Proceedings of the Standing Senate Committee on
Agriculture and Forestry
Issue No. 10 - Evidence - Meeting of May 12, 2016
OTTAWA, Thursday, May 12, 2016
The Standing Senate Committee on Agriculture and Forestry met this day at 9 a.m. to study international market access priorities for the Canadian agricultural and agri-food sector.
Senator Terry M. Mercer (Deputy Chair) in the chair.
[English]
The Deputy Chair: Honourable senators, welcome to this meeting of the Standing Senate Committee on Agriculture and Forestry. I'm Senator Terry Mercer from Nova Scotia, Deputy Chair of the Committee. I would like to start by asking senators to introduce themselves, starting with my colleague on my left.
[Translation]
Senator Tardif: Good morning. I am Claudette Tardif, from Alberta.
Senator Pratte: André Pratte, from Quebec.
[English]
Senator Moore: Good morning. Wilfred Moore from Nova Scotia.
Senator Unger: Betty Unger from Alberta.
[Translation]
Senator Dagenais: Jean-Guy Dagenais, from Quebec.
[English]
Senator Ogilvie: Kelvin Ogilvie from Nova Scotia.
The Deputy Chair: Today the committee is it continuing its study on international market access priorities for the Canadian agriculture and agri-food sector. Canada's agriculture and agri-food sector is an important part of the country's economy.
Indeed, in 2013 this sector accounted for one in eight jobs in Canada, employing over 2.2 million people and close to 6.7 per cent of Canada's gross domestic product. Internationally, the Canadian agriculture and agri-food sector was responsible for 3.6 per cent of global exports of agri-food products in 2014. Also in 2014, Canada was the fifth largest exporter of agri-food products globally.
Canada is engaged in several free trade agreements. To date, 11 free trade agreements are in force: the Canada- European Union Comprehensive Economic Trade Agreement, the Trans-Pacific Partnership, and the Canada-Ukraine Free Trade Agreements have been concluded; and eight free trade agreement negotiations are ongoing. The federal government is also undertaking four exploratory trade discussions with Turkey, Thailand, the Philippines and member states of Mercosur, which includes Argentina, Brazil, Paraguay and Uruguay.
We welcome our witnesses this is morning. From the Canadian Hatching Egg Producers, we have Mr. Jack Greydanus, Chair, and Giuseppe Caminiti, Executive Director; and from the Canadian Agri-food Trade Alliance, we have Claire Citeau, Executive Director. Thank you for accepting our invitation to appear. We'll have you give your testimony in a moment.
Following the presentations by witnesses, we'll have a question and answer session. Each senator will be given five minutes to ask questions before the chair recognizes another senator. There will be as many rounds of questioning as possible, so senators do not need to rush to try to get everything into one round. During the question and answer session, I would ask senators to be succinct and to the point in their questions, and I would ask the witnesses to do the same when answering so we can get as much in as possible.
We'll start with Ms. Citeau, please.
[Translation]
Claire Citeau, Executive Director, Canadian Agri-Food Trade Alliance: Thank you for inviting me today to speak on behalf of CAFTA, the Canadian Agri-Food Trade Alliance.
[English]
CAFTA is the voice of Canadian agriculture and agri-food exporters. We are a coalition of national and regional organizations that have come together to seek a more open and fair international trading environment for agriculture. Our members represent farmers, producers, processors, and exporters from the major trade-dependent sectors, including beef, pork, grains, oilseeds, sugar, pulse, soy and malt.
CAFTA members account for over 90 per cent of Canada's agriculture and agri-food exports: about $50 billion annually. The economic activity generated by our members supports hundreds of thousands of jobs in agriculture and food manufacturing.
I would like to impress upon the committee today the importance of competitive access to global markets for the future viability of Canada's export-oriented agriculture sector. The world is not standing still. Why should a processor from Manitoba today get less than a processor from North Dakota? Why should a farmer in Quebec get less than a farmer in Australia? Competitive access means that Canadian producers and exporters have at least the same access as agriculture exporters from Australia, the U.S. and other markets. Competitive access depends on trade agreements that eliminate tariffs and non-tariff barriers. Because we enjoy in Canada such favourable conditions for food production that far exceed the needs of our population, our agri-food sector is primarily export focused.
As you know, we export over half of everything we produce: 50 per cent of our beef, 65 per cent of our soybean, 70 per cent of our pork, 75 per cent of our wheat, 90 per cent of our canola, 95 per cent of our pulses and 40 per cent of our processed food products. Nine out of ten farmers in Canada export their products directly or sell them domestically at prices set by the international marketplace. One in two jobs depends on international markets and in- crop production; and one in four jobs in the food manufacturing sector. Export opportunities help us to grow. For the last 10 years we've have seen our exports grow by 77 per cent, boosting farm cash receipt by close to 50 per cent.
Today the World Trade Organization continues to serve as the foundation for international trade. Even though the Doha agenda is not progressing as we had hoped, it remains the best forum for achieving fair, global and reciprocal gains in international trade. It's the best avenue for addressing domestic subsidies and export competition. The WTO continues to set the rules and remain the main dispute settlement institution worldwide.
However, the global trade policy regime for agriculture remains uncertain today. Agriculture has always been a very sensitive area in international trade liberalization because of its importance for national food security and rural development and its dependence on the climate and nature. Agriculture remains one of the most highly protected industries around the world, and protection comes in the form of various market-access barriers, export subsidies and non-tariff barriers.
Today we have entered an era of competitive trade liberalization by which countries compete for preferential access through bilateral and regional free trade agreements. Today, no fewer than 620 agreements have been notified to the WTO; and over 400 of them are in force. This is probably one of the most significant developments in global trading in recent years. The result is a myriad of free trade agreements being negotiated around the world, which vary in scope. They are even negotiated with countries that are not traditionally known to be free traders, such as Japan.
For our trade-dependent agriculture sector, what does this mean? It means that for us, being competitive in international markets is not a choice. It's a requirement. The competitiveness of our sector internationally depends now on the timely negotiation and implementation of preferential or equal trade access to the markets that our competitors are also after. Canadian agriculture has lived through this before with South Korea when a billion-dollar market was cut virtually overnight as our competitors, namely the U.S., the European Union and Australia, had access to that market and we did not. We cannot afford to see this happen again.
There are two priorities for Canadian agriculture and agri-food exporters. First, it is paramount that Canada ratifies the Trans-Pacific Partnership, the TPP, quickly. CAFTA strongly supports the TPP and believes it is integral to the future viability of Canada's agriculture and agri-food export-oriented sector. The TPP region absorbs 65 per cent of our exports. It includes some of our major traditional markets — the U.S., Mexico and Japan, which is the big prize in this agreement — but it also includes some of our largest competitors, the U.S., Australia, Chile, and several signatories already have free trade agreements with one another. So the longer the TPP drags on, the further we fall behind. Ultimately, if we're not part of the TPP and other signatories are, we stand to lose many of these markets. The best chance to implement the agreement quickly is to ratify quickly. As well, a number of countries in this important Asia-Pacific region have expressed interest in joining the TPP. So, from that perspective, the TPP presents an opportunity to negotiate the terms of potential future entrants, such as South Korea, Thailand, Taiwan, the Philippines, Indonesia and perhaps others.
Second, we strongly encourage the completion of the respective legal and political processes related to the Canada- Europe Free Trade Agreement, the CETA, while simultaneously completing technical discussions so that the stated benefits of the agreement can be realized in the form of commercially viable access for all Canadian exporters.
In closing, the growth and sustainability of our agri-food industry depends, in large part, on competitive access to global markets. Implementing concluded free trade agreements, fostering new free trade agreements and expanding existing trade relationships in target markets will be critical to ensuring more predictable and competitive access to the world's largest markets for Canadian agriculture and agri-food exporters.
The Deputy Chair: Thank you very much for your presentation. Before we move on to the next witness, I want to draw your attention to other colleagues who have joined us: Senator Oh from Ontario, Senator Plett from Manitoba and Senator Beyak from Ontario as well. Thank you, colleagues, for joining us. We'll now move on to Mr. Greydanus for his presentation.
Jack Greydanus, Chair, Canadian Hatching Egg Producers: Thank you for the opportunity to speak. This is certainly the first time we, as an organization, have spoken. We're part of the supply management group of five, and we are certainly the smallest of the supply management five. We're probably the most important because certainly in our world, the world starts with an egg and not with a chicken.
The Deputy Chair: Chicken and egg.
Mr. Greydanus: That issue has been solved. We'll try to explain that right now, okay? So the egg came first.
The Deputy Chair: We'll make sure that makes the report.
Mr. Greydanus: Thank you very much.
The document has been presented to you, and I'll just highlight it. Firstly, I am a farmer from Sarnia, Ontario. I showed up with the Ontario delegation as a farmer, but I also chair the national organization, which I'm representing here today. Thank you for allowing us to touch base with you today.
Again, our focus will be on how the Trans-Pacific Partnership affects us. As hatching egg producers we represent, as a national agency, 228 hatching egg producers in six provinces across Canada. We do not represent the provinces of Nova Scotia and New Brunswick because they don't have provincial organizations. There are about 16 producers there, so we have a difficult time. We can't represent them if they are not organized. We will talk about that a little bit later on.
The board that I'm part of is a national one, and I am the independent chair. We have six farmer representatives from the represented provinces and two hatchery representatives, industry partners, who also give us some input on it. We make sure that we supply enough hatching eggs or chicks to the broader marketplace: the meat that we eat. We were established in 1986 under the Farm Products Marketing Act. It's our responsibility to provide enough chicks to the broader industry.
What do our farms look like, technically? The average farm is probably around 20,000 birds, producing about 3 million eggs a year. They are hatched out to be chicks naturally. We produce the chicks for the meat market, to keep it separate from the egg. This is strictly for the meat markets. What we're trying to do is to convince a broiler chicken, which is naturally bred to produce meat, to lay an egg. That's very difficult to do, people. It's high management. That's why it's highly technical and very costly to do so. That's the industry we are in.
Our farm would normally comprise one barn or two pens. They are wide open pens. The females run around with the males. Naturally, the idea with that is that we need fertile eggs to get the chicks. That's where we are coming from.
We also, as an industry, only represent about 80 per cent of the domestic requirement. We have trade agreements under the North American Free Trade Agreement. It allows about 21.1 per cent of our total domestic production required for chicken to come from imports. That is a grandfather clause under NAFTA. Of that, 17.43 is the percentage of eggs, and 3.7 per cent is a separate tariff line which is for chicks. So roughly 20 per cent, or one in every five, of broiler chicks comes in. So we do allow trade to happen — there's no question — in that area.
This TPP agreement just increases that access. That's really how we view it. So really, in our world, we look at it as loss of market. If anybody has been in the business world before, losing market is a negative word. That's something we have to look at.
Just a few numbers there: We represent totally, across Canada, 244 producers. As I indicated to you, that's about 20,000 birds per farmer, about 3 million eggs that each farmer gets. There are your total numbers.
Naturally, we are contracted to hatcheries across Canada, 40 of those hatchery facilities across Canada. So what does that mean? We represent about 8,200 direct and indirect jobs across the country, $450 million of gross domestic product and taxable revenue of about $113 million, which is what we are really interested in seeing as it does take money to make a country work and as we pay our due taxes on this, there is no question.
Certainly, everybody knows the Trans-Pacific Partnership was signed amongst those 12 countries on October 5. We understand that those 12 countries represent about half a billion people. There is no question that there are economic benefits, and we understand that.
As part of the agreement, we had to give additional access in the hatching egg industry. I was down there, and they picked a million dozen as the additional access for hatching eggs across Canada — 12 million eggs, including the ramp up over time. So, when the deal is completed, 13.6 million eggs will have to be given. About 1.9 per cent of our domestic production will have to be given up over that time frame. The previous government also had a compensation scheme in there. I don't want to elaborate on it now. That's something that is certainly being discussed in depth with the government at this time.
What we are looking at is that this is, naturally, a permanent loss. It is a loss of market. It's going to be felt forever in our world. We also get hit twice. As you well know, when Chicken Farmers of Canada came in here they indicated to you that they had lost market share too. Some access was through them. We supply that marketplace, so if we take into consideration what we lost, that 1 million eggs that was given away, and also the chicken loss, that's going to be about 4.2 per cent of our marketplace that we have lost totally. We supply the chicken marketplace and, naturally, those eggs are not required. That's certainly something that we have to look at negatively too.
What did we lose totally in market eggs? About 526 million eggs. If you do that math over the 19-year program, that's 10 new producers. That's the math that I look at. We could have 10 new producers across Canada over that term of the deal if that access wasn't given. So it's a sizable give and something that we don't take lightly.
It naturally affects the farm cash receipts, to the tune of about $47,000 a year per farmer. There is loss of additional access, as we know. That's total revenue of about $8,000. That's tax revenue we're talking about. Naturally, when you lose access your barns become less efficient. There are some efficiency costs there. What was the loss per year per farmer? In our view, it's about $27,000 per year. That's tax revenue that is also lost in the grand scheme of things, which is something we have to worry about.
We feel very comfortable that we're a big part of the economy across Canada, and supply management also makes it stable for all Canadians. We support both rural communities and society at large under supply management, which is really important to us. Again, the estimated loss is $27,000 per hatching egg producer across Canada.
The overall impact will be felt over the 19-year period. That loss is forever, and it is will affect us over time. In closing, we thank this committee for granting us the opportunity to speak. We're more than willing to answer questions that may come up.
The Deputy Chair: Thank you very much. The figure of $27,000 per farmer is not insignificant. This is what it will cost because of access given to others. What you didn't cover is whether there is an opportunity for you to participate on the export side — both export and technology.
Mr. Greydanus: It's a world technology. In our world the technology is pretty refined and is done by primarily the parent companies, and those two parent companies are U.S.-based so I do not see any big gains there.
As far as export opportunities are concerned, in today's market our pricing for hatching eggs right now is much the same as it is in the United States.
Understand that we have a hatching egg which is a live embryo. We can only really manage and control the life of that hatching egg fertile embryo for about a seven-day period, so transportation of that egg is pretty limited. Most hatching eggs are limited to probably a region, so opportunity is more limited because you can't freeze it. It's a live embryo.
The Deputy Chair: We did hear recently about some new technology that helps to identify the sex of the chick prior to hatching, which made the process more efficient.
Mr. Greydanus: That is more on the layer side, naturally. We don't necessarily care about the sex of chick because, whether it's male or female, you can still eat it. Only females only lay eggs and males don't, so that's where that technology came into play on the layer side. It doesn't affect us.
Senator Plett: Mr. Greydanus, you stated that you are involved in six provinces. You listed two that are not part of the organization, but we have ten provinces. Are Prince Edward Island and Newfoundland not at all involved?
Mr. Greydanus: There is no hatching egg production in those two provinces. They come in under the Atlantic provinces.
Senator Plett: Quebec, Ontario and west?
Mr. Greydanus: That is correct.
Senator Plett: This is personal: How many operations do we have in Manitoba?
Mr. Greydanus: I did the math yesterday, and I think you represent 10 per cent of the Canadian marketplace.
Senator Plett: Thank you. I would like to ask this of both witnesses: Where do most of your exports go to?
Mr. Greydanus: We contract to hatcheries and processors in the provinces, so we don't export any of our products. Our hatching eggs are not exported at all; they are hatched out to be chicks. The chickens maybe exported.
Senator Plett: Your product is not exported at all.
Mr. Greydanus: It's pretty high technical.
Ms. Citeau: Our main export markets are the U.S., China, Japan, the European Union, Mexico, India, Hong Kong, South Korea, India and Bangladesh. There are a number of other countries, but these are our top export markets.
Senator Plett: So the TPP is, as you suggested, very important?
Ms. Citeau: The TPP is seen as critical for us. It's a short acronym for what we believe is the biggest deal on the planet, at this point. As I mentioned, the region absorbs 65 per cent of our exports. It includes our major competitors, and also some very important markets.
What the TPP will do for us is preserve our privileged access to the North American market. It will provide an opportunity to compete in fast-growing and high-value markets in Asia, such as Japan, Vietnam and Malaysia and, most importantly, it does that on a level playing field for us. The gains are significant, but likewise the losses are huge if we are not part of this deal and it goes ahead without us.
Senator Plett: Mr. Greydanus, if your industry is mostly domestic, why is the TPP important to you?
Mr. Greydanus: It's more of a detriment, because we will lose market share. Do I feel, as a Canadian, that it's important we have a trade agreement to support these industries? Absolutely. If you ask me personally, I don't like losing market share but I think the TPP is a benefit to the greater good of Canada on the export side. We feel there is a benefit to Canadians as a whole.
The Deputy Chair: To follow that up, one would assume that if things are good for the people you provide the chicks to that their demand for more chicks might help offset the access you lose.
Mr. Greydanus: We do look at that. You had the Chicken Farmers of Canada in here and, last time I came here, the Chicken Farmers of Ontario. They told you that there is probably some fraudulent activity happening, and if that was dealt with at the border there would be a benefit to us as hatching egg producers and chicken farmers across Canada.
The Deputy Chair: We have noted that several times in this study. I don't want to prejudge what our report will say, but I think that you might see a line or two in there about that.
I forgot to introduce Senator Merchant, who has just joined us, from Saskatchewan.
Senator Tardif: Mr. Greydanus, I wanted to check a number that you have given us about the loss per farmer due to the loss of market. At one point in your presentation you mention a loss of $47,000 per farmer per year in farm cash receipts, and then at another point, net financial impact, you mention a loss of $27,000 per farmer per year. Which is it?
Mr. Greydanus: The $47,000 is total gross revenue.
Senator Tardif: Okay.
Mr. Greydanus: And the $27,000 is potential profit.
Senator Tardif: Okay. Thank you for that clarification.
[Translation]
Ms. Citeau, you said in your presentation that the Doha program was not progressing well and that you had to rely on the World Trade Organization to resolve certain issues. Can you tell us more about that?
[English]
Ms. Citeau: Negotiations for the Doha Development Agenda have been going on for 12 years now, and they don't seem to be progressing very quickly. While the WTO today remains the foundation and continues to set the rules for trade, the ambitions set in the Doha agenda have not yet been met. There is a bit of a debate going on right now about where these discussions are at. It seems, from what we have read in the media, that the WTO is at a turning point from that perspective, and it seems to have been the case some time.
Basically, the outcomes set in that agreement are still what we want to see achieved.
[Translation]
Senator Tardif: When you appeared before our committee in November 2014, you said that any free trade agreements the key global markets negotiate with our competitors before negotiating with Canada put us at a disadvantage. If the comprehensive economic and trade agreement with the European Union and the TPP move forward, what other agreements do you think it would be important to negotiate at this time?
Ms. Citeau: There is a whole list of very important markets, especially in the Asia-Pacific region, on which it would be important to lean. There are also other significant markets, such as India. Depending on the markets, some of our members prefer to have privileged access to one market over another. In those situations, the Canadian Agri-Food Trade Alliance recommends encouraging negotiations or discussions that help reduce tariffs and non-tariff barriers in the markets its members are most interested in.
[English]
Senator Unger: Thank you to everyone for your presentations.
Ms. Citeau, I'd like to start with you. You just mentioned that in agriculture protection comes in the form of market access barriers. Would you give me an example?
Ms. Citeau: The country of origin labelling is an example. Basically what we've observed with free trade agreements is that typically as free trade agreements come into force tariffs are reduced or eliminated but non-tariff barriers come up. There is a side effect there.
Free trade agreements are contracts to eliminate or reduce tariffs, but countries maintain the right to regulate sovereignty rights. For a number of different reasons, political or other, some countries at times will introduce regulations that will create disadvantages for our exporters and make it more costly for us to export. These are very problematic.
In the case of the European Union, for example, right now there are some technical discussions that remain outstanding. We certainly hope that by the time the agreement is implemented all will be in place for our exporters to have commercially viable access to the European Union. That can include the approval of meat facilities and the timely approval of biotechnology trades, for example. All of these things need to be looked at as well.
Senator Unger: You talk about it being paramount that Canada ratifies the TPP quickly. Are you, as an association — and I agree with you — making your views strongly known to the government that this must be done and are you optimistic that they're listening and will proceed as quickly as possible?
Ms. Citeau: We've appeared before the Trade Committee and the Agriculture Committee in the house. We have encouraged our members to do so. We sent our statements expressing strong for the TPP and outlining the benefits for each of our different sectors, as well as the losses if the agreement is not implemented. We've emphasized the importance of Japan in this market, our third export market globally and a very key and important market in this region as well.
Senator Unger: Are you feeling optimistic?
Ms. Citeau: We're working hard to make sure our views are heard by all parties.
Senator Unger: Thank you for that.
Mr. Greydanus, you have mentioned a whole bunch of numbers and statistics. I have a couple of questions.
You talk about the amount of money that your industry contributes to Canada's GDP, and you quote statistics from 2013 saying that there are 8,200 direct and indirect jobs. Those statistics are three years old. Are there any more current ones?
Giuseppe Caminiti, Executive Director, Canadian Hatching Egg Producers: Maybe I could answer that, senator.
Our last update was a review of the supply management as a whole. We did an analysis and had a survey done on our behalf. We plan on updating that for 2015 as the conclusion has just happened. The expectation is that in the coming months we will have something coming forward. But that is the most recent data and that's why we presented it as such.
Senator Unger: Thank you. Do you have a plan or vision to increase exports in spite of the loss that you've described? Do you have any plan to change that by increasing exports?
Mr. Greydanus: In the hatching egg industry I don't see any potential in that area because, again, most of our production is contracted with facilities within the Canadian provinces, which are the hatcheries. Ultimately, that product is hatched and brought to processers.
If we see a marketplace opportunity in the export market as far as the chicken is concerned, that we naturally are in contact with at all times, then our benefit would improve. If we see access to chicken markets around the world, then we would have hatching egg markets assess at the same time. Directly, as hatching eggs, we don't see that as any opportunity because, as I indicated to you, you can't freeze an egg. It's a live embryo; once it's laid it has to be dealt with in the seven-day period and throwing it on an airplane and those kinds of things are difficult.
Senator Unger: How do we import so many eggs?
Mr. Greydanus: Imports come in on trucks from the U.S. only. That's an agreement we had with the U.S. only. That's the only partner we had. That's why it's part of the NAFTA agreement.
This TPP agreement will allow access, but Americans will be the beneficiary because it's very difficult to move eggs.
[Translation]
Senator Dagenais: Ms. Citeau, there is a lot of talk about the TPP. Some will lose and some will win with those agreements. Could you give us an idea of who will be winning and who will be losing? As for the losers, how can we assess their losses compared with the gains made in five or ten years under those agreements?
Ms. Citeau: I can only speak for the members I represent, who are agricultural and agri-food exporters. I cannot speak for other agricultural or non-agricultural sectors. I think they are in a better position to talk about their interests. In our sectors, we anticipate only gains through the TPP, but there will be significant risks if we are not part of the agreement.
Senator Dagenais: You mention significant risks. What could those risks be?
Ms. Citeau: Let us take the example of Korea, whose free trade agreement with Canada was implemented on January 1, 2015, so several years after its agreements with the United States and Australia, concluded in 2011. However, South Korea was ranked seventh among our export markets, with a value of over $1 billion. In a very short time, just because the Americans, the Europeans and the Australians had access to that market well before us, our $1- billion market was cut in half. So the majority of sectors experienced huge losses, especially the meat industry. The pork sector was hit hard by that disadvantage, that imbalance.
So we can apply this simple example of Korea to Japan, which is now our third-biggest export market, as it accounts for 10 per cent of our exports. It is important to note that Japan has a high-value market. If we were to lose that market today, our exporters, especially our pork producers, could not obtain the value they get in Japan in other markets.
As for losses, it is difficult to forecast what exactly will happen, but the Korean example applied to Japan gives you a good idea. There are also other markets in the TPP region that are very important, such as Vietnam — a growing market of 90 million people — and Malaysia, which also provides considerable opportunities. It should be noted that, if we do not join the TPP, we will not be able to export our products to that market. Moreover, our rules of origin mean that our products cannot be considered in the TPP region. So the entire supply chain of the Asia-Pacific region will be closed to us.
Senator Dagenais: You mentioned the United States. Is the U.S. the most competitive country on the market? If so, is that because it is fiercer?
Ms. Citeau: The U.S. develops many products that are identical to ours.
However, I would like to add one last thing about Japan. Australia has already concluded a free trade agreement with Japan. So we are already behind when it comes to many of our products, including grains, canola and barley. So we are already at a disadvantage compared with Australia concerning many products. Vietnam has also signed a free trade agreement with Australia. In short, the longer we wait, the more ground we lose.
Senator Dagenais: So the Trans-Pacific Partnership puts pressure on exporters through other countries.
Ms. Citeau: The agreements provide opportunities, and pressure is created when our competitors are part of those agreements. The European Union is also a major competitor of ours. It is currently negotiating with Japan. In addition, it has concluded an agreement with Vietnam that will probably be implemented over the next few months or in the coming year, and that is another aspect to consider.
[English]
Senator Oh: My question is for Jack Greydanus. It is about the hatching egg business, following on Senator Unger's question. They are only coming in from the U.S. for import? Hatching eggs come in from no other countries?
Mr. Greydanus: That is correct. They're only from the United States. You can truck eggs. They have to be controlled atmospherically for temperature and humidity, because it is a live embryo. You are limited in terms of the life on those and you have to be critical. Hatching eggs are predominantly moved by truck and, yes, our marketplace would be the United States; the relationship is between the United States and Canada.
Senator Oh: Under CETA, the total expected gain for Canada is in the range of $1.5 billion for agri-food. How are your members doing with the EU after signing the CETA?
Ms. Citeau: We have always supported the CETA as it's expected to result in significant benefits for our sector — $1.5 billion. We have always supported the CETA agreement, assuming the technical conditions will be in place by the time the agreement is implemented.
There are a number of issues that need to be dealt with to allow our exporters to have real commercial viable access to the EU market by the time it is implemented. Today there are some outstanding issues, in particular in the meat sector that will have trickle effects for the grain sector. There are also some issues related to the timely approval of biotechnology trades as well. It will be important to have these resolved by the time the agreement is in place.
Senator Oh: Once the TPP is implemented, how do you value CETA and the TPP?
Ms. Citeau: It's difficult to say that one is better than the other: They are different. The European Union is a huge, high-value market; the TPP is a very important and growing marketplace as well.
It is important to know that, overall, these free trade agreements help our industry diversify and reduce their reliance on the U.S. market. They also provide better opportunities to get better value for some of their products. Some of our producers will seek to get better value from the sale of their products in the European Union than in the U.S. market, for example. Our canola producers will seek to get better value for their oil in Japan than currently.
Senator Oh: Any comments from you, Mr. Greydanus?
Mr. Greydanus: Again, we are not much of a trading organization; we are very much a domestic group. The benefit under our regime is stability. That is part of it. As Claire indicated, there is volatility in the trading market, and currency is a big part of that risk. In our world, that is something we can manage internally, because we are a domestically driven marketplace.
That stability is a benefit to society as a whole with guaranteed quality and price.
Senator Pratte: I have a couple of questions for Mr. Greydanus.
Sir, when you estimate the losses due to the TPP, you seem to talk as though the increase of imports up to what we will be permitted by TPP is sort of like a fatality, as if there is nothing you could do: the U.S. will increase its exports to the maximum permitted.
Is there absolutely no way you can fight this? You can't compete on price, quality or whatever — that's it? They will increase their exports to the level permitted, and there is nothing you can do?
Mr. Greydanus: Under the NAFTA agreement, they have to import 90 per cent of their allocated number. They must import. Under the TPP, I don't know the rules on it yet. They haven't been fully entrenched yet because it is still under discussion. Under that 21.1 per cent that I suggested to you, they have to bring in 90 per cent of that. That is the rule.
Senator Pratte: I understood that was sort of a grandfather clause.
Mr. Greydanus: But you are asking if we can do anything about it. I'm suggesting only if our customers, the hatcheries, are prepared to lose their opportunity there.
Right now the benefit to buying our product is in our hands, because the currency is on our side. Once you get the currency, the U.S. product will be cheaper.
Senator Pratte: You mentioned that the net loss to the hatcheries would be $127 million; is that correct?
Mr. Greydanus: Over the 19-year period.
Senator Pratte: That is after compensation?
Mr. Greydanus: No, I didn't mention it. The previous government had a compensation package in there. I didn't speak to the compensation package because, in my view, that is still up in the air. This is actually what affects the trade agreement.
Senator Pratte: Are you trying to convince the current government to ameliorate the compensation program?
Mr. Greydanus: The compensation program was from a previous government; it's up to the new government to make a decision on it. Am I speaking to it? We can talk about it, but I am not prepared at this time to suggest to the government that they respect it.
There is an element within our industry that would suggest that we get our price from the marketplace. As far as our price for our product comes from the marketplace, there are no mechanisms in there that allows government support to hit our hatching egg farms. This allows that to happen. Some of our producers feel that is probably not where we want to go.
There is a divide. I would rather not speak to it around that premise.
The Deputy Chair: To follow up on Senator Pratte's question, have you or the association tried to meet with Minister MacAulay to talk about the compensation aspect?
Mr. Greydanus: We were invited to the minister's office after the entry of the new government. He spoke to all of us, actually. As a group, we voiced different opinions. He has heard all of us, and he will make a decision based on what he heard from us.
The Chair: We will wait to see what Minister MacAulay says.
Senator Beyak: My questions have pretty well been answered by your responses to Senator Tardif, Senator Unger and Senator Pratte.
However, I want to commend you and your organization for having the common sense and the frankness to see that this is a good agreement for most Canadians and to trust the government to honour their compensation to you. I am pleased to hear that from you.
Ms. Citeau, when you were here in November 2014, you answered most of my questions to Senator Unger, but are their major challenges? We are hearing so many opinions from outside Canada on why we should or should not ratify the TPP. What are the three or four major concerns that you think Canada should care about and the ones we should ignore?
Ms. Citeau: With regard to the TPP agreement, I think the most important is realizing the risks if we're not in it. For us, our export-dependent sectors really being competitive in international markets and having access is not a choice: It is a requirement. There is a lot of debate around the TPP, but for our export-oriented sector it is a free trade agreement but it also really is the future for us.
The Asian marketplace is fast growing. Senator Tardif asked about other free trade agreements and countries. Japan needs to be considered. Japan is in this agreement. I can't emphasize enough the importance of this agreement and the importance of Japan for our exporters.
Senator Beyak: Thank you very much.
Senator Moore: Thank you again, witnesses, for being here.
Ms. Citeau, you mentioned earlier the matter of COOL, but that was resolved in December with regard to beef but it did not cover goats and pork. I don't know if that was something that Canada did not ask for. Are you aware of that?
Ms. Citeau: I'm not an expert on the specific COOL issue. I mentioned it as an example of a nontariff barrier that came up as a result of the U.S. coming up with a regulation that impacted our exporters.
Senator Moore: Maybe you should check that out, because it was disappointing to see that those two products were not covered.
In your brief you say there are no fewer than 620 regional and bilateral trade deals that have been notified to the WTO and 400 of them are in force. How many agreements is Canada party to, excluding TPP and CETA which have been signed but not formally agreed to yet? How many are we party to now?
Ms. Citeau: Canada has a number of free trade agreements with more than 10 countries. We have the Canada-U.S., NAFTA, Israel, Chile, Costa Rica, Peru, Colombia, Jordan, Panama, Honduras and Korea, which was implemented in January. Concluded or signed, we have the European Union, the TPP, Ukraine, Israel, and ongoing negotiations with a number of other countries.
Senator Moore: When you say "which have been notified to the WTO,'' is the WTO the international registry of all agreements between countries?
Ms. Citeau: Yes.
Senator Moore: I think of your example with regard to South Korea and how we took such a big hit there. Do countries have to notify the WTO when they start negotiations or do they do that in secret and only notify once it has been concluded?
Ms. Citeau: I'm not familiar with the specific process. I'm happy to look into that if you would like me to do so.
Senator Moore: Could you check that out and notify our clerk? That is important because that's part of the whole strategic approach to these things and all of a sudden we end up getting snookered and you think "how does that happen?'' It seems to me that things are ongoing, perhaps even today, that we don't know about.
Under the WTO, the agreement that all these countries are party to, are they required to let the WTO know that they're intending to or that they've commenced so that we as a country can perhaps get in on it at the same time and identify that market as something we could be engaged in with some product?
It would be interesting to know that, because it's at the root of all that's happening here, I think. Thank you for that.
Mr. Greydanus, you didn't mention CETA and I guess that's because, as you said, you are primarily a domestic organization. These eggs could not be transported by airplane without all the climate controls? I know you've said they are a living embryo. Is that the reason? Has that ever been tried?
Mr. Greydanus: There have been products shipped by air, there is no question. Genetic companies do it that way. The value of it is quite a bit higher. A broiler producer would pay probably 70 cents a chick when they drop on their farm; we pay around $7 a bird. We're grandparent stock yet the cost is so bearable. There are economics to putting it on an airplane. When product is 70 cents an egg, the economic value potential is not there. It's not a big win, so that's why. It's a heavy product too, so it gets pretty costly.
Senator Moore: Basically you can sell everything you produce now?
Mr. Greydanus: That's correct.
The Deputy Chair: Before we move on, Senator Moore, I took up your question on COOL and consulted with our analyst. She tells me that the COOL decision included beef and pork but not goats and seafood.
Senator Moore: I knew there were two commodities.
The Chair: It was beef and pork. There you go, we're already making progress. Any other tough questions, just direct them to me and I'll ask the person with all the answers.
Senator Merchant: My question is for Ms. Citeau. First, if you listen to the rhetoric that is coming from south of the border, there will be a new administration in the U.S. in November. There is talk about not entering the Trans-Pacific Partnership. When you are thinking about these things do you wonder what will happen if that is delayed because of the change in administration or if it doesn't go through in the way you are hoping it will?
Second, what about China? China is a huge market. It will not be in the first TPP round anyway. What are you doing regarding that market?
Ms. Citeau: On the U.S. election — and this is speculation — I can't predict what will happen.
Senator Merchant: But both sides are talking about not accepting the TPP the way it has been set. Whether it is Republican or Democrat, I'm not arguing that.
Ms. Citeau: For those at the negotiations and not in the negotiating room, we follow the negotiators quite closely. We have been in good and close contact throughout the entire process. It would be very risky to reopen the negotiations at this point. This is a very complex agreement that took a lot for all parties — all 12 different parties that are at different levels of economic development — to reach an agreement. There would be a huge risk to reopening anything. At this point we encourage the government to ratify quickly.
Senator Merchant: And China?
Ms. Citeau: China is our second export market — a huge market for our exporters. We welcome discussions between Canada and China that will eliminate tariff and non-tariff barriers and provide a stable, predictable environment for our exporters to supply to that very important marketplace.
Senator Merchant: Do you think that we're going to reach a different agreement with China outside the TPP? They are not in the TPP.
Ms. Citeau: China is not in the TPP. The TPP is said to be a growing agreement because a number of countries have already expressed interest in joining the agreement, including South Korea, the Philippines, Indonesia and others. From that perspective it is expected to be a living agreement.
With China, however it happens, regardless the type of agreement, I think we welcome further and expanded access, and more predictable and stable access with that market.
The Deputy Chair: Witnesses, thank you very much for your presentation and thank you for being here. This has been a very productive meeting this morning. Your participation is important, and I hope that you see that reflected in our report when we get to it, and we would like thank you for that.
Colleagues, those of you who are coming with us next week to Western Canada, we'll see you in Calgary. You will all be receiving binders for the trip this afternoon from the clerk.
We look forward to seeing all of you in Western Canada next week. Thank you. We stand adjourned.
(The committee adjourned.)