International Trade Committee on Feb. 25th, 2020

[Joel Prins]

As for myself, I was too young for the first deals. From what I know from my dad, there were working groups that analyzed what the cost effect of everything was and what the effects of the trade deals were. As David mentioned, it was $2 billion. Once this CUSMA deal gets ratified, there would have to be another group set up to analyze what effects, even long-term effects, this deal has on the farmer. From there, they would come up with a number that made sense.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

We'll move on to Mr. Blaikie.

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

Thank you very much.

Welcome to all our guests, in particular Mr. Wiens. We had the opportunity to speak back home in Manitoba not that long ago, so I'm happy to take up a few of the themes from that conversation.

You mentioned the use of bovine growth hormone in your opening remarks. With respect to the market share that's granted under CUSMA, is the agreement blind to the content of what's coming in from the United States? Are they allowed to bring in things that don't meet Canadian standards? How does that work, and who would monitor that?

[David Wiens]

That's correct. The use of the hormone rbST, which is a production hormone used in the U.S., is illegal in Canada because of animal health concerns. There would be no restriction of these products coming into Canada. That raises a real concern that Canadian consumers are not always going to know what they're getting, and it raises the fact that it has not been produced to the kind of standards that we have set, especially through our assurance program, proAction, where all farmers in the country follow the standard. Our standards reflect the values of all Canadians, and we take great pride in that.

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

Would you say that if Canadian dairy processors were holding the TRQ—versus the retailers, for instance—they would have a better sense of judging what products coming in from the United States would be comparable to Canadian products?

[David Wiens]

We certainly believe that the processors should have the import TRQs. Processors will be and are much more strategic in terms of the kinds of products they bring in, and it would be less disruptive to the industry.

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

In the CETA process, we know that over 50% of the TRQs weren't granted to processors. They were granted to retailers. What has that meant for the Canadian dairy industry? What has been the impact of that administrative decision on the Canadian end? It was not negotiated in the deal, but it is a unilateral decision by the Canadian government.

[David Wiens]

That had a very negative impact on the processors in this country. Certainly, it's easy to calculate the market losses through that trade deal, which are the 17,000 tonnes of cheese that are being imported. Part of the effect has also been.... We can then potentially get into a discussion of dumping, but it has reduced the margins for processors in this country. It's very difficult to compete against the treasuries of the EU—or of the U.S., for that matter.

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

When we're talking about retailers holding TRQs, is it fair to say that Canadian consumers aren't just concerned about price but are also concerned about choice?

Depending on who holds the TRQ, it could be used to drive down price, including trying to reduce margins for Canadian producers, or it could be used in a way that expands choice by making products available to Canadian consumers that aren't in competition with existing Canadian dairy products. Does it make a difference to the industry how those TRQs are used and whether they're used to promote choice of product or drive down price?

[David Wiens]

Certainly that has an impact for the Canadian marketplace. With regard to processors, again, they strategically import products, although with so much of the import quota being given to retailers in CETA, that has had a very negative impact on our industry. Again, processors are much more strategic in the way they fill those import quotas, so certainly neither the consumers nor the processors or farmers have really benefited from the way in which the quota was allocated in CETA.

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

Thank you very much, Mr. Wiens.

I wonder if our other guests from the dairy industry might like to weigh in on those questions.

[Matthew Flaman]

Yes. I have just a couple of quick comments about imports of the milk that's coming in. Obviously, rbST is an issue. One other thing, which is a bit of an industry standard, is that the quality of milk in Canada is second to none. It's a worldwide standard.

The U.S. has its own standard, which may not be as good in some cases. I don't want to.... I'm sure that in a lot of cases it's just fine. There's a standard they use across the country for what's called “somatic cell count”, which aids in the quality of cheeses and is essentially a measure of cow health. At any rate, it's about double what it would be in Canada, maybe not quite double but close.

We're very proud of the quality of milk that we produce on farms, and that then translates into quality products.

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

Right on. Thank you very much.

[The Chair, Liberal, Judy Sgro]

Mr. Kram.

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

Thank you, Madam Chair.

Mr. Flaman from SaskMilk, welcome to the committee.

Under the new NAFTA, Canadian dairy producers will be losing 3.9% market access to the domestic market. Given the rate of growth of the domestic market and the profit margins of dairy producers, can you give the committee an idea of what the loss of 3.9% means to a typical Saskatchewan dairy producer?

[Matthew Flaman]

In a nutshell, I think the loss of 3.9% is our growth. Predicted growth over the next years might be in that neighbourhood. This is taking away our growth and giving it to somebody else. Effectively, that affects our future. That's troublesome for me. More importantly, on top of that, I'll draw you back to the export cap again. Not only has this taken away our growth within our country, but it has taken away our growth outside of our country. It's very troublesome.

Moving forward, I think that with any other cuts that would come to us, or any other imports, it really does feel like death by a thousand cuts.

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

Can you describe some of the activities and new products that Canadian dairy producers have come up with in recent years to expand growth into foreign export markets?

[Matthew Flaman]

I think we see the future in the milk protein concentrates. I can't really speak of anything that's on the horizon right now, but.... It's different, it's innovative and it's what the world wants from us. It plays well into our current situation in Canada and North America, where there's a high demand for cream and butter fat. What is left over is the protein side of our milk component. It can be used in things like infant formula, protein powders, and obviously to increase protein in just about any food we consume.

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

How will these markets be affected by the new dairy export tariffs?

[Matthew Flaman]

Essentially, with a very low limit of 35,000 tonnes, it handcuffs us not only to our trading partners in the U.S. and Mexico, but also around the world. As far as we understand, we'll lose that market.

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

When did SaskMilk find out about the new dairy export tariffs that are in place in the new NAFTA?

[Matthew Flaman]

It was well beyond the agreement of it. We weren't consulted on the export caps themselves, the size of the caps, nor the impact they would have. I think we may have been....

I'm going to pass this on to David because he was involved with this. We were briefed on it, not consulted. David can add to it.

[David Wiens]

During the process of negotiations, I was part of the delegation that went to Washington, Mexico City and Montreal, following these negotiations. When the export cap was announced after the deal was signed, it came as quite a shock. Also, the U.S. oversight clause on our own domestic dairy policy was not shared with those who were following these discussions very closely.

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

Mr. Flaman, continue if you wish.

[Matthew Flaman]

I do want to conclude with the export portion of this. I think it's unprecedented. It's very troublesome. If you think about any other sector, having a country within a trade agreement control them outside of that trade agreement, no matter what the commodity is—if it's any kind of manufacturing or export that we do—that's very troublesome. It's not good.