International Trade Committee on Nov. 7th, 2013

[Don Davies, NDP, Vancouver Kingsway, BC]

Permit me to interrupt you, if I could, Mr. Verheul. Do the social criteria include creating local jobs for local people? Is that a valid social criteria under that exception?

[Steve Verheul]

Well, it depends on how it is done. If there is, as part of the tender, a requirement for training of local manpower in order to fulfill the contract, that's certainly legit and not an issue. If you're going to say that you're going to give the contract to a particular company because it's local, then that would probably be challengeable.

[Don Davies, NDP, Vancouver Kingsway, BC]

Now, for the first time, we have sub-federal procurement, and obviously those entities are subject to investor-state lawsuits. Is that correct?

[Steve Verheul]

No, that is not correct.

[Don Davies, NDP, Vancouver Kingsway, BC]

They're not. If that city did put in, let's say, a requirement that contracts had to go to a local supplier, you're saying that an investor could not take that municipality under the investor-state provision.

[Steve Verheul]

No, there's a separate provision under government procurement where an investor who felt that he'd been aggrieved as a result of the process could conduct a bid challenge process, which is a separate procurement process that we have now.

[Don Davies, NDP, Vancouver Kingsway, BC]

Are there any provisions concerning an effective appeal of an ISDS panel decision? If it goes to the dispute panel and they make a decision, is there any appeal?

[Steve Verheul]

No, there's not a strict appeal mechanism under the investor-state dispute settlement process.

[The Chair, Conservative, Rob Merrifield]

Thank you very much.

Mr. Holder.

[Ed Holder, Conservative, London West, ON]

Thank you, Chair.

I want to come back to a point that was brought up in earlier testimony. Actually, it was an earlier question by a colleague opposite. I want to set the record straight.

It's not about the European Union agreement; it has to do with trade with the United States. I know, Mr. Verheul, you made some comments about it. I want to be clear.

Just before NAFTA was put in place, Canada exported some $69 billion to the United States. My best numbers, which are from 2012—I think that's about as current as we can get—we now export some $324 billion to the United States. That's almost a 500% growth in exports to the United States. It is totally false for anyone to suggest that the arrangement we have between Canada and the United States has not improved as a result of NAFTA.

Mr. Verheul, I can anticipate that as we look at this deal going into the next decades we're going to have that same kind of significant growth.

Imagine this. As a result of free trade that was negotiated with the United States, we have almost 500% growth. In fact, we have an additional $255 billion per year as a result of this deal. I have to tell you, you look too young to be the person that negotiated NAFTA, but I have to say that was a totally a positive thing for Canada. If you were a kid back then and you did it, my congratulations.

Here's what happens. In 2015, not only will this come into play based on your earlier testimony, but Canada's going to get a balanced budget, taxes are going to be lower for Canadians, and we're going to eliminate the deficit. Do you know what happens as a result of what you and your team have negotiated? It's going to mean removal, by your testimony, of 98% or 99% of tariffs immediately, which means lower costs to consumers, to Canadians in my city of London and all across this country. I say bravo to you for what that means and to the government for taking that initiative. Anyone opposite who suggests that this isn't a great deal for Canada obviously hasn't read it. They don't get it. They don't understand it. I say to you, thank you for what you've done.

Here's my question. One of the things that's been elaborated on all of this is that businesses want a rules-based system. We already trade with every one of those 28 countries that you have negotiated with as a bloc. Canadian business currently trades with them. What we've been asking for is a rules-based system that could be put in place so that business has the security of knowing where it's going. Could you please tell us what the dispute settlement mechanism is? Help us understand that a little bit to give businesses additional confidence going forward.

[Steve Verheul]

Sure. I'll preface my remarks on that by saying that we've not only developed dispute settlement processes that are going to be far more effective than previous ones, but we've also put in a number of mechanisms to prevent disputes from occurring in the first place.

Our regulatory cooperation chapter is geared towards preventing issues from becoming disputes. We will have greater interaction, greater dialogue between Canadian and EU participants. It will be the same in technical barriers to trade. It will also hold true in sanitary and phytosanitary barriers. This is about more cooperation, closer cooperation, so you don't get disputes.

If you do end up with a dispute, then clearly we don't want those disputes to be frivolous, so we have provisions to prevent frivolous disputes. We want to try mediation first, to resolve the dispute more quickly. We have mediation provisions in the general dispute settlement mechanism as well as in the investor-state dispute settlement mechanism.

If you finally do get to a dispute, we have an open, transparent system, but one that will move a lot more quickly than the ones we've seen in the past. We have confidence that the clear-cut language in these provisions will make disputes fairly easy to resolve.

[Ed Holder, Conservative, London West, ON]

My Cape Breton mom always used to say that everything starts with understanding. What I'm trying to understand is there's been some speculation that some parts of this deal might come into effect prior to the actual signing, that there might be some pieces that aren't necessarily part of the actual...they might well be part of the arrangement. Is there any merit to those comments that we've heard flutter through that some potential parts of this deal may come into place prior to the two years from now when it's officially approved by all the countries?

[Steve Verheul]

No. I think most of that has come out of some confusion with the notion of the EU being able to provisionally apply the results of the agreement. That only comes after the approval of the European Council and the European Parliament. That would essentially mean the full deal, or as I said 98%, 99% of it would come into effect when we're both prepared to put it into effect. Some of the less significant issues that aren't under member state jurisdiction, if there are any, would have to come into effect at a later date. Nothing will come into effect before we've gone through all of the necessary processes, legal and parliamentary, to approve and finalize the deal.

[Ed Holder, Conservative, London West, ON]

Thank you.

[The Chair, Conservative, Rob Merrifield]

Thank you very much.

Mr. Shory, I'll give you four minutes or so.

[Devinder Shory, Conservative, Calgary Northeast, AB]

Great, thank you, Chair.

I'm still stuck with my question and confusion about what the NDP are looking for in the text. My friend and my colleague from the NDP, Brian, gave a bad example. He mentioned mortgages. I would be surprised if many people read each and every line of their mortgage. The only thing they're concerned about is the mortgage interest rate, the prepayment terms, default provisions, and repayment penalties.

We on this side, Mr. Verheul, are really excited about this deal, and I'm sure Canadians are. The vast majority of Canadians are excited. You are excited. Your team is excited. For the benefit of those who are watching today's proceedings, I would like you to elaborate on the provision of ratification in Canada. My colleague, Russ, talked about the ratification process in the European Union countries, so you may want to talk about the process of ratification here in Canada.

[Steve Verheul]

Sure.

Not surprisingly it's a bit simpler than it is in the European Union with 28 sovereign states. Once we finish the remainder of the technical negotiations, chief negotiators will initial that agreement. It will be sent off for legal scrubbing. It will go through the translation process. It will then be brought back, and there will be a cabinet approval process at that point. That will be followed by tabling the agreement in the House of Commons for a sitting period of 21 days. That will give the opportunity for debate. It could go to committee. Eventually it would go through that process and get approval.

At the same time, or shortly after that, we would have to go through the process of designing what kinds of changes to legislation would need to be made in order to bring ourselves into compliance with the new obligations under the agreement. That bill would have to go through the House, through the usual process, through committee, to be approved as part of the whole package in moving the CETA forward and ratifying it.

Those are essentially the steps that we would take before we'd be prepared to put the agreement into place.

[Devinder Shory, Conservative, Calgary Northeast, AB]

Mr. Hiebert would like to ask a question.

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

Mr. Verheul, the European Union is going to be negotiating with the United States on a similar comprehensive agreement. I'm wondering if you could elaborate for us what kind of precedent our agreement with the European Union sets for those negotiations. In light of the fact that the national and state governments in the United States have a unique or different relationship than we have here in Canada, is there the potential for it to be as ambitious and as deep as we currently have concluded with the European Union?

[Steve Verheul]

Certainly the outcome of our negotiations will be seen as a precedent in a number of areas.

As I mentioned a little bit earlier, we've had to basically draw a bridge between the NAFTA model of a free trade agreement and the European Union model of a free trade agreement and make those come together.

Some of those are easier than others, but I think we've paved the way for how rules of origin can be negotiated, how investment rules can be negotiated, and for regulatory standards, approaches that could be followed. There is a whole series. Virtually every chapter, since we followed a very similar model to the U.S. up until now, will provide guidance to the U.S. as well.

I don't want to speculate too much on what the U.S. and EU negotiations might go like, but certainly in our negotiations, one of the key EU objectives was government procurement, in particular subnational procurement, so at the provincial level and at the municipal level.

You're quite right in pointing out that in the U.S. it's quite a different situation. The states are far less willing to go along with the federal government in that kind of direction. It's probably inevitable that we will see a less ambitious outcome on government procurement, which will give us a greater preference in the EU market for government procurement contracts.

They'll also have some considerable challenges in some other areas, even on the market access side. Agriculture will be problematic for them, probably even more than it was for us. I think in a whole series of issues they will face significant challenges, but again, for them the stakes will be very high with the two largest economies in the world. We'll have to see how it comes out.

I'll just add one final point. As we negotiated in particular the final stages of the agreement, we made a number of connections or linkages to a potential outcome between the U.S. and the EU, so if the U.S. and the EU get an agreement, that will trigger certain things to happen in our agreement that will provide us with greater benefits. We've done that in various chapters throughout the agreement.

[The Chair, Conservative, Rob Merrifield]

Thank you very much.

I want to use the chair's prerogative for one question.

The committee was actually in Brussels two years ago, I think almost to the day, meeting with you and your counterpart on this deal and suggesting the optimism that was there. We also had a visit with the EU negotiating group or trade committee. Their number one concern was whether the provinces were going to comply and buy in. You have just described that all of them have signed off in Canada.

I'd like to turn that around and ask, because there was some confusion on our trip as to what was happening on the other side, are the 28 countries going to sign on and comply?

I'd like to ask you what your position is on what you expect to see on process on the other side.

[Steve Verheul]

The EU commission has been updating the member states throughout this negotiation. They received their mandate before they began as to what they could and couldn't negotiate, and member states have been very well informed all of the way.

I spoke with my counterpart early last week, and he said they've been having extensive conversations with member states. They are not getting any signal of opposition from anyone. In fact, the reception has been quite positive.

There are certainly pockets of concern. Agriculture is a concern. There are specific issues where people are concerned. But they have seen no signal, and they don't seem concerned at all about getting member states on board and about keeping them on board with this negotiation.

[The Chair, Conservative, Rob Merrifield]

Thank you very much to your team and for your time with us here. You've done a tremendous job for the country. We look forward to passing this agreement finally.

The meeting is adjourned.