Thank you and good morning, Madam Chair and members of the committee.
Thank you for the invitation to appear before the committee today. We look forward to answering questions regarding the outcome of the new NAFTA agreement, following my opening remarks.
The signature of the new NAFTA on November 30, 2018, followed 13 months of intensive negotiations. It brought together a broad range of officials and stakeholders, with a strong partnership between federal and provincial officials. That agreement achieved several key outcomes. It served to reinforce the integrity of the North American market, preserve Canada's market access into the U.S. and Mexico and modernize the agreement's provisions to reflect our modern economy and the evolution of the North American partnership.
On December 10, 2019, following several months of intensive engagement with our U.S. and Mexican counterparts, the three countries signed a protocol of amendment to modify certain outcomes in the original agreement related to state-to-state dispute settlement, labour, environment, intellectual property, and automotive rules of origin. These modifications were largely as a result of domestic discussions in the U.S. However, Canada was closely involved and engaged in substantive negotiations to ensure that any modifications aligned with Canadian interests.
Throughout the negotiations Canadian businesses, business associations, labour unions, civil society and indigenous groups were also closely engaged and contributed significantly to the final result.
For the negotiations, we need to recall that the NAFTA discussions were unique. This was the first large-scale renegotiation of any of Canada's free trade agreements. Normally, free trade agreement partners are looking to liberalize trade. In this process the U.S. goal from the start of the negotiations was to rebalance the agreement in its favour. The President had also repeatedly threatened to withdraw from NAFTA if a satisfactory outcome could not be reached.
The opening U.S. negotiating positions were, to put it mildly, unconventional. These included a 50% U.S. domestic content requirement on autos, which would have decimated our auto sector; the complete dismantlement of Canada's supply management system; the elimination of the binational panel dispute settlement mechanism for anti-dumping and countervailing duties, which we've used extensively, particularly for products like softwood lumber; a state-to-state dispute settlement mechanism that would have rendered the agreement completely unenforceable; removal of the cultural exception; a government procurement chapter that would have taken away NAFTA market access, leaving Canada in a worse position than all the other U.S. free trade agreement partners; and a five-year automatic termination of the agreement, known as the sunset clause.
The U.S. administration also took the unprecedented step of imposing tariffs on imports of Canadian steel and aluminum, on the basis of purported threats to national security, for which there was absolutely no evidence of any kind of justification. The U.S. administration had also launched an investigation that could lead to the same result for Canadian autos and auto parts.
In the face of this situation, Canada undertook broad and extensive engagement with Canadians on objectives for the NAFTA modernization process. Based on the views we heard and our internal trade policy experience, Canada set out a number of key objectives, which can broadly be categorized into the following overarching areas. First, we wanted to preserve important NAFTA provisions and market access into the U.S. and Mexico. Second, we wanted to modernize and improve the agreement where possible. Third, we wanted to reinforce the security and stability of market access into the U.S. and Mexico for Canadian businesses.
With respect to preserving NAFTA, Canada maintained the NAFTA tariff outcomes, including duty-free treatment for energy products. We preserved the provisions on chapter 19, which is the panel dispute settlement mechanism for anti-dumping and countervailing duty matters. We preserved temporary entry for business persons and the cultural exception. We preserved and improved the state-to-state dispute settlement mechanism.
In the area of autos, changes were made to the rules of origin regime to encourage the use of more inputs from Canada, in particular by increasing the regional value content requirements for autos and auto parts, and removing incentives to produce in low-cost jurisdictions. Together with the quota exemption from potential U.S. section 232 tariffs on autos and auto parts, secured as part of the final outcome, these new automotive rules of origin will incentivize production and sourcing in North America, and represent important outcomes for both our steel and aluminum sectors.
With respect to modernizing NAFTA, we have modernized disciplines for trade in goods and agriculture, including with respect to customs administration and procedures; technical barriers to trade; sanitary and phytosanitary measures, as well as a new chapter on good regulatory practices, including for health and safety. That encourages co-operation and protects the government's right to regulate in the public interest.
Commitments on trade facilitation and customs procedures have been modernized for the 21st century to better facilitate cross-border trade, including through the use of electronic processes, which will reduce red tape for exporters and save them money.
New and modernized disciplines on technical barriers to trade in key sectors are designed to minimize obstacles for Canadians doing business in the U.S. and Mexico, while preserving Canada's ability to regulate in the public interest. We also have modernized obligations for cross-border trade and services and investment, including financial services and telecommunications, and a new digital trade chapter.
On labour and environment, we negotiated chapters that are fully incorporated into the agreement and subject to dispute settlement. These obligations will help ensure that parties maintain high standards for labour and the environment, and that domestic laws will not be deviated from as a means to gain an unfair trading advantage.
The outcome also includes a special enforcement mechanism that will provide Canada with an enhanced process to ensure the effective implementation of labour reforms in Mexico, specifically related to freedom of association and collective bargaining.
There were a number of other outcomes of note. On supply management sectors, I think it's important to keep in mind that the U.S. did make an explicit and public demand for the complete dismantlement of Canada's supply management system. In the end, we preserved the three key pillars of supply management—production controls, import controls and price controls—and granted only limited access to the U.S.
On intellectual property, obligations cover a broad set of areas, including copyright and related rights, trademarks, geographical indications, industrial designs, patents, pharmaceutical intellectual property, data protection for chemical drugs and agricultural chemical products, and border, civil and criminal enforcement of IP rights, including civil and criminal IP rights enforcement in respect to trade secrets.
Certain outcomes will require changes to Canada's current IP legal and policy framework in certain areas such as copyright, and here we will increase copyright terms of protection as well as provide criminal remedies in respect of rights management information.
IP rights enforcement will also provide ex officio border authority for suspected counterfeit or pirated goods in transit, as well as criminal offences for the unauthorized and willful misappropriation of trade secrets.
In many of these areas we negotiated transition periods to implement our commitments, and importantly, under the amending protocol the parties agreed to remove the obligation to provide 10 years of data protection for biologic drugs, meaning that Canada does not need to change its existing regime in this area.
The agreement also includes a new digital trade chapter that requires parties to have regulatory frameworks in place to address such things as privacy protections and fraudulent and deceptive practices, and we will work together to mitigate threats to our cybersecurity.
The agreement also includes commitments to address barriers to digital trade, such as provisions that ensure that companies and individuals can move information and data across borders in a reliable and secure manner while ensuring that legitimate privacy and security rights are protected.
Other notable outcomes include that we will no longer have trilateral investor state dispute settlement for Canada. We will not have investor state dispute settlement applying between Canada and the U.S. There will be no government procurement chapter in NAFTA with respect to Canada. We will maintain our access to the U.S. under the World Trade Organization's agreement on government procurement.
In closing, I would like to underline that our objectives for these negotiations were informed closely by Canadian priorities and interests, very close engagement with provinces and territories, as well as a wide range of stakeholders that we consulted on an ongoing basis.
This concludes my opening remarks. Alongside my colleagues, we would be pleased to answer any questions you may have.
Thank you.
