Statement to the Senate Standing Committee on Agriculture and Forestry Regarding international market access priorities for the Canadian agricultural and agri-food sector Brian Kingston, Senior Associate February 26, 2015
CHECK AGAINST DELIVERY Mr. Chairman, committee members, thank you for the invitation to appear before you to discuss Canada s agriculture and agri-food international market access priorities. The (CCCE) represents 150 chief executives and leading entrepreneurs in all sectors and regions of the country. Our members lead companies that collectively administer $6 trillion in assets, have annual revenues in excess of $850 billion and are responsible for the majority of Canada s private-sector exports, investment and training. Canada s agriculture and agri-food sector plays a significant role in the Canadian economy. In 2012, the sector generated $103.5 billion, accounting for 6.7% of Canada's GDP. One in eight jobs in Canada is in the agriculture and agri-food sector, employing over 2.1 million people. International market access achieved through the elimination of tariff and nontariff barriers is critical to the competitiveness of Canada s agriculture and agrifood sector. With export sales of $43.6 billion in 2012, Canada overtook Argentina to become the world's fifth-largest exporter, accounting for 3.5% of the total value of world agriculture and agri-food exports. Today I would like to make four points on Canada s agriculture and agri-food international market access priorities and what can be done to ensure the competitiveness of Canada s agricultural sector. 1. Capitalize on opportunities in Asia Over the next twenty years, Asia s middle class will generate significant increases in demand for energy and natural resources, financial services, education, clean technology and agriculture and agri-food products. But Canada is not well positioned to take advantage of massive urbanization and the rapid growth in the ranks of Asia s middle class consumers. Of the total value of Canadian agriculture and agri-food exports, the US accounted for 48% and China, our second largest export destination, 11%. 2
Canada must act quickly to secure preferential market access to key Asian trading partners by concluding negotiations with members of the Trans-Pacific Partnership (TPP) agreement. The TPP region is responsible for approximately 40% of the world s economic output. More importantly, the TPP has the potential to expand to include other major economies in the Asia-Pacific region. Concluding an ambitious, high quality TPP agreement is the most efficient way for Canada to deepen its integration with other Asian economies and take advantage of Asia s fast growing markets. At the same time, Canada should conclude its negotiations with Japan. Japan has the largest market of current and prospective TPP participants with whom Canada do not have an FTA. A joint study by Canada and Japan has estimated the annual boost to Canada's gross domestic product from an EPA would be between US $3.9 billion and $9.3 billion. Finally, Canada should launch free trade negotiations with China, our second largest agriculture and agri-food export destination. Eliminating trade and investment barriers will give Canadian agriculture and agri-food exporters a significant competitive advantage and boost exports significantly. For example, since concluding a trade deal with China in 2008, New Zealand s exports have grown by over 450%. 2. Ensure the success of recently concluded trade agreements The Canada-European Union Comprehensive Economic and Trade Agreement (CETA) is the most important trade deal for Canada since NAFTA. The EU has a GDP of US$17 trillion, a market of 500 million consumers and is by far the largest importer of agricultural products in the world. Ratifying and implementing the CETA is a top priority for the CCCE. While the market access achieved in CETA is positive for the agriculture sector, many agricultural goods continue to confront non-tariff barriers. Real market access in CETA will depend on Canada s ability to prevent or resolve non-tariff barriers that may arise for agricultural exports. The recently implemented Canada-Korea FTA is another significant milestone for Canada. The CCCE recommends the creation of an Advisory Committee to Minister 3
Ed Fast to ensure the effective implementation and promotion of the South Korea FTA. Outcomes of the FTA should be measured annually, taking into account increased exports, analysis of the sub-sectors that compose these exports, foreign direct investment, sales in South Korea by Canadian foreign affiliates, joint ventures and revenue from licensing agreements. 3. Continue to engage at the WTO Despite the proliferation of regional and bilateral trade agreements, the WTO remains the pre-eminent forum for global trade liberalization. Canada must continue to provide leadership at the WTO and reinforce the multilateral system through various next-generation agreements. The WTO has proven successful in addressing blatantly protectionist measures such as the US s Country of Origin Labelling (COOL) rules. COOL significantly disrupts the North American supply chain, creates unpredictability in the market, and imposes additional costs on producers on both sides of the border. Canada s successful challenge of COOL is an example of the important role the WTO plays to ensure agriculture and agri-food market access. Canada must remain vigilant and react quickly to protectionist measures. International market access is inhibited by a range of trade barriers including tariffs and quotas, trade distorting domestic support, export subsidies, export taxes, tariff escalation, and non-tariff barriers. The WTO is the only venue for addressing these issues on a large scale. 4. Improve the competitiveness of Canada s agriculture and agri-food sector Building a competitive agriculture and agri-food sector sector requires investments in machinery and equipment. To this end, the temporary two-year accelerated capital cost allowance for machinery and equipment should be made permanent to allow for long-term business planning. Faster write-offs of eligible investments helps businesses retool with new machinery and equipment to remain competitive in the global marketplace. 4
The sector s competitiveness also depends on the ability of producers to transport goods to market in a timely and efficient fashion. As demand rises for Canadian goods we must upgrade transportation and storage infrastructure to handle significantly increased export volumes. Finally, the time has come for Canada to reform the supply management system for dairy and poultry producers. The current restrictions on dairy and poultry imports hurt Canadian consumers and are inconsistent with our country s reputation as a champion of open markets. Supply management diminishes our credibility with our trading partners and limits market access opportunities for Canadian companies and workers, including the 80-per-cent share of Canada s agricultural sector that is not subject to supply management. In China alone, urban consumers disposable incomes have risen by more than 245% in the past decade. Yet Canadian dairy and poultry producers are missing out on an opportunity to supply growing demand among the emerging middle class. We only need to look to New Zealand and Australia for proof of the benefits of more open competition. Both countries began to phase out their dairy supply management programs more than a decade ago. They are now responsible for almost half the world s dairy trade, exporting to more than 150 countries. I would be happy to answer any questions you may have. Thank you. 5