Evidence of meeting #34 for Industry, Science and Technology in the 40th Parliament, 3rd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was workers.
A recording is available from Parliament.
NDP
Carol Hughes NDP Algoma—Manitoulin—Kapuskasing, ON
Thank you.
I have a question for Ms. Hendricks.
What innovative measures is your organization, Export Development Canada, offering the forest industry to help it get back on its feet, or allow it to grow, develop better practices and ensure its survival?
Vice-President, Resources Group, Export Development Canada
Thank you for your question, Ms. Hughes. It's important to point out that Export Development Canada's role when it comes to innovation will depend on the way we are able to serve forest industry exporters. There are a variety of products, including insurance, bonds and financing. It is through these products that we are able to support innovation. Forest companies can use these products to ensure their survival or help them with their efforts abroad.
How do we offer these solutions? We create partnerships with financial institutions—for example, if there is a specific need. However, I do want to point out that, ultimately, that need must be connected to an export. That is how Export Development Canada can play a role.
NDP
Carol Hughes NDP Algoma—Manitoulin—Kapuskasing, ON
You mentioned a little earlier that you provide commercial financing. The unions were saying that they need loan guarantees at commercial rates. I am wondering what the difference in rates is, as you see it.
Vice-President, Resources Group, Export Development Canada
In terms of the rates we can offer, we did point out that we are unable to provide subsidies. Furthermore, we cannot take any actions that could be interpreted as enabling a lower market rate. Therefore, if several banks are participating in a funding arrangement, EDC cannot offer a lower rate than the current market rate. We cannot play that kind of role.
NDP
Vice-President, Resources Group, Export Development Canada
It depends on the industry and the structure of the financing that is requested. Depending on what we are presented with, we might do the same thing the financial institutions would. We will look for the best commercial rate that can be provided for that type of structure, basing ourselves on what the company is looking for. It may vary according to the loan structure, but we always comply with market conditions and structures.
NDP
Carol Hughes NDP Algoma—Manitoulin—Kapuskasing, ON
Let's talk about the auto industry. They were given loan guarantees. The government provided funding to that industry. And yet, at the time, this was more of a regionally-based problem.
The forest industry needs a lot more, because this is a national problem. If I'm not mistaken, Quebec provided $140 million. That is clearly not enough, and the fact is that we are seeing our industries disappear. In your opinion, what can be done to ensure the survival of the remaining companies, since they are the ones that are going to make it possible to carry on?
Vice-President, Resources Group, Export Development Canada
Thank you for your question. Once the government has decided where and how it wants to help, our role is to be at the table with these companies and help them with insurance, bonding and funding, in accordance with commercial standards. We will have to look at how we can help them. We are not involved in developing the policy structure per se or in program definition.
NDP
Carol Hughes NDP Algoma—Manitoulin—Kapuskasing, ON
My other question is for Mr. Stephenson.
If the government were to provide loan guarantees to forestry companies—that is what they are asking for—what potential repercussions would that have with respect to NAFTA?
Assistant Deputy Minister, Trade Policy and Negotiations, Department of Foreign Affairs and International Trade
As I explained earlier, as long as there is no subsidy embedded in these loans, and the conditions reflect market conditions, there will be no impact. That would be allowed under the Agreement. The Softwood Lumber Agreement with the United States does impose certain financing conditions. The fact that such an agreement exists is, to some extent, what differentiates this particular situation from the one that prevailed in the auto sector.
Assistant Deputy Minister, Trade Policy and Negotiations, Department of Foreign Affairs and International Trade
Yes, as long as there are no subsidies and that the arrangement is based on commercial conditions.
NDP
Carol Hughes NDP Algoma—Manitoulin—Kapuskasing, ON
In terms of the NAFTA decision on AbitibiBowater, which represents some $130 million, there is good reason to wonder about future rulings.
Are you fearful, as I am, that this decision sets a dangerous precedent?
Our experiences with investor state disputes have been mixed.
I wonder if you could share with us your insights as to the improvements that are required to the current investment regimes, particularly after your team's recent participation in the World Investment Forum in China.
Assistant Deputy Minister, Trade Policy and Negotiations, Department of Foreign Affairs and International Trade
Actually, my team isn't back from China yet, so I can't put it in the context of those discussions.
I'm not quite sure what future dangers exactly you'd like me to address, but with respect to the settlement—
Assistant Deputy Minister, Trade Policy and Negotiations, Department of Foreign Affairs and International Trade
—with AbitibiBowater under chapter 11 of NAFTA, this was to compensate, as required by NAFTA, for the expropriation of assets. In that sense, I don't think there is anything to either fear or correct in NAFTA chapter 11.
NDP
Carol Hughes NDP Algoma—Manitoulin—Kapuskasing, ON
Basically, if you consider the current situation and what happened, the company was located in Newfoundland and Labrador and it was the one that decided to leave. Resources really have to be allotted to the province to ensure that other investors can be attracted. Maybe that part of NAFTA doesn't really work very well.
September 10th, 2010 / 2:30 p.m.
Assistant Deputy Minister, Trade Policy and Negotiations, Department of Foreign Affairs and International Trade
The NAFTA works in the following way: if a company, or an individual, for that matter, owns assets and those assets are expropriated by the government, fair compensation is required. To me, that seems straightforward and an appropriate policy.
Conservative
The Chair Conservative Michael Chong
Thank you, Madame Hughes. Thank you, Mr. Stephenson.
Mr. Scarpaleggia.
Liberal
Francis Scarpaleggia Liberal Lac-Saint-Louis, QC
Thank you, Mr. Chairman.
Mr. Stephenson, you were saying that if the federal government were to provide loan guarantees to the forest industry, they would have to be provided based on commercial conditions that reflect the market. Could you give me an example of the kind of conditions that would be associated with a loan guarantee? In other words, how would a loan guarantee provided by the government be structured?
Assistant Deputy Minister, Trade Policy and Negotiations, Department of Foreign Affairs and International Trade
In fact I'm not an expert in making loans or loan guarantees. I think that would be the expertise of my colleague from the EDC.
Liberal
Francis Scarpaleggia Liberal Lac-Saint-Louis, QC
I'm talking about a government loan guarantee here. Perhaps you could try to answer the question.
Vice-President, Resources Group, Export Development Canada
It's important to bear in mind that, depending on the industry and the standards that apply, a guarantee can be structured in many different ways. As a Crown corporation, we often provide guarantees in cooperation with the bank. If the loan is for $5 million, for instance, we may offer a percentage of that loan in the form of a guarantee, which then means the company has access to better or additional working capital.
Liberal