International Trade Committee on March 16th, 2010

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

Yes.

[Jean-Michel Laurin]

In fact, some companies could not bid for projects unless they signed affidavits stating that they could make the products in the United States.

For instance, in Beauce or in Quebec as a whole, several companies that deal in steel and that make water treatment equipment, whose main market was usually in the United States, lost their main market overnight.

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

All right.

[The Chair, Conservative, Lee Richardson]

We have another round.

Mr. Allen.

[Malcolm Allen, NDP, Welland, ON]

Thank you, Mr. Chair.

I thought you were going to be kind to Monsieur Guimond, as you were last week, and maybe give him some extra time.

Thank you very much for coming, folks.

Let me start with Mr. Laurin. I'm looking at a policy paper you put together with your colleagues back in February of 2008, which I have to tell you I used fairly extensively in a lot of lobbying I did with municipal councils in the Niagara region. In fact, I lobbied over half of them and was successful in all cases in talking about Buy Canadian in municipal procurement.

They actually thought they were under NAFTA, which of course we here all know is untrue. Municipalities were under the misguided belief that NAFTA covered them because the Canadian government had signed on to it. They had used that as part of their excuse not to buy Canadian with what I say is the people's dollars. They don't make profits; they collect money like every government, and it's the people's money that they collect. What I expressed to them was that they had an obligation to spend the people's money on the very people they took it from in the first place.

Of course, I used your report. I'll paraphrase it; I know that you know this report really well. You believe, according to this document of 2008, that this was a good policy instrument that the Canadian government should use; that, indeed, we should invest in Canadian manufacturers as those from whom to buy local procurement.

But today I'm hearing you say to us that the deal is not as good as you would like it to be, but that it opens the door to opening the markets eventually. So really, according to this, you would be telling the government not to have a policy lever when it comes to local procurement, because there would simply be an open border: wherever procurement comes from, so be it.

Is it fair to say it in that way, or has there been a shift in the policy directive of the Canadian Manufacturers and Exporters?

[Jean-Michel Laurin]

Thanks for that question.

No, actually, I think our policy has remained the same. We did that paper a couple of years ago, and it related to the Buy American measures that have been applying to federal moneys that are spent on highways and transportation infrastructure in the U.S.

Those restrictions actually have their origins in the 1930s, and they were modernized in the 1980s. They affect companies making products used in mass transit projects or in highway types of projects. These restrictions have been in place for a very long time. We were unsuccessful in NAFTA, and before that in the Canada-U.S. free trade negotiations, in getting an open market in the United States.

So our policy paper was developed as a result of that. Our members came to us. Our members making mass transit equipment and our members making steel for highways and bridges were coming to us saying, “If we can't change that policy in the U.S., we need to have a level playing field here in Canada, and maybe we should look at having policies that provide us with the same kind of domestic support.”

The objective was always, first and foremost, to get the U.S. market open, but if we're not successful with that, we need to look at our other options. That's what we were trying to tell the government. That's what we've been trying to tell people.

So the parallel with the current Buy American negotiations I think is that this agreement actually gives us an opportunity to put that issue on the table with the Americans, because they've committed to sitting down around the table and having discussions with us over procurement generally.

Are we going to be able to get any traction on that issue? I don't know. But I think the objective should always be to open the U.S. market. That's where most Canadian companies would like to do business.

[Malcolm Allen, NDP, Welland, ON]

And I appreciate it.

I hate to cut you off, but I know Mr. Richardson will cut me off at seven minutes.

[Jean-Michel Laurin]

Yes, I know, he's tough.

[Malcolm Allen, NDP, Welland, ON]

That's okay. It's a very detailed topic, and there's lots of thought to go into this.

And Mr. Richardson's just doing his job, by the way.

Mr. Chairman, I appreciate that.

It is a very detailed and difficult proposal, so I'm hoping that the CMA will indeed keep in mind what it said in 2008, as we go forward, because, as you said earlier, the deal isn't perfect. Some of us would say it's not any good, but that's a question for each of us to decide.

I have to go to Mr. Sinclair and Ms. Healey.

Mr. Laurin kindly talked about what happened with NAFTA and the FTA, and he put it in the historical context of how we didn't do so well over there. We also didn't do so well, in my view, here, which doesn't bode well for the future of international agreements. So based on that, let me ask this question about the scope of the moneys, which was unprecedented in the United States, in the following sense. Was it simply the scope of the money that was put on the table by the federal government in the U.S. that sort of heightened this awareness? Mr. Laurin clearly pointed out—and as I said, I used to use this evidence—the Buy America Act of the 1930s and the upgrades to it over the years, which are still there. Is it simply the fact that the dollars are approaching $1 trillion a pop, and they simply said, “Wow, what happened here? How come we're not in all of that? That's a big cake, how come we can't get a slice?” Or is it simply, “It's always been that way anyway, and if the cake was smaller, we didn't notice”?

Mr. Sinclair.

[Scott Sinclair]

I have to say, as someone who's followed procurement policy for 20 years, that I was somewhat taken aback at the reaction in Canada to the Buy American preferences in the recovery act. They are a long-standing feature of U.S. policy. They have systematically excluded them from most of their international trade treaty obligations. They have very good exclusions.

The psychology of it is quite interesting, because, as you point out, I believe there was a change in the position of the Canadian Manufacturers and Exporters. They had been advocating Buy Canadian policies, at least in certain specific sectors, and then suddenly, along with a number of other actors, they were, I would say, panicking about these Buy American provisions.

Now, it was partly an economic downturn. Our trade to the United States and to other markets was dropping quite dramatically, not because of the Buy American preferences, but because of the recession. It was also, as you state, the scope of the money.

I want to point out that of foreign countries, Canada was the primary beneficiary of the Obama stimulus package, that $787 billion. We benefited more, as their largest trading partner, than anyone else, except the United States. The Buy American preferences were an irritant, but they were a marginal loss.

[The Chair, Conservative, Lee Richardson]

Mr. Holder.

[Ed Holder, Conservative, London West, ON]

Thanks very much, Chair.

I'd like to thank our guests for their testimony today. It is appreciated very much.

It's interesting. Last week we had our officials in to give us a broader overview of this procurement agreement, and one thing that's very compelling to me.... Last year, our committee travelled to Washington, and we selected four issues that we felt were critical to deal with. All parties around this table agreed on the four topics that had to be discussed, and it should not shock anyone that Buy American, and the provisions associated with that, was one of our major topics and a great concern to us.

Why? My political colleagues and I would hear from our businesses--businesses that, by the way, run because employees need to work and make that happen. There was huge concern about Buy American, and as I say, all parties accepted that. That was when we visited various members of Congress. That was one of the issues we dealt with.

I say that because I hear the rhetoric, if I might call it that, the comments on different perspectives from Monsieur Laurin versus Mr. Sinclair and Madame Healy. It won't surprise you the side that I come down on. I say this as a businessperson more than a politician, but I'm compelled, Monsieur Laurin...when you talk about the members you represent, you said that 47% of manufacturing in terms of your membership is export.

It begs the question, are we better off as an isolated, protectionist country, when first, it's not our history, and second, when I look at, for example, the cars that are made in this country, where the United States is the major export market? I'm not here to ask that as a question but to make the point that if we were not a trading country, I think the implications would be far greater in terms of our economy. I would agree with Ms. Healy on this one particular point, that the economy is fragile. It absolutely is, and our recovery is fragile, but when the International Monetary Fund and others say that Canada was the last to get into this global mess and the first to come out, I'd say that's very, very positive.

Enough of the speech, because it felt like a speech, and I'm sorry for that.

Monsieur Laurin, a question for you. We've heard both sides of this equation, so to you I would ask, what would happen if we didn't have this agreement? You've already said better this agreement than not an agreement. If we didn't have this agreement, what would you imagine?

[Jean-Michel Laurin]

That's a very good question. We actually asked ourselves the same question and we came to the realization...first of all, we didn't mention this already, but there were pressures in Canada to have similar types of protectionist policies, especially at the municipal level. There was a campaign orchestrated by some members of the Federation of Canadian Municipalities, which ended up actually being quite helpful in these negotiations, because you know the threat of retaliation always helps move negotiations forward. But I think there would have been tremendous pressure in Canada for some sort of retaliatory measure. I think, especially in the current environment where business has been down because of the recession, any market restriction you put in place--whether it's between Canada and the United States, whether it's between two provinces here in Canada, whether it's with other trading partners--kills jobs because it bars you from accessing certain business opportunities. We've been saying all along during those negotiations that you actually get out of a recession and you create wealth by opening up and creating new business opportunities.

So I think that has always been our focus during those negotiations. If there had been no agreement, I think we would be in a situation where there would be strong pressures on both sides of the border to put more restrictions in place. Quite frankly, we've been so much on this issue that one thing we realized is that there are so many things that Canadians and Americans make together. In every sector you find stories of a Canadian supplier selling a part to an American supplier, to a Canadian company selling its goods in the U.S. and Canada or that might be using a U.S. distributor who's selling his products in Canada.

We are really talking about one integrated economy, in many sectors. The car industry is always the example cited, but I think you could make the case with companies in almost every industrial sector in Canada. That's certainly the message we try to carry with us when we go to Washington. We've got so many examples of Canadian companies that are creating jobs in the U.S. The kind of message that really gets your point across in Washington is if you can point to the impact you're having at the local level.

So again, I think without an agreement we'd probably be worse off. We'd probably be in a tit-for-tat kind of relationship with the United States, and I think we probably would...well, I can't say for sure whether we would have prolonged the recession, but I know we would not have stopped it faster.

[Ed Holder, Conservative, London West, ON]

So I guess my question to you would then be, are your members afraid to compete in the United States?

[Jean-Michel Laurin]

No. It's our main market. Canadian companies have used NAFTA to expand their business, and now the majority of them would consider North America to be their domestic market. It's no longer about just Canada; it's really about North America. What you're seeing companies do right now as a result of the recession is to say, how can we use North America as our own domestic market but as a base from which to grow an international market? The more that companies find specialized niches in which to compete, the more they segment and target very specific markets, the more their playing field is international. It's global.

You see a lot more Canadian companies looking at growing their business in Europe, in Latin America, and in other parts of the world because they realize that these markets are growing faster than the U.S. market and there is sometimes less competition, but also we need to get outside our own domestic base if we want to succeed as companies. I think, going forward, that's certainly a priority for Canadian companies.

[Ed Holder, Conservative, London West, ON]

Have you ever tracked how many employees are represented by the membership in your organization?

[Jean-Michel Laurin]

We track it by shipments and by export sales. Our membership accounts for approximately 82% of manufacturing shipments, about 90% of exports. That's what our membership networks account for. I don't know the number of employees, but I would assume it's along the same lines.

[Ed Holder, Conservative, London West, ON]

If you ever do that calculation, would you let us know?

Thank you.

[The Chair, Conservative, Lee Richardson]

We'll have a quick round of five minutes each for questions and answers, beginning with Mr. MacAulay.

[Lawrence MacAulay, Liberal, Cardigan, PE]

Thank you very much.

With the AGP, do you expect that to affect future legislation in the U.S., particularly when we have Buy American provisions in the legislation? Is there any legal ground for this?

Also, if there's time, I'd like Ms. Healy, for sure, and everybody to comment on the global policies that are decided, looking at the social policy that we have in this country, and how you think it could affect them.

[Dr. Teresa Healy]

When we're talking about global economic policies in this context, in terms of trade and this new aspect of the international agreement that is compelling provinces and some federal governments to be disciplined by the requirements of the World Trade Organization, then we are talking about an impact in terms of social relations.

We know that in Canada the government has said there is a very high cost to increased stimulus spending and has put a limit on it, certainly much lower than other OECD countries. Part of the argument is that there's a very high long-term cost that has to be paid, that we have to think very carefully about how much stimulus money should be extended, how much public money should be extended. So I look at this agreement and say, well, why then would we tolerate leakage? Why would we not encourage that money to be spent within the Canadian economy?

The United States, if I'm not mistaken, has given, per capita, seven times more stimulus money to the economic recovery than Canada, and they have plans about how they want to see that money spent. I'd like to shift this discussion relative to your question to look at the implications for the Canadian economy in terms of our public services, in terms of responsibilities of government at a number of different levels to deal with our economic recovery and the kinds of policy options and space that we have for bringing our economy back from crisis.

[Scott Sinclair]

Just quickly, there are no enforceable legal safeguards in this agreement that would protect Canada or even insulate it from Buy American preferences in future legislation. The proof of that pudding will be in the eating very soon in the Jobs for Main Street Act, which has Buy American preferences. There are several bills that have been introduced that include Buy American preferences. Canada has an expedited consultation mechanism, but we are basically back to square one, and that will be the situation.

[The Chair, Conservative, Lee Richardson]

Mr. MacAulay, if Mr. Laurin would like to respond, you have a minute and a half left.

[Jean-Michel Laurin]

I'd just like to add a comment to your last question, which concerned whether this protects us against future Buy American restrictions.

At the federal level it doesn't. We consulted with some trade lawyers during the negotiations. There are some limits on the President's powers. He cannot give us an exemption for legislation that does not yet exist. That was part of the problem during negotiations. That's why they put in place a mechanism for trying to resolve these issues if they arise again in the future. This does, however, protect us against buy local provisions in those 37 states that have signed on to this WTO agreement.

So the answer is yes and no, but the agreement takes that into account by providing for this special mechanism.

[Lawrence MacAulay, Liberal, Cardigan, PE]

Okay, thank you.