Evidence of meeting #33 for International Trade in the 41st Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was negotiations.

A recording is available from Parliament.

On the agenda

MPs speaking

Also speaking

Ian Burney  Assistant Deputy Minister, Trade Policy and Negotiations Branch, Department of Foreign Affairs and International Trade
Denis Landreville  Lead Negotiator, Regional Agreements, Trade Negotiations Division, Trade Agreements and Negotiations Directorate, Department of Agriculture and Agri-Food
Shenjie Chen  Head, Research Projects Unit, Department of Foreign Affairs and International Trade
Phil Calvert  Director General, North Asia Bureau, Department of Foreign Affairs and International Trade

Noon

Conservative

The Chair Conservative Rob Merrifield

The time has gone. Thank you very much.

Mr. Sandhu.

Noon

Liberal

Lise St-Denis Liberal Saint-Maurice—Champlain, QC

He spoke twice.

Noon

Conservative

The Chair Conservative Rob Merrifield

Excuse me. Mr. Sandhu is first.

Noon

Liberal

Lise St-Denis Liberal Saint-Maurice—Champlain, QC

I apologize.

Noon

NDP

Jasbir Sandhu NDP Surrey North, BC

Thank you, Mr. Chair.

You talked about pursuing benefits in certain sectors for Canadian manufacturers or Canadian companies or Canadian sectors or Canadian trade overall. Could you tell us what sectors the Japanese would want to pursue in Canada, or in what areas they would like to see export of Japanese goods coming into Canada?

Noon

Assistant Deputy Minister, Trade Policy and Negotiations Branch, Department of Foreign Affairs and International Trade

Ian Burney

It's a question that would be better put to the Japanese themselves. Through the negotiating process we'll develop a pretty clear idea of what their priorities are.

I think they would be looking at areas in Canada that are still subject to tariffs. The subject has come up a number of times already this morning, but I think the tariff on automobiles would be a high priority for Japan.

That said, I would point out that the vast majority of Japanese-branded cars that are sold in Canada are actually made in North America; in fact, about half of them are made in Canada. So we're talking about a relatively small percentage that still actually comes from Japan, which is part of the reason that the trade numbers have been going the way they have. In fact, imports of Japanese vehicles have been declining. They've gone from something like $5 billion five years ago to closer to $3 billion now.

Noon

NDP

Jasbir Sandhu NDP Surrey North, BC

Is that the only sector in which they'll benefit?

Noon

Assistant Deputy Minister, Trade Policy and Negotiations Branch, Department of Foreign Affairs and International Trade

Ian Burney

I'd rather not be put in the position of identifying what their negotiating priorities would be. I'm worried about what our priorities are.

Noon

NDP

Jasbir Sandhu NDP Surrey North, BC

What sectors or what kinds of goods would the Japanese want to export here?

Noon

Assistant Deputy Minister, Trade Policy and Negotiations Branch, Department of Foreign Affairs and International Trade

Ian Burney

If you look at Japan's current exports, automotive and automotive parts products are a significant part of their exports. I talked about cars.

On the parts side, though, I should say that the vast majority are also coming in duty free, because we don't put duties on parts that come in as part of original manufacturing. Given that Toyota and Honda are such major investors in the Canadian economy, when they source parts from Japan they come in duty free now. A free trade agreement would not create any additional benefit in that particular area.

Japan is a major supplier of computers and electronics and machinery and equipment, so my guess is that they would be looking at Canada's tariff structure and looking for opportunities across the board. But Canadian tariffs are not very high, which is why we're not anticipating any significant dislocation in the Canadian economy as the result of a free trade agreement.

12:05 p.m.

NDP

Jasbir Sandhu NDP Surrey North, BC

Let me ask you the same question in a different way. How can Canadians benefit? Which goods would we want to import from Japan that would benefit Canadians?

12:05 p.m.

Assistant Deputy Minister, Trade Policy and Negotiations Branch, Department of Foreign Affairs and International Trade

Ian Burney

To the extent that through free trade we stimulate imports from Japan, they could benefit a wide variety of consumer and industrial interests across Canada.

We're talking about a very large, sophisticated trade relationship, which is why it's difficult for me to give specific examples here or there. We would expect benefits to be spread across virtually the entire economy, and not just in goods. There is a tendency to focus on tariffs, but through the more secure and stable regulatory regime created around services and investment, we would expect to see a lot of benefits in those areas in both directions.

It's not as though a benefit to one country is an expense to the other; it's not a zero-sum game. What we are anticipating is a more efficient trading arrangement that stimulates opportunities on both sides: Canadian consumers benefit from cheaper Japanese goods, and Canadian exporters benefit from better access in the Japanese market. The way we would look at these agreements, the benefits are on both sides.

12:05 p.m.

NDP

Jasbir Sandhu NDP Surrey North, BC

I would agree with the premise that there could be mutual benefits to both countries, but there must be some sectors that are going to be positively impacted and some that are going to be negatively impacted. I'm clearly not hearing from you that this is only going to have a slight negative impact upon the auto industry, but maybe not upon some of the other sectors in our economy.

12:05 p.m.

Assistant Deputy Minister, Trade Policy and Negotiations Branch, Department of Foreign Affairs and International Trade

Ian Burney

I am not able to identify other sectors of the economy in which we are seeing the risk of negative implications. Even in the automotive sector, as I've said a few times now, I'm not saying that the impact would be negative. I'm just saying that concerns have been expressed from some stakeholders in that industry.

At the end of the day, the trade agreement is creating the rules. It's up to companies to actually seize the opportunities that are provided by the rules. As a government official, I can't tell you which companies are or are not going to take advantage of the enhanced rules that are provided through the agreement.

12:05 p.m.

Conservative

The Chair Conservative Rob Merrifield

Thank you very much.

Mr. Holder.

12:05 p.m.

Conservative

Ed Holder Conservative London West, ON

Thank you, Chair.

I hear my friend and colleague ask his questions, and I think sometimes we are allowed to accept the possibility of good news. I say that respectfully, because what I'm hearing here is potential.

I'm glad to hear you say, Mr. Burney in particular, that when we establish the rules-based arrangement with the intentionally lower tariffs, we can then let business and job creators get on with the job of doing what they do best.

I think the questions are fair all around in terms of what areas could potentially be impacted from Canada's perspective. I was in London this past Friday as part of an announcement when one of our ministers came to my city to talk about CETA and our negotiations there. Frankly, we were very clear that while the negotiations aren't done, the economic impact is some $12 billion to Canada. I was interested to see in your formal presentation that close to $4 billion of benefit will be attributed to Canada.

I think that is good news, and we need to celebrate the potential for good news more often than not. We as a committee are obligated to ensure that from our standpoint our negotiations are as focused as possible on Canada's interests.

I want to come back to what Mr. Davies said, but really I don't want to play musical chairs with Mr. Chen again unless he chooses to. When he made the assumption of zero unemployment, it wasn't because we realistically presume there's going to be zero unemployment as much as it was to have some parameter, some baseline, if you will, to be able to get on with establishing values.

Is that the premise of using zero unemployment on both sides, so that you have some baseline to work from, as opposed to presuming that it will be zero unemployment? Could you just clarify that?

12:05 p.m.

Assistant Deputy Minister, Trade Policy and Negotiations Branch, Department of Foreign Affairs and International Trade

Ian Burney

My understanding is that it's exactly that. The modellers have to make some assumptions in order to be able to manage a simulation. You could take it to almost infinite levels of complexity, but at a certain point your model has to have some constraints, otherwise you can't make it manageable.

Since this is beyond my technical area of expertise, it might be more helpful if we, in follow-up to this session, perhaps provided a document outlining the methodology used in this—

12:10 p.m.

Conservative

Ed Holder Conservative London West, ON

The rationale would be quite useful.

12:10 p.m.

Assistant Deputy Minister, Trade Policy and Negotiations Branch, Department of Foreign Affairs and International Trade

Ian Burney

—and then the rationale for it, because it is a very technical field. So rather than claiming knowledge I don't have, I would prefer to commit to following up with something perhaps in writing.

12:10 p.m.

Conservative

Ed Holder Conservative London West, ON

I appreciate we're in the early stages of this, but this is not our first attempt to establish a more formal trade arrangement with Japan, frankly. How could the wheels fall off in this deal, or do you anticipate that to be the case?

12:10 p.m.

Assistant Deputy Minister, Trade Policy and Negotiations Branch, Department of Foreign Affairs and International Trade

Ian Burney

Indeed it is not the first. In fact, I was directly involved in the earlier joint study process in 2006-07. Timing is everything and as a result of changes that are ongoing domestically within Japan now and of where we are with regard to our own trade policy orientation, the timing seems to be ideal to move forward with this initiative at this time.

How could the wheels fall off? We've also had experience with negotiations that run for many years and get stalled. That is inevitably a risk. Each side will have some sensitivities that they'll bring to the table here, and we'll have to seek a happy landing zone that allows each party to manage those.

12:10 p.m.

Conservative

Ed Holder Conservative London West, ON

One of the things we've been given with CETA is some municipal backlash where municipalities, some across the country, have said they don't want to play. That is not their call insofar as it's really the negotiation that we have with the provinces and so on, and they, being creatures of the province, can't run afoul of our agreement.

Would it help to have the provinces so closely connected in CETA to be able to do this and to have their buy-in? I would think that any deal going forward has to have that same sense of buy-in.

I'd like to ask you this. You've touched on it. How close will that relationship with our provinces have to be not just in terms of informing but in terms of tabling, if that's the right expression? What do you see as the provinces' role, so we can offset that potential for criticism? You know, quite frankly, that it will be there going forward, because there are those individuals and certain groups that will ensure that municipalities are twisted to a different perspective and they will come out and vote against it.

Have you any response to that, please?

12:10 p.m.

Assistant Deputy Minister, Trade Policy and Negotiations Branch, Department of Foreign Affairs and International Trade

Ian Burney

I'm not sure that the initiative with Japan will generate exactly the same response the CETA negotiation has generated. That would be my first point.

The main point is that we will be in lockstep with the provinces and territories as this moves forward. I think there is a broad-based understanding of the importance not only of the Japanese market but also of the Asia Pacific region as a whole. I think there is a strong degree of support among our provincial and territorial colleagues for Canada being as ambitious as possible in pursuing opportunities in the Asia Pacific region at this time, particularly given the risk that our major competitors are all going to be doing the same thing and we do not want to find ourselves facing a non-level playing field in some of the most important markets in the world, markets that will only get to be more important going forward.

12:10 p.m.

Conservative

Ed Holder Conservative London West, ON

Mr. Chair, I'm done, so I might ask you at some point if the negotiators have any thoughts about Japan's position on the seal hunt, but I'll leave that to you.

12:10 p.m.

Conservative

The Chair Conservative Rob Merrifield

Okay. All things are on the table when it comes to negotiations, but we'll pursue that a little bit later.

Right now, Mr. Davies, the floor is yours. Five minutes.