International Trade Committee on Nov. 21st, 2013

[The Chair, Conservative, Rob Merrifield]

We would like to call our meeting to order.

I want to thank our witnesses for being here with us. I'm a little confused, because we have Andrew Casey from BIOTECanada, who used to be with the Forest Products Association of Canada, but then we have Catherine Cobden from the Forest Products Association. Thank you both for being here.

We are now into our third meeting on the Canada-EU free trade agreement. We are excited about travelling next week and hearing more witnesses, but today we have you two for the first hour. We look forward to your presentations.

We'll start with you, Mr. Casey. The floor is yours.

[Andrew Casey, President and Chief Executive Officer, BIOTECanada]

Thank you, Mr. Chair.

It is a great pleasure to be here with you today to talk about this issue, which is very important for the biotechnology industry.

Thank you very much for the opportunity this morning to provide testimony on your study of CETA, the Canada-Europe free trade agreement.

At the outset, let me just introduce BIOTECanada. BIOTECanada is the national trade association that represents Canada's biotech industry. We have about 250 members across the country, and they are in the three primary biotech areas. These include health and life sciences together as one, and then the industrial and agricultural fields as well. I'll dive into my membership a little later in my opening remarks.

At the outset, let me just say that the industry is strongly supportive of the CETA. As you correctly pointed out, Mr. Chair, I did come from the forest products industry before. We recognize in BIOTECanada as well that this is an important step for Canada, which is an export nation. We depend on markets abroad. I don't want to take any of the wind out of my colleague Catherine Cobden's sails here, but we know that both growing markets and securing markets outside of this country are extremely important for this economy, and I'm sure she'll elaborate on that. It is also very important for our industry internally.

I'm going to talk a bit about the intellectual property aspects of this agreement, which are extremely important to our industry. Particularly important is the patent term restoration of two years for patents that are caught up in the system, and also the right of appeal.

I'm going to now give you a better sense of our membership to explain why this is so important. When you look at BIOTECanada's members, and particularly I'm talking about the health and medical area now, we have about 130 members that are small or medium-sized enterprises across the country. These are individuals who have essentially a good idea that they're trying to commercialize. The companies can range from one person working on a computer in a university lab right up to some that have 30, 40, 50, or up to 100 people working on large or complex molecules in the biologics sphere, and to commercializing and improving people's health.

I also have in my membership some of the large multi-national brand-name pharmaceutical companies that everybody is familiar with. The right question to be asking yourselves right now is why they would they be part of the association. To explain that, I have to explain what the new ecosystem looks like for Canada's pharmaceutical industry, and indeed, for the global pharmaceutical industry.

In Canada, what we have now is large brand-name companies that still have a significant presence here in Canada, but what they're looking to do is develop their pipeline. They're developing their pipeline, which is essentially where their next sets of drug products are coming from, by scanning across the country to try to find these small innovators who are in Canada and working on these novel molecules and trying to partner with them and invest in them to grow and commercialize those molecules. That's one of the reasons they're part of the BIOTECanada table.

Central to all of this, for all of them and particularly for the small members, is access to capital investment. To develop a drug is very expensive. There are estimates that it takes about a billion dollars to develop one, and it takes a lot of time—10 to 15 years. Even with that, it's still very risky. Investment dollars are paramount for the industry. Many of my small member companies spend the bulk of their time crossing this country and going to conferences around the world looking for investors.

Investment is a fickle kind of tourist. It's going to go to the countries in which it feels most welcome. If you don't put out a welcome mat and take care of such things as giving it free Wi-Fi, breakfast in the morning, a nice pillow, and all the rest of the things that other tourists look for, it's going to go to other jurisdictions.

One of the most important parts of welcoming capital into the country is intellectual property protection. That's why this deal is particularly important for my small members. In their quest to get investment capital, they need to be able to provide the assurance to investors that the intellectual property is protected and that it is secure here.

The provisions in this agreement signal to the investment community that Canada takes intellectual property protection very seriously, and also the rights of those property owners here. At the end of the day, when we look at many of the members in BIOTECanada what we're really talking about is good ideas. Unlike the case for my colleague here, Ms. Cobden, whose industry has trees, which cannot be moved from where they are and which you have to process where they are, in my industry you have good ideas that are on laptops. You can move them anywhere in the world.

So if the capital isn't coming to Canada, if we're not putting out the welcome mat and are not giving it the security that it needs, those ideas are going to go where capital is. Then we lose the innovation, and more importantly, particularly in this area, we lose the health care treatment that may be available to Canadian patients.

When we look at some of the innovations that are coming, particular in the orphan drug area for which the government is developing a national orphan drug strategy, we may lose out on some of that innovation. But we also may lose out on some of that health care. To grow the innovation here, to commercialize it here and also deliver health care advantages to Canadians is the reason that this deal is important to our industry. We strongly support it.

I look forward to entertaining any questions that members may have about my testimony.

Thank you very much.

[The Chair, Conservative, Rob Merrifield]

Thank you very much.

Now we'll hear from Ms. Cobden.

[Catherine Cobden, Executive Vice-President, Forest Products Association of Canada]

Thank you.

Good morning, everybody.

Mr. Chair and honourable members, I really appreciate the opportunity to be here. It's wonderful to share the panel with my former colleague. Let's make sure we give him the tough questions.

[A voice]

Hear, hear!

[Catherine Cobden]

The forest industry, as you likely know, is an important part of Canada's economy. We are global players, but we also are the economic backbone of 200 rural communities across Canada that are almost entirely dependent on the forest industry for their livelihoods. We employ 236,000 Canadians directly. I'd like to point out that the vast majority of those jobs are manufacturing jobs. They are permanent, not seasonal, and they're well-paying.

The forest industry has faced significant challenges over the years. To respond to them, we have recognized that we cannot sustain business as usual; we cannot stand still. We must launch on a path of transformation, and we have done so.

To this end, last year the Forest Products Association of Canada unveiled what we refer to as “Vision 2020”. By the year 2020 we hope to generate $20 billion of additional economic activity through the adoption of new innovation, but also through the expansion of our existing markets and entry into new markets. We seek a further 35% improvement to what is an already global standard of our environmental footprint. We intend to employ 60,000 new hires, including women, aboriginals, and new Canadians, in that time period.

To accomplish these goals—we have already begun—we have increased our productivity significantly and our operating efficiencies; we have established world-class green credentials second to none; and we are making technological breakthroughs and producing new, innovative products, everything from clothing to lipstick to pharmaceutical applications, all made from renewable wood.

Our initial efforts to diversify our markets have also been a resounding success. For example, forest products are now Canada's largest export to China, amounting to more than $4 billion of product per year.

Throughout every area of transformation, the government has supported the industry as a strategic partner, including via support with initiatives on the trade front, opening up new markets, and helping us market Canadian wood products globally.

Our industry exports nearly $30 billion of products to approximately 187 countries around the world. This makes us one of the leading exporters in this country and also makes us one of the most successful exporters of forest products globally.

As mentioned, the continued expansion of existing markets and diversification into new markets are critical for our future. For this reason, we're very supportive of the government's trade agenda, including negotiation of new trade agreements and focused support to help us with our entry into new markets.

It's with this background that we welcomed CETA last month. Europe is the third-largest market for our sector. Last year the Canadian forest products industry exported more than a billion dollars' worth of wood, pulp, and paper products to the EU member states. Upon CETA's coming into force, FPAC members will benefit immediately from the elimination of existing tariffs on some of our wood products. Tariffs of between 3% and 10% exist today, for example, in the areas of plywood, panel, and board, so this is a significant improvement.

We also see value beyond tariff elimination. We're very pleased with the potential that we now see for regulatory cooperation between nations. And finally, just to make the point, we view the EU as a really critical future market for the new renewable products that we are beginning to generate from a transforming forest industry.

We appreciate the government's continued efforts in the area of freer trade. Expanding international trade relationships helps the industry to grow, diversify, and prosper. Our collective efforts, however, do not stop with the ratification of this agreement or others. In fact, it is our belief that to ensure the success of this agreement and the others, we must ensure that we have in place all the necessary enablers to ensure that we take advantage of the opportunity that this and other agreements provide.

As a commodity-based industry that is on the aggressive transformational path, we have five enablers that we see as being critical.

Number one is that we must maintain the excellent support of the broad network of trade offices that we benefit from globally. I will speak to a very specific hot topic in this area in a few moments.

Two, we must ensure that we have a reliable and affordable rail system serving all areas of the country so that we can deliver our product to ports and get them to market.

Three, we must develop sufficient infrastructure that supports new markets, particularly as trade flows grow beyond just north-south to east-west.

Four, we really think that promoting the Canada brand is an ongoing effort that's very worthwhile.

And five—this one's quite specific to the forest industry—we need continued support for the innovation system that is the foundation of our transformational strategy.

Based on this comprehensive view, we really welcomed the reference to our sector in the Speech from the Throne last month, where the government identified that they would “continue to support innovation and pursue new export opportunities” for the Canadian forest industry. We hope that the government, though, will consider these enablers that I'm identifying in bringing that open trade to reality.

I mentioned the impact and the real criticality of these trade offices globally. The current issue we are facing, which demonstrates and embodies the need for boots on the ground, if you will, is the recent anti-dumping case that came out two weeks ago: the preliminary determination on dissolving pulp from China.

This is a significant challenge for the Canadian industry as well as for our counterparts in the U.S. and Brazil. It is relevant to five operations currently, but has also put a chill on three other future prospective mills that were basically going to reopen in areas that had absolutely no future prospects other than this. It's also a significant example: dissolving pulp is a transformed industry that goes into the textile industry. We now use our trees to create clothing, which offsets the cotton market.

So we're in the preliminary decision stage, but it has already implicated and put a chill on future investment. I look forward to an ongoing discussion with members of this committee on possibly how we move forward in such a challenging environment.

In closing, expanding international trade relationships and defending our access to key markets is critical to helping the industry grow and prosper. Ultimately, ratification and implementation of CETA will help sustain Canada's forest industry, our communities, and the hundreds of thousands of jobs that the sector supports across the country.

Thank you. I look forward to any questions you may have.

[The Chair, Conservative, Rob Merrifield]

Thank you very much.

We will now move to questions and answers.

Mr. Masse, the floor is yours for seven minutes.

[Brian Masse, NDP, Windsor West, ON]

Thank you, Mr. Chair.

Thank you to the witnesses for coming here this morning and testifying. It's much appreciated.

I'll start with the biotech industry. With regard to intellectual property protection, we've heard the story before that if we increase that, we'll actually increase investment into Canada. But that hasn't statistically played out.

What's different in this case? Are you suggesting that you'll have significantly more investment in research and development from your representative companies because of this deal? What's going to trigger that? And how do we measure that?

[Andrew Casey]

I think if you're talking statistically, it has not measured out.

You're talking about the PMPRB measurement stick that's been put in place.

[Brian Masse, NDP, Windsor West, ON]

Yes.

[Andrew Casey]

Okay.

What you're looking at there is a measurement mechanism that was put in place when the Patent Act was expanded back in 1987. That was done at a time when the industry was very different from the industry that exists in Canada right now.

So the first argument I would make, then, is that the measuring stick is sort of outdated and needs to be updated. Your point is still well taken, though. What is investment and what is R and D? What is happening in the industry right now?

The change in the industry is the one I alluded to earlier, which is that the large brand name companies are looking for new products and new innovations in this country. What's not captured in the PMPRB mechanism is all of my small member companies that are essentially doing their research on their own, in labs, in universities. None of that is captured as R and D in the traditional sense.

So that's not in that statistic, and that's the part that is continuing to grow. I have 130 or 140 members across the country who are all doing nothing but R and D, because that's what they're all about, and they're looking for the investment dollars.

That is what's happening, and I can say that's happening in real form. We're seeing some very significant success stories. I'll give you one particular example that is quite significant. Enobia, a company out of Montreal, developed an enzyme replacement therapy for bone disease in children. They took their drug to a point and they sold it to Alexion, which is a large multinational company, for $1.1 billion. That money is in Canada, and it will get reinvested in other start-ups.

That's the kind of ecosystem that's taking place. I think that's something we would like to keep in this country.

[Brian Masse, NDP, Windsor West, ON]

Okay. So we have that happening, and that's good to hear. I appreciate the clarification about the change.

We have kind of a deal in place without the technical data. We're going to get the technical data, and then we'll go forward from there with legislative change.

Who are the new investors we would get out of this? Where are we missing out that just signing a trade agreement will.... Have there been any studies? Has there been any work done on how to capitalize on those individuals? If there are people pent-up waiting to invest just because we've signed onto CETA, have we identified who they are and how much capital they will have, because in your testimony you're saying that we need the investors and that CETA will open the door for investors, so I'm assuming these are new investors or additional money.

Has there been any work to identify who they are, and how much capital we can expect to get, and how to do it?

[Andrew Casey]

No. I haven't seen any particular studies that would do that, but I can say we're talking about investors that are global. They are around the planet. They are all looking for their opportunities.

Ms. Cobden's industry is looking for the same investors. They have the capital, and they want to invest it. They are looking for a return on that investment. They are going to take that investment, and put it in places where they feel it's the most secure and where they are going to get the greatest return. If they don't feel there's security around that investment, they are not going to invest in that particular industry or particular country.

The point I'm making is that if you don't have in place regulations and recognition of the importance of intellectual property and secure that intellectual property...that's one of the cores to my smaller members. All they have is their intellectual property. If they can't put that out there and sell it securely, then the investment is going to go elsewhere where they think it's more secure.

Other countries are stepping up. We have to keep pace. I can't say what will or will not come, but I can tell you that if we don't keep pace with the other jurisdictions, capital will flow to those other jurisdictions where it feels more secure.

[Brian Masse, NDP, Windsor West, ON]

Thank you.

Ms. Cobden, you made a really good point with the concept of enablers. This government right now is currently in a process where it's cutting CBSA down. In fact, CBSA is going to lose $143 million by 2015 with front-line workers being reduced. You talked about trade offices.

Can you tell us about how important the trade offices are for your organization. We have seen trade offices actually reduced over the last number of years.

[Catherine Cobden]

As mentioned in my remarks, the trade offices are actually really important. There is no way we could have received the information we received just yesterday from the MOFCOM in China without boots on the ground in China.

Whether there are efficiencies to be gained in the system, I think like anything it's worth taking a look at—but in strategic markets trade offices are very important.

[Brian Masse, NDP, Windsor West, ON]

As well, what regions of the forestry sector would benefit most from this deal? You mentioned the rail system—and also the ports, where we need some massive and significant investment. I come from the Great Lakes area where we have witnessed low water levels at different times and changing patterns.

What needs to be done there, and is there a particular region of the forestry sector that would benefit from this trade agreement?

[Catherine Cobden]

As you likely know, we do export product to Europe from across the country, but with a heavier emphasis from the east. That would make some sense given the proximity to market. But I think our infrastructure challenges around ports are not limited to the eastern ports. I think there is a definite need for.... You heard about our China experience, and there are certainly constraints around the port of Vancouver as well.

In the infrastructure program, which we're grateful to see advancing, I think it's important that we look at the trade flow issue going to Europe and to China, and ensure that we have the port structure in place. And absolutely, the rail issue is critical from coast to coast. There is no one region that would benefit more than others. It's a national problem.

[The Chair, Conservative, Rob Merrifield]

Thank you very much.

Mr. Holder.

[Ed Holder, Conservative, London West, ON]

Thank you, Mr. Chair.

I'd also like to thank our guests for attending this morning and sharing their comments.

I'm a little nervous, Ms. Cobden. All of a sudden, wearing my clothes out of wood makes me feel a bit splintery all of a sudden.

Over the course of time when we've been studying all the issues with CETA before signing it, we've had so many positive responses about this free trade agreement. It's been interesting that those who have expressed concern represent some employees and may have some concerns that need to be expressed, but the job creators have been so very positive about this deal. Of course, there's you today from the forest products sector and Mr. Casey in his new world of biotech—congratulations to you—but also from fisheries to pork to beef to lumber to canola, grain growers, pulse growers, and major organizations like the Canadian Chamber of Commerce, the Canadian Council of Chief Executives, the Canadian Manufacturers & Exporters, all the job creators have come out and said this is good for Canada because, by our history and by all that we have done, we are exporters. I was going to say that we are no longer hewers of wood, but I guess being hewers of wood is a good thing, Ms. Cobden.

[Catherine Cobden]

We're well beyond that.

[Ed Holder, Conservative, London West, ON]

We're well beyond, and I think that's the point.

I have a couple of questions, if you would allow me. I have given them some thought.

Ms. Cobden, one of the things you mentioned is that through Vision 2020 you're looking to hire 60,000 people. I have two sets of questions. First, it was interesting that you said you'd hire aboriginals, women, immigrants. How can you be so case-specific?

Secondly, we have a colleague here from Saskatchewan and, frankly, it's critical that they get more employees out there because there are industries going wanting for employees out west, Saskatchewan being a particular challenge.

The two questions are: why these select groups, and where are these 60,000 employees coming from, knowing that Canada has already created some million-plus net jobs since the recession? Our unemployment rate is the lowest it has been in some years. But look, for everybody who is genuinely looking for work, Canada should create that opportunity. But it won't be the government getting them a job, it will be the job creators. All we can do as a government is create the opportunity for those job creators to do what they do.

Enough of me. Could I ask for your response to that, please?

[Catherine Cobden]

Absolutely. I have a number of points I'd like to make. Thank you very much for those thoughtful questions.

The 60,000 number and the specific identification of where we'd like to get them comes from a fundamental philosophy that we would like to attract our neighbours to the industry first. But we actually don't believe that's sufficient. We are going to need support, we think, in growing the labour pool overall.

Whatever the federal government does to grow the labour pool is going to be welcomed by our industry. Again, we are in remote communities where first nations are right beside us. I believe we have the highest percentage of aboriginals in our workforce, but it's not a great number yet. It's 16%. We think we can do a lot better and we are working really hard with aboriginal partners to grow that number.

The last time I looked--I grew up in a northern community, a pulp mill town--half of that community were women. We have an abysmal track record with women, so we'd like to get some of those women in our communities working. Again, we imagine that may not be sufficient.

On the Saskatchewan thing, I do want to point out that there is a particular opportunity that's being lost by the Chinese move on anti-dumping. I am sure you can talk to that company directly, and I don't want to speak for them, but I'm pretty sure that getting over 50% duty from China will immediately cease and desist on that. You can talk to them to confirm that.

Where will the jobs will come from? We had a long discussion with Minister Kenney, only last night in fact, on the need for ongoing development of good LMI data, the supply and demand data. Really nailing this down, I think there's some really good stuff going on around the Canada job portal and that kind of thing. But need to go further in supporting our database to ensure that we are connecting the last...I can't remember the exact number of Canadians who are still without employment, with those jobs.

I think we simply need to keep the pedal to the metal on facilitating that.

[Ed Holder, Conservative, London West, ON]

My colleague opposite made reference to the trade offices, and I beg to differ. But one of the things that's been consistent in the testimony of the various support groups I just mentioned is the importance of trade offices, as you've mentioned as well. It's critical for the sake of Canadian exports to assist—because those are boots on the ground in those countries around the world.

That ties in to the fifth point you made about the various opportunities that the EU may bring. One of the things you thought was critical was to support innovation and new export opportunities. In your industry, Ms. Cobden, what are those new export opportunities that you see as a result of this agreement?

[Catherine Cobden]

Well, we're living one at the moment. With respect to immediate transformation of the forest industry, real-time, is the dissolving pulp and getting into textiles. But there's a tremendous array of new products that we've unleashed from the Canadian forest, and we're beginning, through a number of enabling programs federally, to demonstrate their applicability at a commercial level.

I'll give you just one example, but I could give you 15 examples or more. The one example that I'm quite jazzed about is something called nanocrystalline cellulose. It's taking the tree to the nano level. We are the first generators of nanocrystalline cellulose from trees. This is such an extraordinarily tiny substance that we are the envy of the world. When we go to Sweden, a powerhouse in the forest industry, and Finland, and the U.S., they're all looking at us, asking how we got that done in Canada.

This, by the way, opens up an incredible array of new opportunities for the forest industry. It can be put into composites; it can even be put into, to my even understanding, things like bone structures and tires. The applications of this new product just go on and on and on.

So it's an exciting new world in the forest industry. We're no longer just hewers of wood and drawers of water.

[The Chair, Conservative, Rob Merrifield]

Thank you very much.

Mr. Pacetti, the floor is yours.