to opening new export markets and expanding access to existing markets. The Canadian Pork Council and producers welcomed the news out of Japan that an agreement was reached on the Comprehensive and Progressive Transpacific Partnership (CPTPP).

And we would like to thank Prime Minister Justin Trudeau, International Trade Minister François Champagne, Agriculture and Agri-Food Minister Lawrence MacAulay, Minister of Foreign Affairs Chrystia Freeland, the negotiating team and all other Canadian representatives that supported the request that this trade deal be concluded as soon as possible and contributed to making it happen.

Producers are confident Canadian pork will soon have competitive access to key markets in Japan, and to developing markets such as Singapore, Vietnam and Malaysia. The signing of this agreement in March, and its ratification shortly thereafter, will only signal further investment in the sector. Because of improved access to key markets, Canadian pork producers can keep doing what they do best knowing that their livelihood and that of thousands of other Canadians in rural and urban communities who work in the pork industry are supported by this latest agreement.

Canadian producers also welcome the Canadian government's efforts to expand economic ties with the Pacific Alliance through a free trade agreement. A key reason for the growth of Canadian pork exports has been the establishment of free trade agreements with strategic partners. As you know, at present, Canada benefits from bilateral trade agreements with each of the members of the Pacific Alliance. The FTA with Mexico as part of the North American Free Trade Agreement was brought into force on January 1, 1994. The FTA with Chile was implemented July 5, 1997, and the FTAs with Peru and Colombia were brought into force on August 1, 2009, and August 15, 2011, respectively.

We see the potential agreement between Canada and the Pacific Alliance as an opportunity to improve exports in several areas. However, recognizing the importance of certain questions, I would like to highlight just a few key points and leave it to my colleague Mr. Lavoie to expand further.

[The Chair, Liberal, Mark Eyking]

Excuse me, sir. If you could wrap it up, we would appreciate it.

[René Roy]

Okay.

There are three things to remember. First, we request that the allocation process in Colombia for Canadian pork products be simplified. Second, that the Colombian government recognize Canadian swine herds as trichina-free, permitting exports of chilled pork to that market. Third, that the quota for Canadian pork products be drastically increased and the existing tariff rate reduced in Peru.

Thank you.

[The Chair, Liberal, Mark Eyking]

Thank you, sir. As a farmer, I know your industry went through some hard times over the years, and it's good to see it's now very vibrant and doing well. Thank you for coming.

[René Roy]

Thank you.

[The Chair, Liberal, Mark Eyking]

We're going to move over to Canada Pork International.

Mr. Lavoie, go ahead.

[Martin Lavoie, President and Chief Executive Officer, Canada Pork International]

Thank you very much for having me here this morning.

On behalf of our members, I'd like to thank you for the opportunity to talk about the free trade agreement eventuality with Canada and the Pacific Alliance.

Canada Pork International was established in 1991. We are a joint venture of the Canadian Pork Council and the Canadian Meat Council, and we represent Canadian packers and trading companies. Our focus is on having market access and promoting Canadian pork in foreign markets. We're involved in trade and supporting companies doing business in over 100 markets.

The Canadian pork industry exports over $4 billion annually. We're exporting the equivalent of 50,000 sea containers every year. We're a huge driver for jobs, and all those containers are getting on trucks and trains before they're getting shipped, so we are a big mover in the agribusiness sector.

Pork is the largest meat industry in Canada. We're 70% dependent on export, and our success is directly linked to the government's ability to provide more competitive market access conditions than our competitors—mainly the U.S. and the EU.

As Mr. Roy was saying, this is why the announcement of CPTPP is such great news for the Canadian pork industry. Not only does it give us an opportunity to have better access to the market for chilled pork in Japan, where we're competing head-to-head with the U.S.—sharing 50% of the market with them—it also prevents us from falling behind on frozen products from the EU, which is now putting in place a free trade agreement. While we're still feeling the impact of falling behind on the United States-Korea Free Trade Agreement, and we've seen our business negatively affected there, we're really positive about this news. It's going to have a tremendous impact on our industry.

I'll get into more specific details. I'm going to go to the four partners of the Pacific Alliance. Mexico is our fourth-largest market, with $200 million of trade, but we're already covered through NAFTA and CPTPP. It's a very important market, but there's not a whole lot extra we can gain. It's the same thing with Chile, where the FTA has come to maturity. Over the years, there were TRQs and tariffs, but now we have free trade just like the U.S. We're on a level playing field with them.

I think where we have the most gains to make is in Colombia. With their FTA, Colombia recognized the U.S. as having pork free of trichina, so they are able to ship fresh, chilled pork and have access to the retail market in Colombia. That gives them access to higher-value markets.

Also, the conditions right now are so different. It's a free market for the U.S., so there are no TRQs or tariffs. Right now, after 6,000 tonnes a year, there's a 41% tariff kicking in for Canada, so our trade pretty much stops at that point. There's a great benefit to be had by catching the U.S. Just to give you an example, we're shipping around $30 million every year to Colombia, compared with $200 million from the U.S. I don't think the market would grow, because they already have access to the U.S. market. I think we would be able to get a much better share of that very good market. It's not a primary market, but it's an excellent secondary market for a lot of pork products.

What's important in the pork business—I just came back to Canada Pork International, and I've been in the trading business for the last six years—is having access to the best return market for every single cut. This is where it's important. If they like some specific bones in Colombia and they're paying more than others for that type of product, this is where we're adding value to all the businesses in Canada. It's not about just looking at the market as a whole. You have to look at the opportunities for specific products, and this is where we're creating value.

We have an FTA with Chile, but right now it's 500 tonnes a year of TRQ, and after that there's a 25% duty. I told you about the 50,000 containers earlier. This is 20 containers, so it's pretty limited. It's not a huge market, but we can definitely grow our business in that market.

As I mentioned, the three main potential gains are the following: in Colombia, getting access to chilled products and having a level playing field with the U.S. on tariffs, and also increasing the TRQ allocation or having free trade with Peru.

In conclusion, we're supporting the FTA with a Pacific trade alliance because we trust that the Canadian government has the resources to deal with all the trade deals in place and on all fronts at the same time. CPTPP, NAFTA, China, ASEAN, and the Pacific trade alliance are all priorities for us. Where we can measure the value of this deal for the Canadian pork industry is how quickly we can achieve an agreement. We're going to get to free trade with Colombia in 2023 and Peru in 2025. If we're in a position where this is going to take four or five years, that decreases the value for us. The conditions are there. We have FTAs with all of those countries. This is something that could be achieved quickly. To me, this is a very important factor in the success of the pork industry.

Thank you.

[The Chair, Liberal, Mark Eyking]

Thank you, sir.

Before I go to the other MPs, I have a side question for you.

We often focus on the big trade agreements. If you can give me a number, do we export much Canadian pork to the Caribbean countries?

[Martin Lavoie]

We do, but you'd have to look at the region. Just to give you examples, markets like the U.S. and China are 300,000 tonnes. They are big markets. These markets are all between 2,000 and 12,000 tonnes a year, but they're very important: there are some countries where we're shipping very high-value products, because there are some parts of the animal that only these countries like. This is very important for the overall value. Cuba is a very important market. In Barbados we're doing great business. I was actually looking at the trade numbers yesterday. We're shipping 2,000 tonnes a year to the Dominican Republic, but the U.S. is shipping 30,000. This is something for me to look at and investigate how we can do better.

Definitely, when we take them as a whole.... Plus there's an opportunity for processed products, and for hotels—the hotel industry is fairly important—and these things are important to me as well.

[The Chair, Liberal, Mark Eyking]

Maybe someday down the road our committee can look at that region, and we'll have your input.

We're going to start with the Conservatives for five minutes.

Mr. Carrie, you have the floor.

[Colin Carrie, Conservative, Oshawa, ON]

Thank you very much, Mr. Chair, and thank you to the witnesses for being here.

We're living in a very interesting time, given the uncertainty around NAFTA.

I really liked the comments about how we have to look at these for the chamber, modernizing these individual agreements—first-mover advantage, strategic advantages—and I was wondering if you could comment. The United States, for example, is a big market for us, but they're also becoming one of our big competitors. We look at the obvious—the resource sector, oil and gas—but of course in our agricultural community it's huge as well. The United States just went through and modified their entire tax structure. I was wondering if you could comment on the importance of us keeping in sync with the United States as far as the competitiveness side of things, and the importance of these agreements getting done fairly quickly so we can have that competitive advantage if we're losing on other ends. How important is it to get these done now, taking into account the American changes to their taxes?

Mr. Lavoie, is that going to be causing your producers challenges right now?

[Martin Lavoie]

Yes. This is one of them, but obviously we're competing with the U.S. on a daily basis. We have the advantage in Canada, I think, of having a better product. I really believe it. You see the impact of that in Japan, the success we're having right now, just on the recognition of the quality of the product by the Japanese consumers. This is also why I think TPP is going to get tremendous results. We still have to compete on everything, because that success can be washed away if price becomes a huge factor. Quality is one thing, but there's always a price linked to it. Whether it's on the fee, on the taxes, or on the FTAs, we have to look at everything. This is a huge factor. The currency, obviously....

I'm not here to talk about Korea, but we've seen the impact of having an FTA three years ahead. It's crazy when you look at the graph of the U.S. trade going like this and ours going like that. This is directly linked to the timeliness of the trade deal. I agree, timing is so important for those agreements.

[Colin Carrie, Conservative, Oshawa, ON]

Thank you for that, because we do live in a different world.

Madam Vega, could you comment on that as well? You brought up the strategic side of things, the first-mover advantage. Could you please expand on that?

[Adriana Vega]

Yes. I would agree with Mr. Lavoie for sure. I think competitiveness vis-à-vis the U.S. is a perennial issue for Canada. Yes, we trade with them; they're our biggest trading partner, but as well, as you mentioned, they're a close competitor.

Trade agreements are just one piece in that puzzle to succeed internationally. We're looking at things like taxes, cost of doing business, access to talent, and opening markets. All these things work together, and unfortunately there's no easy solution. You have to look at all of them holistically and how you can make the most out of your local conditions to improve your competitiveness overseas.

I am not the in-house expert. I would recommend perhaps that you consult with our policy director at the chamber who looks at tax. Our recommendation has been to look at Canada in terms of our comparative competitiveness, and certainly tax—or a review of our tax system—is a part of that.

[Colin Carrie, Conservative, Oshawa, ON]

Mr. Roy, you mentioned three points, and one of them was the trichina-free issue. I wonder if you could talk about this issue of non-tariff barriers and how important it is with these new modern trade agreements that we address the non-tariff barriers. It seems to be used by other players. Canada goes into these trade agreements, and I always say we're the boy scout. We do what we're supposed to do, and then you get these other countries putting in these barriers.

Could you explain how important it is to modernize and address things like non-tariff barriers?

[The Chair, Liberal, Mark Eyking]

It will have to be a quick answer, please.

[René Roy]

For non-tariff barriers, the question—especially with the United States—is that there are some implicit problems that are not that clear when you look at the numbers, but when it's time to go through the borders you have some problems. This is a real problem for the whole production—not only at the producer level, but also at the processor level. We have some problems to go through the border even if there are no trade barriers. Technical trade barriers come in and hurt our market right now.

[The Chair, Liberal, Mark Eyking]

Thank you.

We're going to go over to the Liberals.

Mr. Fonseca, welcome back. It's good to see you on the mend. One of us always seems to be on the mend on this committee.

[Peter Fonseca, Liberal, Mississauga East—Cooksville, ON]

Thank you.

I'd like to welcome and thank the presenters. I thank you for your advocacy and for your strong voice for your members, but more so for the knowledge and experience that you always bring to our committee. It makes a tremendous difference.

That's where I want to start my questioning. I'm going to go to Ms. Vega. I know you do a lot of reports, analysis, and position papers. How do you consult with your members, so when you bring forward something like FTA Pacific Alliance you gauge where your members are with this and where they can put their opportunities, concerns, etc. on the table?

[Adriana Vega]

That's an interesting question. I will try to keep it short.

As you know, we're the largest business association in the country. It's not an easy or simple process. We have various ways through which we inform our policy positions. We have an annual general meeting where our different chambers of commerce across the country come together. They make recommendations on policy positions, and that's a very democratic process in a way. It goes through many different iterations and commentary. At the end of that process they are voted on. That becomes our position on a topic for the next three years.

One of those positions that's in our books right now is to diversify trade. This would fall under that bucket, but obviously things don't happen under our timelines. We have a number of committees within the membership that look at different aspects of policy issues.

I staff, for example, our committee on international affairs, which specifically looks at trade agreements and bilateral economic relationships with various countries, for instance, Canada-China, Canada-Japan, negotiations with the EU. This kind of consultation on the Pacific Alliance will fall under that bucket. We know this is a big committee, so we'll tend to go to those members whom we think have an interest or would have more relevant information. We ask them. We try to raise our positions to a high enough level that it brings together all the different views. Sometimes we can have quite divergent views. Our position is to have policy recommendations that are as rich as possible.

[Peter Fonseca, Liberal, Mississauga East—Cooksville, ON]

Because you represent all sizes of businesses, small, medium, and large, and all sectors for the most part, which sectors have said that they would realize the biggest opportunity with an FTA with the Pacific Alliance?

[Adriana Vega]

At the moment we have agrifood production, agriculture as you can see from my colleagues at the table, and services. That has been the biggest caucus I would say in favour.

[Peter Fonseca, Liberal, Mississauga East—Cooksville, ON]

Have some of your members raised concerns?

[Adriana Vega]

Surprisingly, no. I have tried to look. I did ask. It was surprisingly no, no big comments against.

[Peter Fonseca, Liberal, Mississauga East—Cooksville, ON]

This could be to any of the presenters.

We heard from the Canadian Labour Congress, and they're looking at making this a very progressive FTA, so bringing forward chapters on labour, environment, indigenous, etc. Any of you can comment.

How would you feel about those chapters? Do you think that would enhance this agreement?