International Trade Committee on April 18th, 2016

[Robin Silvester]

As we look at trade flows to the Asia Pacific through this gateway, we see progressive changes, in line with the way the economies move. For example, we see increasing trade flow with Vietnam. I think if we project out into the future, in either scenario we will see increased trade flow with Vietnam, but clearly, in a TPP scenario in which there's a free trade agreement in place, there is greater opportunity. We would see both greater opportunities for trade with different partners within the TPP, as well as the overall growth opportunity with existing partners.

[Kyle Peterson, Liberal, Newmarket—Aurora, ON]

Mr. Keane, you indicated that the B.C. economy would benefit from increased LNG exports to the Trans-Pacific markets. Would any of these benefits flow in other jurisdictions throughout Canada, LNG specifically, not B.C. LNG, but is there any value added?

[David Keane]

Absolutely, as I mentioned in my comments we're talking about the largest single investment ever made, not only in British Columbia, but if we get two or three of these facilities up and running that will be the largest ever made in Canada. This will provide tens of thousands of new jobs that will not only benefit British Columbians, but will go straight across the country. From the east coast to the west coast tens of thousands of people will be employed in this industry, either directly or indirectly.

[The Chair, Liberal, Mark Eyking]

Thank you.

We're going to move to Mr. Fonseca for five minutes. Go ahead, sir.

[Peter Fonseca, Liberal, Mississauga East—Cooksville, ON]

Thank you, Mr. Chair, and I would like to thank all these presenters for their remarks and what you had to say about the TPP.

If the TPP were to be ratified where do you see the biggest gains would be here in B.C., and also across Canada? Also in the same vein on the counter side where do you see the pitfalls with the TPP? That's open to anyone on the panel.

[David Keane]

I think we'll see tremendous benefits for British Columbia.

I think it's important to point out that with regard to jobs, we will employ tens of thousands of Canadians. But it's also important to recognize that we've made a commitment to the government, and we're working closely with the British Columbian government, with the federal government, with first nations, and with organized labour in terms of ensuring that we hire British Columbians first, other Canadians second, and then we look elsewhere for the labour we need.

I think that's an extremely important point to make.

[Peter Fonseca, Liberal, Mississauga East—Cooksville, ON]

On the negative side, on the risks, where do you see those with the TPP?

[Stewart Beck]

The risks if not ratified or the risks if ratified?

[Peter Fonseca, Liberal, Mississauga East—Cooksville, ON]

Who would be negatively affected in B.C. or in Canada—what groups, what sectors—if ratified?

[Stewart Beck]

If ratified, it won't really have a tremendous impact on the traditional sectors. People would say the automotive sector might be impacted because of the agreement that's done with the Japanese, but if you take a look at the assemblers and then you take a look at the tier one and tier two suppliers, tier one and tier two suppliers are global and will benefit dramatically from having a TPP.

The question is, where's the balance there? On the automotive, there could be some risks, but that's really on the assembly side, but not so much on the tier one and tier two supplier side. That's what you have to keep in mind.

It's obviously going to help our traditional exporters of commodities, so the big net gainers by having a TPP would be coming from the Prairies and B.C., and in some cases the Atlantic provinces as well. As I said earlier, it's where you want to be five years from now.

As we know, more and more is going to be done using online and e-commerce services. You want to have an agreement that captures those and makes it easier from a customs and border perspective to get products back and forth.

This is what we have to understand. It's not necessarily about today. It's about where we want to be five years from now.

[Peter Fonseca, Liberal, Mississauga East—Cooksville, ON]

Thank you, Mr. Beck. My next question is for Mr. Keane.

Since the Fukushima nuclear disaster, Japan has become dependent on coal and LNG imports. With the United States set to be a net exporter of natural gas by 2018, where do you see BC LNG Alliance benefiting under a ratified TPP agreement?

[David Keane]

It puts us on a level playing field, number one, with the United States. As I mentioned in my comments, our biggest market for natural gas exports is becoming our biggest competitor.

Japan will want to ensure that it diversifies its supply mix, so it is not going to buy all of its LNG requirements from the United States. I'm hopeful, and I firmly believe, that it will be buying some of its natural gas supply from British Columbia.

[Peter Fonseca, Liberal, Mississauga East—Cooksville, ON]

Mr. Beck.

[Stewart Beck]

If we think where Canada, from a global perspective, has a strategic advantage in the context of Asia, we aren't involved in what I would call traditional security, but we can get involved in non-traditional securities. If you're in a place like Japan, energy is critical and they have no source or supply of their own, and they don't want to be wed to the natural gas coming from the Middle East and the gulf because of the issues around the Strait of Malacca. This is becoming more of a strategic issue from the southeast perspective.

Canada, and B.C. in particular, is 12 days shorter a cruise to Japan than it is to the United States. Plus, the gas that's coming out of the U.S. is coming out of Louisiana, so it would have to go through the Panama Canal. This is something we have to keep in mind, if we want to have a non-traditional strategic role in the Asia Pacific.

[Peter Fonseca, Liberal, Mississauga East—Cooksville, ON]

Again, on the gas, if the TPP is ratified and comes into force, there are those in the environmental community who see that one of the potential consequences could be an increase in fracking.

Can you please explain what this is, and how do you address these claims?

[David Keane]

I think there will be an increase, and today I believe 60% or 70% of the natural gas supply into the Lower Mainland of British Columbia is coming from shale gas that is having to be hydraulically fractured to produce. There will be an increase, but it can be done and is done every single day very safely and in an environmentally sound manner.

I think if you look at what's been done over the years in terms of hydraulic fracturing, which has been taking place in British Columbia for over 60 years, there's never been a significant issue. There's never been anything that has been confirmed in terms of water contamination, or air contamination, so I think—

[The Chair, Liberal, Mark Eyking]

Sorry, sir, your time is up.

We have to move on. Thank you for the question.

We only have time for one more round of questioning. I think we're going to go back to the Conservatives.

Mr. Ritz, you're up the last five minutes.

[Gerry Ritz, Conservative, Battlefords—Lloydminster, SK]

Thank you, gentlemen, for your insightful presentations here today.

Like it or not, we're a country that's involved in global supply chains, and they're very important. You've made the stipulation that, should we sit on the sidelines and allow TPP to be ratified and not be part of it, the benefits we've seen in NAFTA and other agreements that we have would be eroded.

How quickly do you think we'd see that erosion?

[Robin Silvester]

I will perhaps go back to the example with Korea, in which I think the erosion could be fast—measured in a small number of years. Just seeing that example of Canadian beef exporters losing market share very rapidly in the Korean market was quite striking to me.

I can't speak from the standpoint of an economic analysis in general terms, but I can speak with a specific example that I think cautions us that it could be fast.

[Gerry Ritz, Conservative, Battlefords—Lloydminster, SK]

The point has also been made that we should be pursuing a bilateral agreement with Japan. I fully believe in that myself. I think that it's very important that we do that, not only as a plan B, but also as a backup. Even if we have a bilateral agreement, we could also have a multilateral agreement, and there are certain things that could be addressed in that.

The bottom line is that there seems to be an idea in Canada that we should wait for the U.S. to ratify, rather than moving ahead. I know Japan is looking at presenting it this spring. Australia and New Zealand have already done that. Chile is on the way. I have talked to the Mexicans; they're doing it as well.

Is there any reason that we should be holding off, waiting for the Americans to ratify before we do?

[Stewart Beck]

Ultimately, I think we have some time to have the conversations that we're having today, for example. I think that's a healthy thing to do.

[Gerry Ritz, Conservative, Battlefords—Lloydminster, SK]

Great.

[Stewart Beck]

Whether or not everybody agrees, I think fundamentally, people will need to understand that it's in our collective interest going forward. To build on Robin's point, we do not want to be at a disadvantage, because this impacts people's jobs here in Canada, or will.

[Gerry Ritz, Conservative, Battlefords—Lloydminster, SK]

As a former diplomat too, Mr. Beck, I'd like your opinion on how fundamental a fulsome ISDS clause is. You've been on the ground where Canadian business has sort of hit the wall with the government, and we've had the same situation here. How important is that? How fundamental is that for investment and growth going forward?

[Stewart Beck]

It's very important in emerging markets because what you want are rules of the road that are understood, and everybody abides by them. So when you're dealing in markets like China and India, which are two priority markets for the government, you'd like to have an ISDS-type of arrangement where you could go to an independent arbitration as opposed to having to deal with the vagaries of the judicial system in the other countries.

It's a net gain benefit for us in a place like India, for example. It's not that the legal system is bad in India. It isn't, if it gets to the judges. But the problem is, it's how long it takes for the case to get to where it has to go. When you have a process that is more open and transparent and where you have an independent judicial system, that's fine.