Mr. Richard Doyle (Executive Director, Dairy Farmers of Canada):
Mr. Chairperson, thank you for the opportunity to participate in the committee's study on the benefits to Canada of the Trans-Pacific Partnership.
The Dairy Farmers of Canada recognizes the importance of trade for this country and is on the record as supporting the government entering the talks based on the balanced trade negotiating position.
Our director of trade, Mr. Yves Leduc, who was originally scheduled to appear before this committee, is currently in Brussels, unfortunately—I don't know if it's fortunately or unfortunately, but he's in Brussels—following the CETA negotiations and I'll try to replace him and answer your questions, if I can.
The aim of the Canadian milk supply management system is to balance supply and demand, as well as balance market power among the supply chain stakeholders. Despite concentrating our effort on the domestic market, international trade talks are an important aspect when it comes to maintaining the integrity of the Canadian system in the future. Predictable imports are critical considering that dairy farmers discipline their production to ensure domestic demand is met without creating unnecessary surpluses.
Between 6% and 8% of our Canadian dairy consumption is supplied by imported dairy products coming in tariff-free, which makes Canada more generous than the U.S. or EU in terms of access. Predictability and import control are not equal to no imports. Dairy farmers are proud of the dairy sector's contribution to the Canadian economy, and we consider ourselves job sustainers, providing stability in the economy and supporting our rural communities.
It should also be noted that the Canadian dairy sector increased its number of Canadian jobs between 2009 and 2011. Dairy farmers are doing their part of the economic action plan to keep our economy strong and prosperous.
Essentially 100% of our dairy sales take place on the Canadian market. Exports only represent roughly 1% of Canada's milk production and export opportunities are virtually nil as a result of the negative decision in the late 1990s of the WTO panel on Canada's export policy. Any market opening, therefore, even if it were reciprocal, would come at the expense of Canadian dairy farmers.
Canada has negotiated 11 trade agreements with a number of negotiating partners over the past 20 years and has always maintained supply management for dairy and poultry. In other words, no concessions have been made with respect to TRQ expansion or over-quota tariff reduction. This is fully in line with the position defended by the Canadian government and which was clearly spelled out in the motion which was unanimously adopted in the House of Commons on November 22, 2005. The motion clearly states that Canada will accept no over-quota tariff reduction and no TRQ expansion for its supply-managed products as part of its balanced negotiating position in any trade discussions.
DFC would like to express its appreciation for the comments made by the Prime Minister, Minister Ritz, Minister Fast, and their parliamentary secretaries, who have consistently reiterated on a number of occasions that they will not make any concessions on supply management. We also very clearly want to acknowledge and appreciate the continued support of all parliamentarians for a system that is working well for Canada.
We've tabled with you a more detailed brief this afternoon, but I would like to address two issues with regard to the TPP trade talks.
First, negotiations like those on the TPP are often presented as being subject to no a priori exemptions. It is interesting to note, however, that domestic support in agriculture cannot be found on the negotiating agenda. Failing to discipline the use of such subsidies which can be very trade distorting goes against the principle of a no a priori exemption.
Second, I would like to mention that all countries, including New Zealand, Australia, and more particularly the United States, have a number of sensitive sectors. There are several examples outlined in our submission, but many more can be found. While we may be more up front about it, as Canadians, we don't have to be shy to defend what is in the best interests of Canadians and Canadian industries.
In conclusion, Mr. Chair, Dairy Farmers of Canada is on record as supporting the Canadian government entering the TPP trade talks as part of the government's trade agenda that is based on the balanced trade negotiating position. For dairy farmers, this means that the government will continue to defend supply management both domestically and internationally, in line with the June 3rd, 2011, Throne Speech and the November 2005 House of Commons motion.
Consequently, Canada must not give any concessions in the TPP or any other trade negotiation that would in any way undermine the credibility of the Canadian negotiating position at the international level with respect to Canada's right to maintain supply management.
Thank you for your attention. I will be happy to respond to your questions.
Mr. Scott Sinclair:
Mr. Chair, I thank the committee for the invitation to participate.
Today's trade and investment treaty negotiations no longer deal exclusively, or even primarily, with trade matters. They are increasingly about putting new types of restrictions on how governments and societies are able to democratically regulate themselves. This is particularly true in the case of TPP negotiations with the U.S. and 10 other Pacific Rim nations, which Canada joined last year. It has been consciously sold as a next generation, 21st century trade and investment agreement that will delve into many behind-the-border regulatory matters. The agreement is designed to tie government's hands in many areas only peripherally related to trade, including patent protection for drugs, foreign investor rights, state-owned enterprises, local government purchasing, orderly agricultural marketing, cultural expression, and public interest regulation.
Canada already has trade and investment treaties with four other TPP members. It is in separate bilateral negotiations with Japan. The other six countries combined account for less than 1% of Canada's exports. With the exception of the Japanese market, there is limited trade expansion upside, yet there are very significant policy risks for Canada in this side of negotiations.
The TPP is primarily a U.S. driven and dominated project. From their perspective, it is a geopolitical exercise with a dual purpose: to construct a trade and investment bloc that reflects U.S. commercial interests and regulatory norms, and to counter the growing dominance of China in the Asia-Pacific region. The U.S. expects the TPP to curb China's influence by providing an advantage to U.S. commercial interests over Chinese competitors within the bloc, and ultimately the goal is to convince China to join the TPP on terms that compel Chinese reform in areas such as state-owned enterprises and currency manipulation. It is far from clear that the TPP will have the desired results in China. It will certainly enable the U.S. to apply intense pressure on other TPP members, including Canada, to accede to their ambitious regulatory demands.
A key problem with the agreement and the processes is that despite its potential to have serious implications on governments at all levels of the citizenry, the negotiations are excessively secretive. There are no opportunities for public scrutiny and debate of negotiating proposals and texts. The 26 draft chapters and other negotiating documents are stamped as classified for four years from entry into force of the TPP agreement, or if no agreement enters into force, four years from the close of the negotiation. Officials and private sector advisers must sign strict non-disclosure agreements. This extreme level of secrecy is unacceptable, especially when one considers that the TPP deals with regulatory matters that go to the heart of democratic decision-making in the public interest. Any agreement would restrict the policy options of future governments for generations.
There are precedents for greater transparency. The draft text of the free trade area of the Americas, FTAA, was publicly released in 2001. The WTO regularly publishes negotiating proposals and draft texts. It is critical that the TPP terms be subject to greater scrutiny by the public, outside experts, and legislators before they are agreed to and essentially set in stone by negotiators.
The rest of my remarks will focus on two important areas where some information has been leaked from inside the negotiations: first, the impact of TPP proposals on drug costs; and second, the investment protection chapter and investor-state arbitration.
The U.S. proposal for intellectual property in drugs has been leaked. It incorporates demands from the brand name industry for WTO-plus patent protection, including longer periods of data exclusivity, stronger patent linkage provisions, and significantly for Canada, patent term extensions, which would add to the term of the patent the time it takes for health regulators to give regulatory approval to a drug, up to a maximum of five years.
The U.S. has made these proposals for longer periods of patent protection conditional on a so-called access window. This would give brand name drug companies access to the stronger IP protections only if they stopped marketing approval for a drug in another TPP country within a certain as yet unspecified period of time, after first obtaining marketing approval in another country. But the access window is little more than window dressing. The proposed changes would invariably reduce the availability of cheaper generic medicines and drive up costs to consumers and governments.
Currently Canada does not have a system of patent term extension, although it is widely expected that the CETA will move us in this direction. The estimated cost of implementing a full system of patent term extension is around $2 billion annually. Containing rising drug costs is essential, and these U.S. demands could deal a further blow to the sustainability of Canada's universal health care system.
The U.S. has also proposed new rules that would undermine important drug cost containment policies, including price regulation and reimbursement levels. A proposed annex to the TPP transparency chapter would deal specifically with pharmaceutical and medical technologies. It includes procedural rights for drug companies to participate in the decision-making process for reimbursement, and substantive rights, which are quite vaguely worded but were based on prices as set, for example, by the Patented Medicine Prices Review Board on the value of the patent or market-based prices.
The potential impact of these transparency proposals, which I would be happy to discuss in further detail, including the costing facts, should be studied fully and debated widely.
I would like to turn now to investor-state arbitration. A draft text of the TPP investment chapter was leaked last year. It revealed a U.S.-style investment protection agreement modelled on NAFTA chapter 11 and U.S. bilateral investment treaties, BITs. Significantly, the chapter includes an investor-state arbitration mechanism.
Four investors have already used chapter 11 and BITs to challenge a wide range of government measures that allegedly diminished the value of their investments. Since most government regulations or polices affect property interests, NAFTA's investor-state rules and similar mechanisms have been strongly criticized for giving multinational corporations far too much power. Investors do not need to seek consent from their home governments and are not obliged to try to resolve complaints through the domestic court system before launching an investor-state claim. There has been a steady rise in the number of actions against Canada, particularly in the area of environmental protection. We are also witnessing the use of more aggressive arguments, such as in Eli Lilly's investor-state challenge to a Canadian court decision to deny patent protection on one of its drugs.
Agreeing to investor-state arbitration in the TPP will greatly expand the pool of foreign investors who have the right to invoke the severely flawed mechanism. The leaked investment text notes that Australia is refusing to be bound by this mechanism. Australia adopted this position in 2011 after a thorough independent review of the costs and benefits of investor-state arbitration. Such a review is long overdue in Canada and until one is completed, Canada would be wise to follow Australia's example.
There was also a growing problem of incoherence in the various investment protection treaties that Canada is negotiating. For example, in the Canada-EU agreement, Canada is under pressure to agree to stronger investment protection rights in certain areas, such as minimum standards of treatment. NAFTA's most-favoured-nation provisions require that all protections given to the European investors be extended to investors from the U.S. and Mexico. As a result, these investors will be able to mix and match investor rights from NAFTA chapter 11 and the CETA to construct the most favourable challenge. This problem of treaty shopping will only worsen under the TPP.
To close, the astonishing range of matters being negotiated within the TPP underlines how far this process has strayed from bread-and-butter trade issues. New disciplines on state enterprises, ostensibly aimed at China, could impact CBC and Canada Post. Both the U.S. and New Zealand are insisting on significant access to Canada's dairy market, as we've heard, which would threaten the viability of supply management. As you will hear from other witness, TPP treaty commitments to the free flow of commercial information may undermine domestic privacy policies. The U.S. has never accepted the legitimacy of Canada's cultural exemption in trade treaties, and this will be up for grabs once again. The list goes on, and may well include new issues and matters that are net yet public knowledge.
The role of Parliament in examining this treaty and how it may affect Canadian interests is critical. There needs to be a much fuller discussion of the range of potential costs and benefits, but meaningful discussions and debate are hampered by the unprecedented level of secrecy and the difficulty in obtaining proposals and negotiating texts.
Mr. Gerald Keddy (South Shore—St. Margaret's, CPC):
Thank you, Mr. Chairman.
I welcome our witnesses. It's always good to have a few dairy farmers in the room. In the interests of full disclosure, my wife grew up on a dairy farm, so it's near and dear to me, and I think there's a few committee members who have some dairy experience.
I have a couple of questions. One is an overall question surrounding the importance of confidentiality when you're negotiating agreements and especially international agreements. Sometimes these agreements can take years, if a lot of information that gets out is, quite frankly, wrong.
The Dairy Farmers of Canada sat on the committee. You signed a waiver, which you mentioned, on confidentiality, but you were part of the process and you were briefed, and therefore your membership was briefed.
What's your membership? How many dairy farmers across Canada do you represent?
Mr. Gerald Keddy:
But not that it's an exaggeration, though.
On the TPP, there's a lot of discussion here about how we joined after the ninth round. Quite frankly, I think there's some surprise in the lack of forward momentum. You have to realize that there's a lot of talk about the United States steering these meetings, but the United States wasn't a founding member. A number of countries decided to open up the Trans-Pacific Partnership.
There's a lot of work to be done here. I think most of us who believe in free trade welcome this group, but none of us is so foolish as to think they're going to be able to negotiate an agreement by the end of the year. If they can, good luck, but it's a huge undertaking.
Mr. Cannan wanted a couple of questions, but I have one before I wrap up.
With your association with the government—not just our government, but previous governments—in briefings and in having the dairy industry and the supply-managed sector as a whole understand what our free trade agreements are about, are you satisfied with your briefings and the amount of input you have with government?
Hon. Wayne Easter:
My next question is for the Dairy Farmers of Canada. Richard, on this text business and being on the sectoral committee, you said that being on that sectoral committee may be lacking a bit. I would say, and let's be honest, without the text in terms of the sectoral committees, setting up the committee on the part of the government is absolutely nothing short of a farce. That's all it is. They just want to use the number to say that we're meeting with people. If commodity groups and organizations don't have the text, then the whole thing, in my view, is nothing but a farce.
That's where I sit, because here's the thing: you have somebody on the committee who signs a declaration of confidentiality, has no access to the text, and is maybe or maybe not briefed on the text, but because of the confidentiality agreement, he or she can't go to the board of directors and tell the board of directors what we're talking about. How can that person represent the group on the sectoral committee? He or she can't tell anybody, and doesn't even know if they're dealing with the issues that are in the text.
I mean, that's just absolutely nothing but a farce. Let's call it what it is.
I don't know if you have a comment or not.
Hon. Wayne Easter:
The problem is, Richard, that they can't talk to the very representatives of the industry that they're supposed to be representing in the negotiation. My point still stands.
You mentioned, Mr. Doyle, that more access is allowed into Canada for dairy products versus access we have into Europe or the United States, but that's not well known. In fact, I mentioned it to some people this morning, and they were shocked, because Canada is seen as protectionist. We are more open on dairy access than these other countries. We've somehow lost the messaging fight.
The USTR is clearly using the TPP to try to break our system. The USTR publication on foreign trade barriers said, “supply management...severely limits the ability of United States producers to increase exports”. The Congressional Research Service said, “...to tackle outstanding non-tariff measures that have limited, and could further restrict, access for U.S. fluid milk...and cheese into Canada's market”.
Could you expand a little on what we do versus what they do? That information has to get out there. We're an open market even though we—
Mr. Bev Shipley (Lambton—Kent—Middlesex, CPC):
Thank you, Mr. Chair.
Thank you to our witnesses.
Maybe I am a little closer to the dairy industry than some of the others here. One of the things I find interesting is that when you talk about.... We've always been criticizing Canada because of the pricing. I'll use the context of $1.45 a litre for milk, whereas in New Zealand, where they've opened it up and taken it away, it's actually $1.65 a litre. In Australia, it's $1.55. In the United States, they have so many subsidies attached that it's hard to trigger down, but actually, across the board, the price per litre of milk is more than it is in Canada.
On turkeys, for example, we always hear about the cheap turkeys you can buy because of the lack of supply management in the States. Canada's price is actually $2.97 a kilogram and in the States it's $3.26. That's over a 13-year average.
Mr. Doyle, in terms of Canada's position, with the 11 trade agreements you referenced that are in place, have you been satisfied with the outcome, the end result of those agreements in terms of your producer organizations?
Mr. Scott Sinclair:
That would be a matter that would have to be agreed to by all the members.
There's also leeway that can be taken by governments and negotiators. The United States negotiators, as is generally the case in negotiations, use leaks strategically. They are much more open about what their demands are, and in a sense are less preoccupied with secrecy when it doesn't suit their purposes.
Canada could play that game more, but I think what would be more preferable, of course, would be an agreement to open up the process to outside scrutiny. I think you're invariably going to have better outcomes.
These texts are not easily understood or accessible. They need to be explained by negotiators. Negotiators need to have a few things explained to them, for example, from public health experts and legal experts who are outside the formal consultative process and outside of the negotiating room.
Mr. Ed Holder (London West, CPC):
Thank you, Chair.
I'd like to thank both our guests for being here today.
Chair, I was listening to testimony from our guests. I heard less testimony than I heard a soliloquy from my colleague opposite, Mr. Easter. One thing struck me about that. I was thinking about his comments about transparency. I just want to make this statement, because transparency seems to be an issue among our guests, and certainly Mr. Easter has extended that conversation quite a lot.
I thought I'd do a little research. I went back to when Mr. Easter's party was the party in power. They did not have a lot of free trade agreements on which to base my conclusions because that wasn't as much the focus, but to be fair they did some, with Chile, Costa Rica, and Israel. I was struck by the fact that the Liberal government of the day was exceptionally careful not to share information. They knew if they had to do a deal there were going to be negotiations and discussions that had to be in private.
It's very curious that now that the member opposite is in a different position, he seems to make a different argument.
I'd like to ask Mr. Doyle a question. You made the comment in your testimony that you're concerned you haven't seen the text. Has it hurt you so far?
The time is up.
Certainly this committee has embarked on a TPP study that promises to be very lively and very public.
That takes us to the end of our first session.
We are expecting a vote and the bells to ring within a minute and a half, so any time now. It's unfortunate because our second session, I believe, unless something is going on in the House.... Things happen in that place that sometimes change the agenda. The bells are ringing right now, so things haven't changed, unfortunately. We're going to have to postpone the second hour of our testimony and bring these two players back at another time.
I want to thank the two witnesses for kicking off this study in a very exciting way.
With that, the meeting is adjourned.