EVIDENCE

Standing Committee on International Trade NUMBER 033 1st SESSION 42nd PARLIAMENT Tuesday, September 27, 2016 Le mardi 27 septembre 2016 Standing Committee on International Trade CANADA [Recorded by Electronic Apparatus] EVIDENCE September 27, 2016 Committee Edited Evidence * Table of Contents * Number 033 (Official Version) Official Report * Table of Contents * Number 033 (Official Version) Témoignages * Table des matières * Numéro 033 (Version officielle) 33 27 09 2016 2016/09/27 09:05:00 House of Commons Comité permanent du commerce international Standing Committee on International Trade CIIT Chair The Honourable Mark Eyking 42 1

(0905) [ English ]

The Chair (Hon. Mark Eyking (Sydney—Victoria, Lib.)) :

Good morning, everybody. Welcome to the House of Commons international trade committee. We have been very busy since the start of this session. Of course, our main issue right now is the TPP, but our committee deals with other trade issues as well. We are finishing up on the European trade agreement, but we also have many other issues, especially with the United States. We have softwood lumber and a couple of agricultural issues. The dairy and chicken industries have issues with the States. Our committee is fairly busy, but the TPP is our main focus. My name is Mark Eyking. I am the chair of our committee.

We have members from all across the country. We don't have the full committee here, but we have a good representation. We have Ms. Ramsey and Mr. Van Kesteren from southern Ontario; Mr. Ritz is from Saskatchewan; Ms. Ludwig is from New Brunswick; Madame Lapointe is from Quebec; and we have Mr. Dhaliwal from British Columbia. We have a good representation across Canada. We landed in your beautiful province last night, and we took a bus ride through, which was nice. It is beautiful country here. I have been here many times, being from Cape Breton and a farmer.

You are blessed with your resources and the people you have. We got to taste some of your stuff last night. We had lobster and potatoes, so it was a really good start to our leg here. We have gone through six provinces so far—seven now. We finished New Brunswick yesterday. We are going to do Atlantic Canada the rest of the week. We are going to Newfoundland and Nova Scotia. We have had video conferences with the territories. We have over 125 briefs, and we have had over 260 witnesses. We are doing a couple of things a little differently from many committees.

We are accepting emails from average Canadians on what they think of the TPP. Right now we have over 20,000 emails. We are also doing open mikes in each meeting, where we are hearing a lot from Canadians across the country. October will wrap up our consultation process, and in November and December we will be putting our report together. After that, it will be presented in the House of Commons. Thank you for coming. Everybody's input will be reflected in the report we do. As you could see last night if you watched the debate in the U.S., the TPP came right up there. We are going to do our

part in Canada to make sure we have a good report. We are also watching very closely what they are doing down there, because it has a reflection on where we go from here. We have farmers, or representatives of the farmers, right off the bat here this morning. I am a vegetable farmer from Cape Breton, so I know many of the farmers from P.E.I. I went to agricultural college with many of them. They are good bunch to hang out with. Without further ado, we are going to start. With us this morning we have the Dairy Farmers of P.E.I., the National Farmers Union, and the P.E.I. Federation of Agriculture.

We usually try to keep each group to five minutes. If it gets to be over five minutes, I will put my light on or give a reminder, and you can wrap up. Then we will open dialogue with the MPs. This format has gone quite well, and everybody seems to get in their five cents' worth. Without further ado, we are going to start with the Dairy Farmers of Prince Edward Island. We have Mr. Douglas Thompson and Mr. Ronald Maynard. Whoever wants to go, go ahead, sir.

Mr. Ronald Maynard (Director and Corporate Secretary, Dairy Farmers of Prince Edward Island) :

Thank you very much. My name is Ron Maynard. I am a dairy farmer from Prince Edward Island, and I'm the secretary of the Dairy Farmers of Prince Edward Island. The Dairy Farmers of Prince Edward Island is pleased to appear in front of the committee. It is important to emphasize that the Canadian dairy sector makes a huge contribution to the Canadian economy. It contributes $19.9 billion to the GDP and $3.8 billion in taxes every year. It sustains 221,000 permanent full-time jobs. Dairy is either the top or the second in seven of the 10 agricultural provinces. It is second in Prince Edward Island only to potatoes.

Furthermore, unlike other jurisdictions where farmers' income is heavily subsidized, Canadian dairy farmers receive no direct subsidies and derive their income from the marketplace, a marketplace that would be further diminished by access granted in both the CETA and the TPP agreements. According to initial government estimates, the sum of access granted was at 3.25%. After running some figures, we think it will probably be closer to 4%.

The milk displacement of this agreement will never be produced in Canada and will result in perpetual loss of revenue of as much as $246 million to our farmers and the Canadian economy. Furthermore, these numbers do not take into account the impact of the CETA. To secure the CETA deal, Canada offered as much as 2% access to the Canadian dairy market as was granted to the European Union. The access granted in this agreement will allow the EU to ship an additional 16,000 tonnes of cheese, an additional 17,000 tonnes of industrial cheese to Canada.

The expropriation of the Canadian cheese market granted under CETA amounts to a loss of revenue to dairy farmers to as much as $116 million in sales going into cheese processing annually in perpetuity. Unfortunately, the combined effect of CETA and TPP will seriously impact Canadian dairy farmers' bottom line year after year. This loss cannot be substituted through exports. As a matter of fact, only 9% of dairy production is traded in the world. Dairy is mostly produced domestically and for local needs.

While we are working on strategies to take advantage of some export opportunities, they remain limited as a result of the WTO panel in 2002, which essentially concluded that export sales at below domestic prices constitute an export subsidy.

(0910) Mr. Douglas Thompson (General Manager, Dairy Farmers of Prince Edward Island) :

In a similar manner to CETA, TRQ administration is very important to ensure these products are imported in a manner that is coherent with supply management and which helps preserve the stability of the Canadian marketplace for milk and dairy products. This is particularly true for butter since the agreement will prevent the Canadian Dairy Commission from importing the TPP butter TRQ as it currently does for the WTO TRQ. Clarification is needed about who will be able to import as well as the role the CDC can play to ensure that the impacts of the agreement are limited.

While we are pleased with Canada's compositional standards for cheese were preserved in the TPP agreement, we do have some concerns with respect to whether or not Canadian regulations and standards will be applied to imported goods. The growth hormone rBST, for example, is banned in Canada but remains in use in other countries. In addition, some of the labelling requirements for sugar, sodium, and trans fat content mentioned in the Minister of Health's mandate letter are different from country to country.

These have important implications for Canadian businesses, which could be placed at a competitive disadvantage if importers do not face the same regulations. It would also create confusion for Canadian consumers who might struggle with products not made to the higher Canadian standards.

Mr. Ronald Maynard :

After the TPP negotiations were concluded in October 2015, in order to ensure no negative impact on Canadian dairy farmers as a combined result of CETA and TPP.... On compensation for supply management farmers for their losses as a result of TPP, the Government of Canada announced a multiple mitigation measure and a $4.3-billion compensation package to be delivered over 15 years.

It is important to keep in mind that, although the original $4.3 billion, 15-year compensation represented a significant sum, this is a government investment in all of the supply management sectors—chickens, eggs, turkey, hatching eggs, and dairy—to mitigate the CETA and TPP deals. At the time of the announcement, while the government specified that the entirety of the CETA portion of the $4.3 billion was meant for dairy, the government did not specifically say how much of the TPP portion of the package was destined to each of the supply management commodities.

After announcing their intent to consult with the dairy sector on CETA compensation within 30 days in May 2016, the government requested that the Dairy Farmers of Canada submit a framework for compensation for CETA to the Minister of International Trade and Minister of Agriculture, which was done on May 18. To date, the government has still not committed or offered any feedback from the proposal of the CETA package.

In addition to awaiting a commitment on the proposed CETA compensation, the DFPEI and our partners at DFC continue to expect a package geared specifically toward mitigating the effects of TPP, should it come into effect. The $4.3 billion package that was initially proposed to supply management remains a minimum expected of a combined CETA and TPP package. In conclusion, DFPEI, along with its partners at DFC, has never opposed Canadian trade strategy as long as there is no negative impact to dairy farmers. Our position is simple: a dairy farmer should not have to pay the price for our nation's trade agreements.

While we would prefer not to have additional market access in the dairy sector conceded in the TPP agreement, we recognize that the government fought hard against other countries' demands and pledged to lessen the burden with mitigation measures and a compensation package. The government chose to make concessions on dairy to secure a TPP trade agreement for Canada. The compensation to dairy farmers' revenue lost was part of the compensation the Canadian government was willing to make.

Mr. Douglas Thompson: There's a couple of things on Prince Edward Island—

The Chair :

I'm sorry, you're well over time. If you don't mind, could you wrap it up?

Mr. Ronald Maynard :

That's basically the bottom line. The other information is that we have 168 dairy farms here on Prince Edward Island. We're talking about losing on average 74 cows. What this will mean is that we have 10 farms that will be out of business because of the loss of milk sales on Prince Edward Island, so that's 10 out of 168. That's our bottom line. The other aspect of it is that the 17,000 tonnes that's coming in will more than likely be fine cheese. On Prince Edward Island here, our major processor is a cheese processor.

Their major product is fine cheeses, basically havarti and feta, so it may affect them to a greater extent than other processors in other places. This is a co-op owned by the producers on Prince Edward Island. Thank you very much for your time.

(0915) The Chair :

Thank you to the Dairy Farmers of Prince Edward Island for that briefing. We're going to move on to Mr. Phelan of the National Farmers Union. Go ahead, sir.

Mr. Reg Phelan (Regional Coordinator for Region 1 and National Board Member, National Farmers Union) :

Thank you. As was mentioned, I'm with the National Farmers Union. I'm the regional coordinator for the Maritimes and a national board member. Doug Campbell was supposed to be here with me. Doug's a dairy farmer from the western part of the province. He's likely delayed. It's not often we have traffic jams in P.E.I., but I ran into one myself this morning getting here. There was an accident on the Hillsborough Bridge and they were saying there were a few others around, too. Hopefully, he'll be along shortly.

The National Farmers Union opposes the Trans-Pacific Partnership agreement and recommends it not be ratified by Canada. Our comments will focus on the damage the TPP would do to Canadian supply management systems, particularly for dairy; the harm its procurement rules would do to local food system development; its lack of benefit to other aspects of agriculture; and the unacceptable restriction on sovereignty of democratically elected governments that would result from TPP investor-state dispute settlement mechanisms.

Turning to the TPP and supply management, supply management rests on three pillars: production disciplines, import controls, and cost of production pricing. All three are interlocked, so that weakening one pillar weakens the whole system. In the first five years of the TPP agreement, the other 11 TPP countries would gain tariff-free access to 3.5% of the current Canadian dairy market, 2.3% for eggs, 2.1% for chicken, and percentages for turkey and broiler hatch chickens also. In subsequent years, there's also provision where tariff-free access to these markets would increase.

The governments of TPP members United States, New Zealand, and Australia have embraced an export-oriented approach to dairy which has resulted in extensive losses for their farmers as world milk prices fell drastically. Instead of disciplining their members to match demand, these countries aim to sell more milk to pry open Canadian markets. However, this will not solve their problem. Selling more at prices below the cost of production would simply increase the volume of losses, deepen debts, and push farmers out of business.

For European farmers now, I think their price is half the price realized by Canadian farmers, so the pressure is on internationally. Canada's TPP side letter with Australia says:

Canada confirms that Australian dairy products, including those imported under HS

Chapter 3504 such as milk protein concentrates, can be utilised in dairy processing in Canada to the fullest extent possible, including in cheesemaking.

Milk protein concentrate imports are highly controversial and are used by processors to replace domestically produced milk. The TPP agreement would require 80% of the fluid milk imports to be processed in Canada. Canada's side letter with the United States commits both countries to immediately be assessed the equivalency of each other's pasteurized fluid milk safety regulations, with assessment to be done by the end of 2017.

Determination of equivalency would open the door to U.S.-produced fluid milk being processed in Canada, even though U.S. regulations allow doubling the somatic cell count, a key indicator of quality and herd health, and of course we don't have BST in our milk here either. The text of the TPP together with those two side letters would deny Canadian farmers full access to our domestic dairy market and transfer a significant portion to non-Canadian producers. Canadian dairy consumption is growing slowly because changing tastes and aging demographics have resulted in reduced per capita consumption of dairy products.

TPP market concessions add on to those given away previously through the World Trade Organization and ratifying the CETA. Each deal chips away at Canadian farmers' share of our domestic market by increasing the amount of tariff-free imports allowed. The brunt of this market loss in our supply-managed sectors will be felt by young people who aspire to become dairy, egg, chicken, and turkey farmers. Without the market to support new entrants, they will be denied the opportunity. Some retirement-age farmers may be willing to take a payout in compensation for TPP-related losses.

The National Farmers Union rejects that option because of injustice to future generations of farmers.

(0920) The TPP local procurement rules mean governments and public agencies could not implement programs to purchase local products as a way to support the vitality of local agriculture. If ratified, the TPP, like CETA, would prevent governments from putting local content requirements into procurement contracts. It would require all governments to use a tendering system to give corporations in TPP countries an equal chance to supply these goods and services. If foreign companies are the successful bidders, the jobs, profits, and multiplier effects from filling those contracts would occur outside of Canada.

The Chair :

Excuse me, could you wrap up, sir?

Mr. Reg Phelan :

Okay. Procurement rules unfairly pit locally owned competitive companies against large corporations. We think there are very clear conflicts between a lot of what was offered, particularly in the ISDS and climate change in Canada. Canada has signed on to the Paris agreement, and we've made a commitment to reduce greenhouse gas emissions to prevent global temperatures from rising. We think the TPP would allow corporations to sue governments for compensation for loss of future profit. I think we need to address climate change, and TPP is going to make this quite difficult.

Trade deals like the TPP are superficially about trade. They are ultimately designed to limited the authority of national governments over their own economies, and to expand the scope of power of multinational corporations. These deals contain ratchet mechanisms, such as the investor-state mechanism, that make it difficult, if not impossible, for countries to roll back concessions to corporations and reclaim democratic control. Placing these powers into corporate hands by ratifying the TPP would be anti-democratic and contrary to the interests of Canadians, including future generations. Thank you.

The Chair :

Thank you, sir. We're going to move on to Mr. Godfrey and Ms. Robinson from the P.E.I. Federation of Agriculture. You have five minutes.

Ms. Mary Robinson (President, Prince Edward Island Federation of Agriculture) :

Good morning. My name is Mary Robinson, and I am a member of the sixth generation of my family to farm here on Prince Edward Island. We farm potatoes, soybeans, grain, and hay. I'm also currently the president of the P.E.I. Federation of Agriculture. With me today is Robert Godfrey, our executive director. We want to thank you for this opportunity to present today here in Charlottetown. We understand this committee has been meeting with folks in cities all across Canada to hear the issues on this topic, and we appreciate being included in the effort.

The PEIFA is the province's largest general farm organization, representing the interests of 80% to 85% of farms across the province. We have approximately 600 farm members, as well as 15 different commodity organizations, ranging from cattle and dairy producers, to potato and strawberry growers, to fur breeders and honey producers. We have great diversity, and with this great diversity in membership comes diversity in the context of trade agreements. We represent both offensive and defensive interests, much like the federal Government of Canada.

Mr. Robert Godfrey (Executive Director, Prince Edward Island Federation of Agriculture) :

The PEIFA would like to thank the negotiators for pursuing Canada's interests for both exporter and supply-managed sectors. We understand the pressures they faced throughout the negotiations. The PEIFA is supportive of the outcome of the Trans-Pacific Partnership. Global Affairs Canada's economic impact report, released earlier this month, painted a picture that illustrated the importance of this agreement, an estimated gain of $4.3 billion to Canada's GDP. It also pointed to the potential loss of $5.3 billion if this agreement goes ahead without Canada.

It presents an opportunity for Canada as well as an opportunity for our farm community. The job now is for government to help in ensuring there are real market gains for our exporters. It is also important that the government commit to a compensation package for any losses that our supply-managed sectors may incur as a result of this agreement. This agreement will affect our supply-managed commodities. We will leave much of this to our colleagues, the Dairy Farmers of P.E.I., but we certainly want to echo their concerns.

When it comes to trade, the PEIFA has always been supportive of the supply-managed commodities' position: trade is essential for the Canadian economy, but it should be pursued in a way that provides no negative impacts to supply-managed farms. They should not have to pay the price for a nation's trade agreements. It's that simple. You will recall that a compensation package was committed to last October, as Ron outlined a few minutes ago. The PEIFA asks that this government commit to do the same.

The compensation of supply-managed farmers for revenues lost is part of the compromise the Canadian government was willing to make. The supply-managed sector estimates that the sum of access, and therefore the loss of potential revenue, will be substantial. The dairy industry, one of our largest members and one of the largest of agricultural sectors in P.E.I., estimates a Canadian-wide decline in the economy of $246 million per year. Chicken, eggs, and turkey are also estimating significant losses of revenue with the implementation of the TPP.

These displacements of products will be filled by foreign farm operators and will represent real losses at the farm gates of island supply-managed farms. We would hope that an announcement of this package will be forthcoming soon. In addition, it promised to tighten up the many leaks in the current import regime for supply-managed products. In many cases, these loopholes allow almost as many imports of supply-managed products as do the current TRQs. Our supply-managed sectors would certainly benefit from a more robust system that limits imports to the intended limits.

(0925) Ms. Mary Robinson :

On the export side, the real gain for Canada is the equal footing in the Japanese markets we will have with our competitors from the U.S., Australia, and Mexico. However, these gains only come about if Canada is a signatory to the TPP, as Australia already has a free trade agreement with Japan. As you know, if Canada does not ratify the TPP, these gains will be lost to the Australians. The PEIFA is hearing reports from the U.S. suggesting that Congress wants to amend some of the provisions of the TPP or to introduce other legislation that would alter the TPP.

This is not to mention the rhetoric coming out of the presidential election, where both candidates have publicly opposed the current version of the agreement. It's important for us to remember that often the devil is in the details. Phytosanitary issues can act, and have acted, as a non-tariff barrier for agricultural products. The P.E.I. potato industry, our economy's largest agricultural economic contributor, is especially attuned to this. The PEIFA cautions the Canadian government to keep this in mind as the process moves forward.

We ask that the Canadian government remain vigilant throughout the ratification process of the 12 TPP countries, ensuring that no changes are made that would undermine Canada's interests, and specifically those interests related to the ag sector. Now that Canada has successfully negotiated trade agreements with the EU and the TPP, the PEIFA is advocating that government sit down with industry and develop an overarching export strategy that will identify what is needed for Canadian agriculture, including Prince Edward Island farmers, to take full advantage of these trade agreements.

Finally, we want to assure you that the PEIFA and our national partner the Canadian Federation of Agriculture are ready to work in collaboration and partnership with you and our government to further the interests of Canadian farmers. Thank you for your time.

The Chair :

Thank you to all presenters. We're going to start off the dialogue with the MPs. We'll begin with the Conservatives. Mr. Ritz, you have the floor.

Hon. Gerry Ritz (Battlefords—Lloydminster, CPC) :

Thank you, ladies and gentlemen, for your presentations. It's good to reacquaint myself with a number of you I have met over the years. A six-generation farm, Mary, that's fantastic. Keep it going another six; certainly, the ability is there. There's a hungry world, and of course, they all want more Canada. They recognize the great job you do as farmers, and that our processors do in delivering that good, safe quality food product. Non-tariff trade barriers are always a huge impediment to the stability and predictability of trade corridors.

There's been a lot of fuss made that only six chapters of the TPP speak to tariffs, and then there are a lot of other chapters that would fall under that line of non-tariff trade barriers. There are chapters on standards for food safety, so that what's coming into Canada is done at the same standard as ours, not coming in with lesser quality. We began that work a number of years ago, with the beyond the border initiative with the U.S., which made back and forth inputs, veterinary drugs and so on, so much more affordable and accessible in a timely way.

Then, of course, there are labour and environmental standards to make sure that other countries rise to Canadian standards, but not bring us to theirs. It's a very comprehensive trade agreement. Yes, there is give-and-take for the farm sector. My question for you would be on the point you made. In the U.S. right now with the campaign going on, there's a lot of rhetoric. If the U.S. doesn't ratify it, should Canada continue to push to be a part of the other 11 countries in the TPP?

(0930) Mr. Robert Godfrey :

I think we have to work very closely in collaboration with our largest trading partner. I think the idea that the U.S. will walk away altogether is.... I don't know if I want to say it's unlikely, but it depends on who wins, I guess. This is all pure speculation. I would agree with you, that they are our largest trading partner by far, and we would have to work very closely with them. To ratify the agreement, you need six of the signatories to ratify it and that represents—

Hon. Gerry Ritz :

It represents 85%.

Mr. Robert Godfrey :

—85% of GDP. If the U.S. does not ratify it, that would be a significant hit if that actually happens.

Hon. Gerry Ritz :

There's no stopping the other 11 countries from sitting down and agreeing that that will be set aside and they can move forward. It could be done. I've had those discussions.

Mr. Ronald Maynard :

Right. What I would recommend in that case is to work with the U.S. If the U.S. walked away, I would work with the U.S. on that and I'd probably reignite our FTA discussions with Japan. I think that would put pressure on the other 10 signatories to take a harder look at what's going on and I'd go from there.

Hon. Gerry Ritz :

Yes, I don't disagree with you on that. I'm a little more bullish though, on the fact that we need diversity in our trade portfolio, just as you do in investments. You mentioned the different crops, Mary, and that's why you don't put all your eggs in one basket, literally. That's a terrible cliché, but it's true. I'm very bullish that we should move ahead with the trade agreements that benefit Canada overall, absolutely, but at the end of the day, I think that it's very important we grow into that Pacific Rim market, because that's where the next move will be.

Over to the Dairy Farmers, gentlemen, thank you for the great work that you do across Canada. There's a little misinformation in some of the stuff that you were talking about. You talked in terms of CETA being 16,000 tonnes and 17,000 tonnes. I don't know where you got those numbers.

Mr. Ronald Maynard :

I'm sorry, that's 1,700 tonnes of industrial cheese and 16,000 tonnes of fine cheese.

Hon. Gerry Ritz :

Yes, I was involved in the numbers. Those are static numbers. There's no indexing of that. That's a finite number, so 20 years from now, that's still what they get, and at the same time as we grow our market, there's the ability to absorb that cheese. There's no definition that says it's all going to be fine cheese. The buyers and sellers will decide on what the market will take in. I'm also extremely proud of the fact that Canadian cheese makers go to the European shows and win awards. They are starting to develop that marketplace, as well as exporting their cheese into that market.

There are offsets that are happening just at the market level. Cheese competition standards was a huge win. That was in one of the chapters that was supposedly locked and loaded. We couldn't go back into it. We did. We were able to go back into all of those chapters and work with what was in the best interest of Canada. There are two other...well, there are more than two, but the two that are most prevalent trade irritants are diafiltered milk and spent fowl. There is work being done on that. We've had some hearings. I know Minister MacAulay is trying to get up to speed on that.

The point that I made in committee the other day is that the people sitting with the officials are already up to speed. They know what needs to be done in order to change those. It amazes me that other countries can use those tariff loopholes, if you will, on exports on the WTO agreements, and we can't as a country.

The Chair :

Excuse me, Mr. Ritz, your time is up. I know you're on a roll, but we have to move to the Liberals. Maybe we can get some more in later on. We're going to move to Ms. Ludwig.

Ms. Karen Ludwig (New Brunswick Southwest, Lib.) :

Good morning. Thank you very much for your presentations. Your comments and concerns and opportunities definitely tie in with many of the other consultations that we've had across the country, and in particular, a meeting with the New Brunswick contacts yesterday. To what extent have P.E.I. organizations been previously involved with consultations in regard to the TPP? It's an open question for all of you.

(0935) Mr. Ronald Maynard :

We've worked through our national organization, the Dairy Farmers of Canada, of course, which has been very involved. Mr. Ritz has seen our faces a number of times in his former portfolio. We've been continuing to work with the present government on an ongoing basis. That's a national organization, so we're members of that organization.

Mr. Reg Phelan :

Yes, we've worked nationally. I think we made presentations to this committee before, in western Canada. We're also quite involved here in the other trade.... We're also part of a trade justice group in P.E.I., in which there are quite a few organizations involved. We've also been involved in forums on trade issues. We've been trying to educate people about it and hear what the issues are. It's an ongoing debate here.

Ms. Karen Ludwig :

Ms. Robinson and Mr. Godfrey.

Ms. Mary Robinson :

Our input has been at the Canadian federation level. In terms of direct contribution from the P.E.I. federation to the federal government, this is our first.

Ms. Karen Ludwig :

In terms of our consultations, what we've been hearing is certainly very important, because we're hearing from coast to coast to coast. If there is ever an opportunity for this to be reopened for changes, we certainly have gathered significant input from across the country. We've heard comments from witnesses regarding innovation, identifying new markets, trade training, the concerns about export, and we've heard concerns about Canadian sovereignty, climate change, and human rights. My second question is for the Dairy Farmers. Looking forward in helping mitigate risk, can you tell me the situation with your milk-processing plant in Sussex?

Mr. Ronald Maynard :

The processing plant in Sussex is Dairytown. It's a powder plant. It's 50 years old. It is the plant of last resort in the Atlantic provinces. It is past its prime, of course, and we need a new plant to handle the surplus milk that we have at certain times of the year, as well as ongoing opportunities. Dairy is more and more an ingredient base. We produce milk, but protein and fat and lactose and many other constituents have now.... Milk is now “mined”, as they say. We need a plant that will produce that in the Atlantic provinces, so we can market our product to what the customer is looking for.

Assistance would be helpful in convincing the processor to move to building a new plant in the Atlantic provinces.

Ms. Karen Ludwig :

Is there any product adaptation being done in the dairy sector here in P.E.I., or even in the Atlantic region, to adapt to new markets for export?

Mr. Ronald Maynard :

What I've just said is that the opportunity there is in the ingredients. Mr. Ritz talked about opportunities as far as the cheese goes. Cheese is our main product here on Prince Edward Island, and we are looking at opportunities in that market for specialty cheese. There's also the artisan cheese. There are a couple here on Prince Edward Island that have started. They're small. They probably will not be export people, but direct marketers. That's the innovation that's on Prince Edward Island.

Ms. Karen Ludwig :

My next question is regarding succession planning. In terms of the agricultural sector as a whole here in P.E.I.—

The Chair :

I'm sorry, you only have five seconds left, so I don't think it's going to be fair to the witness to throw in that question. Maybe we'll get around to it. We're going to move to the NDP now. Ms. Ramsey, you have the floor for five minutes.

Ms. Tracey Ramsey (Essex, NDP) :

Thank you so much for your presentations. I think you've mapped out very well that this trade agreement has a huge price to pay for dairy. One of the first presenters that we had at committee was the Canadian Dairy Association. To me, it's astonishing that we're talking about opening up our dairy market to potentially huge losses that the $4.3 billion won't sustain past 15 years with the loss of family farms. I'm from a rural riding. I understand the impact of that. I think most Canadians would be shocked to know that this is what is being discussed in the Trans-Pacific Partnership.

I want to speak to something Mr. Godfrey said about the economic impact study. The $4.3 billion that's being predicted by the government currently is over 24 years. If they give the $4.3 billion over 15 years to dairy, we're in a loss. We have been pushing very hard on the government to come forward with whether they're going to honour the previous Conservative amount that was offered to dairy farmers with the understanding that that's not enough to sustain the industry going into the future.

These are dairy farms, I can assume, like mine in my riding, that have been here for hundreds of years, a hundred-plus years, as long as Confederation or before, as we learned happened here in P.E.I. There is a great price to pay in supply management in our agricultural sector for access to what appears to be one market, Japan. We're entering into this agreement where we'll see incredible losses in all of our communities that will ripple out. I want to ask you how losing 10 farms in a province the size of P.E.I. would impact your community. What would that look like?

I know spin-off jobs exist in my five municipalities that are based on farming. It would devastate my region to lose 10 farms.

(0940) Mr. Ronald Maynard :

Any time that you take jobs from a rural economy, it has a dramatic effect. There's not another job. You're not in downtown Toronto where there's probably another job to be had. If the job in the dairy farm is gone, the people are gone also. It has a ripple effect most certainly on the economy.

Ms. Tracey Ramsey :

My next question is about the non-tariff barriers, because we're already 97% tariff-free with TPP countries. There are some tariff reductions that will happen. I know some of them are in potato farming, but I wonder if you could speak further to what non-tariff barriers exist with the countries in the TPP for your farming in potatoes here in P.E.I., as it's your number one commodity.

Ms. Mary Robinson :

I'll start, and Robert can finish until Mark cuts us off. I know in my lifetime as an adult working on our farm, I've seen us go through the process of PVY N. I've also seen wart, and we also had the twist of the needles in the last couple of years. Each of these issues creates an opportunity for our largest trade partner to deem our products a risk to their industry, so they close the border to us. A lot of the times from our perspective it's incredibly unfair because they say, “You have PVY N; we're closing you down”, but they haven't done any testing on their side.

It's like saying you're not pregnant while never having taken a pregnancy test. It's incredibly unfair and it's the low-lying fruit. It's a great way to shut down trade and, because our products are fairly highly perishable, it really cripples us.

Ms. Tracey Ramsey :

We've heard it repeatedly here at committee. I know there is a committee that will be established in the TPP, but what we've heard from other sectors is there's no strength to it. There are no teeth to it. There's no ability or process within it to actually address the issue. Just simply, there will be a committee to talk about them. I think that, on the whole, we need to look at trade remedies for the non-tariff barriers that can become huge issues when you're looking at trading with other countries. Do I still have time? I'm trying to rush through because we never have time.

The diafiltered milk is obviously an issue that we've been facing here. We just had some hearings. This is another really serious issue. I know that we're here today to talk about the Trans-Pacific Partnership, but what we're talking about essentially is now opening our market to the U.S. in a further way. Diafiltered milk is one way that we have milk proteins coming into the country nefariously. I'm wondering what other challenges you see coming forward with the U.S. market.

The Chair :

Sorry, Ms. Ramsey, but you used up all your time with your introduction and now your time is up. I might seem like the tough guy here, but we've been doing pretty well. I don't know if it's the air in P.E.I., but MPs are just on a roll here today. I'd like to get every MP to be able to have their five minutes in so I have to be pretty close with the clock. I will now move to Madam Lapointe, for five minutes.

(0945) [ Translation ]

Ms. Linda Lapointe (Rivière-des-Mille-Îles, Lib.) :

Good morning and welcome. I am pleased to see that a woman took charge of the family business and that this is the sixth generation. I am very pleased about that. It is very good. I listened to your comments, which were all very interesting. However, as Ms. Ramsey said, we only have five minutes. Earlier, you said that you were very concerned that the trans-Pacific partnership may be signed without Canada's participation. Prince Edward Island has problems with the dairy products, but overall, would signing the TPP be beneficial for the province? For all the products, would it represent an increase in exports?

[ English ]

Mr. Robert Godfrey :

I think the perils of not signing and being outside the world's largest market outweigh the issues that we've outlined. As I've said, PEIFA has the very same position you do. We represent both offensive and defensive interests, and as a whole, we are in support of signing this agreement.

[ Translation ]

Ms. Linda Lapointe :

So that means you are hoping that we sign the trans-Pacific partnership.

[ English ]

Mr. Robert Godfrey :

Yes.

[ Translation ]

Ms. Linda Lapointe :

Okay. Thank you. If the agreement were not ratified, with which countries would you like us to sign a free trade agreement?

[ English ]

Mr. Robert Godfrey :

Obviously, we would keep the free trade agreements we have with the U.S. and Mexico, which are our two largest. There are large benefits for our beef and pork sectors, in particular in Japan. There are opportunities in Australia and New Zealand as well, but I don't think it's any secret—as Ms. Ramsey already pointed out—that Japan holds an awful lot of potential for us.

[ Translation ]

Ms. Linda Lapointe :

Thank you. Mr. Phelan, you said that the consumption of milk per capita was declining. Aren't derivative products, such as yogurt and cheese, on the rise per capita?

[ English ]

Mr. Reg Phelan :

Yes, I believe they are. We have a cheese plant on P.E.I. here, and they're experimenting and doing a lot of extra processing for cheese products here.

[ Translation ]

Ms. Linda Lapointe :

Don't you find that opening up the markets is an opportunity to export processed products?

[ English ]

Mr. Reg Phelan :

Yes, we see an opportunity in doing it, but we don't see much opportunity in selling it at way below the cost of production, which is a big problem with the so-called trade agreement. It's more about control rather than trade, and that's one of our big points about it. Because right now, as I mentioned earlier, the Europeans are producing milk and they're looking at trying to subsidize it incredibly, but the amount of dollars is just beyond...and I think they're backing away from it now. But the producers there have just gone in a downspin because of the signing and taking away supply management.

If they look at a marketing system like supply management that we have here, rather than trying to dismantle it, I think it's much better to trade on such a system as that. When you mentioned Japan, we have been trading even before.... A good example of that was when we had a wheat board in western Canada. We traded quality wheat with Japan and others, and they were interested in getting it because of the service we provided, the quality we provided.

Once you take away those types of marketing approaches, and bring down the quality of a product, and bring it way below the cost of production, I think we're in for a lot of problems, particularly for our future generation of farmers.

[ Translation ]

Ms. Linda Lapointe :

Thank you. You talked about Canadian standards for food products. That gives us a competitive edge. We've talked a great deal about Japan. Do you think Japan would like to trade more with us because of our standards?

[ English ]

Mr. Ronald Maynard :

The capital consumption in Japan is very small. Japan also has a protected dairy market. The opportunity for exporting dairy to Japan is not substantial. It's a niche market, but there is very little potential in dairy.

(0950) The Chair :

Thank you, Madam Lapointe. We're going to move to Mr. Dhaliwal, who fell in love with P.E.I. lobsters last night. I think he has a suitcase full of them now. Mr. Dhaliwal, you have the floor.

Mr. Sukh Dhaliwal (Surrey—Newton, Lib.) :

Thank you, Mr. Chair, and my thanks to the panel members. Mr. Phelan, you mentioned the [ Inaudible—Editor ] period of five years and tariff-free access to 3.2% of Canada's dairy market. Would you fellows like to see an outcome fairer than the five-year [ Inaudible—Editor ] period and 3.25% market access? Please explain your reasoning as well.

Mr. Ronald Maynard :

What we're seeing is that this is what the government had to give to make the deal. That's not our job. Our concern is that it has an effect on dairy farmers' revenue. We would like to see no further access given. Canadian farmers want to produce milk for Canadians, and Canadians want to buy Canadian milk. The reason this product is coming is that it's cheaper. Mr. Phelan talked about the price of milk in Europe. I'm also involved in the International Dairy Federation. My colleagues there are hurting. They're crying because of the very low price of dairy products around the world right now.

We have a standard of living that's higher. We have costs that are higher. For my friends and colleagues in New Zealand, there's no such thing as winter. I have to maintain feed and housing for my cattle for six months of the year because it's -10°. My costs are higher. We are in Canada; we have higher costs. Everything costs more in Canada. That's our bottom line. If you want to have a trade deal that benefits Canadians, fine, but we as dairy farmers shouldn't have to pay for that benefit to the community.

Mr. Sukh Dhaliwal :

So you favour zero access. Ms. Ramsey mentioned smaller Canadian farms being devastated from the impacts of the TPP, but I'm going to take a positive approach. This question is for all on the panel. Do you see any positive benefits from ratifying the TPP for these small family farms? Is there an advantage to them in preferential access to open markets?

Mr. Ronald Maynard :

The problem is logistics. If I'm a small Canadian farmer, everyone is looking for volume. I can't afford to meet standards. I can't afford your export requirements, import requirements, or licensing for a small volume. That's an issue for the smaller processors like we see here on Prince Edward Island. If I'm in the dairy business, and I'm a major, if I'm Agropur, Parmalat, or Saputo, I'm already a multinational. It opens new opportunities. If I'm a smaller processor, then there's a real challenge to set up distribution, marketing, and everything else. That's the challenge we see in the CETA.

We see that the market is open for Canadian products there, but its the logistics of getting in. Right now, the importers that are coming in add another 10% to their volume. They already have the market distribution and everything else set up. Export is fine, but we think the greatest opportunity is to feed Canadians. In agriculture and dairy, we are doing it. The market is growing. It's not for fluid milk, most certainly. It's in the speciality products—the yogourt, the fine cheeses, the ingredients. That goes to your question about plants for dairy products.

We need to be in that market because that is the future, in ingredients.

(0955) The Chair :

Thank you, sir, and thank you, Mr. Dhaliwal. We have five minutes left. We're pretty well on time here. We have enough time for Mr. Van Kesteren. You have the last five minutes.

Mr. Dave Van Kesteren (Chatham-Kent—Leamington, CPC) :

Everyone, it's my first time on the island. Thank you for your hospitality. I've been to every province in this country, and I saved the best for last, and I mean it. I hear some clapping, and you can clap, because I called my wife last night and said, “We're moving. I am going to take you to this island.”

Voices: Oh, oh!

Mr. Dave van Kesteren: What a beautiful place. I come from one of the nicest agricultural areas in the country. I would argue it may be the best. At this point Kent County in southwestern Ontario grows everything. However, last night I saw some corn, and I don't think it was there for silage. Am I wrong? Are you going to harvest that corn? You're growing corn here.

Mr. Ronald Maynard :

Yes.

Mr. Dave Van Kesteren :

I saw some soybeans. A number of years back my father-in-law was farming about 40 kilometres north of London. If you think about that lateral line, that's probably well below Boston, at least, just to give you an impression. The big news at that time was that they were starting to grow soybeans. When I look at P.E.I., wow, you're at the cusp of something really exciting. I don't know if you realize that, but this is an incredible time of year for you. We just bought some farmland, and I don't mind saying that we paid $10,000 an acre. We thought we had lost our minds.

Land in Kent County right now is selling for $20,000 an acre. I heard tell about some land prices around here, and I think we ought to start buying land here. You have enormous potential on this island. We had a talk yesterday with some people from Cavendish about their potato production:1.5 billion pounds. If you look at the population of the world, what potential for growth. I want to encourage you, first of all, I think that you island Canadians have maybe one of the greatest potentials that I have yet seen in this country. I know you have some challenges. I know we have to work through those things.

I wanted to make that comment, more than anything else. There is great potential for growth in your potato industry. We haven't talked about that, and yet if anybody talks about P.E.I., they talk about potatoes. Mary, Robert, or Reg, do you want to tell me how you feel about the potato industry, where that's going, some of the challenges you have, and maybe where you see some of the greatest growth potential?

Ms. Mary Robinson :

I want to speak to that point with regard to high land prices. I can tell you that here in our province we're going through a municipalization and amalgamation exercise, and we're developing a land use policy. As we see these rising prices for agricultural land, it makes it very difficult to pencil out for our primary producer. It's one of the biggest threats we have to protecting our resource land. When we see outside interests looking at our province and wanting to come in to buy land at these high values.... We have a lot of Amish, Germans, and Dutch coming in.

We all got off the boat at one point and we've all bought land, but right now when Canada looks at protecting its food sovereignty, we need to make sure these trade agreements allow us to be profitable on our farms. These high land prices are crippling for a lot of people.

Mr. Dave Van Kesteren :

What is a high land price? I'm just curious.

(1000) Ms. Mary Robinson :

It's laughable from an Ontario perspective. For the better part of my life, high value land traded at $3,000 an acre. Currently, we have had confirmed rumour—and take that with a P.E.I. grain of salt—that land prices are around $5,000 an acre, which is a massive increase.

Mr. Dave Van Kesteren :

I've heard some rumours at $25,000.

Ms. Mary Robinson :

Yes, and you pencil that out on potato production and the cost of farming here on P.E.I., as Ron alluded to, the high costs that we face. We have high input costs and high costs to get product to market. When you pencil it out, you have to qualify what it means to be profitable on a farm if you're paying $5,000 or in excess of $5,000 an acre.

The Chair :

Mr. Phelan.

Mr. Reg Phelan :

One of the aspects we do have here in P.E.I. is the Lands Protection Act, which is about 30 years old. It took us quite a while to get it in place, but I think it's part of what's protecting some of our land base here. As part of that act, we have a maximum amount of acres that you can own, and we have three-year crop rotation to try to be implemented as part of that. I think it's very important in terms of that, trying to protect our soil here in P.E.I. It's very sand-based, and in order to keep the organic matter up, we need that crop rotation and we need diversity.

That's part of the problem the potato industry is running into here now. It just doesn't have that land base. When you're trying to put that in less.... We're having quite a problem with trying to keep the soil together because it has been so sandy. In order to keep that organic matter up, we need a bit more diversity. We need a little more in terms of that to keep the quality there.

Mr. Dave Van Kesteren :

May I ask one little question that hasn't been asked yet?

The Chair :

It's going to have to be a quick one.

Mr. Dave Van Kesteren :

I'm curious. We talk about tonnage in tomatoes, and how that's from 20 to 40 to 45. What's the tonnage in potatoes within the last 20 years?

Mr. Reg Phelan :

One of the problems we're having here now is that our yields are starting to decline a bit. This is what the big processors are saying. They're saying they want to dig deeper wells so they can put more irrigation on. In terms of what's happening there, a lot of times when the soil gets mined out, the yields are going to decline and the quality will decline too. That's one of the aspects we're having to work with here, and it is a major problem.

The Chair :

Thank you. I think the federation wanted a very quick response, and then we will wrap it up.

Ms. Mary Robinson :

Yes. Coming from a potato-producing area and farm, I'd have to say that with plant breeding and genetics as they are, and with improved conservation and everything else that we do on our farms—improved agronomy, site specific, everything—generally we are seeing yields not decline. On my farm, we do not irrigate. I'm one of six who owns my farm; I'm not the only one. We don't wish to irrigate. We don't grow for a processor. We grow for table. Our yields are either steady or increasing year over year. A lot of it is Mother Nature.

Some people aren't looking for increased yield; they're looking for a different product. We have the Little Potato Company growing small potatoes. That means they do it in a shorter time frame and they take off a lower yield. It's in the farmers' nature to want the most per acre, but the bottom line is different than that.

The Chair :

Thank you. Panellists, you gave us a good introduction to agriculture in P.E.I., a good snapshot. I noticed a lot of interest in agriculture from our panellists. We're going to have other farm groups here this morning and we'll be able to ask some questions. Thank you very much for coming. You're welcome to stay. We have many more sessions to go here this morning. Since we're over time a bit, we're just going to break for about five to 10 minutes and then get back at it. I'd appreciate it if MPs don't take off too far. We'll suspend.

(1000) (1010) The Chair :

We'll reconvene the meeting. Welcome anybody who's just arrived, and especially our new panellists for our second panel. My name is Mark Eyking, and I'm the chair of the House of Commons trade committee. We have most of our committee with us. We had to leave some in Ottawa to take care of things back there. Many of our MPs are from right across the country. We are a very busy committee. We're dealing with trade, and Canada is a big trading country. We're dealing with CETA right now. We're dealing with softwood lumber, and we're dealing with agriculture issues with the United States. But our main focus is the TPP.

As you are well aware, the TPP involves over 12 countries, 40% of the world's GDP, 800 million people, so it's a big deal. As many of you may know, it was brought up pretty strongly last night in the U.S. debate, so it's a hot topic. We knew that it was very important. Our committee embarked on this study at the first of the year. We've gone through seven provinces now, and we're going to finish up with the Atlantic provinces this week. We've talked to the territories by video conference. We have had a lot of input. We've had over 125 briefs, 265 witnesses, and 20,000 emails, and they're still coming in.

We're planning on wrapping up our study at the end of October. Then we have to put a report together for the House of Commons. We hope to have that presented by the end of the year, or the beginning of next year. There is a big interest and we see this as we go across the country. I think as Canadians know more and more about it, that's why they're providing their input. We welcome the panellists here for our second hour. First of all, we have translation. I think it's channel one for your headphones, but I'm not sure. If you can, try to keep your presentation to about five minutes.

Also, MPs try to keep it to around five minutes. If we do it that way, we can often get our input in here and it goes well within the hour. Without further ado, I'm going to start off with Jordan MacPhee from the Environmental Coalition of Prince Edward Island. Go ahead, sir.

(1015) Mr. Jordan MacPhee (Board Member, Environmental Coalition of Prince Edward Island) :

It's nice to see you again, Mark. I don't know if you remember, but I met you in March last year. I was part of a little contingency with the NFU Youth. We met when you were still the opposition critic. I don't know if you remember, but nice to see you again.

The Chair :

Yes. It's good to see you, sir.

Mr. Jordan MacPhee :

The Environmental Coalition of P.E.I. or Eco-PEI, is a non-governmental organization that was established in 1989. The focus of our organization's work is public education, community events, and advocacy on issues related to P.E.I.'s environment and the use of our natural resources. The issue of trade falls under this focus. It is Eco-PEI's position that Canada should not ratify the Trans-Pacific Partnership, or TPP.

The central reasons for our stance against the TPP are: one, it will place further stress on already strained environmental systems in Canada and P.E.I. in exchange for minor economic benefit; two, the investor-state dispute settlement mechanism, or ISDS, would allow corporations to sue the government for federal and provincial policies, and the TPP will weaken our ability to effectively legislate environmental controls for the interests of Canadian citizens; and three, Canadian taxpayers will become financially responsible for legal challenges initiated by private interests against federal and provincial legislation, including but not limited to environmental law.

Together, these will have the ultimate effect of undermining Canada's sovereignty in favour of corporate interests. The TPP seems to be part of a trend in recent decades and reflects the willingness of western governments to erode their democratic institutions for the potential prospect of economic growth at any cost without critical concern for the consequences of that growth.

We are not against free trade itself, but before a country signs on to any agreement, it is crucial to consider how and to whom the benefits and costs of that agreement are being distributed, and whether the overall deal is beneficial to Canadians and society as a whole. It is our understanding that the TPP will concentrate most of the benefits to a few certain groups while funnelling most of the costs and the negative consequences to the majority, all the while weakening Canadian legislative authority.

We would like to provide the committee with some context of our local economic and environmental situation in P.E.I. in order to illustrate how the TPP, if ratified, might affect us as a province. According to the Government of P.E.I., roughly 12% of our economy is based in the agricultural, fishing and food processing sectors. Islanders are aware of some of the environmental pressures caused by the agricultural industry. It's a sensitive topic on P.E.I., as almost everyone knows a farmer as a friend or family member.

These pressures include the heavy use of nitrogen fertilizers and pesticides, the leeching and runoff of these chemicals into groundwater and nearby streams, the erosion of fertile top soil from island farms, damaged soil that is less productive and less able to retain moisture, and the resulting increased demand for greater and greater quantities of island groundwater for irrigation. We want to make it completely clear that Eco-PEI is not against island farmers. We understand the economic pressures that farmers are under today and the realities they must face in order to make a living.

Many farmers are responsible for hundreds of thousands or millions of dollars in capital infrastructure investments and it is impossible for them to suddenly switch to a new model of production. However, the TPP is not an answer to farmers' problems, as we have seen with free trade agreements in the past. According to Statistics Canada, since the Canada-U.S. Free Trade Agreement was signed in 1987, farm exports have increased threefold over this time but total outstanding farm debt on P.E.I. has risen from $159 million in 1987 to $748 million in 2015, a fourfold increase in less than three decades.

This trend of rising exports and rising farm debt is similar all across Canada, with farm debt rising from $23 billion in 1987 to $91 billion in 2015, also a fourfold increase. If Canada ratifies the TPP, it would increase P.E.I.'s economic dependence on the export of industrial agricultural products, which would further entrench island farmers in a production system that is already causing harm to the environment's systems we depend on to grow our food. At the same time the economic incentives for young people to get into farming are almost non-existent.

Speaking from my own experience as a young person on P.E.I. who is trying to start a farm business, I know how difficult it is to manage the financial difficulties and other hardships of starting a farm even on a small scale. As a country we need to think about the future of industries and the upcoming generation trying to build an economy that actually understands the ecological limits to growth. The TPP does the opposite.

The hope would be that the TPP would substantially benefit Canada economically, but even proponents of the TPP estimate there will be minor economic benefits in terms of projected GDP growth if Canada were to ratify. According to a January 2016 working paper by the Peterson Institute, written in favour of the TPP, the projected GDP gain for Canada by 2025 is estimated at 0.9%, one of the weakest gains among potential TPP signatories.

Those who are less optimistic, such as Dan Ciuriak, the former deputy chief economist at Foreign Affairs and International Trade Canada, has estimated net gain at only 0.1% of GDP by 2035.

(1020) In either of these cases, the benefits pale in comparison to recent deficit projections announced by this federal government, and in comparison to Canada's GDP as a whole, they are little more than a rounding error. Our final central concern is with the investor-state dispute settlement mechanism, also known as the right of foreign corporations to sue otherwise sovereign governments through private tribunals. In March 2015, a NAFTA tribunal oversaw a challenge by Bilcon, a company that proposed a quarry in Nova Scotia that was denied, and decided against Canada.

Bilcon is now seeking $300 million in damages for loss of potential future profits. Donald McRae was Canada's appointee on the arbitrations tribunal. Remarking on the negative effects of ISDS, he said:

Once again, a chill will be imposed on environmental review panels which will be concerned not to give too much weight to socio-economic considerations or other considerations of the human environment in case the result is a claim for damages under NAFTA

Chapter 11. In this respect, the decision of the majority will be seen as a remarkable step backwards in environmental protection.

In

summary, Eco-PEI's position is that the TPP will place further strains on the environment for little economic return, undermine Canadian sovereignty, and open up the federal government, and therefore Canadian taxpayers, to expensive litigation with private interests. For these reasons, Eco-PEI recommends that Canada not ratify the TPP.

The Chair :

Thank you. We're going to move over to the Prince Edward Island Fishermen's Association. We have with us Mr. Avery and Mr. MacPherson. Go ahead, sirs, for five minutes.

Mr. Ian MacPherson (Executive Director, Prince Edward Island Fishermen's Association) :

Good morning to you, Mr. Chairman, and members of the international trade committee. My name is Ian MacPherson and I'm the executive director of the Prince Edward Island Fishermen's Association. Today I'm joined by our association president, Mr. Craig Avery, who has over 40 years of experience in the commercial lobster fishery. Traditionally, the lobster harvesting sector may not be directly involved in international trade.

However, our intent today is to give the committee an overview of the Prince Edward Island lobster industry from a harvester perspective and the importance of expanding markets over the past several years. The P.E.I. Fishermen's Association, PEIFA, represents close to 1,300 harvesters on Prince Edward Island. Although our primary species is lobster, our members also harvest herring, mackerel, halibut, bluefin tuna, snow crab, and scallops. The fishery, along with agriculture and tourism, is one of the top three economic drivers of the Prince Edward Island economy.

One of the primary reasons that our organization wanted to present today was to comment on the significant change that has taken place in the lobster industry over the past five years, and how our organization is working diligently to prevent a return to wild price swings of the past. We see market diversification as a key component to an overall strategy that will provide suitable returns to all components of the supply chain. For today's discussion we will focus on export and trade in lobster, although many of our discussion points can be transferred to other species.

As recently as 2012, the price paid to harvesters for lobster was at levels that were significantly lower than prices paid in the previous 10 years. With escalating operating costs, this rendered many fleets in Atlantic Canada unsustainable at prices that were in the range of three dollars per pound. As a result of a gulf-wide tie-up, harvesters made a strong commitment to change their industry. Although a number of programs were in place, such as reducing and retiring licences and increased sustainability measures, the harvesters realized that we were too dependent on several traditional export markets.

Historically, Prince Edward Island has produced much more processed lobster versus live lobster. Past ratios of 80% processed lobster versus 20% live lobster were the norm. We are seeing this ratio lessen due to the addition of more live storage on P.E.I. However, processed product is still the primary market for most of our lobster. Although there are co-operatives where fishers are involved in both harvesting and production, most harvesters deal with commission buyers who sell to plants on and off the island.

In the past two years we are also seeing more harvesters become directly involved in live lobster export. Many parts of the supply chain have worked hard over the past three years to improve the financial return to harvesters; however, continued work needs to be done. The traditional markets of the United States and Europe continue to be important. However, with the doubling of catches over a recent six-year period, the development of alternative markets is critical. To put this increase in perspective, the lobster catches in P.E.I. increased from 16 million pounds to 30 million pounds during this period.

That's an annual number. This recent expansion of Asian markets over the past five years has been a contributing factor in increasing financial returns to the harvesters. Much of this increase in sales has been attributed to the emerging middle classes in countries such as Korea and China, where items such as lobster were not affordable in the past. The PEIFA has invested in our own brand that is owned and controlled by the harvesters.

Although we are still early in the stages of market development, we are seeing a keen interest from international buyers and consumers who are seeking a more direct connection with the harvesters. From a harvester perspective, it is critical that any trade agreements include clauses that address factors such as resource sustainability, fair labour practices, fair pay components, and conducting fisheries that are not harmful to the surrounding environment. The PEIFA and Fisheries and Oceans Canada are working on a number of regional initiatives that will contribute to more efficiency in our fishery.

The owner-operator model that works in many countries around the world is strong and effective in Canada. Organizations such as the PEIFA strongly support the continuation of these independent businesses. Each of our captains has a significant financial investment in their fleets, which translates into a direct connection with our fishery. It is important that the focus of any pending trade agreements not be solely based on increasing trade volumes.

The lowering of the current tariffs are projected to have a positive effect on the Canadian lobster industry; however, the focus of market expansion should be increasing the value of existing exports versus increasing exports at all costs. This will require a slight change in focus from both federal and provincial governments.

(1025) In the past, Canada has held a higher global position in exporting seafood than our current ranking. It is important that this be kept in proper perspective so we are not seeking export growth at the expense of resource sustainability. The PEIFA and our Master Lobster brand are seeking strategic partnerships that will develop into long-term relationships that will benefit Canada and our trading partners. We understand that this does not happen overnight. However, having these goals in mind will greatly benefit Canada in the long term.

Our Canadian oceans are extremely valuable resources that we are privileged to harvest on behalf of the people of Canada. The harvesters of the Prince Edward Island Fishermen's Association take this responsibility very seriously and advocate that the factors of resource sustainability, fair labour, fair payer practices, protection of the environment, and the continuation of the owner-operator fleet be cornerstones of any agreements before they are ratified.

The Chair :

Thank you, sir, for that briefing. We were in New Brunswick yesterday, and we heard from many fisher groups. Many of the concerns and opportunities you raise were raised yesterday. We realize how important an industry it is. Trade deals are important, but how they work out is very important, so thank you for your briefing. We are going to move to Mr. Greg Donald from the Prince Edward Island Potato Board. Go ahead, sir.

Mr. Greg Donald (General Manager, Prince Edward Island Potato Board) :

Good morning, and welcome, especially those who haven't been to P.E.I. before. My name is Greg Donald. I'm general manager of the P.E.I. Potato Board. The Potato Board is a potato grower organization here in P.E.I. We also represent the dealers and exporters on the island. I'd like to first hit on the key points relative to this agreement, and those would be that we support the TPP. We certainly support opportunities with countries where we can remove tariffs, level the playing field, and generate opportunities for all sectors, in particular our processing sector, but also for fresh and seed potatoes as well.

I'd also like to highlight that a very important component of the TPP is inclusion of provisions to deal with phytosanitary issues and concerns. That's very important. I know there are examples of trade agreements in the past where, in particular with potatoes, those haven't been addressed. It's very important that this provision has been identified and is going to be there. I'd also raise the issue that we need adequate resources within the CFIA, within the plant health division, to deal with that I would also point out that we've seen another agreement where issues have come up with tariff rate quotas.

Hopefully that's not something that is involved with this agreement. The last point would be the continuing need for investment in agricultural research, particularly potatoes, and in breeding to better meet the needs of the countries where there are opportunities. Those are the main issues. This is a little about our industry and the board. The potato industry is the backbone of the economy here in P.E.I. It contributes over $1 billion either directly or indirectly to the economy here, so it's important to us. We have about 200 family farms.

We all, and certainly I have had the opportunity to travel to many parts of the world. They are small family farms, not industrial farms. I'm not really sure what the definition of that is, but they are small family farms here in P.E.I. We produce about 2.5 billion pounds of potatoes, which is about 25% of Canadian production. About 60% of our crop goes to processing for french fries, potato chips, and other processed products, 30% for the fresh or table market, and 10% for seed. For P.E.I.'s total agricultural exports, we have numbers in 2014-15 of about $345 million.

Of that total export in dollars, 85% is from potatoes. That's both fresh and processed potatoes, so it's very significant. In the last year, we shipped seed potatoes to eight countries around the world, fresh potatoes to 15 to 20 countries, and processed potatoes to close to 40 countries. Similarly with many other products, the U.S. is by far our largest trading partner of that. Of that, $296 million, 81% of it is to the U.S. There's obviously a relationship with them, and that business is very important to us. Having said that, like any business, it's important that we continue to open doors and grow.

Unfortunately, doors continue to close, so it's important to diversity our markets and look for opportunities for growth. That's very important, and we believe that TPP offers that opportunity. Those are the main things that I wanted to touch on. Again, to summarize the points of interest, the tariffs and the phytosanitary issues are very important, that we have the resources to accomplish that, and furthermore, continued investment in programs like Growing Forward to support good research and development of things like new potato varieties. Thank you very much.

(1030) The Chair :

Thank you, sir. We had a bit of an introduction to the potato industry with Cavendish Farms yesterday in New Brunswick—

Mr. Greg Donald :

Yes, I understand that.

The Chair :

Boy, they do a lot of french fries. They're talking about potential in Asia, so we had a good sense of that yesterday. It's good to see you guys here. We're going to move on now to dialogue from the MPs. We're going to start off with the Conservatives. Mr. Van Kesteren, you have the floor.

Mr. Dave Van Kesteren :

Thank you all for attending this morning, and thank you for your hospitality. Yes, when we—I'm talking Ontario—talk about P.E.I., we think about about potatoes, but we forget oftentimes that the fishery is such a big part of the island as well. We saw the collapse of the cod industry. How's the state of the lobster industry? You talked about the need and how you've managed that. I'm just curious. How is that? Is it healthy? It is declining? Is it growing? Maybe you could give the committee some direction on that.

(1035) Mr. Craig Avery (President, Prince Edward Island Fishermen's Association) :

We put a lot of sustainability measures in place over the years with mandatory escape mechanisms. We've increased carapace size. Stocks have been increasing steadily over the last 10 to 15 years. Last year, I think, was a record; the lobster catch in Prince Edward Island was 30 million pounds. This year in area 25, which is fishing right now, it looks like it's going to be a record catch. The stock is in great shape. We've taken all kinds of measures, and I think for the future...the recruitment levels.... We've done studies with DFO, working with fisheries. I think the stock is in the best shape it's every been in.

Mr. Dave Van Kesteren :

Good. That's great news. Did you say 80 million pounds?

Mr. Craig Avery :

It was 30 million.

Mr. Dave Van Kesteren :

Obviously, that doesn't all go to Canada. Maybe you mentioned, but I missed it. How much of that goes to the United States as opposed to Canada?

Mr. Craig Avery :

How much are we exporting?

Mr. Dave Van Kesteren :

Yes.

Mr. Craig Avery :

It's still around the 70% to 80% range.

Mr. Dave Van Kesteren :

That would be because of geography, I suppose. It's closer to send it to Boston than to Toronto or something like that.

Mr. Craig Avery :

That's right, yes.

Mr. Dave Van Kesteren :

Have you ever thought about...because down east, we get lobster, but it's not part of our culture.

Mr. Gerry Ritz: This is down east. You're central.

Mr. Dave Van Kesteren: Yes, I guess I am. Well, we're not really central. Winnipeg is central. The west calls us east. We don't think about the lobster until we come here. Has there been a movement or a plan to introduce Canada more to...when the lobster festival is on, to spread it across the country?

Mr. Craig Avery :

As Ian mentioned in earlier, the Fishermen's Association have taken the initiative of our own branding. This summer, for instance, I was in Calgary at the stampede. We're going back out there again next week, and we're trying to expand those partners all over Canada.

Mr. Dave Van Kesteren :

Good, congratulations. Mr. MacPherson, did you have a comment you wanted to make?

Mr. Ian MacPherson :

I was just going to add that I think we all realize there needs to be a multi-pronged approach. We've historically been dependent on one or two pretty key markets, and we want to diversify, but not neglect our domestic market either.

Mr. Dave Van Kesteren :

It's kind of a shame that those Americans are getting all that good lobster. We should be eating it in the rest of Canada. How much time do I have, Mr. Chair?

The Chair :

You have over a minute and a half.

Mr. Dave Van Kesteren :

Good. We'll go back to potatoes. We just mentioned briefly that figure they gave us, 1.5 billion, and we talked about the history of the potato, how it became the European staple diet in the 1700s, how it took over the grain, and the fact that in Asia, rice is still the staple diet. As an organization, you must be considering that this potential for growth could suddenly give you a huge market. Is that something you're prepared for when that does happen? Because all of us know potatoes are just the best food there is.

Mr. Greg Donald :

Actually, Asian-Pacific countries would represent probably one of the largest growth areas, particularly in processed products. We're experiencing that today, and certainly that's been a major growth area for the processing sector of the industry. That's there today. Obviously, from Prince Edward Island's perspective, there are only so many potatoes that we can produce. I had the pleasure of coming in earlier and hearing some of the comments from some of the other groups.

So there is capacity on our island, and as we focus on going forward, as in any business it's about how we can better differentiate ourselves, get a premium for our product, and at the same time improve our productivity. That's where the focus is, and to do that, the focus is on rotations and improving from that perspective. Some of those countries in Asia are large potato producers as well, which is worth noting. I think we know China, for example, produces 20 times more potatoes than Canada, and last year they announced potatoes as their new staple for food production.

(1040) The Chair :

Thank you. Your time is up, Mr. Van Kesteren. We're going to move to the Liberals for five minutes. Mr. Dhaliwal.

Mr. Sukh Dhaliwal :

Thank you to the panel members. Mr. Donald, you mentioned some of the markets that you have access to when it comes to potatoes. Which markets do you see the most potential in through increased access in the event of ratifying the TPP?

Mr. Greg Donald :

With the TPP in particular, again noting that it's important that through the agreement we maintain the existing business we do with the U.S., just to point out that it's obviously a very significant market for us. Another one I'll bring up is Japan. Most certainly Japan already has no tariffs on potatoes, seed and table potatoes. We do not have access to that market. Currently, the U.S. exports about $9.3 million into Japan. That would certainly be a country that I would highlight as an opportunity to have access to that market.

Certainly, in particular, some of the other Asia-Pacific countries would be opportunities, certainly fries, which I know, processed products—we've talked to Cavendish—and also fresh and seed potatoes.

Mr. Sukh Dhaliwal :

When I was growing up, I never heard about fries and chips in India, for example. You mentioned China is already producing its own potatoes. Even though India is not part of the TPP, do you see a future there when it comes to P.E.I. farmers?

Mr. Greg Donald :

Yes. India, I believe—I'd have to call a friend—might be the second-largest potato producer in the world. Don't quote me on that. It's a very large producer. There are opportunities, yes. Seed potatoes, new varieties that can provide for specific needs are an opportunity. P.E.I. has an excellent reputation in growing good quality seed, so that's an opportunity. On the processing products as well that would be an opportunity, yes.

Mr. Sukh Dhaliwal :

Mr. MacPherson, I enjoyed the lobster, and as my friend Dave on the other side said, we should have access. In B.C. lobster is very seasonal as well. Ratifying the TPP, and I hear that you support that, will benefit the P.E.I. fellows here.

Mr. Ian MacPherson :

Yes. Certainly, we don't want to go back to where we were in 2012 where our supply far exceeded demand, and so there has been a lot of hard work in developing those new markets. I think we want to be very cautious not to all of a sudden go for being dependent on two markets to being dependent on a couple of markets in another part of the world. That makes no sense. We're trying to be strategic in the companies we're working with. There are markets that are more focused on quality than price and those are the markets we want to pursue. Certainly there are those types of countries within this proposed agreement.

Mr. Sukh Dhaliwal :

Overall it depends on the young fellow. I see you have some reservations, Mr. MacPhee. What would you like to see, if we ratify? Is there anything you'd like to comment on to have part of the agreement that will help young people like yourself to get into farming and carry on the family traditions?

The Chair :

You have one minute.

Mr. Jordan MacPhee :

It's about diversification of the production systems we have on P.E.I. It's for all industries across Canada. If you're diversifying the types of industries that a person can make money at, it's easier for young people to break into the industry. If there's already an intense level of market saturation and ownership of that market by existing producers how are young people going to break in? When you centralize production into just a few systems rather than many ways to make money, it's difficult.

If we created deals across Canada and with other countries that made it easier for us to make money from selling different products, like a mixed vegetable farm or anything from IT, instead of it being from people who already own the market.... I don't know how that's done, but I think this is a way of further centralizing the economy in existing hands, rather than making it easier for new people to break in.

(1045) The Chair :

Thank you, sir. Thank you, Mr. Dhaliwal. We're going to move to the NDP and Ms. Ramsey for five minutes.

Ms. Tracey Ramsey :

Thank you for the presentations today. Mr. MacPhee, you mentioned something that I want to dig into a little bit and that's the ISDS provision, the investor-state dispute settlement resolution process that exists in the TPP. For folks who don't know, in

chapter 11 of NAFTA, it was the first time that two developed countries engaged in this type of an established resolution system together. Previously it was always a developing country coming to a developed one. What we've seen under NAFTA is we've become the most sued country in the world under this provision. So $190 million has been paid out, but the asks are now in the billions, and we have cases against us, currently, that are creeping that way because they simply contain this projected future loss number that's pulled out of the air.

We have a very progressive court system here in Canada, so this is where I think most Canadians question the need for this non-reciprocal...essentially a tribunal that exists with three for-profit arbitrators determining whether or not we can legislate for good in Canada. You mentioned that it weakens legislative ability, and as a member of Parliament that's a deep concern to me.

We see cases across Canada—you mentioned the quarry case, in particular—and because you are here speaking mostly about the environment, you know there's a huge human cost to our not being able to legislate for the good of Canadian people, in particular around our environment. I want to ask you if you think that the ISDS will hinder our ability to legislate or regulate to essentially honour what we signed on to in Paris around our environmental commitments to Canadians.

Mr. Jordan MacPhee :

I've read assurances that things like a carbon tax, for example, wouldn't fall under a challenge. I'm not sure why that falls outside the parameter of ISDS, but I've heard assurances that policy implementations like a carbon tax or the carbon pricing system in Canada in the future wouldn't be potentially under threat, but that's only one aspect of many ways to reduce carbon emissions.

If we're going to implement policies that promote local agriculture, for example, to try to limit the amount of carbon dioxide that is emitted through just flying food all over the world when it can be locally produced and consumed, a company from a TPP signatory might say that local agriculture policy affects our ability to break into the market because you're cancelling out all outside companies from being able to bid into that process. That's just one example.

If we have municipalities or provinces all across the country wanting to implement a local agricultural policy in the next couple of decades, and that is stopped—

Ms. Tracey Ramsey :

They wouldn't be able to under TPP because of the standstill clause, so with anything that we attempt to regulate to improve that would fall under a public sphere, and certainly there are public sector workers in Environment Canada, we would run up against issues, I believe, in trying to implement legislation that would benefit Canadians. One of them that concerns me is the climate change targets that we've signed on to. If we try to do that after we sign, would we end up being sued by a corporation for attempting to do so? Would they claim that it was an unfair trade barrier to them? That's my concern.

I have another question about the potatoes, because we've been talking a lot about that. You mentioned that 81% of your trade is with the U.S., so I wonder, in signing the TPP, would that increase our ability to trade with the U.S., and would it change anything that exists currently with our relationship with the U.S. specifically?

(1050) Mr. Greg Donald :

I don't believe so, and again, I was just acknowledging how important the relationship we have with them is—

Ms. Tracey Ramsey: I agree.

Mr. Greg Donald: Having said that, we want also to diversify our markets, and it would be good to have other customers as well.

Ms. Tracey Ramsey :

So if we sign, it wouldn't change, and presumably if we don't sign, you still would enjoy that 81% with the U.S. through the FTA and NAFTA.

Mr. Greg Donald :

Are you stating that they would still be signing it?

Ms. Tracey Ramsey :

Yes. So if we weren't part of the TPP—

Mr. Greg Donald :

There is also a possibility that they may not sign it.

Ms. Tracey Ramsey :

Yes, that's what I'm saying. You're saying if we sign on there really wouldn't be any difference for that 81% for you. In the same way, if we didn't sign, and the U.S. signed, would it change anything for us in terms of potatoes and your 81%?

Mr. Greg Donald :

Yes, I would say it depends on how the U.S. would view that. That is how I would answer that in a short answer.

Ms. Tracey Ramsey :

Hopefully, they still want our potatoes.

Mr. Greg Donald :

That's my answer.

The Chair :

Thank you. Time is up, Ms. Ramsey. We are going to Madam Lapointe, for five minutes.

[ Translation ]

Ms. Linda Lapointe :

Good morning and welcome. I am pleased that you are here with us today. I will add to what Ms. Ramsey was saying about potatoes. Earlier, you talked about the Chinese market, which produces 20 times more potatoes than Canada. You also talked about Japan, where you want to diversify the markets, and the United States a little. Right now, we have no access to the Japanese market. What can the potato product sales on those markets represent, either in tonnes or in monetary value? What can those sales represent for Canada?

[ English ]

Mr. Greg Donald :

Are you specifically asking about processed potatoes?

[ Translation ]

Ms. Linda Lapointe :

Either table potatoes or processed potatoes. Which ones can be more profitable for you?

[ English ]

Mr. Greg Donald :

I know you spoke with Cavendish Farms yesterday. They would be much better qualified to talk about the value of the processing business. Certainly, I could speak from a seed and fresh perspective, and the question, just so I'm clear, referred specifically to Japan?

[ Translation ]

Ms. Linda Lapointe :

It's more in relation to Japan, because there wouldn't be a tariff anymore. Earlier, you said that you did not have access to the Japanese market right now.

[ English ]

Mr. Greg Donald :

Yes. To answer your question, that would be.... For example, the U.S. is currently selling $9.3 million there. I would say there is at least a $9.3-million opportunity there. That is a good example for this agreement, but I could also probably point out other countries, such as Taiwan or South Korea, where there are agreements in place, but we can't sell potatoes there. With Japan, Taiwan, and South Korea, I would say the opportunity for table stock and chip stock potatoes would be probably close to $20 million.

[ Translation ]

Ms. Linda Lapointe :

Thank you. I now have questions about lobsters. We all love them. You said that quality products were sought after by some markets. I thought you were referring to Japan. You insisted that we send the products directly to the United States. However, how much have the sales of lobster gone up in Japan in recent years?

[ English ]

Mr. Ian MacPherson :

I don't have the exact statistics with me today. However, the majority of the increase over the last five years has been in China.

[ Translation ]

Ms. Linda Lapointe :

You know that China is not part of the trans-Pacific parnership, correct?

[ English ]

Mr. Ian MacPherson :

Yes, but a lot of what needs to be done in Japan is some more education in terms of what we have to offer as a product. The quality of processed products has increased dramatically over the last few years, and one of the positives is that there is basically zero mortality. That is very attractive to the restaurant, tourism, and other businesses, because it is a very high-value product, and there can be losses through the live shipments. We have been focusing on getting the word out that we have a desirable high-quality product that is becoming more convenient to consumers.

New products are being developed, and we need to continue to do that, to get that out to more people and increase our sales to Japan.

(1055) [ Translation ]

Ms. Linda Lapointe :

Thank you. You mentioned China just now. I interrupted you not because I didn't want to talk about China. What exports are on the rise in that country? If we had to hold meetings with China to promote our trade with that country, what would you like to see?

[ English ]

Mr. Ian MacPherson :

That trend has helped us a lot. Sales to China, from P.E.I.'s perspective, doubled every year over the last five years, so this has been significant in putting the supply and demand balance more in place. Korea has been a very attractive market also, in terms of wanting quality product. I will be careful what I say here, but certainly we don't want to just go into markets that are strictly price-driven, in that you are looking for product at lower prices. We need to maintain the amount of money that is going back to the harvesters. We cannot go back to $3 lobsters, so we need to be strategic in what markets we pursue.

[ Translation ]

Ms. Linda Lapointe :

Thank you very much. I think my time is up. I'm sorry. I would have liked to ask you questions.

[ English ]

The Chair :

Before we move on, I have a question for the lobster people. Out of P.E.I. and going to Asia, are most of your lobsters live lobsters? How do you ship them? Do you put them all in containers and take them to Halifax or Moncton? Do they fly direct? How do they get from here, technically, from your wharf to the tables in Asia?

Mr. Ian MacPherson :

Our ratio has typically been 80% processed versus 20% live product. That's maybe changing a little bit in the last few years because more live storage is being added. That's certainly infrastructure that we need, to make our plants more efficient and also to give us more opportunities. Typically, the product is transported to Halifax. When Halifax is busy, it has to go all the way to Toronto, but Halifax is a primary market. It is done typically by 20-foot or 40-foot container loads, and they're obviously refrigerated to keep them frozen.

The Chair :

Thank you. We're going to move on. Madam Ludwig, I think you have the floor. Go ahead.

Ms. Karen Ludwig :

Thank you very much for these excellent presentations. I just want to go over quickly what I've heard this morning from the panel, starting with Mr. Donald, the need to diversify markets, looking at the value of the Growing Forward program, continued research in the area of potato production. Mr. MacPhee, one of the things that resonated with me was succession planning, which we had talked about in an earlier panel, and the need for youth to enter into this market.

In the area of lobster production, it would be resources, the inability, responsible fishing, fair labour, enforcement of the owner-operator model, education, Japan, the higher value products, product modification possibly for lobster, if we're looking at infrastructure requirements. Mr. Eyking just asked if it was a 40-foot refrigerated container. What resources do all of you access in P.E.I. to support trade? Are you accessing the trade commissioner service, the provincial services, Trade Team PEI? What are the ones that you find of great benefit?

What are some of the opportunities for us to help support all of you in those areas for our programs?

Mr. Greg Donald :

I guess I can start off. I would say all of the above, and we certainly do. On your list, I just want to point out at the start that I can't stress enough the importance of addressing phytosanitary-type issues—

Ms. Karen Ludwig: Yes, sorry, that was on my list too.

Mr. Greg Donald: —when it comes to potatoes, because it becomes very political. I heard you ask an excellent question earlier about non-tariff trade barriers. There are lots of opportunities for those with potatoes. So I can't stress enough the importance of adequate resources at the CFIA in the plant health division to address those. As well, market access is very important, I would highlight. There are many countries where there are opportunities today. Again, quite frankly, we can deliver as good or better quality potatoes from P.E.I., from a plant health and quality perspective.

Our major trading partners are doing business with these countries, significant business, that we should be doing business with as well. There needs to be more attention within the market access division to working through the issues around potatoes.

(1100) Ms. Karen Ludwig :

Okay, thank you. What about the lobster area?

Mr. Ian MacPherson :

Certainly, we understand that version three of Growing Forward is currently under discussion. There is some discussion of a similar program, I believe, to include the seafood industry. We've kind of been left out of some of those programs in the past, and we would really encourage all parties to support that type of initiative. We have a great brand out there in terms of the Canadian brand, but we also have to back that up with proper promotion and marketing. We're quite new to this.

Certainly ACOA and the provincial support, Trade Team PEI, have been excellent in helping us, because we're on a steep learning curve, but there have been great support mechanisms. I know that Mr. King, from the processors association, will speak this afternoon. I'm not here to speak on his behalf, but certainly investments in infrastructure, like live holding capacity, increasing that capacity, makes our plants run more efficiently, gives us the option, if the live market's strong, to put more product into the live market, and gives us more flexibility. The processing plants on P.E.I. need us, as harvesters—

Ms. Karen Ludwig: Exactly.

Mr. Ian MacPherson: —and we need them also, and we want to keep those jobs here in Atlantic Canada.

Ms. Karen Ludwig :

On the processing side, what do you do with your no-claw or one-claw lobsters?

Mr. Craig Avery :

They go to the processing sector mainly, or if the company is processing tails, raw tails, we use some of that.

Ms. Karen Ludwig :

You may want to look into the clawing up expansion that was announced recently in Nova Scotia. It was specifically regarding processing, but looking at no-claw or one-claw lobsters, and just different ways to remove the meat in a very high pressured heat. Thank you.

Mr. Jordan MacPhee :

This plays into what Mr. Dhaliwal was asking before. I had looked into the Growing Forward program for my own start-up venture, to invest in simple things like a greenhouse or a tractor, and the help that I could get through that. That's an important capital investment that I can access in order to start the business. I think more things like that would help younger people get into the market, because I can't afford to take on the debt of a $1.5-million tractor, or 3,000 acres of land, or 1,000 acres of land. But you can make a living on 10 acres of land and a $10,000 tractor.

It's just a matter of scale and getting to a high-value low-quantity market, rather than a low-value, high-quantity market, because we're a small province. We can't compete with Iowa and other large-scale.... There's a limit to it. We can compete to a certain degree, but I think in order to really compete in the future, programs like Growing Forward that help young people get into high-value markets is really important.

Ms. Karen Ludwig :

I will wrap this up quickly, I'm not sure if I can stress strongly enough how important it is that a young person is here on our panel, because you are our future and the future of our industry. Often young people think outside the box, and we really need your input at all times regarding any of these panels and any of our sectors that we're discussing.

Mr. Jordan MacPhee :

Thank you. I appreciate that.

The Chair :

Thank you, Ms. Ludwig. We're going to wrap up this round with Mr. Ritz.

Hon. Gerry Ritz :

Thank you, ladies and gentlemen, for your presentations here today. It's all good information that we can certainly make use of. Jordan, I'll start with you. You said a couple of things that I'll take exception to, talking about farm debt and farm assets. They're actually in better shape than they've been for 30 years, the debt-to-asset ratio. Farmers on this end...and Mary can probably tell you that. Net income has been going up steadily. This year it's down a bit, but in the past four out of five years it's been setting records. So things are good on the farm, but we want to keep them there.

There are programs available for young entrepreneurial farm ideas through Farm Credit Canada. They have a complete separate pot of money that has less demand on it. All they need is a good business plan from you saying what you want to do, how you want to do it, and they'll adjudicate it. You'll have a far better chance because they understand the need. It's a separate pot of money dedicated to exactly what you want to do. The thing you're going to have to address is how you do the seasonality of fresh vegetables. I agree with you. It's all about value, not volume. Ian made that point as well.

But there are programs out there that maybe aren't well advertised, so certainly check that out.

Mr. Jordan MacPhee :

Right. Let me just comment about the asset-to-debt ratio. I forget in which years the graph started, but I've seen exports over a certain amount of time that have risen by 20 times. I think it was from the 1980s, around when the Canada-United States Free Trade Agreement was signed. In the same period of time, net income has risen six times, adjusting for inflation; so you see exports rising by over three times the amount of the productivity, and the money coming into the farm. On that same graph, there was a flat line at the bottom, and that's actually the money that's staying with the producer.

There's a lot of money coming into the Canadian economy, but a lot of it is going to the middlemen.

(1105) Hon. Gerry Ritz :

Sure, I've seen the ability of overlaying different graphs and coming up with an idea that you want. But talk to these guys. They'll actually tell you where it's at. That's not really reflective of what's happening out there today. Yes, the cost of farming is expensive, and yes, there's a lot of cash flow that's required, and so on, but they're also able to hang onto a lot more money than—

Mr. Jordan MacPhee :

This was Stats Canada. This wasn't like, you know....

Hon. Gerry Ritz :

Yes, well, you're overlaying different things. But at the end of the day, certainly talk to the actual farmers. They'll tell you that life is pretty good. On the whole aspect of diversification of trade, stability and predictability of markets, I'll go to the potato guys for just a second, on the phytosanitary stuff. We constantly argue with our major trading partner. The problem we have with the U.S.—and we've had this discussion, Greg—is that we'll have an agreement with USDA, but then state by state they will change it.

When you go to a TPP type of initiative, where the U.S. signs on on behalf of the states, if the states start to play silly bugger with phytosanitary, you can use the ISDS clause and actually take them to court to bring them to heel and to apply those new regulations. The ISDS is not just harmful to Canada, if you want to categorize it that way, it also creates a level playing field that we can use in reverse on some of those types of situations. We had this fight with potato wart, potato cyst, on seed potatoes and table potatoes. It's there to safeguard both imports and exports.

I had a number of other things, too, but we never have enough time. There's never enough money for everything that needs to be done around marketing, but certainly with the new GF3, or whatever they're going to call it, coming up, there's lots of work to be done, and it has to be driven by innovation, by marketing, and so on. Turning to the lobster guys, fisheries has always been a bit of an anomaly. You're under DFO, but the marketing is done by Ag Canada. There's always that tossing back and forth as to who's going to do it and how it's going to happen.

A number of good food trade shows happen all around the world that you guys are taking

part in and making connections. Japan is a premium market, a value market. I agree with you that it's about value over volume. Canada is known around the world, commodity by commodity, as a premium supplier of quality products. We demand a little more for them, but we get them. Japan is actually buying more wheat now at a higher premium price than they did under the old wheat board regime. It's about making those connections. There is tremendous work being done by our trade consular services.

We kept increasing them, and I know the Liberals have every intention of doing that as well, because they're there to serve you. These are educated people. For the first time ever, in the last five years we have agriculture and CFIA people embedded in embassies and consulates around the world, to be there to help you, because they understand the files. It's not a Global Affairs person with an ag file; it's an actual ag person with your file. Make use of them. Make those contacts, the ambassadors, or back through the marketing side, Fred Gorrell and his guys at Ag Canada. I know I'm out of time. It's unfortunate.

The Chair :

You're out of time, Mr. Ritz. That wraps up this panel. Thank you very much, panellists, for coming. That was a very diverse group, a lot of information, and good dialogue with the MPs. We're going to suspend for 10 minutes and then continue with our next panel.

(1105) (1125) The Chair :

We're going to continue with our TPP consultation process. This is our third panel. We've had quite a few interesting panellists talking about the various industries and perspectives in P.E.I. on this major agreement that's in play right now, the TPP—12 countries, 800 million people, 40% of the world's GDP. Our committee has been travelling across the country. We've done seven provinces and we're finishing up in Atlantic Canada. We're also hearing from citizens. We have over 20,000 emails sent to us and we'll be receiving them into October.

After October we'll be putting our report together and we'll present it to the House of Commons. I thank the panellists for coming here. The way we do it is we'll start off hearing from each of you, for around five minutes, about your background, what you're thinking, and then we'll open it up to MPs to dialogue with you. We have two groups. We have witnesses from the aerospace industry and from Trade Justice PEI. The seafood processors might come a little later, so we'll see what happens. If not, we'll try to get them on the next panel. Without further ado, we're going to start off with Trade Justice PEI.

If you could keep it to five minutes, it would be appreciated.

Ms. Rosalind Waters (Member, Trade Justice PEI) :

Thank you very much for inviting us to speak today. Trade Justice PEI represents 20 island groups and hundreds of individuals on Prince Edward Island who oppose the Trans-Pacific Partnership. The idea that eliminating all barriers to trade will bring prosperity to us all is falling on hard times. Evidence and opinion are mounting against it.

Most recently, Tufts University reports on both the CETA and TPP confirm that benefits from these deals accrue to the corporate elite rather than to workers, and also that seeking to boost exports as a substitute for domestic demand is not a sustainable growth strategy for Canada. Nowhere is this more obvious than in Prince Edward Island where the agenda is driving unsustainable agricultural models, and at the same time taking away our democratic rights to legislate in the public interest.

We have fish kills in many of our rivers year after year, and estuaries that go anoxic on a regular basis because of heavy inputs of nitrogen-based fertilizers. Our current strategy for agriculture is weighted towards producing massive amounts of potatoes. This requires monoculture of a crop that is heavily dependent on high inputs of chemical fertilizers and pesticides that have devastating effects on our environment. P.E.I. ecosystems simply cannot support any more of this type of agriculture.

Our concerns with the TPP include its adverse impact on supply management and rural communities, the locking in of privatization, and also the single-minded focus on expanding industrial agriculture. Today we want to talk about three issues: health care, ISDS, and labour rights. Loss of democracy is a thread through all of these three topics. The requirement that Canada extend patent protection for pharmaceuticals blocks any future attempt by a government to control drug prices. It is estimated that it will cost islanders between $2 million and $3 million annually in increased drug costs.

On P.E.I., services such as dialysis and emergency services in rural areas have recently been threatened due to budget cuts. An increase in drug costs will put further pressure on P.E.I.'s health budget, putting services at even greater risk. The rights given to corporations through the market access rules and investor-state dispute provisions create barriers to strengthening medicare. Bringing services such as pharmacare, dental care, and home care into the national public program would be exposed to challenge.

Investor-state dispute provisions in the TPP give corporations extraordinary rights to sue taxpayers whenever public interest legislation gets in the way of their profits. The tribunals which hear these cases are outside of the Canadian legal system and can order governments to pay corporations millions of dollars. It amounts to a huge transfer of risk from corporations to the public purse. That's unfair and it's anti-democratic.

As Atlantic Canadians, we're close to three NAFTA cases which demonstrate well the effect of ISDS on public interest legislation: the Bilcon case in Nova Scotia; ExxonMobil versus Canada, involving a Newfoundland job creation policy; and threats to New Brunswick's efforts to introduce public auto insurance in 2004. P.E.I. is a very fragile ecosystem.

Our only source of water is our groundwater, and demands from the community for policies protecting our land, rivers, and shellfish industry include a moratorium on hydraulic fracking, no drilling of oil in island waters, controls on land use, and a moratorium on high-capacity wells. These policies could all be targets of ISDS. Under the TPP, companies doing business in Canada will be freer to transfer skilled trades workers and technical employees to Canada, even when Canadian workers are available to perform the jobs. In a high unemployment region such as P.E.I., this provision is particularly offensive.

(1130) Pro-TPP studies project tiny economic gains, and the models used are highly unrealistic. Critical studies using more realistic models predict increased inequality and job losses. Already 93% of Prince Edward Island exports to TPP countries are tariff-free.

The Chair :

Excuse me. Could you wrap it up in the next half minute?

Ms. Rosalind Waters :

Yes. Any increase in exports will likely be offset by increased imports and intensified competition in the U.S. market. Let's remember that Vietnam is the third-largest exporter of seafood in the world and has very low labour costs. For all these reasons, we believe that the TPP is not in the interests of islanders. The agreement drives loss of democratic control over policy, unsustainable development, and increasing inequality. Thank you very much.

The Chair :

Thank you. That wraps up your session. We're going to move to the aerospace industry in P.E.I. We look forward to hearing about your industry and your perspective. Go ahead, gentlemen.

Mr. Eric Richard (President, Aerospace and Defence Association of Prince Edward Island) :

Good morning. Thank you for giving us the opportunity to offer our input into the Trans-Pacific Partnership agreement. Before doing that, I would like, first of all, to provide you with some historical context of the aerospace and defence industry on Prince Edward Island, which I hope will give you all a sense of the importance of the sector to the province's economy. Our industry itself is only 25 years old, dating back to a 1989 federal government announcement of the closing of CFB Summerside, which had housed 413 Transport and Rescue Squadron.

One of the solutions used as an economic adjustment strategy was the privatization of the base facilities and the employment of those assets to pursue aerospace and training development initiatives. In 1991 the base assets were turned over to a new entity, Slemon Park Corporation, and shortly after two firms moved into what is known as Hangar 8: Atlantic Turbines International, a gas turbine engine maintenance, repair, and overhaul company initially employing 20 people, in year one, and Bendix-Avelex, a gas turbine engine and fuel control maintenance repair and overhaul company employing 16 people in year one.

Today Atlantic Turbines is now Vector Aerospace and employs over 450 people, and Bendix-Avelex has evolved into Honeywell Aerospace, Summerside and employs close to 100 people. A number of other companies have since established operations in either Slemon Park or other areas of Prince Edward Island, including Summerside and Charlottetown.

As for the dynamics of the industry in this province, it is centred in the commercial maintenance, repair, and overhaul space as well as manufacturing, but also includes a number of marine-based companies that are active in pursuing opportunities in the national shipbuilding strategy. Since those early days, growth has been very attractive. First year annual sales for the initial two companies of $45,000 have grown to 11 companies in 2015 generating close to $430 million, 75% of which is export-related, and employment is more than 950 people.

From its origins to today, it is clear that the aerospace and defence sector in Prince Edward Island is very important to the economy of the province for not only the export sales, payroll, and taxes it generates, but for diversifying the economy as well. Aerospace and defence is now the third-largest industry in the province and holds itself well against the country. In fact, a recent economic impact study concluded that, among the 10 provinces, the aerospace and defence sector in P.E.I. is second only to Quebec in per capita value of international exports.

With that historical context serving as a backdrop, the aerospace and defence sector of P.E.I. is reliant on export-driven revenues. By extension, we welcome efforts in achieving access to export markets. In general, we support the Trans-Pacific Trade agreement; however, we will also say that we are not aware of the overall effect the agreement would have on our sector here in Prince Edward Island. We understand that tariffs will be removed on aerospace parts, but we are not sure of the effect on maintenance, repair, and overhaul services.

As well, we are unclear as to how well defined the efforts in standardization have become to this point, particularly as they relate to adopting AS9100 and ISO 9000 under the Asia-Pacific aerospace quality group and ISO. In closing, we generally support the TPP. We don't see it as a major game-changer to our industry; however, we look forward to monitoring the progress and defining standardization such as technical regulations and conformity assessment procedures that include testing, inspection, and verification. Thank you very much.

(1135) The Chair :

Thank you. What a story. We often hear of tourism, fisheries, and agriculture, of course, the big three, and look at how your industy grew. It's a bit of an example, too, where the government set the table—sometimes I guess they do things right—and private industry took it from there. It's a good story, and thanks for coming. We have another witness who might be in later, Dennis King, but we are going to start the questioning, and if he comes in, we'll let him jump in and then continue on with the rounds. We're going to move on and start off the dialogue with the MPs. Mr. Ritz is first. Go ahead, sir, for five minutes.

Hon. Gerry Ritz :

Thank you, ladies and gentlemen, for your presentations today.