EVIDENCE Standing Committee on International Trade NUMBER 016 2nd SESSION 41st PARLIAMENT Tuesday, February 4, 2014 Le mardi 4 février 2014 Standing Committee on International Trade CANADA [Recorded by Electronic Apparatus] EVIDENCE February 4, 2014 Committee Edited Evidence * Table of Contents * Number 016 (Official Version) Official Report * Table of Contents * Number 016 (Official Version) Témoignages * Table des matières * Numéro 016 (Version officielle) 16 04 02 2014 2014/02/04 09:05:00 House of Commons Comité permanent du commerce international Standing Committee on International Trade CIIT Chair The Honourable Rob Merrifield 41 2 (0905) [ English ] The Chair (Hon.

Rob Merrifield (Yellowhead, CPC)) : I'd like to call the meeting to order. We've had three meetings on the TPP, the Trans-Pacific Partnership, between Canada and our Trans-Pacific Partnership partners, and we want to continue our study today. We look forward to the testimony of the witnesses we have before us today. This will be the fourth meeting. From the British Columbia Cattlemen's Association, we have Kevin Boon, general manager; from the Canada Wood Group, we have Paul Newman, president; and from Interfor, we have Ric Slaco. Thanks to all of you for being with us.

We look forward to your testimony, after which we'll get into the question and answer portion of the meeting, which is always interesting. This is, I should say, another day in paradise if you look at it from Ottawa's eyes. I'm from Alberta, so I don't see it quite that way. Nonetheless, we are pleased as a committee to be here on the coast of British Columbia, on the west coast, enjoying the weather. With that, we will start. Mr. Boon, the floor is yours, I believe. Mr.

Kevin Boon (General Manager, British Columbia Cattlemen's Association) : Thank you very much for the opportunity to be here today and to present to you on behalf of the B.C. Cattlemen's Association and its members. In a lot of ways, our industry is very much a national industry, so what is good for us here in British Columbia is the way it works for us pretty much right across the country. I want to begin by talking a little bit about the importance of the beef industry to Canada and British Columbia, and about trade in general. Trade access to all markets is extremely important.

In 2003, with the discovery of BSE in Alberta we saw all of our doors close. With an industry that exports close to 50% of our product out of Canada, we can't eat our way out of a situation like that. The six months that it took for the U.S. to open its borders were extremely difficult for us. Since then we've gradually seen the doors open to other countries and other trading partners around the world, but it's been slow and there have been a lot of restrictions and regulations put on us, which has also made it difficult to gain access. I'll address some of this as I go through what the TPP means to us.

Global supplies of beef are at an all-time low. We need these markets to incite the investment that we need to grow our industry back here in Canada. Being at the table with the Trans-Pacific Partnership is actually quite important to us. Especially with our vast expanse of arable lands here in British Columbia and Canada, we know that over the next 20 to 30 years, 30 to 40 years, we're going to probably become one of only six countries in the world with the ability to produce more than what we can consume. Knowing that, we have to prepare for that for the future.

We have to make ourselves invest in what we're going to need in 30 years' time, because we feel that agriculture and the beef industry will be very important economic drivers for Canada and British Columbia. One of the things that we consider here in B.C.—and I know that our provincial government has made it very clear—is that we are a gateway to both Canada and the Pacific. As such we can showcase, as you pointed out Mr. Merrifield, the beautiful country out here and the vast resources and the environment, which is very inviting when we have the Asian and Pacific markets coming over to visit us.

That's what they see and that's what they take home, and it's a huge selling point for us in our industry. One of the things we have to consider in all of this is that with our industry and what we do, we have an animal that we break out, a carcass. It's roughly 900 pounds of raw product to utilize. But not all countries or cultures want to utilize the same parts of that carcass, so it's extremely important for us to have a wide variety of different markets available to us. We call it whole-carcass utilization.

The signing of the CETA was extremely important to us, one, because of the volumes; two, there are no tariffs; and three, they're utilizing parts of the carcass that we're not utilizing in other parts of the world. This brings in the Pacific and Asian partners; they're utilizing different parts of that carcass. If we can do that in a way that we are spreading that around the world, it allows us to utilize and get a premium for all portions of that carcass, rather than just part of it.

So whole-carcass utilization is important, and that's why getting markets around the world and in different areas is very important to us. The other part about this is that we're so dependent on the U.S. right now. Approximately 45% to 47% of our product is being exported out of Canada, but of that, about 73% goes into the United States. We are very dependent on that U.S. market. By creating partnerships in Europe and in the Pacific, we are able to spread that out and become less dependent on the U.S. It also helps our capacity and our processing.

If we process it here at home rather than sending it south of the line to be processed down there, we're able to keep the jobs at home and we're able to add value in the processing sector, and that all helps us in the overall economics. In the TPP consideration alone, we have to look at certain things, because it's not just a matter of having them at the table. It's having the right people at the table and making sure that we have a good balance. We know that coming into the Trans-Pacific Partnership, we not only have people we want to trade with but we have competitors sitting at the table there as well.

So in the plurilateral agreement that is being looked at here, it's very important that we are all equal and that there is not a benefit given to one, a quota taken here, or a quota taken there. All tariffs have to be removed in the same timely fashion to the same level for each of the countries, so that we are on an equal and level playing field. We also can't see these tariffs or hindrances being put on one country over another for such things as our health and our practices, so we need a standard.

We would like to see it go under the OIE standards, and that way there is a set field and a set of guidelines that we all follow. We also feel that it's very important that any decisions made must be science-based. We know that with emotion and with the quickness of media travel, some get the wrong

interpretation or the wrong feeling or the wrong idea about some of what comes forward. So we must make sure that all decisions on the trades that are made, the deals that are made, and the standards going forward are based on science so that we're also on that equal playing field. It can only be beneficial that we are all on that equal playing field. There must be a single agreement so that we include all the countries. I believe there are 11 or 12 right now that have signed up, and we know there are more to come. It wasn't beneficial to us really until we started seeing the likes of Japan coming online.

Vietnam is very important to us, but Japan and Korea—which we have indication will probably sign—make it extremely important to us. With the partners currently at the table, it's very important that we be part of it. To be outside of that circle would be a detriment as well. If you're not totally in agreement with the deal, that's one thing, but if you're outside of it, you have no say. So we feel it's very important to be part of the negotiations and part of the partnership.

B.C. is going to benefit from any agreement that it makes with any of the Pacific trading partners, and a lot of that is due to our proximity. It's due to the other products that we're marketing. The lumber industry, for example, has had great successes in China, and we know the value and the population base that we have to work with. It's extremely important for us in the beef industry to get that investment now so they can start to prepare and make their alliances so they can have some food security in the future. It's very important to us to be able to supply that.

With the growing need to produce safe high-quality food to supply a global demand, it's imperative that we be at the negotiating table, but it is equally important that we make the right deal. The agreements reached here will mould our agricultural production and its economic impact for Canada for our future generations. The long-term effects must be carefully considered in the negotiations, but the opportunity to expand our trading markets is before us and we need to take advantage of it. With that, I'll conclude my presentation.

I thank you once again very much for the opportunity and I look forward to questions. I find that's the best place to actually get the real opinions out. Thank you.

(0910) The Chair : Very good. Thank you very much. We'll now move to our second presenter. Mr. Newman from the Canada Wood Group, the floor is yours. Mr. Paul Newman (President, Vancouver Head Office, Canada Wood Group) : Thank you, Chairman Merrifield, ladies and gentlemen. I'm going to be speaking today on the TPP and Canada's offshore wood product exports. Quickly, I just want to tell you about the Canada Wood Group. We are an association of associations and we represent 10 regional wood product associations in Canada based in the Maritimes, Quebec, Ontario, Alberta, and British Columbia.

Our members export lumber, panels, engineered and value-added wood products to world markets. The organization provides market access and promotional support in target countries. We receive support for our activities from Natural Resources Canada, a number of provincial governments, and matching dollars from the forest industry. We have offices in Europe, Japan, Korea, and China. We'll soon be active in India. We work closely with DFAIT and Canadian posts in many countries. I should emphasize that the Canada Wood Group does not have a mandate to work in the United States.

I'm joined today on behalf of B.C. producers by Mr. Ric Slaco who represents the B.C. Lumber Trade Council, which handles U.S. trade issues. So, if questions arise during the question period, Ric will handle those. Like Mr. Boon who made, I thought, some compelling comments on market diversification, diversification for the forest sector has been critically important in recent years, especially given the slowdown we saw in the U.S. We also have a similar situation, interestingly like beef, where we have complementarity of products and markets.

So, it's important to spread your product across many markets and in so doing maximize value and sales return. In terms of the current participants in the TPP discussions, the United States, Japan, New Zealand, and Australia are long-standing and valued customers for Canadian wood products. By value, year-to-date, November 2013, the United States represented 65% of softwood lumber exports from Canada, with Japan at 12%, and Oceania at three-quarters of a per cent. Canadian industry has expectations that countries like Malaysia and Vietnam hold promise going forward as new markets for softwood lumber.

Although current sales are negligible, shortages in traditional supplies of tropical hardwoods and a relocation of manufacturing facilities to these countries from places like China and other higher-cost locales suggest that Canadian exports will grow to those countries. The remaining members of the TPP group at the present time represent small customers for our industry and we don't have great expectations for increased business. I should note that the U.S., Chile, and Oceania are competitive exporters with vibrant domestic force sectors selling into world markets competing against Canada.

In fact, Japan has a growing domestic capacity driven by expanding homegrown log supplies and aggressive government incentives. When we look at some of the potential future TPP participants, there are a number of countries that we would view, if they acceded to the TPP negotiations, as a very positive development. China, as has been mentioned, is a very significant new customer for the Canadian wood products industry at close to 19% of export value, November 2013 year-to-date. We believe that Canada's trade with China in wood products will continue to expand and diversify product-wise.

Taiwan and Korea both represent approximately 1% each of 2013 exports and there's definitely room for growth. India and Indonesia fall under the same category as Malaysia and Vietnam, little sales as yet, but circumstances like changing fibre flows suggest that opportunities will emerge. When we look at specific issues that are going to be addressed under the TPP negotiations, I would echo Mr. Boon's comments on tariffs. Wood products are subject to fluctuating exchange rates and relatively thin profit margins. So the export potential for Canadian wood products are very dependent on import tariff levels.

Where level playing fields have existed for all international competitors, Canada has shown it can compete. However, differential tariffs such as those presently existing in South Korea, as a result of the passage of the 2012 U.S., 2011 European, and the 2011 Chilean free trade agreements, can place Canadian exporters at a disadvantage.

(0915) Therefore, tariffs need to be addressed in any negotiation, and especially in those circumstances where Canadian producers could be exposed to higher levels than their competitors. We also are subject to and affected by a number of technical barriers to trade. These include things like phytosanitary barriers. These are ostensibly erected to prevent the movement of invasive pests and diseases and are often well justified, but frequently they are unnecessarily robust or used as a trade barrier by some nations. Product standards and building codes are also potentially an issue.

As a prerequisite to get Canadian products accepted for approval in structural building applications, it's usually necessary that our products be included in foreign standards, or ideally, that we get direct recognition of Canadian product standards by import countries or customer countries. However, some countries insist on foreign products meeting their own standards, regardless of whether or not the product has been demonstrably fit for the purpose. Conformity assessment systems refer to third-party certification of product quality and conforming to the standards to which they're manufactured.

Canada has sound and very well-regarded systems for quality certification of solid wood products. These systems are recognized in many markets and accepted in their own right as assurances of product performance. However, some countries impose their own conformity assessment requirements on imports, which are usually duplicative and ignore Canadian marks of conformance. Therefore, wherever possible, we should strive to have Canadian conformity assessment systems and standards directly recognized to minimize cost and maximize flexibility.

With respect to environmental reputation, many countries are sensitive to environmental concerns and strive to implement sustainable solutions and use green building materials. Canada has an excellent story to tell in this regard. However, not all countries ascribe a positive role to wood in building or as a material. Therefore, every opportunity should be taken to advance Canada's image as a credible, sustainable supplier of wood products and to support the case for wood as an integral element in green building solutions. These barriers exist to greater or lesser degrees in most TPP countries.

If possible, efforts should be taken to minimize the effects of these barriers and achieve recognition of existing Canadian systems where possible. Existing TPP countries account for at least 78% of Canada's softwood lumber exports to world markets. When you add aspirant nations, real and potential TPP states represent close to 98% of Canada's current exports of softwood lumber, which was valued in 2012 at $5.8 billion.

Therefore, what happens in terms of TPP trade provisions that address tariffs and quotas, barriers to trade, procurement and competitive policies, and environmental requirements matter enormously to the wood industry. Some suggestions that we would have for Canadian negotiators include provisions that limit the ability of countries like Japan to introduce preferential purchasing policies linked to incentives that favour the domestic industry. An example of that is the forestry agency's current wood-use points program, which represents a significant threat to Canadian market share.

I've mentioned already acceptance and recognition of our conformity assessment schemes and product standards, and I've also mentioned environmental credentials and the potential for wood as a green material. Again, we see some situations—Korea perhaps is the most outstanding—where our exporters are at a disadvantage, so negotiations within the TPP, but also within Canada's EPA with Korea, will be critical in levelling the playing field with other countries.

In closing, the Canadian forest industry greatly appreciates the work being done by our government to negotiate and put in place free trade agreements and trade deals. These agreements enable industry to perform commercially and bolster the export side of our business, which is a critical driver in the improving fortunes of the sector.

(0920) Thank you very much for the opportunity to appear before you today. The Chair : Thank you very much for your presentation. The forest industry is way ahead of governments in international trade. What you've done is to be admired, and you're all the better for it. Ms. Crowder, the floor is yours for seven minutes. Ms. Jean Crowder (Nanaimo—Cowichan, NDP) : Thank you, Mr. Merrifield, and I want to thank the witnesses. I'm going to start with the forestry sector because I come from the riding of Nanaimo—Cowichan that has long relied on the forestry sector for the health and well-being of its economy.

Over the last number of years we have seen a decline in the forestry sector. We've closed a number of sawmills, and it's really had an impact on the local economy. One of the troubling issues that has been raised by a number of organizations is the fact that people don't have access to details around the TPP. What's your comfort level? What kind of of information do you have? What kind of details do you have, and how have you been consulted?

(0925) Mr. Paul Newman : That's a good point. When I set out to prepare some remarks, I went on the Internet. I looked at material available from the federal government. I even looked at Wikipedia, things like that. Those were the sources I used. I probably missed useful sources. I even looked at information from other countries like the United States and some others, Oceania and so on. I didn't find a tremendous amount of detail available but I thought I had enough to at least craft a position. Ms. Jean Crowder : I appreciate both Mr. Boon and Mr.

Newman coming with concrete recommendations because I think that's useful for the committee, but in effect, your list of recommendations is a wish list and is not based on having access to details from the TPP. Mr. Paul Newman : I did see the scope of the areas the agreement is addressing and these resonated in terms of the issues we face in a number of the target countries. I crafted it on that basis. Ms. Jean Crowder : Before you go, Mr. Slaco, I want to say that a number of us have relied on leaks. I have the “TPPA Environment

Chapter & Chair's Commentary Posted by WikiLeaks”, so unfortunately we haven't been able to rely on our own government. We've had to go to WikiLeaks to get information, and this one has some very good information about the environment chapter, which it should have. I've noted your comments around the environment, and this should have us very concerned. Mr. Slaco. Mr. Ric Slaco (Vice-President and Chief Forester, Interfor) : Yes, in answer to your question, the forest sector does have an avenue to get information on the TPP and other trade agreements. Ms.

Jean Crowder : Would you be prepared to share that with the committee because you probably have insight that we don't have? Mr. Ric Slaco : The mechanism for us to do that is through something that was established through the federal government's program to advise us on the softwood lumber agreement. At the same time we get briefings, and I believe there are webinars and briefing sessions to advise us. Certainly one of the most important aspects of TPP is to bring Canada forward in establishing modern trade agreements with trading partners outside the current ones.

While we are all learning from this—and I think even Canada's entry into TPP was partway through—it's a learning process for both of us. So despite the fact that there may be some limit in the information that's out there in text form, the opportunity that the federal government has provided by way of briefing— Ms. Jean Crowder : I'm going to cut you off because I have only seven minutes and that includes my questions and your answers. Mr. Newman, there are two points I'd like you to address. Yesterday we heard from some witnesses about the importance of value-added.

First, has your organization done an assessment of your competitors and what the TPP might mean in terms of incursions into our own market? Second, do you have a specific recommendation for this committee with regard to support for value-added, because those are the more lucrative jobs for the Canadian economy? Mr. Paul Newman : I'm probably not the right person to talk about that, and the reason I say that is I mentioned we're an association of associations. My own expertise is in the solid sawn lumber industry. We do have an organization called BC Wood Specialties Group, which is a member of our group.

They would commission research and that sort of thing, but I'm not an expert in that area. Ms. Jean Crowder : With regards to the assessment of competitors, what about supports for value-added? Mr. Paul Newman : What about...I'm sorry? Ms. Jean Crowder : If you were going to make a recommendation to this committee for how we could develop policy or protect within the TPP value-added, do you have some specific recommendations for that?

(0930) Mr. Paul Newman : Well, certainly tariffs and things like that should be minimized. Ms. Jean Crowder : You talked about the standards. Mr. Paul Newman : Yes, standards. Those can all be potential barriers to value-added products. There are phytosanitary issues as well. Ms. Jean Crowder : So that's essentially what you presented in your presentation, but nothing additional comes to mind with regard to value-added. Mr. Paul Newman : Well, you mentioned specific research on potential competitive nations, and so on. Again, I think you'd be better advised to talk to people familiar with the value-added sector.

Ms. Jean Crowder : Has the forestry sector had an opportunity to do an analysis on whether they anticipate additional job creation in the forestry sector? I'm interested in B.C., but in Canada as well. Mr. Slaco or Mr. Newman, have you done any work in that respect? Mr. Paul Newman : We have seen significant job creation. If you look at some of the aspiring nations like China, it was estimated that about 20 mills kept running through the downturn, representing many hundreds of jobs as a result of that 19% of shipments that I talked about that are flowing into China. There's real experience.

Korea would be another market where we've seen excellent shipment growth— Ms. Jean Crowder : But that's outside of the TPP— Mr. Paul Newman : Yes. I'm not aware of any sort of projections. Mr. Ric Slaco : There's no specific analysis. As I said, it's incredibly important to have modern trade agreements with trading nations. That in itself will be a benefit to us, whether it's a job next week, next year, or even 10 years from now. The Chair : Thank you very much. Mr. Hoback. Mr. Randy Hoback (Prince Albert, CPC) : Thank you, Chair, Thank you, gentlemen, for being here this morning.

I come from the great riding of Prince Albert. We have lots of beef and forestry products, for sure. When my grandpa came to Canada, it's one of the things he did. He worked in the bush up in Big River and cut logs. My family also farms, so I'm attached to both sectors in my cultural history in Canada. One thing I find really interesting is that the NDP keep trying to say that there are no jobs created from TPP, which we all know is absolutely false. They like to say that there's no benefit to doing a trade deal because there isn't a trade deal that they've ever liked.

Don't be astonished by your questions from the NDP, because that's just who they are. Mr. Boon, maybe I'll start with you. If you weren't involved in TPP, if you were on the outside looking in, what would that do to your sector, and how would it impact Canadian farmers across the Prairies and right across Canada? Mr. Kevin Boon : We're in a bit of a unique position because of the effects of BSE right now. What we've really seen since BSE was discovered in 2003 is the use of that as a trade barrier.

In joining in a partnership with TPP, a lot of these barriers have been more prevalent in the Pacific Rim and the Asian rim, where they'll allow some limited access. But they put such stipulations in place that it's hard for us to conform with our product. The TPP partnership is going to allow us to equalize some of that and put us on more of an equal playing field with some of our competitors. It's not just gaining access, but it's also putting us on a more equal playing field with those that also supply. Mr.

Randy Hoback : Wouldn't it be fair to say then that Minister Ritz has been out and about and very active over the last three years opening up those markets that BSE closed? It's called BSE, but in this case it was being used as a non-tariff trade barrier. Now, with TPP you have a multilateral agreement. Instead of him going to every country one at a time, you have a multilateral agreement, plus the nature of a multilateral agreement is enforcement on a multilateral agreement, the ability to make sure it's enforced. That was the benefit to the cattle producers, for sure. Mr.

Kevin Boon : Definitely a benefit in that aspect, and I have to take my hat off to Minister Ritz and Minister Fast for the work they've done on trade. One of the things, especially with our different industries, is that we're a global market. We're a global community now. We can't necessarily just think of within Canada. The more we have at the table, coming up with an equal agreement or a comparative agreement, it's going to make it much easier for us to do business on a broader base. I talked about the value of that cut-out. Being able to get a premium for tongues and livers that we don't use is where it's at.

Even within the Pacific, there are different requirements, so it really helps our value-added and our processing. Mr. Randy Hoback : Yes, that's what I was just going to say: your utilization of different products for different parts of the world. CETA, for example, uses certain cuts, and then TPP will use other cuts. That means that the processing has to happen here in Canada in order to break shipment there. Again, it's another benefit back into the Canadian economy. That is jobs for Canadians. Mr. Kevin Boon : Very much so.

I've always felt one of the biggest mistakes we made following BSE was to open our own borders to live cattle leaving the country because we took away our processing opportunities. The more we keep at home, the more jobs we create and the more opportunity we have to add that value here at home. The other really important part of the CETA deal that a lot of people don't equate is the fact that under the requirements for Europe, we have to produce feed that has no added hormones. China has been very adamant that they do not want any ractopamine.

To not get too technical, the ractopamine is the carrier for a lot of the added hormones. So by raising the beef for that European market, we create a product that is acceptable to China as well, and so the two of them blend very well. All this to say, if Europe is taking 35% or 40% of our carcass, and we still have 60% or 70% left to utilize, and all of a sudden we have another player that comes in and is taking 30% or 40% out of that, we're able to get a premium price for that in a way that we don't have to segregate on our line so much, so we can keep our costs down.

It actually allows us to maybe produce a little more cheaply for our own domestic product as well. We're able to spread out that cost for processing. One of the big advantages to opening these up is to be able to expand that capacity for not only production but for processing as well.

(0935) Mr. Randy Hoback : Mr. Newman, of course in 2008, the forestry sector...2007...coming from Prince Albert, we had our pulp mill closed. We've basically seen the whole forestry sector just collapse. To be honest with you now it's coming back. We have seen some of the sawmills opening up. The pulp mill is scheduled to open up in another 18 months hopefully, again, if we can find labour and the appropriate trades, which is another topic we'll talk about on another day. But one of the things I think created the problem is our dependence on one market for all the product we were making.

Of course, with the CETA and TPP you're going to have access to a wider range of consumers, 500 million in Europe alone, and then I'm not sure how many millions would be in Asia. That's the number that Mr. Holder could probably tell me off the top of his head. What does that mean to the sector? Will that not give it a base level that's high enough that you could have consistent production throughout a wide range of different types of anomalies that may be country-specific? Mr. Paul Newman : Yes, absolutely. We were hammered in the downturn in 2006-07, where we were over-leveraged in the U.S. market.

Fortunately, there had been some work done starting in the late 1990s and early 2000s to buy companies—by groups like Canada Wood—to try to get our specifications and get our products recognized in some of these new Asian markets. That helped greatly. As Mr. Slaco said, this is where we really see trade agreements as being critical to our future because I don't think the industry's going to want to get into a dependency situation like we had. Mr.

Randy Hoback : So it's fair to say, then, if we weren't at the table, for example, on TPP, your industry would be at a huge disadvantage compared to other countries you compete with in the global market. Mr. Paul Newman : Yes. I think we would be looking at the opportunities that our negotiators could leverage. But also if we weren't in the game and were being left out in terms of non-tariff barrier agreements and so on, it could badly impact us, I think. Mr. Randy Hoback : But that's basic macroeconomics. You don't need to see the fine details of the deal to understand that. Correct?

The Chair : Okay, that's it now. Our analyst has just told me there are 792 million people in TPP. There you go. Mr. Pacetti, the floor is yours. Mr. Massimo Pacetti (Saint-Léonard—Saint-Michel, Lib.) : Thank you, Mr. Chair. Thank you to the witnesses for coming here and appearing before us. I guess my first question would be for you, Mr. Boon. My understanding is that when we sign free trade agreements it's normally about duties and tariffs, but you mentioned it will put your industry on equal footing with some of your competitors, more on a regulation and conformity type of basis. Can you comment on that?

Is that going to be part of the negotiations? Have you had any input regarding that? That's going to be important. Mr. Kevin Boon : Yes, it is. Through our Ottawa office of the Canadian Cattlemen's Association, John Masswohl has been very engaged in the process with our Canadian government in putting forward the facts. We also have what we call our Five Nations Beef Alliance, where we ourselves are partnered with the U.S., Mexico, New Zealand, and Australia. Those are some of our major competitors. Where our disadvantages come are in what was put down in the regulations and what we have to adhere to since BSE.

So we have to do some extra steps that put us definitely at a cost disadvantage. It's why it's so important we use a science-based approach to this, so it's understood that yes, we might have some restrictions that the others don't have as we phase in, but we have the ability to get to that level.

(0940) Mr. Massimo Pacetti : Sorry to interrupt, but it has nothing to do with duties and tariffs. It's mainly about conformity of regulations and making sure that's all the same. Mr. Kevin Boon : Exactly. Mr. Massimo Pacetti : Even if you didn't sign the TPP would that make a difference? Mr. Kevin Boon : Yes, it does. The TPP, while we had signed an agreement and we worked with them together, has very much become a trade barrier, especially when we work with China and Japan at this point. They've utilized a lot of it to restrict us in a manner whereby it's just not economical for us to try.

In that it comes down to whether or not we're allowed access with product with bone-in or bone-out, and what we have to remove for specified risk material, stuff like that. We're not saying that we want it eliminated so that we don't have to do it. It's just that those regulations should follow the same. Mr. Massimo Pacetti : I only have five minutes so I just want to get a question to Mr. Newman. Who is your main competitor in the group of TPP? Mr. Kevin Boon : In Asia, in TPP, it would be Australia and New Zealand, and a lot of that is geography and proximity to the market. Mr.

Massimo Pacetti : Okay, thank you. Mr. Newman, you mentioned something about the sector not benefiting from trade just towards the end. I didn't catch that because I don't have a copy of your brief, but you said something about if you sign the TPP there will be some sectors that are not going to benefit from the TPP, and you don't want to be penalized. Is that what I understood? Mr. Paul Newman : No. Sorry, I apologize that you don't have my remarks. Mr. Massimo Pacetti : No, that's fine. Mr.

Paul Newman : I think what I may have said is that some TPP nations don't look to us at this stage like they have tremendous potential, for different reasons. They may have their own wood product industries, they may not use wood a lot, etc. But I think our sectors, broadly, would see benefit in a trade agreement. Mr. Massimo Pacetti : In terms of process...maybe this question is more geared towards Mr. Slaco, but I'm not sure. You have two countries that start negotiating in 2005, then there are additional countries that join in 2008, then other ones in 2010, and Canada finally joins in 2012.

When Canada joins, have they already made the commitment that they will agree to a certain amount of the negotiations that have already been undertaken from 2005 to 2012? At what point do we start negotiating? Does anybody know? Mr. Ric Slaco : My understanding is that they start negotiating right away, in terms of any issues that have been established early on. Then in terms of ultimately accepting an agreement you'd have to catch up on what was discussed, but it's really only a discussion. It's when the document actually— Mr. Massimo Pacetti : Has anything been agreed to? Mr. Ric Slaco : Pardon me. Mr.

Massimo Pacetti : Nothing has been agreed to that is going to affect your industries, or maybe, Mr. Boon, it affects you as well? I can't believe that nothing was agreed to from the beginning of negotiations in 2005 until 2012. Mr. Ric Slaco : I imagine a certain amount of this is process that's involved. Certainly from our perspective, while issues may have come up, each country would have— Mr. Massimo Pacetti : You're not aware of anything that— Mr. Ric Slaco : No. From our perspective one of the most important issues was the trade agreement we have with the U.S.

Certainly we didn't want TPP to be infringing upon— The Chair : Your time has gone. Mr. Massimo Pacetti : Mr. Boon, are you aware of anything? Mr. Kevin Boon : Negotiations have proceeded, but there are no agreements that I am aware of yet. The Chair : Thank you very much. Mr. Holder. Mr. Ed Holder (London West, CPC) : Thank you, Chair. I'd like to thank our guests for being here and providing their specific insights as it relates to their industry. Mr. Boon, if I may start with you. There are just a few questions that I have as it relates to the cow.

I live in London, Ontario, which I like to describe as an urban oasis in a sea of agriculture. While we're called the forest city, that's as far as trees come to our city. We don't cut them down for commercial purposes but we appreciate the chlorophyll and other things they do, but that's probably the extent of London's contribution to the Canadian environment. Sorry, that was for Mr. Newman. Mr. Boon, you talked about how opening up the markets in the TPP would expand the opportunities to use the fuller parts of the cow. There are some aspects that you don't market into certain countries.

What I'm trying to understand is what would you.... You said that 900 pounds represents the amount of product that would be available from a processed animal. I'm trying to get a sense what the benefit of TPP is over, let's say, CETA and the United States and other things, in terms of the parts of the carcass that you can use there or sell there that you couldn't otherwise in Europe or in the United States.

(0945) Mr. Kevin Boon : Basically if we have just a domestic market—let's take all of our trade out of it—we would probably only utilize about 85% of that carcass. The other 15% becomes waste and it's not so much waste as it is underutilized product. It might go into pet food. Mr. Massimo Pacetti : Hot dogs.... Mr. Kevin Boon : Hot dogs are actually quite good now. They got a bad wrap over the years. The ability for us to utilize those comes because some of these countries utilize them. A real simple one is our livers and our tongues. We use very little of that here in Canada.

A real good example is that one of the first countries to open to us after BSE was Cuba, and it was for liver. That in itself gave us an extra $12 per head of animal. Mr. Ed Holder : My question though as it relates to TPP is this. Is there any part of the carcass that you would use at a higher level through the countries that would be in play that you're not utilizing now at the high level? Mr. Kevin Boon : At the high level definitely Japan and Korea are going to utilize a lot of the things like the external what we call offal, and at a very high level. You'll notice too here in Canada short ribs.

If you go out to buy a short rib, it's extremely hard to buy now because that is one of the products they are taking off of us, and at a high enough level that we can't afford to buy it in our country. By expanding that amount it actually cuts all of our costs in that whole total production, but it's giving it to certain areas that normally we would probably pay to get rid of. Mr. Ed Holder : You made a comment that as this deal comes through you would imagine there would be more processing at home as opposed to processing now done in the states.

I think there's always been a lot of talk as to why there isn't more processing being done in Canada. How does the TPP deal allow us to do more processing in Canada? Mr. Kevin Boon : We know right now with the issues that we're having with the U.S. and around COOL, country of origin labelling, and the protectionism that goes...by signing a multilateral agreement such as this we live under the same rules and regulations of both processing and of how we tariff in the market. So when it comes to things like our SRM and our regulations about what we have to remove, we get put on the same basis as the U.S.

Right now they're at about a $35 advantage to us in a lot of these countries for things they don't have to remove to get there. If we can get to that same level then that adds more and it allows us to do it here at home as well. The other one is labour. Labour is huge to us...their cost advantage. So if we can get more value out of that animal we're able to equalize. Mr. Ed Holder : Thank you for that. Mr. Newman and Mr.

Slaco, thank you for your comments on behalf of the Canada Wood Group, and certainly the Forest Products Association of Canada has been very supported of CETA in the past, so your comments on TPP are helpful. You clearly know that with TPP the arrangements will include what we have with the United States with our North American Free Trade Agreement. Are there things that you imagined your industry would get from a standard standpoint through TPP that you might not otherwise currently have with NAFTA? Do you have any thoughts, hopes, expectations? Mr. Ric Slaco : Nothing that I'm aware of....

There's certainly, as I mentioned, a consideration that TPP, while it may not provide any new benefits per se in North America because we have an existing agreement that's in effect that's working well.... It was just to ensure that TPP in fact is not going to have any effect on that agreement. Our understanding to date is that this is the case. Mr. Ed Holder : It's interesting, Mr. Slaco, you said it's working well. We all remember the softwood lumber issue with the United States, and I'm not sure that's a definition of working well. I'm curious. How would you respond to that? I struggle with that.

I mean, we ultimately got a solution that you might want to comment on, but I have to tell you my frustration at the time with the United States was beyond the point of reasonableness. I was quite disappointed.

(0950) Mr. Ric Slaco : Certainly the dispute with the U.S. on lumber trade has been around for decades—a hundred years—so it's not something new. I think what really came about in 2006 was an agreement that, while it may not have been perfect at the time, certainly provided both countries with some certainty. Mr. Ed Holder : Would we have had that settlement without the NAFTA, do you think? Mr. Ric Slaco : It's hard for me to say specifically if that was going to occur or not. I think ultimately what happened is— Mr. Ed Holder : I'm not talking about the occurrence of the dispute.

I'm talking about the settlement mechanism. Mr. Ric Slaco : I think the settlement mechanism really wasn't dependent on NAFTA. It was a combination of a number of factors in terms of Canada's position in the agreement in terms of establishing trade that would conform to world international standards, and the U.S.'s ability, given the fact that they had some unilateral actions that were available to them through their U.S. Department of Commerce, that ultimately resulted in an agreement that both sides could live with. If you look at it since 2006, I think it has worked well.

In fact, both parties agreed to extend it a year ago, and I think it was because there was a recognition that while it may not have been perfect, it was actually working. The Chair : Thank you very much. Mr. Sandhu. Mr. Jasbir Sandhu (Surrey North, NDP) : Thank you, Mr. Chair. I want to follow up on the question Mr. Pacetti asked earlier. Mr. Boon, you talked about being at the table and not outside, that it's important to be at negotiations. The negotiations for the TPP began in 2005, and the main ones started in 2008. Canada entered TPP negotiations in 2012, and by that time 14 rounds were already completed.

Part of the condition of Canada's entry was that we would not be able to go back and renegotiate what has already been negotiated. Are you concerned about what's already been done and that we weren't at the table? Mr. Kevin Boon : Not overly, at this point, for the simple reason that we've had a very good and open relationship with the government trade groups with Minister Ritz and Minister Fast in putting forward what it will take for us and what we require going forward in any market. We have a very strong position of exactly what it takes for our industry to move forward.

Those have always been set in stone, and we've always been adamant that if we don't adhere to these and if we aren't listened to on them, it will be extremely hard and detrimental to our moving forward. So while we maybe haven't seen all the details and fine print involved, and the devil is always in the details, I think a very good effort has been made to make sure they've done everything possible to make our industry viable. Mr. Jasbir Sandhu : Would you agree that we are not able to go back to what's been negotiated already? That could serve as a disadvantage to Canada. Mr.

Kevin Boon : It could, but I guess at the end of the day— Mr. Jasbir Sandhu : That's all I want. Mr. Newman, you talked about environmental concerns. How can governments and businesses work together to mitigate those environmental concerns and the image of sustainability? Mr. Paul Newman : What I was trying to get at was that there's a movement in many countries around the world now to use wood in a way that is part of an environmental solution in building and other areas. I think anything we can do to highlight the fact that Canada's wood products come from a sustainably managed forest, and that — Mr.

Jasbir Sandhu : How can government be part of the building of sustainable wood products that we export to other countries? Mr. Paul Newman : Well, you could be part of it through any discussion on the TPP, but we have examples right now, say in China, where the federal government is working with MOHURD, China's ministry of construction, to position wood as a green building material to help China with some of its environmental issues to do with energy efficiency and things like that. So there are real, concrete things on a bilateral level. Then I would expect there would be opportunities at the TPP level.

(0955) Mr. Jasbir Sandhu : You talked about new markets like Vietnam and Malaysia, and how a lot of the manufacturing is shifting toward those two countries. Again, how can industry and government work together to produce value-added products here, rather than exporting raw logs out to those countries? How can we work together here to have value-added jobs? Mr.

Paul Newman : Interestingly, this work that Canada Wood Group has been doing, which has been supported by the federal government and the provinces—and it's actually been supported since about 1999, so under different governments—has been pushing to try to create demand for value-added products in different nations, particularly in places like Japan and other places where people have considerable income. That is a concrete example of something that's going on right now to try to develop demand and create value-added jobs here in Canada. Mr. Jasbir Sandhu : Mr.

Boon, you talked about investing for the next 30 years and what's going to happen in 30 years. Again, how can the government partner with industry in that investment in order to create future value-added jobs? Mr. Kevin Boon : A lot of it comes from creating the atmosphere by making sure that we have the personnel, but right now one of our biggest issues out on the land is keeping young people there with some of the other industry and the competition.

Forestry, actually, with the downturn that they've had, right now their mid-term timber supply is going to be at a low, and they're going to probably have some extra workers at that time. We run through these labour things so that we have, number one, a trained force, but that's right at the grassroots. We need to be able to keep that going.

When we talk about investment in the future, it's making that capacity to keep the product at home, to do the cut-out, to do the processing, which is a huge part, to develop our grasslands, and to work with the other vested interests on the land to make sure we can produce the grass that's required to grow it. We are at an all-time record low for beef herd size. It topped out in 2005, but here in British Columbia we've lost over a third of our mother cows in that time, and a lot of it was due to the fact that we just didn't have access to a lot of markets.

With those opening up now, we're in that position where we're down, but we see a global supply shortage with droughts around the world and everything. We're in an atmosphere where we need to grow our herds to take advantage and we're also in an atmosphere where we're seeing population growth. We're also seeing at this time that, globally, beef is really craved, and so we have an opportunity. We have to make it advantageous and desirable for the young guys to stay on the farm and produce it, and also make that investment worthwhile down the road.

The trade agreements that we sign today will help us ensure investment on our own for the future. If we know we have a market, we'll invest on our own as well. The Chair : Thanks very much. Mr. Hiebert, you have five minutes. Mr. Russ Hiebert (South Surrey—White Rock—Cloverdale, CPC) : Thank you both for being here. Mr. Boon, you made reference in your presentation to OIE standards. Could you tell us what those are? Mr. Kevin Boon : The OIE standards—I'm sorry, I always get lost in what the initials actually stand for—but it's really our world health organization for veterinary practices, for animal health.

A lot of those standards are left to

interpretation by the country, so there are certain rules that might get put in by a trading partner under certain things. A very good example of this is the use of adding growth promoters to help efficiencies. A lot of it isn't understood, and it isn't based on science when they stop it. It's a matter of feeling that we're adding something, so it has to be bad. We have to make sure that the science base and that the recommendations under OIE are actually adhered to, and we don't see that everywhere.

In some of our trading alliances, especially Australia and New Zealand, they don't follow those same criteria, those same rules. As a result, they're able to do things a little differently and make their own bilateral agreements. It's very important to us in a TPP agreement that everybody agrees to utilize the same standards.

(1000) Mr. Russ Hiebert : That's right. Now they are voluntary. Mr. Kevin Boon : They are voluntary. If a country signs on, we follow that code of conduct and those standards and practices, and that's part of our trading capacity. Some countries do not. They're not signed onto the OIE, so as a result, they don't necessarily follow those same practices. Mr. Russ Hiebert : Here is my last question. Is there anything your industry would need, whether in terms of support from government or the industry, to take advantage of the TPP once it's concluded? Mr. Kevin Boon : I think one of the big things....

Money always helps, but it's our money we're asking to get back. We're talking about taxpayers' dollars, so when we ask for that we have to make darned sure we're able to return that investment. It is extremely important for us to be able to make sure we have the introductions to the right people in the right countries to be able to bring trade back. I'll use an example. We're doing a feasibility study here in British Columbia right now regarding an opportunity to put a federal plant here in British Columbia. With that we see an opportunity to hit the export markets.

Now that CETA is pretty much there, we see an opportunity to do it. But in order to do it in a manner that will enhance both us and trade, if we can get foreign investment—I'm not saying that we get them to buy it—from a European investor and from a Chinese investor, for example, and from our own domestic investor, then we'll have an opportunity and there will be an incentive to take our product across those borders. It's not just buying the product; it's buying it after it's been processed so they have a vested interest in getting that product there.

Once we have that and we have that investment, it's much more likely that we'll have a stable partner for the future. We don't have the volatility of them saying they don't like this and they're gone. They'll work with us to make sure that it meets the needs of their country and they understand the costs involved as well. Mr. Russ Hiebert : Thank you. Mr. Newman, at the end of your presentation you were making reference to the preferential purchase policy that some countries use to promote their domestic suppliers. I didn't catch which country that was. Was it Japan doing that? Can you elaborate on that? Mr.

Paul Newman : Yes, I can. Mr. Russ Hiebert : It doesn't seem to fall within normal trade practices. It seems as though it would be an offence to any trade agreement or bilateral agreements we might have. Mr. Paul Newman : The industry and government—DFAIT and other agencies in our own government right now—have considerable concern about this. Japan has a multi-pronged incentive or program right now to push forward the domestic forest sector and essentially, to substitute imports. They're doing it on the land base by providing incentives, subsidies, for forest road development and things like that.

They're doing it with manufacturing facilities. They will fund up to 50% of new mills and other operations. The latest incarnation we've seen is through something they call the wood-use points program, and the equivalent of about $600 million equivalent has been provided to the forest agency in Japan to provide incentives to Japanese consumers to buy domestic wood. It has the potential to hurt not only Canada, but of course, all international shippers into Japan. There's been a lot of work, actually, on our part and on the part of other international like-minded countries to try to take exception to this. Mr.

Russ Hiebert : I know my time is done, but I never thought of Japan as a forestry nation. The Chair : Actually, when the committee traveled to Japan a year ago, we did examine this quite a bit and we are absolutely concerned about what you're saying. Thank you very much. Mr. Ed Holder : How was that trip? The Chair : It was a great trip, and you're not bitter, I know. Some of the members couldn't go. We do want to thank you, witnesses, for coming forward. We appreciate your time with us. With that, we will suspend as we set up for our next set of panels. (1000)

(1015) The Chair : We ask our members to take their seats. We have on this panel, from the Asia Pacific Foundation of Canada, Mr. Woo, the president and CEO. You've actually been with us by video conference before, is that right? We certainly appreciated your comments and look forward to your comments this morning, as well as the question and answer period. We also have scheduled Mr. Van Keulen from the British Columbia Dairy Association. He was with us yesterday but has not quite arrived. If he arrives, we'll give him the opportunity to share his comments as well and have a question and answer.

We'll start with you, Mr. Woo. The floor is yours. Mr. Yuen Pau Woo (President and Chief Executive Officer, Asia Pacific Foundation of Canada) : Thank you, Chairman. Thank you, members of the committee, for having me here to share some ideas with you again,m and welcome to Vancouver. We arranged some good weather for you. I'll make some comments on the TPP from a strategic Canadian trade policy perspective. I'm not able to comment on the details of TPP.

We don't know much about the details, but I think there are some important considerations for us to look at, even without knowing the details of the negotiations so far. The first strategic point to make is that Canada has yet to conclude an FTA with any Asian country. We are an outlier compared to most of our industrialized country competitors, certainly in the G-7 and the OECD, and that puts us at a competitive disadvantage vis-à-vis countries that do have trade agreements with Asian partners.

The best example of this competitive disadvantage is in the case of Korea, where we have been negotiating—as you all know—coming to nine years now. In the meantime, we have been overtaken by the United States and more recently, by Australia. Both of those countries now have margins of preference, particularly in the cultural sector, that put our exporters at a disadvantage. So the issue of the TPP should be seen in the context of our trade position in Asia as a whole and our relative disadvantage in Asia because we do not have any agreements to date with Asian countries.

What I'm trying to say here is that TPP is a very big game in the formation of trade agreements in the Asia-Pacific. It's not the only game, and we need to keep all of our options open and to continue to pursue trade agreements bilaterally with existing negotiations, as well as perhaps with new trading partners in Asia with which we have not yet embarked on free trade agreements.

The second point I want to make is a general point, but one that really has to be reiterated, which is that FTAs in general terms, to the extent that they are generally about opening markets and lowering barriers to trade, increase economic welfare for all parties concerned, even if there may be relatively little competitive gain for one economy over another. That reason in itself—the gain in economic welfare for all the players—is an important reason to liberalize trade. We should pursue the opening of markets even if the relative gains for our economy vis-à-vis our competitors may not be so great.

The efficiency gains, the productivity gains, the consumer welfare that's generated by more open markets, is a plus for all of the players. The third point is that, from a narrower perspective about competitiveness, the game is not about overall economic welfare, but it is about preferential access. This is a different kind of calculation we need to make when we pursue free trade agreements. Basically, that game is about gaining preferential access for us and not having others get preferential access.

We want a trade agreement with an economy where others don't have a trade agreement so that we have those margins of preference. As I've already said, on that game we are losing because we don't have agreements in Asia whereas some of our major competitors do. In this sense, the TPP for Canada is, I think, essentially a defensive play for us. As it turns out, we already have a trade agreement with a number of the TPP members-—most notably the United States, but also with Chile, Peru, and Mexico.

Certainly the United States and Mexico, two of our more important trading partners, are already within Canada's preferential trading arrangements.

(1020) For us to not be involved in the TPP would run the risk of other members of the TPP gaining access to those markets that would erode our preference, that would erode the advantage we have. It's important for us to be at the table, if nothing else to protect the preferential access that we have in existing markets and also to gain new access to markets that we currently don't have trade agreements with.

The TPP has been described as a 21st-century trade agreement that will not only look at traditional market access for manufactured goods and agricultural products and services but will also talk about some new generation issues. This is where we have not much information, but this committee, and I think Canadians, are right to pay special attention to the types of provisions that are negotiated in the areas of IP, e-commerce, and to some extent state-owned enterprises.

The traditional beliefs about opening markets and liberalization in terms of goods and services do not apply quite so simply when it comes to intellectual property and e-commerce. It's important for Canada to take a position on those issues that genuinely advances Canadian interests, and not just the interests of the countries that currently are the leaders in intellectual property and e-commerce that will entrench the strength of the incumbents and make it more difficult for developing economies. It's also for Canada to gain strength in the areas of IP and e-commerce.

So my caution on the new generation issues is that we not treat them as ancillary, but really as central to the value of the TPP for this country. My final point, ladies and gentlemen, is that the TPP must not be about excluding China. There has been a notion for a number of years that the point of the TPP, being driven so hard by Washington, D.C., is in some sense to provide a buffer against China's rise and perhaps to try to force China into a position that is closer to western market economic approaches.

At one time China also saw it in this way, and felt that it was being left out of the TPP, but more recently we have heard very encouraging signals from Beijing that they in fact want to be part of TPP and may well consider submitting an application to join. What we are hearing now is some resistance on the part of the United States—to not let China be part of the discussions, and to create a number of preconditions before China is admitted—but I think Canada should take a position to welcome China's participation.

It would in fact bring them closer to the economic system that we are familiar with, and it would avoid creating a rift, or a line, if you will, down the Pacific Ocean. Even better, if we still have the opportunity to negotiate bilaterally with China on a free trade agreement, as the Chinese offered to us over a year ago, we should take up that offer. Thank you very much.

(1025) The Chair : Thank you very much. We look forward to that. I'm sure that will stimulate some very interesting questions. We have with us again Mr. Van Keulen. The floor is yours. Mr. Stan Van Keulen (Board Member, British Columbia Dairy Association) : I see I'm early. Yesterday I spoke here on the CETA agreement and you understand the impact it has on dairy. I want to reiterate that, to put it on the record that the CETA agreement has presently increased CETA's access of cheese to close to 16,000 tonnes extra now and that is effectively doubling the current EU access.

As a local dairy farmer and on behalf of the people I represent, we're proud Canadians and we're proud of the industry that we've built. We stand second to no one in the industry when it comes to quality, the types of products we produce, and I think as Canadians we can be proud of that. To have another threat with the TPP and I'm not sure if it's going to be a threat, but when it comes to the supply management system we'd like to keep it intact in its present form. CETA has taken something from us already and we don't want the Trans-Pacific Partnership agreement to take any more.

To speak personally here, I'm not against trade. I think trade has to be fair and equitable. I think what the government is doing is wise and it's smart to be part of the Trans-Pacific Partnership, but I think what we've given up already in dairy is enough. I think we have to recognize that. This next round of negotiations is going to be very difficult because the Oceanic countries are going to be knocking on the door wanting to get into our market. On that note, I want to emphasize the three pillars of supply management.

One of those is the production management, the discipline we have in this country—we take care of the surplus. There's no government support. There is no cash outlay by the federal government, unlike the European Union where there are close to 40% subsidies. The American system...we knew with the farm bill that if it didn't pass, the price of milk was probably going to double to the consumer. There is obviously some sort of subsidy program that they have down there. The other thing is the predictable imports.

I mentioned yesterday when I had that glass of milk here and in that glass of milk a processor will fractionate those products down, whether it be here or Europe or in New Zealand or Australia and then they'll try to circumvent the rules of the imports to come into this country. The foundation of supply management is the predictability. As dairy farmers we know what a milking stool is and I think most of the people in this room know what a milking stool is. Years ago we had a lobby day and we would go out and give each and every MP a milking stool, but it was a card holder.

The thing about that milking stool is it tips over if the third leg or any of the legs are cut off. That's the analogy I want to use when it comes to the three pillars. The production management, the predictability of the imports, and the pricing mechanism that we establish under government regulation in this country give us a fair and stable price and no cost to any of the consumers through subsidy dollars to the federal government. As the TPP moves forward, we in this industry would like to see no further impact on dairy.

We would like to see, obviously, more access to other countries, but as I pointed out yesterday, we are in a trade deficit obviously. But if it means no access to gain our market and control of our market, it would probably be better to have a very stable market, because the stable market we have within Canada is good right now.

(1030) I want to stress the three points again. We want to keep our industry stable and strong. It doesn't cost the Canadian taxpayers any money. It doesn't cost the federal government any money. The farmers in this country, probably for the last 15 to 20 years, have never derived any subsidy dollars from the federal government. We derive our funding, our costs, our income through the marketplace. We're proud of that fact. There are not too many farmers in the world who can say that. We'd like to have that continue, and we want to grow our domestic market.

I pointed out yesterday, with the CETA agreement, that these people have access, the additional 16,000 tonnes, to get into a market that we've established, or we've tried to establish through advertising programs, through incentive programs, new development programs. There are programs that we have within the dairy industry whereby if somebody wants to start in the industry in the processing sector we give them a special quota to allow them to develop their new products, to get it online for a period of two or three years before.

We're helping people in this sector develop new markets, develop new products, and move forward. I want to close by saying that I really appreciate the fact that you allowed me to speak here. I really appreciate the fact that I'm speaking on behalf of our industry. This goes on record that we believe that our industry is a very strong and viable industry, it is a very prosperous industry, has no direct costs from the federal government. I think I can't stress that enough. The other thing is that supply management isn't what it was 25 years ago. We are constantly evolving.

We are evolving maybe slower than some people wish, but as I speak right now, in Ottawa right now, there are discussions taking place on new pricing mechanisms, on new ways of allocating quota. These things are happening all the time. Our industry is not standing still. It's maybe not moving forward fast enough for people, but it is not standing still. It is not an archaic system. Some of the MPs and the Minister of Agriculture clearly say that we have to modernize supply management. We are doing that.

We've consistently done that, maybe not as fast as people want, but I want to leave you with the note that we are moving forward. If the words “modernization of supply management” is the term that people are comfortable with, we are doing that today. Thank you very much.

(1035) The Chair : Thank you very much. We'll start our question and answer with Mr. Davies. The floor is yours for seven minutes. Mr. Don Davies (Vancouver Kingsway, NDP) : Mr. Van Keulen, Mr. Woo, thank you for being with us today. Welcome to the committee, Mr. Woo. First of all, I want to start by thanking you for the wonderful work and service you've done as president and CEO of the Asia Pacific Foundation of Canada. You've really contributed so much to Canada's policy, and I want to thank you on behalf of all parties. Mr. Woo, I want to start with you.

You have written that Asian countries feature prominently in the global markets action plan, and they will welcome Canada's primacy of economic development. But you've also written that the strengthening of economic ties with Asian countries will not come about just by sending trade missions to the region or signing FTAs. I will quote you now, it says: The fact that Canadian foreign policy goals are now defined largely in economic terms does not mean that the instruments for advancing those goals are of an exclusively commercial nature.

The role of the Canadian government has to be more than that of a chief marketing officer. Asian counterparts are also interested in political and security dialogue, scientific and technical cooperation, educational exchanges, and cultural diplomacy. I'm wondering if you have any specific suggestions for, I guess, pan-economic groups in which Canada can and should be taking

part in the Asia region. Mr. Yuen Pau Woo : Yes. Thank you for your comment, and thank you for reading my writing. It's good to know that somebody is. I make a distinction between having economic goals as part of our foreign policy objectives and coming up with tools to achieve those objectives that can go beyond economic instruments. It's understandable that we are driven largely by economic interests, and our Asian counterparts understand that. However, the way in which we achieve our economic objectives has to be done through a variety of measures.

For example, we need to have a very strong diplomatic presence and a strong political security presence in the region where our partners understand that we are there not simply for our economic benefit, but for the peace and security of the region and the advancement of development goals, particularly in the developing countries. A great example, I think, would be in the area of international education, where the government, of course, is making some moves to strengthen two-way movement of students.

This is not simply about a commercial initiative where we gain more dollars from foreign students who pay high fees at our Canadian schools. It is about building long-term relationships, institutional partnerships, research partnerships that will benefit both countries in the long term. On your specific question of taking

part in regional organizations, I think that it's part of the thinking that I have as well. There are a number of new regional fora in Asia, particularly the East Asia Summit, which is emerging as the premier organization for discussions on political security and economic issues. It's not a trade agreement. It does not have an ostensible commercial objective to it. But we should aspire to join it, because if we are not part of that club of decision-makers on the future of the region, we will be left out of decisions that will impact on our economic interests. I know the government is making some moves to join.

We should redouble our efforts and try to find a seat at that table and at other tables in Asia that, as I say, may not necessarily have an overt economic focus. Mr. Don Davies : Thank you. Now, domestically you've further written: Even if we view Asia principally as an economic opportunity for Canada, it is not clear that we currently have the wherewithal to tap into emerging opportunities across the region. This is especially so in the services sector, which is poised for rapid growth in the years ahead....

Selling services to Asian countries is fundamentally different from selling commodities or manufactured goods. It will require deep knowledge of domestic markets, and a level of political, social, and cultural awareness about Asia that is not widely available in Canada. ...the biggest challenge to long-term economic success in Asia is not what we do in Asia, but it is in what we do right here in Canada. Do you have any specific suggestions you can give this committee about how we can develop the capacity in Canada to take advantage of this?

(1040) Mr. Yuen Pau Woo : We need to build Asia competency in our school systems, both at the K-to-12 level and post-secondary, and we need to build it across the corporate sector. We need Canadians who have the skills, the experience, and the knowledge to be successful in Asia. That of course does mean teaching about Asia in the school system, but it's also about on-the-ground experiences, about placements in Asia. It's about corporations that reward staff that have Asia expertise.

It's about boards in major corporations that value having directors with knowledge, skills, and experience in that part of the world. Australia has set itself an objective, for example, within 10 years for every Australian student to have the opportunity to learn an Asian language through the school system—every single Australian student. They have also set an objective for a third of their board members in the corporate sector, of course, on a voluntary basis, to make sure that they have people on those boards who have direct Asia experience and knowledge. We don't have that in this country.

We don't have an appetite to do that. Unless we have the will and the instruments to build Asia skills, literacy, knowledge, expertise in this country, all our ambitions through trade agreements and through speeches and high-sounding advice from me and others will come to naught because we won't have the people to follow through. Mr. Don Davies : Perhaps I might ask you about state-owned enterprises. That's a specific feature that might characterize dealing with countries like Vietnam.

What special considerations, if any, should guide Canada's trade approach when dealing with countries that conduct business through SOEs? Mr. Yuen Pau Woo : First of all, countries with large SOEs in their economy are looking to rationalize and to divest of the state in those enterprises. They are looking for more efficient ways to run their economies, and over time we will see a diminishing share of the state in economies such as Vietnam and in China.

However, the SOEs are not going to go away, and in some sectors they are going to remain the dominant sector, the dominant player, both domestically and internationally. This is particularly true of the oil and gas sector, where SOEs, as many of you know, control about 80% of the proven reserves in the world. Under those circumstances we have to work with SOEs. We cannot treat them as an outlier. We cannot treat them as an anomaly in the system. They are a normal part of the system, and we need to come up with ways to work with them for Canadian interests.

We can regulate in the Canadian interests without discriminating against SOEs. Mr. Don Davies : Thank you. The Chair : Thank you very much. Mr. Cannan, you're next. Hon. Ron Cannan (Kelowna—Lake Country, CPC) : Thank you, Mr. Chair. Thanks again to our witnesses. Mr. Van Keulen, welcome back. Mr. Woo, it's great to have you. Last time, you were at our committee via video conference. We've come to your beautiful community.

As a British Columbian representing the interior riding of Kelowna—Lake Country, I appreciate the great work of your foundation, which is helping constituents in my riding as well as around the province, educating people about this most ambitious trade initiative being negotiated with the Asia-Pacific region. It's important for Canadian businesses to realize that we do not have a bilateral trade agreement with these countries that we're working with specifically, or the majority of them. Australia, for Campion Boats manufacturers, we're at a disadvantage. The U.S. has a bilateral with Australia.

I know it's important. It would only be 5%, but that's the bottom line, 5% off a major product such as a boat. It makes a big difference. Brunei, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, Vietnam—of course, the U.S. is the twelfth partner with Canada in the negotiations at the present time. You talked about the potential of China coming to the table.

It's important also to reinforce the magnitude of the ambitiousness of Prime Minister Harper's vision, with Minister Fast working as the trade minister on the CETA, which covers an area of about 500 million people with a GDP of $17 trillion, and the 792 million approximate population of the TPP partners with a $27.5 trillion GDP. If we're able to secure these agreements, Canada would be the only country in the world that would have a comprehensive trade agreement with 75% of the world's GDP. It's an incredible legacy that can come together.

I know it's very ambitious, and I understand that lots of discussion has to take place. Picking up on my colleague Mr. Davies' comments—I appreciate your foundation's work; I've read some of the work—you've made some excellent suggestions on how we can help the majority of Canadian businesses get engaged and take advantage of these trade agreements. As you know, British Columbia is working with the U.S., who is still our number one trading partner and biggest ally and will continue to be. But what are some of the ways your foundation is...? I looked online. You have some seminars coming up.

Maybe you could share how we can work together to educate British Columbians and Canadians about the opportunities that present themselves.

(1045) Mr. Yuen Pau Woo : If I could go to the point both of you have touched upon now, the importance of services, I think we are at an inflection point in Asian economies where growth is going to be driven increasingly not by investment and by exports but by domestic consumption. Economies such as China will be restructuring so that they provide not just higher GDP growth but a better quality of life for their citizens.

The way they do that is by increasing the share of income that goes to consumers rather than to corporations and by developing what you might call quality of life services and products in the economies, particularly in urban centres. Hence, growth is going to come increasingly from the services sector, and this is an area in which Canada, on the face of it, has a lot of expertise. However, we have not in the past paid much attention to services exports.

We've really been very fortunate to ride on the back of a commodities supercycle, exporting raw materials to Asia on high prices that have benefited this country very greatly. We are now at the end of the commodities supercycle. As Asia transitions to an economy that is driven more by domestic demand and by services, we will need a different way of succeeding in Asia. To sell services in Asia is not simply about putting something in a container and shipping it over. It's about understanding the market, understanding political, social, and cultural institutions. It's about being on the ground.

That's why I think the single biggest challenge for Canada is not necessarily negotiating more free trade agreements or sending more trade missions or making grandiose statements. It's about equipping Canadians with the skills, the knowledge, and the aspiration to be successful in Asia so they can get the job done. Putting stuff in a container and shipping it over is not going to be enough anymore. Asia wants much more sophisticated products and services, and we need to step up to that challenge. Hon. Ron Cannan : I agree. It's relationship-building and cultural education. I was commending your association.

I am looking at some of the upcoming sessions, even this month, as far as educating on the opportunities and the dynamics of TPP.... I know there's some reference to leaked documents. Don't comment on leaked documents, but could you share with us a little bit how you've been involved in the consultation to date with Minister Fast on the negotiations. Mr. Yuen Pau Woo : We work very closely with the ministry and with all interested parties. We've organized a number of events with Minister Fast and with the department, and I've taken

part in most of the post-negotiation debriefings that are held by the chief negotiator and her team. We have as much information as is available to us and other parties. The foundation is part of a regional network of researchers. It has counterparts in all the TPP economies that study the agreement and make recommendations. We look forward to getting more information as the negotiations advance so that the export community as well as the public feel confident that this is a deal that benefits all Canadians and all the parties involved. Hon.

Ron Cannan : I agree, open and transparent, and it has to go through and eventually be tabled and debated for a few more years before anything comes to fruition, I would imagine, before legislation. I have just one quick question, Mr. Van Keulen. I agree that industry wants strong, stable, predictable, rules-based policies in place. You mentioned that you want to have access to open markets. So when you're negotiating, what would be the benefits for other countries in doing business with Canada, specifically for the dairy industry? You want access to their industry.

In looking at reciprocities, is that something you'd be looking at from your association's perspective? Mr. Stan Van Keulen : I think the key is that there has to be a dollar in it. Obviously reciprocity on trade is a good thing. We can't have a garage sale whereby we're selling off our market without getting some benefit back by way of a profit. I think that's the key here right now. If you're going to have trade, there has to be balanced trade and it has to be done in a profitable manner.

(1050) The Chair : Thank you. Mr. Pacetti, the floor is yours. Mr. Massimo Pacetti : Thank you, Mr. Chair, and thank you to the witnesses for coming forward. I have just a quick question to Mr. Van Keulen before I get to Mr. Woo. You stated in your presentation that there's no cost to the taxpayer, yet yesterday you mentioned that Europe thinks your industry is subsidized. Am I correct? Mr. Stan Van Keulen : No, some people think we're subsidized because of supply management. Mr. Massimo Pacetti : Don't the Europeans think that the industry is subsidized? Mr.

Stan Van Keulen : No, if we sell products on an export market below our domestic price, they consider that a subsidy because we're using our domestic price to subsidize an export price. The WTO ruled against that. That's what I— Mr. Massimo Pacetti : So would that affect your industry in the TPP negotiations? That's what I'm getting at. Mr. Stan Van Keulen : My understanding is that is correct. Most of the countries.... Under our system of supply management, there are certain products that we can export but the moment we export them below our domestic price, they are then considered a domestic subsidy. Mr.

Massimo Pacetti : It'll hold true also for TPP in your opinion. Mr. Stan Van Keulen : My understanding is that's correct. Mr. Massimo Pacetti : Mr. Woo, I'll start with my last question first because you stated that we should be letting China into the negotiations for TPP. I don't know if I have an opinion on it but I guess it's part of the discussion. Should we not first ask certain things of China so that we are on a level playing field, or should we just say we'll let them trade with us and now let's trade on a free market without duties and subsidies or without duties and tariffs? Where do we start?

Can you expand on that a little more? Mr. Yuen Pau Woo : China has to go through the same process and hurdles in joining TPP that we went through and we went through a lot of hurdles with such a diverse group already in the membership including, as someone has pointed out, Vietnam, which is an even more tightly controlled economy. I think China understands well the kind of commitment it's going to have to make if it wants to join the TPP. Mr. Massimo Pacetti : Can you give me an example of what Canada had to do to join the TPP? Mr.

Yuen Pau Woo : We don't know what the behind-the-scenes discussions were but it took us—I can't remember now—14 months at least to get admission and a number of times we were pushed back. I would imagine we had to make undertakings to aspire to a very high level of liberalization, including in the agricultural sector. This is the same story with Japan as well, and Japan has come back a number of times recently to say they will aspire to a very high level of agricultural liberalization. Mr. Massimo Pacetti : In discussions with China what would you do? Would you ask them to join in and take their word for it?

It's a huge economy that you couldn't just flip on its head overnight. I don't even know how much time it would take to change their philosophy. What comes first? Do we wait for them, or is that up for discussion? Mr. Yuen Pau Woo : No, you look at the track record. The last 40 years have seen remarkable privatization and globalization in the Chinese economy. The Chinese economy in 1980 was 85% controlled by the state sector, today it's only 5%, and continuing in that— Mr. Massimo Pacetti : Twenty-five per cent? Mr. Yuen Pau Woo : Today it's only 5% controlled by the state.

State-led production in China is only about 5% of total production. It was the reverse in 1980. The Chinese government understands very well that if they want to move from a lower middle-income economy to a middle, or upper middle-income economy, they're going to have to liberalize even further. I think there is a realization that one way to do it is to create external pressure on itself, and the way to create that external pressure, within limits, is to join a trade agreement where it's foreign countries essentially putting restraints on your economy so that you have to open it up.

That's exactly the strategy they took when they entered the WTO. It was a very difficult decision they made because there was a lot of domestic opposition, but Zhu Rongji understood that by joining an international system and committing internationally to undertake reforms, such as opening up your manufacturing sector, you can use that as a cover if you will for domestic reforms much more easily than if you did it domestically.

(1055) Mr. Massimo Pacetti : Would you impose conditions on human rights and things other than commercial barriers or conditions? Mr. Yuen Pau Woo : No, because it's not part of the TPP. It would be unfair. This is what I mean by not trying to put special restraints on China. If in fact human rights have not been part of the discussion so far in the TPP, why would we do that to make a special exception of China? Mr. Massimo Pacetti : That's why I'm asking. Thank you. The Chair : Thank you very much. Mr. Hiebert, the floor is yours for seven minutes. Mr. Russ Hiebert : Thank you. Welcome back, Mr. Van Keulen.

You have given me the perception that the Canadian dairy industry in particular, the supply management system, is working well as long as we keep the competitors at the gate, so to speak. You highlighted yesterday the fact that you believe European farmers received about a 40% subsidy. Do you have any idea of what kind of subsidies New Zealand and Australian farmers get from their governments? Mr. Stan Van Keulen : No. Mr. Russ Hiebert : Do you know that they get any? Mr. Stan Van Keulen : I don't know. Mr. Russ Hiebert : Okay.

Without that information it's hard to say, but assuming that they don't get any, or even if they did get a bit, it baffles me that they are so eager to come to the Canadian market, despite the costs associated with transportation, and that your industry is afraid that Australian or New Zealand farmers might actually bring product to Canadians. Mr. Stan Van Keulen : There are more cows in New Zealand than I think there are people. Mr. Russ Hiebert : I know there are more sheep there. I'm not sure about cows. Mr. Stan Van Keulen : They're an exporting nation. Their business is exporting.

They will export to wherever they go. That industry is based and founded on that particular way of doing business. To put a container on a boat and move it, for them, I don't think costs that much money. They want it at our door. We give them access to our market already. Mr. Russ Hiebert : Mr. Woo, you've raised a number of really interesting points and I'll have to move through them quickly as I only have a few minutes. You made the comment that we should be teaching, like Australia, our students an Asian language.

But I'm also told that Asian countries, in particular China, are teaching their students English at a staggering rate. I don't know if this is true but I've heard that there are more English speakers in China than there are in Canada. If that's the case, if they're moving so close to this international language of commerce, is it that imperative that we teach Mandarin or other Asian languages? Mr. Yuen Pau Woo : There are more people learning English in China than there are people in England. Let me ask you something. It's very simple.

If you're competing with someone abroad and that person knows your language fluently and you don't know that person's language who has the advantage? To me it's dead simple. Mr. Russ Hiebert : If you had to choose a language, would you choose Mandarin? Mr. Yuen Pau Woo : Yes, I would, and let me be clear. I'm not saying that Mandarin should be mandatory. We already have official bilingualism. French is a very important language for Canadians to master, perhaps even before they master a third language, but the option should be presented.

When you think about Vancouver, just Vancouver alone, which is of course the most Asian city outside of Asia, we only have one French immersion high school, only one for all of Vancouver, which is ridiculous. Mr. Russ Hiebert : Which one are you referring to, because we have one in South Surrey as well. Mr. Yuen Pau Woo : Sir, I'm talking about the Vancouver school district. It's at Oak and 57th. Mr. Russ Hiebert : Okay, I'm going to move the topic along. You made the suggestion that we need to focus on services because the commodity supercycle is over.

Now, does that not make the assumption that the commodities that are needed to continue the manufacturing of goods, which even the Chinese will want, are no longer needed? Mr. Yuen Pau Woo : No, there will continue to be demand for coal, copper, zinc, and iron. Mr. Russ Hiebert : Steel?

(1100) Mr. Yuen Pau Woo : And steel. All of that, but China, as we all know, is moving from 12% growth to 7% growth. A lot of that reduction would be because there would be less investment in fiscal infrastructure, partly because they are overbuilt and because of exorbitant property prices. So that 7% growth is going to come increasingly from domestic demand, basically the consumption— Mr. Russ Hiebert : Of non-commodity-based products.... Mr. Yuen Pau Woo : —of non-commodity-based products. Exactly. Mr. Russ Hiebert : I know I'm almost out of time. We often speak of Asia, but that's really code for China.

Are there other Asian countries that we should be looking at, beyond China, that offer as great an opportunity to Canadian exports? Mr. Yuen Pau Woo : Yes, Japan is still very important, the largest economy in the world. We're negotiating a free trade agreement with them and we should try to conclude that as quickly as possible. India, of course, is on the radar as well. They're going through an election now and they will have to come up with some fresh reforms if they want to compete with China. The one we haven't talked about very much is Indonesia.

I would recommend that this committee perhaps pay some special attention to changes in Indonesia and why it's a very important market for us. Mr. Russ Hiebert : In terms of the, what is it, 200 million? Mr. Yuen Pau Woo : Yes, size, political weight, it's one of the G-20 countries. It has a very large domestic economy that insulates it from global downturns. So it's one of the targeted economies in the current taper crisis. Indonesia has the ability to grow even when the world is slowing because it has such a large domestic constituency and so much pent-up demand. Mr.

Russ Hiebert : It may be countercyclical to the rest of the world. Mr. Yuen Pau Woo : Not fully countercyclical, but it has buffers that other economies do not have. Mr. Russ Hiebert : Since I have still a few seconds left, I'm going to bring us back to your comments where you said we should watch IP e-commerce and state-owned enterprises. You kind of touched on state-owned enterprises in some of the questions, but when it comes to e-commerce and IP, will China respect IP? That's one question, and what about e-commerce? What should we be looking at? Mr.

Yuen Pau Woo : Well, I'm not an expert on all of those issues, but there are privacy issues, I think, and issues around the control of domain and location of service, and so on, that don't translate quite so easily into the traditional thinking around opening markets.

There are some very huge competitive advantages for economies that are first movers, either in IP, e-commerce, and so on, and I think there are arguments for the public good nature of information flows and of intellectual property that argue for a regime that allows less developed countries, including Canada, which is not always at the forefront of technological development, to benefit from those developments as well. I think of pharmaceuticals, for example.

The length of time before pharmaceuticals lose their copyright and can be turned into generics is a very important issue for Canada and especially for developing countries, and we should be sensitive to that. The Chair : Thank you very much. Madame Liu, the floor is yours for five minutes. Ms. Laurin Liu (Rivière-des-Mille-Îles, NDP) : Thank you, Mr. Chair. First of all, Mr. Woo, Sun nien fai lok . I know that we celebrated the Chinese new year recently, the 31st of January. I wish you a very happy and prosperous new year. Mr. Yuen Pau Woo : Thank you. Ms.

Laurin Liu : I'd like to begin by talking about what you mentioned, that China is not a part of this TPP. The Asian countries are part of the TPP. Right now I think the major country that is part of the TPP is Japan, and we know that Canada is currently undergoing trade negotiations with Japan as well as Korea—South Korea, obviously. Do you think that it should be a priority for Canada to concentrate more on negotiating a bilateral agreement with Japan, a strong economy, rather than being involved with a process of negotiating with the TPP? Mr.

Yuen Pau Woo : I'm told that the negotiations are taking place in parallel and that the bilateral talks are not being held back in any significant way because of TPP. That said, we're still in the very early stages in the negotiations with Japan. I would be very surprised if Japan plays all its cards bilaterally before it has played its cards on TPP. It would surprise me if we are able to conclude bilaterally with Japan before a TPP deal is concluded. Where the priority should lie in terms of closing the deal with Asia is South Korea. We've been at this now for, as I said, nine years.

The Americans concluded well before us. The Australians have now concluded. Our exporters, particularly in the agricultural sector, are at a significant competitive disadvantage. I think many of the issues have been resolved. I know there's opposition from the auto sector. We need some all-party support and some public expression of support for a deal that's in the national interest, so that we can close this deal with South Korea. Then we can say that we have one under our belt; we have one deal with Asia under our belt.

It would greatly increase our credibility and make it easier for us to close deals with other Asian economies.

(1105) Ms. Laurin Liu : You moreover raised concerns about IP and e-commerce that my colleague Mr. Hiebert mentioned in his line of questioning. Can you expand more on what we can be doing to make sure that Canada's e-commerce sector is competitive when faced with other international parties in the TPP? Mr. Yuen Pau Woo : Again, I don't have enough details about what has been negotiated, what the contested points are, but fundamentally it's this. We mustn't put in place provisions around e-commerce and IP that hinder trade rather than advance trade. The whole point is to advance trade.

If you're putting in place more restrictions on IP that make it more difficult for trade to take place, more difficult for innovation, more difficult for start-ups to take place, then I think you're running against the purpose of a free trade agreement. All you're doing is protecting the vested interests of the established players. What it boils down to is that Canada needs to focus on a made-in-Canada approach to intellectual property and e-commerce that's in Canadian interests and which values the importance of the free flow of ideas and the free flow of knowledge to the benefit of populations around the world.

Ms. Laurin Liu : Critics of the TPP have raised concerns surrounding possible necessary changes to the Canadian Copyright Act. I'm sure you're familiar with those critiques. What kinds of changes do you think will be required to the Canadian Copyright Act by the TPP? Mr. Yuen Pau Woo : I'm not in a position—I don't have enough knowledge on that topic to comment. Ms. Laurin Liu : Do you see these changes possibly based on what we know more or less around the TPP as being positive or negative for Canadian copyright law? Mr. Yuen Pau Woo : I don't have enough information to comment on that. Ms.

Laurin Liu : You mentioned also the fact that there are structural changes happening in China right now. Could you elaborate a little bit on what you meant by that? Mr. Yuen Pau Woo : Yes, they are looking to change the structure of demand, so it's less export and less investment-driven, and more consumer-driven. It will mean a redistribution of wealth from companies to individuals. It will mean liberalization of the financial sector and probably a rise in interest rates.

It will mean a whole new set of economic opportunities for Canada that we haven't yet even thought about, issues of professional service, architecture, engineering, education, and so on and so forth. The Chair : Thank you very much. Mr. Holder, you have five minutes. Mr. Ed Holder : Thank you, Mr. Chair. I have a quick question to you before I start and perhaps to the analyst. Any testimony we have from witnesses that are here today that relates to TPP, will that be extrapolated into the TPP report or do we need to ask those questions again to get them on the TPP record? The Chair : We're into the TPP report. Mr.

Ed Holder : I'm not sure I understand what you meant. If the question was asked yesterday, do we need to ask it again today to get it on the record or will the analyst extrapolate it? The Chair : It's seized by the committee. Yes, that's a good question. Ask it again if you're nervous about it, but if not we'll certainly try to incorporate it into the report. The Clerk of the Committee (Mr. Paul Cardegna) : From a research point of view, it would be worthwhile to ask it again, if only for the fact that people looking for information related to TPP won't think to look under yesterday's testimony.

That will be listed under CETA. The Chair : Yes, they might not look in the other one. Mr. Ed Holder : To be fair, that wasn't my question. I don't mean to possess the committee's time with this, but I could ask Mr. Van Keulen, who's a very wise person, several questions to get it back on the record today, but if it relates to TPP, the same kinds of things, why wouldn't we move it over to that as well if that's the purpose? Mr. Don Davies : Yes, Mr. Chairman, we would agree with that. It would give the analysts the flexibility to extract the testimony and put it in the appropriate place.

The Chair : Yes, I would assume it is, if seized by the committee. I think what the clerk was suggesting is that if somebody is looking for testimony under a TPP study, they may not find it if it was actually presented in the CETA study, that's all.

(1110) Mr. Ed Holder : I just presumed that will come from the report, but let me just work through this. The Chair: Fair enough. Mr. Ed Holder: Thank you, Chair. I'd like to thank our guests. Mr. Woo and Mr. Van Keulen, welcome back again. Mr. Van Keulen, isn't the elephant in the room with TPP on the issue of New Zealand and powdered milk? If you had to net it all down to your biggest concerns as it affects the dairy industry in Canada, would it be that? Mr. Stan Van Keulen : Repeat the question again. On the powdered milk, you said? Mr.

Ed Holder : It's the powdered milk issue, where I would presume New Zealand wants to export a considerable amount of powdered milk into Canada. Is that a concern for you? Mr. Stan Van Keulen : It would be one of the issues. It's not the big elephant in the room. We have a structural surplus, that's what it is. We have a rolling tonnage of powdered milk that we have to either use domestically or there is a certain amount of quota that we can export. Mr. Ed Holder : Last week we had the EU ambassador to Canada into Ottawa as one of our witnesses to the trade committee.

He spoke about how there will be unfettered access to cheeses from Canada into the entire EU. It seemed to give you some comfort yesterday. Are you still comfortable today? Mr. Stan Van Keulen : With the unfettered access? Mr. Ed Holder : To the European Union market.... I'm trying to get something on the record so that we have this. Just say yes, and I'll go on. Mr. Stan Van Keulen : No, I'm not going to just say yes. Mr. Ed Holder: Please, I don't want to put words in your mouth. Mr. Stan Van Keulen: So you want me to answer that?

The aspect of unfettered access into the EU is based on your submission that the ambassador said we had that. If that is true, that we do have unfettered access, then I will clearly state that if we have unfettered access that is profitable, then I have comfort in it. Mr. Ed Holder : We talked about a whole number of countries where Canada has established free trade agreements. I won't name them all right now. One of the things that we've been very clear on is that we've protected the supply management aspects up to this point.

Perhaps I could ask your opinion on that in terms of how the government has handled that to this point as it relates to the dairy industry. Mr. Stan Van Keulen : The government has handled it very well. Mr. Ed Holder : Okay. Thank you. Mr. Woo, if I might ask you, you talked about bilaterals, and I got the sense from what you said that it's multilaterals, if necessary, but not necessarily multilaterals. In other words, don't let the pursuit of a multilateral get in the way of a bilateral dialogue. Did I understand that correctly, and could you explain that a little bit, please? Mr. Yuen Pau Woo : Yes.

First of all, I wouldn't use the word “multilateral”. That's usually in reference to the WTO. Mr. Ed Holder : Okay, fair enough. Mr. Yuen Pau Woo : TPP is an example of what we call a— Mr. Ed Holder : What would you call that? Mr. Yuen Pau Woo : A mega-regional, that's the new term that's come up now. CETA, of course, is the first mega-regional, and the most prominent one. The next big one coming up is the TTIP, of course, between the EU and U.S. My point is that we don't go into free trade agreements, I think, for the sake of negotiating. There are lots of things that governments need to focus on.

Free trade agreements are a tool for improving economic welfare for Canadians and for the welfare of the region. From a strategic perspective, we want to do a number of things. One is to improve the efficiency of the economic system as a whole, and trade liberalization, I believe, does that. So there's value in liberalizing trade through multilaterals, mega-regionals, preferential bilateral agreements, and so on and so forth. However, from a competitive perspective, we only really benefit if we get a preferential agreement with a partner that others don't have an agreement with, right?

Then we have a margin of preference to sell into their market. Mr. Ed Holder : Based on that, you said, don't ignore and don't exclude China. Is it your view that it would be better for Canada and the current participants in the TPP to have that agreement in place before they approach China? Or should that be a part of the mix? What's your sense? Mr. Yuen Pau Woo : My sense is that, from a Canadian strategic perspective, we should try to get an agreement with China before other people do. Mr. Ed Holder : A bilateral? Mr. Yuen Pau Woo : A bilateral agreement.

The fact is that China has offered to negotiate with us; they haven't offered to negotiate with most other industrialized countries. They only have one deal with an industrialized country, and that's New Zealand. Mr. Ed Holder : I can't comment on whether we will do that or not. If that were or were not to happen, would it be strategically better for the current membership of the TPP to have their agreement in place before they approach China? If that were the choice, or if the other option were to bring China in as a full and willing partner straight away, what do you think is Canada's strategic interest?

Ignoring the bilateral comment that you indicated, what would be best...?

(1115) Mr. Yuen Pau Woo : I think it'd be better to bring them in earlier rather than later, for a couple of reasons. One is that the only way to leave them out until a deal has been concluded among the existing partners is to make a statement of distrust, basically that we don't want China to break into our club at this stage. What will likely precipitate is an alternative trade agreement that China will need, which already is in the works—it's called the Regional Comprehensive Economic Partnership, RCEP.

That creates the risk of another mega-regional agreement among only Asian countries that will potentially serve as a competitor, if you will, to the TPP and a fragmentation, I fear, of Asia-Pacific economic relations that will not be healthy for Canada or for the region as a whole. The Chair : Thank you. Time has gone. I'd like to ask one more question, it's kind of a follow-up, a general question. The President of the United States had been on record as wanting the TPP completed by end of last year—last month. Mexico has recently been in the news suggesting that end of April is a possibility.

From your perspective—and this goes after some of your answers with regard to China and their entry into the TPP—is that an overly optimistic timeline? Mr. Yuen Pau Woo : Absolutely. We heard Harry Reid say just a few days ago that he's not going to support fast-track authority. Without fast-track authority, I think our negotiator should be very careful about putting too many things on the table, because there's no guarantee the Americans can deliver on what they promise. This is why I go back to my very first point. We have no agreements in Asia, so our strategy should be to get one going somewhere.

It should be an all-of-the-above strategy. TPP is a very important part of it, but it's not the only game in town. Let's make sure we keep all our options open. The Chair : Thank you very much for your testimony, both of you. We certainly appreciate your time with us. With that, we'll suspend as we set up the next panel. (1115)

(1130) The Chair : We'll call the meeting back to order and have our members take their seats. We'll move right on to our next panellists. We have Rhonda Driediger from the British Columbia Agriculture Council. Thank you for being here. You have with you Ray Nickel as a representative. I understand you will be presenting. We also have Debra Etsell, executive director of the B.C. Blueberry Council. Thank you for being here. You will be presenting second. First of all, the floor is yours, Rhonda, and we look forward to your presentation. Ms.

Rhonda Driediger (Chair, British Columbia Agriculture Council) : Thank you. I apologize upfront that I speak extremely quickly, but everything is written down in case you need it. Good morning, and thank you for the opportunity to contribute to the TPP consultation process. Here's a bit of background about the B.C. Agriculture Council. We are the province's umbrella farm group, so commodities such as blueberries, strawberries, and dairy all belong to the BCAC as its umbrella group.

We're a council of commodity groups and through our members we represent 14,000 of the 20,000 B.C. farm families who in turn generate 96% of the farm-gate receipts in British Columbia. Agriculture is the third largest resource sector in the province, playing a significant and important role in the overall provincial economy. The farmers represented by BCAC include those focused on international export opportunities, as well as those focused on supplying the domestic market. We understand that trade is a complicated discussion, especially as it pertains to agriculture.

Our hope is that Canada will continue applying a balanced approach to agricultural trade negotiations. BCAC fully supports Canada's pursuit of bilateral and multilateral free trade agreements. We are also pleased with the assurances made by the federal government to continue supporting supply-managed commodities and defending our supply management systems in trade negotiations. Primary agriculture differs from other industrial sectors. Individual farmers, not large integrated corporations, are the main drivers of this industry.

We overcome diverse challenges to produce high-quality food for both domestic and international customers in a financially and environmentally sustainable manner. A lot of my points today will be echoed by the CFA, the Canadian Federation of Agriculture, but I'd just like to point out a few that pertain to British Columbia.

On basic trade policy goals, the BCAC supports the following general trade policy goals that apply to the TPP: working towards bilateral and regional trade agreements that strengthen trade ties with key customers for Canadian agriculture; securing outcomes that benefit all Canadian agriculture by maximizing export opportunities and ensuring trade rules that allow for the maintenance of an effective supply management system; eliminating all dumping and export subsidies in agriculture; preserving farmers' rights and government's ability to enable, design, and operate marketing boards and orderly marketing systems necessary for the stability and profitability of Canadian agriculture; and allowing for domestic programs to ensure the stability and profitability of Canadian agriculture.

I believe our safety net programs often come up on the table during these discussions, so we'd like those to be protected. We also support recognizing that agriculture has evolved differently between countries, resulting in each country having its own unique sensitivities; and ensuring that one commodity is not traded off to enhance the interests of another commodity, nor that agriculture is traded off in general for another industry sector. We get enough of that at home, so we don't want to see it internationally.

Trade negotiation strategy is of course what our negotiators are going to be developing, but one thing to remember in Canada is that we're not the only country with sensitivities. Some of these examples, as you have found out recently and have been dealing with, are the U.S. position on sugar, dairy, textiles, and other commodities; and New Zealand's strict sanitary and phytosanitary measures that restrict access, including for the importation of fresh and frozen pork and poultry, essentially making these products prohibited.

New Zealand has also made it clear it will not permit TPP disciplines on intellectual property that interfere with its pharmacare program. One issue we do have, especially with our organic producers, is reciprocal standards. It's not just organic, but it's how we define and how we standardize here in Canada that we would like respected. Canadian commodity groups have implemented numerous on-farm certification programs related to food safety, animal welfare, environmental measures, etc., to address regulatory requirements.

As these gate-to-plate programs increase the cost of doing business, Canada must ensure that in assessing equivalency, imports are produced under equivalent certification programs and regulatory requirements. One thing that we're also looking for in agriculture, for those of us who do a lot of direct marketing, is to have that marketing structure—I keep using the term respected, but not lost in the negotiations. There are a lot of different ways people sell all over the world...to actually not have any of that restricted. I know there will be a question coming on that, which Deb will answer.

(1135) I'm not sure if anyone has brought up a dispute settlement mechanism. We do have some domestically, but I don't think we have any internationally at the moment. That's very important. It will be an integral component to any well-functioning trade system. BCAC supports a more effective and transparent dispute settlement process that ensures a timely outcome and payment. As exporters we've run into non-tariff barriers in agriculture for decades. Something may not be written down, but something is underlying, especially for organic and for greenhouse. Again, it goes back to proper labelling.

The greenhouse sector right now is fighting with the term “greenhouse growing” for peppers and tomatoes because in some countries they're just putting shade cloth over top, field growing them, and then calling them greenhouse and asking for the additional premium. The proper labelling standards, including the labelling of country of origin, help ensure that consumers are provided with sound, factual information about the product they are purchasing. However, such labelling should not be disguised as a means to modify the conditions of competition between imported and domestically produced products. I believe Mr.

Woo also covered intellectual property rights in his presentation. We're also looking for trade and labour standards. Trade agreements must incorporate the recognition of basic human rights and labour standards as integral to the social fabric and economic development of a nation. In conclusion, the B.C. Agriculture Council supports Canada's pursuit of trade agreements that benefit all Canadian agriculture, maximize export opportunities, and allow for maintenance of an effective supply management system. We're looking forward to some questions. Thank you. The Chair : Thank you very much for your presentation.

Now, Debbie Etsell, the floor is yours. Ms. Debbie Etsell (Executive Director, B.C. Blueberry Council) : I'd like to thank you for this opportunity to give you a brief overview of the B.C. blueberry industry and our support for the Trans-Pacific Partnership. B.C. Blueberry Council represents close to 800 growers who produce 96% of all the highbush blueberries in Canada. We are the largest producing region in the world and growing at a steady rate. Production from the 2013 season is estimated to be approximately 120 million pounds, of which over half is exported outside Canada.

Blueberries are the number one fruit exported out of Canada at this time. The B.C. blueberry industry had initially exported produce, outside of domestic consumption, mostly to the United States of America, but has expanded to various global markets over the last 10 years, including several of the countries involved in the Trans-Pacific Partnership. In 2012 we exported 2.5 million kilograms to our second largest export partner, Japan, and 401,000 kilograms to Australia.

Currently, we ship processed blueberries to South Korea while waiting for Canada and South Korea to conclude negotiations for fresh market access. In 2013 the B.C. Blueberry Council extended our long-term international strategy to include the emerging markets of Malaysia, Vietnam, and Singapore due to the interests from those markets. One of the new challenges our industry has is the higher tariff rates compared to other blueberry producing countries. Prospective buyers comment that they see Canadian blueberries as a quality product, but the difference in cost due to these tariffs is prohibitive.

This has been very evident in South Korea where Canada was building some growth and it was coming along quite nicely. Canadian product was being recognized as one to look at, but when Chile and the U.S. reached their free trade agreements, our sales plummeted due to a 30% to 37% difference in tariffs. In closing, the B.C. Blueberry Council supports the negotiations of the Trans-Pacific Partnership to help sustain our industry to be a healthy Canadian trade partner in the future. Thank you.

(1140) The Chair : Thank you very much. We'll move to questions and answers. Mr. Sandhu, you have seven minutes. Mr. Jasbir Sandhu : Thank you very much. Welcome to the committee and thank you for being here this morning. I picked blueberries back in the eighties and I eat blueberries every morning, so we buy about 200 to 250 pounds a year. I know it's an excellent source of a lot of nutritional stuff that we should be eating, so I'm fully supportive of the blueberry industry in the Fraser Valley. The TPP talks began back in 2005 and the negotiations started in 2008.

Canada did not enter the talks until 2012 and by that time we'd had 14 rounds of negotiations and part of the conditions for us to get in was that those rounds had been negotiated. We wouldn't be opening them up; they're set in place. Are you concerned that we weren't at the table for those 14 rounds? Ms. Rhonda Driediger : You know, there's nothing we can do about the past. I think what we're concerned about is moving forward, especially for our exporting commodities, and moving forward with what we can change. Ms. Debbie Etsell : I think the EU agreement was a huge step forward.

I see the concern that some people have had, but the current environment for trade negotiations for Canada, the program that's in place right now is one of the most ambitious I've seen for any of the countries. So we're v