Proceedings of the Standing Senate Committee on
Foreign Affairs and International Trade
Issue 15 - Evidence, February 3, 2011
OTTAWA, Thursday, February 3, 2011
The Standing Senate Committee on Foreign Affairs and International Trade met this day at 10:31 a.m. to study the political and economic developments in Brazil and the implications for Canadian policy and interests in the region, and other related matters.
Senator Percy E. Downe (Deputy Chair) in the chair.
[English]
The Deputy Chair: Welcome. The committee will hear two witnesses today: Ron Bonnett, President of the Canadian Federation of Agriculture; and John F. Pineau, Executive Director of the Canadian Institute of Forestry, who will represent the Canadian Forestry Association also. Welcome to the Standing Senate Committee on Foreign Affairs and International Trade, and thank you for taking time to participate in our study of Brazil. I understand Mr. Bonnett has an opening statement.
Ron Bonnett, President, Canadian Federation of Agriculture: Thank you for the opportunity to make a presentation before the committee. I am the President of the Canadian Federation of Agriculture, CFA. I am also a farmer. The CFA is the largest national general farm organization in Canada, representing over 200,000 Canadian farmers. It is a federation of provincial farm organizations and interprovincial and national commodity organizations united to speak with an authoritative voice on behalf of the agricultural community of Canada.
I will speak first about CFA's overall trade position. The increasing interdependence of national economies and the growing and competitive global marketplace have reinforced the importance of export market opportunities and the importance of fair and effective trade rules. CFA's objective for trade agreements is to achieve positive results for Canadian farmers and better functioning of international and domestic markets and to contribute to the improvement of Canadian farm incomes. CFA's primary goals for any trade agreement are to achieve maximum possible access for agricultural exports and to respect the domestic interests of Canadian farmers, including orderly marketing systems and supply management.
The range of processes, initiatives and options on Canada's current trade policy agenda is very large, and the scope of this agenda provides opportunities and poses risks. Therefore, the Canadian government's trade policy must identify the World Trade Organization, WTO, as the principal vehicle for the establishment of fair and effective trade rules and improved export opportunities. In the absence of a WTO agreement, CFA applauds the government's initiative to open up foreign markets through bilateral free trade agreements. However, market access concessions in these negotiations usually are restricted to the reduction or elimination of tariffs. The government must recognize that other factors such as domestic subsidies and non-tariff barriers can significantly impede any possible gains in market access. It is therefore important that the government enter these negotiations in a coordinated fashion and ensure that it addresses all market access restrictions and not just simply tariffs.
Canada is a top-10 exporter of agricultural goods in the world, shipping almost $40 billion last year alone. In fact, agricultural products represent the second biggest segment of Canadian exports behind only the exports of oil and gas. Of these exports, grains and oilseeds and red meats represent the bulk of Canadian shipments.
Brazil is the world's fifth most populated country, the eighth largest economy and is quickly becoming one of the world's largest agricultural exporters. It is already the world's biggest exporter of beef, poultry, orange juice and sugar cane. As well, it supplies one quarter of the world's soybeans. Brazil is the second largest ethanol producer in the world with 25 times the volume produced by Canada. Brazil represents a rather small market for our agricultural exports — the thirty-sixth largest in 2008, which represents about $215 million. Grains and oilseeds represent the lion's share of Canadian exports to Brazil.
However, Brazil exported $705 million in agricultural products to Canada, making it the eighth largest supplier of agricultural goods to Canada. Not surprisingly, Brazilian imports were primarily in the form of raw sugar, orange juice and coffee.
The increase in Brazil's farm production has been stunning. Between 1996 and 2006, the total value of the country's crops rose from $23 billion to $108 billion. Brazil increased its beef exports tenfold in a decade, overtaking Australia as the world's largest exporter. Since 1990, its soybean output has risen from barely 15 million tonnes to over 60 million tonnes. Brazil accounts for about one third of the world's soybean exports, second only to America.
Brazil also has more spare farmland than any other country. The Food and Agricultural Organization of the United Nations, FAO, puts its total potential of arable land at over 400 million hectares, only 50 million of which is currently being used. Brazil has much more spare farmland than the next two countries combined — Russia and America. The Brazilian government wants the agriculture industry to grow by 25 per cent over the next decade and double its exports of meat and poultry products during this time frame.
All of these factors make Brazil a formidable competitor to Canada in the world market for many agricultural commodities now and in the future.
From a Canadian agriculture exporter's perspective, wheat and barley have the most potential to penetrate the Brazilian market. Although Brazil's tropical and subtropical climate is ideal for growing many agricultural products, it is not conducive to growing wheat. In fact, Brazil is the third largest importer in the world, bringing in 5.6 million tonnes in 2010. It imports most of its requirements from surrounding countries such as Argentina and Paraguay. Up to now, Canada has been a residual supplier of wheat to Brazil. As Brazil emerges as a fully developed economy and its population becomes more affluent, consumer preferences likely will shift to more healthy and functional foods. There may be further opportunities for Canadian producers of natural and organic products or niche markets.
As previously stated, the majority of Brazilian imports are products not grown in Canada, such as sugar cane and coffee. However, Brazil is one of the few, if not the only country that has been able to penetrate Canada's import controls on chicken products in the last few years. This situation is of concern to CFA since the WTO over-quota tariffs designed to protect supply-managed products has been breached by Brazil in the past several years.
To summarize, Brazil is a major player in agricultural production and exports and a competitor to Canada in foreign markets, such as the EU, Japan and the U.S. Brazil currently represents a small segment of Canadian agricultural exports. However, CFA believes there are future possibilities for expansion of wheat and barley exports to Brazil and niche markets for natural and organic products.
John F. Pineau, Executive Director, Canadian Institute of Forestry, Canadian Forestry Association and Canadian Institute of Forestry: I thank the committee for the opportunity to testify on behalf of our long-standing organizations, the Canadian Institute of Forestry and the Canadian Forestry Association, both of which are over 100 years old. Several of the members of our organizations have taken the time to provide me with a detailed briefing and information based on their personal and direct experience of doing business in South America, in particular Brazil, within the international forest products and business sector. I can convey this information well, and I am certain it will be of value to you. We remain available after today to provide any additional or supplementary information if required and as requested in either writing or through additional testimony.
I would like to use the opening statement to present a broad overview with respect to Canada's current situation as it correlates to forestry and the forest products sector with some consideration of international trade. Traditionally, Canada has looked at lumber, and pulp and paper as the international trade from its forests. This is and will continue to be a very important part of Canada's trade because currently over 80 per cent of these domestic products are exported worldwide. The reasons for this world leading industry are many and require careful consideration as we examine the current trade situations as well as future opportunities, including biofuels, green-market, certified and value-added products. We also need to recognize that forests produce more than wood fibre and that there are many other forest related knowledge- based services, technologies and products that can be part of Canada's international trade, particularly if we create opportunities through agreements with Brazil and other countries in South America and around the world.
In recent history, Canada's abundance of forest resources, innovative tenure arrangements between provincial governments and entrepreneurs, as well as the application of science-based forest management and the development and adoption of harvest, milling and silvicultural technology have led to a highly productive forest products sector. For Canada to continue to have a globally competitive forest products sector, each of these factors must continue to be nurtured. The uses of forest fibre have become more innovative and diverse and will continue along these lines. Changes to forest tenure planned by many Canadian provinces will need to consider carefully the existing users of Crown-owned forest fibre and to provide opportunities for new players, industry, technology and know-how. Despite pervasive change throughout Canada's forest sector, we must recognize and realize that there is great opportunity to export our knowledge, expertise and technology to those countries that are working toward sustainable forest management. Brazil could become a key trading partner within this context with mutual benefit for the forest sectors in both countries, especially if barriers and impediments to this kind of exchange are lessened or eliminated.
The trade of Canada's wood products is based on the price and quality of these products plus the assurance of globally recognized ecological and socially responsible forestry practices. If we are to continue to service these markets, we will need to ensure that we have highly trained forest professionals and practitioners and skilled trades people. Both of these groups are not recruiting the numbers of young people that are needed. For example, in 2009, only seven high school graduates in all of Ontario identified forestry as their number one choice for university education. The reasons for this decline are numerous but primarily based on a perception of the lack of jobs in the forest sector and the perception that forestry is only about cutting down trees; both perceptions are patently false. Canada has well-trained, knowledgeable, thoughtful and dedicated forest professionals and practitioners. We not only want to be able to continue to state this with confidence but also to make better use of this expertise at an international level. We need more young people to take up this challenge. This is not only essential to sustainable forest management but also to international trade and the good reputation that Canadian forest products have achieved.
We recommend a multi-faceted strategy to help to alleviate this lack of recruitment and to maintain and grow Canada's domestic and international forest expertise.
We should promote teacher training opportunities nationally. The institute and the association along with many partners offer hands-on forestry continuing education opportunities annually to interested teachers at our national office at the Canadian Ecology Centre in the Ottawa Valley. This program can be scaled up easily and offered in different regions across Canada.
We can maintain and grow Envirothon competitions that help inform and educate students and youth about sustainable forestry and natural resources management and stewardship, and the diversity of green, high-tech forest sector employment opportunities.
As well, we can link provincially run youth stewardship summer opportunities with Canada's colleges and universities. For example, Junior Ranger programs could include an opportunity for its colleges and universities to inform these youth and Aboriginal youth about careers in forestry.
Finally, forestry and natural resources faculties at universities and colleges need to be consulted and funded appropriately so that they can prepare for the ongoing challenges and demands of the workplace and Canada's demography.
Canada needs to look seriously at more than wood products in its international trade. Its forest professionals are a great source of wealth that can serve the world. Our forest management service sector is a leader in forest inventory and silviculture, which are key elements of sustainable forest management that lag behind in many other parts of the world. Most of these services are provided by small businesses that potentially could grow if allowed international opportunities. We also need to recognize that many countries have not achieved our standards of forest stewardship and sustainable forest management policy, planning and practice, or in the implementation of third-party certification systems. Again, these are ideas, philosophies and tangible approaches within the context of products and services that we should promote and export wherever and whenever the opportunity exists or is created.
However, an important consideration and perhaps limitation is that provincial funding for silviculture and forest regeneration competes with other high priority demands for financial resources, such as health and education. This makes it difficult for the Canadian forest management business sector to grow and, in some cases, to survive. Canada needs to look at other successful forest jurisdictions, such as Finland, and emulate what they have done to grow a world leading forest products and forest equipment manufacturing sector. Finland allocates about 4 per cent of its gross domestic product to forest research and application. Canada needs to consider a similar strategy for research and operations if we hope to remain competitive everywhere.
In terms of free trade with South America, including Brazil, Canada should seek proactively an association that is truly mutually beneficial and recognizes and considers the ecological, social and economic components within all countries and the entire international forest sector and that pervasively promotes sustainable forest management and stewardship based on sound science.
I want to stress that Canada has a very high calibre of forest professionals. Ironically, this recognition is often more pervasively international than it is domestic. These individuals deal with complex and difficult issues related to resource use and conservation by current and future generations of Canadians - plus all of the other living things that call Canada's forests home. Their skills are needed around the world to deal with the issues of deforestation, desertification, climate change, poverty alleviation and the establishment of effective businesses. Our members across Canada have found that poverty, infant mortality and gender inequity are due to the collapse of local ecosystems that no longer provide vital products and services, for example firewood, shelter, clean water, et cetera. We can mitigate these negative circumstances with the application of comprehensive sustainable forest management.
In summary, our organizations believe that the Senate should direct that a strategy be developed to ensure that we maintain and grow the forestry expertise and knowledge that we have in Canada, ultimately ensuring that we stay competitive while exporting our existing products and diversifying any potentially new and innovative forest products, technology and services. Canada also needs to re-examine its international aid priorities and consider funding forest and agricultural programs that will benefit the poor by reducing the social ills that accompany deforestation. Our members are willing to step up and help internationally. The institute recently has developed a registered charity in Canada called Forests without Borders to enable our members to engage other Canadians to help establish comprehensive sustainable forest management projects and programs in less advantaged and developing countries. We believe that this program will realize great potential.
This concludes my opening statement on behalf of the Canadian Institute of Forestry and the Canadian Forestry Association. Once again, I thank the committee for this opportunity. I hope that our information will be helpful.
The Deputy Chair: Thank you for the presentations. We will begin questions.
[Translation]
Senator Fortin-Duplessis: Welcome at this meeting of our committee. My first question is for Mr. Bonnett. Rising food products prices caused political unrest on a scale we could hardly imagine, said the general director of the World Trade Organization, Mr. Pascal Lamy, at the opening of the two day UN conference on the volatility of agricultural markets. The increase in food products prices creates inflation throughout the world and a level of political unrest we could hardly foresee. When he made that statement, I think Mr. Lamy was alluding to Tunisia and Egypt.
Do you think that, this year, we will experience price increases for wheat and soybeans?
[English]
Mr. Bonnett: Yes. I was glad to hear you talk about the volatility of prices, which is a key issue with its huge swings in prices. We have seen a 50-year decline in the base price for commodities. We need to start slowly building to raise those prices so that there is profitability at the farm level. When governments start to talk about dealing with the food crisis, they have to look at a number of issues, the cost of production, input costs and huge volatility in prices for fuel and fertilizer. Those all have to be addressed as part of the solution going forward.
Discussion has already taken place on the role of speculators in driving market prices higher than they should be. I am encouraged by discussions about raising the issue of food prices at the next G20 meeting. That would be a good forum to have such a discussion. However, I would caution any government to try to regulate prices without looking at some of the long-term issues around ensuring that there is moderation in the cost of inputs and looking at the role of speculators, as well as ensuring profitability at the farm level.
Sometimes in the discussions on rising food prices, the impact on developing countries is missed. In developing countries, 80 per cent of the population is involved actively in agriculture. It could be argued that an increase in prices to those producers in developing countries could be used to alleviate poverty, but at times we have to separate the two issues of poverty reduction in developing countries and ensuring a profitable, sustainable agricultural sector.
[Translation]
Senator Fortin-Duplessis: For the Canadian Federation of Agriculture, on behalf of which you appear, is research and development an important issue in agriculture?
[English]
Mr. Bonnett: Definitely all farm organizations across the country are asking for increased investment in research. This would be looking at farm management practices, water use and the use of genetic technology, which will all be critical. The forecast for demands on the agricultural sector by 2050 indicates that we will have to increase productivity. There is a key role for Canada with proper investment in research and development to take a leadership role in that.
[Translation]
Senator Fortin-Duplessis: Thank you very much. I will have more questions on the second round.
[English]
The Deputy Chair: On behalf of all members of the committee, we would like to welcome Senator Finley back to committee.
Senator Finley: Thank you.
I have a subject that I would like to address to Mr. Bonnett. I read your résumé, Mr. Bonnett, and I am surprised that you have time to be a farmer, quite frankly. You appeared before the Standing Senate Committee on Agriculture and Forestry on October 5, 2010. You mentioned supply management. I will quote you:
It is a tool that has worked very well in Canada. However, that should not be held ransom against some of the export commodities that have some great market opportunities.
I contrast that to statements made on the record by a witness who appeared before this committee in December. Carlo Dade, the executive director of the Canadian Foundation for the Americas, said the following about trade with Brazil:
In terms of Canada and Brazil, there are things that we can do. Obviously, there is the trade agenda. If we can remove agriculture from the table, there are significant prospects . . . .
However, if we are to have hope, agriculture needs to be dealt with.
I do not want to put words in his mouth, but it appears as though Mr. Dade sees agriculture as some kind of irritant toward the development of other trade sectors with Brazil. Perhaps it is because it is such a small component. Evidently, from what I understand, Brazil has little in the way of government subsidies for agriculture and does not appear to practise any major amount of supply management. Could you take a few minutes, Mr. Bonnett, to suggest areas that the Senate committee might explore to help either in the negotiation or preparation of materials to get around this supply management elephant?
Mr. Bonnett: That is a very broad question. On the comments about supply management and other marketing structures that we have in Canada, I will go back to what I mentioned to the previous question. If we are to have long- term sustainability in agriculture, we have to have profitability. In today's world market, we are selling our products to large companies. Some of these marketing structures are necessary so that we have negotiation power in the marketplace. We have to be conscious of the need to have that.
With direct reference to Brazil and negotiations there, we have to go beyond the idea of talking only about tariff barriers. We need to also talk about labour costs and environmental standards, which are part of the reason that Brazil has a competitive advantage. In Canada, producers must comply with a number of regulatory requirements to stay in business. As well, they have obligations to employers and a different cost structure. In part, it is because of the regulatory framework but also society's demands on agriculture. This is where I return to the comment I made in my opening presentation. When you are entering into discussions on trade with countries, you have to be conscious that other factors than simply tariffs come into play. If we are to be competitive, we have to be competitive on the regulatory side and be conscious of the labour issues. Another issue that comes to the forefront with Brazil is transportation costs. The Amazon River provides a cheap mechanism for transportation of products.
The short answer is that when you are into the discussions, you have to go beyond tariff and trade. When you are talking about marketing structures, you have to be conscious of the fact that they likely will be necessary for a number of countries. Countries need to retain the right to put in place structures that work to build market power for farmers in negotiating with large companies.
Senator Finley: You mentioned the regulatory burdens. One would assume that they are heavily weighed on the back of Canadian farmers as opposed to Brazilian farmers. When negotiating an agreement, would you look at reducing the regulatory load on Canadian farmers or perhaps increasing the regulatory load on Brazilian farmers?
Mr. Bonnett: We have to raise the standards for Brazilian farmers. The whole issue of competitiveness arises not only with countries such as Brazil but also with the United States. For example, our regulatory system for approving inputs such as pesticides and herbicides is different than the one in the U.S. That is one area where there could be a lot of discussions about ensuring similar regulatory processes.
I know that labour costs and standards would be a long-term issue, but you have to go at it from the perspective of trying to bring other countries standards up to those of Canada rather than vice versa.
Brazil is viewed as a developing country. However, the mix includes some of the largest, most efficient farm operations covering thousands and thousands of hectares on one side and small subsistence farmers on the other side. If we look at ways to improve the standard of living of farmers in both countries, it would likely be viewed as an international development effort as well.
Senator Wallin: I will go broader and bigger as well with both of you gentlemen because we are looking at this. As you know, the committee has been looking at our relationship with the BRIC countries and Brazil was our last one there.
We are looking at this in the context of trade agreements and whether or not we should be doing trade agreements. Already we have heard testimony from Mr. Dade and others.
We have the Mercosur issue from Brazil's perspective. We have supply management, perhaps especially the Canadian Wheat Board, to look at. We have different points of view on such things as the Organization of American States, OAS, WTO and even G20 and, as you have mentioned, on the regulatory side.
Will a trade deal with Brazil ever happen, both from their perspective and ours? It does not sound to me as though either one of you think it is a great idea at this point; they seem to be severe competitors in both of your sectors. I would like to hear from both of you on that.
Mr. Bonnett: I have a quick comment about when you are heading into any bilateral agreement. You mentioned WTO; I think there has been quite a bit of frustration that we have not been able to make gains there. When you get into a multilateral agreement, we think WTO is the best vehicle to deal with that. You are bringing enough countries in that you may be able to get consensus on a number of issues, and you also get into discussions on non-tariff issues as well.
With respect to the strategy going forward with bilateral agreements, I will congratulate the government at this point. They have really started to focus on those areas where there is potential benefit for Canada and quite often potential benefit for the other country.
I am not a believer in trade at any cost. There is no use trading if we will just give away the product. We have to identify those markets where there is a potential to make a good profit because people want to buy the quality, the standard of products we have.
If the Senate is looking at the whole trade agenda, I think focusing in on where the priority area should be would be something that would be positive. The European trade agreement is taking place now. That could provide a potential opportunity for agricultural producers in Canada, again, because they are a society that has a high standard of living and are looking for the type of product that we produce.
On Brazil, whether it goes ahead in the future, I do not know if agriculture will be the key to that. As I mentioned earlier, we could get some limited market gains in wheat. I think the tariff is only around 10 per cent. There is no tariff on products coming in from Brazil to Canada other than the supply management because, frankly, we do not produce much orange juice here.
As for advice on Brazil and other developing countries, I would suggest caution; look at where the opportunity is, but start focusing on identifying where the priority markets would be.
Mr. Pineau: It is a very similar situation with forestry. I see a lot of parallels in terms of challenges, issues and opportunities. The focus has to be on where our trade and our benefits can be the outcome. Certainly Brazil has to see some benefit or positive outcome also.
As I said in my opening statement, we are ahead of the game in many ways, such as with silviculture, forest inventory, those types of technologies; certainly with some of our products, such as the manufactured wood or high structural value wood. Our fibre is some of the best and most specialized in the world, and we could do some good structural things with that. We can certainly out-compete Brazil in those terms. With kraft pulp and the lower grades of paper, there is no way we could compete on a level playing field. We have to focus on areas where we can use what they have and they can use what we have.
That sounds a little trite, but they are certainly not lagging behind. One example would be tree improvement and cloning technology with their fast-growing eucalyptus. They have done some great work there with seedlings — 1.5 billion to 2.5 billion trees are planted every year.
With sustainable forest management, I think there is a problem with degraded land base there. We tend not to have that in Canada. We are cognizant of ensuring that the ecological processes are maintained where we harvest and regenerate forests. I think we can export that know-how.
We should never lower our standards of forest management practices and policies in Canada. We should continue to strive to improve them and base them on sound science and, where we can, export that knowledge and help other countries to achieve that level.
Senator Wallin: To be clear, I hear the nuanced part of your responses, but you basically seem to be saying that we should not go down this road unless we are sure. It is not, from your point of view, just because you think they are competitors in your respective industries. You think somehow it will be technically difficult, but there would also be a lowering of standards, or potentially that would be the issue.
Mr. Pineau: It is worth the effort to establish a free trade agreement or some sort of overarching, all-encompassing system. I think it is. We have to move in that direction no matter how tough or challenging it will be.
I hear from our members who do business in South America or try to do business sometimes that there are the tariffs and the taxes for imported goods. There are also bureaucratic issues. There is just a pervasive sort of made-in- Brazil policy.
Mr. Bonnett: The comment I would make goes back to separation between the objectives of a multilateral agreement, which is preferably done with WTO because then you can try to blend the concerns of other countries.
When you get into the bilateral agreements, the focus must be on realistic gains. I have read much in the paper recently about the Asia-Pacific partnership agreement. Naturally the rhetoric coming out of New Zealand is that they do not want Canada there unless they give up the supply management. However, the reality is that we have cities that have more people in them than live in New Zealand.
Do we want to hold ransom our whole agricultural trade because one country with its own objective is trying to drive that process? We have to be conscious of that.
If we are talking about a bilateral agreement with a country such as Japan or Korea, there is great potential in making a renewed effort to secure a bilateral agreement. We have to be conscious that everyone that heads into this has their own interests at heart, and Canada should not be any different.
The Deputy Chair: I would like to follow up on that question. You talked about focus. What is the advantage for agriculture and forestry if we were to enter into a trade deal with Brazil? What is our ace card, if you will?
Mr. Bonnett: The only advantage is to get more access for wheat into their market. However, then you would have to do some analysis on whether there would be some risk to other commodities, especially if you start into the discussion on supply management.
As I said about Brazil's cost of production, because of transportation, feed and labour costs, they are almost able to breach the poultry market tariff that is in place now. I think that is the real risk.
Mr. Pineau: Again, it is the quality of our fibre, as we are learning to better use it — the engineered wood products, the structural products and the value-added products. In some instances, even though Brazil is powerful in producing the biofuel ethanol, we are coming on line with that as well. Our technology and so on with wood products as we maximize the value from our fibres will be our great advantage.
Again, there is the excellence in terms of our forest management practices. We have learned much; we have come a long way, and we want to help other folks to do the same.
[Translation]
Senator Robichaud: Mr. Bonnett, you have been talking about the regulatory framework and the use of herbicides and pesticides. How easy is it for Brazilian farmers to use substances which are not allowed in Canada and which we have a hard time to advance?
[English]
Mr. Bonnett: Much of this is mostly hearsay in having the regulatory system in place. You would have to do a detailed study of what their regulatory system. Do they have the same licensing agreements that they have to sign to produce products?
Again, this goes back to the discussion about having these standards set by an international body. We became involved with an organization known as OIE, the World Organisation for Animal Health, based in France when we were trying to get standards coming out of the BSE crisis in the cattle industry. There are a number of issues, such as low tolerance levels for genetically modified products and ensuring compliance with regulatory systems. Those are likely better dealt with on an international basis, where you have more than one country coming together on it. Otherwise, if you are trying to deal with those strictly on a bilateral basis, you could end up with a multitude of standards, which would not be good for the sector in the long run.
Senator Robichaud: You mentioned poultry trade, how they somehow breached the tariff wall by exporting poultry into Canada.
Mr. Bonnett: Yes, their cost of production is so low: Labour and transportation infrastructure costs are low, and local grain prices are very low. Our information is that they do not have the same environmental standards for disposing of manure.
Because of all those factors, they can produce poultry products very cheaply. If you can get your cost of production low enough, it does not matter if there is a tariff wall in place protecting Canadian producers; they can still float in on top of that.
The other factor is that currency fluctuations can influence that from time to time as well.
Senator Robichaud: If they succeed doing that with poultry, would they not be able to succeed with other goods that are under the system?
Mr. Bonnett: On the supply management, it would depend on the type of commodity. With fresh milk, you come up against a transportation issue. They do not have as developed a dairy industry. Part of that may be related to climate. I think it is one of the things of which we have to be conscious.
Depending on who you talk to, there is fairly widespread acceptance that supply management in Canada has acted as a stabilizing force for prices to both consumers and producers. There had not been a wide fluctuation. I know our organization would be reluctant to put that at risk, especially with a trade negotiation with a country such as Brazil, where there would be limited opportunity for other agricultural commodities to make some gain.
Senator Robichaud: If you were a trade negotiator, you would exclude agriculture altogether, is that right?
Mr. Bonnett: I would look at the tariffs in place for wheat, which would give us an opportunity to compete. I think you could argue successfully that, other than the supply management commodities, we do allow a lot of access for products, whether it is orange juice or sugar cane products, for example.
[Translation]
Senator Robichaud: One last question for Mr. Pineau on sustainable forest development. How does Brazil compare with Canada in forestry from the point of view of sustainable development?
[English]
Mr. Pineau: That is a good question. Brazil is very good at fibre farming. They have fast-growing eucalyptus. Their rotation on a crop such as that is seven years. They grow some pine as well.
These are non-indigenous species to Brazil; they have been introduced. This is where they get much of their forest sector trade commodities and what they can sell, the low-grade pulp that I mentioned earlier. That is probably the major material that they are producing. Some diversity does exist, but that is number one.
They have fibre farms, in essence, and these crops of eucalyptus grow and produce pulp on a seven-year rotation. In Canada, if we wanted to do something similar, it is 60 to 100 years on our spruce. We cannot compete with that in a realistic way.
There are many issues around that type of fibre farming. You want to have a good amount of natural forest and your indigenous species taken care of in your country or your region. That is critical. In Canada, we do that through parks and so on.
In terms of managing forests that are natural in Brazil — Mr. Bonnett might want to comment on this as well — there is a great deal of cattle grazing in the northern part of Brazil where natural forests are degraded, and they are not necessarily brought back to natural forests. That is not sustainable in the long term.
In Canada, as much as possible, we manage our forests so that it is a very holistic and natural process. We have different levels of silviculture. There is nothing wrong with fibre farming on small portions of the land. A percentage, 10 per cent or 15 per cent, of your forest is very industrial forest. Then there are various levels of harvest and regeneration in other areas, and some are completely natural and left to their own processes. I do not think Brazil has that mindset yet to make that happen.
Senator Di Nino: I will take a different tact. These are not areas on which I am particularly an expert.
We found as we travelled around — particularly in the three countries that we visited on the study, which would be Russia, China and India — that people often talk about services associated with a particular industry. Obviously, there are some agricultural services that may be available for export. I am talking about in the environmental area, in the educational area. Do we take advantage of that, or is that an area that is not particularly part of this industry in its export?
The thought came to me, Mr. Pineau, when you talked about the quality of our fibre. Is that an area of opportunity for Canada in Brazil?
Mr. Pineau: Definitely. It is a situation where I do not think Brazil produces as much structural wood product as Canada. Our fibre is strong in many of these species because of those long growing periods or short growing periods, depending on how you look at it. One year is a short period where the tree can actually grow.
Over the long term, the fibre that we produce in so many of the species, such as black spruce or white spruce or the lodgepole and jack pine, ends up being very strong. Many of the species that they are using in Brazil that are non- indigenous do not have that structural quality and strength.
Again, we are ahead of the game with our engineered wood products. We can produce materials for building houses, et cetera, very well. I think we are very competitive there.
We are also exploring all manner of innovative and new uses for the quality we find in our fibre. We do not know what will come out of that, but there will be some good opportunities there.
The eucalyptus that I talked about in Brazil is really not suitable for structural purposes. It is mainly for low-grade pulp and ornamental uses. That is the kind of exchange we could do if those barriers are eliminated or diminished. We can get that opportunity to move some of our products into Brazil.
Mr. Bonnett: On the issue of other types of services, Canada has been a leader in a number of areas such as livestock genetics, dairy and beef. Livestock geneticists have travelled around the world and have been recognized for what they are doing.
I am involved with a group now that does genetic evaluations for beef stock, as well as to develop software to track all the food safety information. The general manager is travelling to Kazakhstan in a few weeks because they are interested in the product we have developed.
Our university systems, whether it is McGill University, the University of Guelph or Olds College, all have well- developed exchange programs. Canada is involved with the Canada-Mexico partnership agreement. There is quite an exchange of information among students in the pulse industry. Canada has become a leader in high-quality pulses to some of those markets.
On plant breeding, one of the biggest examples of where Canada has taken the lead is the development of canola, which has now gone worldwide. A tremendous amount of exchange takes place in intellectual property, the sale of genetics and university exchanges.
Senator Di Nino: Are we doing that in large enough numbers with Brazil? Is that an area of opportunity?
Mr. Bonnett: It may be. I am not sure what the status of our exchange is with Brazil. I am more aware of Mexico and Russia.
Senator Di Nino: India is very big as well.
Mr. Bonnett: Yes.
Senator Di Nino: I think Mr. Pineau also talked about a kind of protectionism. How widespread is that in Brazil?
Mr. Pineau: My understanding from our members who briefed me is that it is very tough to get into Brazil with business opportunities, with services or products. We have developed many good technologies and information systems in Canada, such as forest management planning models or forest regeneration and silviculture technologies and mechanization. There are many great opportunities potentially, but it is tough to break those barriers down. Again, the endemic situation in Brazil is it is a struggle, but it is worth the effort.
Senator Di Nino: From both of you, could I have a quick comment on the support from our embassies and consular offices? Do you feel that we have the needed resources and assistance to be exporters to that country?
Mr. Bonnett: I can only speak from the experience I have had with different embassy offices with which we have worked. I am the industry co-chair for the Canada-Mexico partnership agreement with the agriculture sector, and I must say the embassy has been extremely good in trying to make those connections.
Last fall, a group of Canadian producers travelled to Texas to look at how we could identify common ground with Texas farm organizations. Again, the embassy staff members were extremely involved in organizing that. I have nothing but the greatest compliments for them.
In addition, when attending WTO meetings in Geneva, any time the farm community goes over, the embassy staff make a point of giving us a briefing on the status of the negotiations.
I cannot comment on staffing levels or anything of that nature, but I know on a personal basis, I have been pleased with the support that we have been given.
Senator Di Nino: Is that in Brazil? Do you have any experience with that?
Mr. Bonnett: I have no experience with Brazil.
Senator Di Nino: How about you, Mr. Pineau?
Mr. Pineau: From our perspective, I have heard that there is no problem with our government staff in terms of getting into Brazil and doing business. It is tougher for Canadians or other folks to get visas, et cetera. Some sort of trade agreement, from what I hear, also might help Brazilians to visit Canada. They have their own challenges coming this way.
I have heard very positive things about our government. The Brazilian government is a little tougher in that there are hoops to jump through to get something to happen.
With forestry technology and trade shows and so on, I hear there is a growing capacity, interest and occurrence in Brazil with those marketplace opportunities, a sort of show and tell of what is available. They are seeing what is available and looking at it more closely and with greater interest. Those sorts of occurrences are growing, and there seems to be very little problem in making that happen.
Senator Dawson: What about Export Development Canada, EDC? My question would be from the diplomatic services and from the government staff — traditional Foreign Affairs and International Trade Canada — but does EDC seek out opportunities in Brazil with your membership, whether it is in agriculture or forestry, to try to see if opportunities exist for your members, for Canadians, in that country?
Mr. Pineau: I do not know. I can find out and get back to you.
Senator Dawson: I would appreciate that because EDC has been a partner. They have to prioritize where they go. I understand it cannot be everywhere. I am wondering, in this committee's reflection of what we should be recommending to government, whether or not we should recommend a higher participation or a higher presence of EDC in Brazil. We would appreciate an answer.
Mr. Bonnett: I will have to get back to you with details on that as well.
Senator Mahovlich: With the situation now in Egypt, the gas prices are rising in the United States and probably in Canada; I have not been to the gas station recently. In Brazil, it is a required component that ethanol and biodiesel are sold at Brazilian gas stations. I presume that is a government policy, is that correct?
Mr. Bonnett: Yes, I believe that is government policy in Brazil because they have a huge capacity for ethanol production. In fact, for a period of time, ethanol was being imported into Canada. I am not sure exactly how much is presently. In Canada, we are now putting, through government regulation, more ethanol in gas in Canada as well.
When you mention rising oil prices, it puts the whole energy question in the open again. I think it would be true for forestry as well. Forestry and agriculture have a potential to get into biofuels production. As the price of oil rises, it becomes more financially feasible to do that.
One of the questions asked earlier was about research. I think that is one area where there could be a focus on research, getting the technology in place to encourage biofuel production that is cost-competitive.
Senator Mahovlich: Are we not there yet?
Mr. Bonnett: We are close for many of the biofuels that are now being generated. I was just talking to producers in sugar beets not long ago. They are developing new types of beets that can produce much more ethanol per acre than conventional crops.
Quite of bit has been done in the last few years. The technology is changing. I think it will change quickly over the next 15 or 20 years as well.
Mr. Pineau: I agree. A rapid catch-up will happen here in Canada with biofuels. Conferences, seminars and publications on how to better make that happen in Canada seem to be constant.
Brazil certainly has an advantage, and it has been strongly regulated that they become self-sufficient in ethanol production. They have that great advantage of the growing season. I think the price has even come down noticeably in Brazil during the peak growing time of sugar cane. I have been told that. It is quite an incredible industry that they have developed there with very solid self-sufficiency.
Senator Johnson: In terms of opportunities with Brazil, what is your knowledge about the increasing consumer demand for healthy and functional foods? Is there a growing interest in this in Brazilian companies to develop this sector?
Mr. Bonnett: This would be largely in the cities. As we see standards of living rise, all of a sudden the demand increases.
We see that in Canada as well. Many of the niche market products that are produced and sold in Canada do go to a more affluent customer. It is a trend that follows as people become wealthy that they start asking for those.
We have seen Brazil over the last number of years go from a very backward economy to one that is very aggressive. In our minds, it would hardly be called a developing country anymore given how they are moving forward. There will be a potential market there for those high-value products.
Senator Johnson: Do you think it will happen in the next decade? Lentils and peas account for almost $22 million of our exports. Those are fundamental ingredients for that type of food. It is interesting that that is increasing. Especially from Canada, lentils, peas and dried goods are popular in other countries.
Mr. Bonnett: Many people do not recognize that Canada has become one of the number one countries for the production of lentils. There will be a market for those high-value products, whether they are non-GMO or organic; that is where the growth would be. However, as I said, it will be growth for the affluent consumer who wants to pay the premium involved in producing those products.
The Deputy Chair: Mr. Bonnett, I assume that the Canadian Federation of Agriculture is concerned about setting aside supply management because the benefits are so limited and the costs to the farmers are so high. However, do you have another concern about food safety and food security for Canada if supply management is eliminated and the number of dairy farmers, for example, dramatically decreases? At some point if we cannot receive for whatever reason milk or cheese products from another country, will consumers turn around and there will be no farmers behind them anymore? Is this a major concern of the federation?
Mr. Bonnett: Ensuring we have viable farms in Canada, whether they be supply management or non-supply management, is a concern. Related to that question of food security, CFA has started a discussion with a number of commodity groups as well as processors and retailers about stepping back and taking a look at how we will ensure that there is a sustainable agricultural community into the future. Looking at a long-term strategy going ahead, we know there are emerging domestic markets for just some of the high-value products that we were describing before, and we know we are well positioned to be a supplier of export products to meet growing consumption trends that are there.
I think there has to be a discussion not only in the farm community but in Canada about taking a look at the types of things we need to ensure there is food security and a sustainable farm community into the future. Supply management is one of the tools that would be used for that.
The Deputy Chair: Again on food safety, when this committee was in China, the Consul General from Canada at one meeting brought a bottle of ice wine from British Columbia. It had a beautiful label, but it was all fake. Canadians currently have some high degree of confidence that they are safe when they have Canadian products. What about the elimination of supply management and the safety of the food?
Mr. Bonnett: I am a former dairy farmer; we sold our herd a number of years ago now. The farm community itself is very involved in ensuring that food safety standards are put in place. The things that farmers do at the farm levels, both with supply management and non-supply management to ensure that safety is there, should be recognized in Canada.
One of the challenges you have when dealing with developing countries is getting them to have a standard in place, and then have an audit process to ensure that they are meeting the standards. We have that in Canada, but some other countries do not.
The Deputy Chair: In your presentations Mr. Pineau, you mentioned Forests Without Borders being your new association. What, if anything, has your group done in that area?
Mr. Pineau: It is a fledgling endeavour so far, but we have some work in Zambia that is basically afforestation — the re-establishment of tree plantations — and some ecosystem processes to aid communities there, specifically the Petauke Community Forest in Zambia. One of our members out of Vancouver is heading that project up.
We are looking at a reconnaissance trip to Haiti to determine if we can get a project started there. There is a pretty good chance that four of our members will head down to look at the situation to see if we can do something similar to re- establish forests or a forest area and make it sustainable, along with all the goods and services it provides — clean water, firewood, fuel and so on. We have not done anything yet in other parts of the world, but the charity is only a few years old, and it is just getting its feet under it.
The Deputy Chair: I assume it is based on these other Without Borders groups— engineers, veterinarians, et cetera — where people who are professionals in the field go to undeveloped areas to help them with their expertise?
Mr. Pineau: It is the same principle.
The Deputy Chair: Did you have much uptake in the industry, many volunteers?
Mr. Pineau: It has re-energized our membership. Similar to so many sectors, we have a huge contingent of people who will be retiring or who have started to retire. They are still young and capable, with all kinds of experience, and they are looking for ways to make positive contributions around the world.
It is the same with the young folk, our student members; they are very interested as well. Therefore, we have had a great deal of interest and uptake, with plenty of fundraising. We are building the coffers to allow us to do some really good work around the world.
[Translation]
Senator Fortin-Duplessis: My question is for Mr. Pineau. I would like to go back to what Senator Robichaud said about sustainable development.
I will deal briefly with the environment. We learned recently that because of pressures from the agribusiness companies, the Brazilian legislation on forestry might be amended. Amendments will soon be discussed in congress, and they could adversely impact the protected status of an area of some 70,000 hectares, and the result would be the emission of 25 million tons of carbon in the atmosphere.
The weak efforts that resulted in a reduction in the rate of deforestation in Amazonia in recent years may be completely compromised with the increase in agricultural product prices. With an increased international demand, agribusiness companies will present an aggressive argument to boost deforestation again.
Do you think the international community should pressure Brazil so that it does not weaken the existing legislation? What could Canada do? If Canada eventually opposes deforestation, could this make a Canada-Brazil free trade agreement impossible?
[English]
Mr. Pineau: We have to encourage higher standards in other parts of the world and never weaken our own. I want to reiterate that. For this particular instance, it is very good to set aside natural areas of forest. Again, you have a different level of forest activity in your entire forested area of your country, but some of that should be set aside as natural.
When you put a fence around a natural forested area, it does not necessarily mean that everything is just done and that you never have to worry about it again. Forests undergo very rigorous and often cataclysmic changes caused from beyond the fence, let us say. Forests are subject to mortality. They start young, grow old and they die. At any given time, a forest might be a net emitter of carbon or might be sequestering carbon and emissions and mitigating climate change or whatever negative situations are happening with our atmosphere.
It is not a simple thing in that you can just set the forest aside and say everything is fine. Here in Canada, for instance, many of our parks and natural areas require some form of forest management. It is a fact that you sometimes need to have intervention because things outside of the natural area are affecting what is happening.
To specifically answer your question, on an international scale, we certainly should not let important biological, natural, ecologically sensitive areas that have been set aside be accessed if that is the intention. Simply because there is an opportunity to make money, we should not lessen those laws or those regulations. We should speak up and encourage the right thing to do.
I do not have any problem with good harvesting and sustainable forest management throughout a country, but do it in a way that there are all kinds of levels, from natural to very intensive silviculture and anything in between.
We should speak up and exert international pressure to ensure that the right thing is done.
[Translation]
Senator Fortin-Duplessis: I was completely dumbfounded when I saw on television how deforestation is done. They use huge tractors that completely destroy the forest. All animals are fleeing the scene. It was rather upsetting. Thank you for your answer.
[English]
Mr. Bonnett: I have a quick comment on that. You have touched on an issue that agriculture has been involved in with some of the discussion. It applies to how you put value to other types of things that can be done for land use. It brings into the whole climate change discussion how to deal with carbon sequestration and how to bring the marketplace in so that other values are recognized rather than the productive value. I know agriculture is fairly involved in that discussion.
We would solve it today, but it is one of those issues where there has to be a mechanism put in place — and, again, on international agreement — for how to treat carbon sequestration and how to get the marketplace to help drive the public agenda.
[Translation]
Senator Robichaud: Mr. Bonnett, you talked about agriculture in Brazil. You said that there are very big farms and very small ones also. Can you tell us how long the small ones will be able to keep operating rather than being taken over by big farms?
[English]
Mr. Bonnett: I do not think there is a simple answer to that. It is an issue that has been identified. We have had some talks with farm organizations in that part of the world. A conflict exists between some of the large farm operations and the small operations. Domestically, that is an issue that Brazil will have to deal with.
As far as the small producers competing in large commodity markets, they will not have the capacity to compete in those markets. However, they can look at putting things in place to develop some of the local market opportunities for those small producers. That might involve looking at niche market opportunities and similar things. It is an issue. How long they will survive depends on how it is dealt with domestically.
Senator Robichaud: Is it being dealt with? Are there efforts being made to find those niche markets?
Mr. Bonnett: Quite a bit of work is being done at the international level to try to connect small-holder farmers to markets, and organizations, such as the FAO with the United Nations, are looking at the issue. However, this goes back to some of the questions raised about the rising food price, in that the key is to address a number of the issues. Storage facilities must be improved, for example. In a number of developing countries, it is not uncommon to have a 30 per cent or 40 per cent loss in storage. Issues with transportation infrastructure, education and training and irrigation infrastructure all have to be dealt with.
There have been some successes in some areas. I am not particularly sure about Brazil. I am aware of some initiatives in the African subcontinent that have worked. It is the type of approach where you would like to have some policies dealing with the large farms, but a different set of tools has to be put in place if you want to address the small- holder producers.
Senator Finley: I would like to address a question to Mr. Pineau, if I may. I used to go to Brazil quite often. I have not been there for a number of years, but I remember being absolutely staggered by the grinding poverty in many of the large cities such as Rio de Janeiro, São Paulo and Belo Horizonte. There are incredibly bad housing facilities.
I am sure Senator Mahovlich will correct me if I am wrong because I have not sat on the Agriculture Committee for quite some time. The Canadian forestry industry has developed, in conjunction with other government organizations, the ability to build fairly large multi-storey structures out of wood, both commercial and domestic. It would strike me that an ideal marketplace for this would be in some of those larger Brazilian cities.
Is there a concerted effort on the part of Canadian wood or lumber exporters to tackle that particular niche of the marketplace, through changing regulations, training and supply and materials?
Mr. Pineau: I think there are efforts, but there are no strong and concerted efforts of which I am aware. Actually, I would like to check into that and come back to you with an answer. I am not aware of any, though.
Senator Finley: I would like you to because I am sure Senator Mahovlich will agree there is a tremendous market that is largely being developed in Quebec.
Brazil will host two great world events in the next seven or eight years: the FIFA World Cup, which is the greatest event in the world, and the Olympics Games, which rates down second or third, depending whether you are a hockey fan. Canada demonstrated, during the Vancouver Winter Olympic Games, a remarkable facility to adapt wood under very unique sets of circumstances. Do you know if we are making any effort to export that capability or bid that capability in either of those two infrastructure programs?
Mr. Pineau: I am not aware of it, but I will check into that. I certainly agree with you. I visited the Olympic Oval in Vancouver and was mesmerized by the use of pine beetle-killed wood. The mountain pine beetle had decimated many forests in British Columbia, as everyone knows. They managed to salvage that and use it in many of these structures, and it is just beautiful. It is not only structurally sound but very aesthetically pleasing.
Senator Finley: It was Senator Mahovlich, who is known for a few sporting endeavours in his time, who told me that he found that breathing was actually easier for an athlete where the structures were made out of natural materials, wood in particular. I think that would be a tremendous selling point for this type of endeavour.
Thank you very much for taking the time to answer my questions.
The Deputy Chair: I would like to thank the witnesses on behalf of the committee. We appreciated your thoughtful presentations and answers today. Please supply the additional information to the clerk who will distribute it to all committee members.
Honourable senators, we have two meetings next week. The information has been sent to your offices. Thank you very much.
(The committee adjourned.)