:
Good morning, everybody.
Mr. Eyking can't be here today. He asked if I would sit in as vice-chair for the meeting. It's a little different—you see the difference in the makeup of the committee and the questions—so I may take a few questions in light of the fact that it is the privilege of the chair. That said, I want to make sure everybody else gets a chance to ask questions too. You're all so good at asking questions, I'm sure I won't need to, so we'll go from there.
I'd like to welcome the witnesses this morning. You have five minutes each, and after your presentations we'll go to questions and answers. We follow a format here that is based on the makeup of the House itself.
Again, welcome. Take your tie off, if you want, and relax. You'll notice that I don't have one.
We'll start off with Ruth Salmon of the Canadian Aquaculture Industry Alliance.
Good morning, everyone. On behalf of Canada's aquaculture farmers, thank you for inviting me to speak with you today.
These are indeed exciting times to be in the aquaculture industry in Canada. Demand is booming and we are excited by the new trade opportunities the trans-Pacific partnership presents. Few jurisdictions can match Canada's natural advantages when it comes to aquaculture—an enormous coastal geography, an abundance of cold, clean water, a favourable climate, a rich marine and fishery tradition, established trade partners, and a commitment to sustainable and responsible best practices.
The Canadian Aquaculture Industry Alliance represents over 95% of the aquaculture industry in Canada. We are farmers operating in all 10 provinces and Yukon. Our industry generates $3.1 billion in economic activity and over $1.2 billion in GDP. It employs more than 15,000 Canadians in rural, coastal, and first nation communities from coast to coast to coast. The Canadian farmed seafood industry is very much export-oriented, with approximately 65% of our production exported to over 22 countries around the world. Approximately 95% of our exports are destined for the United States, with most of our remaining exports going to Asia.
The global demand for seafood has doubled in the past five decades. To meet this demand, aquaculture has become the world's fastest growing food production sector. It currently contributes more than 50% of the total global fish and seafood production, with the per capita supply from aquaculture increasing at an average annual rate of 6.6%. However, despite growing worldwide demand and Canada's many natural competitive advantages, Canada's annual farmed seafood production has trended downwards for over a decade. In fact, Canada's share of the world's farmed fish market has fallen by 47% since 2002. Canada now accounts for only 0.2% of global aquaculture production. This stagnation has taken place while other producers in Norway, Scotland, and Chile have raced ahead. The principal challenge confronting Canada's aquaculture sector lies in the complicated overlapping laws and regulations that restrict growth and limit investment.
We thank the current government for its commitment to sustainable and responsible growth, and welcome the opportunity to work with all parliamentarians as well as the federal and provincial governments on a modern legislative and regulatory framework for our sector, including a new national aquaculture act. We believe an act with the right legal governance and policy framework will allow our industry to grow in a responsible and sustainable manner, adding an additional 17,000 jobs and over $3 billion in additional economic activity in Canada by 2024, but access to new markets will be critical. A successfully implemented TPP agreement would give Canadian aquaculture businesses greater access to some of the most dynamic markets in the world.
To illustrate the growing importance of Asian markets to our industry, our members are experiencing export gains even without full implementation of the TPP. In 2015 farmed seafood exports to China were over 600% higher than all of 2014. Indonesia was up 105%. Hong Kong and Taiwan were up 50% and 79% respectively. Yet in markets like Japan, Malaysia, and Vietnam, Canadian farmed seafood exports face high tariffs that put our farmers at a severe disadvantage. The TPP presents a good opportunity to reduce those trade barriers and open up a vast 11-nation market of over 800 million consumers. In addition, the TPP will also address many non-tariff barriers to trade. This is welcome news for our farmed seafood suppliers.
In summary, the Canadian Aquaculture Industry Alliance supports and applauds the federal government for its work to implement the TPP. However, our industry requires increased growth and competitiveness to take significant advantage of any new free trade agreement. Aquaculture in Canada offers tremendous opportunities. Working together, we can renew a vibrant aquaculture industry in Canada and unlock the full range of economic, environmental, and public health benefits that flow from a competitive, sustainable, and growing farmed seafood sector
The combination of responsible growth for aquaculture in Canada together with improved market access through the implementation of the TPP will improve industry competitiveness for our sector, ultimately leading to the building of stronger local economies in Canada.
Thank you.
:
Thank you for the opportunity to appear before the committee on the TPP consultations. I would like to speak to the opportunity which the TPP provides for our industry sector, as well as food processing more generally, and I'll explain that.
The Canadian Sugar Institute represents refined sugar producers on nutrition and international trade affairs. The industry has three cane sugar refineries, and they are in British Columbia, Ontario, and Quebec. There is also a sugar beet processing facility in Taber, Alberta, and two further processing operations in Ontario for sugar-containing products, such as iced tea, drink mixes, gelatin mixes, and so on, for both the domestic and export markets.
Our industry has been an integral part of Canada's food processing value chain since its inception. We depend on food processors for 80% of our sales, and food processors in turn depend on a reliable nearby supply of competitively priced sugar.
Our refined sugar produced in Canada is an input to about 30% of food processing. Major sugar users in Canada account for about $18 billion in sales, $5 billion in exports, and 63,000 jobs.
Unfortunately, globally, sugar is one of the most distorted trade commodities, and it is characterized by widespread government support and high tariff walls and quotas. In contrast, Canadian refined sugar producers and processors don't have any of these benefits. The only protection we have from world market distortions is a $31-per-tonne tariff, which is about a 5% to 8% tariff, depending on world sugar prices. This is in sharp contrast to both the prices and the tariffs in most developed markets, including the United States, Europe, and Japan, which would be the leading protectionist countries. Their tariffs would be in the order of 100% or more.
Given this uneven playing field, we have no choice but to advocate for improvements in export access, because our market is open, and the markets of most of our trading partners are quite closed. Our priority is the United States. Unlike most commodities, NAFTA did not open the sugar trade for Canadian sugar and those high sugar content products that our members produce.
The TPP will provide meaningful improvements. It won't open the border, but it will certainly provide very meaningful and important improvements in access to the United States for those products, with a doubling of beet sugar exports out of Alberta and a 16% increase in those sugar-containing products from Ontario.
Much work remains to be done to analyze the benefits in the other trading partners. We see opportunities in Japan for sugar-containing products with a number of quotas that will increase over time, as well as in Vietnam and Malaysia, but much work needs to be done to analyze the specific benefits of trade with those countries.
Given North American and global restrictions on sugar, the vast majority of exports of Canadian sugar are in food products, and that goes beyond the products that we produce, but instead they further the processing industry.
NAFTA was a good news story in that trade improved to the extent that we had a trade deficit of about $40 million in the NAFTA region when NAFTA was implemented, and that grew to a surplus of $1.2 billion by 2005. That surplus has declined since then, which is a major factor contributing to a decline in the surplus, but faster than that has been the decline in the trade balance with other countries. This is why it's very important to our industry to diversify our markets beyond the U.S. We want to build on the NAFTA platform, and we see the potential to grow those exports and improve that trade balance, but we must advocate for market opportunity for food products in other markets.
We're a mature market in Canada. Canadians are not consuming more sugar, contrary to popular perception, so we have to look to exports. The WTO would be the best avenue to improve the sugar trade. In the absence of that, we see opportunities like the TPP, as well as regional agreements that have regional rules where manufacturers can access inputs from different countries based on their efficiencies and where we can take advantage of supplying sugar to food processors in Canada who can then diversify as well beyond the United States.
We see it as absolutely critical that Canada be part of this historic trade agreement, as the costs of exclusion would put Canada further behind in that food processing trade balance and investment in jobs.
The TPP will not resolve all sugar trade inequities for both ourselves and our customers, but it certainly does move the pendulum in the right direction.
We feel it's absolutely essential that Canada be part of this and that there be further work on analyzing and promoting the specific benefits.
:
Thank you. Good morning, everyone.
On behalf of the Canadian Union of Postal Workers, I want to thank you all for the opportunity to appear and to raise the union's concern about the trans-Pacific partnership agreement.
CUPW represents about 50,000 public and private sector workers in large and small communities from coast to coast to coast. I think it's no surprise to you that a majority of our members work for Canada Post. We believe the TPP could negatively impact Canada Post and, by extension, our members.
I'm accompanied here today by Louis Century from the legal firm Goldblatt Partners. Louis helped draft the legal opinion on the TPP and postal services that we submitted to you earlier this year. My comments will be based on this opinion.
I'd like to begin by pointing out that Canada did not take any reservations for postal services. It did not take an annex I reservation or a stronger annex II reservation. Other countries did. For example, Japan and Singapore both took annex II reservations. Notably, Canada's approach to the TPP contrasts with its approach to CETA for which it at least took an annex I reservation.
Unfortunately, Canada's failure to take reservations exposes our public post office to the restrictive rules of the TPP and may give rise to state-to-state and investor-state challenges.
In terms of broad strokes, as you may know, NAFTA and the GATS already impose broad constraints on the authority of Canadian governments at all levels to exercise their legislative and regulatory prerogatives. Unfortunately, the TPP expands the scopes of these constraints in several areas.
There are consequences to the new TPP rules. For example, the TPP includes an annex on express delivery services, which could impose far more explicit constraints on government authority concerning postal services and the activities of Canada Post. I would like to point out that the express delivery annex is a unique feature for a trade agreement, and that it was inserted in response to lobbying from the U.S. private courier industry.
This industry put substantial effort into influencing TPP negotiations, and it was very successful.
The TPP's express delivery annex reflects industry's objective, which is to reduce or eliminate competition from public sector service providers such as Canada Post, particularly in the express delivery market.
First of all, new TPP rules would not only limit the ability of Canada Post to expand current services such as Xpresspost and those provided by its subsidiary Purolator but would also threaten Canada Post's ability to maintain its current business model of integrated express delivery and letter mail services.
Second, the annex prohibits parties to the agreement from, one, requiring an express delivery service of another party to supply universal postal service as a condition of authorization or licensing, and two, setting fees or other charges on an express delivery service for the purpose of funding the supply of another delivery service.
The first prohibition is pretty clear. We believe the second prohibition means that Canada could not require private courier companies to contribute to a compensation fund in order to help fund universal delivery.
Third, the TPP rules concerning state-owned enterprises, or SOEs, and monopolies expand on similar constraints in NAFTA and the GATS and make these constraints more direct. In addition, the TPP expands the scope for investor-state disputes and raises the spectre of another UPS versus Canada case, which is strengthened by the TPP provisions on state-owned enterprise monopolies and the express delivery annex.
That said, chapter 10, “Cross-Border Trade in Services”, which includes the express delivery annex, is expressly exempt from investor state but is still subject to state-to-state challenges.
There's no direct threat, but in the minutes I have remaining, I would like to summarize by quoting from the legal opinion we submitted to you: “While TPP rules present no direct threat to the letter mail mandate of Canada Post, they impose significant constraints on its ability to maintain a business model that depends upon the integration of express package, courier and letter mail services.” The opinion also concludes that there are “no benefits to be gained by Canada in respect to commitments pertaining to postal and courier services.” It raises concerns that TPP rules could limit Canada Post options for responding to new marketplace opportunities. We don't think it would make sense to adopt provisions that could limit opportunities at the same time as this government is conducting a review of Canada Post in which it is looking at new opportunities.
The recommendations from CUPW are simple. CUPW believes the TPP needs to be either radically reformed in many areas or rejected. On postal matters, the union recommends that, first, the federal government eliminate investor-state dispute settlement provisions, and second, it take an annex II reservation for postal services and a reservation from chapter 17 under annex IV.
That concludes our presentation. I'll remain open to questions.
Thank you.
:
Thank you, Mr. Chairman.
[Translation]
I would like to thank the committee members for inviting me to testify today.
First, I will tell you a little about the Retail Council of Canada, the RCC.
[English]
The Retail Council of Canada has been the voice of retail in Canada since 1963. Retail employs over two million Canadians, making retail the largest private sector employer in the country.
RCC is a not-for-profit industry association representing over 45,000 storefronts of all retail formats, including department, specialty, discount, independent stores, grocers, and online merchants.
In general, RCC and its retail members are very supportive of the trans-Pacific partnership agreement. Retailers over the past few decades have built strong relationships with manufacturers and suppliers around the world, and are increasingly becoming importers of products into Canada. This agreement facilitates this, allowing retailers in Canada to provide a great assortment of goods at competitive prices for Canadian consumers.
RCC has been an active participant in consultations on the agreement for the past many years. We have publicly stated our support for the TPP as it was signed in principle by negotiators last October, as well as when International Trade Minister Chrystia Freeland affixed Canada's signature on the agreement in February of this year as a first step towards formal ratification. In relation to the retail sector, there are just a few points that I would like to raise as to why this agreement is important to retailers in Canada.
First, the agreement will eliminate tariffs on a wide variety of products. It provides duty-free access to approximately $5 billion in retail consumer goods from the seven TPP countries with which Canada does not currently have free trade agreements. Most of these tariffs will be eliminated immediately upon formal ratification. The more tariff elimination there is, the more products are available to Canadian consumers at competitive prices.
Second, RCC and its retail members are supportive of the text on regulatory coherence, transparency, and harmonization. Regulatory barriers unnecessarily impact trade, impede product availability and consumer choice, and have negative impacts on competitive pricing. That said, in an ideal world, the text would contain some teeth, requiring TPP countries to have specific mechanisms in place to ensure that systems and processes are there to ensure transparency and predictability. The agreement encourages regulatory coherence and transparency, but does not require it.
I also want to go on record with regard to the agreement's yarn forward, or country-of-origin provisions. Yarn forward means that fabric used in clothing produced in a TPP nation must also come from a TPP nation in order to qualify for tariff relief under the agreement. The vast majority of textiles come from non-TPP nations, such as China and India, so a pair of jeans made in Vietnam under the agreement, for example, would now have to be made from cotton from the United States in order to qualify for tariff relief. This would actually have the effect of lengthening supply chains and go against the spirit of the agreement.
I would also like to raise a point specific to online sales. As you know, Canadian consumers can buy products from anywhere in the world. Currently, imported online shipments above Canada's de minimis threshold of $20 are treated in the same way as goods sold in Canada. All merchants, foreign and domestic, have to pay duties on sales taxes above that $20 threshold so the playing field is level. While you may have been told that the U.S. de minimis level is $800 and that Canada is far behind, this in fact is not the case. We are much more comparable to the EU and the U.K. that have limits similar to ours. Changes to the de minimis level would create an incentive for Canadians to shop anywhere but in Canada, and could be devastating to retail merchants in Canada and to our two million-plus employees. The TPP agreement recognizes this, and treats online imported shipments into Canada the same way as goods that are sold here.
To conclude, RCC and its members support the agreement and urge the government to ratify it. It's good for retailers in Canada. It's good for consumers in Canada, and it's good for Canada.
[Translation]
Thank you.
:
We thank the committee for inviting Soy Canada to appear today.
I'll comment on Soy Canada for just a moment. We are a national association representing the full soybean value chain in Canada. Our members include producer associations representing all the farmers of soybeans across Canada, the seed development companies, soybean exporters, and soybean processors. Soy Canada facilitates industry co-operation and represents the industry on domestic and international issues affecting growth and development of the soybean industry.
The soybean sector in Canada is growing significantly. We are in our eighth straight consecutive year of soybean production growth. Between 2006 and 2016, soybean production increased by 82%, or 5.4 million acres. Since 2005, production levels have nearly doubled, to 6.2 million metric tonnes, and farm cash receipts in Canada are $2.3 billion. Finally, and significantly for the international trade area, since 2005, soybean exports have increased by roughly 250%. Canada has a small domestic market, and our growing production of soybeans is destined primarily for international markets.
Domestic use, processing, and export of Canadian soybeans contribute $5.6 billion to Canada's annual GDP and are linked to over 54,000 direct and indirect jobs. We are a growing segment of the agriculture industry, and further expansion is forecast in the coming years. This is why international trade is critical to our industry.
The TPP represents a huge opportunity for Canada. We know that TPP countries represent nearly 800 million potential customers and account for 40% of the world's GDP and 65% of Canada's $56 billion in agriculture and food trade.
In terms of soybeans, the total value of soybean exports to TPP countries reached close to $1 billion in 2015. The Asia-Pacific region encompasses a large segment of key soybean export markets, with roughly 40% of total Canadian exports shipped to TPP nations. Soybean trade with this region of the world is significant. The TPP provides a platform for our industry to access these growing markets and build on existing trade relationships with our importers.
All members of the soybean value chain—producers, processors, exporters, seed companies, and related companies—directly or indirectly stand to benefit from the TPP. The agreement provides a more secure and equal trade environment free from tariffs and free from administrative quotas on all soybeans and soybean products, which is a very significant development. Canada's participation in the agreement ensures that other oilseed-exporting nations do not have preferential access to TPP markets. Our industry will be better positioned to compete against other major soybean-producing nations, a major advantage for Canada when combined with the increase in demand throughout the Pacific Rim for high-quality Canadian soybeans.
The TPP also includes important provisions relating to biotechnology. As you know, innovation through the application of biotechnology to seed development has provided tremendous benefits to crop production. It is also a frequent contributor to trade disruption, in that the application of zero-tolerance regulatory frameworks and increasingly acute testing technologies in a world of increasing deployment of biotechnology is a recipe for trade challenges.
Recognizing this, policy-makers are looking for ways to better coordinate regulation internationally. The TPP establishes a working group to facilitate co-operation and information exchange on biotechnology issues, including low-level presence of genetically modified materials and the sharing of information related to plant breeding innovation.
To talk a bit about low-level presence, the TPP will establish a process collectively for managing cases of low-level presence should they occur. Low-level presence refers to the trace levels of GM materials that have been deemed safe through safety assessments in commodity grain shipments internationally. It's a very topical issue in the international grain trade as a result of the growing acreage and number of agriculture products being assisted by biotechnology methods. Canada has taken a leadership position in developing new regulatory approaches to managing LLP, and the inclusion of commitments to co-operation in the TPP is very welcome.
The TPP is a modern and comprehensive agreement and an important milestone in reforming international trade. Canada is a trading nation, and our grains and oilseeds sector is heavily reliant on international markets. In many commodities, while access to export markets is very important, we do not have the size and export might of competitive nations.
Soybeans are a good illustration of this. Despite the rapid growth of our sector, Canada represents only about 2% to 3% of production internationally. Our industry competes with the U.S. which produces about 39% of world soybeans, and Brazil is at about 37%. They are responsible for the vast majority of trade. It's critically important that we have fair trade rules that are even and equal, so that we can compete with larger participants.
Thank you very much for your time. I look forward to questions.
:
That's an interesting question.
We're at early days in terms of genetically modified salmon, and it's the first animal that's been approved, so we don't even know where that will lead. Right now the marketplace is not interested in the product, and that's one of the reasons my members aren't interested in the technology, because the buyers are not interested in purchasing the product. I think it's really early days to know how this will be over time and how much of a place in the marketplace it will have.
Our perspective is that there is such a demand for farmed seafood that Canada could be meeting now, and we could be doing more if we had the opportunity, that I don't see that as a real threat right now in terms of trade.
:
It's a great question. I'll lead off and likely let Louis finish up.
Simply put, we have an obligation to deliver universal postal services at affordable rates, first under international law, where we're required to do it, and also under Canadian law, under the Canada Post Corporation Act. The model we have used for many years is that we deliver parcels along with letter mail. We use an integrated delivery method.
Letter mail volumes have been in steady decline for many years, but the parcel business has exploded. For instance, Canada Post revenue from parcels in 2015 was $1.6 billion. Without that revenue, Canada Post likely would not have remained profitable, as it has for over two decades, with the exception of one year.
What's essential is that we continue to be able to do that. As you're pointing out, we're in the middle of a review of Canada Post services and how the Canadian public is going to be best served by Canada Post in the future. Again, we think that what we need is the ability to modify Canada Post in response to what the Canadian public needs.
Something like the TPP, with the provisions that the express courier delivery services from south of the border have placed in it, could put serious constraints on our ability to be flexible and agile and to modify what Canada Post does for you. It's of serious concern to us. The TPP, without the annexes, prevents us from having that kind of flexibility to perhaps integrate some of the recommendations that will come out of the review of Canada Post.
I'll let Louis comment as well. Thank you.
:
I would just add to that by explaining a little bit about the risk that we perceive.
Our view is that the TPP ought not to constrain the kinds of activities we're talking about, both our current integrated service model as well as potential expansion into other lines of business.
There are those who take a different view. The private courier industry has been engaged in a long-running campaign to eliminate competition from postal monopoly providers, any involvement in the private sector courier market at all. That was manifested in the long-running UPS versus Canada dispute under NAFTA. Canada won that claim, but they won it by a margin. There was dissent.
There's no doctrine of precedent in these trade regimes, and similar rules are now implemented in the TPP and expanded upon. The possibility of another UPS-type claim is real, in our view. UPS or other companies like that may well take the view that the TPP changes the rules. We think we ought to win such a claim, but there is that possibility. That possibility looms large when Canada Post is in the process of really re-envisioning its mandate and the ways in which it will be able to deliver on its mandate of providing universal service across a vast geography like Canada.
The current government is engaged in this review, looking at other opportunities and exploring options. Now we have the TPP, which adds to NAFTA, and not only in the rules affecting postal providers. It also opens up the possibility of complaints from a number of other countries as well as private industry in those countries.
Finally, the existence of this risk in our view is a real concern, because it can be used as an argument to freeze policy development. We're already seeing this to some extent in the debate surrounding future directions for Canada Post, those arguing that the TPP will—
:
Thank you, ladies and gentlemen, for your presentations today. It was very interesting stuff.
I have a couple of quick points to begin with.
Jim, on soybean, we all know there's a tremendous market in Japan, especially in the non-GM for foodstuffs, but there's a growing market for animal feed derivatives, once the oil is done. There's that great secondary marketplace as well. Have you done an appraisal as to the potential you have in countries like Vietnam and Malaysia that are major components now in the TPP?
The Australians are close, but we have quality.
:
Letter mail has declined but I wouldn't characterize it as falling off the face of the earth. It still represents the lion's share of the revenue generator for Canada Post. Parcels are now starting to supplement that. Purolator is an arm's-length company from Canada Post. It's a subsidiary but separate so I can't really comment on that. You can't go into a Canada Post outlet, for instance, and buy a Purolator product.
What we're looking at with the Canada Post review is changing what a post office should be. It should be a community hub. It should be a place where people can do a variety of things. If you've been to a post office in Italy or Japan, you'll understand that. They're doing things much differently, and that's where we want to go. We want to say we're changing with the times.
I can't really comment on Purolator. They're doing express delivery, and we're doing it too, but with the integrated service model where we're carrying that with letter mail, etc., that's what's working and keeping us in the game.
:
Thank you for the question.
[English]
Just to make things a little more specific, I spoke about the risk of a new renewed NAFTA-like challenge under the TPP. Of course, the TPP now continues investor state, so that's a possibility. The rules have changed. They have been enhanced in a number of areas.
If you happen to have the opportunity to look at the express delivery services annex of the TPP, I encourage you to do so. It's very short, just eight bullets and under a page, but I think you may be surprised to see an annex of that kind in a general trade agreement. It's quite clear that it serves industry's interests. The efforts of the express delivery and courier industry to influence trade rules are well documented and, frankly, they have been quite successful. Our view is that an annex like this has no place in a general trade agreement. It poses risks of another lawsuit, and even if we're successful, do we really want to go down that road again?
It is also highly relevant as Canada Post is considering all of these options entering into other areas, so it poses a risk to the current line of business. The way Canada Post currently gets by is by also delivering by courier. The view of companies like UPS is that this very involvement in those competitive markets is problematic. They call it cross-subsidization. Now, the jury is out on what exactly cross-subsidization means. It hasn't fully been litigated. The NAFTA case didn't go there, but it may well be litigated under the TPP, and the result could be highly problematic to the survival of Canada Post, which is not to mention lines of business besides courier.
You're a member of the Canada Post review, and obviously Canada Post is looking at a number of other ways to revitalize its services drawing on international models. There are untold consequences throughout the TPP and potential for renewed challenges threatening Canada Post's ability to really deliver on its mandate of universal service, which is particularly hard in a country like Canada.
We heard from some friends about the natural advantages that Canada has in a number of industries. In postal delivery, Canada is at a disadvantage. The geography is vast, there are underserved communities, and we're concerned about new threats that the TPP poses.
:
First of all, let me thank all of the presenters for their fine presentations and the way you represent your sectors. You represent, really, millions of Canadians, be they employers, employees, the public sector, as well as all the consumers in Canada.
I find it so remarkable, Ms. Marsden, that Redpath Sugar is occupying probably the most expensive real estate in Canada, right at the foot of Yonge Street on the lake in Toronto, and they still have a viable business there and have not moved from that location.
You mentioned sugar and our trade with the United States, that it would improve under the TPP, but it will not open the border. What do you mean by improve? Why would it improve, but then not open the border?