Evidence of meeting #3 for Industry, Science and Technology in the 43rd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was cusma.

A video is available from Parliament.

On the agenda

MPs speaking

Also speaking

Lawrence Herman  Counsel, Herman and Associates, As an Individual
Matthew Poirier  Director of Policy, Canadian Manufacturers & Exporters
David Cassidy  President, Unifor Local 444
Jonathon Azzopardi  Director, International Affairs, Laval Tool & Mold Ltd., and past Chairman, Canadian Association of Mold Makers
Roger Boivin  President, Groupe Performance Stratégique
Scott D. Smith  Manager, Honey Bee Manufacturing Ltd.
Mark Nantais  President, Canadian Vehicle Manufacturers' Association
Jennifer Mitchell  President, Red Brick Songs, Casablanca Media Publishing
Casey Chisick  Legal Counsel, CMRRA-SODRAC Inc. (CSI)
Steve Verheul  Chief Negotiator and Assistant Deputy Minister, Trade Policy and Negotiations, Department of Foreign Affairs, Trade and Development
Nolan Wiebe  Senior Trade Policy Officer, Information Technologies, Global Affairs Canada
Robert Brookfield  Director General, Trade Law (Deputy Legal Adviser), Department of Foreign Affairs, Trade and Development
Aaron Fowler  Chief Agriculture Negotiator and Director General, Trade Agreements and Negotiations, Department of Agriculture and Agri-Food
Loris Mirella  Director, Intellectual Property Trade Policy, Department of Foreign Affairs, Trade and Development
Luc Boivin  Owner, Fromagerie Boivin
Bruno Letendre  Chair, Les Producteurs de lait du Québec
Michael Geist  Canada Research Chair in Internet and E-Commerce Law, Faculty of Law, University of Ottawa, As an Individual
François Dumontier  Director, Communications, Public Affairs and Trade Union Life, Les Producteurs de lait du Québec

9:10 a.m.

Liberal

The Chair Liberal Sherry Romanado

Thank you very much, Mr. Boivin.

We still have some technical difficulties at the moment, so we will now move to Mr. Smith.

You have five minutes.

9:10 a.m.

Scott D. Smith Manager, Honey Bee Manufacturing Ltd.

Thank you. I prepared for 10 minutes, but I will do it in five.

I'm Scott Smith. I have the privilege of representing the 160 employees of Honey Bee Manufacturing. I have with me Jamie Pegg, our general manager. We want to thank you for this opportunity to discuss these matters, specifically with regard to issues on the competition and copyright acts that are addressed by this committee.

We have manufactured for over 30 years, since 1979, agricultural equipment that attaches to major brands of OEM equipment—John Deere, Case, New Holland, AGCO and so on. We export our products. I would say that 40% of our output is consumed in Canada and 66% is for export, with 33% exported to the United States. We are exporting to about 26 different countries, but we face a challenge. The challenge we face is interoperability. Recently, with technical protection measures and so on, companies have started to use digital locks and keys to prevent us from allowing our equipment to interoperate with these major OEM brands. It's a form of protectionism that allows them to own and operate the entire value chain at the exclusion of independent manufacturers.

In Canada we have 1,400 manufacturers of implements that are attached to agriculture, mining, forestry or construction equipment. Of those manufacturers, 500 are for agricultural equipment. That agricultural equipment is primarily manufactured adjacent to small communities in Canada, rural communities, where the majority of that type of manufacturing takes place. It's a challenge for us to achieve the ability to continue to legally manufacture our product and sell it onto these platforms. The copyright act in the United States has provision for circumventing for the purpose of interoperation. The Canadian Copyright Act does not have this same term in the agreement.

We would like to see that ratified prior to the signing of the trade agreement so that we're not on that uneven footing that prevents us from competing legally in the marketplace here and abroad. The combines that we manufacture our equipment for are the same combines that are sold everywhere in the world. There's no variation. So a blockage here in Canada blocks us globally. That represents about $2.1 billion a year of exports on agricultural equipment from Canada, and about $1.9 billion of that is to the United States. If we don't have the opportunity to interoperate with the American platforms, which are the global platforms in this instance, it has a very serious impact on our communities.

We employ 160 people in a town of 300. Our employees come from an area with about a 100-kilometre radius to the east, west and north of us, with Montana on our back doorstep. Our employees come from all over the world, including from Syria, Germany, Venezuela and India, as well as locally. A lot of our employees are fourth- and fifth-generation farmers' children. This is something that we don't want to see die. It would be devastating to our communities.

At a minimum, we need to have a copyright clause that's the same as the U.S. clause that allows for the exception for interoperability adaptations. These types of adaptations are very expensive, and we would have to do it for every single platform. The preferred solution is, in the long term, a mandated legislation that ensures that equipment imported into Canada has open interoperability rather than custom reverse-engineering. For example, on one product it cost us between $800,000 and $1 million to reverse-engineer and create a workaround solution, or to complete a parallel system, to allow our equipment to interoperate with the OEM equipment.

The OEMs have not provided ease of access to this interoperability. The issue hasn't been a problem in the past. It has been straightforward, like plugging a keyboard into your computer, but as they go to these digital locks and keys, we're seeing already on several platforms that they have locked it down. We need to have their permission to do it. When they do give us permission and they do provide provision for our equipment, then say we are restricted to only selling this product to this market for this customer and no one else. That's not acceptable, and that's what we're looking to deal with here today.

You have our full comments in the papers we distributed, which you can review at a later date.

9:15 a.m.

Liberal

The Chair Liberal Sherry Romanado

Thank you very much.

We will now move to Monsieur Nantais for six minutes. Thank you.

9:15 a.m.

Mark Nantais President, Canadian Vehicle Manufacturers' Association

Thank you, Madam Chair.

Good morning, honourable members.

I'm very pleased to have received this invitation to be here today representing Fiat Chrysler, Ford, and General Motors of Canada. Our members operate four assembly plants, as well as engine and component plants. They invest billions of dollars in the development of zero-emission technologies and advanced vehicle safety technologies. We have about 1,300 plus independent dealerships right across Canada and we contribute to quality employment opportunities for over half a million Canadians.

Passage of the CUSMA is essential to provide certainty to the North American automotive manufacturers. The automotive provisions as well as the side letters that provide protection from U.S. section 232 tariff actions are critical elements to support automotive manufacturing competitiveness within the North American trade bloc. It's important to remember that, for the auto sector in Canada, the alternative to reaching this agreement would be cancellation of NAFTA, reimposition of tariffs on finished vehicles and parts, and likely section 232 tariffs on production material inputs. If we are anxious to see the final ratification, that is indeed why. Again, we want to thank the Canadian negotiating team for working so closely with us throughout the duration, and for ultimately ensuring that we maintain Canada's auto sector as an integrated part of the North American industry.

This agreement was, simply, existential to Canada's largest manufacturing and export industry. The agreement reinforces the long-established integration of the industry supply chain, which is absolutely necessary for its competitiveness, and the ongoing need for continued regulatory alignment of vehicle technical regulations with the U.S., which are integral to trade and the environment, while ensuring greater consumer product choice and affordability. The auto portions of the new agreement, including the rules of origin and the labour value content provisions, and the 232 side letters are things all our members support and can adjust to over a reasonable period of time so we will be compliant, enabling us to continue to enjoy duty-free access to the largest and most beneficial automotive market in the world.

As far back as 1965 with the Auto Pact, Canada's automotive industry and its supply chains have become deeply integrated with the United States, and, over time, with Mexico. Vehicles are built seamlessly on both sides of the border, resulting in deep integration that has led to a more competitive Canadian auto industry, greater consumer choice at affordable prices, and a strong North American trade bloc.

When the original NAFTA came into force in 1994, it provided a foundation for a strong, globally competitive trading bloc—you'll see I keep coming back to referring to it as a “trading bloc”, which is really critical. The geographic proximity of the three NAFTA partners facilitates the multi-billion dollar parts sector, and just-in-time supply chains were critical to the vehicle assembly operations in North America. They also created inherent transportation and supply chain logistics cost advantages.

Today the automotive industry represents the second-largest Canadian auto sector, with $54 billion in trade in 2019, which is about 92% of the total value, which was shipped to the United States. The United States is our number one automotive partner. It's absolutely critical that a trade agreement be in place to provide the foundation for Canadian automotive production and exports.

We must always keep in mind that Canada is, simply, one-tenth of a complex, fully integrated long-lead industry. Multi-billion dollar product plans and manufacturing investment plans generally begin over five years in advance of the start of production. Planners require regulatory certainty to make their decisions. They especially need for Canada to maintain fully harmonized safety, vehicle, GHG and criteria emissions standards with the United States. This remains imperative if we are to continue to be part of this fully integrated long-lead, large investment industry. Put simply, we did not work this hard to modernize integrated-rules trade in North America to then take our eye off the ball and drift away with unique or different regulatory directions. Doing so could put us back to square one and leave us on the sidelines.

Canada's officials must also maintain a high degree of engagement with counterparts in the U.S. and Mexico as we go forward. We cannot relax our efforts to ensure that Canada is sufficiently competitive to win future manufacturing investments that anchor much of the Canadian auto supply chain. Canada must have competitive—or more than competitive, actually—costs of auto operation in Canada, including investment incentives, carbon costs, competitive labour agreements, taxes that keep pace with the U.S., competitive electricity prices, and a competitive regulatory burden environment.

It's important to remember that the auto sector is going through one of the driest periods in its 100-year history. We need to work closely with all levels of government. We fully respect this committee's need to hear Canadians and to ask questions.

For 36 years now, I've been appearing before various House committees. We certainly understand that and we encourage you in terms of your mandate to make this happen. We've worked with all parties over the last two years to discuss the very complex issues involved, and we appreciate your interest in open dialogue.

I thank you again for this invitation, and I'd be pleased to answer any questions.

9:20 a.m.

Liberal

The Chair Liberal Sherry Romanado

Thank you very much, Mr. Nantais.

Now we will go to Jennifer Mitchell and Casey Chisick in Toronto by video conference.

You have five minutes to present. Thank you.

9:20 a.m.

Jennifer Mitchell President, Red Brick Songs, Casablanca Media Publishing

Thank you very much, Madam Chair and honourable members, for this opportunity. I'm here today with Casey Chisick of Cassels, who is external legal counsel both to Music Publishers Canada and to my companies.

I have had the pleasure of owning and running a Canadian-owned independent music publishing business for almost two decades. I'm here to talk to you about the need to fully implement copyright term extension in accordance with the Canada-U.S.-Mexico agreement immediately, completely and with no conditions. In doing so, small and medium-sized businesses in the music publishing sector and our songwriting partners are able to continue innovating, growing and exporting songs to the world.

Canadian music publishing is a $329-million industry, which grows every year because of innovative entrepreneurs who help create value from songs. In today's digital and globally connected age, songs, music and culture have no boundaries, allowing many Canadian songwriters to achieve international success because of the scale of opportunity outside our country.

The market in Canada is simply too small for songwriters and publishers to succeed only within our borders, so music publishers work hard and make investments to help songwriters expand and grow into international markets. In fact, two-thirds of music publishers' revenue now comes from foreign sources, which is a dramatic change from 2005, when only a quarter of their revenue was from these same foreign sources.

The key to dealing with changes in technology has been our ability to expand globally. Music publishers use their relationships in other countries, built over many years, to create opportunities for songwriters to succeed.

Music publishing is about championing a songwriter and a song through the lifetime of the writer's career and the song's copyright. We take a long-term perspective, and we work a lot behind the scenes to create value. We are the songwriter's partner. We not only make financial investments in songwriters; we also invest time and leverage our relationships to help a songwriter's career evolve.

This means matching people such as songwriter Jeen O'Brien with partners in lucrative markets like Japan to co-write singles that are released by other artists or used in TV, movies, commercials or video games. It means arranging co-writing opportunities for Dan Davidson in London, England, and China and financing radio promotion. Those efforts led to a top 20 Canadian country radio hit.

It means taking a risk to sign emerging songwriter Tom Probizanski, who moved to Toronto from Thunder Bay. We invested in him so he could go to Los Angeles and Denmark to co-write. He released an EP under the name of “Zanski” and we paid for his blog and playlisting promotion so that he was featured in Clash Magazine, EARMILK and various Spotify playlists.

We were able to take these risks and invest that money in Jeen, Dan and Tom only because we could rely on the income of several songs for which my companies hold the copyright. These efforts were made possible by the value that we were able to create from songs such as Imagine by John Lennon; What a Wonderful World; My Way; Y.M.C.A.; Start Me Up by the Rolling Stones; Skinnamarink by Sharon, Lois and Bram; and even the theme for The Simpsons.

This brings us to today. I would like to thank the government for agreeing in CUSMA to extend the term of copyright in works by 20 years. It is critical, though, that this be implemented completely, immediately and with no conditions, rather than waiting the 30 months that is allowable under CUSMA. Bill C-4 would extend the term of copyright for a few works: anonymous works, audiovisual works and so on. It would add an extra five years to the term of protection for performances and sound recordings, which was already extended in 2015, a welcome development to be sure.

However, the bill would not finish the job. It would not extend the term of protection for musical compositions known as songs. On behalf of Music Publishers Canada and the songwriters and composers I work with, I urge the committee members to amend Bill C-4 to align Canada with its global trading partners by extending the term of copyright protection for all musical, literary, dramatic and artistic works right now, instead of using the 30-month transition period.

Why is this important? Many works will fall into the public domain in the next 30 months. That will affect creators' and publishers' ability to reinvest in the Canadian economy.

As I mentioned, many music publishing companies are small and medium-sized businesses that rely on steady income from hit songs to develop new talent. For a small business like mine—

9:25 a.m.

Liberal

The Chair Liberal Sherry Romanado

Ms. Mitchell, unfortunately, that's all the time we have, but I'm sure that once we get into the round of questioning, you'll have an opportunity to add additional comments. I know you've circulated a document to the committee members, which we all have in front of us.

With that, we will move to a six-minute period of questioning by each party, and we will start with Mr. Patzer.

Thank you.

February 24th, 2020 / 9:25 a.m.

Conservative

Jeremy Patzer Conservative Cypress Hills—Grasslands, SK

Thank you very much, Madam Chair.

First of all, I just want to thank everybody for being able to make it here on very short notice to be part of the discussion we're having today.

My first question I guess would be for you, Scott. First of all, I just want to say, again, thank you for bringing up the point that agricultural manufacturing is such a vital part of rural Canada. It has employment opportunities, and it's a mechanism for small towns to remain viable because it's such an important social fabric of our communities.

Scott, one thing you were talking about was the copyright laws we have in Canada and what they have in the United States. Could you elaborate on the difference between those particular laws and how they affect your industry?

9:25 a.m.

Manager, Honey Bee Manufacturing Ltd.

Scott D. Smith

The primary difference is that the U.S. copyright legislation has exemptions to prohibition, to circumvention. Circumvention of people's intellectual property or their copyrighted material is illegal generally, but when an exemption is provided for the purpose of interoperability, it's very viable and important. It was originally put into the act with respect to handicapped persons or people challenged with physical disabilities who require different keyboard input devices, and software had to be modified to allow these types of tools to be used. In our case, it's not necessary that we have this ability, but it's being decided by the OEMs that this is a requirement because they're closing off the ecosystem for open development.

Historically, our products for 30 years just have a couple of wires we hook up and go. The technology that they're adding doesn't change the functionality of the equipment. It's just creating a digital lock and key so they can choose to exclude equipment.

If we adopt within Canada the copyright legislation exemption they have in the United States, it would give us the legal basis to make these adaptations without breaking the law. That's not really ideal, as I said. It's a very expensive process to reverse-engineer and to develop parallel systems, but it's a starting point. It's the minimum that we would like to see, which is already established in the U.S. copyright legislation, that could be transported into the Canadian legislation without argument from the U.S., without bickering about this thing being added or whatever, in advance of signing the trade agreement. The trade agreement is very important to us, but without this, we're dead. We actually can't interoperate with other people's equipment.

9:30 a.m.

Conservative

Jeremy Patzer Conservative Cypress Hills—Grasslands, SK

For sure. If the clause goes into the Canadian Copyright Act, will it completely solve the issue, or is it just kind of, as you mentioned, the starting point for it? If you want to elaborate further, beyond this particular exemption of the Copyright Act, what else needs to be done to further solve these problems?

9:30 a.m.

Manager, Honey Bee Manufacturing Ltd.

Scott D. Smith

This gives us a legal basis to do what we would need to do for reverse-engineering, but it's the most expensive path. For a single platform it costs between $800,000 and $1 million to develop a full technical system that duplicates everything that the tractor systems already do, to plug in, in parallel and switch one in or out, depending on if our product's attached or someone else's is. This is not viable. The farmer doesn't want this. You don't want to hack your keyboard to pieces to plug it into your laptop one wire by one wire, key by key. You just want to plug it in and have it work.

What's really required is some sort of mandate for open interoperability, and this impacts, as I said, construction, mining, forestry and agricultural equipment. They're all in the same boat. It's something about which, over the long term, we've been working with government over the last year through Global Affairs, ISED, Canadian Heritage, Agriculture Canada and the Competition Bureau, trying to get resolution to this matter through existing legislation and channels. Our case with the Competition Bureau was just closed last week for lack of legislation to support the actions that need to be taken.

9:30 a.m.

Conservative

Jeremy Patzer Conservative Cypress Hills—Grasslands, SK

With a trade deal like this, this is something that definitely could and should have been further addressed. We had a golden opportunity I think to have this addressed in it, and it appears it wasn't.

9:30 a.m.

Manager, Honey Bee Manufacturing Ltd.

Scott D. Smith

It wasn't, and it should be.

9:30 a.m.

Conservative

Jeremy Patzer Conservative Cypress Hills—Grasslands, SK

Do any of my colleagues have any questions they'd like to add?

9:30 a.m.

Conservative

Earl Dreeshen Conservative Red Deer—Mountain View, AB

Thank you.

Mr. Boivin, you talked about suspending $300 million worth of products or access to the American market. Unifor was here earlier, and there was no discussion from them about any concerns of theirs. That's where I'd like to start.

When we see all of these products that have been taken off the table, one of the things I mentioned earlier in that regard was the stockpiling of aluminum in Mexico from whatever countries and the concerns we have about that. We also heard that Canada now has 70% protection in the agreement, whereas we had zero protection before. Back in 1994 we had 100% because we were the ones supplying it.

Could you make a quick comment on that?

9:30 a.m.

President, Groupe Performance Stratégique

Roger Boivin

Yes. Historically, we of course had protected access.

However, the aluminum industry in the rest of the world has developed a great deal these past few years. The fact that foreign countries could sell here remained possible. Economically speaking, Canada's aluminum industry has the lowest production costs in the world, among other things because of the self-generation in Kitimat, but also because of Rio Tinto, in Quebec, and of course the preferential tariffs Alcoa or Aluminerie Alouette benefit from.

In terms of the economy, we can compete. For completely legitimate reasons, in the Middle East, in India, in Brazil and in China, a major aluminum industry has developed. The president of the association talked about $35 billion for a single company. I also have documents to support that.

Subsidies of $100 billion have been provided to all the Chinese companies. Those countries encourage aluminum development regionally. It is legitimate, but we cannot be on an equal footing.

9:30 a.m.

Liberal

The Chair Liberal Sherry Romanado

Mr. Boivin that's all the time we have.

9:30 a.m.

President, Groupe Performance Stratégique

Roger Boivin

You are right.

I will conclude by saying that things have changed, and this forces us to get protection now.

9:30 a.m.

Liberal

The Chair Liberal Sherry Romanado

We will now move to Ms. Lambropoulos.

You have six minutes.

9:30 a.m.

Liberal

Emmanuella Lambropoulos Liberal Saint-Laurent, QC

Thank you.

I'd like to thank all the witnesses for their testimony here today and for being here on such short notice.

Ms. Mitchell, I know you were cut off and I'd like to give you an opportunity to finish what you were saying earlier.

I'd also like to point out that, obviously, the cultural exception was put into this agreement, which I'm sure affects a lot of the creators you work with and represent. Can you speak a little to this as well in your comments?

Can you finish what you were saying with regards to copyright as well. I know you appreciate the fact that we've protected copyright for an additional 20 years, but you mentioned something about the transition.

Can you continue on that front?

9:35 a.m.

President, Red Brick Songs, Casablanca Media Publishing

Jennifer Mitchell

Sure.

Just to quickly finish the points I was making, waiting the 30 months to implement the copyright term extension for all classes of intellectual property, particularly when it comes to songs and musical compositions, will create more confusion in the marketplace.

My first point was that we were stifling innovation and creativity, export potential and growth for small businesses, but we also risked creating more confusion. Commercial users who license songs typically do so worldwide, which means they need to get a licence for the entire world. Remaining out of step with all of our international trading partners will continue to complicate licensing for users rather than providing any kind of relief.

We also risk introducing even more complexity by extending the copyright term for some classes of intellectual property and not others as Bill C-4 would do.

9:35 a.m.

Casey Chisick Legal Counsel, CMRRA-SODRAC Inc. (CSI)

The important thing to keep in mind is that this is an international issue at its very heart. We're talking about works by composers like Jimmy Hendrix, Janis Joplin, Duane Allman, the list goes on and on, falling into the public domain during that 30-month period that CUSMA allows for a transition. To the point of a cultural exemption, it's tempting to say these composers aren't Canadians so it doesn't matter, but it does matter because it's income from compositions by composers around the world that gives Canadian publishers like Jennifer the revenue they need to reinvest in the songwriters and the songs she referred to in her initial testimony.

It really is a critical issue. It's baffling that the government would choose to wait another 30 months and allow hundreds or thousands more valuable compositions to fall in the public domain never to be recaptured by publishers who rely on that revenue for their investment in Canadian culture.

9:35 a.m.

Liberal

Emmanuella Lambropoulos Liberal Saint-Laurent, QC

[Technical difficulty--Editor] on the cultural exception, would any of you be willing to comment on maintaining that protection? This is not something that was in the original CUSMA agreement when they began negotiations.

Can you speak to the importance of including it in there?

9:35 a.m.

Legal Counsel, CMRRA-SODRAC Inc. (CSI)

Casey Chisick

I'm sorry. We didn't hear the beginning of your question.

9:35 a.m.

Liberal

Emmanuella Lambropoulos Liberal Saint-Laurent, QC

Does the cultural exception in the CUSMA agreement affect your industry? I believe it affects creators of Canadian content and all of the cultural industry.