It is a great pleasure to be here with you today to talk about this issue, which is very important for the biotechnology industry.
Thank you very much for the opportunity this morning to provide testimony on your study of CETA, the Canada-Europe free trade agreement.
At the outset, let me just introduce BIOTECanada. BIOTECanada is the national trade association that represents Canada's biotech industry. We have about 250 members across the country, and they are in the three primary biotech areas. These include health and life sciences together as one, and then the industrial and agricultural fields as well. I'll dive into my membership a little later in my opening remarks.
At the outset, let me just say that the industry is strongly supportive of the CETA. As you correctly pointed out, Mr. Chair, I did come from the forest products industry before. We recognize in BIOTECanada as well that this is an important step for Canada, which is an export nation. We depend on markets abroad. I don't want to take any of the wind out of my colleague Catherine Cobden's sails here, but we know that both growing markets and securing markets outside of this country are extremely important for this economy, and I'm sure she'll elaborate on that. It is also very important for our industry internally.
I'm going to talk a bit about the intellectual property aspects of this agreement, which are extremely important to our industry. Particularly important is the patent term restoration of two years for patents that are caught up in the system, and also the right of appeal.
I'm going to now give you a better sense of our membership to explain why this is so important. When you look at BIOTECanada's members, and particularly I'm talking about the health and medical area now, we have about 130 members that are small or medium-sized enterprises across the country. These are individuals who have essentially a good idea that they're trying to commercialize. The companies can range from one person working on a computer in a university lab right up to some that have 30, 40, 50, or up to 100 people working on large or complex molecules in the biologics sphere, and to commercializing and improving people's health.
I also have in my membership some of the large multi-national brand-name pharmaceutical companies that everybody is familiar with. The right question to be asking yourselves right now is why they would they be part of the association. To explain that, I have to explain what the new ecosystem looks like for Canada's pharmaceutical industry, and indeed, for the global pharmaceutical industry.
In Canada, what we have now is large brand-name companies that still have a significant presence here in Canada, but what they're looking to do is develop their pipeline. They're developing their pipeline, which is essentially where their next sets of drug products are coming from, by scanning across the country to try to find these small innovators who are in Canada and working on these novel molecules and trying to partner with them and invest in them to grow and commercialize those molecules. That's one of the reasons they're part of the BIOTECanada table.
Central to all of this, for all of them and particularly for the small members, is access to capital investment. To develop a drug is very expensive. There are estimates that it takes about a billion dollars to develop one, and it takes a lot of time—10 to 15 years. Even with that, it's still very risky. Investment dollars are paramount for the industry. Many of my small member companies spend the bulk of their time crossing this country and going to conferences around the world looking for investors.
Investment is a fickle kind of tourist. It's going to go to the countries in which it feels most welcome. If you don't put out a welcome mat and take care of such things as giving it free Wi-Fi, breakfast in the morning, a nice pillow, and all the rest of the things that other tourists look for, it's going to go to other jurisdictions.
One of the most important parts of welcoming capital into the country is intellectual property protection. That's why this deal is particularly important for my small members. In their quest to get investment capital, they need to be able to provide the assurance to investors that the intellectual property is protected and that it is secure here.
The provisions in this agreement signal to the investment community that Canada takes intellectual property protection very seriously, and also the rights of those property owners here. At the end of the day, when we look at many of the members in BIOTECanada what we're really talking about is good ideas. Unlike the case for my colleague here, Ms. Cobden, whose industry has trees, which cannot be moved from where they are and which you have to process where they are, in my industry you have good ideas that are on laptops. You can move them anywhere in the world.
So if the capital isn't coming to Canada, if we're not putting out the welcome mat and are not giving it the security that it needs, those ideas are going to go where capital is. Then we lose the innovation, and more importantly, particularly in this area, we lose the health care treatment that may be available to Canadian patients.
When we look at some of the innovations that are coming, particular in the orphan drug area for which the government is developing a national orphan drug strategy, we may lose out on some of that innovation. But we also may lose out on some of that health care. To grow the innovation here, to commercialize it here and also deliver health care advantages to Canadians is the reason that this deal is important to our industry. We strongly support it.
I look forward to entertaining any questions that members may have about my testimony.
Thank you very much.
Good morning, everybody.
Mr. Chair and honourable members, I really appreciate the opportunity to be here. It's wonderful to share the panel with my former colleague. Let's make sure we give him the tough questions.
A voice: Hear, hear!
Ms. Catherine Cobden: The forest industry, as you likely know, is an important part of Canada's economy. We are global players, but we also are the economic backbone of 200 rural communities across Canada that are almost entirely dependent on the forest industry for their livelihoods. We employ 236,000 Canadians directly. I'd like to point out that the vast majority of those jobs are manufacturing jobs. They are permanent, not seasonal, and they're well-paying.
The forest industry has faced significant challenges over the years. To respond to them, we have recognized that we cannot sustain business as usual; we cannot stand still. We must launch on a path of transformation, and we have done so.
To this end, last year the Forest Products Association of Canada unveiled what we refer to as “Vision 2020”. By the year 2020 we hope to generate $20 billion of additional economic activity through the adoption of new innovation, but also through the expansion of our existing markets and entry into new markets. We seek a further 35% improvement to what is an already global standard of our environmental footprint. We intend to employ 60,000 new hires, including women, aboriginals, and new Canadians, in that time period.
To accomplish these goals—we have already begun—we have increased our productivity significantly and our operating efficiencies; we have established world-class green credentials second to none; and we are making technological breakthroughs and producing new, innovative products, everything from clothing to lipstick to pharmaceutical applications, all made from renewable wood.
Our initial efforts to diversify our markets have also been a resounding success. For example, forest products are now Canada's largest export to China, amounting to more than $4 billion of product per year.
Throughout every area of transformation, the government has supported the industry as a strategic partner, including via support with initiatives on the trade front, opening up new markets, and helping us market Canadian wood products globally.
Our industry exports nearly $30 billion of products to approximately 187 countries around the world. This makes us one of the leading exporters in this country and also makes us one of the most successful exporters of forest products globally.
As mentioned, the continued expansion of existing markets and diversification into new markets are critical for our future. For this reason, we're very supportive of the government's trade agenda, including negotiation of new trade agreements and focused support to help us with our entry into new markets.
It's with this background that we welcomed CETA last month. Europe is the third-largest market for our sector. Last year the Canadian forest products industry exported more than a billion dollars' worth of wood, pulp, and paper products to the EU member states. Upon CETA's coming into force, FPAC members will benefit immediately from the elimination of existing tariffs on some of our wood products. Tariffs of between 3% and 10% exist today, for example, in the areas of plywood, panel, and board, so this is a significant improvement.
We also see value beyond tariff elimination. We're very pleased with the potential that we now see for regulatory cooperation between nations. And finally, just to make the point, we view the EU as a really critical future market for the new renewable products that we are beginning to generate from a transforming forest industry.
We appreciate the government's continued efforts in the area of freer trade. Expanding international trade relationships helps the industry to grow, diversify, and prosper. Our collective efforts, however, do not stop with the ratification of this agreement or others. In fact, it is our belief that to ensure the success of this agreement and the others, we must ensure that we have in place all the necessary enablers to ensure that we take advantage of the opportunity that this and other agreements provide.
As a commodity-based industry that is on the aggressive transformational path, we have five enablers that we see as being critical.
Number one is that we must maintain the excellent support of the broad network of trade offices that we benefit from globally. I will speak to a very specific hot topic in this area in a few moments.
Two, we must ensure that we have a reliable and affordable rail system serving all areas of the country so that we can deliver our product to ports and get them to market.
Three, we must develop sufficient infrastructure that supports new markets, particularly as trade flows grow beyond just north-south to east-west.
Four, we really think that promoting the Canada brand is an ongoing effort that's very worthwhile.
And five—this one's quite specific to the forest industry—we need continued support for the innovation system that is the foundation of our transformational strategy.
Based on this comprehensive view, we really welcomed the reference to our sector in the Speech from the Throne last month, where the government identified that they would “continue to support innovation and pursue new export opportunities” for the Canadian forest industry. We hope that the government, though, will consider these enablers that I'm identifying in bringing that open trade to reality.
I mentioned the impact and the real criticality of these trade offices globally. The current issue we are facing, which demonstrates and embodies the need for boots on the ground, if you will, is the recent anti-dumping case that came out two weeks ago: the preliminary determination on dissolving pulp from China.
This is a significant challenge for the Canadian industry as well as for our counterparts in the U.S. and Brazil. It is relevant to five operations currently, but has also put a chill on three other future prospective mills that were basically going to reopen in areas that had absolutely no future prospects other than this. It's also a significant example: dissolving pulp is a transformed industry that goes into the textile industry. We now use our trees to create clothing, which offsets the cotton market.
So we're in the preliminary decision stage, but it has already implicated and put a chill on future investment. I look forward to an ongoing discussion with members of this committee on possibly how we move forward in such a challenging environment.
In closing, expanding international trade relationships and defending our access to key markets is critical to helping the industry grow and prosper. Ultimately, ratification and implementation of CETA will help sustain Canada's forest industry, our communities, and the hundreds of thousands of jobs that the sector supports across the country.
Thank you. I look forward to any questions you may have.
I think if you're talking statistically, it has not measured out.
You're talking about the PMPRB measurement stick that's been put in place.
Mr. Brian Masse: Yes.
Mr. Andrew Casey: Okay.
What you're looking at there is a measurement mechanism that was put in place when the Patent Act was expanded back in 1987. That was done at a time when the industry was very different from the industry that exists in Canada right now.
So the first argument I would make, then, is that the measuring stick is sort of outdated and needs to be updated. Your point is still well taken, though. What is investment and what is R and D? What is happening in the industry right now?
The change in the industry is the one I alluded to earlier, which is that the large brand name companies are looking for new products and new innovations in this country. What's not captured in the PMPRB mechanism is all of my small member companies that are essentially doing their research on their own, in labs, in universities. None of that is captured as R and D in the traditional sense.
So that's not in that statistic, and that's the part that is continuing to grow. I have 130 or 140 members across the country who are all doing nothing but R and D, because that's what they're all about, and they're looking for the investment dollars.
That is what's happening, and I can say that's happening in real form. We're seeing some very significant success stories. I'll give you one particular example that is quite significant. Enobia, a company out of Montreal, developed an enzyme replacement therapy for bone disease in children. They took their drug to a point and they sold it to Alexion, which is a large multinational company, for $1.1 billion. That money is in Canada, and it will get reinvested in other start-ups.
That's the kind of ecosystem that's taking place. I think that's something we would like to keep in this country.
I'd also like to thank our guests for attending this morning and sharing their comments.
I'm a little nervous, Ms. Cobden. All of a sudden, wearing my clothes out of wood makes me feel a bit splintery all of a sudden.
Over the course of time when we've been studying all the issues with CETA before signing it, we've had so many positive responses about this free trade agreement. It's been interesting that those who have expressed concern represent some employees and may have some concerns that need to be expressed, but the job creators have been so very positive about this deal. Of course, there's you today from the forest products sector and Mr. Casey in his new world of biotech—congratulations to you—but also from fisheries to pork to beef to lumber to canola, grain growers, pulse growers, and major organizations like the Canadian Chamber of Commerce, the Canadian Council of Chief Executives, the Canadian Manufacturers & Exporters, all the job creators have come out and said this is good for Canada because, by our history and by all that we have done, we are exporters. I was going to say that we are no longer hewers of wood, but I guess being hewers of wood is a good thing, Ms. Cobden.
We're well beyond, and I think that's the point.
I have a couple of questions, if you would allow me. I have given them some thought.
Ms. Cobden, one of the things you mentioned is that through Vision 2020 you're looking to hire 60,000 people. I have two sets of questions. First, it was interesting that you said you'd hire aboriginals, women, immigrants. How can you be so case-specific?
Secondly, we have a colleague here from Saskatchewan and, frankly, it's critical that they get more employees out there because there are industries going wanting for employees out west, Saskatchewan being a particular challenge.
The two questions are: why these select groups, and where are these 60,000 employees coming from, knowing that Canada has already created some million-plus net jobs since the recession? Our unemployment rate is the lowest it has been in some years. But look, for everybody who is genuinely looking for work, Canada should create that opportunity. But it won't be the government getting them a job, it will be the job creators. All we can do as a government is create the opportunity for those job creators to do what they do.
Enough of me. Could I ask for your response to that, please?
Absolutely. I have a number of points I'd like to make. Thank you very much for those thoughtful questions.
The 60,000 number and the specific identification of where we'd like to get them comes from a fundamental philosophy that we would like to attract our neighbours to the industry first. But we actually don't believe that's sufficient. We are going to need support, we think, in growing the labour pool overall.
Whatever the federal government does to grow the labour pool is going to be welcomed by our industry. Again, we are in remote communities where first nations are right beside us. I believe we have the highest percentage of aboriginals in our workforce, but it's not a great number yet. It's 16%. We think we can do a lot better and we are working really hard with aboriginal partners to grow that number.
The last time I looked--I grew up in a northern community, a pulp mill town--half of that community were women. We have an abysmal track record with women, so we'd like to get some of those women in our communities working. Again, we imagine that may not be sufficient.
On the Saskatchewan thing, I do want to point out that there is a particular opportunity that's being lost by the Chinese move on anti-dumping. I am sure you can talk to that company directly, and I don't want to speak for them, but I'm pretty sure that getting over 50% duty from China will immediately cease and desist on that. You can talk to them to confirm that.
Where will the jobs will come from? We had a long discussion with , only last night in fact, on the need for ongoing development of good LMI data, the supply and demand data. Really nailing this down, I think there's some really good stuff going on around the Canada job portal and that kind of thing. But need to go further in supporting our database to ensure that we are connecting the last...I can't remember the exact number of Canadians who are still without employment, with those jobs.
I think we simply need to keep the pedal to the metal on facilitating that.
Thanks to our witnesses.
I appreciate the preamble to the discussion to date. I just wanted to remind the committee that the United States is going to continue to be our number one trading partner and we will continue to work closely together reducing red tape and harmonizing regulations, working and streamlining the border with regulatory reform with the CBSA and the Department of Homeland Security.
I was just in Washington last week with the chair of the trade committee and we were working with other sectors as well and discussing the importance of the forest industry. Coming from British Columbia as do Mr. Sandhu and my colleague Mr. Hiebert, we know it's about 3% of our provincial GDP, about 170,000 jobs. It's a big economic employer and stimulus for our province and other parts of Canada.
Ms. Cobden, in your opening comments you mentioned that by 2020 you want to have a $20 billion increase. Right now there is about $1 billion in wood, pulp, and paper products going to the EU.
With CETA, have you been able to do any preliminary estimates indicating how much of an increase you might anticipate from this to help accomplish your goal of $20 billion by 2020 and what percentage of increase of growth that would be?
It goes back to being able to draw investment into the country. R and D is going to drive investment. You're entirely correct, the government has been very supportive of the industry through a number of programs to develop its R and D.
At the end of the day, as I said, it's a very expensive process to develop a drug. It's about a billion dollars. It takes a long time, some 10 to 15 years. That's a long horizon for a lot of investors and there's quite a bit of risk associated with that. Anything we can do to provide greater security for that investment is going to be important for the industry in attaining commercialization.
IP protection is certainly one of those. That's the big part of this deal. The patent term restoration essentially gives them a bit of time that they can tack on to recoup some of the costs associated with the development of the drug, if the drug does get tied up in the regulatory process, which it can. It's particularly important for a lot of the companies in my membership because they're in the biologic space, which are complex molecules. That is different from the traditional discussion of generics, where you essentially copy a small molecule. You could copy this newspaper and that's what that would be like, but in the biologics it's like trying to copy what's on this iPad. It's a very complex, very different world.
Sometimes the regulatory process is a little slower with the biologic space. That's particularly important when we're dealing with the orphan drug world. Anything that can restore some of that lost time to the patent holder, to the intellectual property holder, will help them to attract investment.
Great. Thank you very much, and thank you again for the opportunity to appear before you. It really has been quite a journey to achieve a successful Canada-Europe free trade agreement. I'm really pleased that this day has come and that we can now speak with you about the tremendous results for the Canadian beef producer.
Also, let me just take a moment to thank the committee staff for really being patient with my travel schedule this week. I'm glad it all worked out and I got here.
Of course, the Canadian Cattlemen's Association hasn't just been passively waiting for this CETA to be achieved; we have actively engaged throughout the negotiations. We've engaged closely with the Canadian negotiators to provide advice and feedback. We've also met frequently with the EU negotiators, representatives of the EU member states, and members of the European Parliament. We undertook those efforts both here and in Brussels, so we put on a lot of air miles in getting this thing done.
Lastly, but also importantly, the Canadian Cattlemen's Association engaged with cattle producer groups in Europe. We travelled to France, Spain, England, and Ireland to reach out to our counterparts in those countries to establish relations and to engage in dialogue with them. Really, we haven't had transatlantic beef cattle trade for some 30 years. So that's something new we have to re-establish. We feel this was very helpful in overcoming sensitivities that might have otherwise prevented our reaching a successful conclusion for the beef sector. So we're going to continue to work hard to build on those relationships as we move forward through the implementation of the CETA.
What did we get in this agreement? Page 9 of that technical summary of the negotiations that the tabled recently provides an accurate account of our understanding of the agreement. Really, on the tariff side, the market access side, there are four quotas for beef products. The first is a new 35,000-tonne, carcass weight, duty-free fresh beef quota. The second is a 15,000-tonne, carcass weight, duty-free frozen beef quota. Those two are new quotas that will be for any grade of beef, including veal, and available for Canada only.
The third is an existing quota. It's called the Hilton quota, and it's for high grading beef. Currently it has a 20% rate of duty, and Canada shares that quota with the United States, but on day one of the CETA, the duty rate for Canada will drop to 0%, while U.S. beef will continue to pay a 20% duty rate. That quota is 11,500-tonnes, product weight, or 14,950 tonnes, carcass weight.
The fourth one is the most complicated to explain. It's an existing quota that was provided as compensation for the hormone dispute, and it currently provides 48,200 tonnes, product weight, of duty-free access for high quality beef. That quota is available on what we call an MFN, or a most favoured nation basis, which means it's shared amongst several countries. In the CETA, Canada agreed to take its 3,200 tonnes out of the total 48,200 MFN, and in return we secured a higher quantity in that first new quota I mentioned, just for Canada. As a result, the 48,200-tonne MFN quota will drop to 45,000 tonnes MFN when the CETA is implemented.
Also, there are several other products such as offals, a lot of the organ meats, tallow, rendered products, processed beef hides and skins that will all gain unlimited duty-free access to the EU under CETA.
As I said earlier, we were consulted closely on every one of these decisions during the negotiations. Any time there was a trade-off or a decision to be made, we were consulted and supported those decisions. We're pleased with this outcome. We strongly support this agreement going forward.
We estimate that the fresh beef exports to the EU will be worth approximately $11 per kilogram and the frozen will be worth approximately $6 per kilogram. So on that basis, doing the math, that brings the potential value of CETA to over $600 million for Canadian producers.
In previous appearances to this committee, I did stress the importance of addressing both the tariffs and the technical access barriers. On the cattle production side, we know the cattle will have to be raised according to EU protocols. That means no growth enhancing products, such as hormone implants or beta-agonists. Despite those products being safe and approved for use in Canada and other countries, the EU has refused to allow them and continues to refuse to allow them.
Fortunately, we feel that the value of the EU beef market is high enough that many Canadian producers will elect to incur the additional costs of raising cattle without those products. We always said that we wanted to be pragmatic about this issue and that if the access was worth our while we would produce those cattle. We feel that access is worth it.
We do estimate that Canada would need to produce approximately 500,000 head of cattle annually under the EU protocol. Clearly we don't need every producer to make the decision to follow the EU protocol, but we feel that enough of them will.
The Cattlemen's Association represents the cattle farmers, but on the processing side I know that the Canadian Meat Council has already appeared. They've spoken in detail about the technical issues at the processing level. On that, I would say that we agree with the CMC that it is vitally important to complete the work to ensure that beef slaughter and processing facilities across Canada are approved to export to the EU.
Currently, we only have two very small facilities that are approved to export to the EU. They're both in Alberta. If you're a cattle producer, whether it's in Nova Scotia or Ontario, you need facilities in the east to be approved. If you're a large producer in Alberta or Saskatchewan, you need the larger facilities in the west to be approved, in High River or in Brooks. You need those facilities competing to buy the cattle that are eligible for the EU.
We do understand that there's been a one-year deadline that was established to resolve those technical issues, and there's still work to do. But once those plant approvals are achieved, we can start making better use of the quotas that we already had, even before the CETA is implemented, because those existing quotas are underutilized due to the technical barriers.
This summarizes the main issues of how we got to this point and outlines some of the work ahead.
With that, I will look forward to your questions later.
Mr. Chairman, members of the committee, Dairy Farmers of Canada is in fact pleased to appear before this committee to present our views with respect to the CETA deal.
As you may be aware, Dairy Farmers of Canada is the national lobby, policy, and promotion organization representing Canada's farmers living on more than 12,000 farms across the country. I would like to start by highlighting the fact that DFC leads generic dairy market development in Canada, with an annual marketing budget of $80 million, which is collected from dairy farms across Canada.
The domestic cheese market has been a priority market segment, with an annual strategic investment totalling $30 million dedicated to developing the cheese market across Canada. This investment both sustains and grows the cheese market. Studies have proven that without this yearly $30-million investment, market share would rapidly erode.
I'd like to add that this investment has resulted in an increase in per capita consumption over the past 20 years of two kilos per capita, now in the order of 12 to 12.2 kilos per capita.
I'd like to point out that the dairy sector contributes $16.2 billion to Canada's GDP, and sustains more that 218,000 jobs in Canada. It also contributes annually more than $3 billion in local, provincial, and federal taxes.
We'd like to be clear here: Dairy Farmers of Canada is not against the deal. We have, however, reacted strongly to the news of the new excessive access that was given to the European Union, in particular in the fine cheese segment of the Canadian cheese market. The access granted to the EU will have major impacts on the Canadian dairy industry, much more significant than what is being claimed by Canadian officials.
The Canadian dairy industry is one of the few industries that will be negatively impacted. That was also recognized by , who recognized that there may be some impacts. Therefore, our strong reaction was justified, in our opinion.
Allow me to put the outcome of the agreement into perspective. The new access of 17,700 tonnes will be equivalent to 20% to 33% of the fine cheese market in Canada. It's equivalent to 4.2% of our total cheese consumption. That is equivalent to 2.2% of Canada's total milk production; equivalent to $150 million in farmers' pockets; and translates into a minimum of $300 million at the industry level.
The access for cheese will then increase from 5% to 9% of our total domestic consumption. There are no reasons to be pleased about supplying 91% of the Canadian market when compared with other countries. For example, the EU supplies 99% of its cheese market, and the U.S. supplies 97.5% of its cheese market.
If we look at Canadian cheese production, the growth in the cheese sector is not as significant as what has been reported. While certain segments of the market have grown faster than others, the reality is that cheese production in Canada has grown by only one-half of 1% these past four to five years.
The fine cheese market is the segment that will be most affected, as I pointed out earlier. Considering that this is the segment of the market that attracts the highest value, import strategies will be developed to compete primarily in this market. Failing to compete in the fine cheese market, we expect a cascading effect towards the specialty cheese and ultimately towards the mass cheese market, i.e., cheddar types. In other words, the fine cheese makers will be directly affected, and the impact at the producer's level, the farmer's level, will be spread across the country as farmers are working collectively to supply the Canadian market and are sharing returns collectively.
If the CETA agreement is implemented over a seven-year period, it will add up to a total of $595 million in cumulative losses at the farmer's level. Over a seven-year implementation period, the production of milk going into cheese production would decrease slightly. But most importantly, what Canadian farmers are losing is future growth, in which they have heavily invested.
Furthermore, if the deal were to be implemented over a five-year period, as we have heard might be the case, not only would this result in a production quota cut, but it would also result in an incremental loss of $151 million, for a total of $746 million after seven years. I think this justifies a longer implementation period.
With respect to tariff reduction, while the in-quota tariffs have been reduced to zero—and that wasn't something we were opposing—most over-quota tariffs have been maintained at their current levels, with the exception of the over-quota tariff for milk protein concentrate with a concentration of over 85%. This TRQ had been introduced following the invocation of GATT article XXVIII by the Canadian government back in 2007, and this has now been nullified.
Canada has also granted the EU geographical indicators on 50 cheeses. The protection to be afforded the EU on geographical indicators and their dairy products should be available also within this country. By that, we are talking about effective reinforcement and protection of our own standard of identity for dairy products.
I would also like to address the myth about unfettered access. We believe it is a myth. There is no doubt that Canadian cheese makers can compete on quality. However, in the early 2000s a WTO panel ruled that any export from Canada sold below domestic price be considered subsidized. Combined with a prohibition on the use export subsidies in the EU as a result of this agreement, the reality is that Canada is not in a position to benefit from the opening of the EU market. The reality is that subsidies in the European Union can make up as much as 40% to 50% of farmers' income, and they get a lower price for their milk. That puts Canadian milk and dairy products at a price disadvantage.
I will switch to French for the latter part of my presentation.
The reality is that the world market is highly distorted. The 2013 report by the International Farm Comparison Network (IFCN) highlighted that only 12% of the world’s total milk production has been produced at a cost equal to or lower than the world price. The IFCN initiative started 13 years ago and seeks to compile dairy farm financial data among over 95 countries around the world.
Furthermore, the reality is that not only are we facing higher production costs at the farm level in Canada, but this is also the case along the production chain, with processors' margins that are twice as much as in Europe
The reality is also that the European dairy industry is highly subsidized. The IFCN report provides an astonishing picture of the level of support and direct payments to European dairy farmers.
In conclusion, let us reiterate that we are not against the agreement that has been signed with the European Union. However, we are deeply concerned about the negative impact that comes with it.
Over the last few weeks, we have sat down with Canadian ministers and senior officials and we have presented options to mitigate the negative impact of the agreement, not only on the primary production of dairy farmers, but also on Canada’s entire dairy sector.
Thank you for your attention.
You're close. We got 65,000 tonnes of new duty-free access. Of that, 50,000 of it is fresh, 15,000 of it is frozen, and there's no distinction between bone-in or boneless.
With respect to acid wash, I believe you mean lactic acid, which is a naturally occurring substance in our own human bodies as well as in cattle. It's an organic wash that is used and approved in Canada and the United States to reduce pathogens such as E. coli and other things. That's a standard—in fact, it's a requirement that there be a carcass wash here in North America.
The European Union has reviewed that and other carcass washes by the European Food Safety Authority, EFSA. They have recommended that those things be adopted in Europe. But these things then have to go through the European Parliament, and we've found in the past that the European Parliament often takes a protectionist view, knowing that if they approve things like this, it will mean more beef imports into Europe.
There is, perhaps, some reason to be encouraged. They did approve lactic acid earlier this year in limited circumstances, not in full circumstances. But they haven't approved all of the washes that we use. That's our concern, and our objective on this follow-up step on the technical issues is to achieve full equivalency of the Canadian system as being equally safe as the European system.
Thank you, witnesses, for being here today.
Mr. Chair, before I came to Canada, I didn't have a chance to deal with holy cow meat, but I have had some experience being a dairy farmer myself. I was a certified dairy farmer, I did some courses on dairy farming, and started with very few animals.
What I found out in my experience was that the goal was always to figure out how to grow production and how to find more consumers. I believe it is demand that runs the price of any product.
We talked about, Mr. Davies, a 4% increase in the Canadian market by EU cheese, and Canadian cheese producers would have tariff-free, unlimited access to the European market.
What I'm trying to understand is that with more than 500 million consumers and more than $130 billion worth of agriculture imports a year, how can Canada's dairy industry say that becoming a part of this incredibly lucrative market could have a negative impact? That's number one. Then, another question is how can the dairy industry even take this position, considering the limits of the Canadian market, whose population is just 7% of the European market? Please make me understand.
Chair, I'm pleased to advise you I'll be sharing my time with the great member of Parliament for Bruce—Grey—Owen Sound.
Some hon. members: Hear, hear!
Mr. Ed Holder: As I do I'd like to thank our witnesses for being here today.
I'll start with Mr. Masswohl if I might.
Thank you for your support for the EU agreement. But I was a little curious because perhaps something is.... I'm from London, Ontario. It's the 10th largest city in Canada, and it's an urban oasis in a whole sphere of agribusinesses, everything from cash crops to dairy to beef producers to hog producers. And I chair the southwestern Ontario caucus. We have some strong views as a caucus in support of the EU trade deal.
I have a question for you, and help me understand. You talked about the no growth hormone products still being good for Canadian beef producers. This is the part I don't understand. At what level does it make it worthwhile for a beef producer to get into that market if it's not a market that has been a natural one for us to this point?