International Trade Committee on June 15th, 2010

[The Chair, Conservative, Lee Richardson]

I call the meeting to order.

We still don't have everyone, but we're going to begin. A couple of our people and some witnesses as well are a little tight for time today, so I'm going to get right at it.

We are going to begin a discussion and a study of free trade between Canada and the European Union. These are ongoing discussions and even negotiations. We are pleased to begin today with an overview from Canadian participants in those negotiations, including the chief trade negotiator in the Canada-European Union file. That person is Steve Verheul, who is in Vancouver today.

Thank you for taking the time out. I know you're busy with meetings in Vancouver, and I appreciate the time you've taken today.

We also have David Plunkett at the table with us. He is also with DFAIT and is a trade negotiator in bilateral and regional relations. From the Department of Agriculture and Agri-Food we have Gilles Gauthier, who is director general and chief agriculture negotiator. We're in good company today.

Our members are ready for questions, but I'd like to begin with opening statements. Because of the shortness of time and because we are a little late getting started, I'm going to ask Mr. Verheul to begin with an opening statement. Perhaps Mr. Plunkett would follow up with a statement as well. Then we'll get right to questions.

Mr. Verheul, how is your time? Have we got an hour?

[Steve Verheul, Chief Trade Negotiator, Canada-European Union, Department of Foreign Affairs and International Trade]

Yes, that's fine. There's no problem.

[The Chair, Conservative, Lee Richardson]

Okay, we'll do it that way, and then we'll move immediately to questions. We'll probably wrap up this session by five o'clock, Ottawa time, if we can hang on that long.

With that, I'm going to ask Steve Verheul, chief trade negotiator, Canada-European Union, to start with opening remarks.

Please go ahead, Mr. Verheul.

[Steve Verheul]

Thank you very much, and thank you for the invitation to appear before you today.

I’m going to start by providing you with some context for these negotiations. Then I'll outline some of the key steps in the negotiations and the timelines going forward, and finally I'll provide you with a brief overview of some of the key issues under the negotiations.

First of all, the successful negotiation of a high-quality, ambitious agreement with the EU is a key priority for the Government of Canada. These negotiations represent a significant opportunity. A CETA would provide us with preferential access to the largest market in the world. The EU, made up of some 27 member states with a total population of nearly 500 million and a GDP of over $19 trillion Canadian, is already our second-largest trading partner. We have many historical, economic, and cultural ties with the EU, so the EU is an obvious trading partner for Canada.

Canada has been interested in a free trade negotiation with the EU for a very long time, and convincing the EU to negotiate a trade agreement with Canada was a long process. It involved extensive advocacy by Canadian political leaders and government officials and a great effort by the private sector. In the end, we were able to convince the EU that Canada was prepared to negotiate an ambitious agreement, and negotiations toward a CETA were officially launched in Prague at the May 2009 Canada-EU summit. At the summit, leaders agreed that we would aim for a high level of ambition in the negotiations. They also agreed that we would aim to complete the negotiations within a very short timeframe, within two years.

For Canada, this is by far the biggest free trade negotiation we have undertaken since the Canada-U.S. Free Trade agreement, which has been in place for more than 20 years, along with the NAFTA that came after it. In the CETA negotiations we are aiming to go further than we went in the NAFTA negotiations, both with respect to the range of issues to be covered and with respect to the depth of ambition. On the part of the EU, they too are aiming to go further than they have gone in any previous free trade agreement.

We are expecting an agreement with the EU to deliver benefits across many sectors, including industrial products such as wood, chemicals, plastics, aluminum, and autos and auto parts, as well as fish and seafood and agricultural products. We are also expecting significant benefits in areas of services and investment, such as energy, construction, engineering, information and communication technology, research and development, environment, and many others.

With regard to the timelines, we began the negotiations, as I mentioned, on May 6, 2009, and we've had three formal rounds of negotiations since then. The first was last October, and we've had two this year, one in January and one in April. We're holding two more rounds of negotiations in the coming months, one in July and one in October, and after that we will take stock to assess progress and plan the next steps in the negotiations. The view from both sides, from both Canada and the European Union, is that we have made very good progress in the negotiations so far, and we're aiming to complete the negotiations next year, in 2011.

One of the unique aspects of this negotiation is that because there is a strong EU interest in areas under provincial and territorial jurisdiction, provinces and territories are very closely involved in the negotiations. This involvement includes participating in negotiating rooms on issues under their jurisdiction. We have had between 40 and 60 provincial and territorial representatives at each of the negotiating rounds, and we have been meeting with them frequently, as we are this week in Vancouver. We also meet with them on the eve of every round as well as at the close of each day of negotiations. While this has been a complex and challenging process, it has generally gone well.

As far as more specific progress in the negotiations is concerned, we have been moving at a fast pace. In terms of text, we have a consolidated text covering all 22 areas of the negotiations. We've had that since last fall, and we have already completed or parked a number of chapters in the agreement.

We have also exchanged initial offers on goods, which would have 90% of all tariffs going to duty free immediately upon implementation of the agreement, which is a very aggressive initial offer, and we have exchanged detailed requests on government procurement, services, and investment.

I'll now highlight some of the key issues in the negotiations so far.

Government procurement is an important priority for the EU, particularly at the sub-federal level. It will be important for us to put a high level of ambition on the table on procurement, as this will, to some extent, set the level of ambition in other areas. We are working closely with the provinces and territories to ensure this happens.

On services and investment, we are pressing the EU to adopt the more ambitious approach of a negative list, which means everything is captured by the commitments in these areas except for specific exceptions.

This is the approach we have used in all our agreements, including the NAFTA, but the EU has never used this approach, relying instead on a positive approach, which involves taking commitments only in a specified list of areas.

We are also pressing the EU to go further in the area of labour mobility, both in easing the temporary entry of business people and professionals and in facilitating mutual recognition of qualifications to allow easier movement of professionals back and forth.

In the area of goods, the remaining 10% of tariffs that we have not made offers on yet will involve some sensitivities, including some with respect to agriculture on both sides, and for fish for the EU.

As part of the discussions on trade in goods, we are paying particular attention to non-tariff barriers, especially in the area of regulatory standards. Bridging gaps between EU standards and our standards--whether on a North American basis, a Canadian basis, or a provincial and territorial basis--will be essential to the free flow of goods between our two markets. We have already made significant advances in the area of regulatory cooperation, and we will have a chapter on this issue for the first time in any free trade agreement.

Intellectual property is also an important area, as the EU has been pressing us on copyright protection and enforcement and on the protection of geographical indications for some foodstuffs. The copyright bill tabled by the government a couple of weeks ago is likely to help us advance on some of these issues.

These are the main areas of focus overall, although we are looking to set high standards across the board, including in environment, labour, dispute settlement, areas of cooperation, and many more. We will be continuing to press forward with the negotiations as quickly as we can, while ensuring that we maintain a high level of ambition throughout all areas.

Thank you for your attention. I would be pleased to answer any questions you might have.

[The Chair, Conservative, Lee Richardson]

Thank you very much.

Please go ahead, Mr. Plunkett.

[David Plunkett, Chief Trade Negotiator, Bilateral and Regional Relations, Department of Foreign Affairs and International Trade]

Thank you, Mr. Chairman.

With Budget 2007, Canada adopted a global commerce strategy that is designed to help our businesses be more competitive in today’s global economy. This includes increasing our commercial presence abroad, securing competitive terms of access to global markets, and increasing foreign direct investment in Canada and abroad.

An aggressive trade policy agenda, including our negotiations with the European Union, is part of the global commerce strategy. The reality is that we still face a number of barriers in international markets. That is why our strategy recognizes the importance of continuing to push for free trade through the World Trade Organization, or OMC, and puts a strong emphasis on an unprecedented series of regional and bilateral trade negotiations as well.

Trade is an essential contributor to Canada's prosperity, productivity and growth.

The WTO is the best forum in which to built a more open, rules-based and equitable world trading system.

FTAs are effective tools to improve access to foreign markets and to level the playing field with competitors.

FTAs are also a key element in our response to the global economic crisis. They support economic growth while sending a strong signal against protectionism.

We have made good progress over the last year, including implementing agreements with EFTA and Peru. Legislation has been tabled recently with respect to Colombia and Jordan. Colombia passed into the Senate this week, and in mid-May we signed and tabled the FTA with Panama for review by the House of Commons. We have been active with Ukraine and are having a first round of negotiations in Kiev in mid-May.

Our existing North American Free Trade Agreement remains a key plank of our competitiveness. It allows businesses in all three countries to better realize their potential by operating in a larger and more integrated market, and we continue to work with our North American partners to improve the free movement of goods, services, and capital in North America.

In regard to investment, under the global commerce strategy the government has committed to an aggressive negotiating agenda for increasing the number of Canada's bilateral foreign investment promotion and protection agreements, FIPAs, and investment chapters in FTAs. To date Canada has made significant progress towards this goal, with 12 investment agreements, either as FIPAs or as investment chapters in FTAs, having been concluded since the implementation of the GCS, although some of these must still be signed and ratified.

Foreign investment links Canadian companies to global value chains and new economic opportunities, thereby enhancing their competitiveness and increasing the flow of goods and services between Canada and our trading partners. There are currently 23 FIPAs and three investment chapters in force, and we have an active program of ongoing FIPA negotiations.

Finally, on air negotiations, in 2006 a new international air transportation policy, called the blue sky policy, was announced by the government to help further connect Canadians to each other and to the world. Since January 2006, the Government of Canada has negotiated open, new, or expanded air service agreements with a total of 51 countries, including a comprehensive air transport agreement between Canada and the European Union’s 27 member states.

With that, Mr. Chairman, I will stop and turn the floor back to you.

[The Chair, Conservative, Lee Richardson]

Great. Thank you, Mr. Plunkett.

I should say that in the interest of time, we're not going to have another opening statement from Agriculture and Agri-Food specifically, but feel free to ask specific questions on agriculture if you have them. Mr. Gauthier is prepared to respond to those questions.

We're going to begin right away with a seven-minute round. I'd like to remind members and witnesses again that this will be seven minutes per member for questions and answers.

We'll begin with the vice-chairman, Mr. Cannis.

[John Cannis, Liberal, Scarborough Centre, ON]

Thank you, Mr. Chair. I'll certainly stay within the seven minutes.

Let me first of all welcome our guests and those from out west as well.

It's very interesting as we approach this initiative with the European Union. You mentioned 27 states, but it's growing. The big concern I have--and I'm asked about this by my constituents and business people in my community--is about the arrangements that we're hopefully going to be agreeing to, as soon as possible, I suppose. As they grow, how will it apply to these new members that will be joining the EU, the 28th or 29th or 30th member states? Once we agree on terms and conditions, it will all of a sudden be rubber-stamped, I presume, is what they're saying, or will we have to do any additional fine tuning after that?

Could I get a quick answer on that for my constituents?

[Steve Verheul]

Could I respond to that? If the EU expands to include further members, those new members would be subject to exactly the same obligations that the European Union is taking on under this potential free trade agreement.

[John Cannis, Liberal, Scarborough Centre, ON]

Thank you.

The issue of the movement of labour really caught my interest. There are two things: intellectual property rights, as you talked about, and labour movement.

If I recall—correct me if I'm wrong—they have the Schengen treaty, which allows free movement within the membership. Once we agree to the terms of this agreement in the future, does that mean that we too in Canada will fall under that agreement? Would members of the EU and Canada have free mobility of labour movement back and forth?

[Steve Verheul]

No, we don't anticipate that we would be able to get quite as far as the Schengen agreement, which applies between the European Union and a number of other European countries, including Switzerland and a few others.

Our main focus in labour mobility is more on the business side. We want to facilitate movement back and forth for business people and their spouses to follow investments, change jobs within firms, and do all of that kind of thing. We'd hoped to extend that to technicians as well. We're also emphasizing the importance of being sure that if you are going to work in one of the EU member states and you're qualified as an architect or engineer or something of that nature in Canada, you would also be able to work within the EU member states as an architect or an engineer. We won't be going as far as the free movement of people themselves.

[John Cannis, Liberal, Scarborough Centre, ON]

You just triggered something else, Mr. Verheul, and that is the qualifications or certifications of professionals. For example, veterinarians could come from Europe and move to Canada. With this treaty, are we moving towards addressing this with the provinces and the territories as part of these negotiations? You mentioned that you're including all the provinces and territories in your negotiations and that you're very concerned and sensitive to make sure that we adhere to their specific jurisdictions. In your view, will we be working towards resolving that? Can you make a comment on that for me?

[Steve Verheul]

Yes, we have been working very closely with the provinces and territories in designing the proposal that we will put in front of the European Union. That proposal will apply to all the provinces and territories.

Our biggest challenge on this issue will be getting all the EU member states on board, because they will have to make the decisions individually as well.

[John Cannis, Liberal, Scarborough Centre, ON]

With respect to intellectual property rights, we're all aware that this is an issue that we are also discussing here in Canada. I think personally it's an issue that must be addressed as soon as possible. Correct me if I'm wrong, but I'm reading your comments as suggesting that the Europeans have a model that is a little bit more effective or has more teeth--however you want to describe it--than ours does. Should we be looking towards the European model with respect to intellectual property rights, copyright legislation, etc.? Could you please comment on that?

[Steve Verheul]

Sure. The European Union does have a much stronger regime for copyright protection, for enforcement of intellectual property rights, and for a number of other areas as well.

The government has looked at the EU model, the U.S. model, and others in designing the bill that was put forward a couple of weeks ago, but I think the conditions in Canada are a little bit different in some respects. Our form of protection will not be exactly the same as the EU's or anyone else's, but our initial discussions with the EU last week indicated that they see the bill that we put on the table as going a long way towards addressing their concerns.

[John Cannis, Liberal, Scarborough Centre, ON]

Thank you.

My last question is with respect to open skies and competition. I think it's very important. Could you just elaborate for us, David?

It's interesting that we're having a growing market here in Canada, but in many ways it is described as a restrictive market. Could you give us an overview? Are we going to have open skies that will allow airlines from the European family of 27 today, and other ones in the future, to come and compete fairly right across the country, both for domestic flights and for international flights?

[David Plunkett]

I will not even pretend to be a specialist in this area, sir.

This issue is obviously the subject of negotiation, as they all are. We try to work, as Steve said in another context, to what fits the best to a Canadian situation, recognizing that we have interests of carriers, travellers, airports, shippers, etc. No one size fits all, so as we go through the various negotiations with major partners or smaller partners, each situation will have to be viewed on its own.

If you want to drill down, we can give you the details and talk to our chief negotiator, Robert Ready. He is best placed to answer any technical questions.

[John Cannis, Liberal, Scarborough Centre, ON]

Thank you, Mr. Chair.

[The Chair, Conservative, Lee Richardson]

Thank you, Mr. Cannis.

Monsieur Laforest pour sept minutes.

[Jean-Yves Laforest, Bloc, Saint-Maurice—Champlain, QC]

Thank you, Mr. Chairman.

Welcome to all of our witnesses.

My first question is for Mr. Verheul. Negotiations seem to be moving along quite quickly. I think you are ahead of your essential deadlines. Is there is some rush, or are the obstacles less significant than you had expected?

Also, can you tell me which negotiation related aspects the Europeans want to further protect? And conversely, what concessions are they calling for most insistently? I am asking the question from the perspective of the European Union, and also from Canada's perspective. On what negotiation points are we the least inclined to compromise? On the other hand, what concessions are we asking of the Europeans?

[Steve Verheul]

Thank you.

To respond to the first part of your question, we made the original commitment to try to do this negotiation as quickly as we could, partly because we've seen a lot of negotiations, including some of our own, that have dragged on for years. And we both wanted to get to a conclusion quickly. We've both been through a number of negotiations, so we know what's involved and at stake.

We also wanted to find that we could have a lot in common when we were at the negotiating table. We've established a very good negotiating atmosphere, which has led us to make some very fast, early progress. The Europeans have characterized it as being about a year ahead of schedule, of where they thought they would be. So we are well ahead. But that's partly because the negotiations, so far, have gone more smoothly than we had thought they would, and we're also trying to do things quickly so that we can maintain the momentum. I should recognize, however, that we have more difficult issues ahead, and those might slow us down somewhat.

In answer to your second question, it is a complex negotiation, with some 22 areas under negotiation. We have important demands in virtually all of those, as does the EU. The EU's most important offensive objectives are clearly in the area of government procurement and intellectual property, as well as a handful of others. The offensive interests that are most important to us tend to be more in the goods area. We want to make sure we can get clean access for goods--whether they are agricultural or fish products or all kinds of industrial products--into the EU market.

Clearly both sides have some sensitivities as well. Both sides have some sensitivities regarding culture. We don't want to have an extensive negotiation on culture. The EU also has some sensitivities in areas where they have taken protection for things, such as genetically modified organisms and biotechnology. These are areas where they feel they have limited room to move. Both countries also have sensitivities in the general area of access for agricultural products, or at least some agricultural products. This will be the subject of discussion further on in the negotiations.

[Jean-Yves Laforest, Bloc, Saint-Maurice—Champlain, QC]

Regarding the participation of provincial governments—we know, for instance, that Quebec is taking part—how are our governments reacting? I would imagine the demands of some provincial governments are incompatible with those of others. What do you do to reconcile the demands of some with the restrictions of others internally, within your broader negotiations committee? I would imagine that are some specific points that are not working. Are these major obstacles? If so, can you expand on them?

[Steve Verheul]

We may yet get to some of those obstacles you describe, but the approach to date has worked quite effectively. It's mainly a matter of spending a lot of time with the provinces and territories, and talking about what kinds of priorities we have in common to fit into our overall strategy. But also, we've been asking provinces and territories to identify the specific priorities they have for their own areas, as well as specific sensitivities they may have for their own areas. It's a very long conversation aimed towards getting to a package that works for everyone.

One example is that there's a very strong interest in fish and seafood from the east coast, and to some extent from the west coast, but far less interest in that issue in other parts of the country. But there is a clear recognition among all provinces and territories that we will push very hard for good access to EU markets for fish.

[Jean-Yves Laforest, Bloc, Saint-Maurice—Champlain, QC]

Thank you.

Mr. Plunkett, a number of agreements have been negotiated, with Jordan, Columbia, Peru. You have begun negotiations with the Ukraine. Negotiations with Peru have been completed and there are some on the way with the European Union.

Does the Department of International Trade do strategic planning to have an overview of all these agreements? Could some signed agreements be an impediment to the signing of another potential agreement? This is a very general question.

[David Plunkett]

That's a very good question, because it's something I face on a daily basis.

In broad strokes, the global commerce strategy set out our broad game plan to begin with. We had—and it started before I got to this position—gone through and identified key markets that were of interest to Canada for a variety of reasons, whether in terms of key interests to our business community or as offensive interests. There were other areas in which our competitors were moving ahead, and we needed to level the playing field, and obviously there were some no-brainers, such as how we should deal with the likes of China, India, and some of the big players in the European Union.

We had worked out a plan that had short-, medium-, and longer-term objectives, some of which were to address some of the negotiations that were already in play. We've had mixed results on that. We've been able to conclude a couple of those, EFTA being one, for example. Others, such as Singapore, which has long been on the books, we have still not found a way to wrap up.

In the meantime, as the world continues to unfold, opportunities arise. We hear from stakeholders, from provinces. We spend a lot of time, as does Steve, consulting with our provincial and business colleagues, and they push us and tell us we should be doing this or doing that. We obviously need to work carefully and make sure what each of us is doing is not inconsistent with what the other is doing. They build to a certain extent on the NAFTA model, but we long ago moved away from a pure NAFTA approach. I think Steve's negotiations will move us, in some areas, even further way. So it's a constantly moving process.

We engage a lot of lawyers who keep us honest by making sure what we're doing isn't inconsistent, looking either forward or back. It is a challenge to make sure that all the balls we have up in the air, including what we're trying to achieve in the Geneva context, in the World Trade Organization, aren't going in completely opposite directions.