International Trade Committee on Oct. 7th, 2014

[Erin O'Toole, Conservative, Durham, ON]

So if I could phrase that in one way, it not only secures the jobs from exports now, but there's the potential for far more Canadians finding employment as a result of this trade agreement?

[Claire Citeau]

Possibly, and certainly, it's to ensure that we don't lose more jobs.

[Erin O'Toole, Conservative, Durham, ON]

Perfect.

Are industries in the same market categories you spoke about, from meats to grains and oilseeds, making plans now to access, or to increase their exports to, South Korea and possibly the wider Asian markets through an entry point at South Korea?

[Claire Citeau]

That is correct. Despite the fact that Canada doesn't have a free trade agreement with South Korea yet, some of the sectors have been working on and have been able to maintain the business relationships so that they are ready to go once the agreement is implemented. The industry at large is preparing to some extent for this.

Martin, do you have anything to add?

[Martin Rice]

I was just going to add that about a year ago, maybe weeks before the meeting of President Park and Prime Minister Harper, where there was this discussion to revive and bring the talks to a conclusion, our industry was really thinking that we were going to have to forget about Korea, and therefore let a lot of those business relationships go. I've seen a revival. A lot of industry group participants who quite probably, in the absence of the deal coming together, would have said they have to shift their attention elsewhere are maintaining their business, or at least maintaining relationships, with those Korean buyers.

[Erin O'Toole, Conservative, Durham, ON]

Thank you very much.

My next set of questions is for Ms. Campbell. Thank you again for appearing before our committee.

I wanted to focus on one of the points you made under your first heading “supporting rapid ratification”. Specifically, you talked about the already strong relationship with Canada and South Korea on intermediate goods trade. It's interesting to note that when Mr. Burney and his team briefed our committee at the outset of these hearings, he talked about how critical this deal was so that Canadian suppliers could be part of the global supply chains for a lot of the big South Korean conglomerates.

It seems that there is already some trade in that supply network. Could you expand a little bit more on that point for the committee?

[Dr. Ailish Campbell]

Certainly. As you know, Canada has huge strengths in natural resources, but also great strengths in manufacturing and higher value-added processes that in the goods space are known as intermediate goods, as you've described them. Great examples would be any complex piece of machinery, an airplane, a car, which can in fact traverse borders several times before the final product is created.

Canada is very fortunate to have very strong original equipment manufacturers in the auto space but it also has great strength in the auto parts sector. The auto parts sector is a huge driver of our exports, and one that speaks directly to that intermediate goods situation where you might find complex parts being shipped to Korea for final assembly.

I'd note though, given the distance, the economics also suggest that Canadian foreign affiliates that are already established in South Korea could potentially expand, depending on demand in that market.

I would just encourage this committee to take a look at the OECD value-added trade statistics, which will give you a more specific decomposition of the relationship, and the WTO intermediate goods data that I had cited, and, as well, measure our footprint based on foreign affiliate sales and not simply exports. As I've underscored to this committee before, there's a great importance that we measure our trade properly and that includes goods that are in fact created by Canadians in the other market.

Increasingly, the other exciting thing is we're going to see Korea become a hub for the establishment of a greater Canadian presence in the Asia region. That is the real opportunity of this agreement.

[Erin O'Toole, Conservative, Durham, ON]

Thank you. It sounds like you are prepared to perhaps co-chair or chair this panel that you are recommending Minister Fast—

[Dr. Ailish Campbell]

I would be happy to serve if so called by the minister.

[Erin O'Toole, Conservative, Durham, ON]

We'll keep that.

A final note is one of the vocal voices against this deal, Unifor—Mr. Stanford—was here last week not agreeing with some of the estimates that show only a 0.02% impact on the OEM, the production of Canadian-made vehicles, but spoke at length about how the globalization of auto is occurring, including with South Korean makers.

Expanding on your last point, our suppliers have an opportunity, whether or not there's a plant directly in Ontario, to be part of this globalization of auto. Could you expand on that for 30 seconds?

[The Chair, Conservative, Randy Hoback]

We're going to have to move on to the next witness, so hopefully that question will get answered in the next round of questions here.

Mr. Pacetti, you're next.

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

Thank you, Mr. Chair.

Thank you to the witnesses.

My first question will be for you, Mr. Linton. You spoke a lot about benefits to your membership. The feeling I got from the last group of witnesses we had last week is that we're just basically signing the agreement to stop the job losses or stop the bleeding to Korea. What's your feeling? You have members from a variety of business sectors. What is your feeling? We had the seafood guys. They didn't lose any business because the U.S. signed a free trade agreement with Korea, but they don't necessarily have a plan to penetrate the Korean market.

What do you see overall in terms of your membership and being able to actually produce extra jobs?

[Bob Linton]

First of all, I'd like to say that the employers we have under the collective agreement may not, in some cases, have shared what their plans are, but I can tell you, having spoken to some of our employers in the meat packing and meat processing sector, that they made similar comments to what Mr. Rice made. A year ago they were basically looking at, if this deal wasn't signed, getting out of the market, which obviously, if they're not producing and selling for that market, could realize a potential job loss for our members. They have now turned around. They have done an about-face and are looking forward, if this deal gets ratified, to going to Korea to look for potential greater expansion into the Korean market, which, in turn, hopefully creates jobs.

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

I just have one more quick question. In terms of labour costs, are we competitive with Korea? Have you done any analysis? If a company were to decide whether to set up shop here or in Korea, would we be competitive with regard to labour?

[Bob Linton]

Sorry, if a shop were to set up in Korea or set up in Canada?

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

Would they choose Canada over Korea because of labour costs? Would it be more advantageous here, the treatment of our employees?

[Bob Linton]

Certainly, the treatment of our employees probably in Canada.... Hopefully, in a unionized environment there would certainly be much more fair treatment to the employees.

With respect to the dollar costs I don't know if that analysis has been done. I know that when the product is sold it's sold on the U.S. dollar, so we're competing on the U.S. dollar not on the Canadian dollar.

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

Okay. Thank you.

Madam Citeau, the numbers for exporting of agrifood I think are about $800 million. The green exports, you're saying, were $479 million but the majority of that would be wheat and wheat would only be subject to a 3% duty.

Is that correct or am I mistaken?

My point is that the majority of benefits from agri-trade in terms of wheat would not necessarily go up or down because the duty won't make a huge difference on the profit margin. I know that oats are at about 500%, but that's very minor in terms of your numbers here.

[Philip de Kemp, President, Malting Industry Association of Canada]

I'll try to answer that.

Having been an ex-grain trader many years ago, even though I'm president of the malting industry, 3% may not sound like much if you're dealing on a $250 CIF but when you start adding up $6 or $7 a tonne.... If I'm a trader, I don't care if I'm working for any of the line companies in Canada or CWB, or what have you, if I'm a broker in another country and if I can make the trade at $2 a tonne less I'll do it. Certainly, in the malt industry we're going to see some significant increases. We already have a very good trading relationship in Korea and we have for a number of years.

If I can just add, having grown up on a farm just outside of Ottawa here, and Randy being from Saskatchewan, even when you take a look at value added as far as beef and pork, for the grains industry, for every tonne of pork or for every tonne of beef it's going to be that much more barley or wheat going through those animals. It's going to be that much more fertilizer. It gives the farmers—albeit you're not going to have more farmers in Canada, obviously the numbers are declining and the farms are getting bigger—more income opportunity and more marketing options whether they're going to grow barley, wheat, or canola, depending on the prices in any given year to meet those needs and those value-added industries.

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

Great. Thanks.

I have just a quick question, Ms. Campbell.

In your brief, did you say that the Korea-U.S. Free Trade Agreement did not increase trade as expected? Is that what I understood?

[Dr. Ailish Campbell]

In the auto sector in particular, particularly on finished automobiles, the two-way trade is overwhelmingly in favour of Korea exporting into North America.

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

Okay.

Those are the numbers we have.

Great.

Thank you.

[The Chair, Conservative, Randy Hoback]

Thank you, Mr. Pacetti.

Back to you, Mr. Cannan.

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

Thank you, Mr. Chair.

Thank you to our witnesses again.

I'll start off with Mr. Linton.

I just wanted to clarify something. You might not have the numbers, but Mr. Davies talked about the potential new jobs from this agreement for your membership. It could be similar to what the folks from CAFTA said, that it might be the fact of preventing the loss of jobs. It might be difficult to quantify but are you anticipating from a union perspective a potential growth in employees as a result of this agreement?

[Bob Linton]

Yes, certainly, if the market opens up as we expect it will under this agreement.

For example, in Red Deer, Alberta, where a lot of the pork is shipped to Korea because it is closer than shipping it from Ontario—it's processed in Red Deer and shipped—we expect that if that market opens up there will be substantial employment gains in Alberta. That's not to say that it won't also eventually happen in the other areas as I've mentioned, Ontario, Quebec, and Manitoba. However, I don't have exact numbers as to how many or how much employment will be created as a result of this agreement.