International Trade Committee on April 27th, 2023

[Wilson Miao, Liberal, Richmond Centre, BC]

Thank you.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

Madame Vignola, you have the floor.

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

Thank you, Madam Chair.

Canada botched things up when it came to the details and impact of what it was about to sign. Canada is either a naive negotiator, a bad negotiator or a terrible analyst of the markets it was hoping to gain, or all three.

Mr. Trew and Mr. De Nardi, would you say that's a fair assessment or an oversimplification?

I want to make sure I understood what you said and summarized it accurately.

[Tom De Nardi]

I don't know whether I'm qualified to answer that question and I don't think I'm going to give you the answer you want.

I would simply say that in any market, you have to understand what the customer wants. If the Canadian negotiators at the time didn't understand the type of beef or pork the Europeans wanted, well, I suppose and suggest to you that they didn't do their homework.

May I touch on something from before?

I would like to tell you that the New Zealanders and the TPP countries are equally as disappointed in the draw of a lot of the products they signed on for—mozz, cheddar.... The allocation we gave them has never been filled. There are literally hundreds of thousands of kilograms at the end of the year. I'm sure they're just as disappointed and probably asking themselves the exact same question you just asked me.

I don't know whether I've answered it enough for you. I am sorry. I cannot be more specific.

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

Thank you.

You said Canada had some homework to do and needed to perform better. That's obviously just as true for our farmers and manufacturers as it is for our distributors.

Mr. Trew, did I capture what you said correctly?

[Stuart Trew]

Thank you for your question.

I don't know the answer to that question either. You have a bunch of answers, and they all sound like they could make sense.

Just to reiterate, there are consumer preferences involved here as well. The Europeans know what kind of beef they like and don't like and the production methods they like and don't like. This has very much to do with consumer preferences more than with Canadian negotiating strategy and tactics.

Power is also at play here. We're a much smaller country than the EU.

[The Chair, Liberal, Judy Sgro]

Thank you very much. I think you all did a very good job of answering those questions.

Mr. Cannings, you have two and a half minutes.

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

Okay.

I'll go back to Mr. De Nardi briefly because of what he said about New Zealand and cheddar allocations. It's so that I can understand what they're upset about and why.

Is it something to do with their negotiations, or is it just the way we're acting? That's where I was confused.

[Tom De Nardi]

Every country, with the best of good faith, went into the negotiations and agreements. Canada agreed to give the TPP countries a certain access to our market for products such as mozzarella, cheddar, butter and this sort of thing. That quota is never filled. Canadian consumers, or probably the manufacturers, distributors, and everyone who has that quota.... It's available. You can get as much as you want, but our market, for whatever reason, is not digging it. Whether it's hard to work with or whatever it is, there's something about the product our marketplace does not appreciate. There's a lot of quota left over every single year. It is not filled.

I'm sure the TPP countries, in particular New Zealand, are saying, “Oh, I came into this negotiation thinking you would take all of this cheese, because look at the access you gave me. However, it's not being used.” They may be feeling what Canadians are feeling on the beef side of things.

That was my only point. Have I made that...?

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

I guess so. I just wondered why that isn't happening. Is the price not right? I go to New Zealand regularly, and the cheese tastes great.

[Tom De Nardi]

Yes. It could be for a number of reasons.

Price probably wouldn't be dealing with it. Pricing is an issue. New Zealand is a commodity player. They produce some of the lowest low-cost quality product in the world. It comes across that some of it is frozen. It doesn't quite react the same. Sometimes it's the price. Sometimes it's spending a lot of time on the ship and maybe frozen and thawed. It's just not living up to the standards.

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

Thank you.

[The Chair, Liberal, Judy Sgro]

Mr. Seeback, you have five minutes.

[Kyle Seeback, Conservative, Dufferin—Caledon, ON]

Thank you, Madam Chair.

I want to ask some questions of Mr. Volpe first.

Mr. Kingston came to the committee to talk about autos, obviously. One thing I'm curious about is this: Would disunity in regulations constitute a non-tariff barrier?

In the example Mr. Kingston gave, he said, “we must maintain regulatory alignment with the United States”, because that's where most of our autos go for export. He was talking about Canadian EV standards and clean fuel standards somewhat decoupling from tailpipe emissions standards or regulations in the United States.

I don't know whether you know a lot about that or whether this is an emerging potential non-tariff barrier that we have with our largest trading partner.

[Flavio Volpe]

Thanks for the question.

Brian and I coordinate on this because I think we all have the same interest. It is extremely important for 100% regulatory alignment with Washington in the automotive sector. I say “Washington” because sometimes we look at Sacramento and we say that we like what's happening with the California Air Resources Board. We think it's a little bit more aggressive. They appear to be putting together a coalition of states that represent about 40% of the market, and it's the highest standard.

We all work in a business. Cars and parts work in a single-digit EBITDA world. That's by making one vehicle platform and one type of part for one configuration to sell all over North America. While it may be attractive to create a bit of an island so that you can provide a narrative in Canada—a leadership narrative, noble as it is—it does put Canadian manufacturing at a disadvantage, because what will happen, which we've seen happen specifically, is that companies will either have to create a “subnational jurisdiction only” product or they'll pull the product.

[Kyle Seeback, Conservative, Dufferin—Caledon, ON]

Do we seem to be aligning a little bit more with Sacramento than with Washington? Is that the sense that you're hinting at a little bit?

[Flavio Volpe]

Canada is leaning that way, and we warned not to, because I think it will hurt our manufacturing footprint.

[Kyle Seeback, Conservative, Dufferin—Caledon, ON]

Okay, thanks very much.

Mr. De Nardi, with respect for cheese importers, it seems to me that the non-tariff barrier is being created by the Government of Canada in terms of how they're allocating the way TRQs come into the country; it's all going to producers, and how you move around is non-transparent.

What would be the solution to that here in Canada? How would we fix this to create certainty for importers like yourselves and all other importers across the country?

[Tom De Nardi]

With regard to CETA, without blowing the whole system up and taking manufacturers completely out of the equation—let's just say that we stay where we are at the moment—we could at least be going back to a set of rules that we consider to be fair and equitable.

You had a set of rules with regard to large and small pools. They're moving around due to unintended consequences. I think we we really need to go back to where the spirit of it was at the very beginning and to make it transparent. For a company like mine, if you know that the threshold's around a million kilograms, you make the decision as a business owner. It's in your hands whether you're going to sell more and then lose that quota—that's up to you—or stay below that, not sell as much, maybe charge a bit more, make more money and have that quota for yourself. That's what I would say.

Right now, my business is in the hands of Global Affairs. Somehow it doesn't make sense. It's never a good thing when the Government of Canada is running your business.

As far as the other categories are concerned, I think you have to adopt something similar to what you did with CETA, if that's the way we want to keep this. In that scenario there's a split, a share, between distributors and manufacturers, if indeed that's the road we want to go down. Right now it's very heavily advantaged towards the manufacturers, as I pointed out before.

[Kyle Seeback, Conservative, Dufferin—Caledon, ON]

Would you suggest that it would be more equitable if it were a more equitable distribution?

[Tom De Nardi]

Yes, it would be an equitable 50-50 distribution between distributors and manufacturers. You can throw the retailers in there too if you want to.

[Kyle Seeback, Conservative, Dufferin—Caledon, ON]

What's the allocation right now?

[Tom De Nardi]

In which category, please, sir?

[Kyle Seeback, Conservative, Dufferin—Caledon, ON]

Sorry. With respect to the importation, how much are the producers getting and how much are the importers getting?

[Tom De Nardi]

It's different for each of them. With regard to CETA, 50% goes to manufacturers and 50% goes to distributors and retailers, of which there are four pools. I expressed what happened to me going from the small pool to the large pool. That has to be fixed. That has to be reorganized due to this unintended consequence.

The first category has three players, with manufacturers at 50% and distributors and retailers in another category at 50%. That's CETA.

With CUSMA, it's distributors and manufacturers only—no retailers. Right now, under CUSMA, the more you sell, the more you get, so Mondo Foods gets nothing relative to those massive dairies that pump millions of litres of milk through. They get everything. We get nothing.

The TPP is a little bit different. There is a mechanism there whereby there's a share, so if you apply and you're a distributor, you get a one-piece fair share based on the number of applicants you get. It's not the best, but it's not terrible, and that's for both butter and cheese.