From 2013 through 2015, I headed the Canada-Taiwan Parliamentary Friendship Group, known for its hard work, cross-party camaraderie, and productivity. In that group, we learned the virtues of the type of agreement you are considering today. Such agreements are typical signs of progress between jurisdictions that encourage friendship, free trade, investment, and increased exchange between people.
Let me quickly cover ten benefits I see in this agreement. Deft drafting and careful diplomacy have eliminated the one impediment that delayed this agreement for the 20 years of negotiations it has taken.
One, it encourages trade with a decidedly democratic jurisdiction. Two, it allocates taxing rights between the two jurisdictions so that taxpayers are not subject to double taxation. Three, it reduces the risk of excessive taxation that may arise because of high withholding taxes on payments of dividends, interest, remittances, and royalties paid by a resident of one jurisdiction to a resident of the other. Four, it ensures that taxpayers will not be subject to discriminatory taxation in the foreign jurisdiction. Five, it provides greater certainty to taxpayers regarding their potential tax liability in the foreign jurisdiction. Six, it encourages adherence to the rule of law for people by promoting tax compliance. Seven, it increases tax revenues. Eight, it discourages good Canadians—those of Taiwan background—from renouncing their citizenship. In my experience, Canadians who hold dual U.S. citizenship are renouncing their U.S. citizenship in increasing numbers due to arbitrary and capricious practices by the IRS and the U.S. Treasury Department. Nine, the ADTA paves the way to other promising economic arrangements, including a foreign investment protection agreement and a free trade agreement. And ten, it takes advantage of great timing. There is peace across the Taiwan Strait, so it's easier for Canada to engage with both Beijing and Taipei while adhering resolutely to our one China policy.
In terms of the impact on Canada-Taiwan investment, we've heard about the underperforming rates of investment that are just out of step with the patterns of cross-border trade and the number of people in both places. On two-way investment, the CTOT reports that Taiwan is currently Canada's twelfth-largest trading partner, but we are looking at Taiwan as being only the 40th-largest investor in Canada, so there is much more that can be done in that file.
The CTOT also reports that a number of bilateral investment deals are pending that would benefit from the provisions within the ADTA. They can't be disclosed for reasons of confidentiality, but there is real margin to be had by getting this agreement passed.
The one negative downside has been alluded to by various persons who have testified. This agreement was signed in January of this year and passed by the Taiwan legislature in February. It took two decades to get here, and that is due solely to the concern of offending the one China policy. But the deft drafting includes words such as “territory” and “jurisdiction”, deliberately in there to avoid offending a state-to-state kind of...or proposing that there's a state-to-state kind of relationship here.
The signatories are the two trade offices, not governments directly—another sign of the genius behind this accord. It has been carefully designed to navigate the tightrope that all but Donald Trump require when promoting relations with Taiwan.
In conclusion, this accord is expected to help facilitate increased two-way investment by significantly lowering withholding tax rates. As I related, there are at least ten concrete benefits and no serious downside risks. If the committee and the House can get this through by Christmas, there will be a whole extra year of more value-added investment between the two sides.
I highly recommend that the committee support Bill S-4.