Evidence of meeting #8 for International Trade in the 43rd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was sector.
A video is available from Parliament.
Bloc
Simon-Pierre Savard-Tremblay Bloc Saint-Hyacinthe—Bagot, QC
Now I'm turning to you, Mr. Powell.
As you know, in Quebec, we have Hydro-Québec, which supplies electricity at some of the most competitive rates around. Against that backdrop, do you think the agreement will have any positive or negative effects specific to Quebec?
Director, Government Relations, Canadian Electricity Association
I think yes, but also it's all parts of Canada. I think that the northeastern United States is a major market for electricity exports from Canada. I think you'll see more of that as things go forward, we hope. Indeed, in the last year we have data for, prices and volumes have increased. Those are both positive signs. With the certainty that comes from CUSMA, we'll see that continue to move forward.
NDP
Daniel Blaikie NDP Elmwood—Transcona, MB
Thank you very much.
This is for the Chemistry Industry Association of Canada.
When we talk about the petrochemical industry, what is the extent to which the primary products are sourced from Canada for your members? Would they tend to import oil from elsewhere in order to upgrade it, or do they tend to be customers of Canadian oil companies?
Executive Vice-President, Chemistry Industry Association of Canada
Some of our members are integrated. As a member we'll have Imperial Oil chemical, but they're integrated with the upstream oil and gas. Most of the chemistries we do produce come from natural gas liquids. The reason we we have our clusters in Alberta, Ontario and Quebec is that we're close to that feedstock. You'll find a number of companies, like Dow, NOVA, Inter Pipeline, that are based in this chemistry cluster in Alberta, and they're pulling from the natural gas feedstock available.
The companies are so deeply integrated in terms of Canada-U.S. that those chemical products will cross the border several times before they're finalized and prepared for that next step in terms of downstream products. There is a lot of back and forth, which demonstrates the high numbers in terms of the export-import trade.
NDP
Daniel Blaikie NDP Elmwood—Transcona, MB
Often when we talk about Canada's oil and gas sector, you'd think that it was only an export industry and that the only way to create demand for the product is by increasing access to export markets. What I'm hearing is that there is an industry that is looking forward to continued investment and growth here in Canada that would help drive demand for Canadian oil and gas products.
Executive Vice-President, Chemistry Industry Association of Canada
It's a very vibrant industry. Chemistry is foundational to all of our products. When we're thinking about moving to a low-carbon economy, that drives alternative energy, and it drives a lot of the light-weighting of our vehicles in terms of reducing our greenhouse gas emissions. There's a really interesting story there for chemistry and chemistry products.
NDP
Daniel Blaikie NDP Elmwood—Transcona, MB
Would you have a sense, in terms of jobs per unit of oil and gas, of how effective your industry is compared with the simple export of oil and gas out of Canada?
Executive Vice-President, Chemistry Industry Association of Canada
That's a great question.
Liberal
The Chair Liberal Judy Sgro
—and just as your time is more than up. Thank you.
I want to say thank you to our witnesses. You were a very informative panel. We appreciated all of that.
I will suspend.
The bells are going to start ringing in a few minutes. We will come back for our next panel at seven o'clock.
Liberal
The Chair Liberal Judy Sgro
I call the meeting back to order.
Pursuant to the order of reference of Thursday, February 6, we are examining Bill C-4, an act to implement the agreement between Canada, the United States of America and the United Mexican States. This week, we are continuing to hear witnesses and get comments on how important this is and whether there's anything more that needs to be added as we move forward.
I'll introduce the witnesses.
By video conference, we have from the Canadian Canola Growers Association, Rick White, president and chief executive officer. Welcome. We appreciate having you here. We understand that we have the video conference system only until eight o'clock, so we'll make sure to get questions to you before that.
From Gay Lea Foods Co-operative Limited, we have Rosemary MacLellan, vice-president, strategy and industry affairs.
From the National Cattle Feeders' Association, we have Janice Tranberg, president and chief executive officer, and Michel Daigle, chair.
Welcome to all of you.
We'll start with you, Mr. White, if you'd like to give some opening comments.
Rick White President and Chief Executive Officer, Canadian Canola Growers Association
Thank you very much.
How's my video coming in?
President and Chief Executive Officer, Canadian Canola Growers Association
Yes, that's excellent.
Thank you for the invitation to appear before the committee on your study of Bill C-4, an act to implement the agreement between Canada, the United States of America and the United Mexican States, also known as CUSMA.
It is a pleasure to appear today on behalf of Canada's 43,000 canola farmers. My name, of course, is Rick White, and I am the president and CEO of the Canadian Canola Growers Association.
Thank you for accommodating my presentation through teleconference from Winnipeg, where CCGA's head office is located. I am also joined in your room by Dave Carey. He's our vice-president of government and industry relations based in Ottawa.
Canola farmers support CUSMA and encourage the government to complete the parliamentary process quickly. Canada's ratification will provide a strong signal to our trading partners of the importance of this agreement and reinstate predictability and certainty in the North American marketplace for Canadian farmers.
CCGA represents canola farmers from Ontario to British Columbia on national and international issues, policies and programs that impact their farms' success. Developed in Canada, canola is a staple of Canadian agriculture as well as Canadian science and innovation. Today it is Canada's most widely seeded crop and is the largest farm cash receipt of any agricultural commodity, earning Canadian farmers over $9.3 billion in 2018. Annually, the canola sector provides $26.7 billion to the Canadian economy and provides for 250,000 jobs.
With 90% of canola exported as seed, oil or meal, free trade and access to international markets are key success factors for our farmers' continued prosperity. Free trade agreements such as CUSMA preserve and provide predictable markets and rules of trade in which to sell and grow our sector. In an environment of growing protectionism, it is even more important for Canada to support open markets and enable trade.
The North American Free Trade Agreement has served canola farmers well. Since its implementation 26 years ago, canola sales to our southern neighbours have grown significantly and have directly contributed to the growth and development of the canola sector here in Canada. Today the U.S. is our number one market, and Mexico is our fourth. In 2019, Canada sold 3.5 billion dollars' worth of canola products to the United States, which represents 5.6 million tonnes of seed, oil and meal. Ten years ago, our sales were $1.6 billion, so canola has more than doubled in value over the last decade.
Importantly, the U.S. is a critical market for canola value-added products. The U.S. purchases over 50% of our oil exports and 75% of our meal exports. The economic activity generated from processing seed in Canada and exporting oil and meal is an integral part of canola's contribution to the Canadian economy. Furthermore, many of these processors are in rural Canada, close to canola production. The value-added activity supports local communities, sustains rural employment and provides sales opportunities for canola producers outside the traditional elevator system.
CUSMA builds on and strengthens the NAFTA. CCGA advanced three priorities prior to and throughout the negotiations that are largely met with CUSMA.
Our primary objective was to preserve NAFTA concessions and maintain market access into the United States and Mexico. Under NAFTA and continued under CUSMA, exports of canola seed, oil and meal remain duty-free and will continue to face little in the way of trade barriers. This provides long-term predictability and restores certainty to our trade and business relationships.
Our second objective was to streamline and align regulatory practices between NAFTA partners. CUSMA adds a new section on agricultural biotechnology, including the new generation of plant breeding techniques, recognizing the importance of innovation for North American agriculture. It confirms existing procedures and builds on the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, covering trade facilitation measures, instances of low-level presence and the creation of a working group for co-operation on agricultural biotechnology.
Our third objective was to seek improvements for further processed canola products, such as margarine and shortening. CUSMA modernizes the rules of origin, improving access for margarine products of which canola or soy are primary ingredients. Making the vegetable oil market more competitive should generate additional value-added activities here in Canada and capture more economic activity domestically. lt is unfortunate that we did not achieve the same outcome for shortening as the market is significantly larger.
While I appreciate today's testimony is focused on Bill C-4, the last year has been a challenging one for farmers. The loss of the China market for canola seed, various rail challenges, adverse weather and geopolitical and macro forces out of farmers' control have created significant uncertainty and risk at the farm level. Farmers are again making 2020 production decisions with limited certainty and knowledge of demand, price and available sales opportunities.
While CUSMA restores certainty in North America, reopening the China market to canola seed, meaningful changes to government business risk management programs, and biofuel market diversification are also required to assist farmers to manage the current and any future trade disruption. The current risk management programs, most notably agri-stability, falls short in addressing farm financial losses, and significant enhancements are required to make it work for farmers. Additionally, a clear requirement in the clean fuel standard that all diesel fuel consumed in Canada contain a minimum 5% renewable content would create greenhouse gas reductions and increase domestic demand for canola seed by an additional 1.3 million tonnes to 2.3 million tonnes.
In conclusion, NAFTA was critical to the development and success of the Canadian canola industry, and its modernization through CUSMA provides a platform to further stimulate growth in our sector and in the larger economy. As such, I have one parting comment. CCGA respectfully urges parliamentarians from both Houses to complete the necessary review and swiftly pass Bill C-4 into law.
I look forward to your questions.
Thank you very much.
Liberal
The Chair Liberal Judy Sgro
Thank you very much, Mr. White.
We'll move to Rosemary MacLellan from Gay Lea Foods Co-operative Ltd.
Rosemary MacLellan Vice-President, Strategy and Industry Affairs, Gay Lea Foods Co-operative Ltd.
Thank you.
Gay Lea Foods is a proud Canadian co-operative with members on more than 1,400 farms across Ontario and Manitoba. Our membership in Ontario represents roughly 40% of the bovine milk production in the province. We ourselves process approximately 24% of Ontario's milk in 11 facilities, making everything from milk proteins and ingredients to cottage cheese, butter, whipped cream, soft and hard cheese, sour cream and fluid milk. We also broker 45% of Ontario's goat milk, have a cheese facility in Alberta and are partners in a joint venture in Manitoba.
Recognizing the external threats from global trade agreements as well as the rapidly changing marketplace, Gay Lea Foods has been steadily strengthening our co-operative through investments in our existing operations. These have enabled us to increase sales from $560 million in 2013 to just over $872 million in 2019 as a wholly owned and operated Canadian business.
Gay Lea Foods has been committed not only to our members, our employees and the communities we touch, but to the Canadian dairy industry as well. The basis of our co-operative's investment in a drying facility in 2003 was to support the management of solids non-fat, SNF, as a responsible dairy sector. That is also why Gay Lea Foods was an active partner in the development of classes 6 and 7 in the national ingredients strategy as an industry-led solution to address the growing structural surplus of SNF as a consequence of satisfying the growing domestic demand for butterfat.
It needs to be emphasized that this industry-led, market-driven policy was a significant step for Canadian dairy and ignited investment throughout the sector, including more than $1 billion of publicly reported projects by Canadian dairy processors that included new facilities, modernization of existing capacity and capabilities, as well as expansion.
To that end, in 2016 Gay Lea Foods embarked on a plan to create a new dairy ingredients hub in Ontario, with a $72-million investment in the construction of a nutraceutical-grade dairy ingredients facility in Teeswater. This is the only nutraceutical-grade dairy ingredients facility in Canada.
We also brokered a non-conventional joint venture in Winnipeg, Manitoba, to construct a new MPC, milk protein concentrates, and butter facility with Vitalus Nutrition Inc. The latter was in support of chronic underproduction in western Canada, providing much-needed processing capacity to support dairy farmers in the western part of the country.
Both of these investments were committed, with shovels in the ground, prior to the NAFTA negotiations, and they are both now in operation.
I must add that the $72-million investment was all made from aluminum and steel that was specially fabricated in the United States.
Over the last four years, Gay Lea Foods has invested an additional $180 million in the business, with plans for a further investment of $100 million by 2023. These financial decisions by a dairy co-operative owned by dairy farmers were not made without risk, but they were made with the understanding that both industry and government shared a commitment to the growth of a thriving, innovative and uniquely Canadian dairy sector.
The impact of CUSMA on Canadian dairy needs to be placed in the context of the multiple pressures, opportunities and changes the dairy sector has encountered over the last six years.
The global marketplace and consumer demands on food are shifting. Canadian dairy has lost domestic market share under CETA, CPTPP and now CUSMA. We also have the WTO deadline for the elimination of export subsidies coming into effect later this year.
That was part of the rationale for creating classes 6 and 7: to address our issues of structural surplus while also dealing with the increasing demand for butterfat. This included our looking at how we would utilize and sell skim milk powder, which is globally recognized as some of the best skim milk powder you can find.
ln 2019 we have started to see the real impact of imported cheese in the Canadian marketplace. While the volumes are incremental, the effect on pricing is necessitating changes for Canadian cheese in order to remain competitive. As more imports come into Canada, the industry will need to adjust further to maintain market share.
CUSMA will force the industry to make changes to our milk class pricing and has designated a formula for the pricing of three specific dairy goods: skim milk powder, MPC and infant formula. It will also place thresholds on global exports of these three specific dairy goods, based on our dairy year. This will have a direct impact on the industry's ability to balance the demand for butterfat while providing value to the SNF associated with that milk volume.
As the committee has heard from previous testimony, the timing of the coming into force could add additional challenges to our sector, as these provisions are based on a dairy year starting on August 1.
The agreement also includes provisions on the disclosure of certain information and on obligations to notify and consult with the other party on changes to milk class. It should be noted these provisions apply to both parties to the annex, both Canada and the United States. It is hoped that government will work with industry and ensure that both parties to that annex fulfill their obligations in relation to those provisions.
As a sector, we need to have a good dialogue on the future we want for the Canadian dairy industry. We need to solidify a common vision and chart the plan for the next three, five and 10 years. We will need to know that the government has our back as we move through the unprecedented, most difficult and most significant next three years with these trade agreements, the cumulative effect of which will be a significant impact on all of our businesses and decisions going forward.
We need to work on restoring the stability and predictability that have been eroded in our sector in order to effectively manage milk supply to meet market demands for various milk components. Government will need to play a role as we work on how to position this sector to remain viable with growth, sustainability and innovation at the core. The dairy industry still has so much potential, and we all need to get behind it.
The government needs to move ahead with the implementation of a dairy processing investment program as compensation for both CPTPP and CUSMA. The government has repeatedly committed that this compensation will be full and fair. I would only add that it also needs to be retroactive to the signing of the trans-Pacific agreement in March 2018. The reason for this is simple. We have not waited for the impact of these trade agreements to be felt in our marketplace as we have developed and put investment into mitigation strategies. That was with the understanding that government would be there to support our investments in our operations that are negatively impacted by the trade agreements.
Global Affairs Canada should allocate the TRQs for the market access conceded under CUSMA to dairy processors. Simply put, we are the best placed to identify what is required to fill domestic needs. I will note that contrary to CETA, the market access conceded under CPTPP and CUSMA is market access of opportunity. Canada's not obliged to 100% fill it or even to fill it. It should be brought in only if there are domestic needs to be fulfilled.
Related to the administration of TRQs by Global Affairs Canada, government needs to ensure that the department has the resources to administer the new obligations under these trade agreements to ensure they are timely and business-friendly. They currently administer 38 TRQs for supply-managed commodities. We will see that number increase to 54 with CUSMA. They need to provide for both the resources and the training for the staff, as we look forward to how this administration will be done in a timely and business-oriented way.
While there are many challenges ahead of us, Gay Lea Foods remains committed to working with industry partners and all orders of government on a plan for the sector and our future as a dairy co-operative in what we hope will be a thriving and growing dairy sector in Canada.
Thank you.
Liberal
The Chair Liberal Judy Sgro
Thank you very much, Ms. MacLellan.
We go now to the National Cattle Feeders' Association with Ms. Tranberg and Mr. Daigle.
Michel Daigle Chair, National Cattle Feeders' Association
On behalf of the National Cattle Feeders' Association, we thank the committee for the opportunity to speak to Bill C-4.
To begin, the National Cattle Feeders' Association supports the swift ratification of the Canada-United States-Mexico agreement, and calls upon all MPs to ensure the quick passage of Bill C-4.
My name is Michel Daigle and I am the chairman of the National Cattle Feeders' Association. I've lived and farmed in Sainte-Hélène-de-Bagot, Quebec for 43 years now. Sainte-Hélène is a small community near Saint-Hyacinthe. I'm in a partnership with my two sons, and we seed and harvest over 3,000 acres. We operate a feedlot of 2,300 cattle one-time capacity and market 4,000 fed cattle every year. On the farm my older son operates a cow-calf operation of 100 head, so I know what I'm talking about to you tonight.
Janice Tranberg President and Chief Executive Officer, National Cattle Feeders' Association
My name is Janice Tranberg, and I'm the president and CEO of the National Cattle Feeders' Association. I've worked in the agriculture industry now for over 20 years, and I've worked in areas from industry to government and now the cattle-feeding sector.
Chair, National Cattle Feeders' Association
NCFA represents Canadian cattle feeders on national issues and
Les Producteurs de bovins du Québec also belongs to the association.
NCFA works in collaboration with stakeholders and government to strengthen and improve the cattle feeding sector. Through NCFA, Canada's cattle feeders speak with a unified voice. NCFA is a business-oriented organization focused on growth and sustainability, competitiveness and industry leadership. We work to create a business and trade environment that is conducive to the growth and sustainability of cattle feeding, focusing on enhanced access to existing export markets and the opening of new markets.
We support a regulatory system that better positions our industry for future growth and prosperity. The National Cattle Feeders' Association is a member of the Canadian Agri-Food Trade Alliance and has a strong partnership with the Canadian Cattlemen's Association, both of which appeared before this committee last week on Bill C-4.
Agriculture and agri-food in Canada is a $100-billion industry that employs over two million Canadians. Both the Barton report and the agri-food economic strategy table identify agriculture and agri-food as a high-growth economic sector with significant potential to increase its contribution to the Canadian economy. However, to do so, we need to proactively harness opportunities such as CUSMA.
Canada produces some of the most affordable, nutritious and safest beef in the world. The Canadian beef industry represents farm cash receipts totalling $9.4 billion annually, contributing $18 billion to the GDP annually. The Canadian beef industry generates an estimated 228,000 jobs in Canada, with every job in the sector yielding another 3.56 jobs elsewhere in the economy.
In Canada, there are approximately 82,665 Canadian farms, ranches and feedlots.
President and Chief Executive Officer, National Cattle Feeders' Association
Trade in beef and live cattle between the U.S. and Canada has created a highly integrated North American market that benefits the beef sector on both sides of the border. For all practical purposes, Canadian and U.S. beef industries operate within a single North American market where processed beef and live cattle move across the border in a relatively unimpeded and tariff-free manner.
Cattle feeding is the most valuable production component within the Canadian and U.S. beef value chain and both countries enjoy a tremendous benefit from a very high level of integration.
Even though the Canadian beef industry is approximately one-tenth the size of the U.S. industry, there is still a tremendous amount of reciprocal trade that occurs between the two countries in terms of processed beef, and even more with respect to live cattle.
The U.S. is Canada's largest export customer and Canada is the single-largest import supplier. Canada consumes about one-tenth of the U.S. exports and satisfies one-fifth of the U.S. required imports.
Each year, Canada processes three million head of cattle and yields about one million tonnes of beef. Canada exports 45% of all beef production annually, and about 75% to 80% of these exports are destined for the U.S.
The NCFA supports a swift ratification of this agreement and calls upon all MPs to ensure the quick passage of Bill C-4.
Our sector is not in a position to sustain any further trade disruptions with any of our trading partners, and the U.S. in particular. There is no room for reopening or amending the CUSMA at this stage if agriculture is to have any hope of growth and sustainability.
The FTA that occurred in 1988 and then NAFTA in the 1990s show beef as a good example of how free trade has strengthened industries on both sides of the border. These agreements inject a high degree of competition in the industry and have made North American industry a truly integrated market. Competition drove down input costs and increased productivity. This has allowed the North American beef industry to compete globally.
Going into CUSMA negotiations, the Canadian cattle feeders had four priorities: first, do no harm; second, improve market access where possible; third, include a specific commitment on regulatory co-operation; and fourth, no return of country-of-origin labelling, or COOL, in any form.
CUSMA builds on the success of NAFTA and restores long-term predictability to the North American supply chain. This is exceedingly important during this time of ongoing unpredictability in global markets.
Key benefits to CUSMA for the cattle feeders include no new tariffs or trade-restricting measures, meaningful progress on regulatory alignment and co-operation, and modernizing elements that will help bring NAFTA into the digital age.
CUSMA preserves and secures duty-free access upon which the North American beef cattle sector has been built over the past quarter of a century.
Producers appreciate that there is nothing in the agreement on mandatory U.S. country-of-origin labelling for meat or livestock, and that there is ongoing interest to address regulatory matters affecting cattle and beef trade, and to continuously improve the competitiveness of the North American beef sector.
In conclusion, our message is simple. We call on members from all parties to facilitate the timely ratification of CUSMA. Please pass Bill C-4 and bring CUSMA into force so that cattle feeders can capture the economic and competitive benefits as soon as possible
Thank you.
Liberal
The Chair Liberal Judy Sgro
Thank you very much.
We will go to Mr. Hoback.
We will do five-minute rounds rather than six for the completion of this evening. Is that okay?
Conservative
Randy Hoback Conservative Prince Albert, SK
That's fine. Thank you, Chair.
Thank you to all the witnesses for coming this evening.
It's interesting that we hear from the different groups and associations that they want this passed right away. We agree with you. We've been saying that since April 2019. We said that we should do a pre-study, that we should get the pre-study done so that we could move forward right away. We brought this forward again this past fall. We said to bring the House back and let's get this done and out of our hair.
All the times we brought forward suggestions on how to speed this up, it was always declined, until now, all of a sudden. But we're saying that we still need time to do our due diligence. That's what we would have done in those previous studies. Now they're saying to hurry up and do it. It's frustrating.
For example, we heard from the dairy producers today. Dairy farmers are basically saying that if we hurry up and push this through, they lose a benefit of a year if it goes through too fast. If we wait until after May 1, then that benefit kicks out a year.
Well, we have the NDP doing a backroom deal to make sure it goes through relatively quickly, where we would have said we should work during the break week and then at least move forward. I find it frustrating when people say that we have to move forward really fast on this, when that's exactly what we've been doing. I'm not sure what the minister is saying to you folks, but the reality is that they're the ones, not us, who haven't managed this file. That frustration is kicking through on this side, because we've been pushing it and pushing it and pushing it to make sure that situations like the ones Rosemary brought forward are properly addressed.
There's a classic example in this deal. If we'd done TPP, the replacement to NAFTA, I think everybody in this room would have said it would have been a good deal. The benefit to the Canadian economy was about $4.3 billion. Obama wanted to do it. Trudeau did not want to do it. It didn't happen. Now we do NAFTA. We do a TPP without NAFTA, so we get 3.5% under TPP with TRQ and another 3.5% under NAFTA with TRQ, so the dairy is getting hit twice now. The net benefit here is a $10-billion loss to the Canadian GDP based on C.D. Howe. We're still waiting for the economic factors to come from this government.
What I'm finding is that as we dig into this deal that's supposedly a win-win-win for everybody, there are a lot of losers here who need to be heard from. Dairy is a good example. I know Rick and Janice. I've been on WTO talks with Rick. We have a history together. We're all pro-traders; there's no question about that. In the same breath, I'm looking at this wondering where's the compensation and where's the mitigation for the losses here. We're not seeing it. I just look at the limitations on the ability to export in the dairy sector. Basically, you're going to allow more product in, but on your powdered milk, for example, you're restricted on what you can ship, not only in North America but globally.
Rosemary, you were talking about going through the consultation process with the minister. When they said they were going to put a restriction on the amount of powdered milk, for example, that you can export, what were those discussions about? Did you agree to do a global ban or a global TRQ on the amount you can export?
Vice-President, Strategy and Industry Affairs, Gay Lea Foods Co-operative Ltd.
I don't think any business would ever agree to restrictions on its future growth and potential. Prior to the negotiations starting, as well as during the negotiations and immediately following, Gay Lea Foods, both directly and via the trade associations, was in frequent contact with predominantly the trade officials. In part, it was to make sure they really understood the vital, significant impact that class 6 and class 7 of the national ingredient strategy had.