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October 20, 2016 - International Trade News

Promoting the benefits of the TPP - Presentation to Standing Committee on International Trade

Sandra Marsden, President of the Canadian Sugar Institute

Thank you for the opportunity to appear before the committee on the TPP consultations. I would like to speak to the opportunity which the TPP provides for our industry sector, as well as food processing more generally, and I'll explain that.

The Canadian Sugar Institute represents refined sugar producers on nutrition and international trade affairs. The industry has three cane sugar refineries, and they are in British Columbia, Ontario, and Quebec. There is also a sugar beet processing facility in Taber, Alberta, and two further processing operations in Ontario for sugar-containing products, such as iced tea, drink mixes, gelatin mixes, and so on, for both the domestic and export markets.

Our industry has been an integral part of Canada's food processing value chain since its inception. We depend on food processors for 80% of our sales, and food processors in turn depend on a reliable nearby supply of competitively priced sugar.

Our refined sugar produced in Canada is an input to about 30% of food processing. Major sugar users in Canada account for about $18 billion in sales, $5 billion in exports, and 63,000 jobs.

Unfortunately, globally, sugar is one of the most distorted trade commodities, and it is characterized by widespread government support and high tariff walls and quotas. In contrast, Canadian refined sugar producers and processors don't have any of these benefits. The only protection we have from world market distortions is a $31-per-tonne tariff, which is about a 5% to 8% tariff, depending on world sugar prices. This is in sharp contrast to both the prices and the tariffs in most developed markets, including the United States, Europe, and Japan, which would be the leading protectionist countries. Their tariffs would be in the order of 100% or more.

Given this uneven playing field, we have no choice but to advocate for improvements in export access, because our market is open, and the markets of most of our trading partners are quite closed. Our priority is the United States. Unlike most commodities, NAFTA did not open the sugar trade for Canadian sugar and those high sugar content products that our members produce.

The TPP will provide meaningful improvements. It won't open the border, but it will certainly provide very meaningful and important improvements in access to the United States for those products, with a doubling of beet sugar exports out of Alberta and a 16% increase in those sugar-containing products from Ontario.

Much work remains to be done to analyze the benefits in the other trading partners. We see opportunities in Japan for sugar-containing products with a number of quotas that will increase over time, as well as in Vietnam and Malaysia, but much work needs to be done to analyze the specific benefits of trade with those countries.

Given North American and global restrictions on sugar, the vast majority of exports of Canadian sugar are in food products, and that goes beyond the products that we produce, but instead they further the processing industry.

NAFTA was a good news story in that trade improved to the extent that we had a trade deficit of about $40 million in the NAFTA region when NAFTA was implemented, and that grew to a surplus of $1.2 billion by 2005. That surplus has declined since then, which is a major factor contributing to a decline in the surplus, but faster than that has been the decline in the trade balance with other countries. This is why it's very important to our industry to diversify our markets beyond the U.S. We want to build on the NAFTA platform, and we see the potential to grow those exports and improve that trade balance, but we must advocate for market opportunity for food products in other markets.

We're a mature market in Canada. Canadians are not consuming more sugar, contrary to popular perception, so we have to look to exports. The WTO would be the best avenue to improve the sugar trade. In the absence of that, we see opportunities like the TPP, as well as regional agreements that have regional rules where manufacturers can access inputs from different countries based on their efficiencies and where we can take advantage of supplying sugar to food processors in Canada who can then diversify as well beyond the United States.

We see it as absolutely critical that Canada be part of this historic trade agreement, as the costs of exclusion would put Canada further behind in that food processing trade balance and investment in jobs.

The TPP will not resolve all sugar trade inequities for both ourselves and our customers, but it certainly does move the pendulum in the right direction.

We feel it's absolutely essential that Canada be part of this and that there be further work on analyzing and promoting the specific benefits.