Evidence of meeting #64 for Finance in the 42nd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was agreement.
A recording is available from Parliament.
Liberal
Raj Grewal Liberal Brampton East, ON
Thank you, Mr. Chair.
Thank you to all the witnesses for coming today.
Ms. Taylor, I just want to pick up on the fact that it's an arrangement and not an agreement. That's fine, but just on the legal implications of it...as in, have they ever been challenged before on any of the other issues, on any of the other arrangements we have with Taiwan?
Director General, North Asia and Oceania, Department of Foreign Affairs, Trade and Development
Not to my knowledge, no. I'm checking with colleagues who have a longer historical memory on this than I do, but as far as I know, no. As I mentioned earlier, we have a whole series of arrangements with Taiwan on a wide range of subjects, and I don't believe any of them ever created any problems.
Let me also respond to part of the earlier conversation about whether China might be concerned about the displacement effect of our having an ADTA with Taiwan. I've heard the Chinese complain about a great many things in relation to Taiwan. I've never, ever heard them complain, to us or anyone else, about our doing business with Taiwan. If they were say, “Oh, we don't like this, because it might mean that Canadian investment goes into Taiwan that otherwise would have gone to the PRC”, then it would be a first. I've never heard them make that argument before.
Given how integrated Taiwanese and Chinese value chains are, I think there isn't a direct displacement effect. I think in some instances it's a complementary effect, so it might actually benefit China-Canada economic relations as well.
Liberal
Raj Grewal Liberal Brampton East, ON
Overall it has been positive testimony for getting Bill S-4 passed before the end of the year. Does anybody have anything negative to say, or any reservations, in terms of why we should hold off on doing this? You can respond by saying no.
Director, China Institute, University of Alberta
I yield to the government representative. I'm out of government.
Go ahead, Sarah.
Director General, North Asia and Oceania, Department of Foreign Affairs, Trade and Development
From our perspective, no, we're very comfortable with this going forward.
Director, China Institute, University of Alberta
I will. I confess that I was Sarah's first boss many years ago when she first joined the Department of Foreign Affairs. I worked on Taiwan for a long time, as many of the people here at the table have done. I'm in my 30th year of Canada-China relations, and I think I have a fairly good feel for what's doable and what's a bridge too far.
This one strikes me as doable. As Ms. Taylor said, there are many issues that Taiwan complains about. On some issues, when they come up, you just know: you're waiting for the knock on the door from the Chinese ambassador. You can almost hear his footsteps coming down the hall. But this, to me, is not one of those.
They watch the formalities like a hawk. I've looked over the agreement, and the formalities are being met in a way that is satisfactory to them, I believe. One trick in negotiating with the PRC, in my experience, is that if you honour the formalities, you can get away with a lot of substance. I've had substantive, sometimes very confidential, arrangements made with China where we were honouring the form and getting a lot of substance. I walked away from the table happy and I think they did as well, because they got the form honoured, and they cared less about the substance.
I think this is an example where the amount of investment that's going to flow in either direction is just a rounding error on our own investment arrangement with China, so this to me is in that okay category. But to try to do an FTA with Taiwan—this is my personal opinion—without having advanced one with China would be probably a bridge too far. Sliding it into a TPP would have worked, but to do it all by itself as a stand-alone, without one with the PRC, would be tough. That's a personal opinion.
International Lawyer, McMillan LLP
I think it's critical to acknowledge the timing. If you look at life with a still photo, you will get a deceiving image. If you look at life with a video camera, where things have been and where things are going, you get a clearer image. We are in a very propitious time to do this, because, as has been noted, relations across the Taiwan Strait are strong. Canada has a great relationship with both places. Now is the time to do something like this.
In 2014 our Canada-Taiwan Parliamentary Friendship Group, which has met with the past president of Taiwan on many occasions, got the Terry Fox Run going again in Taiwan. It was a great moment for Canada and Taiwan. It was purely social. There was nothing that China could object to. It was a coming together of two territories with people who really get along well.
I would say this is another opportunity, and we should seize it.
Tax Expert, Agora Fiscalité, As an Individual
To answer your question, for this commission I studied more about the Canada-Hong Kong treaty, as I explained earlier. I know we have to sign an agreement to avoid double taxation, because there is taxation on business income in Hong Kong, but I find it sad that the treaty we put in place is not adjusted to the fact that in Hong Kong there are no taxes on interest, dividends, and capital gains, and there is no withholding tax.
So this is sad, and I find it a bit sad as well that in both the Taiwan and the Hong Kong agreement, the exchange of information is on demand, which is not adapted to the reality in 2016 of the decision that the Canadian government took regarding the automatic exchange of information. I do understand that we can adapt all this, but since it seems to be so important for the Canadian government to agree to the automatic exchange of information, I would expect that it would have been written clearly in the agreement, and the protocol would not exclude the automatic exchange from the agreement itself, let's say in the Taiwan arrangement.
Liberal
The Chair Liberal Wayne Easter
Thank you both.
Mr. Liepert, did you have a question? After you, we'll close with Mr. Dusseault.
Conservative
Ron Liepert Conservative Calgary Signal Hill, AB
I just have a general thing, because I think Mr. Weston summed it up pretty well. It just seems like this is one of those situations that makes a lot of sense. I don't think we're necessarily spending a lot of time talking about the bill but more about our relationships with these countries, and that's, frankly, a good thing.
In a general sense, in listening to the discussion, it's ironic that we're talking about a bill that is about Israel and Taiwan, and I think we spent 90% of our time talking about Taiwan. As someone who comes from the west, it's probably more relevant from our standpoint. But in looking through the notes that we've been provided, obviously there are some tremendous opportunities with Taiwan. If I read this correctly, our trade balance with Taiwan is not very good. We bring in a lot more than we ship out. What I do find a little surprising is that when it talks about exports, it talks about coal, lumber, and copper. I thought Alberta and western Canada exported a lot of pork to Taiwan, or meat products at least.
To any of the panellists, with this particular legislation do you see some of that trade imbalance starting to level out? What are some of the opportunities that maybe we could be pursuing a little more diligently to bring that trade balance a bit more into a balance?
Maybe I'll start with you, Mr. Houlden. Since both Rachael and I are from Alberta, we'll play favourites and let you go first.
Director, China Institute, University of Alberta
Thank you very much. I've lived in Ottawa, but it's nice to be back in my home province as well. I retreated home after government service.
I struggled, as did others, in the office in Taipei with trying to level that balance somewhat. It's typical of many of our trading relationships with Asia—China is an example—where we are at a huge disadvantage in terms of the exchange. You can't expect a balance of trade with all of our partners, as it doesn't work that way, but we should be doing better ultimately. It took us a long time to get beef back into that market, so I'm hopeful that with quality products—of course, as you know, Alberta exports some 80% of the beef from this country—that will occur.
In Taiwan there are some non-tariff barriers to trade. They make it difficult for us sometimes in terms of labelling and regulations, and the job of the mission there is to make sure we're being treated fairly.
The United States has a powerful presence because they are the security guarantor for Taiwan, so all things being equal, that U.S. influence comes to bear. I was there at a time when they got a pass on beef and we did not, for reasons that really had all to do with politics and just clout, but Canadians can be persistent, and we need to be. Don't expect that root balance to be overturned overnight. I think it's a question of time and persistence.
Quite frankly, Canadian business people could sometimes be more aggressive. I've seen the phenomenon in my career of where folks get used to trading in Minnesota, and maybe Georgia is a little bit exotic, but we'll give it a try. The advantage of Australia, in my view, is they are in that part of the world. They had no choice but to adapt to very difficult circumstances. We have the luxury and the burden of having such a great market next door, so that leap to knowing another culture, knowing another language.... Mr. Weston was an example of that. That's a tough job for many Canadian business people. We have no choice, or we're going to be forever super-dependent upon that great market to the south.
Thank you.
Conservative
International Lawyer, McMillan LLP
Sometimes it's important in life to look at the things where you can make a bigger difference fast. The trade balance is structural and very difficult. The thing where we can make a huge premium quickly, I think, is by increasing the opportunity to invest in one another's countries. The Taiwanese invest in Canada because it's a gateway to the United States. People forget that the United States' biggest trading partner is not China. It's us.
There is an opportunity to attract investment into Canada and then there's the reciprocal thing, getting into China or elsewhere in Asia. I was first at the world's largest law firm and, when I set up my law firm, left it to found the world's smallest law firm in Taiwan, and then it grew. We ended up with three offices in Taiwan and correspondent offices throughout Asia, but people were always coming to a Taiwan partner to do business elsewhere in China or something like that because the Taiwanese are good partners. They are savvy. They literally speak the language. They know the culture. So those are opportunities.
I would like to respond a little bit to what Madam Alepin said earlier. The concern about sharing information was a big concern for Taiwanese people in Canada. The Taipei Economic and Cultural Office people will tell you that they received some resistance in Canada on an ADTA because of that concern. It's surprising, therefore, that the Taiwan legislature passed it so quickly, passed it a month from the date the two offices signed it. That tells you there was a concern about that. I think many Canadians were concerned about Canada sharing information with the United States. So maybe it's a good thing that's not in there.
NDP
Pierre-Luc Dusseault NDP Sherbrooke, QC
Thank you.
My question might seem simple, but in the case of Taiwan, it is complicated.
Canada subscribes to a one China policy and recognizes the People's Republic of China as the only China. Since we have a tax convention with China, why does that convention not apply to the territory of Taiwan if we recognize Taiwan as China?
Can anyone answer that?
Director, China Institute, University of Alberta
I'll take a bit of a stab at that. It's a good question.
Taiwan is a proud jurisdiction. Taiwan will not accept, in effect, being a sub-designation of the PRC, if I understand the gist of your question. On the other hand, we cannot bring ourselves, under the one China policy, to refer to the Republic of China, or to....
With such arrangements, we can talk about a territory, but never about the People's Republic of China. It has to be Taiwan. These people will never accept the idea of being a subdivision of the People's Republic of China.
NDP
Pierre-Luc Dusseault NDP Sherbrooke, QC
In the current context then, can a resident of Taiwan claim in Canada that the accord between Canada and China also applies to him?