International Trade Committee on May 4th, 2023

[Jack Chaffe]

Yes, we're very disappointed in the accession of the U.K. to the CPTPP without addressing the trade barriers with the carcass wash.

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

Previously, there was the Comprehensive Economic and Trade Agreement between Canada and the European Union. By the way, in connection with that agreement, you were made the symbol of victory. It was said that the dairy sector had been sacrificed, but that, in exchange, gains had been made for the beef sector. Yet, as we've seen, there were non-tariff barriers.

How is it that the same mistake is being repeated in this new agreement?

[Jack Chaffe]

I guess that's a good question. Why are we making the same mistake?

It's happening again. I mentioned the U.K. before. We weren't getting any beef over there in 2022, whereas they were shipping $33 million worth of beef over here. On the EU side of it, the trade deficit last year was $100 million, so it's definitely disturbing to the beef industry.

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

You mentioned a non-tariff barrier earlier. Are there any others? Can you list some of them for us?

[Jack Chaffe]

I'll maybe turn that over to Dennis Laycraft.

[Dennis Laycraft]

Thanks, Jack.

Clearly, our meat hygiene system and the interventions are the number one impediment. Our processors, to put it candidly, are not prepared to turn down our food safety system to go to Europe. However, I don't want to create the impression that we're in some way inferior, when in fact we have one of the strongest food safety programs in the world.

If we get into some more difficult—and we heard it earlier—tariff rate quota administration procedures, there are a lot of certification requirements to get into that market, all the way back to the birth of the animals.

What we are seeing is a whole new proliferation of measures that are going to thicken the border with the European Union. Right now, they're publishing a rule on deforestation that—

[The Chair, Liberal, Judy Sgro]

Excuse me, Mr. Laycraft; could you raise the boom, as they call it, on your mike?

That's it. Thank you very much, sir. Please proceed.

[Dennis Laycraft]

They're adding some new measures on deforestation that would require, right back to every farm and ranch that the cattle are raised on, an attestation that there was no deforestation, even though Canada will be recognized as a low-risk country. Our big concern is protecting native grasslands. It isn't forestation or deforestation.

There are a range of things like that coming from the EU, and candidly, all of those things together are making it a more difficult market to export to. We were very disappointed, as was indicated earlier, when we simply used that as the transition agreement with the U.K. several years ago. That's probably when we should have drawn the line in the sand to begin with, but right now we need to draw that line in the sand before they're allowed to join the CPTPP.

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

You say it should absolutely be done before, and we haven't seen the bill yet. We haven't seen it in this committee yet. It will come sooner or later. By the way, thank you for your suggestions. We are taking all of that under advisement.

What would be the danger, in the immediate future, of signing this right away without having addressed this issue?

[Dennis Laycraft]

I think the immediate danger to us is that we take.... First of all, we reduce the ambition. We're setting a terrible example for other countries that want to join the CPTPP with the idea that they can come in without addressing a number of these non-tariff barriers. When we brought the countries together, those were effectively resolved with the current group of countries that are in there.

The second thing is that we take away any real need for them to address those issues in a timely manner. There are bigger issues they're looking for that are attracting them to the CPTPP and the large group of economies in it. When we have more strength in our negotiating position as a result of the accession conversations, we need to use that strength to address these issues and get these things fixed so that moving forward, as was discussed earlier, trade can occur on the basis of natural advantage.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

Mr. Cannings, we'll go to you for six minutes, please.

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

Thank you.

This is all very interesting and very complicated, so I'd like to get some clarification here.

Just to find out where we are in terms of what we can do with the CPTPP part of things and with the U.K. bilateral discussion coming out of CETA, I had some information the other day that Australia signed a side letter agreement with the U.K. about their accession to the CPTPP. It removed the investor-state dispute mechanism between Australia and the U.K. That is in CPTPP now, but their side letter said it wouldn't apply between those two countries.

It seems that there is some time here when we can do things like that. Mr. Beck or Mr. Laycraft, might you have some comment as to where we are in the game and what we can do and can't do right now?

[Dennis Laycraft]

I think it's the most important question in this negotiation.

Going back to Australia and New Zealand, they completed bilateral negotiations before they agreed to the accession. Both countries, to my understanding, are saying they need to implement those bilateral agreements as part of the condition of their support for the accession.

What is interesting is that Australia and New Zealand are going to get unlimited duty-free access for beef. Apparently there was some political reaction in the U.K. to that, so they came back to Canada and said that we are only going to get a tariff-free quota of 14,000 tonnes that we are going to share with five other countries, which is obviously on a completely unlevel playing field compared to Australia and New Zealand.

You're right that some of these deals have to be dealt with in the bilateral agreement. That's the point we've been making all along to the negotiators: don't get the accession deal ahead of the bilateral negotiations.

We have time right now to push on the bilateral negotiations. I think we need to make it clear to them that in order to have Parliament support this, they need to make some serious concessions and bring their requirements in line with the WTO and with both the World Organisation for Animal Health and Codex. Those were pretty much the goals we achieved with the current membership of CPTPP and what every new member should meet.

[Stewart Beck]

I would agree with what Dennis is saying. I can say that now, because I'm not part of the government anymore.

You always have to understand what your leverage is. Right now it's in the context of a bilateral relationship. By allowing the U.K. to accede before having completed the necessary elements of a bilateral problem, you are ceding some of your leverage.

There are other countries that want to accede to CPTPP, such as Korea. We already have a bilateral agreement with Korea. It would make some sense to do that, because bringing them into CPTPP would be relatively simple. It is going to be much more complicated with the U.K. Again, one understands the geopolitical imperative that's involved with this, but at the same time it does put our beef exporters at a disadvantage. You have to weigh one against the other at the end of the day, and we need to have some leverage, quite frankly.

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

I'll just turn to the cheese and the wonderful Italians here. We had another Italian here talking about cheese the other day. It's great to hear that.

I just want to know where you stand on this. Do you have any comment about the CPTPP, quickly? Then I can dive into cheese in a bigger way.

[Joe Dal Ferro]

First of all, thank you for your question.

From our perspective, it all has to do with the allocation model of the quotas. If we could exercise those allocations in a user-friendly way, we would be able to leverage far more access for cheeses into Canada for Canadian consumers.

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

Those allocations are all under Canadian control. Right now I get the impression they're dominated by the big players, the processors.

[Joe Dal Ferro]

It varies by the trade agreement, but for the most part, yes.

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

Why does it go up and down so much every year?

[Joe Dal Ferro]

If we can isolate the CETA quota allocation model, we fall into what are called “pools”. In our situation it almost penalizes us for growth. If we by chance get moved into the larger pool, we will get a smaller allocation. We are penalized for growing our business, and that's something we would like to change.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

We'll go to Mr. Carrie for five minutes. Go ahead, please.

[Colin Carrie, Conservative, Oshawa, ON]

Thank you, Madam Chair. I want to thank the witnesses for being here.

I want to follow up with the ICCC on some questions. We've heard from beef, especially about the U.K. ascending into the CPTPP. You mentioned a few of the existing trade barriers you're facing. I wonder if you could comment on how your companies are adapting to those. I wonder if you could comment on Bill C-282, which we recently had here in committee. If that passes, how would that work for your customers and the companies you represent?

[Joe Dal Ferro]

On your first point, everything is predicated on the allocation model of the quotas. In our situation, we face erratic allocation of quota or not enough quota, which forces us to move into what's called the “transfer market”, whereby I and my colleagues need to contact other quota holders and ask if they are willing to rent their quota—and, of course, for a fee. Unfortunately, aside from taking a lot of work and a lot of energy to do this, we have to pass those costs on, and it's Canadian consumers who suffer.

[Patrick Pelliccione, Vice-Chair, International Cheese Council of Canada]

Yes, and furthermore, we have a solution to some of the issues that exist. Basically, right now, the allocation model for the TRQ is based on sales performance of both domestic and imported cheeses. In our solution, we recommend that the allocation model should be based on import performance.

As well, in order to solve some of the issues we're facing now with the allocation models that exist in all the agreements, we need viable economic quantities of TRQ to be allocated to individuals or companies that apply for the allocation.

As well, understanding that an allocation is a privilege, if it's not used during the year, we would recommend that the allocation be forfeited for the following years. Simply stated, in order to solve a lot of the issues, we recommend that the allocations in any treaty—even the new treaties that are being negotiated with the U.K.—be given to the parties that are going to actually use the allocation, instead of setting up a secondary market, as my colleague Joe Dal Ferro stated, for trade or for transfer. That is an economic mechanism that will not benefit Canadian consumers; it will increase the prices of our cheeses or of all products for those consumers.

[Colin Carrie, Conservative, Oshawa, ON]

Did you want to comment on Bill C-282 at all?