International Trade Committee on June 15th, 2010

[Gilles Gauthier]

Absolutely.

[Claude Guimond, Bloc, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Mr. Verheul was saying earlier on that agriculture was an important aspect of the negotiations. That is normal. We feel it, and it is interesting.

However, what agricultural sectors could benefit here? Have assessments been done on that?

[Gilles Gauthier]

Many Canadian agricultural sectors are export-driven. For all of these sectors, Europe is a potential market. Let's take beef for example. The European Union consumes 8 million tonnes of beef per year whereas we only currently export 5,000 to 6,000 tonnes there. You can see how the European market is gigantic in comparison with the current level of trade. The European market also consumes approximately 19 million tonnes of pork annually. Yet we only export a few containers per year. That would be one company in Quebec. Again, it is a market with great potential for all our red meat sectors.

When it comes to grains, Europe has historically been a major market for our wheat, our durum wheat, our flax and other grains. It really is a significant potential market. There is also the entire processing sector we should not lose sight of. It represents great potential for Canada. Given our capacity to produce raw materials, we can also produce processed goods. They could potentially benefit from preferred access to a market of 500 million people.

[Claude Guimond, Bloc, Rimouski-Neigette—Témiscouata—Les Basques, QC]

That is to say that if we manage to maintain supply management in the agricultural sector, the agreement should be a win-win, specifically in global agricultural terms. I know that the issue of supply management often comes back to the fore.

[Gilles Gauthier]

I would say that the purpose of all negotiations is to arrive at a win-win solution for all.

[The Chair, Conservative, Lee Richardson]

Thank you.

Your time is up.

Mr. Trost.

[Bradley Trost, Conservative, Saskatoon—Humboldt, SK]

Thank you, Mr. Chair.

I hope I'm not jumping too far ahead, but one of the things that I think irritates a lot of Canadians whenever we talk about trade with the U.S. is the disputes. I'm not sure if you're at the point to talk about dispute resolution mechanisms, but are you discussing that with the Europeans. If so, how are you making sure that the dispute resolution mechanisms we will have with them will be effective, efficient, and of course quick, which is the one thing that I think we all want?

I think it would probably be best to start with Mr. Verheul.

[Steve Verheul]

Yes, thank you. We are paying a lot of attention to the whole chapter we're going to have on the dispute resolution mechanism. We've looked at the kind of dispute settlement process we have under the NAFTA and we've looked at the process under the WTO, and both of those now go quite a way back in time. We've had quite a bit of experience under those kinds of mechanisms and the opportunity is there to learn some lessons.

Positions between us and the EU are still far apart, but what we're trying to do in this agreement is to take all the flaws that we've seen in those earlier systems and find ways to address them.

Certainly the issue of speed, how quickly you can come to decisions, is an important factor. We also want to make sure that the consequences to being offside an agreement or a provision are clear and that compensation for that should start from when the offending measure was first put in place. We've also looked at approaches that would allow us to get panels formed more quickly than in the previous processes.

We're virtually looking across the board to try to improve the system.

[Bradley Trost, Conservative, Saskatoon—Humboldt, SK]

Some of the other questioners dealt with this in a more general sense, but again, it seems that the biggest problems are going to be the non-tariff barriers. I was wondering if one of the witnesses might be able to help group and organize where the non-tariff barriers tend to be and give us a generalized approach as to how we're dealing with them. Are we dealing with the non-tariff barriers on a broad, principled basis, or are we looking at each specific non-tariff barrier on a more specific, case-by-case basis and dealing with them as individuals rather than taking a rather broad principled approach?

I know you've dealt with some of that in regulations. Who would be best suited to respond?

Go ahead, Mr. Verheul.

[Steve Verheul]

Thank you.

I would say that we're looking at it from both perspectives, actually. First of all, we're starting with the principles of what are we trying to achieve, which is effective entry into each other's market without these kinds of barriers, so we're designing a system that includes some of the various elements that we've talked about: bridging the gaps between existing regulations where they exist; moving forward on regulatory cooperation; finding approaches to mutual acceptance of regulations in some cases; recognizing each other's conformity assessment bodies, which is another way of cutting through a lot of the extra complications. But at the same time, we've both identified lists of specific barriers that we're trying to address concurrently with the negotiations. Those include a number of sanitary and phytosanitary barriers that exist now, and they also include a number of technical barriers to trade that exist now. So we've got a parallel process ongoing to try to deal with those issues, while in the negotiations themselves we're also trying to develop a structure that will put us in a position where we don't have to face these in the same way in the future.

[Bradley Trost, Conservative, Saskatoon—Humboldt, SK]

Mr. Cannan wanted a brief question.

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

Thank you, Mr. Chair.

I think we'll have one more chance to go back and forth yet.

Thank you for this time. I have just a quick question or comment about the magnitude of this agreement. I concur with 300 million versus 500 million, or NAFTA versus the EU, so it's not just distinct; it's of historic proportion. I wonder if you could clarify something. Something we've talked about in this committee--I've been on it for four years--is the idea that when we have free and fair trade and we talk about other countries that have a free trade agreement, there is something called a “transversal clause”. So if we were negotiating and another country came along in a couple of years and had an agreement with the EU, would we get parity with that agreement so that we'd always be on equal terms?

[Steve Verheul]

That's certainly one of the objectives we have, and we suspect that we wouldn't have too much difficulty agreeing to that. We do have that in some of our previous agreements, but in most areas we would see that if the EU went on to negotiate with another trading partner and took further liberalization steps with that trading partner, those benefits would accrue to us and be incorporated into our agreement as well.

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

Excellent.

Could you, for the committee's sake, enlighten us as to the process and the timeline, from their perspective, to ratify this free trade agreement with Europe?

[Steve Verheul]

I have to confess that some of that is a little hazy now, since they just recently passed the Lisbon Treaty and are sorting out some of their respective roles within the European Union. Generally, when we reach agreement on all of the substance of the negotiations, that will be between us and the European Commission, so we will do an initial sign-off of the agreement. We'll then have to go through a legal scrub to ensure that all the provisions are going to have the legal effect we intended. We will have to have the agreement translated into 23 languages, which is what the European Union requires, which will take a considerable amount of time too. At the end of the day, the European parliament will need to approve the agreement formally. Because we're going beyond where a lot of traditional trade agreements would go, and going right into some of the responsibilities of individual member states, member states will also have to approve the agreement, or at least all 27 will have to ratify it. It will be a long and complicated process. We're hoping to accelerate it, and there is even the possibility of the provisional application of the agreement while some of this is happening. It will be a complex process.

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

Thank you. I think you have a busy year and more ahead of you. Good luck.

[David Plunkett]

If I might, the European Union recently concluded a free trade agreement with Korea. So some of the issues that Steve has just highlighted, they are now having to work through vis-à-vis that agreement. Hopefully some of the uncertainty and the newness will have worked their way out by the time they get to us, and it will be a little more efficient than I suspect this first one will be.

[The Chair, Conservative, Lee Richardson]

Thank you, Mr. Cannan.

Mr. Silva, you have a quick five minutes.

[Mario Silva, Liberal, Davenport, ON]

I would just say that Mr. Plunkett is too optimistic about European bureaucracy and its efficiencies.

Part of my question actually was raised earlier by Mr. Trost, and I think it's been answered, but I just want to maybe touch a little bit on the issue of the dispute settlement mechanism--how it's going to work and whether a new framework is going to be established that is unique when compared to the ones we already have with NAFTA, and so forth.

I say that because my understanding of the European system is that it's very much protectionist and a very closed shop. In their procurement procedures they tend to put out specifications and certain provisions and processes that really, at the end of the day, only favour their own different countries. In fact, I have heard of incidents where some of them would work with certain private companies to actually get the procurement to be the way they want it and exclude any foreign type of procurement. That's the way they get around the idea of exclusionary biases they might have. But at the end of the day, the specifications are really much more tailored to their domestic and national interests.

How does one deal with these types of issues? Have you given some thought about this, and what type of mechanism is going to be in place? As I said, is it going to be a totally different framework that will look at these issues?

The question is open to anybody who wants to answer.

[Steve Verheul]

I'll try to respond to that. I think there are a number of different avenues we're going to be looking at when it comes to dispute settlement.

The main dispute settlement between states that will be in the agreement is the one I was referring to earlier. That will be a modification of the NAFTA and WTO approach that has been in place for so long, and an improvement over that. We will also have separate approaches, most likely in areas such as environment and labour, where there will be a different kind of process to be followed. We will have a different kind of process when it comes to investor-state disputes. Again, we'll be looking at modifying what has been used in the past under NAFTA chapter 11 and others.

Part of the issue you're asking about, particularly as it relates to government procurement, is also tied directly to the negotiating process. We're very much aware of the extent of the flexibilities the Europeans have in their government procurement system, and we're having a very detailed discussion in the negotiations about what those flexibilities are and what, if anything, they intend to do with them. If they do not intend to reduce some of those flexibilities, then we will incorporate those flexibilities into our own offer to the European Union. In other words, we're aiming for something that's going to be a level playing field.

[Mario Silva, Liberal, Davenport, ON]

I think that answers my question.

[The Chair, Conservative, Lee Richardson]

Monsieur Laforest, a quick one.

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

Thank you, Mr. Chairman.

One would assume that to the European Union, access to the American market is just as important and attractive. Would you say that the fact that Canada is a member of NAFTA and has to respect the rules of origin is an additional asset for the European Union to sign an agreement with Canada? In other words, because we respect the rules of origin, can we expect that the Europeans will make significant investments here, specifically in leading sectors or high value-added sectors like the auto industry and green energy? If they were to invest in Canada, would that not serve as a springboard to access the American market? Would this be a potential strategy for them, and are we going to promote that as a major asset for Canada?

My question is for Mr. Verheul.

[Steve Verheul]

Yes, I think that is an important consideration of their assessment of the negotiation with Canada. They already have an agreement with Mexico, but the agreement they have with Mexico is a far more modest one than the one we are aiming to achieve here.

I think Canada is in a fairly unique and strong negotiating position by being both a part of NAFTA--in particular, the United States' biggest trading partner--and having this negotiation with the European Union, the largest market in the world. So how we resolve a lot of the issues between us and the European Union will have a direct impact on the relationship between Europe and North America in some ways. We are well positioned for this, and I think the EU is certainly aware of the benefits of the Canadian economy being so close to the U.S. economy.

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

Thank you very much.