:
I'd like to call the meeting to order.
As you know, we're doing a study on the Canada-European Union trade agreement. This is meeting number 4, pursuant to Standing Order 108(2), a study of the Canada-European Union comprehensive economic trade agreement, CETA, and the effects of it on the Canadian agriculture sector.
We have Dairy Farmers of Canada and Glengarry Cheesemaking Inc. with us for the first hour. In the second hour we have Grain Growers of Canada and then a video conference from Vancouver, British Columbia, with an individual.
I want to welcome the witnesses we have with us. From Dairy Farmers of Canada we have Wally Smith, president, and Richard Doyle, executive director. From Glengarry Cheesemaking Inc., we have Margaret Peters Morris, president.
Welcome to each of you. You have 10 minutes to make opening statements.
Please go ahead.
:
Thank you, Mr. Chairman.
Dairy Farmers of Canada welcomes the opportunity to participate in the committee's study on the Canada-European comprehensive economic trade agreement and the effects of it on the Canadian agriculture sector.
Certainly l don't have to introduce DFC, as we have had the pleasure of appearing before this committee on a number of different occasions. However, l want to highlight that DFC leads generic dairy market development in Canada with an annual marketing budget of $80 million, which is collected from dairy farms across Canada.
The domestic cheese market has been a priority market segment for dairy farmers, with an annual strategic investment totalling $30 million dedicated to developing this market across Canada. This investment both sustains and grows the category. Studies have proven that without this yearly $30 million investment, market share would rapidly erode.
With your indulgence, Mr. Chair, I would like to repeat that. The domestic cheese market has been a priority market segment, with a yearly strategic investment totalling $30 million dedicated to developing this market across Canada. This investment sustains and grows the category. Studies have proven that without this yearly $30 million investment, market share would rapidly erode.
We are proud of the dairy sector contribution to the Canadian economy. We consider ourselves job sustainers, providing stability in the economy and supporting our rural economies. In fact, the Canadian dairy sector increased its number of Canadian jobs from 2009 to 2011 to just over 218,000. It should be noted that the Canadian dairy industry also contributes annually more than $3 billion in local, provincial, and federal taxes.
Along with fellow Canadian dairy farmers, I reacted strongly to the news of the excessive access that was given to the European Union, in particular in the fine cheese segment of the Canadian cheese market. The access granted to the EU will have major impacts on the Canadian dairy industry, much more significant than what is being reported. Allow me to explain.
The EU receives an additional tariff-free access of 18,500 tonnes—16,000 tonnes of “high-quality” cheeses, which is a term used by the EU; 1,700 tonnes of “industrial” cheeses; and 800 tonnes under the existing TRQ. This is over and above the already 13,471 tonnes the EU already has under the Canadian cheese TRQ.
This gives them an additional exclusive access of 32% of the current fine cheese market in Canada, over and above the existing generous access. The EU access will then total 31,971 tonnes, or 7.5% of the Canadian cheese market. Imports from all countries move from 5% to 9% of total Canadian cheese market.
The loss to dairy farmers is real. The additional access is equivalent to a 2.25% cut in farm quota, representing a farm income loss of nearly $150 million a year. To put that into perspective, the projected loss from the additional access given to the EU is the equivalent of the entire milk production of Nova Scotia.
In total, the estimated impact to dairy farmers and cheese makers is the loss of the domestic market valued at $300 million annually.
As you well know, supply management rests on three fundamental pillars: production management, predictable imports, and farm pricing. The ability to predict imports is critical considering that dairy farmers discipline production to ensure that domestic demand is met without creating unnecessary surpluses.
The new increased access to the EU into the Canadian cheese market and importation of MPIs, or milk protein isolates, will require predictable planning to ensure that they do not disrupt the domestic market planning and delivery of milk commitments to Canadian processing plants that employ Canadians in communities across our country.
While we have tabled a more detailed brief, l would like to address some of the anticipated negative impacts on the Canadian dairy sector as a result of the CETA deal. All of these could result in unpredictable imports into the Canadian dairy sector if left unattended.
First, the deal creates new categories of import quotas for industrial cheese versus “quality” cheese, which remains undefined.
Second, there will be a lack of predictability on what will be imported. Based on the current level of imports from the EU and the significant portion that is fine cheese, the impact, depending on the cheese that may come into the Canadian market, is anywhere from 15% to 30%.
Third, the removal of the application to the EU of the over-quota tariff on milk protein isolate is eliminating the action taken by the federal government in 2007 to control the imports of such products through article XVIII.
The protection to be afforded by the EU on geographical indicators and their dairy products should be available within this country. That is effective enforcement and protection of our own standard of identity for dairy products, which is now non-existent.
I would also like to put into context the notion that Canada now has unfettered access to the EU cheese market. In the early 2000s, a WTO panel ruled that any export from Canada sold below domestic price is considered subsidized. Canada has also granted the EU GIs on five popular cheese varieties, further disadvantaging any Canadian exports to the EU. This puts Canadian milk and dairy products at a price disadvantage.
Mr. Chair, DFC is trying to work with the government to ensure that there is no impact on Canadian dairy farmers and cheese makers. In spite of all the negative emotion amongst Canadian farmers resulting from the CETA agreement, l, as president, along with the DFC leadership, am intent on engaging in constructive dialogue with government to mitigate the negative impact to our industry.
In conclusion, l ask that you take into consideration these potential negative impacts on the Canadian dairy sector, a sector that with three reinforced pillars can remain strong, stable, and good for Canada.
Thank you.
:
Hello, and good afternoon. Thank you for inviting me to the committee.
My name is Margaret Peters Morris, and I'm the president of Glengarry Cheesemaking and Glengarry Fine Cheese in Lancaster, Ontario. We are makers of fine cheese, artisan handcrafted product, mostly from cow milk. We also work with some other species' milk.
Our new plant commenced operations in October of 2008. We make multiple varieties of hard, semi-firm, and soft cheese out of cow milk, water buffalo milk, and goat milk.
We are known in the industry for being leaders for being successful in this industry since we began production. Just recently, on September 13, we won a Global cheese award. We were grand champion of this particular competition. I think the timing of us winning that and the CETA were almost two in one: I think that's what brought attention to our company, based on our success.
Our company is also closely associated with European suppliers, as our business is also involved in supplying artisan cheese markets and farmstead cheese makers with equipment and production technologies. We have a really good perspective on the dairy business as it sits in Europe and North America, because our connections are within these boundaries.
Artisan cheese production and specialty yogourts are, from what we see, the only sectors in dairy supply management that have shown growth within the past ten years. Artisan cheese production is a sector that can still continue to grow within a supply managed system, as allocation is not restricted and is provided for Ontario, for our plant, up to three million litres once innovation cheeses that have been given allocation under the DDPIP program are expired. That's exactly where we sit right now. This number can go up to five million litres per plant under further programs. So our restriction for milk is not an issue.
To continue to enable new firms to commence and succeed within the framework of supply management, the artisan cheese domestic market during the coming years will require expansion to further markets internationally, as domestic supply could potentially reach saturation. When this will happen I cannot say, but there is a risk.
In the fall of 2011, during the height of the economic recession—that's when we felt it—artisan cheese sales dropped by 20% to 25%, depending on which plant you were. The drop lasted for a period of six to eight months, and it took a year to rebuild it.
If international markets were available to artisan cheese producers, the additional growth potential could possibly enhance this sector by ten times the current levels. That's my perspective.
The majority of artisan producers transform between 300,000 and 500,000 litres of cow milk per annum. With international trade, these producers could increase to five million litres, providing they have the quality. As mentioned in a previous comment, the milk supply can be realized by our current supply management system. This can therefore solidify more than 50% growth, which is derived from current domestic consumption. It takes an artisan plant up to ten years to develop their market under supply management. It's not easy.
Specialty cheeses and vintage Canadian cheddars can realize the potential to increase growth with these international markets. Pre-1970, Canada enjoyed some serious exports for quality cheddars. If programs were available, I know those exports could be restored.
I'll give you a bit of background on my experience in the workforce. I come from a dairy farm. I worked in industry and trade for seven years, in agricultural commodity trading. Now I work independently in business and niche marketing. I think all my perspective is just based on my experience of where I've been in the industry over the years.
What I can say is that in a small way, we have recently brought international attention to the reputation of Canadian cheese, having the goal in our plant to equal or better our European counterparts. Our plant has achieved this goal, with a prestigious award at the Global cheese competition, being crowned supreme champion for one of our cheeses—the Lankaaster aged. We sent two entries, and the second one took a bronze medal in the blue cheese category. I wanted to see if we could compete against the British, and I think we did.
Our cheeses and others in Canada have won numerous prestigious awards, are internationally recognized, and can certainly be marketed all over the world. These cheeses are not price-sensitive, which also enables marketing exporters to have more opportunity to engage in niche markets that purchase finer-quality goods.
The cheeses we manufacture at Glengarry Fine Cheese are Canadian originals. I think it's important that we protect that. They are born from the DDPIP program of the Canadian Dairy Commission. Under supply management, only innovative cheeses and domestic dairy products are given the green light for production; however, Canada has to have its own appellation d'origine to identify our work here. The DDPIP could perhaps lay the groundwork to develop this identity to ready our exports for the future and implementation of CETA.
Another mentionable criterion to ready our processors is to improve our interprovincial trade, as well as licensing criteria for the smaller processors. This has been an impediment to trade even within the framework of our own country. The supply management has enabled us and other specialty plants to manufacture very high-quality cheese, as milk quality in Canada is excellent. If we're given the tools to engage in export programs, my feeling is that Canada will succeed.
What I can comment on is that the artisan cheese sector, albeit not a large one, enables on-farm processors to realize growth for cheese within our supply-managed system. The prices for these cheeses are higher than standard cheddars and mass-produced commodity table cheeses used by consumers. Artisan cheeses are perceived as fine products, and consumers have supported the range of products offered by Canadian processors by buying more each year.
I believe our innovation and Canadian provenance on specialty, artisan, and fine cheese made in Canada will have merit on the international scene. As we have proven, we can make this high quality, and we have farms to back it up with the milk supply. Collectively, cheese factories can achieve and realize some of these export goals.
I've given an example here of what Stilton artisan-origin cheese producers have done in the U.K. They transform 100 million litres of milk into Stilton-branded cheese that is marketed all over the world. This relates to a volume of 1.5 million kilograms and is a remarkable feat from 30-plus family farms. That would be equivalent to where I'm from in the three united counties of Stormont, Dundas, and Glengarry. I don't know if we could do something like that.
This can be a Canadian goal and eventually a program for Canadian artisan cheese makers to achieve for a Canadian-branded product. It will take major cooperation between the provinces and from our supply-managed agencies, federally and provincially.
We're ready to take a step. The infrastructure is in place, there is major recognition for our cheese, and branding has already started with some of the programs of Dairy Farmers of Canada. The efforts to sell cheese in our country will make it easy on the international scene, as we've developed the identifiable blue cow. I think that's a really good program.
Canada is not a big country in dairy on the global scene. CETA will give Canadian processors further opportunity. Yes, there will be concessions; however, we need the tools to make it happen. A start with CETA will open the doors for more business. The trade-off with Europe on a small import quantity of European cheese will not adversely affect us. That is my opinion. Trade will move our dairy industry forward into the global scene where we need to be.
Canadian dairy farmers are always complaining that their markets are not growing. This is what I have heard at producer meetings year in and year out, all my life. They have nowhere else to grow. This opportunity needs to be capitalized on as soon as possible.
Thank you.
:
Thank you, Mr. Chair. Good afternoon. Thank you for inviting Grain Growers to discuss the Canada-Europe trade agreement.
[Translation]
Thank you for inviting Grain Growers of Canada to discuss the Canada-EU comprehensive economic and trade agreement.
[English]
My name is Franck Groeneweg. I'm a Grain Growers of Canada director and the chair of our trade and marketing committee.
I farm 7,500 acres in Edgeley, Saskatchewan, which is about a half hour northeast of Regina, where I grow canola, wheat, flax, peas, faba beans, and hemp. On our farm, we farm sustainably. We're responsible stewards wanting to leave the land and environment in better shape for the next generation, which is my four children.
The Canada-Europe trade deal is the biggest and the most important trade agreement in Canada's history.
The Grain Growers represent over 50,000 successful grain farmers from British Columbia to Atlantic Canada. We have supported the comprehensive economic and trade agreement negotiations—CETA—from the beginning.
We believe that new markets for our crops are absolutely essential to Canadian grain farmers, because we export 85% of our canola, 70% of our wheat, and 65% of our malt barley. In 2011 Canada's top five agrifood exports to Europe were soybeans, canola oil, canola, durum wheat, and non-durum wheat. The Canada-Europe trade deal is opening up a new frontier for Canadian grain farmers, as this trade deal will give us greater access to a market of 500 million consumers with a GDP of over $17 trillion.
We've just harvested the largest canola crop on record. This shows the importance of export markets to canola farmers and rural communities. Canadian canola oil is a preferred feedstock for Europe's biodiesel industry, and this deal will allow for even greater shipments. In the canola sector, we expect canola oil exports to Europe to increase by $90 million annually.
Europe is also our largest importer of Canadian soybeans, with more than a million tonnes shipped annually.
For wheat, on day one, the quota for low- and medium-quality common wheat will increase from 38,000 tonnes to 100,000 tones. This alone will be worth about $20 million. Down the road, we understand that the deal also calls for the complete elimination of European tariffs on Canadian wheat and wheat product exports within a seven-year timeframe. Currently, a tariff is in place on exports of low-protein wheat to Europe. Eliminating this tariff and the risk of a tariff on high-protein wheat will give our exporters much greater confidence in establishing long-term supply relationships with our European customers.
I have just a few statistics. For wheat, depending on quality and class, current tariffs can be up to $190 per tonne. That's about over 50% of its total value. For oats, current tariffs are $114 per tonne. For barley and rye, they are up to $120 per tonne. These tariffs can be huge, and they're about to disappear. Down the road, CETA will lock in permanent duty-free access.
This trade deal is coinciding with new marketing changes for wheat and barley in western Canada. It is easy to see that huge gains are on the horizon.
We're the Grain Growers, but any gain for livestock is good news for Canadian grain farmers. The livestock market is a very important market for Canadian grain farmers. The feed industry alone consumes about 80% of our total harvested barley and 15% of our total wheat crop production. Under CETA, beef exports to the EU are projected to increase by $600 million in this trade deal, and pork exports are projected to increase by $400 million. We anticipate that the deal will drive significant growth in domestic feed grain sales as exports of beef and pork expand under the new trade deal.
With this Canada-Europe trade deal, along with more efficient marketing changes that are currently happening in the grain industry, we feel that this is the opening up of a tsunami of opportunities for Canadian grain farmers.
Increasing market access for farmers is extremely important, so we're also glad to see that CETA includes a commitment to improve consultation and cooperation around biotechnology. Grain Growers is eager to see the Canada-EU trade deal opening a new dialogue with the European Union through an active working group focusing on biotechnology issues to address non-tariff trade barriers in grain, including measures to ensure the low-level presence of genetically modified grains so that it does not serve as a trade barrier.
Grain Growers also sees CETA paving the way for much greater investment in the development of new seed varieties for Canadian farmers. As part of these trade negotiations, we understand the European Union has raised concerns about Canada's outdated legislation with respect to plant breeders' rights. Currently, we're using old legislation from the 1978 convention governing international trade in seeds. Canada is one of only two developed countries in the world that has not brought their legislation into compliance with the 1991 seed convention, commonly known as UPOV 91. As part of the CETA agreement, we encourage the Canadian government to commit to the modernization of our legislation so that Canadian farmers can benefit from increased investment in innovation, research, and development of new seed varieties in Canada.
I am an immigrant from France, where my brothers still farm, so I can confirm that Europeans' taste for good food is similar to Canadians'. They have an appreciation for high-quality Canadian agricultural products. It is a market where we have a lot of room to grow, and it has cash to pay for that high quality.
It is not just the raw products that are reliant on trade. Our value-added products create jobs here in Canada and need new markets as well.
Canada's agrifood industry accounts for over 8% of our GDP. Europe is a good fit for our industry because it releases more than 36% of the world's new processed food products, more than any other region. Europe is interested in innovative and leading-edge food products, which Canadian farmers and industry will provide. As a farmer from western Canada, I am excited about the new value-added opportunities we're seeing down the road.
Currently, Canadian exports to Europe are only one-tenth of what Canada sells to the United States, but as farmers we learn through experience. While the U.S. is one of our best trading partners, we need to diversify where possible. The Grain Growers of Canada fully supports the agreement in principle with the European Union.
[Translation]
The Grain Growers of Canada is therefore very pleased with this agreement, which will enable growers to become more competitive in coming years.
[English]
We seek to ensure that this agreement is concluded as quickly as possible so that Canadian grain farmers can start reaping the benefits of improved market access for grain and grain products, growth in our domestic livestock sector, and access to new, improved seed varieties.
Thank you for your consideration of our views.
[Translation]
Thank you for your attention.
[English]
I'm very happy to talk to you, and I'm very happy that you have invited an economist to address your committee, because I will be presenting the broad views on the impact of the agreement on the whole Canadian economy.
I don't have detailed knowledge of some of the industries that some of your other presenters have, but I would like to speak strongly in favour of the agreement and its positive impact on at least five components of the Canadian economy.
The first component is Canadians as consumers. I believe the position of this government is to improve the standard of living for consumers and to make things better for ordinary Canadians, whether it is by lowering the tax burden or by other means.
This agreement, with freer trade between Canada and Europe, is going to make things better for consumers by offering access to a wider variety of goods and services, and offering them at better prices, because the increased competition will increase productivity. So people will have more goods, more services, better prices, and it will improve the basic standard of living for Canadians as consumers. I think that is probably the most important thing. That's why we have a government running the economy, to help our standard of living.
The second group that will be helped, and this has been mentioned by others as well, is exporters. Trade is a very important part of the Canadian economy—the agricultural sector, the resource sector, and virtually every other sector as well. Fewer barriers to trade and reduced tariffs are going to greatly help our exporters to continue to export, continue to improve our balance of payments, and continue to prosper as businesses.
I am on the board of a forest company, among other companies. We've already noticed—although this committee isn't primarily concerned with forestry—that the 10% and 15% reductions on some of the wood products we export are already helping us build the specialized and high-value-added markets that we were hoping to build in Europe. That is going to make it an awful lot easier.
What any economy needs, what any business needs—and sometimes people planning businesses forget about this—is customers. What the European free trade agreement gives us is customers. It gives us access to a market roughly equal in size, wealth, and number of people to the United States.
Much of our trade has been concentrated on the American market, and Canada has benefited greatly from free trade with the United States and Mexico. We are going to get at least an equal boost by having access to the European market.
Having customers, people who are interested in our manufactured food products, our basic grains, and the other goods we produce in Canada, is going to make it that much easier to have opportunities for businesses to grow and thrive in Canada.
There is another side to that coin, of course. A free trade agreement means that Europe will have more access to Canada. How will that help us?
It will help us by dealing with one of the persistent challenges that the Canadian economy has had to deal with for lo these many decades, and that is productivity. We don't get as much bang for our buck, we don't get as much output out of the amount of input—the labour, the capital, and so on—that we put into our economy. We're not as productive. This means our workers can't get paid as well, and our standard of living is affected.
What the free trade agreement and Europe's access to Canadian markets is going to do is increase our productivity. When producers, whether of cheeses or other products, realize that Europe is going to have more access to the Canadian market, they will sharpen their pencils. I believe Canadians are smart, capable, and intelligent. When they realize that, hey, other people are sending cheaper products, less expensive products, good-quality products, products that customers might want into Canada and they are going to have to compete with them, I believe that Canadian business people will find ways to be more productive. They will sharpen their pencils. They will develop a great many Canadian geographically designated cheeses—it doesn't just have to be Oka anymore—and they will compete effectively to maintain their share of Canadian markets, as well as expanding into European markets.
This isn't just a pipe dream. It has happened, probably about 20 years ago now, in New Zealand, when New Zealand faced a financial crisis and had to remove all the tariffs and protections its heavily protected industries, including agriculture, enjoyed. Everyone had said that if it didn't have this protection on its home market, all the businesses and the economy would fail and the country would die. The country didn't die. The country became much more productive; a wider variety of goods and service of better quality were made available; prices for many goods and services in the country fell; the improved quality and pricing expanded export markets; and New Zealand has gone on to prosper. That is the kind of increased prosperity I see in Canada as we become more productive in response to being a more open market to Europe, as well as to the United States.
So productivity, a big factor in our economy and our standard of living, will be given a very strong push in the right direction by having more European goods and services come into Canada, encouraging Canadian producers to work harder to get a better product and better value for Canadians, as well as to meet export demand.
Another thing: as a global economy, Canada needs to be competitive. I apologize for the cliché—you've heard it a million times—but we have to have globally competitive producers in agriculture and in all our other sectors, and we are going to get one huge competitive advantage that we don't even have to share with Europe as a result of this agreement. As this agreement is implemented, Canada becomes the only major economy in the world that will have free trade access both to the United States and to Europe. That will help Canadian businesses. They will have that many more customers, markets, and so on available to them. It will also help to attract outside investment and other global businesses that are seeking a place to do business.
Canada is a very good place to do business. We have rule of law, stability, and many other advantages. We will have the additional advantage of free access to two of the biggest, richest industrialized economies in the world, and I believe we'll be the only major economy to do that.
So we will be a good place to do business: we will be a more productive economy, with more competitive businesses providing goods and services at better value; we will have more customers for our producers and more market for our exporters; and, as I said, most important of all, we will have more goods and services offering better value and a higher standard of living for all Canadians.
I think this is one of the greatest things that has happened to the Canadian economy, and I think many, many people are eagerly looking forward to its implementation.
Thank you. Je vous remercie.
I'm very glad you asked that question, thank you very much, because I think I have an answer to it.
I have been honoured, if you will allow me to say so, with the Order of Canada, which got me an invite to a lunch with the Governor General. At that very fine meal, we had a plateful of artisan cheeses from Quebec that were really, really excellent. We all asked, “Where did you get these cheeses?” Those of us from the west, especially, had never had them before. They told us that they would be happy to e-mail us a list of all the artisan cheese producers in Quebec, but we probably wouldn't be able to get any cheese, because the Governor General's residence can buy their entire stock.
So I'm looking at the artisan cheese industry as the answer to the European trade agreement—that Canada makes Oka cheeses, makes other very good specialized cheeses, makes all these artisanal cheeses—and that we can develop them under Canadian names and Canadian geography and start building up the capacity and the market of those industries.
What a great presentation this afternoon, to see both sides of the debate on this trade agreement. You know, I'm a little disappointed; I think there is opportunity, as our witness just testified, if people embrace it, in going into Europe. It might be a little tougher, but there definitely is a lot of opportunity for the dairy sector there.
In terms of the grain sector, though, Franck, you said you came out of France, so you know all about productivity of Canadian farmers, grain farmers in particular, versus European grain farmers. I spent a lot of time in Europe when I was with Flexi-Coil and Case New Holland looking at the productivity difference and how they're trying to embrace Canadian technology in Europe to bring down their cost of production. Even though they had heavy subsidization, when you looked at the net dollars in their pockets, it wasn't a lot better than it was here in Canada at that point in time.
You used the example of $190 a tonne on wheat, and I think you said $114 on oats. I thought it was $119, but we're splitting hairs there. I think you said it was $120 on barley.
You grow about 7,500 acres of cereals. Let's just do the math so that people understand how big this is. Out of your 7,500 acres of cereals, approximately how much of that would be wheat?
:
Thank you very much, Mr. Chair.
Through you to the witnesses, thank you for being here today, whether it be virtually or physically.
I want to go back. I'm a great supporter of supply management. However, I understand that whenever your industry feels the slightest threat, you have to push back to ensure you keep the same ground. But we were talking solely on meat, and here's my story.
In the county of Northumberland, which is half of my riding, agriculture contributes about $150 million to the gross domestic product of the county. I think those numbers are low. I think they're much higher.
I was at the Northumberland cattle producers' AGM, and I noticed at that meeting that there were quite a few dairy farmers there. I went to a person I know who's a dairy farmer and asked what they were doing there, at the cattle producers' meeting, and he said, “We produce meat.” In particular, I would like to hone down on that, because cows dry up and they have to be sold for meat, but we also have, I believe, a very high-end product called veal. I wonder if any of the witnesses here can confirm that about 100% of the veal calves that are raised actually come from dairy farms. Would that be correct, or do you think it's correct?
Mr. Groeneweg, Madam Krayden, you talked about canola exports to Europe, which is a good thing. We know there might be certain obstacles. We know, for example, that Germany is one country with a ban on the cultivation and sale of GMO maize. I'm not sure about other grains. There is a stronger feeling against genetically modified organisms in Europe, and whether we agree with that or not, I think that exists.
Because of a low-level presence, we've seen flax shipments stopped and farmers take a hit in Canada. Yet our government...and you agree that we should be having a policy of low-level presence to assist farmers.
The question is this: what do we do if Europe does not agree to our demand for low-level presence? If they basically say, look, folks, this is the way it is here, and if you don't have zero tolerance, then we don't want to accept your shipments, how should we react to that?