International Trade Committee on Oct. 2nd, 2012

[The Chair, Conservative, Rob Merrifield]

Madame Papillon.

[Don Davies, NDP, Vancouver Kingsway, BC]

I'm just going to take the first thirty seconds of the five minutes.

[The Chair, Conservative, Rob Merrifield]

Is that what you're going to do—you're breaking your time?

[Annick Papillon, NDP, Québec, QC]

I was not here during the previous Parliament.

[Don Davies, NDP, Vancouver Kingsway, BC]

This is only to point out to Mr. Holder, because I was present in the last Parliament, that he might remember that his government prorogued Parliament twice, and the prorogation killed the Panama deal at least one time, and then of course the election came. So it's not entirely fair to say that any particular party held up this agreement, since it was his government that wiped this deal off the order paper by proroguing Parliament. Then we went to an election, of course.

I thought that point should be made lest the people who read the blues don't understand this.

Now I'll turn it over to Madame Papillon.

[The Chair, Conservative, Rob Merrifield]

That's an interesting “road through history” lane.

Go ahead, Madame Papillon.

[Annick Papillon, NDP, Québec, QC]

It is important for my colleague to make these clarifications.

I would like to begin by thanking the witnesses for being here today and answering questions. Instead of asking a few questions on Prince Edward Island potatoes, I would rather like to ask some questions about the environment.

Unlike some other agreements, this one does not provide for any financial penalties if environmental regulations are violated. I would like to know why that is. We are wondering why there are financial penalties, but no environmental penalties. Are there any very specific reasons the department representatives could give me?

[Cameron MacKay]

Mr. Chair, it has been the Canadian government's approach in recent FTA negotiations to negotiate both labour and environment side agreements. These do indeed have different provisions, and I think that's because the government recognizes that there are different issues at stake.

I mentioned the environment agreement briefly earlier. The way it works is that both governments are committed to implementing their environmental obligations, to implementing and enforcing their environmental laws, and to not derogate from those laws and their enforcement in order to attract investment or increase exports. If a citizen of either country is unsatisfied with the implementation of that, a citizen can write to the government, and the government is obliged to respond and to make both the question and the response public. If that is not satisfactory, then there can be consultations between the two governments, between Canada and Panama, for example, about an environmental issue. Those consultations can rise to the level of ministerial consultations, and if those consultations still do not resolve the issue, then there can be a panel established and the panel can investigate and write a report, and the report is made public.

This is very similar to the agreements that Canada has negotiated with other FTA partners. So far, we have not seen any dispute between Canada and any of its other partners rise to the level of their being or their needing to be these kinds of consultations or a report struck.

Our approach instead is to try to work with the other government to help it implement its environmental obligations. Our experience has been that this kind of cooperative approach with respect to the environment is more appropriate and can be more successful than a so-called punitive approach.

The situation of labour, which we spoke about briefly at the last session, is different. The failure to implement obligations under the labour agreement tend to arise from different reasons. Therefore, we've negotiated a slightly different approach with respect to labour.

There are some similarities and some differences between the two agreements. The government is satisfied that this is the best approach with respect to those sectors.

[Annick Papillon, NDP, Québec, QC]

You are confirming that we preferred using an approach that is more cooperative than punitive and that, as a result, in the negotiations so far, there are no penalties in terms of that very specific case.

[Cameron MacKay]

That's correct. There are no fines associated with a failure to implement the environment agreement.

[Annick Papillon, NDP, Québec, QC]

Thank you.

Panama was promising the U.S. that it would sign a tax information exchange agreement for eight years. When it finally did sign that agreement with the American administration in November 2012, the agreement did not require Panama to automatically exchange information with American authorities on defrauders, money laundering activities or drug traffickers.

Mr. Castonguay, could you provide us with more information on the negotiations for a tax information exchange agreement? Will that agreement require Panama to exchange that kind of information automatically and, if so, how will it do that?

[Alain Castonguay]

Our agreement is based on the OECD model created in 2002. The vast majority of TIEAs are very similar in terms of that. In order to obtain information about a specific taxpayer, a taxing authority must ask the other taxing authority for that information, which would enable the requesting country to apply its tax legislation. In the case of a specific taxpayer, that information can be obtained only upon request.

If the other country's tax authority does not have the information, it is obligated to use the powers given to it under its legislation to request that the entity with the information—for instance, a bank—provide the information that will be sent to Canada.

[The Chair, Conservative, Rob Merrifield]

Okay. Thank you very much.

We'll now move to Mr. Sandhu as the last questioner for five minutes.

[Jasbir Sandhu, NDP, Surrey North, BC]

Thank you, Mr. Chair.

I do want to thank my colleagues for providing a history lesson from the last Parliament, for those of us who weren't here, in regard to this agreement being left on the floor by the Conservatives when they prorogued the last Parliament.

[Gerald Keddy, Conservative, South Shore—St. Margaret's, NS]

Two Parliaments ago.

[Jasbir Sandhu, NDP, Surrey North, BC]

Two Parliaments ago.

I think the bigger question here is the role of this committee, of course, in scrutinizing trade deals, and also listening to witness experts, who provide input so that we can have the best treaty or the best trade agreement with other countries.

Mr. Chair, judging from what's happened over the last six or seven years, I don't think the Conservatives have a good record on trade policy. Under this government we had a trade surplus, and now it's a $50 billion trade deficit.

[The Chair, Conservative, Rob Merrifield]

I'd ask you to ask a question.

[Jasbir Sandhu, NDP, Surrey North, BC]

I am getting to my question.

We heard testimony in this committee, even today, that this region suffers from a chronic drug trade that's going on in Central America, and that various governments are working with Panama and other governments to somehow prevent this drug trade from going on in Panama or other countries in Central America.

I've heard testimony, but I'm not really clear. It's very evident that there is a drug issue in Panama. There is an issue around Panama being a tax haven. I haven't heard anything concrete or specific that took into consideration that there is money laundering going on, that there is a drug trade going on. What considerations did we take when we were negotiating this trade deal that would provide some assurances to Canadians that drug money is not filtering into Canada?

[Cameron MacKay]

Maybe I can provide a first response, and I know Mr. Reeder has something to add to it.

One of Canada's objectives in negotiating an agreement with Panama is to provide new economic opportunities for Canadians and Canadian businesses, etc. We've spoken about that to some extent. It's also to provide new economic opportunities for Panamanians. We're well aware of that. Basically, by negotiating these agreements, which are about transparency, predictability, stability, rule of law, rules-based trade, etc., we do think we're offering new economic development opportunities to that country, and that should, over the very long run, provide alternatives to the drug trade to the Panamanians who are currently caught up in that trade.

Now, with respect to whether there are specific provisions in the agreement that take into account issues to do with the drug trade, broadly speaking, there are rules about customs evaluation and trade facilitation, and customs cooperation, etc., but there is no chapter on drugs, narcotics trafficking, or anything like that.

That said, we deal with those issues separately on a bilateral basis, and I think that's where Mr. Reeder may have something to add about how Canada is cooperating with Panama with respect to the drug trade in the region.

[Neil Reeder]

My first point, sir, maybe just to clarify, is that no one sees Panama as a drug-producing country. Its geography makes it a transit country for drug trafficking; that may be true. And also, as has been mentioned, there is a risk that drug moneys move through the financial system, but that's not unique to Panama in Latin America nor the Caribbean. Panama shares a common geographic border with Colombia, and the Andean region—Colombia, Peru, and Bolivia—are the primary producers of the coca leaf, which is turned into cocaine. So by virtue of geography, Panama faces that challenge on its borders, and it's a problem endemic to Central America, which has become a major transit zone for cocaine moving north to North America and to Europe.

Our view, certainly in the Department of Foreign Affairs and with our other government department colleagues, is to try to work with these countries. We've got quite an extensive range of programs now to strengthen capacity, judicial enforcement, and oversight in these countries in Central America and the Caribbean, and Panama is benefiting from that.

We've been very active with them, including with a very important container program, by which we look at the containers transiting the ports of Panama, and this has now been extended throughout Central America. It's about a $3 million project that allows us to monitor containers going to Canadian ports and to try to intercept drugs. In the case of Panama, we've now got figures of some 2,500 kilos of cocaine and a smaller amount of heroin that have been seized in Panamanian ports in containers that were destined for Canada. These are the kinds of programs that we're funding, and our effort is to try to reduce the impact and ensure that these drugs do not make it to Canadian streets.

[The Chair, Conservative, Rob Merrifield]

Thank you very much.

We do have a couple of minutes, and Mr. Holder wants a small intervention. I'll allow him a couple of minutes and that will finish us off.

[Ed Holder, Conservative, London West, ON]

Thank you very much, Chair.

I've heard today that drugs are a major problem, that moneys from drugs are moving throughout the economy, and that narco-trafficking continues to be a serious problem. I thought they might be talking about a major city in Canada, or, frankly, any city in Canada. I don't think any country or any city in this world is immune from that. I don't think that precludes us from carrying on with a free trade agreement, because there are issues throughout the world, and I think to the extent that we get hold of this issue, that's to the betterment of Canadian citizens and citizens throughout the world.

I have a question for you, Mr. MacKay. It's one that's troubled me for some time. What I've heard piped through a variety of discussions from members opposite has been that somehow free trade agreements have diminished our balance of trade around the world; that is to say, when we've put in free trade agreements, a result of those free trade agreements—isn't it interesting?—has been that somehow Canada's balance of trade has gone down. I'd like to ask you for your professional opinion, because I'd like to settle this finally, and if I'm wrong, I'm wrong. In your professional opinion, is Canada's balance of trade negatively impacted as a result of free trade agreements they put in place?

[Cameron MacKay]

I have a note here somewhere, but the evidence shows and studies have shown that trade between two countries after negotiating a free trade agreement should roughly double over about a ten-year period, and Canada's experience has been along those lines.

[Ed Holder, Conservative, London West, ON]

So from your standpoint, fundamentally there is no negative impact to Canada's interest by proceeding with a free trade agreement.

[Cameron MacKay]

Certainly with respect to trade balances and trade deficits, trade policy tools are really not the appropriate tools to try to deal with those issues. I think if the government had a concern about those issues, there are tax policies and questions of currency, etc., that are more relevant to the issues of balance of trade than trade agreements are. It's for that reason that successive Canadian governments, over the last couple of decades, have dedicated themselves to negotiating trade agreements where we think they are in our interests.