Foreign Affairs Committee on Nov. 7th, 2017

[Christyn Cianfarani]

Legally binding, correct.

[Erin O'Toole, Conservative, Durham, ON]

The one area where there's substantive change is the brokering provisions.

Has Canadian industry had a problem with respect to export controls by brokers in our domestic marketplace to your awareness?

[Christyn Cianfarani]

Not to our knowledge.

As I mentioned, the regulations right now go from a single company to an end state. If those companies are employing brokers in the process through which they are transacting, what I would have heard would have been the activities that are occurring between that company and that broker that functions as a form of consultancy for a company. It's unlikely that I would hear of any issues coming from what might be perceived as brokering challenges.

[Erin O'Toole, Conservative, Durham, ON]

I've heard some of the witnesses today talk about diversion. Certainly, internationally, that's a concern where international brokers might divert outside of the intended export scope. Certainly, that's extraterritorial to Canada. Brokering in Canada we can regulate but diversion elsewhere we cannot.

[Christyn Cianfarani]

Correct. This legislation will still leave that as an extraterritorial consideration.

[Erin O'Toole, Conservative, Durham, ON]

Okay.

Have any of the wholly-owned subsidiaries of aerospace or defence companies indicated that enhanced regulation and red tape with brokering in Canada might lead their subsidiaries to be less competitive for international work?

[Christyn Cianfarani]

First and foremost, most companies are operating on a significant scale in the sector. We're not talking about small businesses. They're generally exporting into global supply chains, the larger firms that have very large export control units within their own organizations. These are the ones that are typically employing agents or third parties, and these are the ones that already have some form of structures and corporate governance ongoing with respect to the export control regimes, which are very substantive at this point in time. While companies have raised that they think there will be additional processes that need to be put in place, potentially additional paper work to be put in place, there has been no gross level of concern about this legislation adding some undue burdens. We have yet to see the—

[Erin O'Toole, Conservative, Durham, ON]

It will come maybe with the regulations.

[Christyn Cianfarani]

That's right. We have yet to see the regulation, so we would reserve judgment until we can actually assess what the regulation is going to do to the corporations.

[Erin O'Toole, Conservative, Durham, ON]

I have one final question because I'm limited in time.

In many ways you might be able to say that our defence aerospace security industry is created or supported by our ITB regime, our industrial technology benefits, from our own defence procurement. Could you talk a little bit about that and how many of the subsidiaries of larger global players are a result of our domestic ITB regime?

[Christyn Cianfarani]

I would say that our industry is kind of a result of a couple of things. One is that companies that sell into Canada, into our domestic market, are required to put dollar for dollar into the Canadian economy. Over the years, many foreign subsidiaries have established footprints here in Canada. We've seen that most recently with the fixed-wing search and rescue program's joint venture with Airbus and PAL Aerospace, for example. There are many, many other examples: Lockheed Martin Canada, Boeing in Canada, etc., etc. This creates this sort of mechanism by which we motivate companies to put footprints and do business in Canada.

The reverse is also true in that the export regime from which we draw 60% of our revenues is absolutely essential to the growth of Canadian businesses here at home. Canadian companies take those revenues, reinvest them in their Canadian operations, and the products and services of the next generation get provided to our domestic forces, both our Canadian Forces and our Coast Guard, which keeps us at the leading edge, at the forefront of national security. It works both ways.

[The Chair, Liberal, Bob Nault]

Thank you, Mr. O'Toole.

The last questions go to Ms. Vandenbeld, please.

[Anita Vandenbeld, Liberal, Ottawa West—Nepean, ON]

Thank you.

Thank you very much, all of you, for this incredibly informative testimony.

I'd like to pick up on the brokering controls, Ms. Cianfarani. In this committee we've heard a lot of testimony. We also, when we were in Washington, spoke with the Department of State and asked questions in terms of brokering controls. One of the things we heard is that the Department of State is working with Global Affairs Canada to work toward, in the next 18 months, increases in our brokering controls because they, in fact, have controls that were done in anticipation of an eventual ratification of the Arms Trade Treaty.

Is this something you are aware of, the kinds of controls the Americans have, and the integration between the industries that we have in the two countries?

[Christyn Cianfarani]

I don't know about the nuance of the controls that they have in place, but I do know the current regimes in place in the United States. Canadian companies are subject to them when we re-export out of the U.S., the U.S. being one of our largest markets. When we export into the United States, and then our components or technologies become part of their platforms, which are then re-exported, we are subject at that time to the U.S. export control regimes, of which there are four: the Arms Export Control Act, the U.S. international traffic in arms regulations, also known as ITARs, the U.S. commerce control list, and the U.S. export administration regulations. Those four regimes themselves are already up to the UN ATT's standard on brokering. By nature, the United States is actually operating under the same regulation platform, or the same level of regulation, as the UN ATT. Therefore, one would assume that the brokering controls that are in place under those four regimes, to which Canadians are subject, would be by nature being brought to Canada, as the exchange between Canada and the United States is, I think, one of the strongest between two countries.

[Anita Vandenbeld, Liberal, Ottawa West—Nepean, ON]

Thank you.

One of the things we heard from Mr. Butcher from Oxfam was that the Arms Trade Treaty itself is not explicit in terms of how arrangements are done between countries, as long as they meet the objectives of the treaty. He gave, as an example, Luxembourg and Belgium and the kinds of arrangements they have.

Would the arrangement that Canada has with the United States now, in your view, once Canada accedes to the treaty, be something that is sufficient in terms of compliance with the Arms Trade Treaty?

[Christyn Cianfarani]

Yes. The Arms Trade Treaty does not impose any additional constructs between nations. As we mentioned, Canada is subject, when it exports out of the United States, to the United States export control regimes that are in place.

I think it's exceptionally important that we all understand that Canada and the United States have one of the most unique sharing relationships or defence common industrial base relationships in the world. This is sort of codified in two agreements, the defence production sharing agreement and the defence development sharing arrangement. Those two agreements allow for Canada and the United States to have what is called a common industrial base, and that is exemplified in our relationship in NORAD. There are no two other countries that share technologies, goods, and a common industrial base, like Canada and the United States do today, and I would say that we need to be mindful of that very special relationship that we do have with the United States.

[Anita Vandenbeld, Liberal, Ottawa West—Nepean, ON]

Okay, thank you.

I'd like to go to Ms. Macdonald.

In terms of some of the things we've heard, just to clarify, a lot of the Westminster Parliaments, and Mr. Butcher was quite explicit on this with regard to the U.K. and we've heard about New Zealand and Australia, a lot of Westminster democracies put a number of these things into regulation or policy, as opposed to specifically in the language of the bill. One of the things he said to us is, regardless of how a country chooses to do that, whether it's through regulation or legislation, we are legally bound. Once we accede to the treaty, that is a legally binding commitment on Canada. There's actually quite a bit of flexibility in terms of how countries do that.

In terms of the language, I know that in article 7 there are a number of places, for instance in number 1, where it says “taking into account relevant factors”. Number 2 says “shall also consider whether there are measures that could be undertaken”, and then even in the gender-based violence one, it says “shall take into account the risk”.

Given that the language of the treaty itself and the language of the bill are very similar and that the treaty, the part that you cited in paragraph 3, whether the exporting state party “shall not authorize the export”, if it doesn't meet these, Canada will have legally binding legislation we would have to comply with. Is that correct?

[Anna Macdonald]

Yes, that's correct. You would have to comply with that, and I think article 7 is fairly unambiguous in the language there. When a certain threshold is met, then the transfer shall not be authorized.

There is, as you highlighted, a mechanism there for mitigation, which allows an exporting state or a state granting an export licence to engage in dialogue with an importing state around mitigation which could, in theory, be.... For example, if you were seeking to export to a destination where there were significant human rights concerns, you could engage with that government around measures to reduce those human rights concerns and, perhaps, return to the export in some period after standards might have improved or changed. But yes, I think the language is clear.

I would add, on your previous point around the relationship with the U.S. and the exemptions there, I think that would be contrary to the ATT to allow the continued exclusion of the U.S. from legislation because of the very clear language around highest possible common international standard, because the purpose of this treaty is very much about trying to globalize, universalize, the same standards and decision-making processes for all countries.

I don't think it affects relationships with countries. I think, as my colleague from Oxfam also highlighted, if you look at the EU, there are obviously close relationships between many countries within the EU with regard to trade, and they have slightly lighter touch processes that they therefore have for authorizations, but they are still subject to those processes. They are not excluded from them. There is no exemption from country A to country B in terms of the arms authorizations, so I see no reason why Canada would need to have a continued exemption with the U.S. Indeed, I would believe that would be contrary to the obligations in article 2 and article 5 of the treaty.

[Anita Vandenbeld, Liberal, Ottawa West—Nepean, ON]

To be clear, we're talking about continuing existing—

[Anna Macdonald]

Yes.

[Anita Vandenbeld, Liberal, Ottawa West—Nepean, ON]

—arrangements. We're not talking about exemptions. We're talking about arrangements that are in place and we would be working with the Americans to improve those as well.

I know I only have a few seconds left, but this is for all of you.

The purpose of the treaty, as you said, Ms. Macdonald, is to reduce human suffering. The purpose behind this treaty is not about domestic lawful gun ownership used for sports or hunting. It is really about the women in the Congo I talked about earlier, who are being raped at gunpoint, and trying to make sure that kind of thing is not happening in conflict situations around the world. I don't really expect you to respond, as I know the chair is waving at me, but, in a few seconds, could I get your comments on that?

[Anna Macdonald]

Yes, I absolutely agree. It is about reducing human suffering, but it is also about the international flow of weapons and reducing the current situation where we have a poorly regulated or unregulated flood of weapons around the world.

[The Chair, Liberal, Bob Nault]

Thank you, colleagues, for that.

I want to thank the witnesses, Ms. Cianfarani, Mr. Woodley, and Ms. Macdonald. We very much appreciate your testimony. It's always helpful. We did go over time, so I appreciate your allowing us to do that, but I thought it was important to spend some time talking about these matters.

Again, on behalf of the committee, thank you very much for your presentations.

Colleagues, we'll take a break and then go in camera for about half an hour for a couple of matters. That's all it should take.

[Proceedings continue in camera]