I'd like to call the meeting to order.
We've had three meetings on the TPP, the Trans-Pacific Partnership, between Canada and our Trans-Pacific Partnership partners, and we want to continue our study today. We look forward to the testimony of the witnesses we have before us today. This will be the fourth meeting.
From the British Columbia Cattlemen's Association, we have Kevin Boon, general manager; from the Canada Wood Group, we have Paul Newman, president; and from Interfor, we have Ric Slaco.
Thanks to all of you for being with us. We look forward to your testimony, after which we'll get into the question and answer portion of the meeting, which is always interesting.
This is, I should say, another day in paradise if you look at it from Ottawa's eyes. I'm from Alberta, so I don't see it quite that way. Nonetheless, we are pleased as a committee to be here on the coast of British Columbia, on the west coast, enjoying the weather.
With that, we will start.
Mr. Boon, the floor is yours, I believe.
Thank you very much for the opportunity to be here today and to present to you on behalf of the B.C. Cattlemen's Association and its members. In a lot of ways, our industry is very much a national industry, so what is good for us here in British Columbia is the way it works for us pretty much right across the country.
I want to begin by talking a little bit about the importance of the beef industry to Canada and British Columbia, and about trade in general. Trade access to all markets is extremely important. In 2003, with the discovery of BSE in Alberta we saw all of our doors close. With an industry that exports close to 50% of our product out of Canada, we can't eat our way out of a situation like that. The six months that it took for the U.S. to open its borders were extremely difficult for us. Since then we've gradually seen the doors open to other countries and other trading partners around the world, but it's been slow and there have been a lot of restrictions and regulations put on us, which has also made it difficult to gain access. I'll address some of this as I go through what the TPP means to us.
Global supplies of beef are at an all-time low. We need these markets to incite the investment that we need to grow our industry back here in Canada. Being at the table with the Trans-Pacific Partnership is actually quite important to us. Especially with our vast expanse of arable lands here in British Columbia and Canada, we know that over the next 20 to 30 years, 30 to 40 years, we're going to probably become one of only six countries in the world with the ability to produce more than what we can consume. Knowing that, we have to prepare for that for the future. We have to make ourselves invest in what we're going to need in 30 years' time, because we feel that agriculture and the beef industry will be very important economic drivers for Canada and British Columbia.
One of the things that we consider here in B.C.—and I know that our provincial government has made it very clear—is that we are a gateway to both Canada and the Pacific. As such we can showcase, as you pointed out Mr. Merrifield, the beautiful country out here and the vast resources and the environment, which is very inviting when we have the Asian and Pacific markets coming over to visit us. That's what they see and that's what they take home, and it's a huge selling point for us in our industry.
One of the things we have to consider in all of this is that with our industry and what we do, we have an animal that we break out, a carcass. It's roughly 900 pounds of raw product to utilize. But not all countries or cultures want to utilize the same parts of that carcass, so it's extremely important for us to have a wide variety of different markets available to us. We call it whole-carcass utilization.
The signing of the CETA was extremely important to us, one, because of the volumes; two, there are no tariffs; and three, they're utilizing parts of the carcass that we're not utilizing in other parts of the world. This brings in the Pacific and Asian partners; they're utilizing different parts of that carcass. If we can do that in a way that we are spreading that around the world, it allows us to utilize and get a premium for all portions of that carcass, rather than just part of it.
So whole-carcass utilization is important, and that's why getting markets around the world and in different areas is very important to us.
The other part about this is that we're so dependent on the U.S. right now. Approximately 45% to 47% of our product is being exported out of Canada, but of that, about 73% goes into the United States.
We are very dependent on that U.S. market. By creating partnerships in Europe and in the Pacific, we are able to spread that out and become less dependent on the U.S. It also helps our capacity and our processing. If we process it here at home rather than sending it south of the line to be processed down there, we're able to keep the jobs at home and we're able to add value in the processing sector, and that all helps us in the overall economics.
In the TPP consideration alone, we have to look at certain things, because it's not just a matter of having them at the table. It's having the right people at the table and making sure that we have a good balance. We know that coming into the Trans-Pacific Partnership, we not only have people we want to trade with but we have competitors sitting at the table there as well.
So in the plurilateral agreement that is being looked at here, it's very important that we are all equal and that there is not a benefit given to one, a quota taken here, or a quota taken there. All tariffs have to be removed in the same timely fashion to the same level for each of the countries, so that we are on an equal and level playing field. We also can't see these tariffs or hindrances being put on one country over another for such things as our health and our practices, so we need a standard. We would like to see it go under the OIE standards, and that way there is a set field and a set of guidelines that we all follow.
We also feel that it's very important that any decisions made must be science-based. We know that with emotion and with the quickness of media travel, some get the wrong interpretation or the wrong feeling or the wrong idea about some of what comes forward. So we must make sure that all decisions on the trades that are made, the deals that are made, and the standards going forward are based on science so that we're also on that equal playing field. It can only be beneficial that we are all on that equal playing field.
There must be a single agreement so that we include all the countries. I believe there are 11 or 12 right now that have signed up, and we know there are more to come. It wasn't beneficial to us really until we started seeing the likes of Japan coming online. Vietnam is very important to us, but Japan and Korea—which we have indication will probably sign—make it extremely important to us.
With the partners currently at the table, it's very important that we be part of it. To be outside of that circle would be a detriment as well. If you're not totally in agreement with the deal, that's one thing, but if you're outside of it, you have no say. So we feel it's very important to be part of the negotiations and part of the partnership.
B.C. is going to benefit from any agreement that it makes with any of the Pacific trading partners, and a lot of that is due to our proximity. It's due to the other products that we're marketing. The lumber industry, for example, has had great successes in China, and we know the value and the population base that we have to work with. It's extremely important for us in the beef industry to get that investment now so they can start to prepare and make their alliances so they can have some food security in the future. It's very important to us to be able to supply that.
With the growing need to produce safe high-quality food to supply a global demand, it's imperative that we be at the negotiating table, but it is equally important that we make the right deal. The agreements reached here will mould our agricultural production and its economic impact for Canada for our future generations. The long-term effects must be carefully considered in the negotiations, but the opportunity to expand our trading markets is before us and we need to take advantage of it.
With that, I'll conclude my presentation. I thank you once again very much for the opportunity and I look forward to questions. I find that's the best place to actually get the real opinions out. Thank you.
Thank you, Chairman Merrifield, ladies and gentlemen.
I'm going to be speaking today on the TPP and Canada's offshore wood product exports.
Quickly, I just want to tell you about the Canada Wood Group. We are an association of associations and we represent 10 regional wood product associations in Canada based in the Maritimes, Quebec, Ontario, Alberta, and British Columbia.
Our members export lumber, panels, engineered and value-added wood products to world markets. The organization provides market access and promotional support in target countries.
We receive support for our activities from Natural Resources Canada, a number of provincial governments, and matching dollars from the forest industry. We have offices in Europe, Japan, Korea, and China. We'll soon be active in India. We work closely with DFAIT and Canadian posts in many countries.
I should emphasize that the Canada Wood Group does not have a mandate to work in the United States. I'm joined today on behalf of B.C. producers by Mr. Ric Slaco who represents the B.C. Lumber Trade Council, which handles U.S. trade issues. So, if questions arise during the question period, Ric will handle those.
Like Mr. Boon who made, I thought, some compelling comments on market diversification, diversification for the forest sector has been critically important in recent years, especially given the slowdown we saw in the U.S. We also have a similar situation, interestingly like beef, where we have complementarity of products and markets. So, it's important to spread your product across many markets and in so doing maximize value and sales return.
In terms of the current participants in the TPP discussions, the United States, Japan, New Zealand, and Australia are long-standing and valued customers for Canadian wood products. By value, year-to-date, November 2013, the United States represented 65% of softwood lumber exports from Canada, with Japan at 12%, and Oceania at three-quarters of a per cent.
Canadian industry has expectations that countries like Malaysia and Vietnam hold promise going forward as new markets for softwood lumber. Although current sales are negligible, shortages in traditional supplies of tropical hardwoods and a relocation of manufacturing facilities to these countries from places like China and other higher-cost locales suggest that Canadian exports will grow to those countries.
The remaining members of the TPP group at the present time represent small customers for our industry and we don't have great expectations for increased business. I should note that the U.S., Chile, and Oceania are competitive exporters with vibrant domestic force sectors selling into world markets competing against Canada. In fact, Japan has a growing domestic capacity driven by expanding homegrown log supplies and aggressive government incentives.
When we look at some of the potential future TPP participants, there are a number of countries that we would view, if they acceded to the TPP negotiations, as a very positive development. China, as has been mentioned, is a very significant new customer for the Canadian wood products industry at close to 19% of export value, November 2013 year-to-date.
We believe that Canada's trade with China in wood products will continue to expand and diversify product-wise. Taiwan and Korea both represent approximately 1% each of 2013 exports and there's definitely room for growth. India and Indonesia fall under the same category as Malaysia and Vietnam, little sales as yet, but circumstances like changing fibre flows suggest that opportunities will emerge.
When we look at specific issues that are going to be addressed under the TPP negotiations, I would echo Mr. Boon's comments on tariffs. Wood products are subject to fluctuating exchange rates and relatively thin profit margins. So the export potential for Canadian wood products are very dependent on import tariff levels.
Where level playing fields have existed for all international competitors, Canada has shown it can compete. However, differential tariffs such as those presently existing in South Korea, as a result of the passage of the 2012 U.S., 2011 European, and the 2011 Chilean free trade agreements, can place Canadian exporters at a disadvantage.
Therefore, tariffs need to be addressed in any negotiation, and especially in those circumstances where Canadian producers could be exposed to higher levels than their competitors.
We also are subject to and affected by a number of technical barriers to trade. These include things like phytosanitary barriers. These are ostensibly erected to prevent the movement of invasive pests and diseases and are often well justified, but frequently they are unnecessarily robust or used as a trade barrier by some nations.
Product standards and building codes are also potentially an issue. As a prerequisite to get Canadian products accepted for approval in structural building applications, it's usually necessary that our products be included in foreign standards, or ideally, that we get direct recognition of Canadian product standards by import countries or customer countries. However, some countries insist on foreign products meeting their own standards, regardless of whether or not the product has been demonstrably fit for the purpose.
Conformity assessment systems refer to third-party certification of product quality and conforming to the standards to which they're manufactured. Canada has sound and very well-regarded systems for quality certification of solid wood products. These systems are recognized in many markets and accepted in their own right as assurances of product performance. However, some countries impose their own conformity assessment requirements on imports, which are usually duplicative and ignore Canadian marks of conformance. Therefore, wherever possible, we should strive to have Canadian conformity assessment systems and standards directly recognized to minimize cost and maximize flexibility.
With respect to environmental reputation, many countries are sensitive to environmental concerns and strive to implement sustainable solutions and use green building materials. Canada has an excellent story to tell in this regard. However, not all countries ascribe a positive role to wood in building or as a material. Therefore, every opportunity should be taken to advance Canada's image as a credible, sustainable supplier of wood products and to support the case for wood as an integral element in green building solutions. These barriers exist to greater or lesser degrees in most TPP countries. If possible, efforts should be taken to minimize the effects of these barriers and achieve recognition of existing Canadian systems where possible.
Existing TPP countries account for at least 78% of Canada's softwood lumber exports to world markets. When you add aspirant nations, real and potential TPP states represent close to 98% of Canada's current exports of softwood lumber, which was valued in 2012 at $5.8 billion. Therefore, what happens in terms of TPP trade provisions that address tariffs and quotas, barriers to trade, procurement and competitive policies, and environmental requirements matter enormously to the wood industry.
Some suggestions that we would have for Canadian negotiators include provisions that limit the ability of countries like Japan to introduce preferential purchasing policies linked to incentives that favour the domestic industry. An example of that is the forestry agency's current wood-use points program, which represents a significant threat to Canadian market share. I've mentioned already acceptance and recognition of our conformity assessment schemes and product standards, and I've also mentioned environmental credentials and the potential for wood as a green material.
Again, we see some situations—Korea perhaps is the most outstanding—where our exporters are at a disadvantage, so negotiations within the TPP, but also within Canada's EPA with Korea, will be critical in levelling the playing field with other countries.
In closing, the Canadian forest industry greatly appreciates the work being done by our government to negotiate and put in place free trade agreements and trade deals. These agreements enable industry to perform commercially and bolster the export side of our business, which is a critical driver in the improving fortunes of the sector.
Thank you very much for the opportunity to appear before you today.
Thank you, members of the committee, for having me here to share some ideas with you again,m and welcome to Vancouver. We arranged some good weather for you.
I'll make some comments on the TPP from a strategic Canadian trade policy perspective. I'm not able to comment on the details of TPP. We don't know much about the details, but I think there are some important considerations for us to look at, even without knowing the details of the negotiations so far.
The first strategic point to make is that Canada has yet to conclude an FTA with any Asian country. We are an outlier compared to most of our industrialized country competitors, certainly in the G-7 and the OECD, and that puts us at a competitive disadvantage vis-à-vis countries that do have trade agreements with Asian partners. The best example of this competitive disadvantage is in the case of Korea, where we have been negotiating—as you all know—coming to nine years now. In the meantime, we have been overtaken by the United States and more recently, by Australia. Both of those countries now have margins of preference, particularly in the cultural sector, that put our exporters at a disadvantage.
So the issue of the TPP should be seen in the context of our trade position in Asia as a whole and our relative disadvantage in Asia because we do not have any agreements to date with Asian countries.
What I'm trying to say here is that TPP is a very big game in the formation of trade agreements in the Asia-Pacific. It's not the only game, and we need to keep all of our options open and to continue to pursue trade agreements bilaterally with existing negotiations, as well as perhaps with new trading partners in Asia with which we have not yet embarked on free trade agreements.
The second point I want to make is a general point, but one that really has to be reiterated, which is that FTAs in general terms, to the extent that they are generally about opening markets and lowering barriers to trade, increase economic welfare for all parties concerned, even if there may be relatively little competitive gain for one economy over another. That reason in itself—the gain in economic welfare for all the players—is an important reason to liberalize trade. We should pursue the opening of markets even if the relative gains for our economy vis-à-vis our competitors may not be so great. The efficiency gains, the productivity gains, the consumer welfare that's generated by more open markets, is a plus for all of the players.
The third point is that, from a narrower perspective about competitiveness, the game is not about overall economic welfare, but it is about preferential access. This is a different kind of calculation we need to make when we pursue free trade agreements. Basically, that game is about gaining preferential access for us and not having others get preferential access. We want a trade agreement with an economy where others don't have a trade agreement so that we have those margins of preference. As I've already said, on that game we are losing because we don't have agreements in Asia whereas some of our major competitors do.
In this sense, the TPP for Canada is, I think, essentially a defensive play for us. As it turns out, we already have a trade agreement with a number of the TPP members-—most notably the United States, but also with Chile, Peru, and Mexico. Certainly the United States and Mexico, two of our more important trading partners, are already within Canada's preferential trading arrangements.
For us to not be involved in the TPP would run the risk of other members of the TPP gaining access to those markets that would erode our preference, that would erode the advantage we have. It's important for us to be at the table, if nothing else to protect the preferential access that we have in existing markets and also to gain new access to markets that we currently don't have trade agreements with.
The TPP has been described as a 21st-century trade agreement that will not only look at traditional market access for manufactured goods and agricultural products and services but will also talk about some new generation issues. This is where we have not much information, but this committee, and I think Canadians, are right to pay special attention to the types of provisions that are negotiated in the areas of IP, e-commerce, and to some extent state-owned enterprises.
The traditional beliefs about opening markets and liberalization in terms of goods and services do not apply quite so simply when it comes to intellectual property and e-commerce. It's important for Canada to take a position on those issues that genuinely advances Canadian interests, and not just the interests of the countries that currently are the leaders in intellectual property and e-commerce that will entrench the strength of the incumbents and make it more difficult for developing economies. It's also for Canada to gain strength in the areas of IP and e-commerce.
So my caution on the new generation issues is that we not treat them as ancillary, but really as central to the value of the TPP for this country.
My final point, ladies and gentlemen, is that the TPP must not be about excluding China. There has been a notion for a number of years that the point of the TPP, being driven so hard by Washington, D.C., is in some sense to provide a buffer against China's rise and perhaps to try to force China into a position that is closer to western market economic approaches. At one time China also saw it in this way, and felt that it was being left out of the TPP, but more recently we have heard very encouraging signals from Beijing that they in fact want to be part of TPP and may well consider submitting an application to join.
What we are hearing now is some resistance on the part of the United States—to not let China be part of the discussions, and to create a number of preconditions before China is admitted—but I think Canada should take a position to welcome China's participation. It would in fact bring them closer to the economic system that we are familiar with, and it would avoid creating a rift, or a line, if you will, down the Pacific Ocean.
Even better, if we still have the opportunity to negotiate bilaterally with China on a free trade agreement, as the Chinese offered to us over a year ago, we should take up that offer.
Thank you very much.
Yesterday I spoke here on the CETA agreement and you understand the impact it has on dairy. I want to reiterate that, to put it on the record that the CETA agreement has presently increased CETA's access of cheese to close to 16,000 tonnes extra now and that is effectively doubling the current EU access.
As a local dairy farmer and on behalf of the people I represent, we're proud Canadians and we're proud of the industry that we've built. We stand second to no one in the industry when it comes to quality, the types of products we produce, and I think as Canadians we can be proud of that. To have another threat with the TPP and I'm not sure if it's going to be a threat, but when it comes to the supply management system we'd like to keep it intact in its present form. CETA has taken something from us already and we don't want the Trans-Pacific Partnership agreement to take any more.
To speak personally here, I'm not against trade. I think trade has to be fair and equitable. I think what the government is doing is wise and it's smart to be part of the Trans-Pacific Partnership, but I think what we've given up already in dairy is enough. I think we have to recognize that. This next round of negotiations is going to be very difficult because the Oceanic countries are going to be knocking on the door wanting to get into our market.
On that note, I want to emphasize the three pillars of supply management. One of those is the production management, the discipline we have in this country—we take care of the surplus. There's no government support. There is no cash outlay by the federal government, unlike the European Union where there are close to 40% subsidies. The American system...we knew with the farm bill that if it didn't pass, the price of milk was probably going to double to the consumer. There is obviously some sort of subsidy program that they have down there.
The other thing is the predictable imports. I mentioned yesterday when I had that glass of milk here and in that glass of milk a processor will fractionate those products down, whether it be here or Europe or in New Zealand or Australia and then they'll try to circumvent the rules of the imports to come into this country. The foundation of supply management is the predictability. As dairy farmers we know what a milking stool is and I think most of the people in this room know what a milking stool is. Years ago we had a lobby day and we would go out and give each and every MP a milking stool, but it was a card holder. The thing about that milking stool is it tips over if the third leg or any of the legs are cut off.
That's the analogy I want to use when it comes to the three pillars. The production management, the predictability of the imports, and the pricing mechanism that we establish under government regulation in this country give us a fair and stable price and no cost to any of the consumers through subsidy dollars to the federal government.
As the TPP moves forward, we in this industry would like to see no further impact on dairy. We would like to see, obviously, more access to other countries, but as I pointed out yesterday, we are in a trade deficit obviously. But if it means no access to gain our market and control of our market, it would probably be better to have a very stable market, because the stable market we have within Canada is good right now.
I want to stress the three points again.
We want to keep our industry stable and strong. It doesn't cost the Canadian taxpayers any money. It doesn't cost the federal government any money. The farmers in this country, probably for the last 15 to 20 years, have never derived any subsidy dollars from the federal government. We derive our funding, our costs, our income through the marketplace. We're proud of that fact. There are not too many farmers in the world who can say that. We'd like to have that continue, and we want to grow our domestic market.
I pointed out yesterday, with the CETA agreement, that these people have access, the additional 16,000 tonnes, to get into a market that we've established, or we've tried to establish through advertising programs, through incentive programs, new development programs. There are programs that we have within the dairy industry whereby if somebody wants to start in the industry in the processing sector we give them a special quota to allow them to develop their new products, to get it online for a period of two or three years before. We're helping people in this sector develop new markets, develop new products, and move forward.
I want to close by saying that I really appreciate the fact that you allowed me to speak here. I really appreciate the fact that I'm speaking on behalf of our industry. This goes on record that we believe that our industry is a very strong and viable industry, it is a very prosperous industry, has no direct costs from the federal government. I think I can't stress that enough.
The other thing is that supply management isn't what it was 25 years ago. We are constantly evolving. We are evolving maybe slower than some people wish, but as I speak right now, in Ottawa right now, there are discussions taking place on new pricing mechanisms, on new ways of allocating quota. These things are happening all the time. Our industry is not standing still. It's maybe not moving forward fast enough for people, but it is not standing still. It is not an archaic system. Some of the MPs and the Minister of Agriculture clearly say that we have to modernize supply management. We are doing that. We've consistently done that, maybe not as fast as people want, but I want to leave you with the note that we are moving forward. If the words “modernization of supply management” is the term that people are comfortable with, we are doing that today.
Thank you very much.
Thank you for your comment, and thank you for reading my writing. It's good to know that somebody is.
I make a distinction between having economic goals as part of our foreign policy objectives and coming up with tools to achieve those objectives that can go beyond economic instruments. It's understandable that we are driven largely by economic interests, and our Asian counterparts understand that. However, the way in which we achieve our economic objectives has to be done through a variety of measures. For example, we need to have a very strong diplomatic presence and a strong political security presence in the region where our partners understand that we are there not simply for our economic benefit, but for the peace and security of the region and the advancement of development goals, particularly in the developing countries.
A great example, I think, would be in the area of international education, where the government, of course, is making some moves to strengthen two-way movement of students. This is not simply about a commercial initiative where we gain more dollars from foreign students who pay high fees at our Canadian schools. It is about building long-term relationships, institutional partnerships, research partnerships that will benefit both countries in the long term.
On your specific question of taking part in regional organizations, I think that it's part of the thinking that I have as well. There are a number of new regional fora in Asia, particularly the East Asia Summit, which is emerging as the premier organization for discussions on political security and economic issues. It's not a trade agreement. It does not have an ostensible commercial objective to it. But we should aspire to join it, because if we are not part of that club of decision-makers on the future of the region, we will be left out of decisions that will impact on our economic interests. I know the government is making some moves to join. We should redouble our efforts and try to find a seat at that table and at other tables in Asia that, as I say, may not necessarily have an overt economic focus.
Thank you, Mr. Chair. Thanks again to our witnesses.
Mr. Van Keulen, welcome back.
Mr. Woo, it's great to have you. Last time, you were at our committee via video conference. We've come to your beautiful community. As a British Columbian representing the interior riding of Kelowna—Lake Country, I appreciate the great work of your foundation, which is helping constituents in my riding as well as around the province, educating people about this most ambitious trade initiative being negotiated with the Asia-Pacific region.
It's important for Canadian businesses to realize that we do not have a bilateral trade agreement with these countries that we're working with specifically, or the majority of them. Australia, for Campion Boats manufacturers, we're at a disadvantage. The U.S. has a bilateral with Australia. I know it's important. It would only be 5%, but that's the bottom line, 5% off a major product such as a boat. It makes a big difference.
Brunei, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, Vietnam—of course, the U.S. is the twelfth partner with Canada in the negotiations at the present time. You talked about the potential of China coming to the table.
It's important also to reinforce the magnitude of the ambitiousness of Prime Minister Harper's vision, with Minister Fast working as the trade minister on the CETA, which covers an area of about 500 million people with a GDP of $17 trillion, and the 792 million approximate population of the TPP partners with a $27.5 trillion GDP. If we're able to secure these agreements, Canada would be the only country in the world that would have a comprehensive trade agreement with 75% of the world's GDP. It's an incredible legacy that can come together. I know it's very ambitious, and I understand that lots of discussion has to take place.
Picking up on my colleague Mr. Davies' comments—I appreciate your foundation's work; I've read some of the work—you've made some excellent suggestions on how we can help the majority of Canadian businesses get engaged and take advantage of these trade agreements. As you know, British Columbia is working with the U.S., who is still our number one trading partner and biggest ally and will continue to be.
But what are some of the ways your foundation is...? I looked online. You have some seminars coming up. Maybe you could share how we can work together to educate British Columbians and Canadians about the opportunities that present themselves.
I apologize upfront that I speak extremely quickly, but everything is written down in case you need it.
Good morning, and thank you for the opportunity to contribute to the TPP consultation process.
Here's a bit of background about the B.C. Agriculture Council. We are the province's umbrella farm group, so commodities such as blueberries, strawberries, and dairy all belong to the BCAC as its umbrella group. We're a council of commodity groups and through our members we represent 14,000 of the 20,000 B.C. farm families who in turn generate 96% of the farm-gate receipts in British Columbia. Agriculture is the third largest resource sector in the province, playing a significant and important role in the overall provincial economy.
The farmers represented by BCAC include those focused on international export opportunities, as well as those focused on supplying the domestic market. We understand that trade is a complicated discussion, especially as it pertains to agriculture. Our hope is that Canada will continue applying a balanced approach to agricultural trade negotiations. BCAC fully supports Canada's pursuit of bilateral and multilateral free trade agreements. We are also pleased with the assurances made by the federal government to continue supporting supply-managed commodities and defending our supply management systems in trade negotiations.
Primary agriculture differs from other industrial sectors. Individual farmers, not large integrated corporations, are the main drivers of this industry. We overcome diverse challenges to produce high-quality food for both domestic and international customers in a financially and environmentally sustainable manner.
A lot of my points today will be echoed by the CFA, the Canadian Federation of Agriculture, but I'd just like to point out a few that pertain to British Columbia.
On basic trade policy goals, the BCAC supports the following general trade policy goals that apply to the TPP: working towards bilateral and regional trade agreements that strengthen trade ties with key customers for Canadian agriculture; securing outcomes that benefit all Canadian agriculture by maximizing export opportunities and ensuring trade rules that allow for the maintenance of an effective supply management system; eliminating all dumping and export subsidies in agriculture; preserving farmers' rights and government's ability to enable, design, and operate marketing boards and orderly marketing systems necessary for the stability and profitability of Canadian agriculture; and allowing for domestic programs to ensure the stability and profitability of Canadian agriculture. I believe our safety net programs often come up on the table during these discussions, so we'd like those to be protected.
We also support recognizing that agriculture has evolved differently between countries, resulting in each country having its own unique sensitivities; and ensuring that one commodity is not traded off to enhance the interests of another commodity, nor that agriculture is traded off in general for another industry sector. We get enough of that at home, so we don't want to see it internationally.
Trade negotiation strategy is of course what our negotiators are going to be developing, but one thing to remember in Canada is that we're not the only country with sensitivities. Some of these examples, as you have found out recently and have been dealing with, are the U.S. position on sugar, dairy, textiles, and other commodities; and New Zealand's strict sanitary and phytosanitary measures that restrict access, including for the importation of fresh and frozen pork and poultry, essentially making these products prohibited. New Zealand has also made it clear it will not permit TPP disciplines on intellectual property that interfere with its pharmacare program.
One issue we do have, especially with our organic producers, is reciprocal standards. It's not just organic, but it's how we define and how we standardize here in Canada that we would like respected. Canadian commodity groups have implemented numerous on-farm certification programs related to food safety, animal welfare, environmental measures, etc., to address regulatory requirements. As these gate-to-plate programs increase the cost of doing business, Canada must ensure that in assessing equivalency, imports are produced under equivalent certification programs and regulatory requirements.
One thing that we're also looking for in agriculture, for those of us who do a lot of direct marketing, is to have that marketing structure—I keep using the term respected, but not lost in the negotiations. There are a lot of different ways people sell all over the world...to actually not have any of that restricted. I know there will be a question coming on that, which Deb will answer.
I'm not sure if anyone has brought up a dispute settlement mechanism. We do have some domestically, but I don't think we have any internationally at the moment. That's very important. It will be an integral component to any well-functioning trade system. BCAC supports a more effective and transparent dispute settlement process that ensures a timely outcome and payment.
As exporters we've run into non-tariff barriers in agriculture for decades. Something may not be written down, but something is underlying, especially for organic and for greenhouse. Again, it goes back to proper labelling. The greenhouse sector right now is fighting with the term “greenhouse growing” for peppers and tomatoes because in some countries they're just putting shade cloth over top, field growing them, and then calling them greenhouse and asking for the additional premium.
The proper labelling standards, including the labelling of country of origin, help ensure that consumers are provided with sound, factual information about the product they are purchasing. However, such labelling should not be disguised as a means to modify the conditions of competition between imported and domestically produced products.
I believe Mr. Woo also covered intellectual property rights in his presentation. We're also looking for trade and labour standards. Trade agreements must incorporate the recognition of basic human rights and labour standards as integral to the social fabric and economic development of a nation.
In conclusion, the B.C. Agriculture Council supports Canada's pursuit of trade agreements that benefit all Canadian agriculture, maximize export opportunities, and allow for maintenance of an effective supply management system.
We're looking forward to some questions.
I'd like to thank you for this opportunity to give you a brief overview of the B.C. blueberry industry and our support for the Trans-Pacific Partnership.
B.C. Blueberry Council represents close to 800 growers who produce 96% of all the highbush blueberries in Canada. We are the largest producing region in the world and growing at a steady rate. Production from the 2013 season is estimated to be approximately 120 million pounds, of which over half is exported outside Canada. Blueberries are the number one fruit exported out of Canada at this time. The B.C. blueberry industry had initially exported produce, outside of domestic consumption, mostly to the United States of America, but has expanded to various global markets over the last 10 years, including several of the countries involved in the Trans-Pacific Partnership.
In 2012 we exported 2.5 million kilograms to our second largest export partner, Japan, and 401,000 kilograms to Australia. Currently, we ship processed blueberries to South Korea while waiting for Canada and South Korea to conclude negotiations for fresh market access. In 2013 the B.C. Blueberry Council extended our long-term international strategy to include the emerging markets of Malaysia, Vietnam, and Singapore due to the interests from those markets.
One of the new challenges our industry has is the higher tariff rates compared to other blueberry producing countries. Prospective buyers comment that they see Canadian blueberries as a quality product, but the difference in cost due to these tariffs is prohibitive. This has been very evident in South Korea where Canada was building some growth and it was coming along quite nicely. Canadian product was being recognized as one to look at, but when Chile and the U.S. reached their free trade agreements, our sales plummeted due to a 30% to 37% difference in tariffs.
In closing, the B.C. Blueberry Council supports the negotiations of the Trans-Pacific Partnership to help sustain our industry to be a healthy Canadian trade partner in the future.
Thanks. I'll temper my comments between my personal opinion and that of the BCAC board.
When it comes to labelling, the two industries that it's affecting the most right now are greenhouse vegetables and organic. Organic is concerned about labelling and also GMO. They're concerned about GMOs being allowed into Canada and therefore mixing, if your will, with their crops, making their crops unavailable for registration as organic. They see it as quite devastating if it's allowed in, say, with the GMO apple, the Arctic apple, I think it's called. They're concerned about having that come up into your region and having cross-pollination with domestic apples.
So I think organic is very specific. They document how things are grown, where they come from, where their plants come from. They're all non-GMO. Their concern is that there would be a muddying of the waters and they wouldn't be able to certify.
Ray is also an organic chicken producer, so he can answer that on behalf of chickens.
Labelling? Sorry, you had a third question, GMOs? GMOs may save the world one day. We don't know yet, but science will save it.
I'll pass it over to Ray.
Contrary to...we don't grow them in ditches either. I just wanted to add that point.
I just wanted to tie up a couple of loose ends. One was the question by the vice-chair about why tariffs were set in the first place with the demand that's there. The demand came after.
The tariff was there as a trade barrier because they did want to protect fledgling domestic product. Unfortunately, most of these countries found out they could not grow blueberries at the level that we can, and certainly never enough for their own domestic supply—not even close, you're talking drops in the bucket. In China, say, you would have to take thousands of acres of land out of other food production to put into blueberries, because they don't have the water, the pH, the soil, and the temperature all in the same place to grow blueberries like we can. They've come to that conclusion, that's why. They've had a taste of this particular product and there is more demand for it. That's why now it's up to us to start removing those trade barriers, non-tariff barriers, and work towards getting that tariff down to zero.
Chile also tied their agricultural products to their resource products, so a lot of minerals, metals, went to China. But the agricultural products that went in with that are now zero-rated.
If Canada could tie a few more things up with our agricultural products, that would be great.
Good afternoon, and thank you very much for giving me the opportunity to speak today.
By way of introduction, I'll just say that I'm the president and CEO for the Centre for Drug Research and Development, which is Canada's fully integrated national drug development and commercialization centre, supported in part by the federal government through the CECR program, which is the Centres of Excellence for Commercialization and Research program out of the NCE group.
Trade agreements like the Canada-EU CETA, which this committee has been actively engaged in, and the Trans-Pacific Partnership, both offer policy-makers the opportunity to support Canadian research and innovation, and the Canadian commercialization of research, while benefiting Canadian patients and creating jobs. In order to explain the importance of this link to competitiveness and jobs, I would like to take a few moments to describe how our organization fits within the Canadian research enterprise, and the use of it as an example as to how it relates to the discussions on TPP and CETA as well.
The mandate of the Centre for Drug Research and Development, firstly, is to de-risk discoveries stemming from our publicly funded health research and transform these technologies into viable investment opportunities for the private sector, thus successfully bridging the commercialization gap between academia and industry, and translating research discoveries into new therapies for patients. In other words, we de-risk and make investable these technological assets.
Canada is among the world leaders in academic health research in terms of the scale of investment, the quality of the work, and the discovery output. This work is supported mostly through federal government funding, some provincial funding, and then matched private funding, but to a much lower level than we hope to have. But now that we have built this foundation, we risk the return on this investment being realized elsewhere. As we know, in the world of biotech, that is very much the case already. If Canada is to strive for true S and T excellence globally, we need to create an environment that includes the full innovation continuum from discovery through to commercialization, such that the industry critical mass is reached and a self-perpetuating sustainability is achieved.
This shift is not easy. Getting new drugs and other therapeutic products to market has become more difficult with greater associated costs and risks. There is, therefore, a need to support innovation by effectively de-risking new technologies and filling the gaps in the commercialization process, what we call “translation”. To address this need, CDRD was established in 2007 to provide the expertise in infrastructure needed to enable researchers from leading health research institutions to advance promising early stage discoveries forward. CDRD is the only organization in the country and the only one of a handful in the world that has a fully integrated platform. This means that we provide expertise, infrastructure, non-diluted funding, and partnerships to source, evaluate, incubate, accelerate, and commercialize innovative health technologies in virtually any therapeutic area, and stemming from any geographic region in Canada.
A year and a half ago, CDRD also established a commercial arm, the CDRD Ventures Inc., and collectively the CDRD, the enterprise, brings dedicated resources specifically to the commercialization and monetization of high-priority technology assets, which we have successfully incubated. Already this enterprise has proven to be a high-performing incubator and accelerator. In its first six years, the CDRD enterprise has successfully established a network of 40 international and national affiliated institutions. That means from UBC to McGill and Dalhousie, and some European, Japanese, and U.S. high drug-discovery output organizations.
We have built a great innovative pipeline. Over 800 technologies have been evaluated and triaged, so that 125 of those have actually moved forward into incubation. Of these, 49 advanced towards commercialization. To date, within this period, we have actually 49 technologies that are bubbling up. There are three that were out-licensed to the private sector, to biotech and pharma, one which is now advanced into clinical trials. Four new spin-off companies have also been launched.
As a specific example of the removal of barriers and creation of value, one such spin-off is a company called Sitka Biopharma, the technology of which was founded at UBC by Drs. Helen Burt and Don Brooks. The use of this technology is in treating bladder cancer, which is a particularly virulent kind of cancer and very expensive to treat for the health care system. There's been no new drug in the treatment of bladder cancer for the last 25 years, so this a very important technology. We were able to advance it, to take this program, raise $2.5 million, both securing internal and external funding. This critical early stage funding, which we call the first valley of death in our world, was bridged, the technology advanced, a CEO was hired, and a new company established, Sitka. The technology is now moving forward and will go into full clinical trials within the next few months.
Without CDRD, this technology would have not made this kind of progress and likely not seen the light of day. Why I tell you this long story about our organization and this technology is that our ability to successfully have this kind of impact, and to leverage this kind of partnership and create value in research and development becomes severely hampered when we do not have the same ability to protect our IP as our global partners do. To continue to build on our success, it is imperative that policies affecting innovation at all stages of the product development life cycle are, in fact, conducive and in sync to innovation.
The single most critical of all these policies is patent protection, as intellectual property is the primary asset of any innovative company and organization. Canada must therefore ensure that we are home to a national patent protection regime that is equally as strong, if not stronger, as those of our trading partners. Such an internationally competitive intellectual property protection regime is critical to our ability to successfully achieve the vision and mission we share with government and other stakeholders.
It is also imperative to stimulate innovation but this can't be done without the attraction of foreign direct investment to support R and D. In the case of our centre, we have been successful in building partnerships with several of the world's top biopharma companies, which have committed close to $40 million to support the development of our projects and commercialization of these technologies. Without inflow of international capital such as this, we again would have little or no ability, as a country, to successfully take our place on the international innovation stage. It is our belief that an improved IP system will stimulate further investment of this nature in Canada.
Canada aims to be among the world's innovation leaders and as such, the federal government has invested greatly in leading edge research development and training. We applaud and value federal and provincial efforts in this regard. We feel that we must do more to nurture innovation at other stages of development as we continue to lag behind in innovation globally. We are losing ground, internationally, in many metrics.
We believe that improving our IP regime is a step in the right direction and that there are a number of areas that will be assisted by these changes. The first area is that we need to do better in developing IP here in Canada and keeping it here. Indeed, a number of reports released over the last several years concur that a misalignment of policy to fund this research, only to have it commercialized elsewhere, where the environment is more conducive, is not helpful to return on investment. When it comes to R and D and its commercialization, global borders are very porous and we must, therefore, ensure that the innovations remain in Canada as long as possible so that we may add as much value as possible.
The second area we need to do better at is providing job opportunities for our graduates, especially those in science, technology, engineering, and math, or the STEM fields. The commercialization of discoveries is where those jobs come from. Training is one of the core pillars of what the Centre for Drug Research and Development does. As such we have trained over 110 science students over three and a half years with multidisciplinary industrial drug training. Of these 110 graduates, 92% have found jobs in their field in this sector. Without an environment where industry can flourish, these trainees will have no option in the future but to find jobs in other countries.
The third area in which to improve our track record is private sector investment. By way of example on how we could foster international inflow of innovation and capital, in January of last year the Centre for Drug Research and Development led the founding of a global alliance of leading drug discovery and development centres, an association of top-pier translational research organizations including MRC Technology in the U.K., Cancer Research UK, Lead Discovery Center at Max Planck in Germany, CD3 Leuven in Belgium, and Scripps Research Institute in Florida to share infrastructure and best practices and work collaboratively to support and accelerate the conversion of early stage technology into commercial investment opportunities.
Through this alliance the CDRD-CVI also has strengthened the mechanism to attract new foreign technology, innovation, and global funding through the Horizon 2020 funding as opposed to the former paradigm of made-in-Canada discoveries often leaving the country to be commercialized elsewhere. We see these types of relationships as potentially being furthered through the Trans-Pacific Partnership and other such trade agreements. We have to play a global role in a globally competitive environment.
In conclusion it is our hope that the TPP proceeds and is ultimately executed in a manner than ensures that IP in Canada enables the attraction of foreign capital for R and D, creates new Canadian companies, and is found in the most innovative and robust technologies, thus creating jobs for our brightest and best here in Canada.
Thank you for this opportunity to present before the committee regarding the Trans-Pacific Partnership agreement. I'm Steve Anderson, the executive director of OpenMedia.ca.
Founded in 2008, OpenMedia.ca is a community-based, award-winning civic engagement organization working to safeguard the open Internet. We work to bring citizens' and innovators' voices into the digital policy-making process.
OpenMedia is probably best known for our stop the meter campaign that engaged over half a million Canadians to stop meter billing in Canada focused on telecommunications prices. It was the largest online campaign in Canadian history.
In addition to our civic engagement work, we also regularly participate in policy processes and produce public policy reports and recommendations. Many of our recommendations, in particular regarding telecommunications, have now thankfully been adopted as official government policy.
One of our top concerns at the moment is the IP chapter in the Trans-Pacific Partnership agreement, specifically copyright within the IP chapter.
We're working with hundreds of thousands of people in our own trans-Pacific network of public interest groups and web businesses to push for and encourage a balanced copyright provision in the TPP. We are working, as I said, in our own crowdsource process to develop copyright rules that we feel are more befitting of the 21st century.
Our concern with the TPP is focused on the intellectual property chapter, as I mentioned, and its potential limitations on free expression online, commerce, and access to knowledge.
Over 135,000 people have signed on to a campaign that we've run reflecting these same concerns. These concerns are echoed by Canadians and I have, in a sense, crowdsourced this presentation for you today. I asked Canadians online over the last week to let me know what they think I should say, and I did my best to incorporate their input into this presentation. Throughout the presentation, I'll mention a few direct comments that people sent in to me.
The Canadians I heard from were broadly critical of the TPP and their concerns fell roughly into three main categories: the restriction and even censorship of expression in commerce; concerns about the TPP's implications for personal privacy; and thirdly, what many deem as the secretive, closed, and undemocratic TPP negotiating process.
Starting with the first concern—the implications on expression in commerce—Canada took 10 years, as I'm sure many of you know, to pass our copyright policies in Bill . When I attended a TPP negotiating round in Auckland, I asked our own TPP chief negotiator if she would commit to uploading our copyright law and not overriding it through the TPP process. She refused to make that commitment.
Generally, I don't think Bill is exactly how I would have written it, but I think it's a reasonable compromise. But if we get into some of the specifics of the TPP that have been unfortunately revealed through leaked documents, I think we can start with digital locks or technological protection mechanisms.
The U.S. proposal in the TPP would increase the penalties for circumvention and restrict the ability for Canada to create new digital lock exceptions.
On the issue of digital locks, a woman online, named Monica, wrote into our process, and I want to convey this to you today. She said that as part of the special needs community, she wants to be able to continue sharing resources with others without fear of sanctions. As a community, they are often isolated, and without the Internet, they would be even more so. So the TPP threatens to limit the flexibility and exceptions on copyright that those with disabilities depend upon in their use of technology.
According to leaked documents, the TPP would also remove our relatively fair, I would say, notice system for dealing with those accused of copyright infringement. Instead, they would create new, costly liabilities for online service providers and ISPs. This increased cost for Internet service providers will result in Canadian consumers paying more for telecom services. As I'm sure you're aware, we pay some of the highest prices in the industrialized world for telecom services, and increasing fees is the last thing Canadians need right now.
The new business costs could knock independent Internet service providers—the smaller players—out of business and remove choice from the telecom marketplace. The liability costs could also add a barrier to entry for online entrepreneurs that are increasingly critical to our economy.
In short, if this U.S.-backed TPP-ISP liability proposal is adopted, it would mark a major step back for the government's commitment to lower telecom prices and improve choices.
Just to make this a little more concrete, on a daily basis countless photographs and other content are shared through new innovative services that are fundamental to our thriving economy. These services are also threatened by these new liabilities and regulations proposed in the TPP. One example of one online service provider is Vancouver-based HootSuite, which in August raised over $165 million from investors, marking the largest private placement for a privately held tech company in Canada. Another example is Ontario-based e-commerce platform Shopify, which passed the $1 billion evaluation mark this December; and then let's not forget Toronto-based Tucows Inc., which is the world's largest publicly traded domain name registrar.
These companies are threatened by this new liability that will be in the TPP, if it goes through as the U.S. is hoping it will. Do we really want to threaten to burden these budding businesses with new costs and regulations? Do we want to create a new cost that prevents the next HootSuite or Shopify from starting in the first place? Furthermore, as everything from our cars to our fridges are connected to the Internet, these proposed liabilities and costs fundamentally threaten to create red tape for a dizzying array of services. The new liabilities could be particularly damaging to the emerging Internet-fuelled sharing economy that is currently driving value across a range of sectors.
According to the Information Technology Association of Canada, the national Internet economy accounted for 3% of Canada's gross domestic product in 2010, compared to an average of 4.7% in the United States. It's estimated that ratio will become more out of balance if we don't take action to invest in our digital economy. We simply cannot afford to add new red tape and costly regulations to online businesses and commerce, while increasing telecom costs for Canadians.
Increasing ISP liabilities is also a threat to individual expression online. According to IP experts the TPP proposals could result in ISPs taking down and even blocking content based on accusations. In short, the TPP represents a regime that could amount to widespread Internet censorship. One commentator online had this to say on the topic:
Censorship of any kind is undemocratic. It has no business in our society and we should actively DISTANCE ourselves from such heavy-handed policies.
Here is the fundamental point. There's no way that increasing online liabilities as proposed in the TPP is in the national interest of Canada. Old media conglomerates in Hollywood have no problem pushing for policies that will hold back the Canadian economy or free expression, but legislators surely should.
Beyond new service liabilities, there's also concern about the TPP criminalizing common activities that involve small-scale and often accidental copyright infringement, such as sharing a recipe online. According to intellectual property experts and Professor Sean Flynn, the U.S. TPP proposal would severely increase penalties for copyright infringement even when done without commercial intent. He notes that we could even be looking at controversial copyright cases in the U.S. where teenagers and their mothers have been required to pay big record companies hundreds of thousands of dollars for copying music for personal use.
Canadian copyright law now includes an important distinction with respect to statutory damages as it features a cap of $5,000 for non-commercial infringement.
As it stands, we already have copyright trolls trying to use copyright litigation as a business model. Under the TPP, damages could skyrocket. We could see many more of those court cases and we could see Canadians much more timid and fearful online.
I'll move on to the implications for personal privacy. Experts argue that the provisions put forward in the TPP as seen in the drafts would force ISPs to monitor and police their online activity. As discussed above, Internet service providers would now face a financial risk if users infringe on copyrights and thus be compelled to monitor our online activity.
Adding to that, ISPs can be compelled to hand over our online subscriber information based simply on an accusation of infringement. Those who sent me comments on privacy implications of the TPP were vociferous. One commenter said, “I am completely against all of the Internet restrictions, monitoring, policing and enforcement provisions of the TPP. It will only serve to restrict and reduce Internet use in Canada and is a direct invasion of my personal privacy. I will actively campaign against any political party that signs this agreement next election.”
In the most recent TPP leak there were over 900 brackets and Canada was, thankfully, seen to be on the opposing end of many of the efforts of the U.S. What that says to me is that I certainly will know and I'll be letting Canadians know if the government does cave to the U.S. demands. The most recent reports show that there are landing zones that have been established. But have our negotiators caved to the U.S. interests in those landing zones? We just don't know and I think that's a serious problem, which leads me to process issues.
It is an important one. I don't want to underestimate the importance of this issue. As you know the TPP is being negotiated in secret behind closed doors and we only know the details because of a leaked text. Many commenters wrote in about the secrecy issues. One of them said, “These kinds of decisions need to include the input of the general public, not made behind closed doors.” Many people talked about transparency. In response to this closed process, OpenMedia.ca is organizing a crowdsourced process of our own. That's also part of the reason why I tried to encourage citizens to write to me about my presentation today. I think there are a couple of reasons for that.
One is that getting direct public engagement creates better output and ideas than a small group of stakeholders. I also believe that our democratic institutions are losing legitimacy and I think it's because there's a democratic deficit in many of these processes.
I and OpenMedia.ca are in favour of trade—open trade policies that are developed with open debate and participation by those impacted by the policy. But we're against agreements made in secret, closed off from the public, especially those that will negatively impact free expression online.
Thank you to our guests today.
Mr. Anderson, you said that in preparation for today's meeting, you put the word out that you were meeting today to whoever follows you, by whatever means you've done that.
I do a weekly email blog—it's actually quite famous in Ottawa, less so in Vancouver—and I do a question of the week. These are not light questions. They vary, depending on the subject. But I find the best I'm able to get is “yes”, “no”, or “not sure” in my responses.
Assuming you have a following, I would be curious to know if you'd be able to say roughly how large it is, how many respondents you have, and how you're then able to flush out the...because I can't read the hundreds of responses I get. My distribution is only 25,000, and I try to read as many of those responses as I can, but I find that very challenging with my other responsibilities.
How were you able to have the inputs to be able to come forward today with your view? I'm sincerely curious about and interested in how you do that.
Let me begin by thanking the committee for giving me the opportunity to express my views today on the proposed Trans-Pacific Partnership trade agreement. This initiative has important public policy and public health implications, which I believe do merit extensive examination. Let me also note that I am here as an individual and not as a representative of Simon Fraser University, where I teach.
I'd like to start by making clear that I am not opposed to trade. We all benefit from trade. My focus is on whether the terms of this proposed agreement constitute a reasonable way to ensure that Canadians—and other parties to the TPP—achieve the benefits of trade in a fair, balanced, and equitable manner.
This committee hearing is also challenging because the full draft text of the agreement is not available. While secrecy is normal in trade negotiations, there is a powerful democratic argument that the public does have a right to know what is being negotiated on its behalf, given the major public policy and health implications of the TPP and given that once ratified, it is almost impossible to reverse. The limited information accessible to Canadians contrasts with the privileged access given to 600 of the world’s largest corporations that have been included as U.S. advisers in the negotiating process.
I believe the Canadian government should engage in a much wider process of consultation to enable Canadians to make an informed choice about whether they support the TPP. Canada should publish the full draft text of the agreement and provide adequate time for full legislative scrutiny and public debate before it considers ratification. It should follow the lead of the EU, which suspended negotiations with the U.S. on a new trade agreement until the completion of extensive public consultations on enhanced investor rights proposals.
Trade agreements are very complex, both in terms of the obligations in individual agreements and in terms of their interaction with other agreements. This makes it very difficult to know, in advance, how particular provisions will be interpreted by dispute panels. Complexity and interlinkage also open the door to costly trade challenges, the prospect of which can chill government initiatives. The increasing number of agreements—we have nearly 3,000 bilateral investment agreements globally and numerous other free trade agreements—also facilitates venue shopping by those who wish to challenge government policies. Dispute adjudication is handled by a small number of trade law experts who may have little background in health, increasing the risk that their decisions may ignore important population health considerations.
The proposed TPP, like other trade agreements, places restrictions on the policy tools available to governments. These restrictions are meant to minimize any policy on regulatory barriers to trade or investment flows, regardless of the actual intent of these policies. Public regulations to protect health or the environment or to achieve socially beneficial purposes can be challenged if they violate trade treaties.
However, there is a long history of public-health-based regulations that have contributed significantly to improving population health. In light of the well-documented benefits of public regulatory capacity, it is essential that nothing in the proposed TPP erode or restrict the ability of future governments to protect public health, or require governments to adopt measures that subordinate public health considerations to other policy objectives. Governments must continue to have the policy tools needed to protect and advance population health, including the policy flexibility to address future challenges.
The scope of the TPP is very broad, as you know, with 29 chapters covering matters such as intellectual property, public procurement, state enterprises, market access, investment, and so on. In the time available, I can comment on only a limited number of issues and will focus primarily on health implications. A more thorough analysis of the impacts of the TPP on population health is clearly needed. I hope the committee will do this.
Let me turn to some of the major health and public policy concerns raised by the proposed agreement. As the committee knows, intellectual property rights—IPRs as they're called—cover patents, copyright and trademarks. The U.S. has advocated stronger IPRs than exist in TRIPS and stronger than those Canada currently provides or may provide under CETA.
The proposals would extend the duration of pharmaceutical patents, that is TRIPS-plus; lock in data exclusivity, further restricting the ability of generics to enter the market; and include for the first time medical procedures, something the U.S. did not get in its recent agreement with Korea. They would also provide additional protection for biologics. If implemented, the changes will increase the time-to-market for lower cost generic drugs and increase the range of life-saving measures that may be patented, making it more difficult to provide affordable medicines and implement universal public drug coverage.
Canada’s past experience with patent extensions has not been favourable. In the mid-1980s under compulsory licensing, prescription drug expenditures represented 6.3% of total health spending. In 2012 they were 13.6% or $27.7 billion. Drugs have been the fastest-growing component of health expenditures over the past 25 years.
A recent analysis of patent extensions in the proposed CETA estimated that this would add between $850 million and $1.65 billion annually to our drug bill. High drug costs adversely affect many Canadians. Many patients do not fill prescriptions due to cost, or use less than prescribed amounts to make them stretch to fit their budgets, risking their health.
The multinational drug corporations promised to increase research and development in return for increased patent protection from Bills C-22 and C-91. The research and development target was an extremely modest 10% of revenues. While reached between 1993 and 2002, it has now fallen to 6% of sales despite the huge increase in industry revenues.
Much of this R and D is not basic scientific research, but rather applied, that is, clinical trials, marketing, and sales research. Almost half of the R and D is funded by federal and provincial subsidies and tax credits. Our ratio of R and D to sales is a fraction of that of other OECD countries.
I'll be quick as I can. Thank you.
Canada’s balance of payments in pharmaceuticals has also deteriorated. In 1987 under compulsory licensing, we had a trade deficit of $334 million. In 2012 our trade deficit had ballooned to $7.6 billion. Once our Patent Act changes were locked in by NAFTA and TRIPS, the multinational drug corporations had little reason and no obligation to locate production, employment, and research and development in Canada.
In light of the extensive evidence of this policy failure, it's not clear how further extensions of patent protection for pharmaceuticals will benefit Canada.
I'm going to jump down the page a little in light of your comments.
What Canada should demand is a clear commitment by all TPP parties to the Doha “Declaration on the TRIPS agreement and public health”, including “the right of WTO Members to make full use of the safeguard provisions of the TRIPS Agreement in order to protect public health and enhance access to medicines for poor countries”.
We should also oppose any proposals that would undermine existing protections for health in TRIPS.
The TPP proposes additional protection for trademarks, an area that's already witnessed numerous health-related trade disputes.
According to the World Health Organization, tobacco kills almost six million people annually. Over 168 countries have signed the 2005 WHO Framework Convention on Tobacco Control, but not the U.S. This treaty advocates numerous regulatory measures to restrict tobacco marketing and promotion, but the multinational tobacco industry has opposed these measures, launching numerous trade challenges to strike down public health measures designed to reduce tobacco consumption.
Canada should be particularly concerned about this. In 1994 we drafted new legislation that required manufacturers to sell cigarettes in plain packaging, based on evidence from the public health community that industry advertising linked logos and images on cigarette packages with attractive lifestyles and thus encouraged smoking. Despite the health rationale, Canada abandoned plain packaging, fearing it would lose a NAFTA trade challenge from U.S. tobacco interests. These fears were based in part on the testimony of Carla Hills, who was the U.S. negotiator representing R J. Reynolds.
We don't know how many Canadians might have stopped smoking had this legislation passed.
Other labelling requirements are also at risk. We see that Philip Morris has initiated arbitration to stop Uruguay from placing graphic images of smoking victims on its cigarette packages. There are several others that I cite in my paper.
Canada must also ensure in terms of technical barriers to trade that the provisions in the TPP be no more extensive than those in the current WTO TBT. This means that we need to have the right to an explicit guarantee for the right of governments to require health warning labels on all such products.
Another area is alcohol, which has numerous health and social problems. The WHO estimates that 2.5 million people die each year from its harmful impacts. The liberalization of alcohol markets and the elimination of restrictions on alcohol promotion have serious health consequences. In 2010, the UN’s World Health Assembly adopted the global strategy to reduce the harmful use of alcohol. However, TPP commitments to regulatory harmonization and easier market access may pose significant barriers to achieving this goal.
Food safety is another—
I'm here today to speak to you from an industry perspective. I apologize that I didn't have notes for you in advance, but I just landed from a three-week trip abroad, and I'm a little disoriented from jet lag. Hopefully you'll indulge me over the next five to ten minutes.
The clerk asked that I perhaps give you a bit of background on Ballard Power Systems. Ballard is a fuel cell technology company based in Vancouver, Canada. We've been in this business for approximately 25 years. Our business is essentially the development of intellectual property, the sale of products and services, and the licensing of some of our technologies to our customers and partners.
To give you a sense of our revenue streams and where they come from, in 2013 Canada made up approximately 10% of our revenue. From a trade perspective, then, 90% of everything we do happens outside of this country, so anything that happens with regard to removing trade barriers to increase competitive forces for us is a very positive move and endeavour, given our reliance on trade for our business.
When I look at our business over the course of the last couple of years, and specifically in terms of market focus, we have four areas of business focus.
Number one is telecom backup power. Here we provide fuel cell solution systems that essentially replace diesel generators as backup power systems for telecom base stations around the world. As of today, we have about 10 megawatts of these systems operating in different parts of many of the countries you're looking at in terms of the TPP, which affects us, because in many of them we have customers who are buying our solution today.
The second key area of business for us is what we term “engineering services”. In this area we help companies who are looking to advance their fuel cell developments. Specifically we work with automotive companies, such as Volkswagen, Daimler, and others, who are looking at various things in terms of moving ahead their fuel cell technologies, specifically for introducing them in vehicle applications.
We're also involved in material handling. Here we provide our core technology, particularly in the United States, to one of our customers who then builds fuel cell engines for forklift applications. We have approximately 4,000 of our fuel cell stacks operating in these engines in various distribution centres in the United States today.
Finally, we're also in the business of licensing our technology. Here is where we look at our core business, our core competency. We're trying to advance growth in different markets, and particularly markets such as the ones you're looking at, where we would partner with companies to essentially take on the manufacturing, sales, and distribution of the product where we would retain the core technology here in Canada and essentially license our know-how to these companies.
We have about 355 people working at Ballard, many here in Vancouver. These are engineering positions, with key employees who really are responsible for developing the technology and supporting our customers around the world for the deployment of these. We have R and D operations in Bend, Oregon, and in Hobro, Denmark. We also have a manufacturing facility here in Vancouver as well as in Mexico.
In terms of our focus and our real interest here, approximately 35% of our revenue in 2013 occurred in the countries that you've identified as being part of the TPP, so this is an area that's near and dear to us as it relates to the importance.
Really there are three things that matter to us when we're looking at doing business with companies in these various countries around the world.
First, are the governments, when they're talking about renewables, including fuel cells? Oftentimes we'll get into countries and they'll say, “Are you wind? Are you solar? If you are, you're eligible for a whole bunch of incentives.” But oftentimes fuel cells don't get included on that list. One of the things I'd like to ask, then, as the market leader for fuel cells coming from Canada, is that you consider making sure that fuel cells are on that list of renewable applications.
Second, and just as important for us, is the reduction or elimination of tariffs and duties.
If we're going to compete in these markets, oftentimes there is a 20% to 30% tag to our price, which already, in terms of new technology, is trying to compete with diesel generators and other incumbent types of technologies. So that puts us at a disadvantage in these countries, and the elimination of these duties and tariffs greatly supports our export business. That would be the second area in which I'd encourage your commitment and support.
The third area, which is really key to our business and decision-making with regard to who we do business with and what countries we'll get involved in is the protection of our intellectual property. As is the case for most companies in the technology space, our core business is the development of patents and the development of know-how, and if we can't protect that when we're selling abroad, then we'll have real problems in terms of protecting our ability to continue to compete in these markets.
When I look at the role of trade barriers and I look at the role of trade negotiations from an enterprise perspective, I would say those are the three main issues that we grapple with on a day-to-day basis in our decision-making as to whether or not we're going to do business with companies in specific countries, and they are what drives us to have that growth.
When I look at our growth over the course of the last three years, 80% to 90% of our growth has been coming from either Asia or Latin America or from Africa and India. Really it's in the emerging-market space where we're seeing a tremendous amount of growth, and with the increase in trade barriers being dropped, we see our business as one that will continue to see growth in those markets. Obviously, our interest is to remain in Canada, because we see that we have the core competencies, the core personnel, and the core IP here. Our objective therefore is to leverage that to then export our know-how, our products, and our services to these other countries around the world.
With that, I'll pause and indulge in your questions.
I'd like to thank our guests for being here today.
Dr. Calvert, what I really appreciate about you as I read your biography is that you did your undergrad degree and your first post-grad degree in the tenth-largest city in Canada, London, Ontario. I'm pleased to say, as the representative for London West, that obviously that education has suited you well.
I have to say that when you consider the intellectual repartee that's going on here.... I rest my case, Chair. My degree was in philosophy, so all I could do was sell insurance. That's all I'll tell you.
Voices: Oh, oh!
Mr. Ed Holder: You made some references that I just want to make sure I understand, Dr. Calvert.
Under biologics, you talked about universal public drug coverage. We don't really have that in Canada, do we? We have group insurance plans—my background was actually in employee benefits—and of course, if you're in a certain circumstance in various provinces, then you'll get it, but we don't have a universal public drug plan in Canada.
There may be parties opposite that have that as a thought. I don't think it's our thought as the government—it's certainly not mine—but I'm wondering if you can help me to understand where you think that's coming into play as it relates to the issues of the TPP.
Honourable members, it's a pleasure to be here. Welcome to Vancouver.
At Port Metro Vancouver, free and open trade is crucial to the delivery of our mission and to our ability to provide value to the community in which we operate—and, for that matter, to the nation as a whole. With that in mind, we appreciate the opportunity to present to you today, and commend the committee for undertaking this important study.
Simply put, we view the successful conclusion of a comprehensive trade agreement between Canada and the European Union and Canada’s ongoing participation in the Trans-Pacific Partnership negotiations as incredibly important initiatives.
As you may well already know, Port Metro Vancouver is Canada’s largest and busiest port, acting as a vital gateway for domestic and international trade and a significant economic force strengthening Canada's economy.
We are the most diversified port in the whole of North America, facilitating trade with more than 160 economies around the world and handling 124 million tonnes of cargo—in fact, I expect in 2013 probably approaching 130 million tonnes of cargo—worth more than $75 billion each year.
Putting those statistics another way, nearly 20%, or one-fifth, of everything Canada trades in goods moves through this port here in Vancouver.
In British Columbia’s Lower Mainland, the activity creates 57,000 jobs. Nationally the jobs created by the port supply chain alone rise to 98,800. It's worthy of note that jobs related to the port supply chain are at income or wage levels typically 53% above the national average wage for Canada.
Even from the west coast of our nation, Port Metro Vancouver has a long history of facilitating trade with European nations. In 2012 Canadian exports to the EU through our port exceeded 5 million metric tons, and included wheat, meat, wood chips, coal, metals, and minerals. At the same time, Port Metro Vancouver handled the import of 169,000 metric tons of household goods, construction materials, vehicles, machinery, and beverages from the EU.
Canada’s new comprehensive economic and trade agreement with the EU will strengthen ties to one of our most important markets while improving access for Canadian companies, and growing trade in general. An interesting example is the forestry sector, a crucial employer here in British Columbia. It's a perfect example of an industry that stands to benefit directly from a Canada-EU trade agreement.
Through the elimination of tariffs on B.C. wood and wood products, which currently average 2.2% but peak as high as 10%, our exports will now be able to price-compete on an equal footing, and as a result will gain better access to the roughly 500 million consumers in the EU. The 15,000 British Columbians employed in this sector will benefit directly. It's inevitable that employment and economic activity in the sector will increase accordingly.
Other sectors that Port Metro Vancouver believes will benefit include B.C.'s fish and seafood industry, which employs nearly 5,500 British Columbians; British Columbia’s investment environment, through the facilitation of two-way investment in the assurance of equal market access; and our service sector, through the rationalization of citizenship and residency requirements, the introduction of temporary entry rules, and the elimination of ownership and investment restrictions.
All in all, we would support the assertion that the EU trade agreement provides the opportunity for a 20% boost in bilateral trade and a $12-billion increase in Canada’s GDP.
We are, of course, on the west coast also very optimistic about the potential benefits associated with the successful completion of the ongoing negotiations as part of the Trans-Pacific Partnership. A successful TPP agreement would be particularly good news for British Columbia, given our geographic position relative to the participant countries and our deep existing relationships with the markets in question.
Currently three of the nations taking part in TPP talks can be found amongst the list of the top ten trading economies for exports leaving Port Metro Vancouver in 2012. Trade to and from TPP economies via Port Metro Vancouver amounted to over 30 million metric tons in 2012.
While a significant number—going back to my opening—this represents just over 24% of goods traded through the port in that year. The opportunity to increase access to these markets is upon us. As it stands today, Asian countries represent a relatively small percentage of total Canadian exports. A successfully completed comprehensive agreement we believe has the potential to dramatically improve Canada’s access to key Pacific Rim markets.
The benefits of the TPP would include increased exports to these markets and the development of stronger co