Good afternoon, Chair and members of the committee. Thank you for the opportunity to appear before you.
First of all, I'd like to talk about the status of the Canada-U.S.-Mexico agreement. I'll provide some opening comments that should take under 10 minutes, and then we'd be open to any questions that you may have and we can pursue issues in greater depth.
The signing of CUSMA or, as many are calling it, the new NAFTA, on November 30, 2018, followed 13 months of intensive negotiations that brought together a broad range of officials and stakeholders, with a very strong partnership between federal and provincial officials. That agreement achieved several key outcomes. It served to reinforce the integrity of the North American market, preserve Canada's market access into the U.S. and Mexico, and modernize the agreement's provisions to reflect our modern economy and the evolution of the North American partnership.
On December 10, 2019, following several months of intensive engagement with our U.S. and Mexican counterparts, the three NAFTA parties signed a protocol of amendment to modify certain outcomes in the original agreement related to state-to-state dispute settlement, labour, environment, intellectual property and automotive rules of origin. These modifications were largely the result of domestic discussions in the U.S. However, Canada was closely involved and engaged in substantive negotiations to ensure that any modifications aligned with Canadian interests.
Throughout the negotiations, Canadian farmers, producers, processors, business associations, labour unions, civil society and indigenous groups were closely engaged and contributed heavily to the final result.
For the agriculture sector, the government engaged with more than 275 agriculture and agri-food stakeholders through nearly 300 in-person interactions on NAFTA modernization from February 2017 to December 2019. This included more than 55 stakeholders involved in the supply-managed sectors—dairy, poultry, egg and related processors—and 230 others covering a wide range of agriculture sectors, including grains and oilseeds, meat, sugar, fruit and vegetables, and related processors.
To help better inform Canadians of the outcomes, documents have been made available on the Global Affairs website, including the text of the agreement and the amending protocol, a summary of the overall outcomes and summaries of all chapters in the agreement.
As we talk about this negotiation, I'd like to recall that the NAFTA modernization discussions were unique in terms of our experience in negotiations. Normally, free trade agreement partners are looking to liberalize trade. In this process, the goal of the U.S. from the start of the negotiations was to rebalance the agreement in its favour. The President had also repeatedly threatened to withdraw from NAFTA if a satisfactory outcome could not be reached.
The opening U.S. negotiating positions were rather unconventional. These included, first of all, the complete dismantlement of Canada's supply management system; the elimination of the binational panel dispute settlement mechanism for anti-dumping and countervailing duties, which is the existing chapter 19 under NAFTA; a state-to-state dispute settlement mechanism that would have rendered the agreement completely unenforceable; 50% U.S. domestic content requirement on autos, which would have devastated our domestic auto sector; removal of the cultural exception; a government procurement chapter that would have taken away NAFTA market access, leaving Canada in a worse position than all of the U.S.'s other free trade agreement partners; and a five-year automatic termination of the agreement, known as the sunset clause.
The U.S. administration took the unprecedented step of imposing tariffs on imports of Canadian steel and aluminum on the basis of purported threats to national security, with no legitimate justification for that. The U.S. administration had also launched an investigation that could lead to the same result for Canadian autos and auto parts, also a national security investigation.
In the face of this situation, Canada undertook broad and extensive engagement with Canadians on objectives for the NAFTA modernization process.
Based on the views we heard and our internal trade policy expertise, Canada set out a number of key objectives, which can broadly be categorized under the following overarching areas. First of all, we wanted to preserve important NAFTA provisions and market access into the U.S. and Mexico. We wanted to modernize and improve the agreement, where possible. We wanted to reinforce the security and stability of market access into the U.S. and Mexico for Canadian business.
For the first objective, preserving NAFTA, the outcome preserves a number of important elements, including the NAFTA tariff outcomes, ensuring continued duty-free access into the U.S. and Mexican markets for originating goods. For our farmers and food processors, this means securing Canada's over $30 billion in agricultural exports to North American markets.
Second, it preserves the binational panel dispute settlement mechanism for anti-dumping and countervailing duty matters, which is a key component of the overall goods market access package of NAFTA and of the original Canada-United States Free Trade Agreement.
We wanted to preserve, as well, Canada's preferential access to the U.S. under the temporary entry for business persons chapter, and the predictability and security of access for service suppliers and investors. We also wanted to preserve the cultural exception.
As well, we wanted to preserve state-to-state dispute settlement, which we achieved, including through the protocol of amendment, actually improving on that considerably so that it's a much more efficient and effective mechanism to resolve disputes with the U.S. and Mexico.
The U.S. was opposed to almost every single one of those objectives.
With respect to modernizing NAFTA, we have modernized disciplines for trade in goods and agriculture, including with respect to customs administration and procedures; technical barriers to trade; sanitary and phytosanitary measures; new provisions on the trade of products of agriculture biotechnology; as well as the new chapter on good regulatory practices, which encourages co-operation and protects the government's right to regulate in the public interest, including for health and safety.
The agreement also establishes a mechanism for parties to strengthen co-operation and international advocacy on a wide range of agricultural biotechnology issues of mutual interest. The new agricultural biotechnology obligations will establish practical trade-facilitative approaches to getting safe products to market, reinforcing an environment that enables trade and innovation in North America.
Under the new agreement, market access for Canadian refined sugar into the U.S. market will almost double. The new agreement will provide Canadian exporters with new market access into the U.S. in the form of tariff rate quotas for certain dairy products, including cheese, cream, milk beverages and butter. It also eliminates U.S. tariffs for whey products and margarine and provides a more liberal rule of origin for margarine.
The agreement contains a modernized committee on agricultural trade, which provides a forum in which to discuss and address issues and trade barriers related to agriculture.
For our wines and spirits industry, the new NAFTA provides for protection of Canadian whisky as a distinctive product of Canada. It also protects the definition and traditional production method of authentic icewine. As well, Canadian wineries and distilleries retain the authority to sell only their own products on site.
Commitments on trade facilitation and customs procedures have been modernized for the 21st century to better facilitate cross-border trade, including through the use of electronic processes that will reduce red tape for exporters and save them money.
New and modernized disciplines on technical barriers to trade in key sectors are designed to minimize obstacles for Canadians doing business in the U.S. and Mexico, while preserving Canada's ability to regulate in the public interest. We also have modernized obligations for cross-border trade in services and investment.
On labour and environment, we have made important steps forward by concluding ambitious chapters that are fully incorporated into the agreement and subject to dispute settlement.
Finally, the outcomes advance Canada's interests toward inclusive trade, including through greater integration of the gender perspective and better reflecting the interests of indigenous people.
With respect to other outcomes, in the context of the overall outcome, Canada did make some incremental moves in relation to the U.S. objectives, specifically in the area of supply management.
With regard to Canada's dairy, poultry and egg sectors, we should recall that the U.S. made an explicit and public demand for the complete dismantlement of Canada's supply management system. In the end, we preserved the three key pillars of the supply management system, including production controls, import controls and price controls, ensuring that its integrity is maintained long into the future, and granted only limited access to the U.S. The new NAFTA ensures that Canadian dairy farmers and processors will continue to supply the vast majority of the Canadian market.
The government has been clear on its commitment to provide full and fair compensation to farmers for losses in market access. In the fall of 2018, the government announced the formation of working groups on the dairy, poultry and egg sectors. These groups were tasked with developing mitigation strategies to fully and fairly compensate supply-managed farmers and processors to help them adjust to the impacts of recent trade agreements, including the new NAFTA.
Despite this incredible success, we're facing unprecedented uncertainty. Predictability has been eroded by governments putting in place tariffs and other measures that blatantly contradict trade rules. It has happened here in North America, and we're seeing it happen around the world.
Last spring, CAFTA released a prescription for what's required in this new environment. “Realizing Canada's Export Potential in an Unpredictable and Fiercely Competitive World” outlines what we see as being required to help us continue setting record agri-food exports.
Our first recommendation in this paper was to preserve and enhance access to key markets, and this is exactly what bringing into force and ratifying the Canada-U.S.-Mexico agreement will do.
We understand the nationalist noise swirling around. We saw it first-hand when members of CAFTA were present at every round of CUSMA negotiations, whether that was in Washington, here in Ottawa, in Montreal or in Mexico City. It's also why we applauded when the talks for this agreement were concluded last fall, and why CAFTA welcomed the end of aluminum and steel tariffs.
We appreciate the value of tariff-free markets, because the agri-food sector has prospered immensely in North America because of our tariff-free access. Over the last 25 years, we've seen Canadian agri-food exports to the NAFTA countries quadruple, from $9 billion in 1993 to $34 billion in 2019. The U.S. and Mexico are our first- and fourth-largest markets, and they make up about 55% of all of our agri-food exports from Canada.
We support CUSMA because it builds on the foundation established through NAFTA, preserves the duty-free access we obtained in that agreement and builds on that in a few key areas.
Our members, the hundreds of thousands of farmers, ranchers, food processors and agricultural exporters who rely on trade, are really pleased that the government and Parliament are taking steps to ratify CUSMA.
Our members emphasize the following outcomes as key benefits of the new CUSMA.
The agreement contains no new tariffs or trade-restricting measures. All agricultural products that had zero tariffs under NAFTA will remain at zero tariffs under CUSMA. Maintaining predicable, duty-free access to the North American market is a major win for Canada's agriculture and agri-food exporters, which will help strengthen the supply chains that have been developed for the past generation across North America.
The new agreement also includes meaningful progress on regulatory alignment and co-operation. In particular, I would note the establishment of the working group for co-operation on agricultural biotechnology and the creation of a new sanitary and phytosanitary committee, which will help ensure that regulations are transparent and based on science, and that trade in North America flows freely, fairly and abundantly.
Another key benefit for our members is the preservation of dispute resolution provisions that are vital to ensuring that fair and transparent processes are in place when disagreements arise. Preserving chapter 19 in its entirety and much of chapter 20 from the previous NAFTA is an important win for us.
Market access improvements for Canadian agri-food exporters include increased quotas for refined sugar and sugar-containing products, as well as gains for some processed oilseeds products like margarine. These are all welcome gains.
All of these advances will help consolidate the gains of the original NAFTA and provide certainty in the North American market, which is essential to the success of Canadian agri-food manufacturers and exporters.
In closing, CUSMA represents a meaningful upgrade to NAFTA for our members by keeping our trade tariff-free, establishing processes that help remove remaining technical barriers to trade, and maintaining vital provisions to deal with disputes.
We look forward to working with the government to bring CUSMA into force so that our members can realize its benefits as quickly as possible.
Honourable members of the Standing Committee on Agriculture and Agri-Food, on behalf of the Canadian Produce Marketing Association, I'd like to thank you for the opportunity to speak to you today on the study of clauses 44, 46, 53 and 59 of Bill .
The Canadian Produce Marketing Association is a 95-year-old not-for-profit trade association, representing more than 860 member companies doing business in Canada within a supply chain that contributes $17.4 billion in real GDP and supports roughly 249,000 jobs here in Canada. In addition, the fruit and vegetable sector in Canada supports $9.8 billion in wages and salaries. Combined, CPMA members are responsible for 90% of fresh fruits and vegetables purchased by Canadians. As an industry association, CPMA represents the entire fresh fruit and vegetable supply chain, from farm gate to dinner plate.
Our comments are reflective of a wide array of members across the supply chain, who work daily to provide Canadians with the fresh and healthy fruit and vegetable options they demand. That's right from growers all the way through to retail and food service.
The produce industry is a unique entity. This important economic engine is made up of rural, provincial, national and international companies, all working together to increase consumption of fresh fruits and vegetables. CPMA represents the industry in all areas of impact, including sustainability—which currently includes a significant effort around packaging—research, innovation, infrastructure, regulatory modernization and trade, to name but a few.
Since the implementation of the previous North American Free Trade Agreement, or NAFTA, in 1994, Canadian fresh fruit and vegetable exports to Mexico and the U.S. have increased by approximately 396% when adjusted for inflation. This growth is indicative of the importance of tariff-free trade and the integration of our marketplace within North America and within the fresh produce industry.
The integrated North American supply chain also continues to be an important tool in ensuring that Canadian consumers have a consistent and diverse supply of fresh fruits and vegetables year-round, despite a relatively short growing season here domestically.
In order to meet the Canadian government's agri-food export target of 2025, and to ensure that Canadians can meet the recommendation in Canada's food guide that they fill half their plates with fresh fruits and vegetables, the continuation of tariff-free access under CUSMA is essential.
As a side note, industry is pleased that the final text of CUSMA does not include any changes to trade remedy laws related to seasonality and produce. This is an area we're going to continue to be watching, because our understanding is that there is pressure to the USTR still by certain pockets within the U.S. industry. That is one thing we wanted to put on your radar. We stand committed to ratification of CUSMA, and on behalf of industry we are therefore pleased to appear before you today.
Specific to why we are here today, I offer the following comments on clauses 44, 46, 53 and 59 of Bill . Our understanding of the change to subsection 6.2(1.1) of the Export and Import Permits Act, proposed in subclause 44(1), is that it's a simple change to remove the reference to CETA—I think the wording is “for the purpose of implementing CETA”—which we support. Clause 44 relates specifically to dairy products, which is not within the mandate of CPMA and wouldn't be appropriate for us to speak to.
Clause 46 appears to be a simple change to add the text “respecting export charges referred to in subsection 6.?2(5)”. However, unless we are mistaken, there is no subsection 6.2(5) in the Export and Import Permits Act. We're going to reserve comment until that's clarified. It's unlikely that we would object to the export charges if they reflect current practice, but we'd appreciate understanding that text. My apologies if we misunderstood, but I've gone through it a few times and I just don't see that. It ends at 6.2(4).
Clause 53 refers to the Fertilizers Act. Since we do not have the expertise to comment on the specifics of that, we're going to defer to and support our colleagues at both Fertilizer Canada and the Canadian Horticultural Council on this clause. We would like to note that, in general, our industry is very reliant on inputs for fresh fruit and vegetables to continue to provide capacity for production here in Canada. Obviously, we'd like to see the fertilizer inputs remain in place.
Clause 59 refers to the Canada Grain Act. Again, that's outside of our mandate, so we will defer to our colleagues in that sector.
In closing, I would like to underscore our support for the ratification of CUSMA and Bill .
Thank you for the time to present today on behalf of our industry.
Thank you, Mr. Chair and honourable members.
My name is Shane Stokke. I'm vice-chair of Grain Growers of Canada. Grain Growers of Canada provides a strong national voice for grain, oilseeds and pulse producers across Canada. As such, we appreciate the invitation to appear before you to discuss the specific elements of Bill that are pertinent to the grain sector.
I farm at Watrous, Saskatchewan, an hour east of Saskatoon. I grow many different crops, and trade is very important to me to be fluent and real.
Our message regarding CUSMA and Bill is simple. We want to see it pass quickly. Our farmer members across Canada need certainty to invest and grow. With farmers feeling the effects of global trade wars, diplomatic disputes, increased input costs, higher taxes and challenging weather conditions, the last thing we can afford is uncertainty in trade within our own continent. We need tariff-free access for our export commodities. Canadian farmers rely on stable markets to succeed, and ratifying CUSMA will allow us to capitalize on further opportunities for growth with our closest trading partners.
Mr. Chair, specifically relating to the legislation before us, I'm happy to offer a comment, as per request, to clause 59 and sections under the Canada Grain Act portion of the bill. This section includes a remedy to a long-term trade irritant that both the United States and Canada have had. In essence, these changes allow for a levelling of the playing field. These changes ensure that all wheat varieties registered in Canada can receive a Canadian grade regardless of where they're grown. I should mention that a similar change was proposed by the previous government in Bill prior to the 2015 election, but it was unable to pass due to the dissolution of Parliament. We supported that change in 2015, and we are very pleased to see these changes being proposed once again. We hope they will be in place soon, with swift ratification of CUSMA through the passage of Bill .
Over the last decade, there have been significant changes to both grain grading and handling systems here in Canada. This remedy is essential to the last remaining cross-border trade irritant U.S. farmers have with respect to grain, and we support this change. Under the current system, registered Canadian varieties grown in the U.S. and sold into the Canadian bulk handling system are automatically given the lowest grade possible. This change will allow grain grown in the U.S. to be graded here in Canada, and graded appropriately. Under the Canada Grain Act, nothing prevents companies such as mills from buying grain on specifications outside the grading system, and that will not change.
Currently a significant amount of grain is not sold in the Canadian bulk system. We would not expect that to increase dramatically because of this change. This change will now make Canada more compliant in providing reciprocal treatment to our trading partners, which we support and expect in return. This also highlights the fact that Canada truly believes in a rules-based system for world trade, and we're happy to show we will walk the talk in that regard. By removing this long-time, last trade irritant, it also assists Canada in growing forward.
While we believe there should be future reforms to the Canada Grain Act, by ensuring we're working on an even playing field with our trading partners we will be more firmly in control of any future changes to the act. This will allow strict Canadian stakeholder engagement for any future changes to the Canada Grain Act to ensure that any changes made are made in the best interests of Canadian grain growers.
In conclusion, CUSMA ensures continued tariff-free trade, establishing processes that help remove technical barriers to trade and maintaining vital precisions to deal with disputes.
I welcome any questions you may have.
Welcome to our witnesses. It's good to see a lot of you again. I know we've met quite often over the last two years. It's good to be back at this standing committee talking about the issues that we all care about.
I understand, of course, from all three of you, that there is a great desire to see this agreement implemented as quickly as possible, and our committee is working under a pretty strict timeline. We only just, at the last committee meeting, received the invitation from the chair of the Standing Committee on International Trade requesting our committee's recommendations and any suggested amendments.
If I'm reading the room right, given your study of the particular clauses that this committee is concerned with, sure, there may be room for some improvement, but you're generally pretty happy with the way they are.
I want to change tack a little bit. The problem I've had, and indeed the problem my party has had, with the way trade deals have been negotiated is that when we, as a legislative body, receive the implementation act, it's basically a fait accompli. That's why I find the other chair's invitation for us to suggest recommendations or any amendments problematic, because, of course, if we were to suggest any amendments to the act, that would require Canada to reopen negotiations.
We are essentially, as a legislative body, faced with a final product and a yes or no. Negotiating a trade agreement, of course, is a royal prerogative of the Crown, and as a legislative body, we're always trying to find ways to get more involved.
I'd like to hear from each of you going forward, because we know there are some significant trade negotiations that are coming up with South America and possibly Canada and the U.K.
My colleague , on the international trade committee, brought up the issue—and it was confirmed by the today—about how the government is now going to notify Parliament of an intention to start trade negotiations 90 days in advance. We will now get a statement of our objectives in those trade negotiations, and now we're going to get economic impact statements tabled with the implementing legislation. I think this is a great win for all parliamentarians because it gives us a role like the ones the U.S. Congress and the European Union have, to be there from the start so that we feel like we've had some proper input.
I would just like to hear from each of you your thoughts on those proposals. I think that, as a committee, we don't really have a lot of latitude with this particular agreement. There's a lot of pressure to get it done, and I certainly understand the concerns out there with the uncertainty south of the border.
I'll let you start off, and then we'll go down the line.
The full implementation access granted under CUSMA, in addition to existing trade concessions, will represent about 18% of the Canadian market. When considering the latest three trade agreements—CETA, CPTPP and CUSMA—Canadian dairy processors will lose approximately $320 million per year on net margins at full implementation.
On top of the market access concession, CUSMA has a clause that imposes export caps on worldwide Canadian shipments of milk protein concentrates, skim milk powder and infant formula.
For example, for SMP and milk protein concentrate, a cap of 55,000 tonnes is imposed for the first year, and 35,000 tonnes for the second year. After year two, each cap will increase at a rate of 1.2% annually.
Knowing that in the 2017-18 dairy year Canada exported more than 70,000 tonnes of skim milk powder, there is no question that a clause limiting our export worldwide will drastically impact Canadian dairy processors' domestic milk supply requirements from Canadian dairy farms. Indeed, we estimate that the export caps could result in an annual loss of $60 million for dairy processors.
We would also note the extremely peculiar aspect of imposing caps on Canadian exports of the three dairy goods to all countries, including those that are not part of CUSMA. This is a first in a trade agreement and a very dangerous precedent for Canada.
One way for the government to at least try to mitigate the negative impact of the export caps is to ensure that CUSMA enters into force on August 1, 2020 or later, so that the industry operates a full year under a higher export cap of 55,000 tonnes.
To mitigate the negative impacts of CUSMA, we propose a two-pronged approach: first, the issuance of dairy import licences to Canadian dairy processors; second, an investment program in the dairy processing sector.
With regard to the allocation of quotas, we want to reiterate today that import licences for dairy products, commonly known as dairy import quotas, must be allocated to dairy processors. Processors have the necessary expertise and the distribution network to import a wide variety of dairy products, while ensuring the least possible disruption to the Canadian market.
The government must absolutely refrain from repeating the same mistake it made with the Comprehensive Economic and Trade Agreement, or CETA, when it allocated more than half of the quotas to stakeholders outside the dairy industry, which are retailers and brokers. These non-dairy stakeholders have no vested interest, whereas, on the contrary, dairy processors have a vested interest in importing cheese and minimizing the impact on existing production lines and manufacturing platforms, without displacing the milk produced by Canadian farms. Moreover, Canadian processors continue to innovate, invest and maintain well-paying jobs across the country. Additional imports that are poorly planned or poorly targeted will undermine the survival of many businesses.
With respect to the investment program, which is the second component, the dairy processing industry is made up of organizations of different size and product mix, all of which will be significantly affected by these trade agreements. As such, we recommend that the government create a dairy compensation and investment program to support investments in processing facilities and plants to increase competitiveness and modernize our plants.
This program could include tools such as non-refundable contributions for investments, refundable tax credits, and so on. The program would operate on a matching principle to ensure that funds can be provided if investments are made.
Thank you for the opportunity to present today on a trade agreement that is important to the success of Canada's agriculture community and industry.
Agriculture is an essential part of the economic, political and social fabric of Canada and is critical to the well-being of all Canadians. It plays a strategic role in and is the backbone of rural communities. Agriculture and agri-food make a significant contribution to the Canadian economy, directly providing one in eight jobs, employing 2.1 million people in rural and urban Canada and accounting for 6.7% of total GDP.
A significant part of Canadian agriculture and agri-food's growth and success is due to international trade agreements and subsequent export market development and sales. Canada's market is just too small to accommodate the growth potential of what has become a world-renowned, efficient and low-cost agriculture industry.
Currently, the industry relies on export markets for at least 60% of its output. Consequently, the industry is always on the lookout for additional profitable markets and eagerly awaits the outcome and potential opportunities of any and every bilateral or multilateral trade negotiation.
That said, it's equally important to recognize that our supply-managed sectors have built stable and viable industries without reliance on export markets and to ensure that they are not undermined and destabilized in any trade agreements Canada negotiates.
NAFTA has underpinned growth in agriculture production and processing not only in Canada but also in Mexico and the U.S. It creates a market of 449 million consumers and generates agri-food and seafood trade of $289 billion Canadian. The benefits of NAFTA are undisputed and have been since its implementation. Agricultural trade between Canada and its two North American partners has increased significantly since NAFTA, growing to about $66 billion Canadian in reciprocal trade with the U.S. alone and about $5 billion with Mexico.
Nearly 80% of Canada's total processed food exports go to Mexico and the U.S. Canada is the number one supplier of agricultural goods to the U.S., at 19.3%. With the current supply gap of $121.9 billion—the difference between world ag exports to the U.S. and Canadian exports to the U.S.—and Canada's importance as a supplier in at least six of the top 10 U.S. agriculture imports—beef, pork, baked goods, vegetables, canola oil and animal feed—we have considerable potential to increase agriculture trade with the Americans.
The same goes for Mexico, with its growing middle class. There, Canada is the second most important supplier of agricultural goods, with $2.3 billion in exports out of a total of $5 billion Canadian in reciprocal trade.
Furthermore, integration between Canada and the U.S. is such that our respective industries have grown to rely on open borders to strengthen and feed each other.
A state-specific example points us to the $2 billion in trade we do with Iowa. It exports close to $300 million in animal feed to Canada, imports around $170 million in live hogs from Canada, and then turns around and sends us $180 million in fresh and frozen pork. Trade and investment with Canada creates 100,000 jobs in Iowa alone.
From the beginning, CFA has maintained that NAFTA did not need renegotiation, that changes and improvements could well have been made with the agreement already in place. The priority, of course, was to maintain the benefits Canadian agriculture was already enjoying, to ensure that supply-managed sectors would not be undermined through market access concessions, to achieve improved market access for our sugar beet producers and to advance regulatory alignment and domestic support equity.
In reviewing the new CUSMA, it is evident that the open borders and subsequent market benefits from NAFTA remain largely intact. In fact, some additional benefits were achieved, but they came with a very heavy price—too heavy, some may say. It's clear that the Alberta sugar beet producers came away with the biggest gain in this new agreement. Ever since the original CUSFTA, in which the requirement to institutionalize TRQs at historical import levels was ignored by the U.S., our sugar industry has dealt with a very restrictive U.S. TRQ. In CUSMA, our access for sugar beet sugar was more than doubled, with an increase to 20,000 tonnes.
Central to the success of any trade agreement is the ability to reduce non-tariff trade barriers. This includes a process for regulatory transparency, co-operation and alignment.
CFA applauds the efforts made by our government to include the provisions set out in chapter 28 of the agreement, which calls for transparency and a process for communication and co-operation among North American regulatory authorities.
The establishment of a committee on good regulatory practices, composed of government representatives, including from central regulatory agencies, will enhance collaboration with a view to facilitating trade among all parties. Canada tried hard to have the U.S. remove its requirement for Canadian meat imports to be reinspected when they cross the border, but to no avail. That issue should be one of the priorities to go before the committee on good regulatory practices.
Canadian farmers continue to compete against a very high level of supports offered to U.S. producers, and while these domestic subsidies fall within international trade rules, they provide U.S. farmers with an artificial and unfair comparative advantage, even though domestic support is an issue regulated to WTO jurisdiction. It is positive to note that article 3.6 in CUSMA talks about the need to make sure any forms of support are non- or minimally trade-distorting, and if a party has a concern, there is a process to discuss and work toward mitigating trade impact.
Canadian agriculture has built and developed a successful export industry, but its success is contingent on operating within a robust rules-based trading system. An important component to such a system is an effective trade dispute settlement mechanism. For that reason, maintaining chapter 19 was critical and will be an important element in creating a level playing field.
Despite the fact that the open border in agriculture between the U.S. and Canada was never in jeopardy, Canada paid a very high price for the conclusion of the renegotiations by conceding significant dairy, turkey, chicken and table egg market access to the U.S. It's another economic hit in the wake of CPTPP and CETA. With the accumulation of access concessions devastating supply-managed industries, by 2024, for example, the combined market access concessions made by Canada under WTO, CETA, CPTPP and CUSMA will represent 18% of our dairy market.
Supply-managed industries are anxiously waiting for government to fulfill its commitment to quickly and fully mitigate the impacts of these agreements.
As well, every effort needs to be made to eliminate all forms of TRQ circumventions that escalate the volume of imports far beyond the negotiated TRQs.
Two other issues in addition to market access concessions that are a cause for alarm in our industry are the concessions Canada made with respect to policy development and export controls. First, Canada has agreed to consult with the U.S. before making changes to Canadian dairy policies. This is clearly a loss of sovereignty in Canadian policy development, and one that should never, ever have been surrendered.
Second, Canada agrees, in chapter 3, article 3.A.3, to cap dairy sector exports of milk protein concentrate, skim milk and infant formula to CUSMA and non-CUSMA countries, with an applied export charge on exports over the cap. This is disturbing on several fronts. Canada has long argued against the use of export tariffs to regulate trade. It may well be challenged by other WTO countries under GATT, and it sets a dangerous precedent by allowing a regional trade agreement and a party in that agreement to control trade of another party to countries outside of the agreement.
Finally, it's a precedent that may have implications for Canadian export-reliant agricultural sectors. For example, if Canadian exports to other countries out-compete U.S. products, the U.S may try to use CUSMA or some other mechanism to manage or restrict Canadian trade to the rest of the world.
In conclusion, CFA applauds government for its part in consummating an agreement. The importance of profitable markets around the world for Canadian agriculture cannot be overstated. However, CFA would implore government to negotiate successful trade agreements in agriculture without paying the heavy price we have in the past with access concessions in supply-managed domestic markets.
Thank you, Mr. Chair and members of the committee. It's great to be here with you today.
I am Dave Taylor, a dairy farmer from Vancouver Island.
Mr. Alistair MacGregor: He is.
Voices: Oh, oh!
Mr. Dave Taylor: Yes, Alistair and I do know each other.
With me today is Jacques Lefebvre, chief executive officer for Dairy Farmers of Canada.
I'd like to go off script for just a second to say that I think most of you have dairy farmers in your ridings, and they all have a story. We all have a story. As a young kid, I wanted to farm. I've been able to do that, and I appreciate the opportunity I have had. In the late 1970s, my dad had a fairly large dairy operation for Vancouver Island. He expanded into a whole market-garden operation as well. He built greenhouses and a retail store. Of course, in 1982, when interest rates went to the highest levels we've seen, he lost it all. We walked away with 20 cows, 10 heifers, 500 litres of quota, and nothing else. That propelled me to university. I was back and forth to the farm, and in 1995 I was able to jump back into farming. Since that time—this week actually—it's been 25 years that my brother, my dad and I have farmed together. We still farm together. My dad's 81. He is still a part of the farm, along with the next generation, as my son is involved now, too. It's a pleasure farming. There have been great opportunities in the last 25 years, but there have been some real bumps as of late, and I'd like to speak about that a bit in my statement here today.
On behalf of all Canadian dairy farmers—and I feel the weight of that today—I want to thank you for the opportunity to offer our perspective on certain clauses of Bill and the Canada-United States-Mexico trade agreement. The concessions granted in CUSMA have put Canadian dairy farmers in a vise, on the one hand by outsourcing a portion of our domestic production to foreign dairy farmers. After carving out a part of our domestic production in CETA, and again in CPTPP, you are now asking our farmers to make another sacrifice. To be clear, the total impact of these market access concessions, in addition to those already granted through the WTO, will be—and we've heard it from two speakers already—18% of our production by 2024. The government has once again weakened our Canadian dairy sector.
On the other hand, compounding the impact of market access is the fact that the one significant avenue for the dairy sector to mitigate some of these impacts through exports has been taken away by the imposition of an unprecedented and, may I say, draconian cap on our exports. This is covered under clause 44 of the bill, and it is where I will focus some attention today.
CUSMA requires that any export of skim milk powder, milk protein concentrate and infant formula beyond a predetermined threshold be charged an export charge on each additional kilogram of product exported globally. In other words, although CUSMA is an agreement that should ostensibly be limited to its three signatories, the cap on dairy exports extends to every country in the world. This goes well beyond what would normally be expected in a trade negotiation, and it sets a dangerous precedent for future agreements for all other sectors, I believe. In addition, if the caps come into force before August 1, the beginning of the dairy year, the cap on skim milk powder and milk protein concentrates will drop from 55,000 tonnes to 35,000 tonnes on August 1. That is a drop of about 35% after possibly only one, two or three months; we're not sure at this point. That would be another blow to our dairy market with no time for transitioning.
Hundreds of thousands of Canadians depend upon this sector for their livelihoods. This could have ripple effects in communities across our country. The squeeze will also be felt by Canadian consumers, who can no longer be sure that the milk on their store shelves is produced according to the same high standards as milk produced here at home. For example, use of the artificial growth hormone rbST is banned here in Canada due to concerns over animal welfare, and I believe rightfully so. However, this is not the case in the United States.
Given that we are in a vise, we ask if there is a way to mitigate the impacts through an administrative agreement between Canada and the United States that would not require a reopening of the agreement.
Beyond market access and in addition to the cap on exports, CUSMA also requires Canada to consult with the U.S. on any changes to the administration of our domestic supply management system. This amounts to nothing less than giving the U.S. oversight of the administration of our Canadian dairy system. It puts into question the independence of decision-making in Canada and our sovereignty.
The has repeatedly committed to full and fair compensation for the dairy sector for the total impacts of CETA, CPTPP and CUSMA. Let me be clear: Instead of compensation, Canadian dairy farmers would have strongly preferred to see no dairy concessions in recent trade agreements. I'd like to repeat that: We would have strongly preferred to see no dairy concessions in recent trade agreements. This being said, concessions were made and compensation was promised in return.
Canadian dairy farmers, who are all impacted by recent trade agreements and are best positioned to know their own needs, have indicated that this compensation should come in the form of direct payments. This is consistent with farmers' recommendations from the mitigation working group established by the federal government following the signing of CUSMA and the government's commitment to listen to farmers on how compensation should be paid. Direct compensation is for lost markets. Government programs are to foster growth in an industry. The two should not be confused.
We therefore recommend that the Canadian government fulfill its commitment to fully and fairly compensate dairy farmers to mitigate the impacts of CUSMA, as per the producer recommendations made by the mitigation working group.
Another important point I'd like to make is that the Canada Border Services Agency does not currently have the training, tools or resources to effectively monitor what is coming into Canada. Canadian borders are leaky. This will become even more problematic as imports continue to increase as a result of the concessions granted in these agreements. For Canadian consumers it will be important for the government to ensure at the border that the food coming into Canada has the same food safety and quality, and that Canada has the capacity to police the increased amount of foreign product entering the country as a result of these agreements.
Finally, it is important to note that the impacts of recent trade agreements were not limited to dairy farmers. We therefore strongly encourage the Canadian government to provide full and fair compensation for the impact of recent trade agreements to dairy processors, in addition to Canada's poultry and egg farmers.
In conclusion, I come back to the next generation. My son is expecting his first child. He's 24. He's a full part of our farm now. He asked me, because I do get out to the odd meeting now, “Dad, where are we at? What's the future looking like?” He sees the cuts. He sees the hits we take. He says, “Dad, I could go work in the medical industry. I could go do that.” My wish is that he will stay, that he will be involved and will take the farm to another level altogether, that he will have confidence in Canada's supply-managed system and in a dynamic dairy industry for the future. I hope all of us around the table would believe in that and certainly advance that to the best of our abilities.
Thank you so much.