International Trade Committee on April 27th, 2023

[Nathalie Bradbury]

—help small business to then navigate the complex regulatory environment, such as non-tariff barriers.

[Arif Virani, Liberal, Parkdale—High Park, ON]

Thank you.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

We'll go to Madame Vignola, please. Welcome to the committee.

[Julie Vignola, Bloc, Beauport—Limoilou, QC]

Thank you, Madam Chair.

When CETA was negotiated, Canada wasn't able to anticipate the impact of Europe's non-tariff barriers or how they would affect Canada's agri-food exports, namely beef. I gather that you are in an especially tough spot right now, Mr. De Nardi.

Mr. Trew and Mr. De Nardi, here are my three questions.

How do you explain the fact that Canada wasn't able to anticipate those repercussions?

What should Canada have done to avoid finding itself in a situation where the benefits expected to flow from the agreements simply didn't materialize because of non-tariff barriers?

If Canada were looking for ways to eliminate or reduce the European Union's non-tariff barriers, what should the priorities be?

[Stuart Trew]

Thank you for your questions.

I'll try to answer as well as I can.

I think you raised some very important questions about what the government's intentions were in the negotiations. What was the strategy? Was it appropriate? Did we get an outcome that we maybe didn't anticipate?

I don't know with respect to beef. I only go by the stories that everyone can hear about Canada's beef producers being disappointed with the access they received. Could we have predicted this going in? I think probably. This is one of the longest-standing issues Canada has with the European Union with respect to the acceptability standards that are adopted for the production of beef here and within the European Union.

Again, there are multiple domestic interests in the European Union. There are very strong interests and very strong consumer preferences with respect to certain things, such as the use of antibiotics in raising cattle.

Could we have anticipated it? I think probably we could have. Could we have had a better result? I don't know. Given how bad the result was for the sector, did we give up things in other areas that maybe we didn't have to? Maybe. I think this is a question for the government in terms of its satisfaction with the outcome it got.

Going back to what I was saying about the CETA committees, there is still dispute settlement. If Canada has an issue with any of these matters in the European Union, they can take it to dispute settlement or they can take it to the committees. There's a diplomatic cost to that, and that would obviously factor into any decision. However, it's not as if we don't have options in CETA to raise these matters. If you look at some of the CETA committee work, you see that all Canada talks about at the agriculture committee and the SPS committee is beef.

It's not like Canada is not bringing this up again and again. We don't get a lot of information about those committees, though, and maybe there is a bigger role that this trade committee could play in peering into some of those meetings that are happening at the bilateral level. You might find some answers there about what's happening.

[Julie Vignola, Bloc, Beauport—Limoilou, QC]

Mr. De Nardi, what are your thoughts?

[Tom De Nardi]

I'm not going to pretend to be a trade expert in these areas, but I will say what I heard as negotiations were going forth. Under the Conservative government, the CETA was started, to my understanding. It was concluded by the Liberal government, the government of the day, and I'm no partisan either way. This is not the point.

However, what i can tell you is that if Europeans are not living up to their commitment of importing our beef or perhaps even pork, I think we need to ask ourselves what the product is that they want. This is supposed to be a customer-driven system, a customer-based system, right? If you don't have something they want today, then at least the market is there and you need to create something they want. It's supply and demand, a very simple thing. It's basic economics. It's no use trying to sell the Europeans something they don't want.

With regard to cheese, I can speak a little bit about this. I can tell you that at the onset, when the manufacturers in Europe found out that the manufacturers in Canada—the biggest oligopolies in the world, as far as they were concerned—were going to get licence, they had a cow. Pardon the pun. They were very upset. I know this because I deal with a lot of manufacturers.

This was not the spirit at the table. This was a last-second “gotcha” sort of thing: “By the way, the manufacturers are getting 50%.” Why would you say that? How would you like to sell to your competitor in a different market? You don't want to be doing that; you want the broad breadth and depth of the marketplace so you can go find a whole vast array of different customers and not be dependent on the big oligopolies that control 80% of the milk in this country.

They have something that we want, which are fine cheeses, for the most part, out of Europe. If we have to give them back something, it's up to us to decide what is good as far as beef or pork is concerned. We have to.... They're the customer, right?

If this is where we're going with this type of thing, I can tell you that we didn't exactly play fair ball either. They were shocked. They capitulated, but they were shocked. I know this for a fact.

I hope I've answered your question.

[The Chair, Liberal, Judy Sgro]

The time is up. I've been trying to make sure that the witnesses have an opportunity and make sure that the translation is clear.

Mr. Cannings, you are next, please.

[Richard Cannings, NDP, South Okanagan—West Kootenay, BC]

Thank you, and thank you, everyone, for being here today.

It's all very interesting and somewhat complicated. I'm kind of new on this file, so I'm learning a lot.

I want to start with Mr. Volpe to try to figure out exactly what the auto parts manufacturers want. It sort of plays into what Mr. De Nardi just said about producing something that the customer wants.

When I was a kid, we didn't have any cars, or I assume even parts, here in Canada from Japan. Then we had a crisis with gas prices, and suddenly Toyota, Nissan and Honda were making small fuel-efficient cars, which were very, very popular in the seventies. It seems to me, from my uneducated eye, that they used that beachhead to develop a broad impact into the North American market.

It seems that you consider it as a non-tariff barrier, that because we produce big heavy cars that aren't fuel-efficient, we are being cheated somehow by the Japanese. I assume, yes, they are non-tariff barriers, but perhaps we should be looking at that and making something that the Japanese market wants.

It's like California doubling down on emission standards in the seventies because of smog. They made those standards, and the North American market capitulated because California was a big customer.

I'm wondering if you could comment on that. Maybe I'm off base, but I'm trying to understand this.

[Flavio Volpe]

Thank you to the honourable member for dating himself.

When I was a kid, there were big cars here. The big cars were American and the smaller cars were Japanese. The Japanese took proper, full advantage of a hole in the market for what we needed, especially with the spike in the price of fuel.

We use the Japanese or the Europeans. They develop vehicle size and fuel standards in part because of the cost of fuel. It's also in part because of the size of the roads in those markets. In Europe there's a displacement charge that starts at two litres of displacement. If you go to Europe for whatever reason and you rent a car, you'll notice that almost everything starts as two litres or under. Everything else is a luxury tax that gets borne by the owner every year.

I won't tread over the criticism that we should make things that are more attractive to the Europeans and the Japanese. I don't know if I agree or disagree. Those are certainly arguments that have been made over the years. Those products are made that way because of the way the roads are and the price of fuel. The reason we have bigger cars here is that we have cheaper fuel and bigger roads.

What I'm merely saying is that the position of our organization, certainly for domestic producers here, is to be awake to that when you make trade negotiations and say, “Oh, well, we have access to the European market” or “We have access to the Japanese market.” That's despite the fact that a lot of what's happening in the automotive sector is on global platforms that are designed to more homogeneous customer preferences.

The reality of what their production is geared towards is that the Japanese have a market of five million vehicles a year, but they make nine million. They need to export. In Canada we make two million cars a year and we buy two million cars a year. It's a balance. They got the better deal in TPP. We didn't make a free trade arrangement with CETA. There's a quota there. Certainly I would have been saying the same thing if we had conceded local content requirements in exchange for the reduction of, or at least the addressing of, non-tariff barriers.

We don't make decisions in Toronto, Ottawa, Calgary, Montreal or Vancouver on what those cars look like. In this country, we supply those decisions as made by Detroit, Tokyo and now, increasingly, the Germans. Canadian interests don't control the design, engineering and size of vehicles, and Japanese interests do. They have a much stronger hand. The Europeans have a much stronger hand. The Koreans have a much stronger hand.

In the trade agreements we made with each of those regions, we lowered the domestic content requirement to sell a car tariff-free and we did not address the barriers to entry. It wasn't the death knell in any way for the Canadian market, but it did concede a whole bunch of market space to imports. Now we have EV mandates that are proposed, and certainly will be confirmed this year, that require a certain percentage of domestic sales in Canada to be EVs; otherwise, those companies will face a $20,000 fine for each vehicle that is not compliant. Well, a lot of those companies are in TPP or CETA countries that will meet those targets by importing vehicles to sell to Canadians because it's easier and more profitable than to do a short production run here and have Canadians build them and have Canadians supply parts to them.

We need to be careful. At least we need to be informed—

[The Chair, Liberal, Judy Sgro]

Thank you very much, Mr. Volpe.

We'll go to Mr. Baldinelli for five minutes, please.

[Tony Baldinelli, Conservative, Niagara Falls, ON]

Thank you, Madam Chair.

Thank you to the witnesses for being with us this afternoon.

I'd like to begin with Mr. De Nardi.

You talked about the trade agreements that have been reached: CETA, WTO, CPTPP and CUSMA. Under those agreements, if I understand correctly, Canada has agreed to a combined 10% market access when all of those agreements are fully implemented.

It's not so much that the argument deals with what market access is. It's how that quota is then distributed to the manufacturers and the producers. My understanding—and you've raised the concerns—is that you have these large manufacturers in Canada that have operations in the United States and Europe. They're international. They're actually getting a double advantage from these agreements, leaving small producers such as yourself out in the cold.

You've talked to the government. You've raised these concerns. You've asked for changes. You've spoken to Global Affairs. You've spoken to the minister's office. You've written to them. What have their responses been to you? What actions are they taking to address these concerns for small manufacturers? As you know, in my community I have a small producer-manufacturer, Roman Cheese Products, that sells lasagna, gnocchi and ricotta cheese throughout the country.

How do you respond to that?

[Tom De Nardi]

First of all, we're in kind of the distributor class. I just organized that, but we're still on the small side of stuff.

Yes, it's manufacturers versus distributors, and yes, the very large manufacturers are an oligopoly in this country. There's no question. The biggest dairy processors get the most on the CUSMA and TPP side, the lion's share of everything. They are entitled to import quota and so are the distributors, but it works on volume. For Mondo Foods, if I sell a million kilos of product—my combined volume—and someone like the very largest manufacturer sells hundreds of millions of kilos, they get the 99.9% and I get the 0.1%.

That's how it works on CUSMA, which has changed. It used to be an 80-20 rule, but Canada dug in its heels. They changed the agreement, and now we're in a fight with the United States. I don't know how that's going to end, but we'll see how that goes.

It's the same thing with the TPP, which is still intact, in that there is some sharing between the manufacturers and the distributors. For those pools, it's just manufacturers and distributors. The CETA is a different thing. The CETA is the coveted one, right? It's the coveted one because of European cheese, which has always been coveted and wanted by many people in Canada. It has a high demand. Initially, it was only supposed to be distributors and retailers. There are lots of studies. I go back to the 1992 inquiry into the allocation of import quotas as tabled in Parliament in 1992. We've been talking about it since then. I appeared here—yes, we did—in talking about the fair allocation and how it should be, but they got 50% of everything.

For Mondo Foods and this whole threshold thing, it's one set of rules for the manufacturers, between the large and the small—and I'm not begrudging them—but there is a completely different set of rules for distributors like me and the retailers. This moving target, not knowing where we're going to be from year to year, has killed my business, as I've testified.

What does Global Affairs say to get to here? They won't talk to me anymore, not the senior staff. There have been many emails upon emails and conversations that start off very nice, so either they're incapable or they're indifferent. It's one of the two. They're incapable because they don't have the power to do it, or they're just indifferent and they just don't care.

As a matter of fact, I'm going to recite a line that the people of Global Affairs told me. This is the senior management: “Tom, there are winners and losers in this game, and you're on the wrong side of the fence.” Well, tell that to the bank to pay the mortgage after you've just built a business.

That's unacceptable. They won't talk to me. They won't correspond with me—not the director, the deputy director or the senior trade policy analyst—and I've been part of their solutions for so many years. They've come to me so often to participate in their studies, Madam Chair.

[Tony Baldinelli, Conservative, Niagara Falls, ON]

That is totally disappointing to hear.

As our leader likes to say, on this side we should be the servants, not the masters. We should be listening to the input of all those businesses that exist here in Canada on what's better for our sector. There seems to be.... There need to be changes on this end with regard to how that quota is allocated.

We've had before us at this committee an organization called Tree of Life. They bring in specialty cream from the U.K. for high tea and so on. As such, they said that for a nearly two-year period, Tree of Life was unable to bring cream into the Canadian market despite there being no domestic supply, which came at the expense of their thousands of customers.

How does that happen? If there's no domestic supply, how is it that they're not able to get quota to bring that in to service their market and maintain their business so that they continue to exist? There need to be some changes here. Have you spoken to the minister directly on this? Have you asked to speak with her office?

[Tom De Nardi]

Madam Chair, I would love to speak to the minister directly. I absolutely invite that. I would fly to Ottawa from the Northwest Territories to speak to our minister.

If I may, Madam Chair, I would be happy if they would just go back more or less to how CETA allocation thresholds started.

[Tony Baldinelli, Conservative, Niagara Falls, ON]

Then we're not talking about access here; it's about the allocation—

[The Chair, Liberal, Judy Sgro]

We have Mr. Miao, please, for five minutes.

[Wilson Miao, Liberal, Richmond Centre, BC]

Thank you to all of the witnesses for being here today.

I will keep it very simple here because trade is very important, not just to any country but to Canada as well. We hear about problems.

Mr. De Nardi, you've mentioned a few.

I think I'd like to open this question to all of the witnesses on the floor. What do each of you see as the top problem in our current non-tariff trade barriers in existing trade agreements and what kinds of suggestions or recommendations would each of you suggest to us as a committee to take into consideration for any future negotiations with these agreements?

Maybe I can start with Ms. Bradbury.

[Nathalie Bradbury]

Women, of course, are 51% of the population. Women are found everywhere. Women are the top consumers. Global studies have found that women allocate 90% of their personal income to their household, their children, their home and that kind of thing, while men, according to the study, allocate 35% of their revenue to that, so women play a very important role in society and in the economy.

Anything we can do to make it easier for women to be either workers or employees or hopefully go up the value chain would help.

I mentioned earlier the initiatives at the international level with the World Intellectual Property Organization, so there's working more closely there. Working in partnership, I think, is the solution. All of the non-tariff barriers are very onerous.

Any solutions that come through with partnerships.... Also, some large corporations get it, just like Mary Ng's major strategy gets it. I can explain large corporations later in my next question, I guess.

[Wilson Miao, Liberal, Richmond Centre, BC]

Thank you.

Go ahead, Mr. De Nardi, please.

[Tom De Nardi]

Madam Chair, I think the top problem is that the allocations, as far as the agreements are concerned, are heavily weighted towards the very largest players in the industry. That's the top problem.

The solution is that you need to keep, I think, the spirit of what those negotiations were about, and if you have a set of rules.... The solution is that if you have a set of rules, you have to stay pretty close to what the set of rules were at the beginning. We've changed them or let them drift a couple of times now.

[Wilson Miao, Liberal, Richmond Centre, BC]

Thank you.

Go ahead, Mr. Trew.

[Stuart Trew]

In keeping with the spirit of my presentation, I would just say that I can't think of one worst or most important NTB that Canada should be focused on right now. I think they all relate to very specific contexts and very specific sectors, and they should be dealt with that way.

To me, one of the problems with Canadian trade policy is that it tries to to deal with all these very complicated specific issues with a one-hammer approach, which is to make the technical barriers to trade chapters stricter and stricter on government and hope that it has an effect. History shows that it hasn't had an effect. All these issues we're talking about are decades-old issues that no Canadian trade agreement has been able to solve so far.

I think different solutions are needed. That's what I would say, but if I could say one—and you've already dealt with this—it would probably be the U.S. laws on trade remedies. That's a different topic, one that I know the committee has already dealt with.

[Wilson Miao, Liberal, Richmond Centre, BC]

Thank you.

It's over to you online, Mr. Volpe.

[Flavio Volpe]

I would just say one thing. I think that we need to recognize that an industrial policy in new regions makes it possible for surprise players to take our market share if we don't have a reciprocal upside. I talked about the Vietnamese, but who would have known five years ago that Turkey would have a company called Togg that is going to sell vehicles around the world?

Unless we have a domestic carmaker, I think we need to approach current and future trade agreements with countries that have domestic carmakers a little more thoughtfully.