Thank you, Mr. Chairman. Again, it is always an honour to appear before the committee.

I also want to take the opportunity to congratulate you, Mr. Chairman, on your election. We know things are in good hands with someone who understands as well as you do the connection between access to global markets and what it means to farmers and for farm gate prices.

On today's topic, the Canada-Korea free trade agreement, we believe it will be extremely beneficial for Canadian beef cattle producers. The Canadian Cattlemen's Association urges that it be implemented as quickly as possible. Indeed, we need it to come into force no later than January 1, 2015. Earlier than that would be even better.

Currently, Canadian beef, both fresh and frozen, pays a 40% tariff when imported into Korea. That's compared to U.S. beef, which currently pays a 32% tariff. Every year on January 1, the Korean tariff for U.S. beef drops another fifteenth of 40%. That's 2.7% per year. Without the Canada-Korea free trade agreement, the tariff disadvantage for Canadian beef will increase from an 8% differential to 10.7%.

Under the terms of the Canada-Korea free trade agreement, Korea will eliminate the 40% tariff on Canadian fresh and frozen beef in 15 equal annual steps, so that's at the same pace that Korea is eliminating the tariff on U.S. beef. But what we don't know yet is when the Canadian Parliament and the Korean legislature will complete their work to bring the Canada-Korea free trade agreement into force and get the phase-out started.

The agreement itself provides that the annual tariff cut for Canadian beef will occur on the anniversary of the agreement coming into force, so if the agreement comes into force on January 1, we're going to maintain that constant tariff differential of 8% with the U.S. until we eventually catch up and we both get to zero duties going into Korea.

If the parliamentary ratification process drags on and we miss that January 1 date—so let's imagine that maybe it becomes a March 1 implementation—it means that every year through the phase-out period we're going to have a wider tariff differential of 10.7% for the first couple of months of the year. On the other hand, if the House and the Senate work quickly and bring the agreement into force, let's say on December 1, then we'd have a smaller differential of 5.4% every year, just in the month of December.

What the text of the agreement says about coming into force is that the agreement will come into force 30 days after both countries have completed their domestic legislative processes. That means we need royal assent in Canada no later than the end of November. No pressure, we're just looking for some kind of record to be set to get this thing done and implemented expeditiously.

In addition to the beef muscle cuts—we think of the steaks, roasts, and those sorts of things—the Korean market is also important for the organ meats, known as offals. The current Korean tariff for beef offals is 18%. For Canada, that's going to be eliminated in 11 equal annual steps. On the offals, I'd note that the phase-out is faster than the U.S. is getting. Not only will we catch up to the U.S., but we'll actually have a few years' tariff advantage over the U.S. on the offals.

I'm going to wrap up, but before I conclude, I have a few statistics on our beef trade with Korea. In 2002 we exported nearly $50 million worth of beef to Korea. Unfortunately, from May 2003 until February 2012, Canadian beef was prohibited in Korea, so we didn't ship anything. For those 10 months of 2012 after we regained access, we exported 2,247 tonnes of beef, for $10 million, and that was with the 2.7% tariff differential that year, when the U.S. free trade agreement came into effect on March 15, 2012. For 2013, that tariff differential grew to 5.4% and our exports dropped to 1,166 tonnes, for $7.8 million. This year—as I said before, the tariff differential is 8%—from January through July we've exported only 807 tonnes, for $7 million.

What you can see over that time period is that the dollars per kilo of what we are continuing to export has been rising. We were at $4.47 per kilo in 2012. We're at $8.70 per kilo this year. That's partly because there is a global reduction in beef supply and prices are generally rising anyway for beef, but it's also because, with that growing tariff disadvantage, we're not competitive at the low end of the market such as frozen beef and bones, which are a good, important part of what we used to ship to Korea. We have maintained meaningful shipments at the high end.

Our assessment is that by keeping the tariff differential constant at 8% through the transition period, we are going to be able to maintain meaningful trade with Korea. Once that tariff is eliminated, we would expect to be back in the annual $50-million range and probably beyond that.

Thank you, Mr. Chairman. I would be pleased to respond to questions.

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