International Trade Committee on Feb. 25th, 2020

[Rachel Bendayan, Liberal, Outremont, QC]

I understand you export worldwide, but where are the majority of your exports at the moment? Are they going to the United States?

[Jamie Pegg]

The United States is the largest, at 33%. We have a large contingent that goes into Australia. We also have European markets, Kazakhstan, a little bit into Russia, Ukraine, some markets that we're developing there. We've had a strong focus in the European Union as well.

[Rachel Bendayan, Liberal, Outremont, QC]

That's very interesting, but I could imagine that at 33%, keeping that border open and flowing with the United States is important to Honey Bee.

[Jamie Pegg]

It's very important for us. Four years ago we made a company effort, a company strategy, to be able to grow the United States market, grow it through the grain belts and those areas, as we had more factory space to be able to produce our product. That's one of the key markets we're attracting and having a lot of success in.

[The Chair, Liberal, Judy Sgro]

Thank you very much, Mr. Pegg.

Mr. Savard-Tremblay.

[Simon-Pierre Savard-Tremblay, Bloc, Saint-Hyacinthe—Bagot, QC]

I have a quick question for the people from Honey Bee Manufacturing.

Your website says that you have customers around the world. Is that right? Do you conduct business with every country in the world? In other words, your market isn't limited to America. Is that right?

[Jamie Pegg]

Our market is not limited to the Americans. We know that in the agricultural industry with the different impacts that can take place politically, weather-wise, otherwise, that we need to diversify the markets that we're involved in. I've just highlighted that we've focused on the European Union. We've also focused on the United States. We have product in South America as well as Africa as those markets start to emerge and start to have a need for our product. So it is a global company. It's really where the harvest of grain products takes place.

[Simon-Pierre Savard-Tremblay, Bloc, Saint-Hyacinthe—Bagot, QC]

Does CUSMA affect the number and diversification of partners?

[Jamie Pegg]

I think one thing we need to highlight is the power unit that we put our equipment on. The majority of the combines that are built are manufactured out of the United States, or manufactured out of the U.S. and then transported to different parts of the world. That is critically important to the development of our headers and how we do that going forward, which is why, again, we highlight the importance and the significance of the law we are talking about.

I think from there, there are other countries that do it. There is a lot of freedom today that we see with some of the other countries we work with, but I think, looking forward, it's not going to be a whole lot of a different situation in dealing with those countries as we try to create free trade or as we develop those agreements moving forward. Again, I think what we're proposing, what we're stating here is trying to be proactive, trying to ensure that the industry that we've worked on for over 100 years in Canada to develop, to grow, is there, is thriving in our economy, and is creating an opportunity for Canada to grow. That's what we're looking for here.

[Scott D. Smith]

I would add that when it comes to the harvest equipment we manufacture, the two main players in the world on that are both Canadian companies—ourselves and MacDon in Manitoba.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

Mr. Blaikie.

[Daniel Blaikie, NDP, Elmwood—Transcona, MB]

Thank you very much. I was listening and the time snuck up on me.

In your earlier remarks, you referenced that the negative consequences for industry would follow rather quickly. I'm trying to understand exactly why that is and how that works, and if it's just that the turnover of equipment is just that frequent and essential to the operation of the industry. How does that work? Why would those consequences be felt in a matter of months as opposed to a matter of years?

[Scott D. Smith]

The issue boils down to technical evolution. We're moving away from simple and robust means of interconnection and, without adding significant functionality, adding a lot of technical complexity.

In the same way that Apple has unique ways of locking out third party participation on their platforms, it's clear that OEMs, equipment manufacturers, are going down the same road. Because of our involvement inside the OEM operations with respect to co-engineered products, we're made aware of where they're going. We've already worked on a few platforms in the last year or two that have blocked us.

[Daniel Blaikie, NDP, Elmwood—Transcona, MB]

Is it that in working with one particular company you just can't get the equipment to do the applications you need or is it that it just becomes really expensive to use the additional components from the same company?

[Scott D. Smith]

In the case of a simple windrower like a swather, where you're just cutting the crop and laying it down, it's pretty straightforward to reverse engineer or design a parallel system. In the case of a combine, where there's so much integration between what the head does and the rest of the machine, it really needs to be an integrated solution. Reverse engineering that would be an absolute nightmare and, to be honest, beyond economic viability.

[Daniel Blaikie, NDP, Elmwood—Transcona, MB]

Thank you very much.

[The Chair, Liberal, Judy Sgro]

Thank you, Mr. Blaikie.

That concludes the second round. Does anyone have any pressing questions they still want to get in? We have a few minutes.

[Michael Kram, Conservative, Regina—Wascana, SK]

Madam Chair, we have until 6:30 p.m. on the schedule, so can we keep asking questions for a few minutes?

[The Chair, Liberal, Judy Sgro]

That was the plan.

From the Conservative Party, I'm guessing that Mr. Kram wants to ask a question.

[Michael Kram, Conservative, Regina—Wascana, SK]

Yes, that's perfect.

Mr. Pegg and Mr. Smith, thank you so much for coming here all the way from Frontier, Saskatchewan.

What do you need from lawmakers to have your business continue successfully?

[Jamie Pegg]

Scott, go ahead.

[Scott D. Smith]

From my desk, as the engineering guy who's responsible for making those adaptations, I don't want to go to jail doing it. For peace of mind, at the minimum is the inclusion of the exemptions that our American counterparts enjoy and bringing that to our legislation on copyright, but I think that in a major way this is substantially a shortcoming to what will be required very soon.

The digital infusion into the agricultural sector for the purpose of digital locks and keys and lockout, which is basically technology tethering and which we're seeing everywhere across a wide range of products outside of ag—consumer, everything—in order to control the value chain is intentional and explicit in preventing short-line agricultural manufacturers, mining equipment manufacturers and construction and forestry manufacturers from participating on OEM platforms.

If that's allowed to proceed, we're facing a much more serious thing, where you'd have the choice of a single brand or a single colour and you're not allowed to deviate from that, and all of those are made in the States and the Canadian side of it goes away.

[Michael Kram, Conservative, Regina—Wascana, SK]

Are you aware of any precedents with add-ons in the auto sector? I'm thinking of things like remote car starters or car security alarms or that sort of thing. Are those industries running into the same problems that you are?

[Scott D. Smith]

Yes and no.

The interoperability aspect with automotive aftermarket is quite a bit different, because we're not asking to operate our stereo system from the seat controls or some weird thing or whatever to make stuff do the feature we want. We're asking for the same functionality, but access to the systems required to achieve that.

As I said, today we have that. You get in, put your hand on the stick, push the buttons and our head does what it's supposed to do, even though it's on a different brand of combine. Going forward with the digital systems, they're taking that away. Pushing that button sends an encrypted and digital signal down that expects to see a control box and computer on our header that knows the language and knows the encryption keys and allows us to operate.

We're already seeing it in the equipment side. Let's say you have a bucket on an excavator and it's on, say, a Cat, and you have a Kubota and you want to move it from one to the other. Where there's an RFID tag on that dumb piece of steel, with no hydraulics, no electrical, nothing, if you take that Kubota one and put it on a Cat, the Cat doesn't see the RFID tag it wants to see, and it says, “I'm not running my equipment here today.”

[Michael Kram, Conservative, Regina—Wascana, SK]

Okay.

Earlier in your presentation, you mentioned the Competition Act. What were the shortcomings of the Competition Act that did not meet your needs?