Foreign Affairs Committee on April 11th, 2017

[Peter Kent, Conservative, Thornhill, ON]

They already have the benefit of the American discount on Canadian petroleum products because of our landlocked nature.

[Warren Everson]

And we are, all of us, trying to break that landlock, aren't we?

[Peter Kent, Conservative, Thornhill, ON]

Yes.

Thank you, Mr. Chair.

[The Chair, Liberal, Bob Nault]

Thank you, Mr. Kent.

We'll go to Mr. Fragiskatos, please.

[Peter Fragiskatos, Liberal, London North Centre, ON]

Thank you, Mr. Chair.

Thank you for being here today.

You mentioned Mr. Donohue, the president of the U.S. Chamber of Commerce, who was here in February. I want to read a quote: “Let me say right up front that withdrawing from NAFTA would be devastating for the workers, businesses and economies of our...countries...”. That's what he said in his speech when he was here.

This is the first meeting we've had on Canada-U.S. relations as part of this study, and I think it makes sense to hear a very general point from you about the importance of NAFTA and free trade in general. It's been almost 30 years since we had a seminal election on that very issue, and now even the NDP is open to the importance of free trade. This is such an important idea for this country's future prosperity. It generates so many jobs.

I want to hear from you about the value of NAFTA. Could you talk about it in terms supply chains and use a particular example, the auto sector, for instance? There are particular goods that have to cross the border a number of times before they're finally put into a finished product. You can use that example, or you can use any example.

[Warren Everson]

Above all else, before it was NAFTA, it was the Canada-U.S Free Trade Agreement. That was really the political dialogue that happened. If you recall, NAFTA slid in without a lot of controversy, whereas the Canada-U.S. Free Trade Agreement, and the election around that, nearly killed me. It was an extremely intense election campaign.

What the countries declared with that agreement was that we have a special relationship; we have the best relationship. No other two countries trade like this, trading as amicably as we do and have such a complete and respectful relationship in education and sports, the faith community, the defence relationship, and all manner of things. That's why I said that Chapter 19—the decision to create a body to take us out of the courts when we have trade disputes—was such an important central gesture, because it said that these two partners ought not to be stuck in the 6th District Court of Appeal, for example, for 11 years on some dispute. We're special partners, so we should have a facilitated system. That's why I think it's so important that we maintain that.

As the economy has evolved, the United States and Canada are jointly a kind of fortress North America—although we don't perhaps see it quite like that. We are jointly making products. In Canada, about 73% of our exports go to the United States, but about 20% of those are onward bound. In other words, we're just feeding into an American supply chain, which is then exporting. Our products are actually ending up in the rest of the world, but they're doing so via the partnership. As Mr. McKay said, there are some cases where Americans are sending their product through for assembly in Canada, to be shipped onward. We are quite significant partners with each other.

I'm not sure the auto sector is my favourite example, but it gets cited a lot because it's so enormous. The biggest manufacturing sector in Canada is not autos; it's actually food. That's where a tremendous amount of our semi-finished product is shipped onward, once it's been married up in the United States. We're actually partners in commerce. We just need to remind them of that.

[Peter Fragiskatos, Liberal, London North Centre, ON]

Thank you very much.

You mentioned twice that millions of American jobs depend on a strong trade relationship with Canada, but most Americans do not realize that. Why do you think that is? Is it a function of Canadian modesty? Have we not told our story well enough since the free trade agreement was put forward by Mr. Mulroney and then completed in the mid-1990s under the Liberals with NAFTA? What exactly is the explanation for that?

[Warren Everson]

I don't know if I have any brilliant insights.

Yes, of course, I think Canadians are modest and we're not very big on the landscape. The biggest problem, I suppose, is that we rarely cause any serious problems. I have a sign on my desk that says, “War is God's way of teaching us geography”. The only reason anyone pays any attention to anybody else in Washington is that there is either some enormous opportunity, which is rare, or there's some great, big, huge problem that they have to address, and then they pay a lot of attention to it. We never seem to represent either of those things.

I don't know why it is. I don't care why it is. I don't expect that much from our efforts as a nation to talk to the Americans now. I don't think we should be trying for some new Jerusalem. I think we should just remind people where their best self-interests are, and of the usefulness of our relationship on a very pragmatic level.

[The Chair, Liberal, Bob Nault]

Thank you.

Mr. Ellis.

[Neil Ellis, Liberal, Bay of Quinte, ON]

I just want to touch back on the thing you said about opportunity and risk management with Trump administration.

Looking forward, I had a meeting a while back with an international company. Some questions had been asked by fellow MPs about carbon pricing and how the States was maybe turning around on that. The answer from the worldwide company was that it's inevitable, that it's coming. Whether it's now, today or tomorrow, we have to get aboard.

From the speeches I've heard and what I'm hearing today, where do you think those opportunities are? It seems like we're trying to flank here and go this way and that way. I look at it this way: there are opportunities out there. You guys represent businesses. Do you see yourselves taking advantage of these opportunities, whether it's green technology or it's other businesses that can spin off? As business leaders, have you guys had meetings to say okay, on a risk management basis, what can we do to create business and jobs?

[Warren Everson]

Sure. Let me take two aspects of that.

The Chamber of Commerce has advocated carbon pricing for six or seven years now. We believe it's appropriate to try to price carbon so that people will use it where they can, and use it less, with the relative costs between carbon and other forms of energy being closer.

However, we're extremely concerned that carbon pricing, which will throw a lot of money into the hands of governments, be immediately recycled back into the economy to protect the competitive position of the companies that are paying those taxes. I'm a bit alarmed about some of the comments being made by the provinces as to how they intend to use the money.

We're not agreeing as a nation to be taxed so governments will have more tax revenue. We're agreeing to be taxed so carbon will become less attractive economically. That can be done if those governments then sign themselves over to a very religious program of making sure that companies retain their competitive situation. Otherwise in the near term we're going to face a very significant disadvantage for investors coming into Canada versus the United States. We have to head that off.

In the longer term, but not really the very long term, I think that technologies that aid people in less emitting energy sources will be extremely attractive. I think Canada, with its investments in innovation now, has an opportunity to steal a march on the United States and be a significant supplier of that. As you mentioned, the national government may be speaking in a particular way, but a lot of different state governments are going the opposite way and are among the world leaders in climate regulation. I think they're seeking markets. There will be markets for these technologies.

I think there is an opportunity there.

[Neil Ellis, Liberal, Bay of Quinte, ON]

Okay. Thank you.

[The Chair, Liberal, Bob Nault]

Thank you very much, Mr. Ellis.

The last question goes to Mr. Saini, and then we're going to wrap it up.

[Raj Saini, Liberal, Kitchener Centre, ON]

Thank you very much for your comments.

If you look at the history of Canadian trade, especially with the United States, even in the early 1970s, Mitchell Sharp called for the third option, saying that we should broaden our trade.

As a member of the Chamber of Commerce, looking at the challenges we're facing with the United States, do you think this would probably be the best time to reinvigorate that option of trying to expand our trade and not be beholden to one market?

[Warren Everson]

Absolutely. I think governments past and present are doing exactly that. It took us six or seven years to get CETA in place, but as some people have mentioned here, there are probably some significant opportunities for Canada now that we have it.

This government has announced the beginning of a study with China. The Chinese are very excited. We keep hearing from them. They keep approaching us. I think there is a possibility of something quite attractive there. And long before it becomes reality, it will be attractive to investors who are making their investments for the future decade.

Adriana just came back from Japan. We keep urging the Japanese to move quickly with an EPA directly with Canada. The Japanese tend to have a romantic love of the TPP; they keep hoping that it will somehow reappear at their door. Certainly the most attractive market we are not yet doing very well in is Japan.

I think this sort of thing is happening. Those of you who know a lot about softwood lumber will know that when the Americans brought the hammer down, we Canadians found markets for lumber all around the world, to quite a considerable extent. I hope that lesson wasn't lost on people in the United States.

[Raj Saini, Liberal, Kitchener Centre, ON]

Thank you very much.

[The Chair, Liberal, Bob Nault]

Thank you very much for this opportunity, Mr. Everson and Madam Vega.

I'm almost excited about the fact that we did get this through and didn't have to break it off and go to a vote.

This is a very important study, as has been mentioned. As far as the committee goes, we all are seized in a non-partisan way with the same interest you've presented to us. This is so important to Canada that we don't have time to play politics.

If there is any other information you want to present to the committee, please feel free to send it. We are very interested in where the Canadian Chamber of Commerce is going. Of course, as you know, I sat in the House with Mr. Beatty, so I'm one of the few who's been around long enough to have met him when he was younger. We were looking forward to seeing him as well.

Again, I encourage you to feel comfortable in reaching out to us, and let us know where the chamber is going.

[Warren Everson]

Thank you very much, Mr. Chair.

[The Chair, Liberal, Bob Nault]

Thank you very much.

Colleagues, we're going to take a couple of minutes and then go in camera. It will take us about five minutes, and we'll be done.

[Proceedings continue in camera]