Proceedings of the Standing Senate Committee on
Foreign Affairs and International Trade
Issue No. 21 - Evidence - Meeting of April 5, 2017
OTTAWA, Wednesday, April 5, 2017
The Standing Senate Committee on Foreign Affairs and International Trade, to which was referred Bill C-30, An Act to implement the Comprehensive Economic and Trade Agreement between Canada and the European Union and its Member States and to provide for certain other measures, met this day at 4:19 p. m. to continue its study of the bill.
Senator Thanh Hai Ngo (Acting Chair) in the chair.
[Translation]
The Acting Chair: I welcome you all to the Standing Senate Committee on Foreign Affairs and International Trade. I am Senator Ngo, acting chair of this meeting.
[English]
We are meeting today to continue our examination of Bill C-30, An Act to implement the Comprehensive Economic and Trade Agreement between Canada and the European Union and its member states and to provide for certain other measures.
[Translation]
Today we are pleased to welcome Her Excellency Ms. Marie-Anne Coninsx, Ambassador of the Delegation of the European Union to Canada. She is joined by Mr. Karsten Mecklenburg, Head of Trade and Economic Section, Delegation of the European Union to Canada.
[English]
Thank you for accepting our invitation to appear before the committee. We look forward to your presentation and your answers to our questions.
You may speak in English or French, according to your preference, but please do so at a moderate pace to allow the interpreters the opportunity to communicate everything you say. The floor is yours.
[Translation]
Marie-Anne Coninsx, Ambassador, Delegation of the European Union to Canada: Thank you very much, Mr. Chair, Honourable Senators. I sincerely thank you for your invitation to testify in the context of this very important debate on the Comprehensive Economic and Trade Agreement between Canada and the European Union. I will be making my presentation in English, but I will be pleased to answer any questions in French.
[English]
Honourable senators, as an introduction, I would like to focus on the motivation and the background for this groundbreaking new-generation trade agreement, as seen from the EU perspective.
In 2009, we launched negotiations for CETA, and it had already been thoroughly prepared, from both sides I would say, notably by a scoping study on the advantages of the agreement, which already was very positive.
From the outset, I would say that the economic and geographical case, the importance for us of the CETA agreement, was very clear. It is an opportunity to modernize and to deepen our economic partnership with a very close trade partner, ally and friend. I would say that the case of the CETA agreement is even more relevant and important today in these times where there is a lot of uncertainty and even global disorder.
The advantages of the European Union as a trading partner — allow me to say this — are obvious. The European Union trade policy, in its trading agreements, is based on a unique and a most integrated European Union internal market. It is the most integrated region in the world, and, during my three years of experience in Canada, I have noticed that some level of the economic integration within the European Union is even bigger, I would say, than in some parts of Canada.
I'm very pleased to note that CETA is also contributing to a debate and possibly also to giving another push to more interprovincial trade processes, particularly now that Canada is approaching the celebration of its 150 years of Confederation.
The European Union is the largest economy in the world and the largest trading bloc, an internal market with more than 500 million customers. With CETA, more than half of the trade of the European Union will be covered with free trade agreements. The European Union is the first trading partner for 80 countries in the world, much more than, for example, the United States, which is the first trading partner for three countries.
We have, for the moment, 40 trade agreements with countries all over the globe, and, in our experience, without any exception, I would say that, from the moment these trade agreements enter into force, they immediately bring increased trade and bring a lot of benefits and have certainly contributed to mutual economic prosperity. The latest example is an agreement with South Korea, where, from the first year onward, our trade has increased 25 per cent.
For the moment, we are negotiating 20 other trade agreements with partners like Japan, Mexico, Indonesia and Mercosur. This all makes us a very welcome partner in many parts of the world, and I believe that this privileged access to global supply chains may be another argument in its favour for Canada.
For the European Union, Canada is an obvious choice as an important trading partner. Canada is one of our closest allies. Canada is one of the nine strategic partners that the European Union has in the world. Canada is important economically, with bilateral trade that is worth over $80 billion Canadian and over $600 billion Canadian in direct investment. Canada is our twelfth largest trading partner and is the fourth largest investment partner in the European Union. Particularly the last point, that Canada is the fourth investment partner, is not very well-known.
We also share the same values and commitments to free trade, to ambitious social policies and high standards, and we have a shared commitment to putting people first.
CETA offers opportunity to European and Canadian business of all sizes, in all sectors, and I would add to that that CETA will offer benefits to all parts of Canada, east and west, and also to all member states in the European Union. We have very diverse economies in the European Union, and it is exactly this economic diversity that is one of our strengths.
CETA is the most ambitious — we also say the best and most progressive — trade agreement that has ever been concluded by both parties. It has been approved at the European level because the last and very important vote was an overwhelming vote in favour by the European Parliament. This will trigger provisional application of the CETA agreement after the Canadian Senate has completed its proceedings.
Provisional application will mean that CETA will enter into force immediately for more than 95 per cent. I think it's very important to stress this. It concretely means that our companies, our business, our citizens, will already profit from the bulk of the benefits of CETA.
It's true that there has been a rather difficult debate on CETA in some parts of Europe. I would say it is definitely not linked to Canada. On the contrary — maybe a small anecdote — when there was the vote in the European Parliament, there was one political party in the Parliament that had big signs that said, "Yes to Canada; no to CETA.'' All the interventions made it very clear that nobody had anything against Canada; on the contrary. But the CETA, unfortunately, has gone into a debate in Europe, which is regarding anti-free trade, anti-globalization, and people having concerns that the benefits of globalization might not be evenly distributed in society. This is something of the concerns we are addressing to make sure that people who might be affected by the downsides of globalization have the necessary safety nets.
So we had, unfortunately, these anti-free trade and anti-globalization movements. You don't hear less for the moment. Also, there has been a risk that CETA could become a victim of some populist developments, rhetoric, in the European Union. It is also diminishing, particularly, I would say, after the last elections, the presidential elections in Austria and the last elections in the Netherlands, where one party got a spectacular increase of votes, a party that is pro-European Union and pro-immigration. But, in Europe, and, I think, in Canada also, we know that turning inwards is not the right solution, and we believe that openness and high standards go hand in hand and support each other, that building walls and barriers is absolutely no alternative, that trade agreements are an important tool to promote prosperity, to promote growth and to promote jobs.
Therefore, I believe that the trade world is watching the European Union and Canada to give the right signal against protectionism, against inward-looking policies. Hence, we have a joint responsibility to make CETA a joint success, the responsibility to ensure a successful and particularly I would say a rapid implementation of CETA.
Thank you very much. I'm looking forward to your questions.
The Acting Chair: Thank you, Your Excellency, for your presentation.
Before we start with questions, I would like senators to introduce themselves so that Her Excellency will know who we are, starting from my right.
Senator Eaton: Nicky Eaton from Ontario.
[Translation]
Senator Housakos: I am Senator Leo Housakos from Quebec.
[English]
Senator Oh: Senator Oh, Ontario.
Senator Woo: Yuen Pau Woo from British Columbia.
Senator Cools: I am Senator Anne Cools from Toronto, which is in Ontario.
Senator Marwah: Sarabjit Marwah from Toronto, Ontario.
[Translation]
Senator Pratte: André Pratte from Quebec.
Senator Gold: Marc Gold from Quebec.
[English]
Senator Bovey: Pat Bovey, Manitoba.
[Translation]
Senator Saint-Germain: Raymonde Saint-Germain from Quebec.
[English]
Senator Cordy: I'm Jane Cordy from Nova Scotia.
The Acting Chair: Thank you, senator, for your introductions. Senator Eaton, you can start with questions.
Senator Eaton: Thank you very much.
[Translation]
Senator Eaton: Madam, it is a pleasure to have you here with us.
[English]
You are aware that the Wallonia First Minister Paul Magnette said last week that his government will not support CETA when it comes up for ratification unless changes are made to dispute resolution mechanisms in the agreement.
In your role as the point of contact between the EU and Canada, I'm interested to hear your perspective on how this issue with Wallonia is being managed and what concerns you have regarding their opposition. What is your role regarding this challenge with Wallonia?
Ms. Coninsx: Would you like me to answer each question?
The Acting Chair: Yes.
Ms. Coninsx: I thank you, senator, and I will try to answer it as neutrally as possible, being a Belgian.
Senator Eaton: Don't be neutral here.
Ms. Coninsx: From the Flemish side. That doesn't make a difference. I think that, as I said, it's very important to note that CETA will enter into force provisionally as soon as we have now also the ratification of Canada, and thereafter, the next step will be and is a normal process within the European Union. Afterwards, the national Parliaments, and in some countries like Belgium, you have I think six Parliaments, there is a national ratification procedure.
Our experience, for example, with the South Korea agreement is this ratification process, by national Parliaments, can take a long time. It took five years before we had ratification of all the member states in the case of South Korea.
We have taken note of what the Wallonian government has said. We believe that the provisions regarding the investment clause, which has been modified I would say quite late in the negotiation process, are very modern ones, which are taking into account a lot of concerns that have been expressed. We had to debate more in Europe than in Canada.
I don't want to comment completely on what Mr. Magnette has said. Provisional application will apply to everything which is exclusive competence, but the question of the code, an investment code, is something that will not be applied until we have the agreement of all the member states. But we are quite confident that we have made a proposal that should be acceptable to everybody, including Belgium, and it is not only Wallonia. There will be a Belgian position that will be required, and Belgium was from the outset very positive and supportive in support of the negotiations with CETA and the conclusions of CETA as well.
Senator Eaton: Could you clarify something for me? It's only after we in Canada — it's gone through the Senate — have ratified the CETA agreement that you will start the process in Europe? You will not do it at the same time?
Ms. Coninsx: The provisional application will start at the same time, exactly. We have finished from the European side. The council has notified as to Canada, so we are only waiting until your process here is finished, and then it's a question of weeks and then we have a common date, so CETA will start provisionally at the same time in Canada and European Union.
Senator Eaton: I guess what I'm saying is, it will not start going through the European Parliament, so I guess there are what, 28, 25 Parliaments it has to go through for ratification on your end before we have gone through our ratification?
Ms. Coninsx: No. There are, I believe, 46 national Parliaments in the European Union.
Senator Eaton: Which have to agree?
Ms. Coninsx: But this will not affect the ratification.
Senator Eaton: Thank you.
Senator Woo: Excellency, thank you for your testimony. I want to ask if you believe that the fact of Canada being part of NAFTA, a very large economic area, was a reason why the EU was interested in a deal with our country; and, if so, whether there are any concerns about the rumblings in Washington, D.C., about some renegotiation of the NAFTA agreement?
Ms. Coninsx: Thank you, senator. On the first question, I would say that from the outset, there has been a big interest also from Canada to have the CETA agreement. I would like to pay tribute here particularly to the senators coming from Quebec, because I think that the father of CETA, if it has a father, was the former Premier Charest who has been pushing a lot. Forty years ago, it was not called a trade agreement, but the first economic agreement that existed between the European Union and Canada was very much put forward by the father of the current Prime Minister Trudeau. So I would say that there has been a big interest from Canada from the outset for this agreement, I would say the main reason being the intention of Canada for diversification of its strength. We know that Canada has a very high degree of trade and a dependence I would say on the U.S. We in the European Union, also with our neighbours, have a high degree of trade, so this is absolutely normal. But diversification of trade is always important. Therefore, I think one of the reasons from the Canadian side is for diversification.
From the European side, I would say it is a mixture of the importance of Canada as an ally, because I honestly don't know two countries or a country in the region that has a closer relationship than the European Union and Canada. At the same time, there is a big economic interest from the European side as well, so I would say that there has been a mutual interest to have this agreement.
The NAFTA has not a direct effect on the CETA. Maybe on the contrary what is happening in the U.S. — and we don't know yet what the trade policy is of the new administration of the U.S. — but we believe that in the context of some of the developments of some things that we heard, that it makes even more importance to have the agreement with Canada.
I mentioned that we are having negotiations with Mexico. Coincidence, but before being ambassador to Canada I was the ambassador of the European Union to Mexico. We have a trade agreement with Mexico, but particularly because of some developments in the U.S., we are pushing now; we are negotiating and accelerating an agreement of the EU and Mexico to have an upgrade of it. So I think that we are following what is happening with NAFTA, but it will certainly not affect CETA.
Senator Woo: If I could follow up on the question of your revised agreement with Mexico, will there be investment provisions in the EU-Mexico agreement that might make Mexico a more attractive investment destination vis-à-vis Canada, for example, to access the NAFTA market?
Ms. Coninsx: We have investment protection provisions in all our agreements, so this will be nothing new. Most probably because the discussions we have had with Canada, Canada and the European Union in the framework of WTO, are working together for a multilateral investment protection court.
I'm not speaking now on safe ground because I don't know how the negotiation mandate is, but when we were making these changes in the Canadian investment protection process, it was the intention, in the future, to use it with future FTAs.
Senator Housakos: Thank you, ambassador, for being with us. I happen to be the critic of this bill in the chamber, and I'm in the unusual situation where as a critic I'm supporting the bill with as much enthusiasm as the sponsor of the bill, and that is due to the fact that the Conservative caucus is proud of our historical roots under Brian Mulroney, having been strong supporters of trade and free trade, and, as you appropriately pointed out, Premier Charest had such a visionary role in initiating it, and Stephen Harper had the strength of political will to start the negotiations. This is a testament to the fact that successive governments are also supporting the merits of this agreement. We're a trading nation so Canada will always support a trade deal when it's win-win. We think this is certainly the case.
I guess a little skepticism and concern is trade always grows and fosters growth wherever there is political stability, and right now in Europe we've seen with Brexit one of the largest of three economic players wanting to get out of the EU. We have seen politically a number of EU partners where regionalism and territorial nationalism is starting to take a role, which is concerning to some legislators in Canada.
What effect will Brexit have on the CETA agreement, and particularly with the growth of some of the nationalist political movements in some of the member states in the EU? Again, should that be a concern to us as Canadians?
Ms. Coninsx: A short answer will be no, but I will give more explanation.
Thank you, senator, for reminding me, and I also had the intention to mention it, to pay tribute to the previous government. We have been working extremely well together with Ed Fast on the file, and as Europeans we are impressed by the consensus in Canada among parliamentarians and the support of this important agreement.
Canada is a trading nation as is the European Union itself. The concerns you expressed in the first place, I can assure you we have political stability in the European Union in every country.
We were celebrating last week, because it was March 25, the sixtieth anniversary of the Treaty of Rome. The Treaty of Rome was the first treaty which laid the basis for what is today the European Union. For that occasion, the European leaders had a summit in Rome, and they made a declaration about not only the achievements but also the future. I must say it was a summit with 27 leaders.
We regret that the Brexit vote took place, but it's something that we have to respect. Finally, now the U.K. has introduced its official notification by which we will start the negotiations. At the end of April, we will define the mandate of the negotiations which will be done by the European Commission, but already President Tusk of the European Council has been indicating some basic principles for these negotiations whereby we say people first in the sense we will be looking at the interests of our citizens who are living in the U.K. but also in Europe to preserve their rights. Also, we will do everything to avoid uncertainty for business, that there is no change of conditions. The basic principle is that the U.K. will have to follow its financial commitments, and then we have a full principle of trying to have a special regime of not having a hard border between the U.K. and Ireland.
We want to have an orderly divorce, and whatever the outcome is, that the U.K. will always be an important partner for the European Union.
There will be no direct effect of Brexit in the next years, I would say, on CETA. On the country, we have started the ratification process of the national Parliaments. Latvia has already ratified. We expect about five other countries in the next month to ratify, and we know that the U.K. is also very keen to ratify it as soon as possible. They will definitely profit in the next years from the CETA agreement. The U.K. is for free trade, and I'm sure they will take care of it.
Afterward, we have to see. I don't want to speculate, but they will also have to find a trade arrangement with the European Union, and in the meantime the U.K. cannot negotiate any trade agreement with any partner, even a very close partner as it is, with any country in the world.
The rise of nationalism: One of the outcomes of this declaration of the leaders in Rome celebrating 60 years of the European Union was also that the leaders of the 27 countries are more determined than ever to stick together, and unity in the European Union is important.
One of my major tasks in Canada is to ensure visibility of the European Union. Unfortunately, very often you have more negative headlines about the European Union not corresponding to what it is in reality. We will always have some difficulties — this is inevitable if you have a family with 27 diverse members — but when it gets serious, they stick together.
Our economic situation has increased considerably. We have an economic growth in all the member states, and in some member states even a spectacular economic growth. I only want to mention two: Ireland and Spain. A few years ago these were countries with serious economic difficulties. The economic situation is getting better.
For the first time since 2009, we have under a 10 per cent unemployment rate in the European Union. This is big progress, although in some parts of the European Union, we have an unemployment problem, but we are tackling it, particularly the youth employment.
I would say that maybe we are in a change. A positive, new, fresh wind is blowing in the European Union against these nationalist tendencies. I mentioned the two elections which took place, the presidential election in Austria and the Dutch elections. I don't know if it's known in Canada, but over the last weeks there have been thousands of people in more than 60 cities in the European Union marching in favour of the European Union.
Now, it's easy to have a demonstration against something, but to have a spontaneous manifestation that was not organized by anyone, but you have thousands of people coming into the streets of Europe to march in favour of the European Union.
I'm quite positive about this new and quite recent trend. Maybe Brexit was a wake-up, and also what is happening here with your southern neighbour. Of course, a big question mark will be what is happening with the French elections, but we'll see.
I'm more optimistic, I would say, because we have a strong European Union. We have challenges, and I don't want to minimize them, but it's also our constant experience that wherever we had challenges in the past, the European Union always came out of them much stronger.
Senator Bovey: I'd like to welcome you and thank you for your presentation. I'm going to pick up on Senator Housakos' line of questioning around the U.K. and Brexit.
There are sets of numbers with regard to trade deficits and surpluses, and I'm going to quote some from Statistics Canada from last year: the $10.4 billion deficit in trade with the European Union and a $10.3 billion trade surplus with the U.K. I know there are other statistics that give a slightly different number, so I'm using the smaller ones.
When you hear these numbers, and in light of what's going on with Brexit, do you see a further deepening of this imbalance for Canada, a status quo or do you see an opportunity for Canada to gain ground on this trade relationship?
Ms. Coninsx: I'm convinced that everybody, Canada and the European Union, will benefit from this trade agreement, independent of our constant experience that trade improves. This is really a new-generation trade agreement that is a win-win situation for both.
It will immediately bring benefits for business by cutting tariffs in general. The existing tariffs are not very high, but still, if maple syrup is 8 per cent and you go from 8 per cent to 0 per cent, it makes a big difference. Seafood is particularly more important for the eastern parts of Canada. There, you have tariffs of 18 to 21 per cent going to 0. The tariffs, even on the industrial goods, will go down and that will give a boost.
More important, the abolition of non-tariff barriers is something I would like to stress. That will be particularly important for small and medium enterprises. I often hear, and I speak quite often about, the CETA agreement. I get the question around CETA particularly favouring big enterprises. I don't agree. Big enterprises need this free trade agreement so much over the small and medium enterprises, because they have immediate advantages with the tariffs. But cutting red tape and some of the provisions that foresee a mutual recognition of some certification procedures — for example, if some instruments that now have to be tested twice, in Canada and Europe, before they can be exported, if it is a recognition of the certification of these tests that it only has to be done once — will reduce costs for these enterprises.
We foresee for these enterprises fewer obstacles and less cost will make the difference of doing trade. Together we are working in Canada with the delegation of some instruments we have trying to facilitate and give sufficient information to small and medium enterprises on how to make more and better use of the CETA.
CETA will be opening markets for services, and the service market is extremely important for Canada and the European Union. Linked to it, we have facilitation of mobility of professionals, people working for enterprises or other professional activities. For example, it was an after-sale activity taking place in Europe or in Canada, the people will have easier mobility.
We have recognition of professional qualifications, which already started. There were some professions like engineers, architects and accountants. We might even go further there than some of the professional recognition that exists in Canada.
The public procurement opening is also something that, particularly I would say for European companies, is important because it's an opening of the procurement market at the provincial and local levels, but with thresholds so that smaller bets can be foreseen for only local companies.
Then we have the improved dispute settlement and the investment protection.
I would say we have a number of provisions while keeping high standards. This is something, particularly in the European Union, that was a major concern in that some of the groups against CETA were saying it will lower environmental standards, labour standards and health standards. That's not the case, and I think it will not be the case in Canada either.
We foresee that it will boost trade and investment, so it can only be beneficial for both sides.
Senator Bovey: You answered my next question, which was going to be about services and professionals. Thank you.
Senator Pratte: You mentioned earlier a couple of times, and it's probably very familiar to you and maybe not as familiar to everyone — provisional application and ratification. I wonder if you could remind us what is going to happen once we adopt the bill and then provisional application can proceed. Then, what happens only after ratification?
Ms. Coninsx: Once you have ratified — and the European Parliament has already ratified — the moment you notify the EU that your ratification procedure is finished, there is a gap of a couple of weeks and we can start joining the same week the provisional application of CETA. That means that CETA will enter into force immediately for more than 95 per cent. I would say it's mainly provisions related to the investment protection that will not apply. It means that the agreement will enter into force, with the exception of these few issues.
In the meantime, there will be the ratification by national Parliaments within the member states of the European Union. But nothing will happen in the meantime. We have to wait until the 28 member states — the Parliaments have to ratify. These national ratifications will have, during that time, no effect on CETA or the running of the CETA. At the end, when they have all ratified, then we can say that it's fully applicable.
I don't know if I explained myself well.
Senator Pratte: If I understand what that means, provisional application would happen a few weeks after the Senate votes in favour of the bill, if it does. Then with Royal Assent a few weeks after that, tariffs would start going down, actually, on —
Ms. Coninsx: Immediately.
Senator Pratte: Immediately. And the rest of the free trade agreement would start being implemented, except for a few in the investment part of the agreement.
Ms. Coninsx: That's it.
Senator Pratte: The part of the investment protection regime would be implemented only after ratification in the European Parliaments.
Ms. Coninsx: In Europe and Canada, because it's an agreement that is an agreement between Canada and Europe, which includes investment protection. Once the ratification of the national Parliaments is completed — once the 34 national Parliaments have ratified — at that moment, you have the full implementation of the CETA.
But I repeat: As a standard practice with all our former trade agreements, we have this system of provisional application and the full application. Had it not been the case with Wallonia, nobody would have spoken about it. This is something that was such, I would say, a normal procedure, which had never, in the past, caused any difficulty. So it's only with CETA that this has arisen.
A question I often get is also what happens in case of one of these national or regional Parliaments saying no. The answer is that we don't know. It has never happened before, but we are very confident that it's unlikely that it will happen, for different reasons, one of the reasons being that, once CETA has been implemented, the benefits of it for both sides will become obvious and that people also will see that CETA is not negatively affecting their lives, but positively. That will play an important role. Therefore we are very keen to start implementation, provisionally, as soon as possible because it will start from the first moment. It will generate benefits. That will be the best proof and the best publicity for CETA.
It's not in all Parliaments that there is difficulty. I would say that, overall, there is big, big support, in the European Union, for the CETA agreement, but we have this particular case in Belgium. I have to say — maybe it's not diplomatic and I should not say it — it might also be linked a little bit to the Belgian internal political situation.
Senator Marwah: I had a follow-up question. Just to elaborate on the provisional application that you elaborated on. You mentioned that, in case some of the Parliaments do not ratify it, you don't know the consequences. I guess that troubles me a bit. Can you elaborate on some possible outcomes of that? You must have some ideas of likely directions that would go in. Does that mean that, for that particular Parliament, CETA doesn't apply and applies to the other 27?
Ms. Coninsx: No, that's impossible. Of course, we have some ideas. In case that happens, one member state cannot block the implementation of CETA. At that moment, the whole case will have to be discussed by the Council of Ministers of the European Union because they have also originally reviewed the agreement. They approved the agreement, so, in case that problem arises, this will have to be discussed with all the ministers of the Council of the European Union.
Senator Marwah: Just a follow up to that. So how many Parliaments would it take? I know it's highly unlikely. How many Parliaments would have to vote no before this is nullified? Is there any scenario in which that can happen?
Ms. Coninsx: It's very unlikely because we have already a very good overview of which of the Parliaments are most likely to vote in favour, which is an overwhelming majority. We only know of a few cases where we will observe it, and also we will not remain passive in the sense that — what happened in October last year — if some concerns are expressed by some Parliaments, we are there also to try to explain or address these concerns. It's very important not to say, "No, what you're saying is not correct,'' or something like that. It's very important that, when, for example, Wallonia expressed some concerns, we have been very clearly giving answers and trying to demonstrate that there is no source of concern. You probably know also that there has been a paper, which has been agreed to between the European Union and Canada, giving an interpretation on some of the articles, which was just a reply to some of the concerns by these parliaments.
So I would say that the likelihood that there is a Parliament or region that will say no is extremely small, but we have time, in the meantime, and, from the European and Canadian side, everything will be done to have a debate and discussion with these Parliaments. In the meantime, we are quite confident that, when the benefits from CETA are clear, for the people of that region or country concerned, it will be much more difficult to say no to the agreement.
Senator Marwah: Thank you. That's very helpful.
Senator Martin: Nice to see you again, ambassador. I apologize; I was late arriving due to another meeting. So I missed your presentation. But, as I was listening, I was reminded of the day that the Canada-Korea FTA was signed, and the malt barley producers said, "We have just doubled our exports.'' There was this instant sort of result or outcome for certain exporters and importers on both sides. So the current exporters and importers will absolutely benefit. I agree with you.
I'm wondering, for any new Canadian businesses who want to benefit and capitalize on the agreement once we have implementation on both sides, it's a daunting attempt to try to go into new markets. I'm curious whether there are really clear mechanisms in place, certain offices, that will help to facilitate the increase of export-import with new, as well as existing, exporters and importers. If you could speak to that mechanism, that would be helpful.
Ms. Coninsx: Thank you very much, senator. I would say that what we have been doing, Canada and the European Union, as governments, is to create this instrument. It's like building a new road. So we build a new road or the new bridge, but it is up to the users to make use of it, meaning concretely that the trade promotion of explaining where there are opportunities for trade will have to be done on a national or provincial level and also by economic actors like chambers of commerce, trade commissioners and others, which will have to give more visibility and explanation of what the possibilities are.
From the European side, we have created an instrument, for example, where we will be helping to increase the networking of our chamber of commerce within Canada and also to detect, at an early stage, whether there are some obstacles for our European businesses in Canada so that we can address them very quickly.
Member states are not waiting until we have the implementation of the CETA. Already, as of a couple of years ago or recently, we have several economic missions from member states that have gone to different paths in Canada. I was invited. It was about a year and a half ago. There was a Belgian mission to British Columbia and Alberta, and I was invited not as a Belgian but as the Ambassador of the European Union. It was a big delegation, with 300 business people who came to these provinces. The Belgian Ambassador was asked in an interview, "Ambassador, does Belgium already have trade or business relations with the Western part of Canada?'' His answer was, "Not yet.'' Our member states are preparing.
I was in Toronto yesterday, and I'm often in Toronto these days. Most of the time I am also very often in Montreal, where we have more and more — we have also ministers of chambers of commerce. There was a Swedish minister who is visiting at the moment to promote his country of Sweden. I know, for example, that the Swedish Ambassador, together with the Canadian Ambassador in Sweden, has made a road tour in Sweden to promote what could be of interest for Canadian enterprises to invest in Sweden and vice versa.
So I think a lot will be going on. I'm very confident that the Canadian government, together with the provinces, will do everything to promote CETA and get it known to small and medium enterprises.
The last point I would like to mention is that I know maybe for Canada, some markets are better known in the European Union than others — the U.K., for example — but I would particularly like to draw attention to some of the newer markets of the newer member states of the European Union, particularly in the eastern part. They have very high economic growth rates and which are also very interesting markets to exploit and extremely keen to have more trade with Canada.
Senator Gold: Welcome, Your Excellency.
I have a question about dispute resolution, which has obviously attracted a lot of interest and concern. Given the large amount of investment between the European Union and Canada, from your point of view, what is the reaction of investors, whether European or Canadian, on the new dispute resolution mechanism contemplated in CETA? Could you comment on how widespread within the European Union member states is concern, justified or not, about the new mechanisms?
Ms. Coninsx: We had talks with business in Canada, and our impression is they are not concerned about new provisions in the first place because they were not concerned with existing provisions. We already have these provisions in an existing agreement, so the old provisions did not cause any difficulties for business and the new one is an even more sophisticated one, which will give more guarantees to have more transparency, professional judges and everything. From the business side itself, there is a positive reaction.
To be very honest, the whole discussion on the dispute settlement issue raised interest in Europe when the Europeans discovered that this was being discussed with the Americans in our trade agreement. What comes from America is not always so enthusiastically received as what comes from Canada. It had attracted attention from some of the civil society groups in Europe, and by that, they have discovered that this similar clause was also in the CETA. That is the background.
Having said this, when we heard that there were concerns, although we have, nationally, now more than 1,700 national agreements. We have these investment clauses in all of it. When concerns were addressed — and I think these are lessons learned from the European side — we have taken some issues too much for granted. For us, this investment clause is a good clause, particularly now with the new formula. But maybe we have not taken enough efforts to explain why it's good and have discussions, especially what happened with Brexit. That has given a reason more to Europeans to explain better; if people have concerns, take the concerns seriously and to address them.
Senator Cools: I would like to welcome Her Excellency and to let her know she has a strong supporter here, being the only senator with a Belgian name — a Flemish name, as I'm sure you recognize. There are dozens of Cools in Antwerp and those regions. It's a very rare name in Canada.
I would like to especially thank you for all your labours in this very novel and ground-breaking territory. It is very new in a way. Everything that is new is usually extremely demanding of time, effort and skill.
I for one strongly welcome the positive outcomes that undoubtedly Bill C-30 and CETA will endow and bequeath upon Canada. If you look at Canada, it will be visited by many large and wonderful opportunities.
My question to you is much simpler than that. I've been looking at the proposed dates of Bill C-30 coming into force. Colleagues, what is before us is not the agreement. What is before us is a bill of the Parliament of Canada. We used to call these enabling bills. It will enable the government to proceed with CETA. At the end of the day, CETA is an agreement signed between the Government of Canada and these other governments.
I was looking to see if I could discern how and when this bill would come into force. Look to page 109 of the bill, if you happen to have a copy in front of you. It is standard, colleagues. At the end of every bill that there is a section called "coming into force,'' which basically announces the dates that the Governor-in-Council will bring the bill into force by order-in-council, or proclamation.
I notice it seems to be a novel situation. It's all under clause 138 — one, two, three, four, five. It seems to me that there is a sense of a graduated coming into force. For example, subclause 138(1) says:
Subject to subsections (2) to (5), the provisions of this Act, other than sections 133 to 137, come into force on a day to be fixed by order of the Governor in Council.
That same technique or methodology is repeated in subclauses 2, 3, 4 and 5.
I've chosen to use the word "graduated'' for "coming into force.'' It seems to me that somebody would have given this a lot of care and thought, very clearly and very properly, to measure the degree of entry into these marketplaces.
Could you tell us about this sort of gradual coming into force that seems to be happening in this last section of coming into force? It's not often that you see a graduated coming into force like that. It's quite a unique thing. I don't know.
For those senators who do not know, coming into force means the day it becomes law.
Ms. Coninsx: When the CETA enters into force, there will be no graduation. It's not that we say "that part of CETA enters'' — with the exception, I would say, of the investment article and the provisional implication. But when CETA enters into force, it will enter into force in its entirety. It might be that in a Canadian system — but you are better placed than I am — there might be some provisions that will need to be worked on in order that they can be implemented. I guess that is it. But I would say this is more —
Senator Cools: This is a local thing.
Ms. Coninsx: This is more a Canadian —
Senator Cools: This is a local thing, obviously.
Ms. Coninsx: — issue than a European one. For us, it's important to get a date when you finish your work and we have this enabling bill. I can tell you that we are looking forward to it very much because everybody is impatient. If you speak with business, they want to start this as soon as possible.
Senator Cools: That makes sense because, as I said, this is an enabling piece of legislation, so the government knows that it has a lot of work to do. It's giving itself maximum freedom to do it, which I think is desirable.
The Acting Chair: Thank you, Your Excellency, for your presence here today and for all the information you provided to us.
Ms. Coninsx: Thank you. I wish you a lot of success with the adoption of this bill.
The Acting Chair: Honourable senators, the committee will continue with the examination of Bill C-30, An Act to implement the Comprehensive Economic and Trade Agreement between Canada and the European Union and its Member States and to provide for certain other measures.
[Translation]
For the second part of our meeting, it is our pleasure to welcome, from the Agropur Cooperative, Mr. René Moreau, President, and Mr. Dominique Benoit, Senior Vice President, Institutional Affairs and Communications.
[English]
And Claire Citeau, Executive Director, Canadian Agri-Food Trade Alliance. I would like to invite Ms. Citeau to make a statement and then we will hear from Agropur.
Claire Citeau, Executive Director, Canadian Agri-Food Trade Alliance: Thank you for inviting me to speak on behalf of CAFTA, the voice of Canadian agriculture and agri-food exporters, regarding the Canada European Union Comprehensive Economic and Trade Agreement, or CETA.
CAFTA represents farmers, processors, exporters from the beef, pork, grains, oil seed, pulse, soy and malt and sugar sectors. Together, our members represent 90 per cent of Canada's agriculture and agri-food exports, roughly $54 billion annually, and support 940,000 jobs across the country.
Competitive access to global markets through free trade agreements is our top priority. Europe, Japan, China, the Asia-Pacific and NAFTA are the top of this priority list.
Access for Canadian agriculture and agri-food products is a core benefit for Canada in the CETA agreement. CAFTA has long been a champion of CETA and increased trade with Europe.
CAFTA has attended many negotiating rounds and met regularly with the negotiators in the government to ensure that negotiated outcomes would provide real benefits for Canada's agriculture and agri-food exports.
CAFTA voiced its strong support for the potential of the agreement in principle when announced back in 2013. We were also very pleased by the conclusion of the CETA negotiations and were present in Brussels for the signing of the historic deal.
CETA offers tremendous potential. It secures substantial access to one of the world's few multibillion dollar export markets. It does so ahead of our major competitors. With a population of 500 million people, the EU is by far the largest importer of agricultural products in the world.
In 2014, Canada shipped $3.2 billion in agriculture and agri-food products to the EU, mostly wheat, soybeans, oilseeds, pulses, canola oil, frozen foods and maple syrup. This is only 5 per cent of our total agri-food exports, and really our exports should be much higher.
CAFTA has expressed support for the CETA as the EU market has the potential to result in significant benefits for our exporters. The agreement could drive additional exports of $600 million in beef, $400 million in pork, $100 million in grains and oilseeds, $100 million in sugar-containing products and $300 million in processed food products. Taken together, this is $1.5 billion in new Canadian agri-food exports to the EU. That is assuming that negotiated outcomes provide for commercial and viable access to the EU market.
Canadian agri-food exports to the EU currently face high tariffs, an average 13.9 per cent. On day one of the implementation, tariffs on almost 94 per cent will be eliminated immediately and new quotas will provide access for many agri-food products.
But tariffs and quotas are not the only part of the access equation. CAFTA has long stated that in order to achieve meaningful access to the EU, our members needed to have the tariffs and non-tariff barriers fully resolved before the CETA implementation.
In the CETA, Canada and the EU have committed to working together to address a number of non-tariff issues. Today it is clear that the commercially viable access that was promised for all exporters may not be fully achieved for some time.
Non-tariff barriers will prevent a large part of the agri-food sector from using the agreement if these are not resolved. They include: The timely approval of biotechnology trades, the timely approval and reevaluation of crop and food products and the approval of meat processing systems.
Throughout 2014-16, CAFTA has strongly encouraged the completion of the legal and political processes related to the CETA, while similarly continuously contemplating technical discussions so the stated benefits of the deal can be realized in the form of commercially viable access.
Throughout 2016, CAFTA has stated that its support for the implementation of the deal will be evaluated based on the extent to which the negotiated outcomes provide for commercially viable access.
Last August our members met with officials from Global Affairs Canada and Agriculture and Agri-Food Canada and discussed the value of a CETA implementation plan for Canadian agriculture and agri-food exporters as part of a path forward.
Today, given the slow progress the EU is making to resolve these issues, CAFTA gives conditional support to the implementation of the CETA, with three conditions: We will support the CETA agreement if the Government of Canada commits to a well-resourced advocacy strategy and comprehensive CETA implementation plan for Canadian agriculture and agri-food exporters to achieve real access for our exporters. This plan will need to ensure that the negotiated outcomes result in commercially viable access, including but not limited to the grains and oilseeds sector and the meat sector through the establishment of high-level working groups.
We also ask that this committee recommends in its report on Bill C-30 that the Government of Canada commit to the CETA implementation plan for Canadian agriculture and agri-food exporters, to ensure that negotiated outcomes provide for real access for the Canadian agriculture and agri-food sector. This plan will need to remain in effect until such time as the market access outcomes contained in the agreement become commercially viable for our exporters. We ask that the Government of Canada exert every effort to resolve as many outstanding technical barriers as possible during the interim period between now and the date of CETA implementation.
In closing, there is much more work that needs to be done. Due to the strong potential of the EU market and CAFTA's history of working collaboratively with the government, we support the passage of Bill C-30 and implementing CETA with the three conditions I mentioned.
We will be pleased to report to the committee on a regular basis on the progress achieved for agriculture and agri- food exporters as the CETA gets implemented.
[Translation]
René Moreau, President, Agropur Cooperative: Good afternoon, and I thank the members of the committee for giving us this opportunity to speak on the implementation of the Canada-Europe agreement.
First of all, allow me to say a few words about Agropur. It is the largest Canadian dairy cooperative, owned by 3,345 dairy producers in five eastern Canadian provinces.
We currently generate $6 billion in revenue, and we employ more than 8,000 people, of which 6,000 are located in Canada. We own 39 cheese, milk and yogurt dairy processing plants, 27 of those being located in Canada across eight provinces. We had a period of rapid expansion during the 2000s. Our revenues rose from $1.2 billion to $6 billion. We are one of the five largest dairy processors in North America, and we are among the largest players in the global dairy industry.
Thanks to our cooperative format, we can distribute our profits as dividends to our member-owners. Over the past five years, we distributed more than $400 million to the eastern regions of Canada.
To speak on the quota import objectives in connection with this agreement, I am going to yield the floor to Mr. Benoit.
Dominique Benoit, Senior Vice President, Institutional Affairs and Communications, Agropur Cooperative: Agropur Cooperative is in favour of the implementation of this agreement, that is Bill C-30. That said, our approval is linked to the imminent decision on the allocation of cheese import quotas in connection with the Canada-European Economic Agreement.
From our perspective, the objectives linked to that issue, which is specific to our industry, should aim to honour international commitments while protecting the sector in which Agropur Cooperative operates, that is supply management in the dairy sector. We think it is important that in allocating quotas, the government minimize the impact on the Canadian dairy industry and compensate processors for their losses.
In the allocation mechanism for import quotas, we think it is important that the government allow for a transition period, because we are dealing with a sensitive product, cheese. Consequently, its marketing has to be planned. We feel it is important to minimize the risk to public health by ensuring that these sensitive products are managed by experts. We want to allow Agropur Cooperative to continue its development as an important player in the fine cheese market in Canada.
In the context of the agreement and the bill, we understand that in order to honour its commitments, the government must allocate at least 30 per cent of new quota, that is, 17,700 tonnes, to new market entrants. We think it is desirable that this quota be granted to the Canadian Alliance of Cheese Makers, an organization created for that purpose. In order to minimize the impact on the Canadian dairy industry and compensate processors for their losses, we believe it is desirable that the new import quotas be allocated to cheese manufacturers.
We believe the government should provide at least a six-to-nine-month transition period to allow us to develop appropriate marketing plans for our new business environment in the cheese sector. Once this transition period is completed, quotas could be introduced on a five-year basis, as provided in the agreement.
We are convinced that processors are in the best position to manage quality assurance programs and minimize the risk to public health. Cheese is a sensitive food product, and the cheese makers are the ones that currently administer quality programs, recall programs, et cetera.
Our business, and businesses like ours, have extensive expertise and know-how relevant to cheese importing. We believe it is important for import quotas to be allocated to Canadian cheese manufacturers on the basis of their current cheese production. The government should support Canadian cheese manufacturers that have no manufacturing capacity in Europe and who would enjoy an advantage in both Canada and Europe.
In deciding on an import quota allocation system — the Minister of International Trade, Mr. Champagne, will have to make that decision in the weeks to come — the federal government should aim to stabilize the already vulnerable cheese market. Administrative methods designed to stabilize the market would be desirable.
Once again, the cheese market demands extensive expertise, in-depth knowledge of logistics and distribution, and appropriate quality management and recall mechanisms, all capabilities that Canadian cheese manufacturers have developed. The government must support the builders of Canada's dairy industry such as Agropur Cooperative, which is a Canadian business that employs 6,000 people in 29 plants located in eight provinces. We are an important economic contributor to rural communities, and that is why we believe it is important to support this sector of our Canadian economy.
We thank you, and we are at your disposal for discussion and to answer your questions.
[English]
The Acting Chair: Thank you very much for your presentation. I'll start with Senator Eaton. You have the first question.
Senator Eaton: I'll ask my questions quickly and if you could answer quickly, I know there are lots of questions around the table.
What about non-tariff barriers? We take for granted that canola and honey are GMO foods. I remember last year when I was on the Agriculture Committee that Germany would not allow Canadian honey to be imported into Germany because it found when it was examining some Canadian honey that the bees had gone through GMO fields and they found some GMO in the honey. Are there other non-trade barriers and how are we going to surmount those?
To Agropur, I might be crazy but reading your sheet, and I heard you in French, you say:
We understand that in order to honour its commitments the government must allocate at least 30 per cent of new quota to new market entrants. We think it is desirable that this quota be granted to the Canadian Alliance of Cheese Makers.
I would have thought that quota would have been reserved for European cheeses coming into the country, but I obviously don't understand what you've written.
Ms. Citeau: On non-tariff barriers, just to start with, in general, the agriculture sector faces tariff and non-tariff barriers when it comes to getting access to markets.
Senator Eaton: What are non-tariff barriers?
Ms. Citeau: What free trade agreements do is remove tariffs, but what we experience, what our members experience is, as soon as the tariffs come down, very often a number of non-tariff barriers come up. In the CETA, both Canada and the EU committed to addressing a number of non-tariff barriers, including the timely approval of GM products. Canola is a GM product, and the agreement doesn't say that canola cannot be exported; it can actually be exported as a biofuel and feedstock, which is allowed under EU regulations. So that remains in place.
What the commitment stipulated is that those approvals need to be done on a timely basis. Currently, we are facing GM non-tariff barriers because the EU has not fulfilled its commitment in terms of the timely approval of those trades. There are a number of trades that need to be approved that take a long period of time that in principle should require much less for our exporters to prepare to take advantage of the EU and start planting the crops they need to plant today so that they can sell it. But they need those market signals right now. From that perspective, time is of the essence. We experience more or less the same situation on the meat side as well. Sanitary and phytosanitary barriers are non-tariff barriers and the reason why, today, if the agreement were implemented, our meat exporters, beef and pork for the most part, would not be able to take advantage of the tariffs being eliminated because of the non-tariff barriers related to the approval of meat processing systems that the EU is still not approving.
Mr. Benoit: Just to make it very clear, the Canadian government has committed to opening the Canadian market to 17,700 tonnes of additional EU cheese coming into Canada, and, out of that 17,700 tonnes, they have committed to allowing at least 30 per cent of that volume, so in the range of 5,000 tonnes for new importers — at least 5,000 tonnes to new importers.
What we're seeing is that we believe that this volume should be limited to 30 per cent, and we would support very much this volume being offered to the Canadian cheese alliance.
Senator Eaton: So they're cheese importers and not cheese makers?
Mr. Benoit: The Canadian Alliance of Cheese Makers is a group of small- and medium-sized companies that do not currently import cheese, that have regrouped together and have asked the government for the opportunity to be granted that 30 per cent of new import quotas.
We are in support of that. I'll say that we're in support of that because we believe that the cheese makers are in the best position to manage the imports, and we would ask the government to issue the new import quota to cheese makers because, out of the cheese makers today, there are a number that own import quotas, like Agropur. Agropur is a cheese importer that owns WTO import quotas. There are a number of smaller cheese makers that are regrouped under the alliance of cheese makers, and we support that these companies be granted the 30 per cent for new importers.
Senator Woo: Thank you, witnesses. I have a series of questions for our colleagues from Agropur and one for our colleague from CAFTA.
My first question to Mr. Moreau and Mr. Benoit is very simple. How much can we expect the price of cheese to fall after the implementation of CETA? If there is no answer, that's all right. Perhaps the answer is that you don't expect the price of cheese to fall; is that correct?
Mr. Benoit: I'll answer this. It is really hard to know what's going to happen. I would say that it will depend very much on who is going to get the quota and how these people will manage the quota accordingly.
I'll give you an example. We believe that, if quotas were managed as a way to dump cheese into Canada, that would probably be bringing in pretty cheap product. But we would not be building an industry that makes sense. What we think is that cheese is a sensitive product that needs to be managed very carefully. We believe that, for the benefit of our industry, but also the consumers — we can talk about consumers — a stable environment is beneficial for both consumers and producers and processors like us.
Senator Woo: Thank you for that. I presume it would also depend on the output choices of the Canadian producers. If you were to reduce your output in line with the increase of 17,700 tonnes, that would then nullify the increased supply in the market and, therefore, keep prices stable, correct?
Now, on the question of who should get this quota, can you make the case for why the quota going to the cheese producers would be more likely to reduce the cost of cheese to consumers? Because the free trade agreement ultimately has to benefit not only our exporters but also consumers. Why would that benefit consumers more than actually allocating the cheese quotas to the retailers who would, in effect, create some competition in the market for imported cheeses?
[Translation]
Mr. Moreau: The main reason we are asking that processors continue to have these new quotas is the following: as you know we have developed the fine cheese industry over the past 30 years, particularly in Quebec but also in Canada while also developing imports. In addition to those 17,700 tonnes of new quotas to come, 20,000 tonnes were already being imported from Europe, for several years. Processors should be the ones to control those imports. The cheeses we import are complementary to our domestic production. They do not compete directly with cheeses produced here. That is the main advantage to exercising that control.
When we want to offer products to our clients, being able to offer them the whole range constitutes another advantage. With large clients, if we do not have the whole range of products, that is, imported cheeses as well as domestic ones, we cannot even bid. Therein lies the advantage of being able to control the imports.
[English]
Senator Woo: I don't understand how that will lead to lower cheese prices, but I'll let that go.
Let me just continue with the observation that this agreement provides for the Government of Canada to offer up to $350 million in compensation for a variety of initiatives to help the dairy industry. That's for 17,700 tonnes of imported cheese, which works out to about $20 per kilogram of cheese. That's taxpayers' contribution on top of the price we have to pay for the specialty cheeses, so it's going to be a lot more expensive than that.
I'd like to hear from dairy colleagues why you think the industry is deserving of this compensation when other sectors in Canada will also suffer from adverse market losses because of imports from the EU.
Mr. Benoit: I think we would be wrong to leave you with the impression that dairy products in Canada are more expensive than elsewhere around the world. We have a lot of evidence to demonstrate that dairy products in Canada are not more expensive than in the United States, Australia or New Zealand.
The reality is that we believe that the mechanisms we have in place today allow for fair prices for consumers, as well as a stable environment that allows for producers and processors to grow.
Now, with regard to the question of the benefit, what we understand has been offered by the government to the industry, for the processing industry that will be the primary sufferers from the agreement, is $100 million. Our understanding is that that money has not been linked directly to the cheese imports but much more to the need for this industry to invest in the ingredient strategy and putting in place mechanisms to produce ingredients in Canada.
I would say that the stable environment in which we are contributes very much to the rural economy where plants are located and farms are located.
I'll be happy to talk to you later about other questions, if needed, on the study that we mandated the Boston Consulting Group to do, two years ago, on supply management. I'll be more than pleased to talk about that if you want.
Senator Woo: I'll defer my question for Ms. Citeau to a second round.
Senator Housakos: I have a supplementary question to Senator Woo's question, which I think is a fundamental question. At the end of the day, we know, as legislators in this country that we've chosen to have a very cartel-oriented industry when it comes to milk and cheese. It has served that industry well.
It's a question and opinion I'm putting on the table. I find it very difficult to comprehend why the new entrants into Europe will be going to manufacturers who are in Canada already in direct competition with the current quotas already in place. If you are a distributor or retailer of cheeses anywhere in Europe, which is a specialty item in today's market, you are in direct competition.
For example, in Quebec we have excellent goat cheese manufacturers and they're in competition with goat cheese that comes in from Europe. If we want to be market-oriented in terms of our preoccupation, I think what the government should be doing — and of course this is going to be in the application process of the agreement, it's not within our purview — but they should be giving these quotas to distributors and to retailers. The benefit already for small and large sized manufacturers in Canada they are getting through this agreement already additional access to the second richest market in the world.
It is an upside for manufacturers that we have a market, now we can go in there with our excellent goat cheese from Quebec and a competitive price and challenge their markets. That's where free trade agreements could be win-win from all sides. Again I'd like your opinion on this.
I know there is always a reflex on the side of your organizations to be protective of what we have, but if we're going into this free trade agreement which is a new world, and we're getting access to a bigger, wealthy market to compete with our products, we have to be ready to allow in reverse the products that come in and create some competition which will also have a net benefit to our consumers. Because a trade agreement can only be judged on us winning the trade surplus war, we're going to sell more to Europe than they sell to us. I think when we get into that situation, that's when trade agreements fall apart. Please share your comments.
[Translation]
Mr. Moreau: With the Canada-Europe agreement, we will have the right to export to Europe. The gains will not be achieved in the short term, but in the long term. As we know, the price of milk in Europe is much lower, because of the common European agricultural policy and subsidies that represent approximately $83 billion euros a year. It is very difficult to compete with that. With our supply management system, we receive no subsidies. So it will be very difficult for us to profit in the short and medium term from the newly opened European markets.
[English]
Mr. Benoit: I would add to the comments of Mr. Moreau that supply management is a choice of society. The Canadian government decided 40 years ago that in Canada, instead of subsidizing the dairy industry, we would have a system that allows for the industry to live with the consumer paying a fair price for the product that they consume.
It's a totally different story in Europe and a totally different story in the United States. In Europe, they have dismantled their quota system two years ago, and look what happened in Europe in the last two years. There's a dairy crisis in Europe today because the industry is suffering a lot from the regulation.
To echo what Mr. Moreau said, the reality is that hoping Canada is going to export dairy products into Europe is unrealistic. It will not happen, and we will not gain anything from the Canada-EU deal.
The dairy industry is a trade-off for the export industry that is represented by CAFTA to allow them to export in that country. The reality is we're going to lose, and our industry is going to lose, and we ask the government, in its consideration for the cheese import quotas, to manage the loss. We think that by allocating the cheese import quotas to the manufacturers, they will minimize the impact on our industry.
[Translation]
Senator Saint-Germain: In analyzing your brief — and I'm speaking especially to Agropur — I note that there are a lot of comments or recommendations about the administrative aspects of implementation, and the relationship, among others, with Health Canada and Agriculture Quebec.
I have two questions concerning your recommendations. First, you referred to public health risks. We know there are some. However, my experience with the industry has allowed me to see that it acts with great professionalism and is very serious in preventing contamination and managing risk. You say that processors are in the best position to manage quality assurance programs and minimize the risk to public health. When the agreement is implemented, do you want to see changes in your current relationships and in the responsibilities Health Canada and the provincial agriculture departments have, in this case the Quebec department?
Mr. Benoit: The answer is no, of course. There are processes in place currently both at Health Canada and at the Canadian Food Inspection Agency. Those processes are very well structured and organized. What we are trying to say in that paragraph is that in real life, processors are responsible for product recall programs.
Today, when there is a problem with a cheese, whether Canadian or imported, we are the ones who, using our expertise as manufacturers, take charge of the recall with our clients and consumers. We had the listeriosis crisis in 2008, and that event comes to mind when we talk about recalls. The large processors like us, as you said, took that issue extremely seriously, as it was a major risk to public health. Those mechanisms are not managed by our clients but by us, the processors.
Senator Saint-Germain: I wanted to understand if you were asking for changes in administration. During the listeriosis outbreak, I was the citizen's ombudsman in Quebec, and I carried out an investigation, as you may recall. My findings at the time were that the bureaucracies, both federal and provincial, were very slow to react and to meet your needs. I know there have been improvements since then. So I was thinking about those facts in connection with the listeriosis outbreak. In the last sentence of the penultimate paragraph of your brief document, you say:
Administrative methods designed to stabilize the market would be desirable.
In that statement, you are talking about the allocation of quotas. What do you mean by "administrative methods designed to stabilize the market''?
Mr. Benoit: That comment is not about quality management, but about the fact that cheeses, and fine cheeses in particular, are marketed products that have their own unique characteristics. Importing a camembert from Normandy is very different from importing a block of ordinary cheddar. Cheeses have their own personality, and that market has to be developed. That development cannot be done using unstable administrative mechanisms to manage import quotas. For instance, in certain sectors like beef, management is based on the principle of first come, first served. In the beginning of the year, importers arrive at the border and obtain their import quotas. Once that quota is filled, it is over.
We feel that cheese import quotas must be managed in a stable manner, as they are today. The people who develop those markets prepare marketing plans, present the product to consumers, and develop a long-term market. So, when we talk about administrative methods designed to stabilize all that, it is because a cheese is not a commodity; it is a particular product.
Senator Saint-Germain: One last point: you said in your presentation that the Canadian Alliance of Cheese Makers was created specifically to manage quota allocation. Do I understand that there is a consensus within the industry, both among processors and manufacturers, that the alliance is the industry body that is in the best position to do that?
Mr. Benoit: Once again, regarding the allocation of quotas, the government has committed to granting 30 per cent to new market entrants. Agropur believes that the alliance is in a good position to manage that 30 per cent. We think that the remaining 70 per cent should be granted to traditional processors such as Agropur and other players.
Senator Saint-Germain: Thank you.
[English]
Senator Pratte: My first question is for Ms. Citeau. You addressed three conditions to this committee. Would you care to repeat? Because you went very fast.
[Translation]
If you could repeat that condition for the committee, I would then have a question for the Agropur representatives.
Ms. Citeau: It is the second condition, and I will repeat it:
[English]
CAFTA asks that this committee recommends in its report on Bill C-30 that the Government of Canada commits to a CETA implementation plan for Canadian agriculture and agri-food exporters to ensure that negotiated outcomes result in commercially viable access for agriculture and agri-food exporters.
[Translation]
Senator Pratte: Thank you, that is clearer.
To the Agropur representatives, I am a bit "slow on the uptake,'' as we say; I'm still having trouble situating you in this picture. I understand that the producers who belong to the alliance are small or medium producers. So, that does not include you; this body does not deal with you. However, you want them to receive the import quotas and you would like the remaining 70 per cent to be granted to those who already have import quotas, like you. If I understand correctly, you do not want the new players to be retailers. If they were, what are your fears in that regard?
Mr. Moreau: As we mentioned earlier, the biggest risk is that we destabilize the market. There are various periods during the year during which the sale of cheeses fluctuates a lot. We know that the holiday period and Easter are high points of the year. We can control imports in order not to adversely affect our domestic products, but the time of year when cheeses are imported is also very important, and that is our main concern. If this falls into the hands of retailers, we will have no control whatsoever, and obviously during the peak times of the year there may be an increase in imports. That could adversely affect the fine cheese market and destructure it, and it is a market we contributed to building over the past 30 years.
Senator Pratte: Let me play devil's advocate and follow up on what Senator Woo was saying earlier; is there not, conversely, an advantage for the consumer? Would retailers not try to see to it that consumers had as much choice as possible, at the lowest possible price?
Mr. Benoit: You will understand that we will not criticize our clients on camera. I think what is important to us is that you look at all of the development that has taken place in the cheese sector in Canada over the past 20 or 25 years, in Quebec, but also in British Columbia and Ontario. The arrival of these 17,000 tonnes of cheese is going to put a large number of small and medium players very much at risk.
Let me take the example of a Gouda manufacturer very close to Quebec. He produces between 1,500 and 2,000 tonnes of Gouda cheese on a yearly basis. It is very easy for a retailer to import 10,000, 5,000 or 2,000 tonnes of Gouda into Canada and to offer Canadian consumers European Gouda instead of Canadian Gouda. That is possible. So how do we preserve our cheese industry? By giving the import quotas to cheese manufacturers who know the industry. The alliance is in a very good position to do that. It is made up of small and medium players who do not necessarily have import expertise, but can manage the distribution and marketing in a way that complements their own production.
Senator Pratte: I agree with your view. However, I think the alliance is somewhat unnatural, because you're also a major competitor for these small and medium producers.
Mr. Benoit: We like to believe that a number of small players exist today because we were able to develop a taste for cheese in Canada and Quebec as a result of cheese imports. These enterprises have taken the place that belongs to them. Today, they have their place on the market in the context of supply management. In the future, how will the 17,700 tonnes be managed? It's an enormous quantity of fine cheese, when compared to the Canadian market. Based on how fine cheese is defined, the Canadian market accounts for 60,000 to 100,000 tonnes. The importation of 17,000 tonnes to Canada represents about 17 to 40 per cent of the Canadian fine cheese market.
This will certainly have a major impact. Tomorrow morning, Agropur will still be running. We'll still be here. We'll survive this. However, we're aware of small players that are in a more precarious situation. We know them, and we deal with them. We support their request to obtain 30 per cent of the new quotas.
Senator Pratte: Thank you.
[English]
Senator Cordy: Thank you for being here this evening. Again, I'm going to look at your recommendations, Mr. Benoit. You spoke about it in your presentation. You said, "We believe the government should provide at least a six- to nine-month transition period to allow us to develop appropriate marketing plans.''
Just before you came, we heard from the Ambassador of the EU to Canada. She said that if this bill does pass the Canadian Parliament, 95 per cent of it will come into force as provisional application. She said it was investment that would be excluded, so that would mean cheese would be included within weeks of the passage of the bill.
Do you think a six- to nine-month transition period would hurt the Canadian cheese processors for their exports, if the European cheese is going to be coming into Canada within weeks of passage of the bill?
Mr. Benoit: The reality is we recognize the agreement will come into force. What we don't know is how the government will implement the tariff-free quota for cheese.
What we're saying is that to do a good job of putting it onto the market the first year, it will be a portion of the 17,000 tonnes. It is not going to be the full 17,000 tonnes the first year because it will be implemented over five years. The first year there is going to be maybe 2,000, 3,000 or 4,000 tonnes that will have to be marketed into Canada.
We're saying that in order to do a good job, build a marketing plan, develop a relationship with customers and offer that product in complement to our own production, we need time. If the government doesn't allow us that time, I can tell you it will be a roller coaster for that cheese business, and it's going to be roller coaster for those who will be impacted by this.
We're saying that for an organization like us, which has a lot of resources, it's going to take us six or nine months at least to prepare a marketing plan to put that volume on to the market. For a small guy, it will take him likely more time because he has fewer resources.
Our preference — and that's why we have asked in our representation — is that this period be allowed to have a smooth transition — with our objective to minimize the impact, and not disrupt our fragile market.
Senator Cordy: Are you developing marketing plans as we speak?
Mr. Benoit: We don't know how much quota we will be granted. Building a marketing plan on something you don't know, I have to say it's really tough. We all have this in our mind, and we are thinking of it. But to say that we're spending money today on something that we don't know, we're not spending a lot of money today to develop those marketing plans because we don't know.
Senator Cordy: We talked a lot about imports. Currently, we have 17,700 tonnes of cheese coming into Canada. There will be a 30 per cent increase in that. What do we export currently to the EU? Do you have those numbers?
Mr. Benoit: Again, to put the record straight, 17,700 tonnes will come in in addition to what is coming in today. Thirty per cent would be allocated to new importers, to new —
Senator Cordy: So the 17,700 is an increase, actually.
Mr. Benoit: Yes.
With regard to export, Canada exports very small volumes of cheese into Europe today. Agropur exports a little bit of cheddar cheese to the U.K. — to the Queen in the U.K. We like to say that. But this is not a business that we're going to develop, because we're not competitive on the pricing in Europe. We cannot compete with the subsidies in Europe.
Senator Cordy: Okay. Thank you.
Senator Eaton: I want to follow up on what Senator Cordy was saying. I find it — I'm sorry — surprising. It's kind of typical. We have heard from Canadian business before how we're not risk takers. We don't go forward. We wait for things to be given to us. I find with Agropur — and you've been so successful; you're a very large concern — that you have not formulated and have not gone over there. I love Quebec, Ontario and New Brunswick cheeses. I don't know why we can't go over there and try and compete. I don't know why you're not helping. If you want the Canadian government to give small producers and cheese-makers the quotas to bring in, I don't know why you're not trying to sell them in Europe either. I just think it's a shame that you're not trying; you're not taking a risk to go Europe to promote Canadian cheese, which I think is second to none to French, German or English cheeses.
[Translation]
Mr. Moreau: Cheese producers in the European market, other than those I mentioned earlier, pay much less for milk, their raw material, than we do here. So, from the start, it's difficult to compete. It's a very full market. Europe is the largest producer of cheese in the world, with a market of 500 million people. Europe is one of the largest exporters in the world.
We're open-minded. In the long term, we'll try to develop niche markets in Europe for specific products, but certainly not in the short term.
[English]
Senator Eaton: Canadian wine is being sold in Europe, and they have a much harder market than Canadian cheeses.
The Acting Chair: Thank you. With this question and answer, I thank you, Ms. Citeau, Mr. Moreau and Mr. Benoit, for being here.
(The committee adjourned.)