International Trade Committee on Feb. 3rd, 2014

[Dr. Bruce Banman]

Yes.

[Ed Holder, Conservative, London West, ON]

We're not going to have the opportunity to hear from you, I don't believe, tomorrow about the Trans-Pacific Partnership. Do you have a thought as it relates to the great city of Abbotsford?

[Dr. Bruce Banman]

I do. Actually I have a thought that's more in relation to Canada as a whole. One of the things that we have to consider is the brand of the Canadian maple leaf, the brand of Canada. It is seen as being one of the cleanest, one of the most pure. It has good branding across the world.

Abbotsford, like I mentioned, in the third most culturally diverse city. Coincidentally, we're far enough outside of metro, so we're actually considered our own metropolitan area. Yes, go figure. We're the third most culturally diverse city in Canada. We're very much like Canada. Our diversity is our strength. The reason that is a strength is that we have connections and toeholds and relatives in virtually every country in the world. That is a huge leg-up. We have already built-in connections. We just need to be able get into those so that we can find ways to infiltrate those markets, in my opinion.

We are educated. I took my education in the United States. I have to be honest, up here I'm kind of middle of the road, but down there it was a walk in the park. We are better educated than our neighbours to the south. We're better educated than most countries, actually, if you take a look at the statistics. That diversity, that innovation, and what I believe is that Canadian entrepreneurial spirit and spirit of just surviving, the country itself breeds in that ability to find ways and niches to take advantage of.

You take our Canada branding. If you find a bunch of items in a store, there is a preference, I believe, to buy Canadian.

[The Chair, Conservative, Rob Merrifield]

Thank you very much.

We certainly appreciate both of your testimonies and your time before us answering questions.

We thank the committee also for their good questions.

This wraps up this session. We'll now break for lunch and be back at two o'clock.

So thank you very much again, and we are suspended.

[The Chair, Conservative, Rob Merrifield]

We'd like to call the meeting back to order.

We want to thank our witnesses for this panel for coming forward. We have with us, from the City of Victoria, Marianne Alto, councillor. We also have, from the Coast Forest Products Association, Rick Jeffery, president and chief executive officer.

We thank both of you for being here. We look forward to your testimony. We'll then open this up to questions and answers. If this morning is any judge, I'm sure we will have a very interesting time ahead.

With that, we want to start with you, Marianne. The floor is yours.

[Marianne Alto, Councillor, City of Victoria]

Thank you very much, Mr. Chair.

For those who aren't aware, I am Marianne Alto, a Victoria city councillor, and I'm also elected to the regional government in the Capital Regional District.

I'd like to thank the standing committee for allowing me to appear today. It's a great honour to be part of the dialogue.

What I'm here to talk about today obviously is CETA, but particularly what my council understands some of the terms to be and how CETA may affect municipalities, Victoria in particular. I say how my council “understands” it because, until very recently, very little information about CETA has actually been made available to municipal governments, this despite the fact that, as we understand it, negotiations have been ongoing since 2009.

This has been a real source of frustration to the Victoria city council, so much so that in May 2012 we unanimously endorsed a resolution expressing concerns about the terms that we understand CETA may include and the influence it may have over municipal decision-making. I have left copies of our resolution with your clerk for your information.

Let me be clear from the outset that neither my council nor I are opposed to international trade, fair trade agreements, or the robust exchange of goods and services between and among nations. But my council and I would appreciate being engaged in the development of that trade and those agreements, particularly when the terms of those agreements affect municipal authority and decision-making.

If CETA includes clauses, as we believe it does, that have an impact on municipalities, this would have been a perfect opportunity for the federal government to include its municipal colleagues in a way that was not only collaborative and respectful, but that could have added value to the process and content of CETA. From our perspective, we believe it's unfortunate that this opportunity was overlooked.

As we understand the process to date, the federal government has completed multiple rounds of negotiations on the agreement and has made significant progress in key areas, including goods, services, investment, and government procurement.

We also understand that the federal government has worked hard to resist some protectionist measures and to seek ambitious outcomes across negotiating areas, and has also instructed its negotiators to move forward quickly to try to get a really good agreement for the people of Canada. These are all really laudable goals, goals that could have built alliances across jurisdictions and created a broadly supported and beneficial agreement that would have met with accolades across a broad interest base. But we believe that collaboration did not happen. Instead, we observe that CETA has been constructed without consultation with local government, and as snippets of detail about the agreement have emerged, municipalities and our professional associations have expressed their discomfort and concern about CETA and with the process that has brought us here to the conclusion of the negotiations.

The UBCM and, to some extent, the FCM have suggested that CETA undermines local government powers and have raised concerns about the local governance implications of the proposed agreement. It is some of these concerns that have influenced my council's resolution.

First, there is the issue of water. Of tremendous concern to Victoria is the idea that CETA negotiators may open or may be open to the privatization of municipal water services. While the Canadian government has in the past tried to preserve its sovereign control over water when negotiating international trade agreements, we understand that the EU has specifically requested that drinking water services be included in this agreement. This would seem to open the door to private ownership and operation of municipal water infrastructure by multinationals. We understand that the proposed rules would allow a water conglomerate to bid whenever a Canadian municipality or its utility tenders for goods or services related to water supply systems, such as treatment technology, or engineering design and construction, or operational services. Victoria is absolutely opposed to this and completely committed to the public ownership of water.

In June 2011, Victoria's council unanimously endorsed an initiative to protect the public ownership of water and water services in our city. We believe that any potential risk to publicly owned water resources is absolutely unacceptable. Privatizing municipal water systems operated by European companies has already led to poor or unreliable service and higher water prices, and French municipalities have begun returning their water systems to public control in the last decade.

The suggestion that CETA may remove our local right to make decisions about public ownership of water is a major concern about the intrusion CETA may have into local governance and is one of the primary concerns expressed by Victoria.

Our second concern is the possibility that CETA may affect the ability of local government to include local and Canadian content requirements in our procurement processes. Victoria's ability to “buy local” is an important tool for stimulating our local economy and fostering innovation. A policy that prefers local suppliers can have a positive impact on local production, jobs, and consumption. This is an important aspect of our own local economic development strategy and is a crucial complement to our recently completed official community plan.

This local advantage has long been recognized as significant and desirable, and Canada has signed international trade agreements over the last 30 years that have allowed buy local and buy Canadian policies. But we were concerned to see this trend seeming to take a different direction when, in 2010, the Canadian government signed a deal with the U.S. that included measures preventing local governments in Canada from giving Canadian or local contractors preference in some municipal construction projects. And we're concerned that what we understand as the current CETA takes it a step even further.

Some draft documents that have been shared suggest that the EU believes that CETA terms mean that municipalities can no longer give preference to local or Canadian suppliers, or restrict tender calls or bidders to local or Canadian companies. If this is true, this is a serious limitation of local governments' ability to choose local suppliers and workers and to support and foster our own locally driven social and economic development strategies.

A third concern for Victoria is the risk that CETA could increase our costs and create legal hurdles for local government. It looks to us like CETA may allow multinational corporations to present municipalities to choose larger transnational RFP respondents. Under the proposed agreement, as we understand its terms, unsuccessful corporate bidders may have the right to challenge a municipality's decision in awarding a contract. For us this would mean significant litigation risks and increased administrative costs, as local governments are forced to report on and defend procurement choices and respond to legal or administrative appeals of those choices. We understand too that CETA suggests that local governments might even have to compensate unsuccessful bidders if a court finds that CETA procedures and rules were not strictly observed.

You'll note that throughout my remarks, I've said over and over again phrases like “maybe”, “could mean”, “might include”, “we understand that”. This is all because of the remarkable lack of information, or detailed information, that has been available to us about CETA and its terms up until very recently.

That leads to the last concern I'll address today. As a facilitator, I find a particularly exasperating aspect of these negotiations to be the lack of transparency or inclusion of the municipal or citizen voice. While we may be facing something like reduced control of water resources, restricted procurement policies, and increased administrative and legal costs, this agreement may pass all these potential burdens on to municipal governments and taxpayers already lurching under the weight of federal and provincial off-loading. It may do so, it seems to us, without its author, the federal government, having had a strategic conversation with the people who will be left dealing with many of the day-to-day effects of CETA.

In the face of this shift of authority and the plethora of limitations on local governments' democratic capacity, I would argue that the federal government has—so far—failed to adequately engage municipal governments in the dialogue about CETA. Federal government leaders have an obligation to provide objective information about CETA's costs and benefits for municipalities, and municipalities should have a meaningful opportunity for input before negotiations conclude.

I want to be clear that Victoria understands that there could be potential benefits to municipalities and their residents from CETA, but we haven't been engaged sufficiently to be able to make an informed analysis, comment, or decision.

At the start of my remarks, I noted that both UBCM and FCM have taken positions on CETA. It's important to remember that as long ago as 2010, UBCM delegates endorsed a resolution that specifically addressed the negotiations then ongoing between the governments of Canada and Europe. UBCM was concerned at that time that the European Union and corporations were insisting on full access to procurement by subnational governments and agencies like municipalities, school boards, universities, hospitals, airports, transit authorities, and other organizations. As stewards of the municipal purse, UBCM said then that an agreement like this could reduce or eliminate the right of a city to specify local publicly funded investment in goods, services, or capital projects.

UBCM worried that cities could lose the right to make their own spending decisions, that the federal government was not listening, and that negotiations were taking place in private without input from local governments. They called for our provincial government to negotiate a permanent exemption for local governments from CETA. This call for a municipal exemption is the cornerstone of Victoria's own resolution.

As I said at the start of my remarks, Victoria is not opposed to trade and its supporting agreements. We believe municipalities should consider the larger issues that permeate any discussion of international trade, and should resist any blind adherence to protectionism. But within that consideration, municipalities must not overlook or relinquish their obligation to ensure that local decisions can still be made by local decision-makers for the good of local communities. Without being privy to the exact terms of CETA, my council and I are concerned that this agreement is undermining that obligation. From what we know, CETA weakens local decision-making autonomy and restricts our ability to make decisions that support our local economy. It too easily opens debate about who makes decisions on important municipal issues like water ownership, procurement policies, administrative expenses, and resource allocation. Our civic governments deserve to be heard and respected, and this process has done neither.

It is with these assertions that Victoria city council unanimously endorsed the resolution that I've shared with you today. We remain hopeful that the federal government's decision to hold these hearings indicates a desire on your part to now include municipalities in negotiating the final terms for CETA.

We reiterate our request that the City of Victoria, like many other municipalities, be exempted from CETA, and further ask that the federal government protect the city from any restrictions to its autonomous powers that might remain in any final terms of the Canada-European Union comprehensive economic and trade agreement.

I thank you for your time today, and I look forward to your questions.

[The Chair, Conservative, Rob Merrifield]

Thank you very much.

We'll now move to Rick Jeffery from the Coast Forest Products Association.

I understand your colleague Susan Gagnon is with you. The floor is yours.

[Rick Jeffery, President and Chief Executive Officer, Coast Forest Products Association]

Thank you, Mr. Chair.

Susan is my director of communications, so she has come here to try to keep me in line.

Thanks for inviting us here today to talk about this very important topic. We look forward to the questions and answers afterwards.

I'd like to start by offering our congratulations to the Government of Canada on what we think is a highly proactive approach to initiating and completing a bilateral agreement with the EU on trade. We'll be speaking in support of this agreement today.

One of the things I—unlike my colleague Ms. Alto—find very positive about this agreement is the depth with which the federal government consulted with the province. It's a hallmark of collaboration that I don't think has existed in other trade negotiations up to this point in time, and I mention it to speak to it and to encourage the Government of Canada to continue that practice in ongoing trade discussions they have elsewhere.

Today I'm here speaking on behalf of the members of Coast Forest Products Association. We have 20 large forestry companies that operate up and down the coast of British Columbia in all facets of the business, from logging to solid wood production to remanufacture to pulp and paper. We represent a modern, innovative, and sustainable industry that produces logs, lumber, pulp and paper, and a range of high-value wood products to markets across the world. Indeed, we send our products to over 26 jurisdictions across the world in North America, Asia, and Europe. I'm counting the EU as just one jurisdiction.

There are 38,000 people who rely on the coastal forest industry for their livelihood. Communities up and down the coast and on Vancouver Island, including Victoria and my home town of Colwood, rely on our industry for their stability and viability. Even though it doesn't seem that apparent, there are a lot of people in the industry who are in those communities.

We've just completed a value-added study on the coast. We surveyed over 100 remanufacturing companies and found out that those that are manufacturing coastal forest products employ more than 3,000 people and have annual sales of over $1.6 billion. Some of that goes to the EU. What I'd say about that is the product mix we send into the EU, into markets like the U.K., Belgium, and Italy, tends to be on the higher end of the value chain. That is in part due to the fact that many years ago we had a pinewood nematode issue that kind of destroyed our markets, and we haven't been able to recover from that. The world's forest products industry changed, and we changed with it and we still enjoy high-value niche markets there.

By the way, we're non-partisan. I'd like to just speak to the current government agenda around trade, training, transformation, technology, and taxation. Those are all highly important areas that affect the competitiveness of our industry and, ergo, the livelihood of the 38,000 to which I just referred. We are encouraged by a government agenda that looks at those issues in a proactive way, and certainly CETA fits in there.

Just to run through some really quick statistics, B.C. wood exports to the EU were $304 million including $127 million in softwood lumber. Our pulp and paper exports were $168 million. Of that, $161 million was pulp. So you can see that with numbers like that, CETA will have a significant impact on the industry.

What's in it for us? First and foremost is the matter of tariffs. Our exports face tariffs that average 2.2% with highs of 10% and there are quotas that get filled very quickly.

Under this agreement, these barriers are expected to be eliminated, which is very important for the coast of B.C. and our forest industry, because the high-value products we have going in there attract these quotas and tariffs and affect our ability to service those markets. CETA also provides the ability to address non-tariff barriers such as standards certification, conformity assessments, and those kinds of things.

That's a very active part of the world. Market access is something we spend probably upwards of 30% to 40% of our time on, above and beyond just the straight trade stuff. CETA provides that framework, and indeed we're actively talking to them about their illegal logging standards and certifications and those kinds of things.

I talked a little bit about the value added. As I said, this is a very important market for our value-added wood products, including some plywood and—this is not for the coast—the OSB and wood pellet business that our interior friends enjoy. So something like CETA fosters that cooperative trade environment and allows us to get to the root of these issues.

That's kind of it directly on CETA, but as I said earlier, we'd encourage the government regarding its five Ts, including trade, especially around priority markets in the Asia-Pacific region. Those include the Trans-Pacific Partnership, Japan, and Korea. I'm going to India on the 21st to head up another trade mission. We're trying to plow the ground in India. There are issues in the TPP for the forest industry. Japan has a wood points program that is conveying large subsidies to its domestic wood. Korea has a quality indication system on treated wood and is trying to introduce lumber-grading standards that will make it prohibitive for us to export there. China has all manner of subsidies. So when we get to negotiating with them, there's a whole opportunity there for us to level the playing field. As I said, we're trying to develop India as a market. In the Trans-Pacific Partnership we have issues with log export controls. We have issues with how chapter 19 of NAFTA on dispute resolution will be dealt with, and they've been making noise about our provincial timber sales.

At the end of the day our goal is to ensure that we have trade with our valued overseas partners and that the trade be as unencumbered as possible so we can compete and have a healthy and robust industry here. We also look for continued collaboration among the Government of Canada, the Province of British Columbia, and the forest industry on CETA as well as on these other trade agreements. If I have one negative thing to say about the EU piece, it is that there was a little bit of a convoluted route to the federal negotiators, but we managed to get there. With that I'll close and I look forward to the questions.

Thank you.

[The Chair, Conservative, Rob Merrifield]

Thank you very much.

We will start with our questioners, beginning with Ms. Crowder for seven minutes.

[Jean Crowder, NDP, Nanaimo—Cowichan, BC]

Thank you, Mr. Chair.

I want to thank the witnesses.

I'm going to start with Mr. Jeffery. Mr. Jeffery, you and I have had conversations in the past about the importance to British Columbia of value added. I wonder if you could briefly outline some key recommendations for the committee in the context of this trade agreement to support value added.

[Rick Jeffery]

Yes. The thing about the value-added industry on the coast of British Columbia is that it's very commercially driven. When we undertook our value-added study, we were very interested to see the breadth of the industry on the coast. There are over 160 firms. We surveyed a hundred of them. Those one hundred were directly involved in converting B.C. coastal products into value-added products.

So for us, with the value-added perspective in mind, among the things that are important is making sure those products do not attract tariffs, and we think CETA gets us on that. We want to ensure there are no non-tariff trade barriers in respect to that.

The value-added guys right now have a problem with chain of custody in terms of trying to demonstrate to the Europeans that the wood is sourced, that it comes basically from us to us as a log and we convert it into lumber, and then they are going to turn around and try to convert that lumber into some kind of value-added product. It's very onerous for a small company to try to track that chain of custody, so they have an issue there. CETA has a framework around that. We're actively working on that with NRCan, with the international trade department, and with our provincial counterparts, who I notice are here, to ensure that we simplify those systems and make sure the value-added guys don't get locked out.

Those are the two main issues for us. Other market access issues may come up.

This lumber grading issue comes up every once in a while. The EU has their own standards for lumber grading, so that remanufacturers trying to send some boards in there need to have the appropriate stamps, certifications, and those kinds of things. If we don't do that right, they'll get buried under bureaucracy and not be able to capitalize on those markets.

[Jean Crowder, NDP, Nanaimo—Cowichan, BC]

Thanks, Mr. Jeffery. That's helpful.

Ms. Alto, I wanted to touch on a couple of points. I'm going to paraphrase here, but essentially the buck stops at the municipal governments, as we've seen over the years. I have to declare that I was a former municipal councillor, and we saw it roll downhill from the feds to the province to the municipal councils. They're the ones closest to the citizens and the taxpayers.

I want to raise a couple of points. One is a question that we did ask this morning. Once something like a water system is privatized, do you have any degree of comfort that a municipality would be able to retrench that back into the public sector if it didn't work out under CETA?

[Marianne Alto]

Well, we don't have any comfort, and we don't have any comfort with this particular idea, as we don't have comfort with a lot of what we think might be there, because we haven't seen it. We are aware that in other jurisdictions—I think I referenced the remarks of France—they have done the experimental foray into privatization of water supplies, have found it to be lacking, and have tried to go back. They have had some success, but it's a very complicated matter to try to undo an agreement when it has been entrenched in the establishment of providing something as essential as water.

So for Victoria, it is one of the most significant concerns, because it's a very proactive community. It's a very eclectic council, I should say. It's not at all reflective of any particular viewpoint, so it was a surprise to me that this particular resolution passed unanimously. It's because of the fact that there is such anxiety around two things in particular. One is the whole procurement strategy issue, with all of the attendant details, but the other is the very significant risk that the city council saw to the provision of an essential service, which we see water as being. We've been proactive in trying to make sure that it remains public indefinitely and we'll resist really every effort to try to privatize that.

As an aside, I want to mention that it isn't just about water, but about water as a resource. The Capital Regional District, as you're well aware, is embarking currently on a very massive sewage treatment plant at the direction of the federal government, and the provincial government as well, and is abiding by the rules set out by both of those larger governments. There is a high degree of anxiety at that table. One of the reasons driving that project forward as quickly as it's going, despite some resistance from the local community, is the notion that it is such a big project that it could in fact and would in fact fall under the terms of an agreement like this.

So there isn't just water from the perspective of consuming water, but water from the perspective of a resource that you may use for other things once it's treated. There are many aspects of anxiety around water.

[Jean Crowder, NDP, Nanaimo—Cowichan, BC]

One of the other things I want to touch on, which you also touched on, is with regard to language. I have the technical summary of the final negotiated outcomes here, and I must admit that I've read through it a number of times, and when I come to the end of it, I'm still not entirely clear on what some of this means.

I want to read a couple of things for you. Under government procurement, for example, for anybody who wants to read page 16, it says, “Maintained ability to include social and environmental criteria in contract requirements”. Further on down, it says, “Maintained broad exception for” and lists a number of things. One of them is aboriginal businesses. Of course, as the aboriginal affairs critic I'm interested in that, but nowhere in there do I see any definitions of what that means.

[Marianne Alto]

Yes, you raise a really important point. Because the technical report is the only report—and that's why I referenced that recently information has come to light—that we've had a chance to really look at. There is an enormous degree of vagueness around what the parameters may be in the end.

Certainly, from Victoria's perspective, we've just completed a fairly exhaustive official community planning process, which included about 7,000 of our residents, a very high return rate. That has several components that are absolutely integral around social and environmental and economic development strategies. Those rely heavily on our ability to make choices that favour local or regional or provincial or Canadian respondents to any particular projects. Our bridge, for example, we're rebuilding a very historic bridge in Victoria, which is a $93-million project. It is a project where we looked very deliberately at which parts of it could be handled by local contributors. Again, without any clarity of the definitions, without any examples of the definition, without a lot more information generally, there is nothing on which we can hang our hats to say, “That looks good.”

I appreciate my colleague's comments around the parts that he could identify that were good for his industry, but we can't do that. As municipal governments, we haven't seen the evidence that says we have the ability to retain our autonomy to make good local decisions and still serve our taxpayers, which we want to do. I have to say again, we're not against trade agreements. We're a very eclectic council that understands that this could be good for us, but we don't know because we haven't seen it.

[The Chair, Conservative, Rob Merrifield]

Okay, thank you very much.

We'll now move to Mr. Hiebert.

[Russ Hiebert, Conservative, South Surrey—White Rock—Cloverdale, BC]

Thank you.

Thank you both for being here this afternoon.

Ms. Alto, you identified three different areas that you were most concerned about: water, procurement, and consultation, if I understood you correctly.

[Marianne Alto]

Right.

[Russ Hiebert, Conservative, South Surrey—White Rock—Cloverdale, BC]

Suffice it to say that the Government of Canada has been very clear that Canada's water is not for sale. It wasn't under NAFTA and it's not going to be under CETA. I wondered if you had a chance to look at this document. It's the technical summary of the final negotiated outcomes. Have you seen this?

[Marianne Alto]

We've had it very recently. Can I quote chapter and verse? No, I can't.

[Russ Hiebert, Conservative, South Surrey—White Rock—Cloverdale, BC]

No, I wouldn't expect you to do that, but I think it's been out for some time. Do you know how long it's been around?

[Marianne Alto]

I think it was October.

[Russ Hiebert, Conservative, South Surrey—White Rock—Cloverdale, BC]

October?

[Marianne Alto]

Yes.

[Russ Hiebert, Conservative, South Surrey—White Rock—Cloverdale, BC]

Okay.

So when I looked up “procurement” in this document, on page 17 it talks about the thresholds at which the competitive nature of this agreement would apply to local government. As it relates to goods and services, it's around $315,000. Then for infrastructure, construction, and so on, it's much larger, at about $7.8 million as it applies to municipalities.

I'm not sure if you were aware of that, but now that you are aware, does it give you some measure of comfort that at least underneath those thresholds municipalities would have some discretion as to how they would allocate their resources? If they wanted to pick local companies, even if they might be more expensive, they would have the prerogative to do that.