Good afternoon, Chair and members of the committee. Thank you for the opportunity to appear before you.
First of all, I'd like to talk about the status of the Canada-U.S.-Mexico agreement. I'll provide some opening comments that should take under 10 minutes, and then we'd be open to any questions that you may have and we can pursue issues in greater depth.
The signing of CUSMA or, as many are calling it, the new NAFTA, on November 30, 2018, followed 13 months of intensive negotiations that brought together a broad range of officials and stakeholders, with a very strong partnership between federal and provincial officials. That agreement achieved several key outcomes. It served to reinforce the integrity of the North American market, preserve Canada's market access into the U.S. and Mexico, and modernize the agreement's provisions to reflect our modern economy and the evolution of the North American partnership.
On December 10, 2019, following several months of intensive engagement with our U.S. and Mexican counterparts, the three NAFTA parties signed a protocol of amendment to modify certain outcomes in the original agreement related to state-to-state dispute settlement, labour, environment, intellectual property and automotive rules of origin. These modifications were largely the result of domestic discussions in the U.S. However, Canada was closely involved and engaged in substantive negotiations to ensure that any modifications aligned with Canadian interests.
Throughout the negotiations, Canadian farmers, producers, processors, business associations, labour unions, civil society and indigenous groups were closely engaged and contributed heavily to the final result.
For the agriculture sector, the government engaged with more than 275 agriculture and agri-food stakeholders through nearly 300 in-person interactions on NAFTA modernization from February 2017 to December 2019. This included more than 55 stakeholders involved in the supply-managed sectors—dairy, poultry, egg and related processors—and 230 others covering a wide range of agriculture sectors, including grains and oilseeds, meat, sugar, fruit and vegetables, and related processors.
To help better inform Canadians of the outcomes, documents have been made available on the Global Affairs website, including the text of the agreement and the amending protocol, a summary of the overall outcomes and summaries of all chapters in the agreement.
As we talk about this negotiation, I'd like to recall that the NAFTA modernization discussions were unique in terms of our experience in negotiations. Normally, free trade agreement partners are looking to liberalize trade. In this process, the goal of the U.S. from the start of the negotiations was to rebalance the agreement in its favour. The President had also repeatedly threatened to withdraw from NAFTA if a satisfactory outcome could not be reached.
The opening U.S. negotiating positions were rather unconventional. These included, first of all, the complete dismantlement of Canada's supply management system; the elimination of the binational panel dispute settlement mechanism for anti-dumping and countervailing duties, which is the existing chapter 19 under NAFTA; a state-to-state dispute settlement mechanism that would have rendered the agreement completely unenforceable; 50% U.S. domestic content requirement on autos, which would have devastated our domestic auto sector; removal of the cultural exception; a government procurement chapter that would have taken away NAFTA market access, leaving Canada in a worse position than all of the U.S.'s other free trade agreement partners; and a five-year automatic termination of the agreement, known as the sunset clause.
The U.S. administration took the unprecedented step of imposing tariffs on imports of Canadian steel and aluminum on the basis of purported threats to national security, with no legitimate justification for that. The U.S. administration had also launched an investigation that could lead to the same result for Canadian autos and auto parts, also a national security investigation.
In the face of this situation, Canada undertook broad and extensive engagement with Canadians on objectives for the NAFTA modernization process.
Based on the views we heard and our internal trade policy expertise, Canada set out a number of key objectives, which can broadly be categorized under the following overarching areas. First of all, we wanted to preserve important NAFTA provisions and market access into the U.S. and Mexico. We wanted to modernize and improve the agreement, where possible. We wanted to reinforce the security and stability of market access into the U.S. and Mexico for Canadian business.
For the first objective, preserving NAFTA, the outcome preserves a number of important elements, including the NAFTA tariff outcomes, ensuring continued duty-free access into the U.S. and Mexican markets for originating goods. For our farmers and food processors, this means securing Canada's over $30 billion in agricultural exports to North American markets.
Second, it preserves the binational panel dispute settlement mechanism for anti-dumping and countervailing duty matters, which is a key component of the overall goods market access package of NAFTA and of the original Canada-United States Free Trade Agreement.
We wanted to preserve, as well, Canada's preferential access to the U.S. under the temporary entry for business persons chapter, and the predictability and security of access for service suppliers and investors. We also wanted to preserve the cultural exception.
As well, we wanted to preserve state-to-state dispute settlement, which we achieved, including through the protocol of amendment, actually improving on that considerably so that it's a much more efficient and effective mechanism to resolve disputes with the U.S. and Mexico.
The U.S. was opposed to almost every single one of those objectives.
With respect to modernizing NAFTA, we have modernized disciplines for trade in goods and agriculture, including with respect to customs administration and procedures; technical barriers to trade; sanitary and phytosanitary measures; new provisions on the trade of products of agriculture biotechnology; as well as the new chapter on good regulatory practices, which encourages co-operation and protects the government's right to regulate in the public interest, including for health and safety.
The agreement also establishes a mechanism for parties to strengthen co-operation and international advocacy on a wide range of agricultural biotechnology issues of mutual interest. The new agricultural biotechnology obligations will establish practical trade-facilitative approaches to getting safe products to market, reinforcing an environment that enables trade and innovation in North America.
Under the new agreement, market access for Canadian refined sugar into the U.S. market will almost double. The new agreement will provide Canadian exporters with new market access into the U.S. in the form of tariff rate quotas for certain dairy products, including cheese, cream, milk beverages and butter. It also eliminates U.S. tariffs for whey products and margarine and provides a more liberal rule of origin for margarine.
The agreement contains a modernized committee on agricultural trade, which provides a forum in which to discuss and address issues and trade barriers related to agriculture.
For our wines and spirits industry, the new NAFTA provides for protection of Canadian whisky as a distinctive product of Canada. It also protects the definition and traditional production method of authentic icewine. As well, Canadian wineries and distilleries retain the authority to sell only their own products on site.
Commitments on trade facilitation and customs procedures have been modernized for the 21st century to better facilitate cross-border trade, including through the use of electronic processes that will reduce red tape for exporters and save them money.
New and modernized disciplines on technical barriers to trade in key sectors are designed to minimize obstacles for Canadians doing business in the U.S. and Mexico, while preserving Canada's ability to regulate in the public interest. We also have modernized obligations for cross-border trade in services and investment.
On labour and environment, we have made important steps forward by concluding ambitious chapters that are fully incorporated into the agreement and subject to dispute settlement.
Finally, the outcomes advance Canada's interests toward inclusive trade, including through greater integration of the gender perspective and better reflecting the interests of indigenous people.
With respect to other outcomes, in the context of the overall outcome, Canada did make some incremental moves in relation to the U.S. objectives, specifically in the area of supply management.
With regard to Canada's dairy, poultry and egg sectors, we should recall that the U.S. made an explicit and public demand for the complete dismantlement of Canada's supply management system. In the end, we preserved the three key pillars of the supply management system, including production controls, import controls and price controls, ensuring that its integrity is maintained long into the future, and granted only limited access to the U.S. The new NAFTA ensures that Canadian dairy farmers and processors will continue to supply the vast majority of the Canadian market.
The government has been clear on its commitment to provide full and fair compensation to farmers for losses in market access. In the fall of 2018, the government announced the formation of working groups on the dairy, poultry and egg sectors. These groups were tasked with developing mitigation strategies to fully and fairly compensate supply-managed farmers and processors to help them adjust to the impacts of recent trade agreements, including the new NAFTA.
