The Chair (Hon. Mark Eyking (Sydney—Victoria, Lib.)):
Good morning, everybody.
She's been a rough wet night and morning, but it's good to see everybody here.
We're going to try to have this meeting structured a bit like the last one. I'm thinking that we'll have our first round. We'll probably do 50 minutes. Then, if the other guest witnesses are here, we'll go right to them. Then we'll try to save the last 15 minutes for new business.
Is that in agreement with everybody?
Some hon. members: Agreed.
The Chair: Our main topic today is agriculture. That's dear to many of our hearts, especially with our former minister here.
To start off, we have the Canadian Agri-Food Trade Alliance here today, and the Vintners Association.
If you folks are ready, we usually try to keep our presentations tight, so we have lots of room for questions. I'm sure you've done this before.
We're going to start off with the Agri-Food Trade Alliance.
Ms. Citeau, go ahead.
Ms. Claire Citeau (Executive Director, Canadian Agri-Food Trade Alliance):
Thank you, Mr. Chair.
On behalf of the Canadian Agri-Food Trade Alliance, or CAFTA, which is the voice of the Canadian Agriculture and Agri-Food exporters of Canada, I thank you for having invited me today to speak to you about the Trans-Pacific Partnership.
CAFTA is a coalition of national and regional organizations that seek a more open and fair international trading environment for agriculture.
Our members represent farmers, producers, processors, and exporters from major trade-dependent sectors including the beef, pork, grain, oilseeds, sugar, pulse, soy, and malt sectors. Together that's roughly 80% of Canada's agriculture and agrifood exports, about $50 billion annually in exports, and an economic activity that supports hundreds of thousands of jobs across the country.
As you know, Canada has one of the most trade-dependent agriculture sectors in the world. We export over half of everything that we produce, and 60% of that goes to TPP markets. CAFTA strongly supports the TPP and believes that it is integral to the future viability of Canada's export-oriented agriculture sector. It is essential that the TPP be ratified and implemented quickly.
The TPP region represents a market of 800 million people and absorbs 65% of our exports. It includes some of our top trading partners: the U.S., Mexico, and Japan. But it also includes some of our largest competitors: the U.S., Mexico, and Australia. Some signatories already do have trade agreements with one another.
Specifically, Japan is our third priority export market and a premium market that demands $4 billion per year in Canadian agrifood products. That's roughly 10% of our total agrifood exports. TPP countries also include fast growing markets in Asia such as Vietnam, Singapore, and Malaysia.
Additional access to the U.S., Japan, Vietnam, and Malaysia appears to be the major market gain for Canadian agriculture and agrifood exporters under a ratified TPP. Tariffs will be removed or phased out of a number of export commodities in key markets. Outcomes are significant for Canadian agriculture and agrifood exporters despite the fact that the U.S. and Japan remain highly restrictive on their sugar market.
I would like to share with you a sample of CAFTA members' projections of the opportunities that seem to be provided in the TPP. For canola these include better trade security, more value for their products, and increased exports by up to $780 million per year. For pork producers, the opportunities are preferential access ahead of non-TPP competitors and the ability to compete in the billion-dollar Japanese markets, where exports could climb to $300 million. Canadian beef producers expect to double or triple annual exports to Japan to nearly $300 million. Canadian barley producers could export an additional 400,000 to 500,000 tonnes of barley in various forms, worth about $100 million.
The TPP will create new opportunities, provide a secure trading environment, level the playing field, and preserve current exports for a lot of our products. This applies to our 1.5 million tonnes of premium wheat exported to Japan; our $2.3 billion in grains and special crops going to Japan, Malaysia, and Singapore; our $884 million in soybean exports to TPP markets, and our $340 million in pulse exports to TPP markets.
As for Canada's sugar and sugar-containing products, the TPP provides welcome, though small, increases into the restricted U.S. market. The industry is currently looking at doing an analysis of what the opportunities in Japan, Vietnam, and Malaysia will mean for their sector.
Beyond tariffs, the TPP also sets a new Asia-Pacific framework for trade with rules to increase co-operation and transparency on non-tariff barriers related to sanitary and phytosanitary measures, biotechnology, and plant health.
We recognize that this agreement may do more for some than others and will certainly not eliminate all tariff barriers in the region, but all our members are united in supporting the TPP as a significant improvement on the status quo for all Canadian agrifood exporters and our broader economy in general.
Overall, the TPP preserves our privileged access to our number one trading partner, the U.S. It secures unprecedented access to fast-growing Asia-Pacific markets, and it provides an opportunity to enhance our competitive position in the region and obtain more value for our products. It also provides an opportunity to negotiate the terms of entry of potential future countries such as South Korea, Taiwan, Thailand, the Philippines, and others.
Most importantly, the TPP puts us on an equal footing with our global competitors in the region. Canadian agriculture cannot afford to relive the destructive experience of South Korea, which saw a billion-dollar market virtually cut in half overnight when our competitors, namely the U.S. and Australia, had access to this market and we did not.
Ultimately, if we're not part of the TPP and other signatories are, we will fall behind, so the best way to implement the TPP quickly is to ratify it quickly. The TPP will substantially increase opportunities for hundreds of thousands of farmers, producers, and exporters who depend on trade. Without such an agreement, Canada would be ceding market share to global competitors in the region.
Mr. Dan Paszkowski (President and Chief Executive Officer, Canadian Vintners Association):
Good morning. My name is Dan Paszkowski. I am the president and CEO of the Canadian Vintners Association, better known as the CVA. I'd like to thank everybody for the opportunity to provide the Canadian wine industry's perspective on the Trans-Pacific Partnership agreement.
As the national voice of the Canadian wine industry, our members are engaged in the entire value chain, including grape growing, farm management, grape harvesting, wine production, bottling, retail sales, research, and tourism.
Canada is a premium global wine producer, skilfully producing high-quality table wine, sparkling wine, and icewine. Canada's wine industry is robust and growing, contributing $6.8 billion to the national economy, supporting 31,000 jobs, and attracting more than three million tourist visitors every year.
Canadian vintners are actively engaged in the global economy, with $74 million in export sales shipped to 40 countries in 2015, up from $20 million in 2005. From Nova Scotia to British Columbia, vintners support a competitive and fair global trading environment, recognizing the numerous benefits to industry, customers, and the greater economy.
Under the TPP agreement, the Canadian wine industry widely anticipates developing preferential relationships with our largest trading partners, providing enhanced access to 800 million consumers, and nearly 40% of the world economy. While roughly 96% of our TPP wine export value is currently exported to the United States, Asia-Pacific consumers are rapidly increasing their interest and demand for premium wines, providing important new market potential for Canadian vintners.
TPP members are responsible for 98% of Canada's current wine export volume, in part because Canada already appreciates tariff-free access with the United States, Mexico, Chile, and Peru. Nonetheless, the proposed agreement will offer immediate and tangible benefits to the Canadian wine industry, reducing costly tariffs, providing greater protection for authentic icewine, and streamlining complex technical and administrative barriers to trade.
If Canada were excluded from the TPP, the sole benefit of these negotiations would go to some of the world's most ambitious wine-exporting countries, namely, Australia, Chile, New Zealand, and the United States, leaving Canadian vintners significantly disadvantaged.
Most importantly, today I want to emphasize that our export growth realization is tied to our domestic success. The Canadian wine industry is firmly rooted in Canada, yet our domestic market share is a mere 32%, 10% of which is for our premium wines, the lowest of any wine-producing region in the world.
For the Canadian wine industry to reach its full potential, decision makers and political leaders must recognize that TPP countries already represent 46% of total wine volume imported to Canada. Combined with CETA, this amounts to 89%. Our competitors are eager for even greater sales, investing millions annually to market their products in provincial liquor boards. Last week, The Globe and Mail reported that New Zealand wine export sales to Canada were up 18% in 2015, surpassing 92 million, and this is before the full implementation of import tariffs when the TPP enters into force.
All eyes are on Canada. We are the second largest wine-growing market in the world, with wine consumption growing three times faster than the global average. Canada is the sixth largest wine importer in the world and over the past decade, imports have captured 75% of Canada's 150 million litre wine sales growth. Looking ahead, Canadian wine demand is expected to grow by 50 million litres, or 11%, by 2018, making our country increasingly attractive to our import competition.
The Canadian wine industry looks forward to the removal of tariff and non-tariff barriers to trade with TPP countries, but given the front end competitive benefits that this agreement offers our competitors, ratification must include federal support to help the wine sector adjust, take advantage of, and prepare for trade agreements like TPP and CETA.
With 685 grape wineries operating across Canada, our future success in the global market remains intricately tied to our growth and success at home. A competitive tax system, support for private infrastructure investment, and the removal of interprovincial barriers to wine trade will help stimulate innovation and business investment, enhance our competitive position, capture greater domestic share, and help take advantage of these emerging export opportunities.
Thank you for your time. I look forward to your questions.
Mr. Dan Paszkowski:
We're different, for example, from the dairy sector, which has 100% market share in Canada; we only have 30% market share. In order to support our growth, we have to grow domestically to be able to take advantage of the opportunities that the TPP has to offer us, and we do believe there are opportunities.
The things that we're talking about are support for innovation and infrastructure in the wine industry, so that we can produce better quality wines, so we can put in place some climate resilient technology. As David mentioned, with the cold snap in southwestern Ontario, if there had been wind machines there that could keep the warm air down on frosty evenings, it would have protected that entire crop, and these winemakers wouldn't now be waiting three years to take advantage of profitability. Those types of things would be helpful for our industry, and help us to take advantage of what the TPP has to offer.
Also, we're working with one hand behind our back—actually two hands—because we don't have free trade within our own country. British Columbia, Manitoba, and Nova Scotia are the only three provinces that have opened up their borders since a unanimous bill passed in the House of Commons and was approved in the Senate in 2012.
If we had those types of things in place, we could grow our domestic market, and therefore, take advantage of these agreements. With reduction in tariffs, New Zealand and Australia will continue to grow their market share here. If we can't compete, we won't benefit domestically and we won't benefit from the TPP.
Mr. Dan Paszkowski:
I can't disagree with you. British Columbia does make some fantastic wines.
We'll be holding our first wine caucus, non-partisan wine caucus, on March 7. I'm sure all of you will be invited to participate, and there's always a reception at the end of our caucus meeting. I think British Columbia has great opportunities from the TPP in terms of its location in the world and Asia-Pacific. Japan is our seventh largest trading partner for wine. There are great opportunities in Japan, Singapore, Malaysia, and Vietnam with the reduction of tariffs. I did mention that the tariffs in Canada ranged between 2¢ and 5¢ per litre. They are significantly higher in those countries. Vietnam has a 50% ad valorem tariff and in Japan it's 15%. The elimination of those tariffs will allow us to compete with, as was mentioned, Chile and Australia, which already have free trade agreements with Japan, and allow us to get greater access into a market where wine consumption is continuing to grow.
As I mentioned, from a negative perspective for British Columbia, if more Australian and New Zealand wines enter into that marketplace at a faster pace than we can grow our own domestic share, that will continue to reduce market share in Canada.
I did mention that we went from 50% to 32%, but over that period of time, from 2000 to 2015, we also increased our production of quality wines in Canada by five times. Market share is lower, but production is higher, and we believe we can grow that to the benefit of the Canadian economy.
From an Agreement on Internal Trade perspective, three out of the 10 provinces have opened up their borders, two of which are wine-producing jurisdictions. We believe that if ministers, who are supposed to be meeting on the Agreement on Internal Trade in March, could focus in on wine, even if it was as a pilot project, to continue to open up borders would be extremely helpful. As we grow our market share domestically, we'll be able to take greater advantage of the TPP.
I'll give you an example from the United States. Small wine producers in the U.S. represent 5% of production. In 2005 in the United States, the Supreme Court ruled that it was unconstitutional to allow a winery to ship directly to a consumer within the same state but not to allow a winery out of state to ship to that consumer. Since that time small wineries have represented 51% of direct consumer delivery in the U.S. They will continue to become more profitable because they're getting more margin for their products. As they continue to become more profitable, they're going to start exporting to the most attractive wine market in the world, which is Canada, which is going to put us at a competitive disadvantage.
It's extremely important that we do make progress in opening up our borders so that we can take advantage of the export opportunities we have but also to protect ourselves from those other wine producers that are growing because they don't have two hands tied behind their back.
Mr. Mike Dungate (Executive Director, Chicken Farmers of Canada):
Thank you, Mr. Eyking.
Good morning, everyone. Thank you for inviting us to share our perspectives on the Trans-Pacific Partnership.
My name is Mike Dungate. I'm the executive director of Chicken Farmers of Canada. With me today is my colleague Yves Ruel. He's our manager of trade and policy.
I'd like to quickly tell you a bit about our industry, about how the chicken industry benefits all of Canadian agriculture, and about how we can improve our contribution to Canada's GDP, in spite of the additional access that Canada had to provide to conclude the TPP agreement.
We're a national organization. We represent 2,700 chicken farmers in Canada. Our board of directors has farmers, processors, further processors, and restauranteurs. We take a value-chain approach to it and really are a growth and a value-addition success story.
We sustain 78,000 jobs, $2.4 billion in farm cash receipts, and $6 billion in contribution to Canada's GDP. We pay $2 billion in taxes. We're part of the economic solution. We also purchase 2.5 million tons of feed, annually, and support other farmers with what we do.
We have farmers located in every province and we have more farms today than we had in 1978 when we started our business. Production has grown steadily, about 20% in the last 15 years. The year 2015 marked the sixth consecutive year of growth. We grew 3% this last year.
Contrary to a popular misconception, our market is not closed. Everybody focuses on the high over-quota tariffs, which nobody pays. Their sole purpose is to determine what the level of access is to our market and provide certainty. People avoid talking about the tariff that people actually pay. For every one of our free trade partners, chicken comes into Canada duty free or at a maximum of 5.4%.
It's not applied just on a small amount. In 2015 we imported 214 million kilograms of chicken into Canada. That makes us the 17th largest importer of chicken in the world. It makes us the second most important market in 2015, up from number three for the U.S. and after Mexico. Of the 12 Trans-Pacific Partnership countries, we import more chicken than the U.S., Peru, New Zealand, Australia, Malaysia, and Brunei combined. That's absolute volume with 35 million people. We're a big importer of chicken.
Only 10% of chicken production is exported globally. That's because it's a fresh market product. It doesn't have the shelf life of other meats and that's why it is at that level. Of the 10% of global production that is traded, Brazil and the U.S. account for 75%. In fact, we're the eighth largest exporter of chicken in the world, but we're a bit player, at that.
We believe we can increase our contribution to the Canadian economy, despite the concessions provided under the TPP.
At the end of the TPP's implementation period, we will offer additional access of 26.7 million kilograms to our market on an annual basis. This is the equivalent of us losing 61 farms in Canada, average size, with annual sales of $57 million. That's the hit that comes on us. In a loss, in terms of jobs, it's about 2,200 jobs, and it's about $150 million in contribution to GDP on an annual basis.
It will be on top of the already significant access we have of 7.5% of our previous production and that equalled just over 80 million kilograms this past year. When you take the two together, 9.6% of our market will be from imports, very close in line with the 10% that is traded globally. There's nothing for us to be ashamed of regarding the access we provide into our market. Every single kilo of that access will come in duty free.
On its own, this would be a hard hit for the Canadian chicken industry. However, the displacement of our production resulting from this additional access can be mitigated by the elimination of some import control circumvention measures. We've been working with the government for several years on these issues.
Three specific measures were announced by the government when the TPP was signed on October 5, 2015. It's critical that the government implement these, without delay. They were announced with the TPP, but they're not tied to the TPP.
The first is to exclude chicken from the duties relief program. This is a Canada Border Services Agency program that allows companies to import chicken, keep that chicken in Canada for four years—not sure what it's like after four years—potentially substitute it for lower-value product and re-export it. We see it as a fraudulent way to circumvent the import controls that we have. That volume is 96 million kilograms or about 9% of our production, so it's not an insignificant number.
The second is to implement mandatory certification for all spent fowl imports. These are old laying hens and they're not subject to import controls at all. We imported 103 million kilograms, or about 9.5% of our market of them. The problem we have here is not stopping spent-fowl imports but the fact that we're importing more spent fowl from the U.S. than they produce in the U.S. That speaks to outright fraud. They're labelling it as spent fowl, and it's actually chicken. That's taking away 8,900 jobs and $600 million in GDP contribution that we could be doing.
The third issue is to stop creative packaging by modifying what we call the “specially defined mixture rule.” Add a packet of sauce to chicken and it's no longer chicken. It comes in duty free. We don't think adding a packet of sauce that the consumer doesn't want, that the consumer throws away, should be a valid means of changing tariff classification.
In addition to the elimination of these import-control circumvention practices, there were indemnity programs announced on October 5. These will help the industry to face this new TPP access. We believe these measures recognize the difficult concessions that Canada had to make to get this deal that provided us access to other markets. They will provide some relief to farmers, albeit on a temporary basis, and help both farmers and processors.
In conclusion, the Canadian chicken industry and its evolving supply-management system continue to be a significant contributor to the overall health of the Canadian agriculture economy. We're innovating and we're investing to grow our industry. We're evolving our system to change and meet consumer demands. While the TPP agreement will be a hard hit on its own, chicken farmers and the Canadian chicken industry believe that the package that was announced by government on October 5 is the critical component. We support a rules-based trading system and call on the government to re-establish the integrity of our import control system by eliminating those circumvention practices so that we can fully seize the opportunities we have for our market.
Ms. Caroline Emond (Executive Director, Dairy Farmers of Canada):
Good morning. DFC is pleased to participate in the pre-consultation of the Standing Committee on International Trade on the TPP.
My name is Caroline Emond. I'm the executive director of the Dairy Farmers of Canada. I'm joined today by my colleague Yves Leduc, who is the director of the policy and trade department. He's been following the trade negotiations for more than 20 years now, so he will definitely be able to give you all the background you need on this agreement and others.
DFC has never been opposed to the signing of any international trade agreements that preserve the integrity of supply management.
DFC is the voice of the Canadian dairy farmers, fostering a strong and united support of farmers at the grassroots level for a national system of supply management. We are the national lobby, policy, and marketing organization representing all dairy farmers living on Canada's 11,350 dairy farms. Our organization strives to create stable conditions for the Canadian dairy industry today and in the future. We work to maintain policies that foster the viability of Canadian dairy farmers and promote Canadian dairy products and their health benefits.
It is important to emphasize that the Canadian dairy sector makes a huge contribution to the Canadian economy. It adds $18.9 billion to the GDP; sustains 215,000 jobs, full-time equivalent; contributes $3.6 billion in tax revenues; and is one of the top two agricultural sectors in seven out of 10 provinces. Furthermore, unlike other jurisdictions where farmers' incomes are heavily subsidized, the Canadian dairy sector derives its income from the marketplace, a marketplace that will be affected by the opening of the market to European and TPP countries. The dairy sector is a positive contributor to the Canadian economy regardless of the state of the economy.
While we would have preferred that no additional access be conceded in the dairy sector, we recognize that the government fought hard against other countries' demands and have lessened the burden by announcing mitigation measures and a compensation package.
In addition to the CETA agreement that amputated our market of 17,700 tonnes of cheese, the TPP agreement includes concessions for cheese, with an additional 16,500 tonnes, as well as concessions for all dairy products. To this day, the dairy sector is extremely proud to state that it does not receive any direct payments from the Canadian government.
While we were pleased that 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 mentioned in the Minister of Health's mandate letter for sugar, sodium, and trans-fat content 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 meeting higher Canadian standards.
Regarding the estimated 3.25% of access granted for milk and dairy products in the TPP agreement, using the government's assumptions, DFC was able to replicate the government calculations. However, when calculating using DFC's own assumptions, which differ slightly from those of the government on some products, our estimates came in at a slightly higher number. According to our conservative estimates, the outcome ranges between 3.37% and 3.97%, representing a loss of revenue ranging between $190 million and $250 million, depending on what product is really imported at the end.
In a similar manner to CETA, TRQ administration is very important in order to ensure these products are imported in a manner that is coherent with supply management and that 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 the impacts of the agreement are limited.
Unfortunately, the combined effects of CETA and TPP will seriously impact Canadian dairy farmers' bottom line year after year. DFC conservatively estimated that the combined impact arising from both CETA and TPP to be between 4.85% and 5.8% of the 2016 milk production forecast by Agriculture and Agri-Food Canada.
It represents between $282 million and $357 million in lost revenue. These are perpetual losses that cannot be substituted through exports. While we are working on a strategy to take advantage of some export opportunities, these remain limited as a result of the WTO panel, which essentially concluded that any export sales at below the domestic price constitutes an export subsidy.
DFC supports trade agreements as long as they have no negative impact on dairy farmers. Canadian dairy farmers should not bear the cost. The government chose to make concessions on dairy to secure the TPP trade agreement. The compensation to dairy farmers for lost revenue is a part of the compromise the Canadian government was willing to make. We are seeking a commitment from the Canadian government to invest into dairy and other supply management sectors the full $4.3 billion envelope at a minimum.
Contrary to the claim that trade agreements have helped to shape a better world market environment, it is difficult for us to conclude that. Now, 20 years after the WTO the world marketplace is not a friendlier place for farmers.
When DFC appeared before the Senate committee in November 2014 we told members that the world dairy market was essentially a dumping ground. Unfortunately, the situation remains disastrous. Looking at the International Farm Comparison Network world price indicators, prices have decreased from $56 per 100 kilograms of milk in February 2014 to $33 per 100 kilograms in November 2014 and to $25 in January 2016. At this price, none of the world milk producers can cover their cost of production.
Let's not forget that dairy is not a sector in which trade defines the industry. Only 9% of dairy production is traded on the world market. Dairy is mostly produced for domestic and local needs.
The CETA and TPP agreements open the door to products from dairy industries that are highly subsidized in both the U.S. and EU, putting Canadian dairy farmers at a disadvantage in our own market. Even products from New Zealand would currently enter the Canadian market at a dumping price, because 80% of the New Zealand dairy farmers cannot cover their costs of production with the current price they're getting; and Fonterra is helping them to offset some of this impact.
In 1966 Canada decided to support its dairy farmers by voting into law the Canadian Dairy Commission Act, whose mandate is to provide efficient producers of milk and cream with the opportunity of obtaining a fair return for their labour and investment. Since then, Canada has been fulfilling its promises to its farmers, and DFC hopes it will continue.
This is why the Dairy Farmers of Canada strongly believes supply management works. We wish to reiterate that DFC is not opposed to pursuing export opportunities. However, we are facing higher costs of production at the farm level as well as the processing chain in Canada. For example, Canadian processor margins are almost double what they are in the EU right now, suggesting that export opportunities are limited.
These export opportunities must return adequate profits for both the farmers and the processors. The promotion of export activities and export strategies can only succeed if they are jointly developed through a strong producer-processor partnership in collaboration with government. To be successful in world markets, the Canadian dairy industry must target specific niche markets as opposed to commodities. There is a real interest in exploring and developing beneficial and smart export activities, and we can assure you that we are engaged in dialogue with the processors and government stakeholders in finding ways to help sustain and grow the Canadian dairy sector.
In conclusion, DFC is looking forward to working with the government, which has reiterated its support for supply management, and working collaboratively to find solutions. We want to ensure farmers will continue to make an adequate income from the marketplace, while adequately compensating the farmers and processors for the negative impact occurring from the TPP and CETA.
Ms. Caroline Emond:
Thank you, that's a good question.
Mike mentioned, and it's the same thing for us, that the TPP trade agreement goes with a mitigation and a compensation package. That was the way it was built and negotiated. As we said, we never opposed the trade agreement, but why should our industry bear the costs of that agreement that had been negotiated for the benefit of other sectors?
We understand that fully. We have never prevented our colleagues in pork and beef to export because it's important to them, and we respect that. You can see that lately, both with CETA and TPP, dairy is the sector that is paying the price for that.
We are a great contributor to this country, and I think everybody supporting supply management can understand that the dairy sector is not only an economic benefit to this country, but also a social one. The role we play in those rural communities is important, and I think that's why we want to make sure this industry is healthy.
We always say that when the dairy farmers are doing well, then the country's doing well. In that sense the compensation package is essential to that agreement.
Mr. Mike Dungate:
They are absolutely key. As we said, this is a package and we worked hard. It was clear that we needed....
The whole part about a supply management system is not that we don't import chicken. We import a significant amount of chicken. The point is to know how much of it is coming in, because then we can do our production accordingly and are going to try to drive the market. But if it's circumventing it, that destabilizes what we're trying to do in market terms.
Certainly somebody can bring in chicken, keep it in our market for four years, and export it whenever they want. Even if they were going to re-export it, they are putting it into our market when it's opportune for them and then re-exporting a lower-value product at a time that's opportune for them, whereas we're working on an eight-week production cycle. It's completely out of line.
Our point—and we met earlier this week with François-Philippe Champagne—is that we were at the point concerning the duties relief program with the previous government last May that it was set. It was going to be done. It was to take all food products out of it, because that is not a perishable product program.
We would like to see this in the budget. It's a no-cost measure, and in fact it will support an industry and allow us to contribute more.
Mr. Mike Dungate:
I'll give you an example of how we do it in that quota.
Every eight weeks we set the production in Canada for chicken. We allocate out to a province and we give them their share, and then they allocate to their farmers, every single eight weeks. They will have a unit of that provincial production. If 2% more access comes into Canada, and therefore they get 2% less, their unit will be devalued by that 2.1%. What effect does that have on the market? If we adjust down to compensate for that, it will just be a loss of volume. If we were trying to maintain it, it might be a loss of price in terms of that because that's not being affected.
As I said before, our job is to try to do cash flow as opposed to appreciation of that quota. As we grow, our farmer may have a unit, but a province will say, “We've just grown 1%, so your unit is worth 1% more because when we allocate it out, it's a greater amount”. As we grow, there's an appreciation of the value, not just today but what it will be. If you're in a growth industry like we are, people are buying ahead, just like on the stock market, and saying, “What's the value going to be five years from now when I'm interested in selling, perhaps because I want to retire?”
Hon. Gerry Ritz:
Thank you, Mr. Chair.
I have a couple of comments on points that Caroline made on the CETA agreement. It's not a zero-sum game, as you portray, and on the TPP, we came in on the landing zone that the Dairy Farmers of Canada gave us. Even using your numbers, we're still within that landing zone. I just wanted to point that out.
On CETA there is tremendous access for dairy dealers in cycled-out cows, because no ractopamine is involved, and so on. They have unlimited access into that market. The 50,000 tonnes of beef that we've negotiated into Europe will certainly benefit eastern dairy more than anybody else, I would think. We also have full access back on dairy.
I know at the last Paris food show 30-some cheese producers from Canada did exceptionally well, won awards, and have now developed market access back in. You did allude to the fact that there are some niche markets that can be accessed.
The whole reason for the compensation package that we worked out with you guys was to make sure there was no run on quota. The Province of Quebec has backstopped a lot of quota. Farm Credit Canada under Agriculture Canada backstops several billion dollars' worth of quota. We didn't want to see a run on that quota value. The whole idea of the compensation was to maintain the stability of the operation.
I just wanted to make those points. We also went into—