I'm a dairy farmer. I was invited to speak here by way of our local MP, , but more on that later.
I was born and raised in a city in Holland. You might have already guessed that by my name. My parents had no farm. For some reason I always wanted to become a dairy farmer. I knew I would never have enough money to buy any kind of farm in Holland. Because I wanted to become a farmer, I went to the agriculture school in the city where I was born.
ln my final year at school, which would have been when I was 19, I contemplated where to go to pursue my dream. At that time—this would have been the late 1980s—France and Australia were popular. Denmark was also a go-to place. I had heard in school that Canada was good to their dairy farmers, as they had some kind of system in place to ensure their dairy farmers were getting paid a fair price for the milk they produced. That was all I knew in 1986, but it was good enough for me to go on a big adventure. I bought my first plane ticket to go to Canada.
I arrived in Halifax, Nova Scotia, not really knowing much English, and ended up working on a farm in Nova Scotia. Of course, I was very homesick. I slowly started to find out that there was indeed a good system in place here, which I eventually learned was called supply management.
True to the Dutch stereotype, I was not much of a big spender, focusing instead on saving money towards my goal of buying a dairy farm. I managed to save $700 a month of the $900 a month I was earning working on the farm in Nova Scotia. At the age of 25, I began looking around and found this nice working dairy farm in beautiful northwest New Brunswick. I indeed had enough money saved up for a down payment for that farm, and bought it in 1991.
Not coming from a farming background, my attitude might differ from some other farmers. I feel I'm also a businessman. In my opinion, profit is not a bad word, including in a farm setting. Why would I want to work pretty much every day for long hours and not make any money doing it?
It's the same for my 23-year-old daughter, who hopes to take over the family farm someday. She now works full time on the farm and sees the political climate we are in. The trade concessions have gotten her very concerned. She feels that we, as dairy producers, have been picked on from all sides. Over the years I have been following the situations that have occurred in Holland in respect to the dismantling of the Dutch quota system and all the hardship that it caused. I still talk sometimes to my agriculture school buddies about what they have had to endure. In no means was it pretty or easy.
Canadian supply management, in my mind, consists of three pillars, like a three-legged milking stool: supply control, import control and a stable pricing system based on costs and markets. But the system only works if there is political will to safeguard the pillars. If any one pillar is taken away, like a stool, the stool will fall over.
This brings me before you today. All during the time the negotiations went on for CUSMA, when people asked me if I was concerned about the outcome, I would say, “No, I am not.” I always said I had full faith in our government to stand up and defend supply management.
Unfortunately, I was proven wrong. I think I and most other dairy farmers were very disappointed when the final details came out. We have a system here that ensures the primary producer, the farmer, gets a fair price for his product. By no means are we getting rich, but we're doing okay.
I believe that farmers in other countries recognize that our supply management system does work well and that we do get a fair price for our product. I know for a fact that a lot of dairy farmers in other countries envy us. Unfortunately, it seems that rather than working towards improving their own system in their own countries, they are trying to compromise or infringe upon our system. I just don't understand that way of thinking of the other farmers in other countries. All the magazines I read from south of the border put CUSMA as a great win for their dairy farmers. In my mind, that would mean we got the short end of the stick.
I have also read of farms south of the border that milk as many as 30,000 cows on one farm. That's equivalent to all the dairy farms in New Brunswick and Nova Scotia combined. Is that where we want to go? In my small community, I employ three people full time. One of them is my 23-year-old daughter. I also use land belonging to several of my neighbours, and at times even employ my neighbours as needed. I employ about six high school students to work shifts during milking, giving them experience in work ethic and some spending money.
If farming becomes too challenging due to these trade agreements, I and other dairy farmers might have to stop farming. Therefore, there would be essentially no economic activity left in our community. If Canadian dairy farmers are forced to abandon their livelihood, this would contribute to the ongoing decline of our rural communities. This might be why my local MP, , asked me to appear before you. He is very aware of what will happen if farms keep disappearing from his riding. Remember that any kind of farming is, and has to be, a business.
Another side effect of this agreement is that we had a processor who was going to upgrade and expand a processing plant in New Brunswick. This processor now has indefinitely postponed this project due to uncertainty. We Maritimes producers are very concerned about keeping processing in our region.
I now want to touch on the compensation package promised, and partly delivered, for CETA and CPTPP. I haven't heard anything about the remaining years and how it will be paid out. That in itself concerns me. The compensation package is bittersweet. Most farmers, including me, received a payment in December of last year for those previous trade agreement concessions. As far as I am aware, no concrete timeline has been set for the next payments. We, as dairy farmers, have always prided ourselves on getting all our money from the marketplace. This is how the system is supposed to work. This is how it did work. The government trading away excess and then offering compensation is not what we want. Having the supply management system tampered with by government trade concessions to the point where we're now looking for compensation should tell you how bad these concessions are hurting us. To be honest, the words “no more concessions will be made” sound a bit hollow to me, as this was the line all along. Of course, we're now getting concerned by the possible trade talks that will happen sometime with the U.K.
I don't pretend to know all the precise details of the agreement. We as dairy farmers have DFC for that. You can probably stump me pretty easily with some in-depth questions. But one thing that stands out to me in CUSMA is the oversight and export cap clause that this government has granted the U.S. I just do not understand how one country, that being Canada, can allow another country, that being the U.S.A., to dictate where and how much it can export to a third country. It's even more frustrating as our domestic market is being given away.
In conclusion, if I could make any suggestion, it would be that compensation for all the agreements will help to maintain my farm and business and allow us to manage for my family's future. As my business model was based on producing milk, I now will need the compensation money to keep the farm viable and profitable for my daughter. Keep in mind that the last 10% to 15% of the milk produced on any farm is the cheapest milk for the farmer to produce, and the most profitable. Having that share of the milk market traded away means we will need compensation funding to continue to innovate and adapt to this new market reality.
Finally, anything you could do to prevent further concessions and limit the U.S.A.'s ability to oversee our system and limit exports would be positive for dairy farmers like me.
Thank you for this 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 it 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 easily awaits the outcome and potential opportunities of any and every bilateral or multilateral trade negotiation.
Having said that, it's equally important to recognize that our supply-managed sectors have built stable and viable industries without reliance on export markets, and it's important to ensure that they are not undermined and destabilized in any trade agreements Canada negotiates.
The North American Free Trade Agreement has underpinned growth in agriculture production and processing not only in Canada but also in the U.S. and Mexico. It creates a market of 449 million consumers and generates agri-food and seafood trade of $289 billion. The benefits of NAFTA are undisputed and have been since its implementation. Nearly 80% of Canada's total processed food exports go to the U.S. and Mexico. Canada is the number one supplier of agriculture goods to the U.S., and we have considerable potential to increase ag trade with Americans. With its growing middle class, the same goes for Mexico, where Canada is the second most important supplier of agriculture goods.
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 specific state example points us to the $2 billion Canadian 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.
CFA, from the beginning, maintained that NAFTA did not need renegotiation, that changes and improvements could well be made within the agreement already in place. The priority of course was to maintain the benefits that Canadian agriculture was already enjoying. In short, supply-managed sectors would not be undermined through market access concessions, achieve imported market access for our sugar beet producers, and advance regulatory alignment and domestic support equity.
In reviewing the new agreement, 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 price, and some may say, far too heavy a price. It is clear that the Alberta sugar beet producers came away with the biggest gain. Ever since the original CUSFTA, where the requirement to institutionalize TRQs at historic 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 beets was more than doubled to a total of 20,000 tonnes.
Central to the success of any trade agreement is the ability to reduce no-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 between the parties.
Canada tried hard to have the U.S. remove the requirement for Canadian meat imports to be reinspected when they cross the border, but to no avail. This issue should be one of the priorities on good regulatory practices to go before the committee.
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 of such a system is an effective dispute settlement mechanism. For that reason, maintaining chapter 19 was critical and will be an important element in creating a level playing field.
American farmers have long had the ability to sell and ship wheat to Canadian terminals just across the border and have negotiated prices reflective of quality. However, even though the price may have reflected the grade quality, the documented designation did not reflect the grade. This agreement calls for the Canadian grade to be assigned to the imported product with appropriate documentation. CFA has been assured this will not compromise our system of variety registration.
Canada paid a very high price for the conclusion of CUSMA renegotiations by conceding significant dairy, turkey, chicken and table eggs 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. For example, by 2024 the combined market access concessions made by Canada under the 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 trade agreements. As well, every effort needs to be made to eliminate all forms of TRQ circumvention—circumventions that escalate the volume of imports far beyond the negotiated TRQs.
Two other issues in addition to market access concessions which cause alarm for the industry are the concessions Canada made with respect to policy development and export controls. 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 have been surrendered.
Second, Canada agreed to cap dairy sector exports of milk protein concentrates, 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 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 the agreement.
Finally, it's a precedent that may have implications for Canadian export reliant agricultural sectors. If Canada exports to other countries and out-competes U.S. products, the U.S. may try to use CUSMA or some other mechanism to manage and 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, the 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 very much, Madam Chair.
Good afternoon, honourable members.
I'm pleased to be here today representing Fiat Chrysler Automobiles Canada, Ford Motor Company of Canada and General Motors of Canada Company.
Our members operate four assembly plants, as well as engine and components plants. They invest many billions of dollars in the development of zero-emission technologies and advanced vehicle safety technologies. We have over 1,300 independent dealerships across Canada, and we contribute quality employment opportunities for over half a million Canadians.
The CVMA has been a primary advocate of CUSMA, and we recommend passage of Bill without delay. The passage of CUSMA is essential to provide certainty to North American automobile manufacturers. The automotive provisions, as well as the side letters that provide protection from the U.S. section 232 tariff actions, are indeed critical elements to support automotive manufacturing competitiveness within the North American trade bloc.
It's important to remember that, for the auto sector in Canada, the alternative to reaching this agreement was the cancellation of NAFTA, the reimposition of tariffs on finished vehicles and parts, and likely section 232 tariffs on input materials. So, if we are anxious to see ratification, that is indeed why.
We again want to say thank you to the Canadian negotiators for working so closely with us and ultimately ensuring that we maintain Canada's auto sector as a truly integrated part of the North American industry. This agreement was existential for Canada's largest manufacturing and export industry.
The agreement reinforces the long-established integration of the auto industry supply chain necessary for its competitiveness and, importantly, the ongoing need for continued regulatory alignment with the United States of vehicle technical regulations that are integral to trade and the environment while ensuring greater consumer product choice and affordability.
The auto portions of the new agreement, including the rules of origin, the labour value content provisions and the section 232 side agreements, are things that all our members support and can adjust to over a reasonable time period so that we will remain compliant, enabling us to continue to enjoy duty-free access to the largest and most beneficial auto market in the world.
Since the Auto Pact of 1965, Canada's automotive industry and its supply chains have become deeply integrated with the United States and, over time, with Mexico. Vehicles are built seamlessly on both sides of the border. The resulting deep integration has led to a more competitive Canadian auto industry, greater consumer choice at more affordable prices and a strong North American trade bloc.
When the original NAFTA came into force in 1994, it provided a foundation for a strongly global competitive trade bloc. The geographic proximity of the three NAFTA partner facilities, the multi-billion dollar sectors, the parts sector and the just-in-time supply chains are critical to vehicle assembly operations in North America. It also created inherent transportation and supply chain logistics cost advantages.
Today, automotive manufacturing represents the second-largest Canadian export sector, with $54 billion in trade in 2019. Ninety-two per cent of the total value of that was to the United States. The United States is our number one automotive trade partner, and it's absolutely critical that a trade agreement be in place to provide the foundation for Canadian automotive production and exports in the future.
We must always keep in mind that Canada is one-tenth of a complex, fully integrated long-lead industry. Multi-billion dollar product plans and manufacturing investment plans generally begin over five years in advance of the start of production. Planners require regulatory certainty to make their decisions. They especially need Canada to maintain fully harmonized safety, vehicle GHG, criteria emissions regulations with the United States.
This remains imperative if we are to continue to be part of this fully integrated, long-lead, high-capital-cost industry. Put simply, we did not work this hard to modernize integrated rules of trade in North America to then take our eye off the ball and drift away with unique or different regulations. That could actually put us back to square one and leave us on the sidelines.
Canada's officials must also maintain a high degree of engagement with their counterparts in the U.S. and Mexico. We cannot relax our efforts to ensure that Canada is sufficiently competitive to win future manufacturing investments that anchor much of the Canadian automotive supply chain. Canada must have competitive, in fact, more competitive, costs of auto operation in Canada, including investment incentives, carbon costs, competitive labour agreements, taxes that keep pace with the United States, competitive electricity prices and competitive regulatory regimes.
It's important to remember that the auto sector is going through one of the most dramatic periods of change in its 100-year history for auto technology and mobility business models. We must work closely together with the Canadian industry and all levels of government to demonstrate that Canada is the best place anywhere to invest in the future of this important industry.
In closing, we fully respect the committee's need to hear Canadians and ask questions. We have worked with all parties over the last two years to discuss this very complex issue. We have been truly involved, and we appreciate your interest and open dialogue. We thank you for that, but we must ask you to ratify this agreement promptly.
I'd be pleased to answer any questions.
Good afternoon. On behalf of the Dairy Farmers of Canada, I want to thank you for the opportunity to offer our perspectives on Bill concerning the Canada — United States — Mexico Agreement.
I'm accompanied by Jacques Lefebvre, our chief executive officer, and Chris Cochlin, our legal advisor from Cassidy Levy Kent LLP. Mr. Cochlin is an expert in international trade.
The vast majority of politicians in this country say that they support supply management. However, in the end, actions speak louder than words. Today, with CUSMA, supply management has never been more weakened. There's no doubt that Canadian dairy farmers have been hit by the three most recent trade agreements. This is something that even the Government of Canada recognizes.
When the imports already authorized under the WTO and the access previously granted under the Comprehensive Economic and Trade Agreement, or CETA, and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, or CPTPP, are added together, these total imports will be equivalent to 18% of Canadian milk production by 2024. CUSMA also gives the United States oversight over the management of our dairy system by requiring a consultation with them prior to any changes in its administration.
Is this not an abdication of the independence of Canadian decision-making and our sovereignty? Have we negotiated reciprocity with the United States, given the non-tariff barriers that our products must face in order to enter the American market?
The has repeatedly committed to full and fair compensation to the dairy sector for the cumulative impacts of CETA, CPTPP and CUSMA. In terms of the first two agreements, at the end of 2019, we received a first instalment representing a little more than 12% of the total promised compensation. We await guarantees that the sums still to come are locked in. Once again, actions speak louder than words.
This compensation doesn't include CUSMA. Some wonder why financial compensation is being offered instead of programs.
First, our recent experience with programs set up to mitigate agreements with Europe hasn't been conclusive. Of the $250 million granted, almost 10% was allocated to the administration of the program by the public service. This amounts to $22 million returned to state coffers for the administration of the program by federal public servants. The remaining sums benefited only a small number of producers.
Second, the compensation formula announced in August 2019 is consistent with the recommendations of the mitigation working group created by the federal government after the signing of CUSMA. However, beyond the numbers, realities on the ground affect some 11,000 families across the country.
My experience isn't unique, but it sheds light on why financial compensation is needed. When my brothers and I took over the family farm some 30 years ago, we knew that the market was equivalent to the potential of Canadian consumers. We made calculations and projections on this basis. We determined that we could make ends meet despite the significant costs associated with acquiring a farm.
The Canadian government will have ceded nearly one-fifth of our production to foreigners by 2024. We know now that our business plan didn't take into account the fact that our market would be conceded in this way. If we had known this, my brothers and I would have given serious thought to whether it was worth it to take over the family farm. This would be true of any business confronted by a loss of nearly 20% of its market.
However, since the concessions have been granted, we have a few recommendations.
We recommend that the Canadian government continue to give dairy farmers, in the form of direct payments, the remaining seven years of full and fair compensation to mitigate the impacts of CETA and CPTPP. We ask that the total amount be formally accounted for within the 2020 main estimates and that the government announce the amount of compensation for CUSMA prior to its entry into force.
On the other hand, CUSMA contains a provision that imposes export taxes, above a certain threshold, on skim milk powder, milk protein concentrate and infant formula.
This threshold is draconian. In the first year of the agreement, it represents about half our exports for 2018, and then it declines. This export tax undermines the competitiveness of our products in relation to the products of other global players, including the United States. This provision sets a dangerous precedent for any dairy product that may be exported.
In addition, if CUSMA enters into force before August 1, the beginning of the dairy year, the export thresholds will see a dramatic decline of nearly 35% after only a few months. For Canadian dairy producers, CUSMA presents a fourfold threat.
On the one hand, we've conceded more of our domestic milk production to foreign producers for products that will end up on our shelves. These products will be made from foreign milk whose production is directly and indirectly subsidized, which isn't the case here. This results in cheaper milk for foreign processors that export products here. This gives rise to the question of whether this unfair competition constitutes the dumping of foreign dairy products on our shelves.
At the same time, we face export barriers for dairy products made with milk from our own country. Add to that the fact that our border is porous and the government isn't in a position to test foreign dairy products coming into the country. It's important to note that these products aren't subject to the same production standards to which we adhere.
Given the impact on our industry and the dangerous precedent set by the export thresholds, we call on the government to take mitigating steps. We understand that this could be done through administrative measures after the ratification of CUSMA, on a voluntary basis, without reopening the agreement.
When it comes to controlling our borders, the government must commit to giving the Canada Border Services Agency the resources and training to enable officers to fully play their roles. After our discussions with the union management, we're convinced that the officers expect nothing less.
Canadian dairy producers are committed to the highest standards of sustainable production. This is done through the proAction program. These standards come with costs for farmers. For example, unlike American producers, our Canadian producers don't use artificial growth hormones to increase milk production at the expense of the health of the cows.
Instead of supporting our farmers so that they can maintain these rigorous production standards, the government has chosen to open its market to surpluses of foreign dairy products that don't meet our domestic standards.
In conclusion, the Dairy Farmers of Canada understand the importance of international trade to the Canadian economy in general. They aren't opposed to Canada exploring or entering into new trade agreements. However, let's be realistic. All countries have both offensive and defensive interests when it comes to trade negotiations. The United States, for example, has a long tradition of protecting their sugar, cotton and dairy sectors. Unlike in Canada, these industries receive production subsidies, directly or indirectly, from the American government.
The defence of supply management has never prevented Canada from entering into an international trade agreement. Trade negotiations don't seek to pit one Canadian industry against another. However, we firmly believe that access to the Canadian dairy market should no longer be the price of entry into these agreements. Despite the government's assurances, we remain concerned about what could be conceded in a free trade agreement with Great Britain. It's also important to consider that the impacts of recent trade agreements weren't limited to dairy farmers.
The Canadian government should also provide full and fair compensation to dairy processors, in addition to Canada's poultry and egg farmers. Lastly, the time may have come for a committee of the House of Commons or Senate, or even of both, to look into the possibility that foreign dairy products are being dumped in Canada. Your farmers aren't scared of international competition, provided that there's a level playing field.
I'll be pleased to answer your questions.
Thank you, Madam Chair.
I want to thank the committee members for the opportunity to be here today to ask a few questions regarding an issue that has kept me busy in recent years.
In concrete terms, I've enjoyed working very passionately with the people in the Canadian agricultural sector.
I also want to thank you, Ms. Robinson. I was very pleased to work with you.
Obviously, one issue has been of greater concern to us than other issues in recent months, especially in Quebec. That issue is dairy production.
Although there has yet to be an announcement on compensation for the new free trade agreement with the United States, we expected the government to tell us its intentions before asking us to sign the agreement. We haven't heard any news. We still don't know what will happen to the remaining seven years of compensation for the other agreements previously announced. We're also concerned about this issue.
We expected that the dairy processors would receive compensation, but we've had no news on that front. There's still absolutely nothing for egg and poultry farmers.
You can appreciate why it's important for us, on the opposition side, to have the opportunity to ask you questions about this free trade agreement. That's why we want to thank you for being here to answer these questions.
Last week, I was particularly surprised to hear the presentation given by , Deputy Prime Minister, who was here at the Standing Committee on International Trade.
I listened carefully to her presentation. In response to a question about the new export tariffs on milk proteins, such as skim milk powder or infant formula, Ms. Freeland said that the supply management sector was consulted extensively regarding the imposition of export tariffs on powdered milk.
I would translate that as “consulté intensément.” You're part of the supply management sector, because you were the representatives of the Dairy Farmers of Canada. Do you consider that you were “consulted extensively” on the Canadian government's new approach?
Thank you very much, Madam Chair.
My first question is for Mr. Nantais.
We get it. The agreement does provide certainty and protection against 232s. The whole idea of these agreements is so we can get costs down and align regulations and things like that so we can be more competitive as a North American bloc.
I worry about the rules of origin. In some ways they are good, but, in other ways, the costs.... We know that manufacturers aren't afraid of importing cars into North America. Where's that tipping point if the costs are too high here, if somebody just built that car in China and just shipped the whole vehicle over here? That's a worry I have since I come from Oshawa, where we just lost our assembly plant for whatever reasons. Manufacturers say it's like death by a thousand cuts, and that's what I'd like to talk to you about.
The agreement here, the new CUSMA, is supposed to work on alignment and making us more competitive, but since I come from a government that was working on harmonizing regulations across the sector, the current government is putting in all kinds of unique Canadian costs and regulations.
We could talk about environmental considerations and costs such as the carbon tax. You mentioned the high cost of electricity. I hear that over and over again. You mentioned in your opening statement that we almost have to be more competitive here in Canada.
As the guy who represents Oshawa, where we just lost our assembly plant, I'd like you to comment. Is there anything specific in this agreement that would favour Canadian investment versus an investment in the United States? If I'm General Motors, Ford or Fiat Chrysler, why would I pick Canada versus the United States based on this agreement?
That's an excellent question, Mr. Carrie, and all of those things you have said are absolutely true. These are considerations that have to be given due analysis and consideration.
We do operate in a high-cost jurisdiction. We have signed other trade agreements where we don't have full reciprocal access to those markets. Certainly during the course of negotiations, we had discussions around what would happen if the cost of compliance and so forth exceeded the advantages.
It is true that all the multinationals that I represent under other trade agreements could, in fact, go abroad to manufacture their vehicles and simply ship them in, like all these other countries do, to Canada duty-free under those other trade agreements. These are all very serious considerations and risks, if you will. Absolutely.
We do believe, though, that with the agreement as it stands, yes, there's probably additional complexity and some costs. The question becomes whether we can manage those costs. All the companies now are giving consideration to those costs and complexities, how they report, and ultimately how they will factor that into their pricing and their production costs.
We think they're manageable at this point in time, as they stand. We are adding more content, if you will, by virtue of this agreement, more regional content. Parts makers have said that's probably an advantage for them.
Yes, we agree with that, but I will add the caveat that there are no guarantees. This agreement does not provide guarantees.
That's why I worry if we're diverging now and having all these uniquely Canadian costs. I think time will tell, but I can keep my fingers crossed on that.
My next question is for the Dairy Farmers.
Monsieur Lampron, you said something like “had we known”. We realize that these are families. These are small businesses. This sector is being negatively affected. One of the things we want to do at this committee is our due diligence.
We've been asking the government for impact assessment studies that have been done. The Americans finished theirs last April, and they gave their lawmakers material about three inches thick to go through ahead of ratification. We were not given the same courtesy here, even though my colleague Mr. Hoback wanted to do those studies last spring. At the time the Liberals had the majority and we weren't able to do that.
I'm worried. On Friday the C.D. Howe Institute gave its impact assessment for the agreement. Sadly, this looks as if it's going to be a $10-billion hit on our economy going through with this agreement. One of the things we've heard is that the only thing worse is not having an agreement. It's going to be even worse than that. We're in a catch-22 situation here.
I was wondering if you could comment on the openness and transparency of the government going through this process. The minister, rightfully, was here. She said that they consulted extensively. We've heard from the dairy industry, and pharmaceuticals of course, that they don't agree with that. She said that she was in front of committee 12 times. I think it was four times. Before the election, she said that this agreement was going to be a victory for Canada and a win-win-win.
Do you agree with that assessment? How would you rank the government on its openness and transparency on the way it managed this deal?
How much time do we have? A short response is....
Well, to begin with, let's start with zero-emission vehicles. Basically, they're electric vehicles or fuel cell vehicles, absolutely, and they're already in the market now at a pace that is unprecedented. There are many more new models and many more sales. I think that's a given, particularly when you look at the GHG emission standards that we have to meet. We can't meet them without electrifying the fleet.
When we start getting into connected vehicles, and ultimately autonomous vehicles further down the line, obviously, we start getting into the shared economy. Autonomous vehicles and so forth and shared transportation services again are very much of the future, but a little farther out. There are many things we have to satisfactorily address, I might say. We have in Canada this little problem called winter, and some of our sensors don't work that well when they're covered with snow and so forth, just as a practical matter.
Even just on zero-emission vehicle technologies, I would say that literally hundreds of billions of dollars are being invested. Companies are definitely committed to seeing a return on their investment in that regard. They are very much our immediate to mid-term future.
Thank you, Madam Chair and members of the committee for the opportunity to come and discuss with you Bill .
RCC, the Retail Council of Canada, strongly supports Bill
I will briefly introduce the RCC.
The retail trade is the largest private employer in Canada. More than 2.2 million Canadians work in our industry. Recognized as the voice of retailers in Canada, RCC represents more than 45,000 businesses of all types, including department stores, grocery, specialty, discount, independent and online stores.
The grocery members of the RCC are proud to be an integral part of the Canadian food system. They constitute the final and direct link with consumers, offering Canadians the wide variety of foods they eat every day.
RCC is highly supportive of Bill .
Canada is a trading nation. Free trade is essential to a modern economy, allowing Canada access to world markets for its exports and allowing retailers and consumers in Canada to access a variety of goods at competitive prices.
The renegotiated NAFTA, otherwise known as the Canada-United States-Mexico agreement, or CUSMA, preserves key elements of the previous free trade agreement and incorporates new and updated provisions that seek to address 21st century issues.
Let me be clear. CUSMA is good for retailers and CUSMA is good for Canadian consumers.
Specifically, I'd like to make comments on two points within CUSMA.
The first one is the de minimis threshold. Retailers in this country are pleased that the Canadian negotiating team delivered a deal that protected Canadian retailers from the most unreasonable demands made by the U.S. side. With U.S.-based online merchants and couriers pushing hard for an increase of the de minimis level to $800 U.S., it could have been devastating for retail merchants in Canada and to the over 2.1 million Canadians working in the retail sector.
This level would have created a tax and duty advantage for foreign shippers over Canadian retailers, essentially incentivizing Canadians to shop anywhere but in Canada, at the expense of those who actually invest and employ in Canada. Clothes, books, shoes, toys, sporting goods, consumer electronics and housewares would have been particularly hard hit, and these tend to be the areas in which small and medium-sized retailers specialize.
We're very pleased to say that the Canadian negotiating team did not cave in to these demands, and I would personally like to thank the , and the Canadian negotiating team for the work they did in this area.
The second area that I'd like to comment on is the tariff rate quotas for supply-managed goods. Through negotiation of CUSMA and other new trade agreements, such as the CPTPP and CETA, Canada has increased its TRQ commitments for supply-managed goods nearly threefold, and the landscape of Canadian industry and consumer demand has changed significantly.
RCC is supportive of the government's decision to conduct this comprehensive review of its TRQs for existing and new trade agreements, such as CUSMA.
That said, if the purpose of these trade agreements is to bring competitive pricing for Canadian consumers, retailers must be given their fair share of duty-free quota under Global Affairs Canada's review, to maximize consumer choice and bring these better prices.
In particular, quota on products meant for final retail sale to the consumer should be allocated directly to retailers, rather than slicing the pie so thinly that each piece of the pie would be of negligible value, or allocating the bulk of ready-for-sale goods such as fluid milk, cheese and poultry up the line.
Having fewer price takers along the supply chain will ultimately lead to more competitive prices for Canadians.
While quota cannot be allocated directly to consumers, it can be allocated to the people who are closest to consumers, and that is retailers, if Canadians are to see the full benefits of this deal.
In conclusion, thank you once again for the opportunity to present the perspective of food retailers and other retailers on Bill .
I'll be pleased to answer your questions.
Thank you, Madam Chair.
It's an honour to appear before the committee today.
The trading relationship that Canada has with the United States and Mexico is a key pillar of our economy. The Canada, U.S. and Mexico trade agreement represents a step forward in that relationship and the Chemistry Industry Association of Canada and its members support its ratification with the passage of Bill .
Canada's chemistry industry is a vital component of our economy and is the fourth-largest manufacturing sector, at just over $58 billion in annual shipments. Ours is also a very highly skilled industry. More than 38% of our nearly 90,000 employees are university graduates, second only to the IT sector. These highly skilled employees are well paid with an annual average salary of $80,000. The chemistry industry also supports an additional 525,000 Canadians in indirect jobs. While few people give thought to the role of chemistry in the economy, more than 95% of all manufactured goods are directly touched by the business of chemistry. This includes key sectors of the Canadian economy, such as transportation, agri-food, natural resources and, of course, the municipal entities through water and sewage treatment.
In my brief time with you today, I want to share a few key points on behalf of Canada's chemistry sector. First, free trade has been an unquestionable benefit for our chemistry sector and nowhere is that more prevalent than here in North America. Canada's chemistry sector is highly integrated into international trade flows. Our industry exports nearly $40 billion of chemical products each year, second only to transportation equipment providers in the manufacturing space. On the other hand, we import just under $60 billion from other nations. Taken together, the chemistry sector trades around 100 billion dollars' worth of products each year.
With respect to our North American neighbours, approximately 76% of our exports and 58% of our imported chemical products come from the United States and Mexico, equating to over 65 billion dollars' worth of trade annually. Our members have offices and production facilities across Canada, including in B.C., Alberta, Saskatchewan, Manitoba, Ontario, Quebec and New Brunswick. Every single day these facilities trade hundreds of millions of dollars of products with our American and Mexican neighbours. Every day they send hundreds of train cars from Fort Saskatchewan, Sarnia and Bécancour to facilities in Texas, Illinois, Ohio, Coahuila, Chihuahua and Mexico City. In return, these U.S. and Mexican companies send hundreds of cars back, picking up new products in Guadalajara, Louisiana, New Jersey and Washington along the way, and sending them to manufacturers in Red Deer, Toronto and Montreal. Thousands of trucks and train cars cross our three borders each day in a highly efficient and integrated manner. All of this has been possible through free trade.
My second point is that once it became clear that a renegotiation of NAFTA was imminent, CIAC wasted no time in articulating clear and concise priorities that would preserve and modernize North American trade. While it was important for us to maintain tariff-free access for chemical products into the U.S. and Mexico, we wanted to use this once-in-a-generation opportunity to modernize key aspects of the North American trade framework. Addressing non-tariff issues through free trade negotiations is a constructive way to ensure a common approach among trade partners, vital to a knowledge-based economy. This means finding new ways to strengthen government-to-government co-operation, avoiding duplication and enhancing regulatory cohesion among trade partners. Just as important as enhancing the free flow and security of goods, the flow of ideas and information helps to strengthen our supply trains, improve our businesses and improve business certainty. Modern trade agreements go far beyond tariffs and it is crucial that these agreements evolve with the economy.
In a unique step, we collaborated with our sister associations in the United States and Mexico to offer tripartite recommendations to our respective negotiating teams on modernizations to the areas of rules of origin and regulatory co-operation. These two areas are uniquely critical for the trade of chemical products.
CUSMA preserves and enhances the trilateral trade of chemistry products in North America. It prevents new tariffs from being applied to chemical products, modernizes rules of origin by offering companies a clear menu of options for documenting the origin of their products, enhances regulatory co-operation with a sectoral annex intended to facilitate cross-border information and burden sharing to protect human health and environmental health, and strengthens Canada's world-leading risk management approach to chemicals management. Finally, it facilitates digital trade by ensuring that industry data can flow freely and securely across borders.
The chemistry sector has evolved significantly since the original NAFTA was adopted. Today, tens of billions of dollars' worth of chemical products are traded across our borders. CUSMA will provide for tariff-free trade of chemical products. It modernizes key areas vital to a knowledge-based 21st century economy and it strengthens Canada's risk-based approach to chemicals management.
Finally, we'd like to thank the and Minister for their extensive engagement on the file. We can't say enough about Canada's negotiating team at Global Affairs Canada. They proved that despite the tense rhetoric, you can achieve win-win-win outcomes. I'd also like to note the high degree of participation from the provinces as well.
In the interest of time, I will leave it at that and welcome your questions.
Thank you, Ms. Pohlmann.
The Canadian Federation of Independent Business, or CFIB for short, is an independent and non-partisan non-profit organization representing 110,000 small and medium-size independent businesses across the country in every sector of the economy.
Our last survey on international trade dates back to 2017. We received 4,400 responses, and we used the data to publish a report containing many of our members' comments as well as real-life examples of issues they face when they engage in international trade. We have a few copies of the report with us, so if anyone would like a copy, I can provide you with one after the presentation. We can also send it to you by email.
It's important to note that more than 90% of Canadian exporters are considered small businesses. What's more, 31% of survey respondents said they had some experience with exporting, and 71% reported having experience with importing. Some engage in international trade only occasionally, whereas for others, it's a regular, if not daily, practice. What matters, however, is that they be able to trade with others as smoothly and as swiftly as possible, regardless of how often.
In addition, 63% of respondents import products or services from the United States, while 28% export to the U.S. Clearly, the figures aren't as high when it comes to trade with Mexico, but the country remains a major trading partner for Canadian businesses, and that trade is growing. These figures show just how important our trading relationship with the U.S. is, while highlighting the need for clear rules and a predictable trading environment to make it easier to trade with our partners.
We asked our membership what motivated them to engage in more international trade. It may be greater demand for a product or service, a desire to grow their business or a business opportunity. More than a third of members indicated that good trade deals influenced their plans to export products or services.
In 2018, we asked our members whether a new agreement between Canada, the U.S. and Mexico should include provisions specific to small and medium-size businesses, so we are pleased to see an entire chapter devoted to them in the new agreement, recognizing their important role in the economy. As one of our top recommendations in connection with the negotiations, this is a positive step forward, one we hope will make it easier for small and medium-size businesses to engage in more international trade.
I will now turn the floor over to my colleague, Ms. Pohlmann.
We'll get into our priorities and recommendations. I want to say, first and foremost, that we encourage the government to move forward on ratifying this agreement as soon as possible. We have experienced a lot of uncertainty in international trade over the past few years, and this would help bring some needed stability with Canada's largest trading partner.
In addition, we're very pleased to see a small business chapter, as Jasmin pointed out, included in this agreement, which recognizes the particular challenges small businesses face when it comes to trade. If we want to see more small business engage in trade, we would encourage the government to move quickly on many of the ideas and principles found in the small business chapter and throughout the agreement.
While eliminating and/or lowering duties is important, almost more important to smaller businesses is to focus on making border processes easier. This includes improving how quickly trucks can cross the border but also finding ways to clarify and simplify customs processes and paperwork. In particular, things like the rules of origin can be a real challenge for smaller firms who may not have the expertise or resources to address issues that may arise in that area.
Also important, though, is to review things like trade facilitation programs such as FAST, C-TPAT and PIP and to make sure that they consider the needs of small and medium-sized companies when they're being designed, and making sure they're easy to access for smaller firms, as well. Too often they're really focused on the large firms and not on the small firms.
I want to touch on a couple of small things. While we'd like to see this agreement move forward as soon as possible, we also know there are a couple of areas of concern. We recognize that certain sectors may be hurt by some aspects of the agreement, and action must be taken to address those issues. For example, we know the dairy industry will see U.S. competitors gain greater access to the Canadian market. To deal with this, the government should provide a detailed transition plan, provide clarity on what compensation will be offered and provide assurances that these measures will work for smaller producers, as well.
As an aside, I should mention that our members in the grain and livestock industries are also struggling due to trade issues with places like China and India, so we would certainly welcome efforts to resolve those issues, as well.
We're also concerned with the higher de minimis. While we agree with the Retail Council, we were pleased to see that the government sort of stuck to the ground and didn't go to the $800 that was being pushed by the Americans. We are still concerned that it is doubling the cost from $20 to $40 for tax purposes and up to $150 for duties.
Small Canadian retail businesses are already facing intense competition from online and international businesses, and we feel that some of these changes will actually make it worse. At the very least, we ask that government direct stronger enforcement of the rules by Canada Post and CBSA. The issue here is that the rules are in place but they're not being applied. We need to see stronger rules enforced and make sure that the rules that are in place are being properly enforced by Canada Post and the CBSA.
We would also encourage the government to look at ways that we could potentially offer other relief should this become an issue for smaller retailers on the ground here in Canada.
These are the issues we hope to address today. We'd like to thank you for the opportunity, and we look forward to your questions.
The sector is uniquely positioned to help advance Canada's clean energy future and provide, as the throne speech aspires to, clean, affordable power in every Canadian community.
Canadians and Americans share a highly integrated electricity grid, connected by more than 35 high-voltage cross-border transmission lines. Our members also engage in bidirectional electricity trade with the United States and work with American counterparts to keep the grid reliable and secure.
Trade integration forms the backbone of a highly positive and mutually beneficial cross-border electricity relationship, which provides economic, environmental, resiliency and security benefits to Canadians and Americans and contributes to affordable and increasingly clean energy for customers on both sides of the border. Overall, the binational integrated electricity system exemplifies the advantages of partnership and collaboration and benefits both countries.
In recognition of these mutual benefits, CEA and its U.S. counterpart, the Edison Electric Institute, submitted joint comments to negotiators on both sides of the border during the renegotiations. These joint comments highlighted our shared view that the existing cross-border trade relationship works well and the importance of preserving it. For more than 25 years, NAFTA has provided stability and predictability to our shared interconnected grid. Its value is underpinned by NAFTA's guarantee of tariff-free electricity trade, and it is positive that the Canada-United States-Mexico free trade agreement maintains this integral guarantee.
CEA also supports the greater integration and interdependence of North American energy systems and was pleased to see the inclusion of a CUSMA Canada-U.S. energy side letter on regulatory measures and regulatory transparency.
Over 70 terawatt hours of electricity flowed across the border in 2018, representing an electricity trade relationship of over $3 billion. Approximately 30 states engage in electricity trade with Canada each year, with Canadian exports to northern border states being particularly robust. This two-way exchange enables electric supply to meet demand in the most efficient manner, increases resilience, boosts affordability for customers and helps regions meet policy and business goals. Many Canadian and U.S. electricity companies own assets in both countries.
Canadian export volumes are high relative to import volumes, as Canadian generating capacity generally exceeds requirements. In 2018, net exports were 48.2 terawatt hours, which represented a net value of $2.4 billion Canadian. We have additional surplus supply as well as rich resource development opportunities.
From a Canadian perspective, electricity trade provides system reliability and resilience and economic and affordability benefits. While exports represent a valued source of revenue for many Canadian electricity companies, that is only half of the story.
From the American perspective, particularly for northern border states, our electricity is an affordable, reliable, safe, secure, clean supply option that contributes to national energy security, environmental goals and economic success. Given our abundant clean electricity profile and rich clean resource development opportunities, Canadian electricity imports contribute to the shrinking of the U.S. carbon footprint and can also serve as backstop energy to support the development of U.S. variable renewable resources such as solar and wind.
This relationship is more than powering homes and businesses. National energy security has also been a major Canadian preoccupation throughout the negotiation of the agreement. The interconnected nature of the North American grid means that its reliable and safe operation is a shared responsibility. Canada and the U.S. have worked together to develop effective institutions in support of a safe, secure, reliable electricity system to the benefit of both Canadian and U.S. businesses and communities.
The Canadian electricity sector is an active participant in cross-border institutions and programs that aim to secure the grid, such as the Electricity Subsector Coordinating Council, which enjoys participation of senior government officials in the sector and electricity industry CEOs from both countries. The electricity sector and the government also participate in major cross-border security incident response exercises like GridEx, which was held this past November across Canada and the U.S.
To this end, Canada and the U.S. work very closely on the protection of critical infrastructure. Cybersecurity and physical security are top of mind for industry and government alike. While there is good collaboration between our governments and industries, there is always opportunity to strengthen cyber protocols.
All things considered, there are further opportunities to leverage the positive electricity partnership between Canada and the U.S. The ratification of CUSMA will help provide the stability and predictability to our shared interconnected electricity system to help forward this valuable partnership.
We'll keep working to make North America the world's leading energy region by promoting energy security and affordability, strengthening energy and infrastructure protections and achieving environmental goals.
Thanks for your time.
Thank you, witnesses, for being here this afternoon. I appreciate it.
I'm sure you're aware that we're doing extended sittings all this week. We're doing as much as we can to give the 200 people who want to appear in front of the committee a chance to talk about the impact of CUSMA, the new NAFTA.
The concern we have is not the deal; we're going to approve the deal. The bill should go into clause-by-clause study hopefully on Thursday or Friday, and then it will be out of here. Now with regard to the Senate, that's a different story. The will have to deal with them; that's his baby. However, as far as the House of Commons is concerned, we should get it through, which I think everybody wants to see.
There are some concerns I want to bring in.
I'll start with the CFIB.
A lot of people will say to get it done, yet when you start telling them what's in the deal, they say, “Oh, I didn't know that.”
You used a good example. You talked about the de minimis. It goes from $20 to $40, and then the duty is to $150.
Do you realize that Canada Post doesn't qualify? It is only a courier outside of Canada Post that would qualify for those types of situations.
Organizations like EDC and the trade commissioner service for that matter are not well known either among small companies. In fact, when they do learn about them, they often feel like they're not really meant for them and that they're meant for bigger companies. We're constantly educating them ourselves to say, “No, actually, they're meant for you.”
Again, I think it goes back to finding ways to make it easier. I'll give you an example. When you go to the Government of Canada website it's very difficult to find anything specific to small businesses. It's very much focused on Canadians, which makes sense, but it's something that allows them to understand that there's a piece where they can go to get information that they need. It's not easy to navigate. That's where it starts.
There are things that CBSA can do that are a little bit more focused on the information the businesses need to import or export. Even though they're more involved in the importing side, that's where small businesses go to get information. They go to the border folks. They need to also be able to have a more consistent message around what you need to do in order to export effectively.
Ultimately, they've talked about a single window for years. It is the idea that as a small business that wants to get involved in trade, you go to one place and you get all the information you need from all the different government departments. That still doesn't exist. Businesses have to figure out whether they have to talk to CFIA or the USDA or....
That's where these types of agreements can start working together,. It's not only figuring things out on the Canadian side, but it's linking those to the American side, so you can deal with all of those other government departments in one spot instead of having to figure out which ones you have to deal with.
That's what is really going to help small businesses get more involved in trade.
Have a visitor rebate program. Canada is the only OECD country that does not have a visitor rebate program. Essentially, think about Europe and the VAT program and other countries. Japan has a really good model that we're looking closely at where consumers can go, shop and get their taxes refunded directly at point of sale.
I think Canada absolutely needs a visitor rebate program in order to encourage more people to visit Canada, exactly as you've suggested. It wouldn't just benefit retailers. It would benefit others when people need somewhere to stay and something to eat when they're here. Canada absolutely needs a visitor rebate program.
If I may touch on your other question, small and medium-sized retailers come to the Retail Council of Canada for information. They trust us. We represent over 45,000 storefronts across the country and even some retailers that people might think are—quote, unquote—large retailers. Depending on the business model and in the case of franchise models, which happens all the time, these are all small businesses across the country. As I said, we represent 45,000 storefronts. They come to the Retail Council for this kind of information because, number one, they trust us and, number two, we can put it in language that is meaningful to that sector, to retailers.
My thinking, if I were to advise government on how to get the word the word out, is to work with industry associations such as the Retail Council of Canada.
Yes. The small business chapter in this agreement is very important. It's only the second or third agreement now. The small business chapter first appeared in the Trans-Pacific Partnership agreement, and this one has adopted it at this scale. The reason it's important is that it recognizes the differences small businesses have in international trade.
When you look at the details, you see that it's non-binding. It's only looking at how to better communicate and share information. It's the principle behind it that's really important. Recognizing that small businesses are important in the international trade sphere, that, I think, is key.
I'd love to see innovation, or I guess some additions, happen, not just in that chapter, but throughout the agreement, in areas that are important for small businesses and which I mentioned earlier.
Dealing with trade facilitation is really the biggest issue. It's the way you deal with the regulations, with customs processes. These are the areas that are the most important for smaller companies.
Duties are important, and everybody wants to make...but at least you can understand them. It's the unexpected what we call non-tariff trade barriers that make the biggest difference in a small business. Making sure, when we're looking at ways to reduce customs processes and reduce regulations, that we're thinking about the impacts upon the small companies—they are different from those upon large companies—is the area in which I hope this will go further.
By including this chapter, I hope that when we're discussing how to address the regulatory barriers and how to make trade easier, we're thinking about the issues in the context of small companies, because their challenges are very different.
Yes, we would definitely like to see better enforcement of the rules that exist. That being said, we understand the challenges associated with that. We are a trading nation, and that's a good thing.
To your earlier question about online, anything that facilitates goods going both ways, and in the case of retailers and consumers, anything that facilitates goods coming into this country is a good thing.
We understand the volume of things. We definitely would like to see better enforcement, but ultimately at the end of the day, as I said, I think the Canadian negotiating team did a good job with the limits they established.
I did want to touch on that point about online and facilitating trade. Retailers support that. The single biggest barrier, though, and one of the single biggest challenges to all our retailers, including small and medium-size retailers, is government over-regulation.
What you talked about I think will facilitate things, but what we would like to see is more regulatory co-operation between Canada and the U.S. and even within Canada, because the number of examples we have—children's toys, strollers, child car seats—where there are slightly different requirements in Canada from the United States, where if we could all agree that we would like to afford the same highest level of protection possible to all citizens, that sort of thing would have a significant impact on making sure Canadians are able to have as much choice as possible and keep prices low.
I call the meeting back to order.
Pursuant to the order of reference of Thursday, February 6, we are examining Bill , an act to implement the agreement between Canada, the United States of America and the United Mexican States. This week, we are continuing to hear witnesses and get comments on how important this is and whether there's anything more that needs to be added as we move forward.
I'll introduce the witnesses.
By video conference, we have from the Canadian Canola Growers Association, Rick White, president and chief executive officer. Welcome. We appreciate having you here. We understand that we have the video conference system only until eight o'clock, so we'll make sure to get questions to you before that.
From Gay Lea Foods Co-operative Limited, we have Rosemary MacLellan, vice-president, strategy and industry affairs.
From the National Cattle Feeders' Association, we have Janice Tranberg, president and chief executive officer, and Michel Daigle, chair.
Welcome to all of you.
We'll start with you, Mr. White, if you'd like to give some opening comments.
Thank you for the invitation to appear before the committee on your study of Bill , an act to implement the agreement between Canada, the United States of America and the United Mexican States, also known as CUSMA.
It is a pleasure to appear today on behalf of Canada's 43,000 canola farmers. My name, of course, is Rick White, and I am the president and CEO of the Canadian Canola Growers Association.
Thank you for accommodating my presentation through teleconference from Winnipeg, where CCGA's head office is located. I am also joined in your room by Dave Carey. He's our vice-president of government and industry relations based in Ottawa.
Canola farmers support CUSMA and encourage the government to complete the parliamentary process quickly. Canada's ratification will provide a strong signal to our trading partners of the importance of this agreement and reinstate predictability and certainty in the North American marketplace for Canadian farmers.
CCGA represents canola farmers from Ontario to British Columbia on national and international issues, policies and programs that impact their farms' success. Developed in Canada, canola is a staple of Canadian agriculture as well as Canadian science and innovation. Today it is Canada's most widely seeded crop and is the largest farm cash receipt of any agricultural commodity, earning Canadian farmers over $9.3 billion in 2018. Annually, the canola sector provides $26.7 billion to the Canadian economy and provides for 250,000 jobs.
With 90% of canola exported as seed, oil or meal, free trade and access to international markets are key success factors for our farmers' continued prosperity. Free trade agreements such as CUSMA preserve and provide predictable markets and rules of trade in which to sell and grow our sector. In an environment of growing protectionism, it is even more important for Canada to support open markets and enable trade.
The North American Free Trade Agreement has served canola farmers well. Since its implementation 26 years ago, canola sales to our southern neighbours have grown significantly and have directly contributed to the growth and development of the canola sector here in Canada. Today the U.S. is our number one market, and Mexico is our fourth. In 2019, Canada sold 3.5 billion dollars' worth of canola products to the United States, which represents 5.6 million tonnes of seed, oil and meal. Ten years ago, our sales were $1.6 billion, so canola has more than doubled in value over the last decade.
Importantly, the U.S. is a critical market for canola value-added products. The U.S. purchases over 50% of our oil exports and 75% of our meal exports. The economic activity generated from processing seed in Canada and exporting oil and meal is an integral part of canola's contribution to the Canadian economy. Furthermore, many of these processors are in rural Canada, close to canola production. The value-added activity supports local communities, sustains rural employment and provides sales opportunities for canola producers outside the traditional elevator system.
CUSMA builds on and strengthens the NAFTA. CCGA advanced three priorities prior to and throughout the negotiations that are largely met with CUSMA.
Our primary objective was to preserve NAFTA concessions and maintain market access into the United States and Mexico. Under NAFTA and continued under CUSMA, exports of canola seed, oil and meal remain duty-free and will continue to face little in the way of trade barriers. This provides long-term predictability and restores certainty to our trade and business relationships.
Our second objective was to streamline and align regulatory practices between NAFTA partners. CUSMA adds a new section on agricultural biotechnology, including the new generation of plant breeding techniques, recognizing the importance of innovation for North American agriculture. It confirms existing procedures and builds on the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, covering trade facilitation measures, instances of low-level presence and the creation of a working group for co-operation on agricultural biotechnology.
Our third objective was to seek improvements for further processed canola products, such as margarine and shortening. CUSMA modernizes the rules of origin, improving access for margarine products of which canola or soy are primary ingredients. Making the vegetable oil market more competitive should generate additional value-added activities here in Canada and capture more economic activity domestically. lt is unfortunate that we did not achieve the same outcome for shortening as the market is significantly larger.
While I appreciate today's testimony is focused on Bill , the last year has been a challenging one for farmers. The loss of the China market for canola seed, various rail challenges, adverse weather and geopolitical and macro forces out of farmers' control have created significant uncertainty and risk at the farm level. Farmers are again making 2020 production decisions with limited certainty and knowledge of demand, price and available sales opportunities.
While CUSMA restores certainty in North America, reopening the China market to canola seed, meaningful changes to government business risk management programs, and biofuel market diversification are also required to assist farmers to manage the current and any future trade disruption. The current risk management programs, most notably agri-stability, falls short in addressing farm financial losses, and significant enhancements are required to make it work for farmers. Additionally, a clear requirement in the clean fuel standard that all diesel fuel consumed in Canada contain a minimum 5% renewable content would create greenhouse gas reductions and increase domestic demand for canola seed by an additional 1.3 million tonnes to 2.3 million tonnes.
In conclusion, NAFTA was critical to the development and success of the Canadian canola industry, and its modernization through CUSMA provides a platform to further stimulate growth in our sector and in the larger economy. As such, I have one parting comment. CCGA respectfully urges parliamentarians from both Houses to complete the necessary review and swiftly pass Bill into law.
I look forward to your questions.
Thank you very much.
Gay Lea Foods is a proud Canadian co-operative with members on more than 1,400 farms across Ontario and Manitoba. Our membership in Ontario represents roughly 40% of the bovine milk production in the province. We ourselves process approximately 24% of Ontario's milk in 11 facilities, making everything from milk proteins and ingredients to cottage cheese, butter, whipped cream, soft and hard cheese, sour cream and fluid milk. We also broker 45% of Ontario's goat milk, have a cheese facility in Alberta and are partners in a joint venture in Manitoba.
Recognizing the external threats from global trade agreements as well as the rapidly changing marketplace, Gay Lea Foods has been steadily strengthening our co-operative through investments in our existing operations. These have enabled us to increase sales from $560 million in 2013 to just over $872 million in 2019 as a wholly owned and operated Canadian business.
Gay Lea Foods has been committed not only to our members, our employees and the communities we touch, but to the Canadian dairy industry as well. The basis of our co-operative's investment in a drying facility in 2003 was to support the management of solids non-fat, SNF, as a responsible dairy sector. That is also why Gay Lea Foods was an active partner in the development of classes 6 and 7 in the national ingredients strategy as an industry-led solution to address the growing structural surplus of SNF as a consequence of satisfying the growing domestic demand for butterfat.
It needs to be emphasized that this industry-led, market-driven policy was a significant step for Canadian dairy and ignited investment throughout the sector, including more than $1 billion of publicly reported projects by Canadian dairy processors that included new facilities, modernization of existing capacity and capabilities, as well as expansion.
To that end, in 2016 Gay Lea Foods embarked on a plan to create a new dairy ingredients hub in Ontario, with a $72-million investment in the construction of a nutraceutical-grade dairy ingredients facility in Teeswater. This is the only nutraceutical-grade dairy ingredients facility in Canada.
We also brokered a non-conventional joint venture in Winnipeg, Manitoba, to construct a new MPC, milk protein concentrates, and butter facility with Vitalus Nutrition Inc. The latter was in support of chronic underproduction in western Canada, providing much-needed processing capacity to support dairy farmers in the western part of the country.
Both of these investments were committed, with shovels in the ground, prior to the NAFTA negotiations, and they are both now in operation.
I must add that the $72-million investment was all made from aluminum and steel that was specially fabricated in the United States.
Over the last four years, Gay Lea Foods has invested an additional $180 million in the business, with plans for a further investment of $100 million by 2023. These financial decisions by a dairy co-operative owned by dairy farmers were not made without risk, but they were made with the understanding that both industry and government shared a commitment to the growth of a thriving, innovative and uniquely Canadian dairy sector.
The impact of CUSMA on Canadian dairy needs to be placed in the context of the multiple pressures, opportunities and changes the dairy sector has encountered over the last six years.
The global marketplace and consumer demands on food are shifting. Canadian dairy has lost domestic market share under CETA, CPTPP and now CUSMA. We also have the WTO deadline for the elimination of export subsidies coming into effect later this year.
That was part of the rationale for creating classes 6 and 7: to address our issues of structural surplus while also dealing with the increasing demand for butterfat. This included our looking at how we would utilize and sell skim milk powder, which is globally recognized as some of the best skim milk powder you can find.
ln 2019 we have started to see the real impact of imported cheese in the Canadian marketplace. While the volumes are incremental, the effect on pricing is necessitating changes for Canadian cheese in order to remain competitive. As more imports come into Canada, the industry will need to adjust further to maintain market share.
CUSMA will force the industry to make changes to our milk class pricing and has designated a formula for the pricing of three specific dairy goods: skim milk powder, MPC and infant formula. It will also place thresholds on global exports of these three specific dairy goods, based on our dairy year. This will have a direct impact on the industry's ability to balance the demand for butterfat while providing value to the SNF associated with that milk volume.
As the committee has heard from previous testimony, the timing of the coming into force could add additional challenges to our sector, as these provisions are based on a dairy year starting on August 1.
The agreement also includes provisions on the disclosure of certain information and on obligations to notify and consult with the other party on changes to milk class. It should be noted these provisions apply to both parties to the annex, both Canada and the United States. It is hoped that government will work with industry and ensure that both parties to that annex fulfill their obligations in relation to those provisions.
As a sector, we need to have a good dialogue on the future we want for the Canadian dairy industry. We need to solidify a common vision and chart the plan for the next three, five and 10 years. We will need to know that the government has our back as we move through the unprecedented, most difficult and most significant next three years with these trade agreements, the cumulative effect of which will be a significant impact on all of our businesses and decisions going forward.
We need to work on restoring the stability and predictability that have been eroded in our sector in order to effectively manage milk supply to meet market demands for various milk components. Government will need to play a role as we work on how to position this sector to remain viable with growth, sustainability and innovation at the core. The dairy industry still has so much potential, and we all need to get behind it.
The government needs to move ahead with the implementation of a dairy processing investment program as compensation for both CPTPP and CUSMA. The government has repeatedly committed that this compensation will be full and fair. I would only add that it also needs to be retroactive to the signing of the trans-Pacific agreement in March 2018. The reason for this is simple. We have not waited for the impact of these trade agreements to be felt in our marketplace as we have developed and put investment into mitigation strategies. That was with the understanding that government would be there to support our investments in our operations that are negatively impacted by the trade agreements.
Global Affairs Canada should allocate the TRQs for the market access conceded under CUSMA to dairy processors. Simply put, we are the best placed to identify what is required to fill domestic needs. I will note that contrary to CETA, the market access conceded under CPTPP and CUSMA is market access of opportunity. Canada's not obliged to 100% fill it or even to fill it. It should be brought in only if there are domestic needs to be fulfilled.
Related to the administration of TRQs by Global Affairs Canada, government needs to ensure that the department has the resources to administer the new obligations under these trade agreements to ensure they are timely and business-friendly. They currently administer 38 TRQs for supply-managed commodities. We will see that number increase to 54 with CUSMA. They need to provide for both the resources and the training for the staff, as we look forward to how this administration will be done in a timely and business-oriented way.
While there are many challenges ahead of us, Gay Lea Foods remains committed to working with industry partners and all orders of government on a plan for the sector and our future as a dairy co-operative in what we hope will be a thriving and growing dairy sector in Canada.
NCFA represents Canadian cattle feeders on national issues and
Les Producteurs de bovins du Québec also belongs to the association.
NCFA works in collaboration with stakeholders and government to strengthen and improve the cattle feeding sector. Through NCFA, Canada's cattle feeders speak with a unified voice. NCFA is a business-oriented organization focused on growth and sustainability, competitiveness and industry leadership. We work to create a business and trade environment that is conducive to the growth and sustainability of cattle feeding, focusing on enhanced access to existing export markets and the opening of new markets.
We support a regulatory system that better positions our industry for future growth and prosperity. The National Cattle Feeders' Association is a member of the Canadian Agri-Food Trade Alliance and has a strong partnership with the Canadian Cattlemen's Association, both of which appeared before this committee last week on Bill .
Agriculture and agri-food in Canada is a $100-billion industry that employs over two million Canadians. Both the Barton report and the agri-food economic strategy table identify agriculture and agri-food as a high-growth economic sector with significant potential to increase its contribution to the Canadian economy. However, to do so, we need to proactively harness opportunities such as CUSMA.
Canada produces some of the most affordable, nutritious and safest beef in the world. The Canadian beef industry represents farm cash receipts totalling $9.4 billion annually, contributing $18 billion to the GDP annually. The Canadian beef industry generates an estimated 228,000 jobs in Canada, with every job in the sector yielding another 3.56 jobs elsewhere in the economy.
In Canada, there are approximately 82,665 Canadian farms, ranches and feedlots.
Trade in beef and live cattle between the U.S. and Canada has created a highly integrated North American market that benefits the beef sector on both sides of the border. For all practical purposes, Canadian and U.S. beef industries operate within a single North American market where processed beef and live cattle move across the border in a relatively unimpeded and tariff-free manner.
Cattle feeding is the most valuable production component within the Canadian and U.S. beef value chain and both countries enjoy a tremendous benefit from a very high level of integration.
Even though the Canadian beef industry is approximately one-tenth the size of the U.S. industry, there is still a tremendous amount of reciprocal trade that occurs between the two countries in terms of processed beef, and even more with respect to live cattle.
The U.S. is Canada's largest export customer and Canada is the single-largest import supplier. Canada consumes about one-tenth of the U.S. exports and satisfies one-fifth of the U.S. required imports.
Each year, Canada processes three million head of cattle and yields about one million tonnes of beef. Canada exports 45% of all beef production annually, and about 75% to 80% of these exports are destined for the U.S.
The NCFA supports a swift ratification of this agreement and calls upon all MPs to ensure the quick passage of Bill .
Our sector is not in a position to sustain any further trade disruptions with any of our trading partners, and the U.S. in particular. There is no room for reopening or amending the CUSMA at this stage if agriculture is to have any hope of growth and sustainability.
The FTA that occurred in 1988 and then NAFTA in the 1990s show beef as a good example of how free trade has strengthened industries on both sides of the border. These agreements inject a high degree of competition in the industry and have made North American industry a truly integrated market. Competition drove down input costs and increased productivity. This has allowed the North American beef industry to compete globally.
Going into CUSMA negotiations, the Canadian cattle feeders had four priorities: first, do no harm; second, improve market access where possible; third, include a specific commitment on regulatory co-operation; and fourth, no return of country-of-origin labelling, or COOL, in any form.
CUSMA builds on the success of NAFTA and restores long-term predictability to the North American supply chain. This is exceedingly important during this time of ongoing unpredictability in global markets.
Key benefits to CUSMA for the cattle feeders include no new tariffs or trade-restricting measures, meaningful progress on regulatory alignment and co-operation, and modernizing elements that will help bring NAFTA into the digital age.
CUSMA preserves and secures duty-free access upon which the North American beef cattle sector has been built over the past quarter of a century.
Producers appreciate that there is nothing in the agreement on mandatory U.S. country-of-origin labelling for meat or livestock, and that there is ongoing interest to address regulatory matters affecting cattle and beef trade, and to continuously improve the competitiveness of the North American beef sector.
In conclusion, our message is simple. We call on members from all parties to facilitate the timely ratification of CUSMA. Please pass Bill and bring CUSMA into force so that cattle feeders can capture the economic and competitive benefits as soon as possible
That's fine. Thank you, Chair.
Thank you to all the witnesses for coming this evening.
It's interesting that we hear from the different groups and associations that they want this passed right away. We agree with you. We've been saying that since April 2019. We said that we should do a pre-study, that we should get the pre-study done so that we could move forward right away. We brought this forward again this past fall. We said to bring the House back and let's get this done and out of our hair.
All the times we brought forward suggestions on how to speed this up, it was always declined, until now, all of a sudden. But we're saying that we still need time to do our due diligence. That's what we would have done in those previous studies. Now they're saying to hurry up and do it. It's frustrating.
For example, we heard from the dairy producers today. Dairy farmers are basically saying that if we hurry up and push this through, they lose a benefit of a year if it goes through too fast. If we wait until after May 1, then that benefit kicks out a year.
Well, we have the NDP doing a backroom deal to make sure it goes through relatively quickly, where we would have said we should work during the break week and then at least move forward. I find it frustrating when people say that we have to move forward really fast on this, when that's exactly what we've been doing. I'm not sure what the minister is saying to you folks, but the reality is that they're the ones, not us, who haven't managed this file. That frustration is kicking through on this side, because we've been pushing it and pushing it and pushing it to make sure that situations like the ones Rosemary brought forward are properly addressed.
There's a classic example in this deal. If we'd done TPP, the replacement to NAFTA, I think everybody in this room would have said it would have been a good deal. The benefit to the Canadian economy was about $4.3 billion. Obama wanted to do it. Trudeau did not want to do it. It didn't happen. Now we do NAFTA. We do a TPP without NAFTA, so we get 3.5% under TPP with TRQ and another 3.5% under NAFTA with TRQ, so the dairy is getting hit twice now. The net benefit here is a $10-billion loss to the Canadian GDP based on C.D. Howe. We're still waiting for the economic factors to come from this government.
What I'm finding is that as we dig into this deal that's supposedly a win-win-win for everybody, there are a lot of losers here who need to be heard from. Dairy is a good example. I know Rick and Janice. I've been on WTO talks with Rick. We have a history together. We're all pro-traders; there's no question about that. In the same breath, I'm looking at this wondering where's the compensation and where's the mitigation for the losses here. We're not seeing it. I just look at the limitations on the ability to export in the dairy sector. Basically, you're going to allow more product in, but on your powdered milk, for example, you're restricted on what you can ship, not only in North America but globally.
Rosemary, you were talking about going through the consultation process with the minister. When they said they were going to put a restriction on the amount of powdered milk, for example, that you can export, what were those discussions about? Did you agree to do a global ban or a global TRQ on the amount you can export?
Thank you once again to all the presenters.
We've made a commitment, and we've heard it over and over again, to get the NAFTA deal through expeditiously. Obviously, the dairy farmers have some concerns, and we've heard them. They've come to the table with a number of ideas to help to continue to strengthen the dairy producers. I appreciate that testimony, too.
I'm not going to ask any questions that have already been asked, that the analysts have already gathered. We gather all your information, not only yours but from many other people, and we create a report.
I have one quick question that I have not heard yet. I'm probably going to have some time left over.
We're talking a lot about the United States in the NAFTA deal. When the canola farmers made the presentation, they mentioned that the United States is their number one market and Mexico is the fourth.
I would ask the canola farmers what opportunities there are in increasing exports to Mexico, taking it from fourth to higher, or just increasing exports with Mexico.
Sure. I think that trade diversification is key.
I think that with the U.S. and China representing so much of our exports, looking towards Mexico to increase.... We were at about $782 million in 2018. So I think a newly invigorated NAFTA is a good thing—CUSMA.
I think the key is that we can't be so reliant on any one export market. As we look to strengthen relationships with Mexico, we see there certainly are market gains to be found there.
To the expeditious nature of your question, 90% of our crop is exported. We can't consume everything that we grow here on the canola side.
We also have to look at where the U.S. is in their electoral cycle. Right now with the U.S. and Mexico having ratified, we're still under NAFTA, but if we get into the U.S. election cycle, we would be in a dangerous position, where Canada would be outside of NAFTA, and the U.S. and Mexico would continue to be....
We'd love to see more exports going to more markets, more to Japan and more to Southeast Asia, Bangladesh, Pakistan. There are lots of other markets. Mexico is certainly one where we can make inroads, but we can't do it without the CPTPP.
Thank you, Madam Chair.
I'll try to be as brief as possible.
Ms. MacLellan, this is for you, please.
I did read a statement from Gay Lea Foods. I believe it's from October 1, 2018.
Very quickly, one of the statements was that USMCA “will have destabilizing and detrimental impacts on the Canadian dairy industry, our co-operative business, and dairy farmers.” It went on to speak about the investments that you spoke about, I believe, in your opening statements. I see numbers in here of $140 million to build a dairy ingredients hub in Ontario, $68 million for an ingredients facility in Teeswater, a $3-million innovation centre in Hamilton, and so on and so forth.
You mentioned the statement that CUSMA will call into question millions of dollars of investments Gay Lea has made over the last several years. Have you been able to research the impact of CUSMA since this statement, and what are your findings? In other words, can you talk us through how the new NAFTA will potentially impact those specific investments?