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Dairy Farmers of Canada Submission to the House of Commons Standing Committee on Industry, Science and Technology

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Dairy Farmers of Canada Submission to the House of Commons Standing Committee on Industry, Science and Technology DAIRY FARMERS OF CANADA SUBMISSION TO THE HOUSE OF COMMONS STANDING COMMITTEE ON INDUSTRY, SCIENCE AND TECHNOLOGY Study of the Subject Matter of Bill C-4, An Act to Implement the Agreement between Canada, the United States of America, and the United Mexican States February 21, 2020 On behalf of all Canadian dairy farmers, Dairy Farmers of Canada (DFC) welcomes the opportunity to offer our perspectives on Bill C-4, An Act to Implement the Agreement between Canada, the United States of America, and the United Mexican States. Drivers of Economic Growth Canada’s dairy farmers are part of a sector that produces a stable supply of nutritious dairy products for Canadian consumers. As one of the top two agricultural sectors in seven out of ten provinces, Canada’s dairy sector is a driver of economic growth, and a leader in innovation and sustainability. With 10,371 dairy farms and 514 processors, the dairy industry has been a bedrock of Canada’s rural communities for generations. In 2015, the sector’s economic contributions amounted to $19.9 billion towards Canada’s GDP, and $3.8 billion in tax revenues. In addition, the dairy sector sustains approximately 221,000 full-time equivalent jobs across the country. A vibrant dairy industry means jobs, improved access to rural infrastructure, and a strong economy that benefits all Canadians. The dairy industry is a mainstay of the Canadian economy, a key element of a successful rural Canada, and combined with the jobs and investments it creates across the value chain, contributes to a strong middle class. Market Access and Other Concessions Under CUSMA Canada’s three most recent trade agreements were made on the backs of Canadian dairy farmers; CUSMA is but the latest example. The outcome of CUSMA negotiations goes far beyond dairy market access concessions, which alone represent 3.9% of Canada’s 2017 milk production, in addition to the existing imports under WTO, plus access already granted under CETA and CPTPP. By 2024, total imports will be the equivalent of 18% of Canadian milk production. CUSMA also requires consultation with the US on any changes to the administration of Canada’s dairy supply management system. Forcing a Canadian industry to consult with its direct competitor in another country over any administrative changes it might make domestically in the future puts in question the independence of decision making in Canada and our sovereignty. The Importance of Full and Fair Compensation for Recent Trade Agreements The impacts of recent trade agreements have created uncertainty, especially among young farmers, and could have a dramatic impact on on-farm and processing investments, and may lead to job losses, with ripple effects in communities across the country. The impact isn’t just limited to dairy farmers, it will also have an effect on farm workers, veterinarians, equipment manufacturers, truck drivers, feed dealers, and many other associated industries. These impacts go beyond economic considerations; displacing Canadian dairy creates additional uncertainty at a time when the mental health of farmers and rural Canadians continue to be a concern. The Prime Minister has repeatedly committed to full and fair compensation to the dairy sector for the cumulative impacts of CETA, CPTPP and CUSMA. On August 16, 2019, the federal government announced a $2 billion compensation envelope to mitigate the impacts of CETA and CPTPP. This does not include CUSMA. Of the announced $2 billion, $250 million was provided previously under the Dairy Farm Investment Program. The remaining $1.75 billion will be paid out over eight years. The Dairy Direct 2 Payment Program, launched in the fall of 2019, is expected to pay out $345 million by the program end date of March 31, 2020. The remaining commitment of $1.405 billion needs to be confirmed as direct payments, and be paid out over the remaining seven years. Canadian dairy farmers, who are all impacted by recent trade agreements and are best positioned to know their own needs, have indicated that compensation should come in the form of direct payments. This is consistent with farmers’ recommendations from the mitigation working group established by the federal government after the signing of CUSMA and the government’s commitment to listen to farmers on how compensation should be paid. The announced compensation package for the access granted in CETA and CPTPP was a first step in this regard; however, in order to fulfill its commitment, the government will also need to deliver on its promise of full and fair compensation for the impacts of CUSMA. The Canadian government has repeatedly stated that it wants a vibrant, strong, and growing dairy sector that creates jobs and fosters investments. Compensation is needed to restore confidence within the sector, and will provide stability for dairy farmers to move forward. This will help ensure farmers continue to have the ability to sustain investment at current levels in the development and adoption of innovative on-farm best practices, and technology that supports sustainability. As an example, through its continued investments into new and emerging technology, Canadian dairy which accounts for only 1% of Canada’s total Green House Gas emissions and is already amongst the lowest carbon footprints for dairy in the world, has reduced its carbon footprint by 7% since 2011. A viable and sustainable dairy industry is key to the ongoing provision of nutritious and healthy dairy products at an affordable cost to Canadians. Instead of compensation in exchange for concessions granted, Canadian dairy farmers would have strongly preferred to have seen no dairy concessions in recent trade agreements. Therefore, DFC recommends that: 1- The Canadian government continue to provide dairy farmers, in the form of direct payments, the remaining seven years of full and fair compensation to mitigate the impacts of CETA and CPTPP, and that the total amount be included within the 2020 Budget main estimates. 2- The Canadian government fulfill its commitment to fully and fairly compensate dairy farmers to mitigate the impacts of CUSMA, as per the producer recommendations made by the mitigation working group established by the government following the announcement of CUSMA. Export Charges CUSMA also contains a provision imposing export charges over a certain threshold on certain dairy products, setting a dangerous precedent that could affect other sectors in future trade deals. The export charges under CUSMA require any exports of skim milk powder, milk protein concentrate and infant formula, beyond a specified amount, to face an export charge which effectively equates to a 3 worldwide cap on the export of Canadian dairy products. As a result, these Canadian dairy products will not be competitive versus other global players. Efforts to mitigate the impact of the export charges need to be made; this could be achieved through administrative measures with the United States, even after the ratification of CUSMA. These caps set a dangerous precedent for any Canadian product which could be exported, as a means of limiting Canada’s competitiveness in world markets. Therefore, DFC recommends that: 3- The Canadian government negotiate an administrative agreement with the American government to mitigate the impact of the export charges contained in CUSMA, which are triggered after a threshold on certain dairy products (milk protein concentrates, skimmed milk powder and infant formula) has been reached. Ratification and Compensation for Other Sectors It is important to note that, should CUSMA enter into force before August 1st, the beginning of the ‘dairy year’, the export thresholds for skim milk powder, milk protein concentrate and infant formula will see a dramatic decline of nearly 35% after only a few months. This would be another blow to the dairy market, which would not be able to benefit from a transition period. It is also important to consider that the impacts of recent trade agreements were not limited to dairy farmers. There are also impacts to dairy processors, which are key to the long-term sustainability of the sector, as well as to other supply managed sectors. Therefore, DFC recommends that: 4- To enable a proper transitional period for the export thresholds, CUSMA not enter into force until after August 1st 2020. 5- The Canadian government provide full and fair compensation for the impacts of recent trade agreements to dairy processors, in addition to Canada’s poultry and egg farmers. Additional Expertise for CBSA Unfortunately, Canada’s border services agencies do not currently have the training, tools, or resources to effectively monitor what is coming in to Canada. Canadian borders are porous, and this will become even more problematic as imports continue to increase. The supply managed sectors continue to face ongoing challenges from products specifically designed to circumvent the existing tariff structure. As shown by the success of DFC’s Blue Cow logo, 100% Canadian dairy is important to our economy, but it also offers a guarantee of quality to consumers; Canadian dairy is amongst the highest quality in the world. At the border, it will be important for the government to ensure the same food safety and quality, such as the use of the artificial growth 4 hormone rBST in the United States dairy sector,which is currently illegal in Canada due to animal health concerns, and ensure Canada has the capacity to police the increased amount of foreign products entering the country as a result of these agreements. Therefore, DFC recommends that: 6- Increased resources, tools and training be provided to CBSA to improve their effectiveness in dealing with border issues in a timely and transparent manner, particularly given the additional level of imports granted under recent trade agreements. Conclusion Canadian dairy farmers’ position continues to be that any future trade agreement not include market access concessions for the dairy sector.
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