Mr. Speaker, I am pleased to talk to Bill C-32, an act to implement the free trade agreement between Canada and the Republic of Costa Rica.
The purpose of the bill is to implement the free trade agreement with Costa Rica, the objective of which is to establish free trade between the two countries by gradually eliminating barriers to trade in goods and services.
I will put a summary at the front end, which is that this is not a controversial bill, with one singular exception. I believe, as the parliamentary secretary made reference to, that we have dealt with that quite adequately at committee. We tried very hard to make that a co-operative arrangement with the government. The compromise we came to hopefully will stand the test of time. This will be seen as time marches on. I will certainly be getting into that in some detail during my presentation.
The bill follows the free trade agreement with Chile in 1997 and NAFTA in 1994. One of the major stated purposes is to promote regional integration through an instrument that contributes to the establishment of the free trade area of the Americas, the so-called and so-named FTAA negotiations. This could be the first of several of these agreements with other countries in South and Central America.
Eighty per cent of what Costa Rica exports to Canada, primarily fruit, vegetables, coffee and coal, already enters Canada duty free. Canada was looking to expand its market for some specific things. Interestingly, french fries, metal structures, fish, paper products, auto parts, plastics, wood and agricultural products were among that mix. These products had very high tariff rates applied to them. One interesting example is french fries. Even though Costa Rica does not grow potatoes, it has a 41% tariff on imported french fries. This shows the need for tariff reductions on all kinds of fronts. That was very much a focus of these negotiations.
In 2000, Canada's total exports to Costa Rica were about $86 million. In the same year we imported $183 million worth of products from Costa Rica. These are Government of Canada statistics and I do recognize that there is some difficulty in identifying exactly what are the imports and exports because some of them flow through the United States and are attributed in that fashion.
The Canadian Alliance promotes free trade and the joint elimination of tariffs with our trading partners. We support securing access to international markets through the negotiation of trade agreements. We will vigorously pursue reduction of international trade barriers, tariffs and subsidies. Additionally, we will ensure that Canadians' concerns about labour practices, environmental protection and human rights are reflected in these agreements.
I did mention that there was one aspect of the bill that was contentious. I will spend some time making reference to it. It is an industry that is important to us. I am talking about the domestic sugar industry. Historically we have grown sugar beets in Canada in many provinces, and now, based on a closure of export opportunities with our trading partners, sugar is one of the most protected markets in the world. Canada has the most open market in the world for sugar.
What has transpired is that we have one sugar beet producing province left, which is Alberta. We have gone from seven sugar refineries not very many years ago to three. Those refineries have made major capital expenditures to ensure that they operate with world class efficiency.
We basically are supplying our own domestic industry with our own refined sugar. We are importing a lot of raw cane sugar. We produce beet sugar and have almost no export opportunity. For example our total export opportunity to the United States at this time is, I believe, 10,000 tonnes, which works out to one tenth of 1% of its total consumption. We are facing tariffs on exports to other countries in the Americas of anywhere between 50% and 160%. Our only protection for our domestic industry is an 8% tariff or about $30 a tonne. It is a very small tariff and we do not subsidize our sugar industry in any other way.
As an example, Costa Rican sugar prices are about $650 a tonne higher than world prices. What that really means is that Costa Rica can cross-subsidize any exports of its sugar anywhere in the world, including Canada. What this has done of course is create a lopsided agreement on sugar. In a sense we have sacrificed our sugar industry in many agreements. That is why our place in the sugar world has shrunk.
A very significant concern came forward from the refiners and the growers as represented by the Canadian Sugar Institute. They felt that although the bill would not be in itself a major problem because Costa Rica has no refining capacity, if the market provisions of this agreement were to be built into the ongoing negotiations with central American countries such as Guatemala, Honduras, El Salvador and so on, or with the free trade area of the Americas, we basically could write off our sugar industry. We would be doing that in a non-free trade environment because no one else is practising free trade. We believe in free trade but it has to be fair trade.
I will move on to some of the important parts of the agreement. We as a nation of 31 million people have entered into an agreement with Costa Rica, which has a population of less than 4 million, no military and longstanding democratic traditions and institutions. This is an important agreement because Costa Rica is very much viewed as a stable, democratic entity in that part of the world and one that we should be doing our utmost to do business with and to practise the purest of free trade with if we can.
Canadians have a lot of investments in Costa Rica. The Bank of Nova Scotia has 12 branches. Hollinger owns the newspaper La República . Canada has major solid waste treatment facilities, hotels and tourism oriented enterprises and Hydro-Québec is involved in a large hydro generating station in Costa Rica. Our total capital investment is running at about $500 million. I think investors have had generally pleasant experiences.
That gives a good summary of where we are. I will move now into the area of some of the things that would be exempt from tariff reductions under this agreement. Canada has a long tradition, under the Liberal government, of exempting some things from tariff reductions. They are simply not on the table. There is no change from that in this agreement. Exempted from tariff reductions from our perspective are beef, culture and our supply managed industries such as dairy, poultry and egg products.
The basic message is that when government negotiators negotiate a free trade agreement or any kind of international trade agreement, they do have to make choices. I believe, and I know others believe, that historically we have tended to sell out our sugar industry. This agreement is viewed as being no exception.
Our single protection for the sugar industry is an 8% tariff. As I mentioned, the lowest in the Americas is 50%, up to 160%, for all of our competitors. Canada is basically excluded from any ability to export beyond our boundaries for any significant amount of sugar. Nothing would change under this agreement. It is a very lopsided agreement in regard to our access to their sugar market. In the words of the industry, it is token access.
I would like to quote from the website of the Canadian Sugar Institute, which states:
The recently announced Canada-Costa agreement is a case in point. Costa Rica has a 50% tariff compared to Canada's 8% tariff, and supports its sugar production through high prices that are far above the Canadian and even the supported US price. Yet, Costa Rica is demanding approximately six times more duty free access than it is willing to give Canada during a transition period. Further, it will only grant access for a token amount of Canadian refined cane sugar (which makes up 90% of Canada's sugar production) and even that depends on Costa Rican sales to Canada. In spite of objections from the industry that this is both a bad deal and would set a dangerous precedent for the CA-4 talks (countries whose combined exports are 1.5 times greater than Canada's total production) and the FTAA, the government seems willing to accept these lop-sided terms.
It is referring to the Canadian government. The CA-4 talks are to be held with the Central American countries I referred to earlier.
This is what they were saying prior to the bill getting to committee. These are some of the other things and some of the background of the Canadian producers. There is only one beet sugar factory remaining in Canada. It is in Taber, Alberta. At one time beets were also grown and processed in Manitoba, Ontario and Quebec.
Canada has three refineries that process raw sugar. They are in Montreal, Toronto and Vancouver. In the past 20 years four other refineries have ceased operations. The total Canadian market for sugar is about 1.2 million tonnes. Beet sugar supplies about 10% of this amount. Of the remaining 1.1 million tonnes a small but significant portion is imported into Canada in a refined state.
Sugar is one of the world's most trade regulated commodities. Most countries severely restrict imports through a system of duties, quotas or other mechanisms. Canada is among the most liberal countries in the world with an 8% duty on refined sugar and free import of raw sugar.
Guatemala places a 160% duty on sugar imports. Canada is allowed to export only about 12,000 tonnes of sugar to the U.S. due to its quota system. This is sugar from beet sugar as restricted by country of origin rules. No other viable export opportunities exist for the Canadian industry. In other words we are locked into our domestic market.
I have covered the basics of the sugar situation fairly well. It is worth adding that the Costa Rican market currently does not include refined sugar. Only raw sugar is sold. The fact that we have gained entry into the Costa Rican market is academic from the standpoint that there is no current market. Its domestic prices are about $650 a tonne more than world prices.
This leads to cross-subsidization. It also leads us to ask why would they import sugar if they have those kinds of domestic pricing arrangements.
I will go into this a bit further. Guatemala is one of the CA-4 countries. CA-4 will be the next set of negotiations on free trade along with the free trade area of the Americas. Guatemala's current sugar exports amount to about 1.2 million tonnes. That is virtually identical to the entire Canadian market.
The CA-4 countries, the four major countries in Central America, have current export surpluses in refined sugar of about 300,000 tonnes. That is without further investment in refining capacity or anything else. That is immediately available capacity. This could totally displace the entire western Canadian market, which is the most likely place for these exports to arrive because their ports are on the Pacific coast.
This is a major concern. One can understand why members of parliament from every part of Canada are receiving a lot of solicitation from sugar refiners, sugar growers and the Canadian Sugar Institute, and why they are taking the Costa Rica agreement so seriously.
If it were to be a precedent for the next negotiations we could see the sugar industry in Canada, a non-subsidized industry protected by a tiny tariff, swallowed up with a loss of 1,500 refinery jobs and about 500 grower jobs. I am not sure anyone would consider this to be free trade in the sense of unsubsidized industries competing with unsubsidized industries. It is not.
In the House of Commons we have something called the national sugar caucus to which the parliamentary secretary made reference. Some of the hon. members on the sugar caucus were also on the committee which met earlier this week and heard witnesses representing the Canadian Sugar Institute, sugar refiners and beet growers.
At that meeting I tabled amendments to the preamble of the bill, not to the treaty, to give clarity to the fact that the sugar provisions should be seen as unique to the Costa Rica agreement and not as a precedent for the upcoming CA-4 negotiations or the free trade area of the Americas negotiations. What ended up deriving from discussions among all parties at the meeting was that I would withdraw the amendment if we could somehow build a similar thought process into the language of our report and a subsequent letter to the minister.
That is where we are. I can quote from the third report to the House of Commons which was tabled recently. I will outline the relevant paragraph. The Sub-committee on International Trade, Trade Disputes and Investment, which is an offshoot of the Standing Committee on Foreign Affairs and International Trade, is studying the bill. It stated:
The Sub-committee wishes to highlight the specific concerns of Canada's sugar industry and asks that their interests be taken into account in any future trade negotiations involving Canada.
That is what we did. I am hopeful the government and government mandated negotiators will take heed that those are the sentiments expressed by the all party subcommittee. It was done in the right spirit and with good intentions on all sides. It is an eminently correct way to proceed in our future negotiations.