International Trade Committee on March 1st, 2007

[Dean Allison, Conservative, Niagara West—Glanbrook, ON]

In terms of investments coming in, I know the government set up FINTRAC, which obviously tracks large investments as well, trying to figure out what may be laundered. It would not necessarily be the case. There are mechanisms that the government is trying to put in place to try to monitor some of these things and figure them out.

[Art Ridgeway]

I am not party to that, or we're not involved in that particular program, but I know of it.

[The Chair, Conservative, Leon Benoit]

Do you have one question?

[Ron Cannan, Conservative, Kelowna—Lake Country, BC]

Thank you, Mr. Chair.

I come from British Columbia. I'm reading through the report and hearing what you're saying about transshipments. For the importing province, in this case British Columbia, the numbers would be skewed, because we've put approximately $600 million into our gateway, and we're expanding. That's not necessarily the origin, the destination; it could be shipped throughout the province.

So how significant a problem is the transshipping, in terms of collecting that export data? How can this problem be overcome?

[Craig Kuntz]

You're talking merchandise trade?

[Ron Cannan, Conservative, Kelowna—Lake Country, BC]

Yes, export and import.

[Craig Kuntz]

As you aptly alluded to, in the province of clearance, where the goods are landed.... After that, we don't track where they go in the country.

There's a project in the national accounts where they try to measure interprovincial trade flows, but it's detached from that administrative data source.

In terms of improving the transshipment data, we're working with our colleagues at CBSA. We've put in some measures. They have penalties to try to really get at the issues of reporting, the whole under-coverage issue.

For the other part, we keep negotiating with our colleagues in the United States to get access to those in-transit documents from U.S. Customs and Border Protection. If we could get those, they would help us a lot.

As I mentioned earlier, we had access to them only twice. We had a one-week period in 2003 and found that there was about 90% under-coverage. We had a longer period in 1993-94, when we were looking at about a 65% under-coverage rate. So there is quite a bit of trade that's going sort of in-transit out of the country, which, based on our measures, we aren't accounting for.

What we do to sort of account for this is in the balance-of-payments-based series. We put in what we call an export under-coverage adjustment, which currently represents between 3% to 4% of total trade.

We're expecting that when we finish the latest study we've been doing on the marine ports, this number will come down. We don't know by how much, but we will react and adjust that export under-coverage adjustment.

So we are trying to add in at the aggregate level an accounting of what we believe is missing, in terms of exports on the balance-of-payments-based series.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Cannan.

Mr. Marston, you have seven minutes.

[Wayne Marston, NDP, Hamilton East—Stoney Creek, ON]

Thank you, Chair.

I don't do this often, and I guarantee it, but I'm actually agreeing with the members opposite.

[Some hon. members]

Oh, oh!

[Wayne Marston, NDP, Hamilton East—Stoney Creek, ON]

These flags of convenience are offensive to the Canadian people and to me, but I think I'll leave that alone.

It's very tempting to watch people sweat when we put them in a political hot seat, but we'll avoid that somewhat.

Mr. Kuntz, our party is particularly concerned if Canada has put all of its eggs in one basket--the American basket, of course. We believe we've seen this with softwood lumber, the mad cow crisis, and oil and gas exports. Now we have the security and prosperity partnership of North America that's being negotiated. Again, we're concerned that there's kind of a gravitational pull putting a lot of pressure on Canadian sovereignty by reducing our ability to frame and control our policies.

Another concern, in our opinion anyway, is that it seems to reduce the east-west trade linkages in our country.

I come out of the labour movement, and one of the things we've noticed since the free trade agreements were implemented is that wages in Canada have stagnated. We've had about four decades of declining inequality in our country, but now the inequality regarding after-tax family income seems to be widening again.

Do you think this export concentration dependence on the U.S. market is healthy or safe? If not, what could Canada do to reverse this trend and diversify our exports? What role could government policy play?

I said I wasn't going to be political, but I guess that's reasonably political.

[Anthony Burger]

It is with peril that you volunteer.

[Some hon. members]

Oh, oh!

[Anthony Burger]

I would note that in the past few years, a couple of phenomena have occurred indicating that the situation is a bit more complex than we had expected, certainly than I had expected.

For example, with the opening of diamond mines in the Northwest Territories and the concentration of the diamond business in Europe, we're seeing a significant increase in exports of mineral products to both Belgium and the United Kingdom, which is having an impact on the share of our exports going to the United States.

Another reason why our share of exports to the United States has fallen in the past couple of years, which may not be as attractive to everybody, is the decline in the automotive trade. You have those two phenomena.

Another thing that is happening is that global resource prices have risen, and while you might think that would lead to an increase in the share of exports going to the United States, because of a rise in the value of petroleum exports, that's offset to some extent by two-way trade.

We are seeing exports of commodities on a global basis, whether it's metallurgical coal to Asia or other products to third markets, rising as a share of total trade.

Maybe Mr. Kuntz has the exact figure, but I think the share of our exports going to the United States has fallen over the past couple of years.

[Wayne Marston, NDP, Hamilton East—Stoney Creek, ON]

Thank you.

Again to you, have you studied the relationship between trade and employment in Canada? I'd be particularly interested in the relationship between the volume of trade and employment. When we hear about trade, we almost always refer to it in dollar figures and not volume.

Have you done studies on this relationship? If yes, why, and if not, is it perhaps because of lack of resources?

[Craig Kuntz]

Let me deal with the volume question first.

One of the reasons we do price indices is so we can convert the monetary trade flows from a current dollar to a constant dollar basis, where we're then trying to get at what would be a proxy for volume in terms of a constant dollar series.

That's part of how we address this.

[Art Ridgeway]

On the research questions, I can't identify a particular paper. I think there have been some papers produced at Stats Canada on looking at the effects of trade on productivity and growth in different industries by our productivity people.

We could try to find those and circulate them to members, if necessary.

I don't know if Dan is aware of any immediate ones, but I think there have been some studies done in that area that could be enlightening to some members.

[Dan Ciuriak]

John Baldwin at Statistics Canada has been very active in estimating the impact of trade on the economy, and on productivity in particular, but also in terms of the performance.

A firm that becomes an exporter, in John Baldwin's finding, becomes substantially better in all aspects of firm performance, including productivity, research and development, higher wages, and so forth. There are very complex interactions between a firm entering an export market, being subjected to international competition, gaining access to international technology and knowledge, and then improving its own performance at home. Of course, this impacts on its ability to generate exports, domestic sales, and domestic employment.

There are some studies of that nature.

[The Chair, Conservative, Leon Benoit]

You have about a minute left, Mr. Marston.

[Wayne Marston, NDP, Hamilton East—Stoney Creek, ON]

Then I'll ask Mr. Burger a direct question.

Do you believe that any new trade deals we pursue should take into account the important questions of quality of life for citizens, effectively incorporating principles of labour standards and environmental concerns? Also what would your version of fair trade be?

[Anthony Burger]

If I had been asked to make some remarks, I would have said at the beginning, Mr. Chairman, that we're responsible for the analysis of trends and we hand issues of this nature over to policy-makers.

So with respect to the member, I would say that the question of the impact in a welfare sense is something that we look at, but we hand decisions over to other people, with respect to the way to respond to those phenomena.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Marston.

We will now go to the five-minute round.

Go ahead.

[John Maloney, Liberal, Welland, ON]

You referenced the Canada-U.S. reconciliation. Do you do reconciliations with other countries as well?

[Art Ridgeway]

No, we don't. It's a fairly resource-intensive activity, so we haven't done that.

We have had some musings about possibly doing it with Europe, particularly now that the EU is sort of one unit. We could do it with the EU as a total, rather than with each separate country. We have had minor discussions at that level, but we haven't explored that very much at the moment.

[John Maloney, Liberal, Welland, ON]

Is it a resource problem, or you just don't have the money?