Less than three weeks after talks concluded on the revised North American free trade agreement, executives from a Chinese infant formula manufacturer that had invested $332 million to build a new plant in Kingston, Ont. asked for a sudden meeting with Canadian officials.
Zhiwen Yang, the general manager of Canada Royal Milk — the Canadian subsidiary of China Feihe Limited — wrote to then-Agriculture Minister Lawrence MacAulay and the Liberal MP for Kingston and the Islands, Mark Gerretsen, describing how Canada’s concessions in the Canada-United States-Mexico Agreement (CUSMA) put his business plans in jeopardy by limiting how much cow’s milk formula it can export and dismantling the dairy ingredient pricing system.
Yang asked the federal government to “mitigate the risks to the project.” His three-page letters, dated Oct. 16, 2018, were released to CBC News under the Access to Information Act.
A few days later, Feihe International Inc. “respectfully” asked the president of the Canadian Food Inspection Agency and another senior government official to meet for 90 minutes on Oct. 29 with Yang and his boss, Feihe International chair Youbin Leng, who was travelling to Canada with his directors of research and regulatory affairs.
“The purpose of the meeting is to discuss the regulatory framework in China and explore how we can work together. The expectation is not for a decision to be made, but to begin a conversation,” said the email from Carey Bidtnes, Canada Royal Milk’s human resources manager, who was part of the team that worked on bringing this investment to Canada during her previous employment with the Kingston Economic Development Corporation.
Bidtnes said that Canada Royal Milk was working with Health Canada and the CFIA to “resolve a challenge” with exporting its formula.
The documents reveal that the financial stakes for Feihe were higher by the fall of 2018 than they were in 2017, when CBC News reported on the potential international trade issues triggered by Feihe’s plans to export the vast majority of the infant formula it manufactures in Canada back to Chinese consumers.
As construction began, the Chinese investment was pegged at $225 million. A year later, the investment was estimated at $332 million and project proponents were predicting it would bring 277 direct full-time jobs to the region once production ramps up. A further 300 construction jobs have been created in the Kingston area and the plant is expected to generate the equivalent of over 1,000 more jobs in its eventual supply chain.
Chinese companies have a deeper relationship with China’s central government than private sector firms in North America do with their own national governments. Feihe is listed on the Hong Kong stock exchange, but its subsidiary, Canada Royal Milk, is incorporated in Canada.
The investment — the largest foreign direct investment in Ontario agriculture in the last decade — was finalized with officials from the Canadian Dairy Commission during a 2016 visit to Canada by Chinese Premier Li Keqiang.
CUSMA limits exports, changed pricing
American officials were monitoring this Chinese investment. President Donald Trump — and the powerful U.S. farm lobby — regard Canada’s supply management system as “unfair” because it blocks most American dairy from Canada’s domestic market.
In the CUSMA, Canada agreed to several concessions that harm its dairy industry — including strict limits, enforced by new export charges, on international exports of infant formula and skim milk.
CUSMA’s export limit for cow’s milk formula is lower than what Feihe originally planned to produce in Kingston, according to a presentation obtained three years ago by CBC News.
Newly released government talking points say Canadian negotiators “were in contact with a number of individuals with direct knowledge of the proposed facility’s operations,” including the Kingston Economic Development Corporation, “to ensure negotiators had a thorough understanding of the intended operation … with a view to avoiding unintended impacts.”
Kingston’s mayor, Bryan Paterson, and a team of other local officials visited China to help land the infant formula facility in Eastern Ontario. It’s the largest foreign investment in Ontario’s agriculture industry in a decade. (Office of Mayor Bryan Paterson)
It’s the same response CBC News got in 2018 when it asked whether Canada’s NAFTA renegotiation team spoke directly to Feihe about its plans before signing off.
Another concession Canada agreed to in the CUSMA talks dismantled part of its dairy pricing regime, ending lower ingredient pricing that kept processors competitive. Canada’s prices are now based on American rates.
When Feihe agreed to invest in Ontario, Canada’s lower ingredient price was part of its forecasts.
Xinhua, the Chinese news agency, reported that then-foreign affairs minister Chrystia Freeland spoke to Chinese Foreign Minister Wang Yi to brief him within days of concluding CUSMA negotiations.
But if the two ministers discussed the dairy concessions, they apparently didn’t resolve the manufacturer’s concerns because the documents show that, within days of that conversation, Feihe began its own outreach to the Canadian government.
Chinese asked Canada to limit competition
Earlier presentations of Canada Royal Milk’s business plans didn’t mention producing and exporting skim milk powder for the adult market. But this letter to MacAulay said the company would produce skim powder for export during a “ramp up” period of testing the new facility.
Canada already has a significant surplus of skim milk powder, left over after meeting Canada’s strong demand for butter. Making baby formula at this new plant was supposed to help use up this surplus, not exacerbate it.
Feihe eventually plans to manufacture formula from both cow and goat milk at its Kingston facility, exporting most of it to China. A decade after its tainted milk scandal, some Chinese consumers still have more confidence in foreign formula. (Andy Wong/Associated Press)
The global market for skim is crowded and ultra-competitive, with American farmers hostile to any threats. Under the World Trade Organization’s Nairobi Agreement, Canada agreed to stop exporting skim milk products as of January 2021.
“The export cap is a very serious issue for the operations of the company for 2019 and 2020,” the letter from general manager Yang to then-minister MacAulay said, “and we believe it will hinder the growth of the entire industry in the future.”
In its correspondence, Feihe asked for assurances that its facility had the support of all levels of government. It also requested “reasonable quota” so it could take maximum advantage of the tariff-free exports that would be allowed under the CUSMA, including a “guarantee that the full annual export quota for infant formula would be assigned to Canada Royal Milk.”
Our team has already been contacted by U.S. dairy producers who are eager to sell their products to us.– Zhiwen Yang, General Manager, Canada Royal Milk
Canada is allocating its export quota for skim milk powder based on processors’ past production. But for infant formula, export quota was distributed according to planned production — presumably to accommodate the new plant coming online.
“Currently, details on which entities have received an allocation for the dairy export thresholds are not public,” Jean-Sébastien Comeau, a spokesperson for Agriculture Minister Marie-Claude Bibeau, told CBC News.
In a question redacted from one document released to CBC News but repeated without redaction in another, Yang also asked the government if it would “take steps to limit the licensing of new infant formula manufacturing in Canada.”
While that appears to be anti-competitive behaviour, no other Canadian dairy processor has shown interest in making infant formula in recent years — which is why Canada pursued the Chinese investment in the first place.
Looking for compensation
On the demise of ingredient pricing, “it’s unclear how this will impact our operations in the medium to long term,” Yang’s letter to MacAulay said.
“Our team has already been contacted by U.S. dairy producers who are eager to sell their products to us,” the letter continues.
“What has the government proposed to assist dairy processors to overcome the loss of [ingredient] pricing?”
The letter sent to MP Gerretsen repeated the same demands.
Construction of the massive Canada Royal Milk facility in Kingston, Ont. was expected to create about 300 jobs. Once production begins, it expected to employ 277 people full-time jobs and create the equivalent of another 1,000 jobs in local supply chains. (Feihe International Inc.)
Although Bibeau announced funding for dairy producers harmed by trade deals with the European Union and Pacific Rim countries in the days leading up to the 2019 federal election, the industry is still waiting for the compensation it was promised when NAFTA was replaced.
It’s unclear whether Canada Royal Milk would be eligible for compensation but the Chinese investment has qualified for other federal and provincial support programs.
If Feihe believes its investment was harmed by Canada’s concessions, it could sue for damages under the 2012 Canada–China Foreign Investor Protection Agreement, which was negotiated by the previous Conservative government.
“The sued country can opt not to make public anything until an arbitration award,” Osgoode Hall law professor and investment treaty specialist Gus Van Harten said, noting this agreement is unique in this regard.
International Trade Minister Mary Ng’s spokesperson Ryan Nearing said “there has been no dispute launched against Canada under the Canada-China FIPA to date, nor notification of an intention to do so.”
Despite delays, manufacturer now ‘confident’
In an interview with CBC, MP Gerretsen said he passed on the requests he received from the company to officials at Agriculture and Agri-Food Canada. But he said the only formal encounter he’s had with Canada Royal Milk was a tour of the construction site in his riding earlier in 2018.
“A number of the issues that were in their letter I believe have been addressed,” he said.
In departmental email, one bureaucrat called Yang’s correspondence “an interesting letter indeed.”
Before federal government officials met with the Chinese, two senior officials from Prime Minister Justin Trudeau’s office, Brian Clow and Simon Beauchemin, joined an “urgent briefing” with MacAulay’s office — an “additional twist,” another bureaucrat called it.
“The Chairman is in Canada in the context of making more investment,” a senior official said. The request to meet with the president of the CFIA was “in the context of the application for export,” he said, “which may not be the full reality.”
Comeau, Bibeau’s spokesperson, tells CBC the Kingston facility now has its licence to export from the CFIA.
The Canadian Dairy Commission originally hoped an investor like Feihe could build a second facility, perhaps in Western Canada. But now, the government “is not in discussion with Canada Royal Milk about additional future investments,” Comeau said.
Earlier plans obtained by CBC News suggested Kingston facility would be exporting by now. Bidtnes told CBC News its production lines are complete and it is pleased with the results of its test batches.
“Timelines for beginning commercial production have been stretched into the fall due to the impact of COVID-19 on some regulatory processes,” she said, adding that the company remains “confident in our business plans and the support we have received from all levels of government.”
BATHURST, N.B. – RCMP in New Brunswick say a weekend ground search for evidence related to the disappearance of a teenage girl in 2021 didn’t reveal any new information.
In an emailed statement, the RCMP said 20 people participated in the search for evidence in the case of Madison Roy-Boudreau of Bathurst.
The release said the search occurred in the Middle River area, just south of the girl’s hometown.
Police have said the 14-year-old’s disappearance is being treated as a homicide investigation.
The RCMP said the search “did not reveal any new information regarding the circumstances of her disappearance.”
There are no plans for another search until police receive a tip or a lead pointing to a new search area.
This report by The Canadian Press was first published Oct. 21, 2024.
VICTORIA – A middle school in Victoria was forced into a lockdown after a man entered the building without permission, and police say they had to use a stun gun to make an arrest.
Victoria police say officers received multiple calls around noon on Monday of an unknown male entering Central Middle School, leading staff to set off emergency procedures that put the building under lockdown.
Police say its emergency response team arrived within minutes and found the suspect, who “appeared to be in a drug-induced state,” in the school’s library.
A statement from police says the suspect resisted arrest, and officers had to use a Taser to subdue the man.
He’s being held by police and has been assessed by emergency medical staff.
Police say the man was not armed and there were no continuing safety concerns for students and staff following the arrest.
This report by The Canadian Press was first published Oct. 21, 2024.
VANCOUVER – Former B.C. Green leader Andrew Weaver knows what it’s like to form a minority government with the NDP, but says such a deal to create the province’s next administration is less likely this time than seven years ago.
Weaver struck a power-sharing agreement that resulted in John Horgan’s NDP minority government in 2017, but said in an interview Monday there is now more animosity between the two parties.
Neither the NDP nor the B.C. Conservatives secured a majority in Saturday’s election, raising the prospect of a minority NDP government if Leader David Eby can get the support of two Green legislators.
Manual recounts in two ridings could also play an important role in the outcome, which will not be known for about a week.
Weaver, who is no longer a member of the Greens, endorsed a Conservative candidate in his home riding.
He said Eby would be in a better position to negotiate if Furstenau, who lost her seat, stepped aside as party leader.
“I think Mr. Eby would be able to have fresh discussions with fresh new faces around the table, (after) four years of political sniping … between Sonia and the NDP in the B.C. legislature,” he said.
He said Furstenau’s loss put the two elected Greens in an awkward position because parties “need the leader in the legislature.”
Furstenau could resign as leader or one of the elected Greens could step down and let her run in a byelection in their riding, he said.
“They need to resolve that issue sooner rather than later,” he said.
The Green victories went to Rob Botterell in Saanich North and the Islands and Jeremy Valeriote in West Vancouver-Sea to Sky.
Neither Botterell nor Valeriote have held seats in the legislature before, Weaver noted.
“It’s not like in 2017 when, you know, I had been in the (legislature) for four years already,” Weaver said, adding that “the learning curve is steep.”
Sanjay Jeram, chair of undergraduate studies in political science at Simon Fraser University, said he doesn’t think it’ll be an “easygoing relationship between (the NDP and Greens) this time around.”
“I don’t know if Eby and Furstenau have the same relationship — or the potential to have the same relationship — as Horgan and Weaver did,” he said. “I think their demands will be a little more strict and it’ll be a little more of a cold alliance than it was in 2017 if they do form an alliance.”
Horgan and Weaver shook hands on a confidence-and-supply agreement before attending a rugby match, where they were spotted sitting together before the deal became public knowledge.
Eby said in his election-night speech that he had already reached out to Furstenau and suggested common “progressive values” between their parties.
Furstenau said in her concession speech that her party was poised to play a “pivotal role” in the legislature.
Botterell said in an election-night interview that he was “totally supportive of Sonia” and he would “do everything I can to support her and the path forward that she chooses to take because that’s her decision.”
The Green Party of Canada issued a news release Monday, congratulating the candidates on their victories, noting Valeriote’s win is the first time that a Green MLA has been elected outside of Vancouver Island.
“Now, like all British Columbians we await the final seat count to know which party will have the best chance to form government. Let’s hope that the Green caucus has a pivotal role,” the release said, echoing Furstenau’s turn of phrase.
The final results of the election won’t be known until at least next week.
Elections BC says manual recounts will be held on Oct. 26 to 28 in two ridings where NDP candidates led B.C. Conservatives by fewer than 100 votes after the initial count ended on Sunday.
The outcomes in Surrey City Centre and Juan de Fuca-Malahat could determine who forms government.
The election’s initial results have the NDP elected or leading in 46 ridings, and the B.C. Conservatives in 45, both short of the 47 majority mark in B.C.’s 93-seat legislature.
If the Conservatives win both of the recount ridings and win all other ridings where they lead, Rustad will win with a one-seat majority.
If the NDP holds onto at least one of the ridings where there are recounts, wins the other races it leads, and strikes a deal with the Greens, they would have enough numbers to form a minority government.
But another election could also be on the cards, since the winner will have to nominate a Speaker, reducing the government’s numbers in the legislature by one vote.
Elections BC says it will also be counting about 49,000 absentee and mail-in ballots from Oct. 26 to 28.
The NDP went into the election with 55 ridings, representing a comfortable majority in what was then an 87-seat legislature.
Jeram, with Simon Fraser University, said though the counts aren’t finalized, the Conservatives were the big winners in the election.
“They weren’t really a not much of a formal party until not that long ago, and to go from two per cent of the vote to winning 45 or more seats in the B.C. provincial election is just incredible,” he said in an interview Monday.
Jeram said people had expected Eby to call an election after he took over from John Horgan in 2022, and if he had, he doesn’t think there would have been the same result.
He said the B.C. Conservative’s popularity grew as a result of the decision of the BC Liberals to rebrand as BC United and later drop out.
“Had Eby called an election before that really shook out, and maybe especially before (Pierre) Poilievre, kind of really had the wind in his sails and started to grow, I think he could have won the majority for sure.”
He said he wasn’t surprised by the results of the election, saying polls were fairly accurate.
“Ultimately, it really was a result that we saw coming for a while, since the moment that BC United withdrew and put their support behind the conservatives, I think this was the outcome that was expected.”
— With files from Darryl Greer
This report by The Canadian Press was first published Oct. 21, 2024.
