International Trade Committee on Oct. 7th, 2014

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

That's fair enough. Thank you very much.

Ms. Campbell, thanks for your compliments to our former chair and also your welcome to our new chair, who will be a great addition to our committee as well. I know that Mr. Merrifield will be working at representing not only Alberta but Canada. He's a great Canadian at heart.

Looking at this from a Canadian perspective, I thank you for your handout this morning, the Canadian Council of Chief Executives' annual report. In there, you made these comments:

Canada concluded a free trade pact with South Korea after nearly a decade of negotiations. The deal represents a watershed in Canada's efforts to forge closer economic ties in Asia and will create new opportunities to sell Canadian products in one of the world's fastest-growing advanced economies.

You go on to say:

In 2014, Canada will pass an important milestone: exports are expected to catch up with and surpass the levels seen prior to the 2008 recession. Better still, our country appears poised for an export boom in the years ahead. With one in five Canadian jobs dependant on trade, this is encouraging news for Canadian workers.

I share those sentiments totally. One of the comments we've had in discussions around the table—I've been on the committee for eight and a half years—is on the issue of looking at monthly stats as they point to the trade deficits. Often, the headlines are alarming Canadians about our shrinking trade deficit for that month, but I think that overall the narrowing trade gap, which you've referred to, means a better-performing economy. It's not always reflected in the immediate economic performance numbers. I'd say that almost the inverse is true, because GDP improves when a trade deficit exists, at times.

There was a comment you had on a blog, “Canada's trade deficit: understanding the big picture”. You stated, “While persistent trade deficits over a number of years may spell trouble in certain circumstances, Canada is very far from being in that situation.” To improve the trade balance, the organization has pointed to certain key factors, including the foreign direct investment and earning world prices on our energy resources, as well as pursuing robust trade opportunities with the Americas and Asia, including China, India, Japan, and South Korea, which we know are all economic indicators that our government has acted on as part of our GMAP strategy and which it believes are important to our local and national economies.

My question for you would be for the benefit of my constituents and for all Canadians. As we point to the trade deficits perspective on the Canadian economy, could you elaborate on this issue, perhaps sharing with us what factors influence the numbers, what the statistics don't tell us about trade in different sectors, and what we need to do to ensure Canada's overall economic health? There's a combination of questions in there, but I think there's something from your blog and comments in the past that maybe would help clarify it for the committee.

[Dr. Ailish Campbell]

You've quoted at length from several CCCE documents, so I thank you for that. I would just simply add that a positive trade balance is of course something that all Canadians want to see, but it isn't the whole picture.

We've been encouraging Statistics Canada to improve their measure of services trade and also the foreign affiliate data so that we can add that to the statistic you've pointed out on merchandise trade. The key point there is this: don't look at just one month's number. Look in the aggregate, not least because Statistics Canada often restates monthly numbers. We went from a surplus of $2 billion in July to a deficit of $600 million in August, but we still want to see the Canadian economy on track for about a $45-billion annualized rate.

Prices do matter. You could see volumes stay the same or even increase, but export numbers actually go down if we receive lower prices for our goods. That includes energy, which is a major component of our export numbers, in addition to things like auto parts, which can definitely shift monthly numbers.

So price matters. That means we want as many customers as possible for our products, and that's why this deal with South Korea—and indeed, more diversified trade with Asia—is essential so that we have more consumers and hopefully can get a more competitive and higher price for our products.

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

Thank you very much.

Shifting to the auto sector, there is good news of over 1,000 jobs at the Oakville plant. Ford is going to employ another 1,000 Canadians. We look forward to providing new opportunities in Asia. I think there are 21,000 finished vehicles going into China. That is a success, and it's great news for Canadians to be exporting finished products into China.

With Korea, I know that there's the KORUS agreement, as you alluded to. The issue specifically is the regulatory changes or non-trade barriers. With our agreement, its accelerated dispute mechanism clause has been improved over the U.S. model and is permanent. I wonder if you could comment in terms of that possibly being an added asset in our agreement in staying ad hoc as we implement this agreement as well.

[Dr. Ailish Campbell]

The dispute settlement mechanism, particularly on autos, was essential to concluding the deal so that this was a good deal for Canada. The U.S. snap-back clause is also in effect. I think it's important to think that Canada will need to work with its EU and U.S. partners to ensure that the Korean industry and the Korean government understand the importance of two-way openness to trade since we are certainly incredibly open to Korean vehicles that are imported, not just from Korea, but also from Korean-owned plants in the southern United States that are coming into Canada duty-free under NAFTA.

The global supply chain here is very important. Tariff barriers need to be surfaced and transparent. Testing needs to be rational; it needs to be actually related to a consumer safety issue or need, and Canada will need to cooperate with the other auto-exporting nations in order to ensure that the Korean market is open. It's a vital part of this agreement.

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

Thank you very much.

[The Chair, Conservative, Randy Hoback]

Thank you.

Ms. Liu.

[Laurin Liu, NDP, Rivière-des-Mille-Îles, QC]

Thank you, Mr. Chair.

Ms. Citeau, I would like to talk about the market share that Canada lost in 2011 and 2012 following free trade agreements with the European Union and the United States.

Beef exports dropped from $96 million in 2011 to $8 million in 2013. Other witnesses who appeared before the committee told us that the pork industry suffered major losses as well.

Can loss of market share for beef and pork producers affect other related agri-food sectors in Canada?

[Claire Citeau]

Since he's here, I will ask Martin Rice, executive director of the Canadian Pork Council, to answer your question about pork.

[Martin Rice]

Thank you.

I think, as Mr. de Kemp indicated, that the grain sector and the oilseed sector are both major contributors of inputs to the beef and the pork sectors, and there simply will be implications for them if that grain, which was able to be sold locally, has to be exported. So I would certainly see implications for those sectors, and I'm sure that there are other examples I'm not thinking of right now.

[Laurin Liu, NDP, Rivière-des-Mille-Îles, QC]

Ms. Citeau, aside from tariff lines, are there other obstacles that could hinder the export of agri-food products? If so, what are the main non-tariff barriers?

[Claire Citeau]

There are a number of measures related to the plant health environment. Mechanisms are in place to improve those conditions. In general, developing a foreign market takes a lot of time and investment. The industry is examining that aspect in particular to win back the confidence of South Korean buyers.

[Laurin Liu, NDP, Rivière-des-Mille-Îles, QC]

What do you mean by that? Can you provide more detail?

[Claire Citeau]

The important thing is regaining the confidence of South Korean buyers. An agreement between Canada and Korea can help create that confidence and reassure the markets.

[Laurin Liu, NDP, Rivière-des-Mille-Îles, QC]

Thank you.

You talked about how it can take time for the agri-food sector to regain the market share it has lost since 2011, and you said that varied sector by sector.

What sectors will take the longest to regain their market share, and which will do it fastest?

[Claire Citeau]

That depends on the sector. For some sectors, tariff measures will be implemented after two, three or five years for some processed food products containing sugar. For other sectors, the implementation of tariff measures will take a little longer, about 12 or 13 years.

It is important to emphasize that this agreement will benefit the agri-food sector in general. Once one or two products can enter the country, that will build the brand and produce positive spin-offs for the rest of the sector.

[Laurin Liu, NDP, Rivière-des-Mille-Îles, QC]

Which sectors could take 10 to 12 years to regain their market share?

[Claire Citeau]

I think it will be meats, but I can get you more specific information as soon as possible.

[Laurin Liu, NDP, Rivière-des-Mille-Îles, QC]

My last question is for Mr. Linton.

Obviously you can't give us precise figures on the number of jobs that would be created among your membership, but do you have an estimation of the number of jobs that would be lost if the treaty didn't take place?

[The Chair, Conservative, Randy Hoback]

We're right out of time, but I can give you 10 seconds.

[Bob Linton]

At this time, as I previously mentioned, there has been no job loss, because the companies that our members are employed by were successful in finding other markets for their products.

[The Chair, Conservative, Randy Hoback]

I'm sorry, Mr. Linton. You just ran out of time.

Colleagues, I would just remind you that you have your time period to not only ask the questions but also get the questions answered. I usually try to give you a one-minute warning, so if you're looking up towards me, you will see me raise my finger at one minute left.

We'll move on to Mr. Shory.

[Devinder Shory, Conservative, Calgary Northeast, AB]

Thank you, Mr. Chair.

Thank you to the witnesses.

Ms. Campbell, I want to thank Minister Fast, the negotiating team, and of course the advisory panel for negotiating such a great deal that even the NDP is supporting this agreement. I can see that the union from the agrifood industry is also supportive of this. When everybody is supporting this and is part of the positive tone, it's not that easy to ask questions.

But I'll start with you, Ms. Campbell. You talked about the EDC and trade commissioner partnership a little bit. I want to start by asking you to make a comment on their performance to date. In terms of the trade commissioners specifically, how has their performance been to date, all across the world?

[Dr. Ailish Campbell]

I agree, it's hard to ask interesting questions in an environment of violent agreement, but let me attempt to provide an interesting answer.

The Trade Commissioner Service reports annually on the trade they've facilitated. I encourage you to take a look at that report, or it may be part of the departmental performance report. But the critical factor is that the Trade Commissioner Service is present on the ground in growth markets. We would certainly like to see an increased footprint of the Trade Commissioner Service in Asia, and particularly in Korea, to help amplify the potential benefits of this agreement and make connections.

I would also note that economic diplomacy is of great use to those large firms that, as I said, the CCCE members represent. Those 150 companies represent the majority, over 50%, of Canadian exports. They commend the Trade Commissioner Service, our ambassadors, and indeed the work of the government to us regularly in Asia, particularly because the nature of that relationship is that the government is seen as a partner in business, not least because Korean student enterprises and large Korean firms are very much working in concert with their government.

Overall it's a positive message. I would say that EDC's work to establish agreements with large conglomerates, large enterprises, in Asia that are looking for supply chain partners of both medium- and small-sized Canadian firms as well as large is really important. EDC has facilitated a number of large Asian firms to come to Canada and better understand potential new partners in their supply chains. It's that kind of work, not just EDC focused on Canadian exports out but some of the ability to attract investment into Canada.

I would commend the government for the extension of the domestic powers on a permanent basis to EDC. We feel that EDC is an important partner in, as I say, not only promoting Canadian direct investment abroad in exports but also attracting significant investment to Canada. I commend their work in that area as well.

[Devinder Shory, Conservative, Calgary Northeast, AB]

Thank you.

Realizing how fast the Asian markets are growing, how important is it for Canada to have free trade agreements with Asian countries?

[Dr. Ailish Campbell]

As I've outlined to this committee previously, our primordial and key relationship will continue to be with the U.S. That being said, Canada is vastly underexposed to Asian markets when you compare us with similar economies. It is a bit of apples and oranges at times, but we've seen Australia just leap ahead of Canada in terms of its penetration of Asian markets—Korea, China, and Japan. We don't want to fall further behind, because North American growth rates are going to be relatively flat. That being said, Mexico does provide, I think, a really interesting market.

But it's clear that the growth in the global middle class will come in Asia. We can't be left behind. We've seen competitors from the U.S., Germany, and Australia very active in those markets. The more we can do to promote large business as well as small and medium-sized firms, to take advantage of new customers in growth markets in Asia, the better.