Bill C-4 (Historical)

Canada–United States–Mexico Agreement Implementation Act

An Act to implement the Agreement between Canada, the United States of America and the United Mexican States

This enactment implements the Agreement between Canada, the United States of America and the United Mexican States, done at Buenos Aires on November 30, 2018, as amended by the Protocol of Amendment to that Agreement, done at Mexico City on December 10, 2019.
The general provisions of the enactment set out rules of interpretation and specify that no recourse is to be taken on the basis of sections 9 to 20 or any order made under those sections, or on the basis of the provisions of the Agreement, without the consent of the Attorney General of Canada.
Part 1 approves the Agreement, provides for the payment by Canada of its share of the expenditures associated with the operation of the institutional and administrative aspects of the Agreement and gives the Governor in Council the power to make orders in accordance with the Agreement.
Part 2 amends certain Acts to bring them into conformity with Canada’s obligations under the Agreement.
Part 3 contains the coming into force provisions.

[The Chair, Liberal, Sherry Romanado]

We will begin the second panel of the Standing Committee on Industry, Science and Technology. The subject matter is to study clauses 22 to 38 and 108 to 122 of Bill C-4.

With us today we have Roger Boivin, president, Groupe Performance Stratégique. We also have Mr. Scott Smith from Honey Bee Manufacturing, and Mr. Mark Nantais from the Canadian Vehicle Manufacturers' Association. By video conference, we have Jennifer Mitchell, president of Red Brick Songs, for Casablanca Media Publishing.

Welcome. Each witness will have five minutes to present, after which we will move into questions. When you see the little paper move up, that means you have thirty seconds left to kindly wrap up your remarks. I will try to allow as much time as possible but our time is tight this morning.

With that, we will begin with Mr. Roger Boivin for five minutes.

[David Cassidy, President, Unifor Local 444]

Thank you.

Good morning, Madam Chair and members of the committee. My name is Dave Cassidy. I'm the president of Unifor Local 444 in Windsor.

Local 444 represents just under 10,000 active members working across a range of industries including gaming, long-term care, aerospace, energy and transportation. Of course, we also do auto assembly and make auto parts.

Our local represents approximately 6,500 workers at the Fiat Chrysler Windsor assembly plant, producing vehicles like the Grand Caravan, the Voyager and the Chrysler Pacifica. We also represent thousands more workers at nearby feeder plants, right down the supply chain.

I want to thank you for the opportunity to address you today with respect to Bill C-4 on the implementation of the Canada-United States-Mexico trade agreement. As the committee members will know, our union international president Jerry Dias took a very active interest in NAFTA renegotiations. I can tell you, coming from Windsor, that reopening, or even getting rid of NAFTA, has been top of mind for workers ever since that original deal came into force back in 1994.

I know the terms of NAFTA stretch beyond just the auto sector. It's a deal that touches nearly every good and service that crosses our continental borders, yet among them the auto industry seems to grab the headlines, and for good reason. Building and developing an advanced auto industry is lucrative business. It is also a tool for significant economic development. Canada is fortunate to have invested heavily in the auto sector. Every one job in auto assembly helps generate 10 others throughout the economy.

An auto assembly plant is like a centre of gravity for additional manufacturing investments. Supplier parts, whether seats, doors, wheels or other components, are intentionally located nearby to help meet production schedules and demand. This is exactly the case in Windsor where the auto industry is still a vital cog in the local economy, this despite years of devastating closures, plant reallocations, job outsourcing and layoffs.

In 1994 NAFTA changed the terms of trade and redefined the North American supply chain. It is no surprise that automakers and parts manufacturers started relocating production to low-wage Mexico or in some cases the low-wage U.S. south.

We used to have a $3.5 billion auto trade deficit with Mexico for cars and parts. The deficit is now nearing $30 billion. We expected this would happen. This is part of the reason Canadian auto workers have long been opposed to NAFTA. Over time and through our collective bargaining, we've managed to secure decent wages and benefits for our members doing very difficult, repetitive and skilled labour, but all that gets undercut as Mexican factories pop up and workers are paid a wage that's a fraction of what we earn.

I don't know if you know this, but a new Audi assembly plant located in Mexico, producing a $40,000 luxury SUV, for instance, will pay workers around $2.25 U.S. per hour. Canadian workers will not, and should not, have to compete with that. I'll tell you there is rarely a time when Canadian auto companies fail to point out these disparities when they're trying to lower our wages, trim our benefits or overhaul our pensions. This is NAFTA's effect on working conditions in Canada.

As I said, our union put a lot of time and resources into engaging in NAFTA renegotiations and working with federal officials to make meaningful changes. No one was under any assumption that tinkering with NAFTA would, by itself, undo decades of damage and neglect, but certainly, meaningful changes were made, and we recognize that.

Under CUSMA there is now a much higher threshold to determine a North American-made car than there was under NAFTA. Giving tariff preferences to carmakers that build a car actually made from North American components strengthens the integrity of the deal. This is far different from the approach the Harper government took when renegotiating the TPP wherein they committed to weakening the NAFTA threshold. Under TPP, which Unifor strongly opposed, more than half a car didn't have to be built in a trade zone to receive tariff preference.

It's good news that under CUSMA the trend is reversed. We think that this could help locate production of tier-1 and tier-2 suppliers into Canada as carmakers attempt to meet the new rules.

CUSMA also strengthens rules of origin on key component parts over and above the original deal. For the first time, there are auto rules of origin that apply to steel and aluminum resources, requiring OEMs to purchase at least 70% of these materials in North America.

[Matthew Poirier, Director of Policy, Canadian Manufacturers & Exporters]

Thank you, Madam Chair.

Good morning, everyone. It is my pleasure to be here on behalf of Canada's 90,000 manufacturers and exporters, and our association's 2,500 direct members, to support Bill C-4, an act to implement the agreement between Canada, the United States of America and the United Mexican States, also known as CUSMA.

Before I begin, I'd like to commend the efforts of the Prime Minister, Deputy Prime Minister Freeland, Chief Negotiator Verheul and all their staff for negotiating CUSMA. Being part of the process, we at Canadian Manufacturers & Exporters, or CME, understand how difficult these negotiations were. It was crucial to achieve a positive outcome for Canadian businesses and all their employees, and we did just that. As such, CME fully supports this bill. We urge the government and all parliamentarians to ratify CUSMA as soon as possible.

My goal today is simple. I want to explain why free trade is important to manufacturing and how CUSMA will improve on NAFTA.

Why is free trade so important? Simply put, North American trade is the basis upon which Canada's manufacturing industry is built. Our sector alone employs 1.7 million workers in every community across the country. In 2019 we shipped 455 billion dollars' worth of merchandise exports to the U.S. and Mexico. This represented 77% of our total exports to all countries that year. Two-thirds of these exports, worth about $305 billion, were manufactured goods. The numbers simply speak for themselves.

You see, Canadian, American and Mexican manufacturers don't really compete with one another. Rather, we build stuff together in a continental manufacturing ecosystem bound together by integrated supply chains. North American free trade is therefore a pillar of our national economy. It is why the manufacturing sector produces the bulk of Canada's exports. It is how the sector can compete against the rest of the world. This is why CUSMA—NAFTA before it—is so important. Without this agreement and without integrated production with the U.S. and Mexico, we simply would not have the scale necessary to be a global player. Canada's ability to take advantage of any other trade deal is only possible if North America continues to manufacture and grow.

How does CUSMA improve on NAFTA? CUSMA preserves the integrated manufacturing operations that allow the relatively free flow of goods and services between our three markets. Going into the negotiations, our members made it clear that the primary objective of Canada must be to do no harm to this integrated manufacturing economy. CUSMA accomplishes this. In fact, CUSMA preserves many of the key elements of the original NAFTA that were targets of the U.S. for elimination. This includes the dispute settlement mechanisms and business traveller visa exemptions. This was by no means assured at the outset, but there they are, alive and well.

Importantly, CUSMA updates critical areas of NAFTA, dragging it into the 21st century. This alone will significantly enhance North American trade. For example, the new digital trade chapter recognizes that the Internet is a thing, and establishes a framework for e-commerce in North America. The customs administration and trade facilitation chapter will also go a long way in modernizing borders throughout North America, enabling the free flow of goods.

Lastly, chapter 26, the new competitiveness chapter, has not garnered a lot of attention, but in our estimation it is one of the biggest accomplishments. Why? It sets up a framework for three sovereign countries to become a unified trade bloc. It will do this by promoting better coordination and integration of our manufacturing industries so that it can tackle global trade challenges together. This is a significant accomplishment. We have consistently urged the government to start work on implementing the parts of the agreement—parts like chapter 26—that do not require legal changes. We should be looking to make early progress by establishing committees for North American competitiveness and good regulatory practices, as outlined in the agreement. This would show Canadian leadership, signal to our other partners that we take CUSMA seriously and let us hit the ground running.

Once CUSMA is the law of the land, we need to pivot towards helping manufacturers and exporters take advantage of the new deal. The U.S. is, and always will remain, our largest export market. We must leverage such excellent government resources as the trade commissioner service and Export Development Canada to help companies transition from NAFTA to CUSMA.

Limited access to the U.S. government procurement market is also a big challenge.

This is how government can play a positive role in helping companies capitalize on CUSMA once it's in force—

[The Chair, Liberal, Sherry Romanado]

Good morning, everyone. Happy Monday morning.

We are meeting today at the Standing Committee of Industry, Science and Technology to study clauses 22 to 38 and clauses 108 to 122 of Bill C-4, an act to implement the Agreement between Canada, the United States of America and the United Mexican States.

With us this morning we have Mr. Lawrence Herman, who is joining us by video conference from Toronto. We also have with us Mr. Matthew Poirier from the Canadian Manufacturers & Exporters; Mr. David Cassidy, UNIFOR Local 444; and Jonathon Azzopardi, from the Canadian Association of Mold Makers.

Since we have a large panel, we will ask that you each present for approximately five minutes. At the end of the testimony, we will then move into a rotation for questions.

We will start with Mr. Herman, who is joining us by video conference. Just in case we have a technical problem, we want to make sure we get his testimony on the record.

With that, Mr. Herman, please feel free to begin your testimony.

[Alistair MacGregor, NDP, Cowichan—Malahat—Langford, BC]

Thank you, Chair.

Thank you to our witnesses for giving their testimony today and giving us some guidance on our deliberations on CUSMA. We're operating on quite a tight timeline, and I very much appreciate what our supply-managed sectors have gone through. We seem to be constantly paying the price for other jurisdictions' overproduction problems. It's obvious when you look at states like Wisconsin, which produces more milk than our entire country and is affected by massive price fluctuations, that they're looking for places to get rid of their excess production. Canada was an easy target, and I very much appreciate that.

There have been a lot of discussions about when this agreement is actually going to be ratified. I was looking at Bill C-4 and the coming into force provisions. Section 213 says, “this Act comes into force on a day to be fixed by order of the Governor in Council.” I'd like to know what your conversations with the executive branch have been like when you've raised these particular concerns.

[Dave Taylor]

Yes, Alistair and I do know each other.

With me today is Jacques Lefebvre, chief executive officer for Dairy Farmers of Canada.

I'd like to go off script for just a second to say that I think most of you have dairy farmers in your ridings, and they all have a story. We all have a story. As a young kid, I wanted to farm. I've been able to do that, and I appreciate the opportunity I have had. In the late 1970s, my dad had a fairly large dairy operation for Vancouver Island. He expanded into a whole market-garden operation as well. He built greenhouses and a retail store. Of course, in 1982, when interest rates went to the highest levels we've seen, he lost it all. We walked away with 20 cows, 10 heifers, 500 litres of quota, and nothing else. That propelled me to university. I was back and forth to the farm, and in 1995 I was able to jump back into farming. Since that time—this week actually—it's been 25 years that my brother, my dad and I have farmed together. We still farm together. My dad's 81. He is still a part of the farm, along with the next generation, as my son is involved now, too. It's a pleasure farming. There have been great opportunities in the last 25 years, but there have been some real bumps as of late, and I'd like to speak about that a bit in my statement here today.

On behalf of all Canadian dairy farmers—and I feel the weight of that today—I want to thank you for the opportunity to offer our perspective on certain clauses of Bill C-4 and the Canada-United States-Mexico trade agreement. The concessions granted in CUSMA have put Canadian dairy farmers in a vise, on the one hand by outsourcing a portion of our domestic production to foreign dairy farmers. After carving out a part of our domestic production in CETA, and again in CPTPP, you are now asking our farmers to make another sacrifice. To be clear, the total impact of these market access concessions, in addition to those already granted through the WTO, will be—and we've heard it from two speakers already—18% of our production by 2024. The government has once again weakened our Canadian dairy sector.

On the other hand, compounding the impact of market access is the fact that the one significant avenue for the dairy sector to mitigate some of these impacts through exports has been taken away by the imposition of an unprecedented and, may I say, draconian cap on our exports. This is covered under clause 44 of the bill, and it is where I will focus some attention today.

CUSMA requires that any export of skim milk powder, milk protein concentrate and infant formula beyond a predetermined threshold be charged an export charge on each additional kilogram of product exported globally. In other words, although CUSMA is an agreement that should ostensibly be limited to its three signatories, the cap on dairy exports extends to every country in the world. This goes well beyond what would normally be expected in a trade negotiation, and it sets a dangerous precedent for future agreements for all other sectors, I believe. In addition, if the caps come into force before August 1, the beginning of the dairy year, the cap on skim milk powder and milk protein concentrates will drop from 55,000 tonnes to 35,000 tonnes on August 1. That is a drop of about 35% after possibly only one, two or three months; we're not sure at this point. That would be another blow to our dairy market with no time for transitioning.

Hundreds of thousands of Canadians depend upon this sector for their livelihoods. This could have ripple effects in communities across our country. The squeeze will also be felt by Canadian consumers, who can no longer be sure that the milk on their store shelves is produced according to the same high standards as milk produced here at home. For example, use of the artificial growth hormone rbST is banned here in Canada due to concerns over animal welfare, and I believe rightfully so. However, this is not the case in the United States.

Given that we are in a vise, we ask if there is a way to mitigate the impacts through an administrative agreement between Canada and the United States that would not require a reopening of the agreement.

Beyond market access and in addition to the cap on exports, CUSMA also requires Canada to consult with the U.S. on any changes to the administration of our domestic supply management system. This amounts to nothing less than giving the U.S. oversight of the administration of our Canadian dairy system. It puts into question the independence of decision-making in Canada and our sovereignty.

The Prime Minister has repeatedly committed to full and fair compensation for the dairy sector for the total impacts of CETA, CPTPP and CUSMA. Let me be clear: Instead of compensation, Canadian dairy farmers would have strongly preferred to see no dairy concessions in recent trade agreements. I'd like to repeat that: We would have strongly preferred to see no dairy concessions in recent trade agreements. This being said, concessions were made and compensation was promised in return.

Canadian dairy farmers, who are all impacted by recent trade agreements and are best positioned to know their own needs, have indicated that this compensation should come in the form of direct payments. This is consistent with farmers' recommendations from the mitigation working group established by the federal government following the signing of CUSMA and the government's commitment to listen to farmers on how compensation should be paid. Direct compensation is for lost markets. Government programs are to foster growth in an industry. The two should not be confused.

We therefore recommend that the Canadian government fulfill its commitment to fully and fairly compensate dairy farmers to mitigate the impacts of CUSMA, as per the producer recommendations made by the mitigation working group.

Another important point I'd like to make is that the Canada Border Services Agency does not currently have the training, tools or resources to effectively monitor what is coming into Canada. Canadian borders are leaky. This will become even more problematic as imports continue to increase as a result of the concessions granted in these agreements. For Canadian consumers it will be important for the government to ensure at the border that the food coming into Canada has the same food safety and quality, and that Canada has the capacity to police the increased amount of foreign product entering the country as a result of these agreements.

Finally, it is important to note that the impacts of recent trade agreements were not limited to dairy farmers. We therefore strongly encourage the Canadian government to provide full and fair compensation for the impact of recent trade agreements to dairy processors, in addition to Canada's poultry and egg farmers.

In conclusion, I come back to the next generation. My son is expecting his first child. He's 24. He's a full part of our farm now. He asked me, because I do get out to the odd meeting now, “Dad, where are we at? What's the future looking like?” He sees the cuts. He sees the hits we take. He says, “Dad, I could go work in the medical industry. I could go do that.” My wish is that he will stay, that he will be involved and will take the farm to another level altogether, that he will have confidence in Canada's supply-managed system and in a dynamic dairy industry for the future. I hope all of us around the table would believe in that and certainly advance that to the best of our abilities.

Thank you so much.

[Shane Stokke, Vice-Chair, Grain Growers of Canada]

Thank you, Mr. Chair and honourable members.

My name is Shane Stokke. I'm vice-chair of Grain Growers of Canada. Grain Growers of Canada provides a strong national voice for grain, oilseeds and pulse producers across Canada. As such, we appreciate the invitation to appear before you to discuss the specific elements of Bill C-4 that are pertinent to the grain sector.

I farm at Watrous, Saskatchewan, an hour east of Saskatoon. I grow many different crops, and trade is very important to me to be fluent and real.

Our message regarding CUSMA and Bill C-4 is simple. We want to see it pass quickly. Our farmer members across Canada need certainty to invest and grow. With farmers feeling the effects of global trade wars, diplomatic disputes, increased input costs, higher taxes and challenging weather conditions, the last thing we can afford is uncertainty in trade within our own continent. We need tariff-free access for our export commodities. Canadian farmers rely on stable markets to succeed, and ratifying CUSMA will allow us to capitalize on further opportunities for growth with our closest trading partners.

Mr. Chair, specifically relating to the legislation before us, I'm happy to offer a comment, as per request, to clause 59 and sections under the Canada Grain Act portion of the bill. This section includes a remedy to a long-term trade irritant that both the United States and Canada have had. In essence, these changes allow for a levelling of the playing field. These changes ensure that all wheat varieties registered in Canada can receive a Canadian grade regardless of where they're grown. I should mention that a similar change was proposed by the previous government in Bill C-48 prior to the 2015 election, but it was unable to pass due to the dissolution of Parliament. We supported that change in 2015, and we are very pleased to see these changes being proposed once again. We hope they will be in place soon, with swift ratification of CUSMA through the passage of Bill C-4.

Over the last decade, there have been significant changes to both grain grading and handling systems here in Canada. This remedy is essential to the last remaining cross-border trade irritant U.S. farmers have with respect to grain, and we support this change. Under the current system, registered Canadian varieties grown in the U.S. and sold into the Canadian bulk handling system are automatically given the lowest grade possible. This change will allow grain grown in the U.S. to be graded here in Canada, and graded appropriately. Under the Canada Grain Act, nothing prevents companies such as mills from buying grain on specifications outside the grading system, and that will not change.

Currently a significant amount of grain is not sold in the Canadian bulk system. We would not expect that to increase dramatically because of this change. This change will now make Canada more compliant in providing reciprocal treatment to our trading partners, which we support and expect in return. This also highlights the fact that Canada truly believes in a rules-based system for world trade, and we're happy to show we will walk the talk in that regard. By removing this long-time, last trade irritant, it also assists Canada in growing forward.

While we believe there should be future reforms to the Canada Grain Act, by ensuring we're working on an even playing field with our trading partners we will be more firmly in control of any future changes to the act. This will allow strict Canadian stakeholder engagement for any future changes to the Canada Grain Act to ensure that any changes made are made in the best interests of Canadian grain growers.

In conclusion, CUSMA ensures continued tariff-free trade, establishing processes that help remove technical barriers to trade and maintaining vital precisions to deal with disputes.

I welcome any questions you may have.

[Jane Proctor, Vice-President, Policy and Issue Management, Canadian Produce Marketing Association]

Thank you.

Honourable members of the Standing Committee on Agriculture and Agri-Food, on behalf of the Canadian Produce Marketing Association, I'd like to thank you for the opportunity to speak to you today on the study of clauses 44, 46, 53 and 59 of Bill C-4.

The Canadian Produce Marketing Association is a 95-year-old not-for-profit trade association, representing more than 860 member companies doing business in Canada within a supply chain that contributes $17.4 billion in real GDP and supports roughly 249,000 jobs here in Canada. In addition, the fruit and vegetable sector in Canada supports $9.8 billion in wages and salaries. Combined, CPMA members are responsible for 90% of fresh fruits and vegetables purchased by Canadians. As an industry association, CPMA represents the entire fresh fruit and vegetable supply chain, from farm gate to dinner plate.

Our comments are reflective of a wide array of members across the supply chain, who work daily to provide Canadians with the fresh and healthy fruit and vegetable options they demand. That's right from growers all the way through to retail and food service.

The produce industry is a unique entity. This important economic engine is made up of rural, provincial, national and international companies, all working together to increase consumption of fresh fruits and vegetables. CPMA represents the industry in all areas of impact, including sustainability—which currently includes a significant effort around packaging—research, innovation, infrastructure, regulatory modernization and trade, to name but a few.

Since the implementation of the previous North American Free Trade Agreement, or NAFTA, in 1994, Canadian fresh fruit and vegetable exports to Mexico and the U.S. have increased by approximately 396% when adjusted for inflation. This growth is indicative of the importance of tariff-free trade and the integration of our marketplace within North America and within the fresh produce industry.

The integrated North American supply chain also continues to be an important tool in ensuring that Canadian consumers have a consistent and diverse supply of fresh fruits and vegetables year-round, despite a relatively short growing season here domestically.

In order to meet the Canadian government's agri-food export target of 2025, and to ensure that Canadians can meet the recommendation in Canada's food guide that they fill half their plates with fresh fruits and vegetables, the continuation of tariff-free access under CUSMA is essential.

As a side note, industry is pleased that the final text of CUSMA does not include any changes to trade remedy laws related to seasonality and produce. This is an area we're going to continue to be watching, because our understanding is that there is pressure to the USTR still by certain pockets within the U.S. industry. That is one thing we wanted to put on your radar. We stand committed to ratification of CUSMA, and on behalf of industry we are therefore pleased to appear before you today.

Specific to why we are here today, I offer the following comments on clauses 44, 46, 53 and 59 of Bill C-4. Our understanding of the change to subsection 6.2(1.1) of the Export and Import Permits Act, proposed in subclause 44(1), is that it's a simple change to remove the reference to CETA—I think the wording is “for the purpose of implementing CETA”—which we support. Clause 44 relates specifically to dairy products, which is not within the mandate of CPMA and wouldn't be appropriate for us to speak to.

Clause 46 appears to be a simple change to add the text “respecting export charges referred to in subsection 6.?2(5)”. However, unless we are mistaken, there is no subsection 6.2(5) in the Export and Import Permits Act. We're going to reserve comment until that's clarified. It's unlikely that we would object to the export charges if they reflect current practice, but we'd appreciate understanding that text. My apologies if we misunderstood, but I've gone through it a few times and I just don't see that. It ends at 6.2(4).

Clause 53 refers to the Fertilizers Act. Since we do not have the expertise to comment on the specifics of that, we're going to defer to and support our colleagues at both Fertilizer Canada and the Canadian Horticultural Council on this clause. We would like to note that, in general, our industry is very reliant on inputs for fresh fruit and vegetables to continue to provide capacity for production here in Canada. Obviously, we'd like to see the fertilizer inputs remain in place.

Clause 59 refers to the Canada Grain Act. Again, that's outside of our mandate, so we will defer to our colleagues in that sector.

In closing, I would like to underscore our support for the ratification of CUSMA and Bill C-4.

Thank you for the time to present today on behalf of our industry.

[Claire Citeau, Executive Director, Canadian Agri-Food Trade Alliance]

Thank you for inviting us to speak on behalf of the Canadian Agri-Food Trade Alliance, or CAFTA, voice of Canadian agri-food exporters, regarding the Canada-United States-Mexico Agreement.

My name is Claire Citeau, and I am the executive director of CAFTA. I will share my time with our vice-president, Brian Innes.

Our members have a very simple message: CAFTA calls for the swift ratification of CUSMA to ensure continued stability in the North American market and strongly urges parliamentarians in both Houses to pass Bill C-4 quickly.

CAFTA represents the 90% of farmers who depend on trade, as well as producers, manufacturers and agri-food exporters who want to grow the economy through better and competitive access to international markets. This includes the beef, pork, meat, grains, cereals, pulses, soybean, canola, as well as the malt, sugar and processed food industries.

Together, our members account for more than 90% of Canada's agri-food exports, which in 2019 reached over $60 billion, and support about a million jobs in urban and rural communities across Canada. A significant portion of these sales and jobs would not exist without competitive access to world markets.

[Yves Perron, Bloc, Berthier—Maskinongé, QC]

Thank you for your answer.

Can you confirm that under the protocol to replace NAFTA, article 2 states that this protocol and its annex shall enter into force on the first day of the third month following the last notification and that therefore, if Bill C-4 is fast-tracked as the government wishes, the agreement will apply before the beginning of the dairy year, which begins in August?

Therefore, dairy farmers would only benefit from a few weeks of the first year of the agreement because the second year of the agreement would have already begun.

Correct me if I'm wrong. In the first year, 55,000 tonnes could be exported. In the second year, 35,000 tonnes could be exported. We are talking about a major financial issue for Canadian dairy producers and processors.

Have I read the facts correctly?

[The Chair, Liberal, Pat Finnigan]

Welcome, everyone, to our meeting on the study of Bill C-4, an act to implement the agreement between Canada, the United States of America and the United Mexican States.

We have a three-hour meeting today. It's going to be very tight, so I'm going to be tight on the time also.

Here with us, for the first 40 minutes, we have Steve Verheul, chief negotiator and assistant deputy minister of trade policy and negotiations at the Department of Foreign Affairs, Trade and Development.

From the Department of Agriculture and Agri-Food, we have Nicole Howe, executive director of the supply management and livestock policy division at the policy development and analysis directorate, and Aaron Fowler, chief agriculture negotiator and director general of trade agreements and negotiations.

Mr. Verheul, if you want to start, you have up to 10 minutes for an opening statement.

[Matthew Poirier, Director of Policy, Canadian Manufacturers & Exporters]

Thank you, Madam Chair. Good afternoon to everyone.

It is my pleasure to be here on behalf of Canada's 90,000 manufacturers and exporters and our association's 2,500 direct members to support Bill C-4, an act to implement the agreement between Canada, the United States of America and the United Mexican States, also known as CUSMA.

Before I begin, I would like to thank the efforts of the Prime Minister, Deputy Prime Minister Freeland, chief negotiator Steve Verheul and all of their staff for negotiating CUSMA. Being part of the process, we at Canadian Manufacturers & Exporters, or CME, understand how difficult these negotiations were. It was crucial to achieve a positive outcome for business and all its employees, and we did just that. As such, CME fully supports this bill and we urge the government and all parliamentarians to ratify CUSMA as soon as possible.

My goal today is simple. I want to explain why free trade is important to manufacturing and how CUSMA will improve on NAFTA. Why is free trade so important? Simply put, North American trade is the basis upon which Canada's manufacturing industry is built. Our sector alone employs 1.7 million workers in every community across the country.

In 2019, we shipped $455 billion of merchandise exports to the U.S. and Mexico. This represented 77% of our total exports to all countries that year. Two-thirds of these exports, worth about $305 billion, were manufactured goods. The numbers simply speak for themselves. You see, Canadian, American and Mexican manufacturers don't really compete with one another. Rather, we build stuff together: a continental manufacturing ecosystem bound together by integrated supply chains.

North American free trade is therefore a pillar of our national economy. It is why the manufacturing sector produces the bulk of Canada's exports. It is how the sector can compete against the rest of the world. This is why CUSMA, and NAFTA before it, are so important. Without these agreements and without integrated production with the U.S. and Mexico, we simply would not have the scale necessary to be a global player. Canada's ability to take advantage of any other trade deal is only possible if North America continues to manufacture together.

How does CUSMA improve on NAFTA? CUSMA preserves the integrated manufacturing operations that allow the relative free flow of goods and services among our three markets. Going into the negotiations, our members made it clear to us that the primary objective of Canada must be to do no harm to this integrated manufacturing economy. CUSMA accomplished this.

In fact, CUSMA preserves many of the key elements of the original NAFTA that were targets of the U.S. for elimination. This includes dispute settlement mechanisms and the business traveller visa exemptions. This was by no means assured at the outset, but there they are alive and well.

Importantly, CUSMA updates critical areas of NAFTA, dragging it into the 21st century. This alone will significantly enhance North American trade. For example, the new digital trade chapter recognizes now that the Internet is a thing and establishes a framework for e-commerce in North America. The customs administration and free trade facilitation chapter will also go a long way in modernizing borders throughout North America, enabling the free flow of goods.

Lastly, chapter 26, the new competitiveness chapter, has not garnered a lot of attention, but it is, in our estimation, one of the biggest accomplishments of CUSMA. Why? It sets up a framework for three sovereign countries to become a unified trade bloc. It will do this by promoting better coordination and integration of our manufacturing industries so that we can tackle global trade challenges together. This is a significant accomplishment.

We have consistently urged the government to start work on implementing parts of the agreement now, like chapter 26, that do not require legal changes. We should be looking to make early progress by establishing committees for North American competitiveness and good regulatory practices, as outlined in the agreement. This would show Canadian leadership, signal to our other partners that we take CUSMA seriously and let us hit the ground running.

Once CUSMA is the law of the land, we need to pivot toward helping manufacturers and exporters take advantage of the new deal. The U.S. is, and will always remain, our largest export market. We must leverage the excellent government resources like the trade commissioner service and Export Development Canada to help companies transition from NAFTA to CUSMA.

Limited access to the U.S. government procurement market is also a big challenge. We encourage the government to work with the Americans, on a bilateral basis, to open up this lucrative area for Canadian farms. This is how government can play a positive role in helping companies capitalize on CUSMA once it's enforced.

In the final analysis, CUSMA is a good deal for Canada, and given the very challenging negotiations, an impressive achievement. We urge all parties to pass this bill as quickly as possible. If you do that, I can assure you that Canadian manufacturers will return the favour by creating prosperity for all Canadians for years to come.

Thank you, and I look forward to the discussion.

[Risa Schwartz, Legal Counsel, Assembly of First Nations]

Thank you, Judy.

With the ratification of CUSMA, Canada, working together with first nations, will be taking steps to make international trade more inclusive and more equitable for indigenous peoples, especially for indigenous women.

CUSMA didn't ultimately include a trade and indigenous peoples chapter, but the text of the final agreement mainstreamed many important provisions for first nations. CUSMA maintains Canada's traditional reservations, exceptions and exclusions in the areas of services, investment, environment and state-owned enterprises. It continues the WTO agreement on procurement carve-outs for indigenous businesses. It contains provisions that recognize the important role that indigenous peoples play in conserving the environment.

There is a new emphasis in CUSMA on co-operation activities to promote and enhance opportunities for indigenous businesses in the chapter on small and medium-sized enterprises. Indigenous peoples are the youngest and fastest-growing demographic in Canada, and opportunities for indigenous business means opportunities for women and for youth. There is a new provision in CUSMA for handcrafted indigenous textiles and apparel goods, which are now eligible for duty-free treatment.

Also, importantly, for the first time in a Canadian trade agreement, CUSMA includes protections for inherent and treaty rights through a new general exception in article 32.5, “Indigenous Peoples Rights”. The general exception clause is much stronger than we have seen in other agreements. This new exception clause covers the entire agreement and applies to indigenous peoples in all three CUSMA countries. It will allow all three states to take action to fulfill their legal obligations to indigenous peoples.

As well, we'd like to note that the investor-state dispute settlement will be phased out as between the United States and Canada. ISDS is a threat to indigenous peoples' rights. All these matters are groundwork for positive change.

Once CUSMA is ratified, we must work together to realize economic gains and to ensure these provisions are implemented in a manner that provides for greater economic equity for first nations. We note that the mandate letter for the Minister of Public Services and Procurement includes that “at least 5% of federal contracts awarded” must be “to businesses managed and led by indigenous peoples”.

This commitment needs to be monitored by each federal department and reported upon to cabinet on an annual basis to ensure the target is being met. Progress in meeting the 5% target should also be published by the Government of Canada for transparency.

While CUSMA is an example of the difference it makes to engage with indigenous peoples at an early stage, there must be increased opportunities for first nations to participate directly in international trade negotiations, consistent with the United Nations Declaration on the Rights of Indigenous Peoples.

The Assembly of First Nations will continue to advocate that Canada move beyond engagement and invite first nations to the negotiation table; include trade and indigenous peoples chapters in all new or modernized international trade agreements; explicitly acknowledge the United Nations Declaration on the Rights of Indigenous Peoples in international trade and investment agreements; and ensure that a general exception to protect indigenous people's rights, such as the one in CUSMA, is a red-line item for negotiation agreements. Like New Zealand, Canada must commit to protecting indigenous rights in international trade agreements. This is not a matter that should be up for negotiation.

As well, we ask that Canada halt the negotiation of new ISDS provisions in new international trade and investment agreements and remove ISDS provisions when older agreements are being modernized.

Finally, we ask Canada to invest in programs and services needed for first nations trade networks and inter-nation trade so that additional capacity can be established in first nations trade policy and programs and services. We are also here today to recommend an amendment to Bill C-4. The bill is missing a non-derogation clause. The non-derogation clause amendment was proposed previously by the national chief when he appeared before this committee during the study for Bill C-100.

All implementing legislation for international agreements that have the potential to impact inherent and treaty rights must include a non-derogation clause. It is not just the international trade and investment agreements that can impact inherent and treaty rights, but also how the agreement is implemented through domestic regulatory and policy matters. A non-derogation clause will clarify that the act and CUSMA shall be construed so as to uphold existing aboriginal and treaty rights recognized and affirmed in our Constitution.

Chi-meegwetch for the opportunity today to present to the Standing Committee on International Trade.

[Judy Whiteduck, Director, Safe, Secure and Sustainable Communities, Assembly of First Nations]

[Witness spoke in Algonquin]

[English]

I wanted to acknowledge all of you, myself and the territory before we begin. We have a brief set of remarks that we'll share, which I will start with.

Thank you, first of all, for the invitation to the national chief of the Assembly of First Nations to appear before your committee to inform the study of Bill C-4. The national chief has sent his regrets due to other commitments, and we are pleased to be here on his behalf.

My name is Judy Whiteduck, and I am the director of the economic sector. I am joined by Risa Schwartz, our legal counsel on international trade matters.

The AFN is a national organization advocating for first nations citizens in Canada, which includes more than 900,000 first nations people, both living on reserves and in towns and urban centres.

First nations leaders direct the work of the Assembly of First Nations through resolutions passed at chiefs' assemblies. In 2019, the AFN passed resolution 37/2019, which was continued advocacy on Canada's international trade agreements to achieve economic reconciliation. It urged greater participation of first nations in international trade negotiations, and called upon Canada to include a trade and indigenous peoples chapter in future international trade agreements. The AFN has a specific chiefs committee on economic development, which includes first nations trade relations.

In 2017, the national chief was welcomed by Deputy Prime Minister Chrystia Freeland to be a member of the NAFTA council. At an official level, Risa Schwartz and I also participate on the indigenous working group on international trade for the Canada-United States- Mexico agreement. While there is more to do, this work has resulted in the most inclusive international agreement for indigenous peoples to date.

I will now ask Risa to provide additional comments on CUSMA and to make a recommendation for an amendment to Bill C-4 as well.

Thank you.

[Lawrence Herman]

Thank you. I won't go through the paper in any detail. I'll just summarize some points.

Bill C-4 is an implementation measure. It adjusts Canadian laws to bring those laws into conformity with the agreement, with CUSMA, and it needs parliamentary approval, obviously, to make those changes to Canadian statutes. Those changes set out in the bill will allow Canada to ratify the treaty.

It's important to understand that the conclusion of treaties and their ratification is an executive act. It doesn't legally require parliamentary approval for the Government of Canada to ratify an agreement, but the policy for many years has been to submit major agreements, trade agreements in particular, to Parliament for parliamentary approval. Of course, before Canada can ratify any agreement, whether it's a trade agreement or otherwise, Canadian laws have to be brought into line with the provisions of the agreement. If Canada were to ratify an agreement and Canadian laws had not been made consistent with the agreement, Canada would be, as a country, as a state, in breach of its obligations under the agreement.

Let's come to Bill C-4. I want to give you a bit more context about Bill C-4. There is nothing that I could see in Bill C-4 that is in any way inconsistent with the provisions of CUSMA. I have to say—and I think this is important in terms of context—that CUSMA is a done deal. The negotiations are over. This committee is not being charged with renegotiating or proposing renegotiating the CUSMA. It is done. The U.S. has ratified it. Mexico has ratified it. It is now Canada's turn to ratify the agreement. That requires that Canadian laws be changed and adjusted in some respects. In some cases, it's a matter of tinkering, but in some respects, Canadian laws and statutes have to be changed. That's what Bill C-4 does.

This committee, it seems to me, has three options.

It can approve Bill C-4, possibly with some minor tinkering here and there. I don't think there's much that needs to be done in that regard, if anything. It can approve the bill as presented.

The second option would be to propose amendments to Bill C-4 with or without a recommendation that the treaty be approved. It could radically amend Bill C-4 to change its contents, making them inconsistent with what Canada has agreed to in CUSMA.

Third, it could refuse to approve Bill C-4 and refuse to recommend Canadian approval of CUSMA.

The latter two options or scenarios would mean that Canada could not ratify the agreement. This would be, in my view, an enormous setback for the country, and in fact would be without precedent. There has never been an instance in Canadian history where Parliament has refused to approve a trade agreement and to pass the necessary legislation. We know that in 1987-88 the original Canada-U.S. Free Trade Agreement was held up in the Senate after it had passed the House. An election was held and we know the consequences. A Conservative government was returned with a majority and the House subsequently passed the necessary implementing legislation.

In the case of the NAFTA, before it was presented to the trade committee or indeed tabled in the House, there were changes made to the NAFTA as renegotiated, because Canada, the U.S. and Mexico agreed that it would be necessary to add side letters to the negotiated text of the agreement. The NAFTA implementing bill was tabled in the House and was approved.

Canadian implementing legislation in other areas has been approved by the House. The European Trade Agreement—the CETA—and the trans-Pacific trade agreement have both been approved by the House. If any one of the negative scenarios that I outlined were to be proposed and approved by the House as a whole, I think the consequences would be disastrous. It would mean that the U.S. and Mexico would have ratified CUSMA, Canada would not have and, I assume, that Mexico and the U.S. would go ahead with the implementation and all of the other matters under the agreement. Canada would not be a party to that agreement. It would complicate things enormously in terms of supply lines and other matters. More than that, it would set back Canada-U.S. relations in a major way.

If this agreement, as I said—negotiated, signed, approved and ratified by the U.S. and Mexico—were turned down by Canada, legally, at least initially, the NAFTA would then remain in force as is between Canada and the United States. There would be serious doubts about whether the NAFTA would be continued by this particular administration under that scenario. The future of the NAFTA itself would be extremely uncertain.

The question then before this committee is what the consequences for Canada would be if Parliament, by following through with any such recommendation by this committee, were to refuse to approve the CUSMA and pass the necessary implementing legislation. That is the issue that you're faced with.

I know that in previous deliberations of this committee, suggestions have been made to reopen the NAFTA because one or another interest group is not happy with certain of its provisions. That is frankly a non-starter. The United States and Mexico, but particularly the United States, will not agree to reopen this agreement. It has passed the U.S. Congress. It's been ratified by the President, and the suggestion that Canada could go back to the U.S. government and say that it wanted to reopen this agreement is frankly a fantasy. It will not happen. Even if it did in the remotest of possibilities, even if the United States and Mexico were prepared to reopen the CUSMA because of Canada's insistence, we would have to look at starting negotiations again, going through all of the process of negotiating and putting on the table our starting position, and being prepared to make compromises, because, as Mr. Verheul said in his testimony, trade negotiations are questions of balancing concessions. Canada would have to put its starting bid on the table and be prepared to make concessions. This is, to me, the most unrealistic of scenarios.