Mr. Speaker, I am pleased to rise in the House to speak to Bill C-41, which will implement the free trade agreement between Canada and the Republic of Korea. I am very pleased because, honestly, our position makes me smile and laugh. As deputy international trade critic, I am pleased to confirm what our senior international trade critic said, and that is that we are going to support this bill to implement the trade agreement at third reading.
This makes me smile because, unlike what our opponents, the government members, like to say, we are not a party that is against international trade. We are not anti-trade, quite the contrary. If members want to ask me questions about that, they should also speak to the member with whom I have been communicating over the past two, three or four years on economic issues. They will see that as an economist, I am in favour of the principles of trade agreements and that the value of each trade agreement that we sign or negotiate must be assessed based on the content and details of that agreement.
Furthermore, I think that we cannot repeat often enough the basis on which the NDP, the official opposition, assesses these trade agreements. We have three criteria. The first pertains to the notions of democracy, respect for human rights, and respect for environmental rights and working conditions. When we signed NAFTA, or even the initial agreement between Canada and the United States, there was an entire section regarding environmental issues and respecting environmental rights and working conditions. However, only side agreements were signed, and they were not as restrictive. We then saw that very few complaints were lodged about NAFTA. Complaints were made regarding working and environmental conditions, but they did not end in a court decision. The process clearly has no teeth.
What we on this side of the House want is for the negotiation of trade agreements to be used as leverage with the country we are negotiating with in order to raise that country's environmental and democratic standards, as well as its standards related to human rights and working conditions.
We think this first condition is essential, which is why we repeatedly said that we opposed the agreement with Honduras, because the agreement did nothing to raise these standards.
The second condition is the economic and strategic value of the agreement in question. There is no denying that South Korea is a significant trade partner. South Korea is Canada's seventh-largest trade partner and its third-largest in Asia. The standard of living, or more specifically, the per capita income in Korea, if we evaluate it based on purchasing power, is about 75% of that of Canada, and that is rather significant. From a strategic standpoint, therefore, no one can deny the importance of South Korea.
More specifically in terms of agri-food, and because the region I am honoured to represent relies on agri-food for 12% of its economy, it is important to point out that South Korea is our fifth-largest partner in this area. In terms of current global exports, South Korea is as important as Germany or France as a trading partner. Exports are currently worth over $3 billion.
In fact, this brings several questions to mind. As I said at second reading, an internal memo from the Department of Foreign Affairs and International Trade raised the problem that the government was squandering too many resources on issues that had less strategic value and that the resources were not available to negotiate and eventually conclude as agreement as important as the one with South Korea.
I think the government needs to seriously address this issue at some point, because putting these resources into an agreement with Honduras when our trade with that country is worth a little over $40 million and neglecting the negotiations for an agreement with a trade partner worth over $3 billion in exports is highly problematic in terms of the government's ability to effectively negotiate trade agreements. Thus, there can be no question about the economic and strategic value of the agreement.
This brings us to the third criterion we used to analyze the agreement: the actual terms. Obviously, the Standing Committee on International Trade did its job. I know that a number of members of the House also assessed the consequences of the agreement for our ridings and the economies of our regions. As with any trade agreement, certain sectors will benefit in the short and medium terms, while others will face economic challenges once this agreement is implemented.
I am going to talk about the advantages and disadvantages. As far as advantages are concerned, the beef industry will benefit rather quickly from the phasing out of the 40% tariffs imposed on that sector. Some members of the House have already mentioned that. The United States also opted to have this tariff phased out when it signed the agreement in 2012.
Our share of the beef market in South Korea has decreased tremendously because of our diminished competitiveness compared to the United States. Tariffs on the U.S. are currently 32% and are decreasing by 2.7% a year, while tariffs on our products are 40%. This is a real red flag. These market shares we are losing for our beef sector have to be recovered quickly.
In 2002, our beef exports to South Korea totalled $50 million. After the South Korean embargo was lifted in 2012 and the South Korean market was finally reopened, beef exports totalled $10 million. The following year, in 2013, these exports dropped to $7.5 million. The difference in tariffs has had a huge impact, and that is why we must use the agreement with South Korea to minimize and eventually compensate for and eliminate the competitive difference between Canadian and American exports.
The European Union and the United States signed agreements with South Korea in 2012 while our own negotiations lagged, mainly for lack of resources. This resulted in a 70% drop in our share of the agri-food market. However, it is an important sector of our trade with South Korea. It was quite irresponsible not to put enough resources into concluding an agreement with South Korea more quickly. It took 10 years to negotiate.
I was talking about the elimination of 40% tariffs on the beef industry. Tariffs of 18% on beef offal will eventually be eliminated. For pork, these tariffs can reach 25%, depending on the product. These tariffs will gradually decrease to allow our farmers to open up a market. This decrease will be welcomed in the pork industry in particular, since there is currently uncertainty in that sector as a result of our trade with Russia, which was a big consumer and importer of Canadian pork.
A number of areas stand to win, as pointed out by most of the people who came to the Standing Committee on International Trade. The aerospace sector the forestry sector, which is an important industry to my region and riding, stand to gain a lot. Furthermore, tariffs for various forestry products, which vary from 8% to 13%, will eventually be eliminated. Tariffs for other sectors, such as mining, transportation, fish and seafood, which could go as high as 50%, will also gradually be eliminated. Some sectors stand to benefit a lot. Furthermore, nearly 87% of all the tariff lines that imposed tariffs on our exports to South Korea will eventually be eliminated.
One of the reasons why we are supporting this agreement is that it is 100% reciprocal. Once again—and earlier I heard a speech that mentioned this—we need to consider South Korea's tariffs on Canadian products. They were much higher than Canada's tariffs on South Korean products. This will give our exporters access to a market that did not use to be as open to Canadians as the Canadian market was to South Koreans.
Obviously, if at some point we are unhappy with something in the agreement, if there are disputes about the effects of the agreement, there is always a way to renegotiate or revoke it. This, however, would take six months. Everything can be renegotiated.
We also raised concerns about the investor state dispute settlement mechanism, and I will come back to that. It is very important to have that six-month time period. It cannot be so long that it ties the hands of future governments—that is a fundamental principle of democracy—as is the case, for example, with the Canada-China foreign investment protection agreement, which is binding for 31 years.
In all of the trade agreements that we have signed in the past, that fundamental principle allowed us to renegotiate or open up the agreement to include or withdraw certain clauses, obviously with our partner's consent, over a six-month period or with six months' notice.
This new investor state dispute settlement mechanism contains more progressive transparency measures than previous incarnations. These measures are welcome. When it comes to the lack of transparency in the process, this is one element that really worries those who want to ensure that the recourse measures to ensure compliance with trade agreements are democratic and open.
The disadvantages have been talked about in committee and by the media. There are a number of risks related to the challenges facing the automobile and steel industries. A representative of Unifor, the main union representing auto workers, expressed his concerns about these agreements. This might come as a surprise, but the Canadian Council of Chief Executives had the same concerns. I should point out that we import around $3 billion worth of South Korean cars but export just $15 million worth of Canadian or Canadian-American cars.
This is a major concern for the union and the automobile industry. We had a 6.1% tariff on South Korean cars, but there was an 8% tariff on cars we exported to South Korea. The tariff was higher. That is not the only reason for the big difference, and people have pointed that out, but we still have to pay close attention to the auto sector and the impact of this agreement on it. As I said, the Canadian Council of Chief Executives has recognized this particular challenge. In committee, it suggested that we should develop a special strategy for the auto sector vis-à-vis the Korean market for automakers. Here is what it said:
...that Canadian auto and auto parts manufacturers are positioned for success. Such a strategy could examine exports, two-way foreign direct investment, and non-tariff barriers as well as cooperation with other major auto and auto parts exporting nations that have free trade agreements with Korea, to ensure an open market for foreign products.
This specific problem for the auto industry was raised by the Canadian Council of Chief Executives, among others, and must be taken seriously. In fact, this was included in one of the amendments that we tried to propose. We proposed it at the Standing Committee on International Trade and it was rejected by the government members on the committee. We proposed five amendments and they were all rejected.
There is a lot of talk about the investor state dispute settlement mechanism, but that is not the only thing we proposed. The government could have accepted entirely reasonable aspects, such as sending a Canadian mission to South Korea to oversee the implementation of the agreement and report on the progress of that implementation. In fact, I asked the member for Huron—Bruce about that. This mission should report regularly, every year, until it is no longer necessary to do so.
The government members rejected this idea. Again, to reassure those who might be concerned about this, we proposed an amendment whereby no environmental law could be repealed or amended in order to increase investment. These are laws for the common good. These are the environmental protections the public called for and we recommended, not to put up an obstruction or a non-tariff barrier, but truly for the common good. The government refused.
The measures we proposed sought to respond to the concerns we on this side of the House are hearing. The last amendment we proposed responded precisely to the request by Unifor and the Canadian Council of Chief Executives; it was aimed at developing a strategy to help the auto industry and the steel industry meet the challenges that the implementation of this trade agreement will present.
In closing, I would like to speak to this issue of the investor state dispute settlement mechanism. I heard the parliamentary secretary say that this was the cornerstone of every trade agreement that has been and will be negotiated by Canada.
There is no international consensus. Many countries are asking questions about the validity, usefulness and relevance of this mechanism. The first time it was proposed in the context of trade negotiations was for NAFTA, in response to concerns that Canadian and American investors had regarding the strength and soundness of the Mexican legal system, in particular. That is where the idea of an external mechanism came from. No one said that this had to be done behind closed doors, but that is what happened. No one was supposed to say that the Canadian or American legal system had not been used. However, this agreement goes beyond Canadian and American legal powers. The fact remains that it was originally in response to the perceived lack of soundness of one of our trade partners, namely, Mexico in this case.
This issue can also come up in the negotiation of trade agreements that we, as a party, if we formed the government, might negotiate less aggressively than this government is doing. I am thinking of countries like Honduras and Panama and other countries we do business with that not only have serious problems when it comes to human rights, environmental rights and working conditions, but also have legal systems of dubious soundness and impartiality.
Is that the case with South Korea? I do not think so. Is that the case with the European Union? I do not think so. Should we automatically include an investor state dispute resolution mechanism in situations where our trading partners have respected, impartial systems that can serve as tribunals in the event of any investor complaints regarding what is perceived as an impediment to investments or profitability, which would ultimately be a non-tariff barrier?
This mechanism remains controversial and will continue to be debated. I categorically reject the government's contention that this is the cornerstone of the agreement. On the contrary, in the months and years to come, we will see more and more countries raising concerns and asking questions about the relevance of automatically having such mechanisms in every agreement. As I mentioned, the new president of the European Commission and countries such as Austria and Germany are beginning to publicly air their concerns.
Nevertheless, we support Bill C-41 at third reading stage. We support the principle of the agreement with South Korea, which may not be the agreement we would have negotiated but, for the time being, satisfies the three criteria we use to assess the relevance and desirability of a trade agreement. We will gladly vote for this bill.
