Industry Committee on Feb. 24th, 2020

[Michelle Rempel, Conservative, Calgary Nose Hill, AB]

There were no guidelines on chapter 19.

At this point, I would point out that such intangibles as data and IP comprise considerably more of major global economies. The government is spending billions of dollars on things like superclusters. Yet you're telling me there has been no analysis done on this particular issue when this is probably one of the biggest areas of economic growth.

Can you table the analysis that was done with regard to the provisions in chapter 19 around intellectual property, essentially entrenching an American status quo policy framework on IP, on the impact of things like the supercluster program and the ability for Canada, in our investment in those programs, to generate and retain IP in Canada?

[Steve Verheul]

I think there's a bit of a misunderstanding here. We don't complete formal pieces of analysis when we're preparing for negotiations. We rely on the expertise of our trade policy team, part of which you see here. We rely on consultations with stakeholders. We don't have the time to produce formal reports for analysis on all of those issues, but I can tell you that this negotiating team is better informed on these issues than any other one in the world.

[Michelle Rempel, Conservative, Calgary Nose Hill, AB]

But you weren't able to tell me basic things. Data localization is a fairly significant topic, as it's going to pertain to new privacy frameworks, etc. The European Union, as you're well aware, Mr. Verheul, doesn't look at things that are in chapter 19 because of the lack of regulatory frameworks, or best practice on regulatory frameworks, yet we've jumped right into this. We've signed away a bunch of stuff under this provision.

If you're saying that your team had a lot of expertise, that there was no analysis completed, that you didn't have time, why are we doing something that the EU has been loath to do?

[Steve Verheul]

I didn't say we didn't have time. I said it's not something we routinely do. We rely on the expertise of the people we have. We addressed many of those issues in the trans-Pacific partnership negotiations, so broad discussions of those issues had already taken place. Many of those issues had already been addressed in those fora.

[Michelle Rempel, Conservative, Calgary Nose Hill, AB]

Actually, on that note, I would note that specific to addressing personal information protection requirements, where I think there is some discrepancy between that and the CPTPP, all chapter 19 does is include a footnote that acknowledges that enforcing voluntary undertakings of enterprises related to privacy is sufficient to meet that particular obligation. It just seems to me like we have taken a position here that is far apart from where the European Union is.

Do you think that will create any problems in terms of the discrepancy between our agreement with the United States on data versus where the Europeans are? How would a company trying to operate in all of these environments proceed with Canada as a base if we've taken two very disparate approaches to this issue?

[Steve Verheul]

Well, you're quite right, the European Union takes a different approach on these issues than the U.S., certainly. We do have agreements with the European Union, as you know, and with the United States. We're required to bridge the gaps if we're going to have the kinds of access we're going to have to both of those markets. We will operate somewhat differently in each of those markets, but we know what the rules are.

[Michelle Rempel, Conservative, Calgary Nose Hill, AB]

How is that possible?

[Steve Verheul]

Well, it depends on the actual specific provisions. When it comes to some of the provisions with respect to data protection, clearly, we will have to offer that to other trading partners as well.

[Michelle Rempel, Conservative, Calgary Nose Hill, AB]

Thank you.

[The Chair, Liberal, Sherry Romanado]

The next round is for Mr. Jowhari.

[Majid Jowhari, Liberal, Richmond Hill, ON]

Thank you, Madam Chair.

Mr. Verheul, welcome to our committee. Thank you for the great work you did over the challenging period we're facing.

We heard in the first hour of the testimony from an international trade lawyer, Mr. Herman. I was left with a feeling that while this is in front of us, we have to deal with it and approve it. Subsequently, we heard from a lot of other organizations. They highlighted the benefits, how it has helped, how it's been preserved and how it's been modernized.

Also, in the briefing notes I notice that the negotiating team has proposed at least three different dispute settlement mechanisms. Those dispute settlement mechanisms involve bringing in different stakeholders, and the way in which disputes could be handled. Can you shed some light on these three different dispute settlement mechanisms, who the stakeholders are, and how this is actually preserving and modernizing the CUSMA?

[Steve Verheul]

Thank you.

I think the whole area of dispute settlement is probably the one where we managed to achieve the most in the negotiations. We came into this negotiation with the U.S. insisting on getting entirely rid of the existing chapter 19 under NAFTA, which is the only reason we've been able to win a succession of cases on softwood lumber over the years, to maintain some degree of access to that market, although it remains difficult. The only way we can challenge U.S. laws is through that chapter 19 process. That is unique in the world. We managed to preserve that over adamant U.S. positions to get rid of it.

When it comes to state-to-state dispute settlement, the U.S. also wanted to render that completely ineffective. They have a view that, because of sovereignty considerations, they should not be able to be challenged if they break international obligations. We not only managed to preserve state-to-state dispute settlement; we actually improved it significantly. We removed the problems that currently exist in the system, where the U.S. can and has blocked the formation of the panels that we have requested to try to resolve disputes. That has been much improved.

We also have the new labour dispute settlement process—the rapid response mechanism—with respect to labour practices in Mexico. That's also a new and innovative approach that doesn't exist in other agreements but gives us the opportunity to pursue any kind of difficulties we might have with specific plants and operations in Mexico that are not respecting freedom of association for unions, collective bargaining and other labour requirements. From a dispute settlement perspective, I think we're on much better ground than we were under the existing NAFTA.

[Majid Jowhari, Liberal, Richmond Hill, ON]

Thank you.

On top of chapter 19, were chapters 10, 14 and 31 new chapters that were added, or were they amended chapters?

[Steve Verheul]

Well, the provisions on trade disputes, on anti-dumping and countervailing duties—the trade remedy issues—were left largely as they exist now. I believe that's chapter 10 now. The state-to-state dispute settlement was significantly modified, as I just pointed out. That's now chapter 31. The rapid response mechanism on the labour side is a brand new initiative that does not appear in NAFTA at all.

[Majid Jowhari, Liberal, Richmond Hill, ON]

How would chapter 31 be able to help, if it can help us, with some of this dispute we have over softwood lumber?

[Steve Verheul]

For softwood lumber, since it involves countervailing duties and anti-dumping duties, we would be more likely to use chapter 10—the new chapter 10—because under that, we can actually challenge the U.S. application of its own laws. We have won many times in the past and demonstrated that the U.S. did not properly apply their own laws when applying and calculating these duties. That's something fundamental to a lot of the cases we've had not only on softwood lumber but on a variety of other products.

[Majid Jowhari, Liberal, Richmond Hill, ON]

Thank you.

I think I have 10 seconds left, which I'm going to yield to the chair.

[The Chair, Liberal, Sherry Romanado]

You actually have one minute.

[Majid Jowhari, Liberal, Richmond Hill, ON]

I have one minute? Oh, great.

You talked about the role of the transition period. Can you help us understand that? I think it's two years. How does it apply? What are the benefits and the challenges with it?

[Steve Verheul]

There are a number of transition periods in certain areas, primarily in intellectual property, although there are also some in agriculture and some other areas in which we wanted to have some additional time to allow us to make adjustments in the sector or industry to allow them to accommodate the changes. We asked for those transition periods. We negotiated those, and they will allow for a much smoother process of changing from the existing rules to these new rules that are going to be in place.

[Majid Jowhari, Liberal, Richmond Hill, ON]

Would you categorize that as part of the modernization aspect?

[Steve Verheul]

It's more a matter of easing the transition, because some of these rules will involve adjustments required by companies and exporters, so it's important to have the time to do what they need to do to adjust to these new rules.

[Majid Jowhari, Liberal, Richmond Hill, ON]

Thank you.

[The Chair, Liberal, Sherry Romanado]

Thank you very much.

We'll now move to Monsieur Lemire.

[Sébastien Lemire, Bloc, Abitibi—Témiscamingue, QC]

Thank you, Madam Chair.

Mr. Verheul, thank you for your contribution today.

Clearly, we recognize the enormous amount of work you've done, so thank you. Unfortunately, our job is to be somewhat thankless, in other words, to shine a light on what you sacrificed, so to speak, in the negotiations.

Do you agree that the aluminum and steel industries are afforded the same protection under the new agreement?