International Trade Committee on Oct. 19th, 2006

[Lui Temelkovski, Liberal, Oak Ridges—Markham, ON]

I'm Lui Temelkovski, member of Parliament for the riding of Oak Ridges—Markham, which is on the north side of Toronto.

[The Chair, Conservative, Leon Benoit]

Mr. Eyking.

[Mark Eyking, Liberal, Sydney—Victoria, NS]

I'm Mark Eyking, member of Parliament for Sydney—Victoria, in Cape Breton, Nova Scotia, on the Atlantic coast.

[The Chair, Conservative, Leon Benoit]

Thank you.

Mr. Tomlin.

[Ben Tomlin, Fellow, C.D. Howe Institute]

My name is Ben Tomlin. I am a C.D. Howe Foundation fellow at the C.D. Howe Institute. I'm also a PhD candidate focusing on international trade and finance.

[The Chair, Conservative, Leon Benoit]

Would the researchers introduce themselves, and the clerk as well, very briefly?

[Peter Berg, Committee Researcher]

My name is Peter Berg. I'm with the Parliamentary Information and Research Service and I've been staff on this committee for quite some time now—since 2000.

[Michael Holden, Committee Researcher]

My name is Mike Holden. I'm also with the Research Branch of the Library and I've been with this committee for about four years.

[The Chair, Conservative, Leon Benoit]

Mr. Clerk.

[The Clerk of the Committee, Mr. Normand Radford]

I'm Norm Radford. I'm the clerk of the committee. I've been with the House of Commons for about 20 years and with this committee for a few weeks.

[The Chair, Conservative, Leon Benoit]

Thank you.

Before we get to the more in-depth introduction by each of the invited participants, I would like to point out that at the back of the room today we have a class of interpreters from the University of Ottawa. I want to recognize your being here.

I want to say that some of us more than others really depend on interpreters here in the House of Commons. I don't know what your futures might be, but all the best to all of you. It's a great occupation and career.

Let's start—we'll go around the table the same way—with Mr. Myers. Could you start with a little bit more on what your involvement is with the organization you are with, and then briefly state what Canada's trade policy should look like?

[Dr. Jayson Myers]

Thank you very much, Mr. Chair, and thank you, members of the committee, for inviting us here today.

I think we all find that this particular issue not only is important but will be of growing importance, and that our ability to craft an international business policy is really going to be very important for not only the future competitiveness of Canadian business but also our ability to take advantage of new market opportunities around the world.

The Canadian Manufacturers and Exporters, as that organization, has been in existence for about ten years, but it was formed as the result of the merger between the Canadian Manufacturers Association and the Canadian Exporters Association.

That's an interesting development in itself. The CMA was established in 1871 for the sole purpose of fighting free trade with the United States and protecting Canadian industry. The Exporters Association was formed in the 1940s to open markets around the world for Canadian goods and services.

The fact that these two organizations came together says a lot about the nature of Canadian manufacturing today and of Canadian industry. Close to two-thirds of what is manufactured in this country is exported. The United States is our major market. I think it also says that if we're going to have successful businesses in Canada, then international business and international markets play a very important role.

I've worked with CMA and CME for fifteen years and have worked very closely with other colleagues around the room on the development of trade policy issues.

Let me just make five or six quick points about what Canada's trade policy should look like.

I don't think we should be talking about trade policy. I think we should be talking about international business policy, because what we're looking at today is a very new era in which businesses are operating on a global basis.

The success of Canadian business—the success of any business today—depends on exports, it depends on imports, it depends on international investment, and on our ability to secure product mandates and attract international investment. It depends on services and technology and partnerships around the world. It's international business. We talk about integrative trade, but what we're really talking about is a global international business policy, and we should be thinking in that context.

The second point I would make, when we ask what the role of government is in this, is that the role of government is to negotiate agreements with other countries in order to secure non-biased access for Canadian businesses, exporters, and investors.

Part of the role of international business policy is that negotiation, but a very important other role involves the business services that are delivered by government and government agencies in support of Canadian businesses doing business around the world.

My third point is that we should be dealing with circumstances in markets in ways that fit the circumstances of the economy. Our approach to the United States and to business in North America, I think, has to be a priority, just because of the nature of the integrated relationship today that has developed particularly over the last fifteen years. The approach to the North American market is going to be different from our approach to other markets around the world, but we should also focus on those other markets. That's another part of our international business policy.

My fourth point is that international business policy has to be integrated. It has to be integrated among federal and provincial departments and agencies. I think there's a lot to be done to have a much more integrated approach.

It has to be integrated with domestic policy as well. We can't take advantage of the opportunities in the Asian market unless we build the right infrastructure here—for instance, in transportation at our west coast and east coast ports—and then have the types of North American logistical systems that make it possible to import, export, and do business not only with Asia but with the United States as well. That's an example of where we need an integrated domestic approach.

I would also say that we need an integrated approach in terms of the enforcement of trade rules. It's all well and good to negotiate trade rules, but when it comes to actually enforcing trade rules we fall short. That has to be another very important part of our international business policy.

My final point is that international business policy, whether it's for the negotiation of international agreements or for the provision of business services, has to be focused on the customer, on those Canadian businesses that are doing business around the world. Like any good business, it has to be a customized service. What we do in government in policy and in business services has to provide a solution to those Canadian companies that are doing business around the world.

Thanks.

[The Chair, Conservative, Leon Benoit]

Thank you very much, Mr. Myers.

Mr. Hodgson, would you give a bit of an introduction to what you're involved in with the organization and then just a brief statement about what you see Canada's trade policy looking like.

[Glen Hodgson]

Jay's done a great job of opening up the debate. In fact, rather than having six points, I can only make three, because I'm going to play off many of the comments he's made.

First of all, I should tell the committee that the Conference Board is very close to publishing the biggest piece of work we've ever done. It's a project called the Canada Project—a pretty grand name—funded largely by the private sector three years ago. We have produced 26 research reports to date and we have more to come. We'll be publishing in January in three volumes, one on Canada's place in globalization—how do we stay a rich nation—one on resources, and one on cities as a driver of wealth.

Perhaps more important for the committee, Maclean's will be doing a preview of this, taking pretty much a full edition in mid-November, as they do with universities and other things.

The magazine L'Actualité is going to do the same thing in French. I believe their coverage will be shorter but it will be of the same quantity and will transmit the same message.

We're very excited, because the Conference Board will have a chance to share its thinking on Canada's place in globalization with the entire country, using Maclean's but also trying to reach idea leaders such as yourselves.

We're basically going to set out a series of core strategies for creating wealth in Canada, and trade and investment policy is at the centre of it. It's a critical piece of the national productivity strategy, so there I agree with my colleague Mr. Myers entirely.

We've been debating violently and agreeing, Jay, for about fifteen years now, and again we're in full agreement that having a well-articulated international trade and investment policy is right at the heart of our productivity agenda of creating wealth within Canada.

Trade matters for two reasons, effectively. It matters because it allows us to reach more markets around the world; it gives us access to billions of consumers rather than tens of millions. But it also keeps us honest: it raises the level of competition within Canada.

Economists are trained to see the value of trade. Really, what we're talking about is keeping our businesses sharp, exposing them to international competition, forcing them to innovate and to adapt more quickly, and frankly, I think we've gone to sleep over the last decade. I'll come back to that in my third message.

The core message for us is that trade and investment is right at the centre of developing a well-articulated national productivity strategy.

Secondly, I'd like to agree with Jay that for us trade and investment are not separable. They're really completely integrated. In fact, there's an expression now being used increasingly in government, “integrative trade”. It's actually a term I created about four years ago when I was at EDC to try to demonstrate how inseparable imports are from exports, investment is from trade, services are from goods. They're all now integrated parts of a whole, and our whole trade policy approach—policy practices within government, how you negotiate—has to take that as the backdrop.

We're still stuck in a world of mercantilism, where we largely see exports as good and imports as bad, and we want a little bit of investment, but we only want it on certain terms. That doesn't work any more. The world has already moved beyond Canada. We've become a laggard rather than a leader in international trade. I think it's time for us to move to the front of the pack.

And maybe that's the third message, that since NAFTA, Canada has really become a follower on international trade. We are no longer a leader within the World Trade Organization. We're not part of the inner circle of people making policy. We have not aggressively pursued NAFTA deepening. We only have three very small bilateral deals, while the rest of the world is out negotiating like crazy. The Americans, the Chinese, and the Europeans are extremely active now, trying to expand their access to other markets and also to create competition integration. It's about time Canada got really into the game.

I can talk about that in greater depth as we go on, but perhaps I'll just stop right there.

[The Chair, Conservative, Leon Benoit]

I would be interested in knowing later on why you think it is that Canada hasn't been a leader over the past while.

Mr. Murphy.

[Michael Murphy]

Thank you, Mr. Chair. It is a pleasure to be here this morning. Having listened to the first two presentations, I can safely say that we're onto some themes we all agree on.

Let me briefly speak to the issue from the perspective of the Chamber of Commerce. I think you're all aware that our organization is very much a broad-based business organization, including large businesses, small businesses, every sector of the economy, and all parts of the geography. Our focus as an organization--I think it's what's relevant, quite frankly, to this discussion--is on competitiveness and productivity, and that's where we should start the discussion. I noted that in June the trade minister started his speech with respect to International Trade Day that way, and I was encouraged by that. I think it's exactly the right context.

Competitiveness and productivity constitute the overarching issue for us as an economy. There are many components to it, and we can talk about many of them, but we focus on the trade and investment side. The two go together, as our first two presenters pointed out very well.

There is a context, though, when we talk about competitiveness and productivity in our economy. We also like to talk about it in terms that some people I think can understand a little more readily; we use the phrases “standard of living” and “quality of life” when we take it to that extreme. Whether you're talking about what you need to do in the next budget or what you need to do in terms of the next trade agreement that we're negotiating or what we're going to do in terms of domestic policy to support those initiatives, our standard of living in Canada is the issue here, and we should never take that for granted. That's why I think what you're doing today--thinking about Canada's trade policy--is worth doing.

That's the context for us and for our members.

I'll also just repeat that it is absolutely essential, in terms of thinking about policy, that you don't have an international policy that's separate from what you're doing domestically. We can throw those words out there, but they are very important in terms of what we should be doing on a day-to-day basis in thinking about trade and investment from a strategic standpoint.

My last point is to give you a quick sense of where we are as an organization. I'll do this with top-line priorities, because we have a chance to test this regularly with our members; at our annual meeting a few weeks ago in Saskatoon, we spent quite a bit of time talking about trade priorities because they're important to our members from across the country. Obviously our relationship with the United States and our relationship inside North America still remains, for our members, at the top of the heap, and we can talk about that further.

We have deep disappointment with respect to where we are on multilateral negotiations in terms of Doha. I don't think a country like Canada should be other than deeply disappointed with what's going on, because, quite frankly, multilateralism is our best option as a country, and the fact that we're deeply mired in this stoppage at the WTO is a big concern to us.

Because we're talking about how important trade and investment are on a regular basis, it didn't take us long to make sure we want to stay focused on foreign investment protection agreements. These are vital and essential for our members across the country.

I'll stop there, Mr. Chair. Those are just some top-line remarks.

[The Chair, Conservative, Leon Benoit]

Thank you very much. I appreciate that.

We'll go to Mr. Tomlin now.

[Ben Tomlin]

Thank you, Mr. Chair.

Jayson and Glen and Michael have all talked about why trade is important for Canada and why we should be involved in these international negotiations. A lot of what I want to say has already been said, so I'll keep it brief. I wanted to start by outlining what I think are the five policy options we have in pursuing trade negotiations. They are not mutually exclusive. I think this can help structure some of the rest of the discussions; I'll just outline them and leave it at that.

Obviously our first option, as Michael was saying, would be continuing to push for a deal in the WTO, and that would mean focusing our efforts on the multilateral effort. This is obviously the best for Canada from an economic standpoint, but as we know right now, it has run into some problems, and it doesn't look like there's going to be much headway made on it.

Our second option is to pursue bilateral deals. There are two ways in which we can do those. The first is to follow in the footsteps of the U.S. The U.S. obviously has an agenda right now of finding foreign market hegemony by developing a U.S.-style trade agreement and making bilateral deals with countries for reasons that aren't so much economic as they are strategic.

We have two options if we follow in the footsteps of the U.S. One is to try to get involved in future bilateral negotiations with the U.S.--to try to make them trilateral in this sense. This is good, in that it would limit some of the hub-and-spoke effects that can happen when the U.S. is signing outside deals and Canada is not involved in them. This is one option.

Another option is to go out on our own and sign bilateral deals with countries the U.S. is negotiating with and already has deals with. This can be framed within creating a Canadian style or Canadian brand of trade agreement.

Another way in which we can pursue bilateral deals is not following the footsteps of the U.S. We can either go after countries that are of economic importance to us, ones that we actually want to open up trade with, or we can have a system similar to the U.S. system--go after countries and offer them a Canadian-style or Canadian-brand trade agreement. This can be strategic in the sense that spreading bilateral deals can actually work towards opening up the WTO negotiations. If we offer a trade deal that's in line with the WTO negotiations, it can actually work towards opening up the WTO.

The fourth option is the economist's favourite; I don't think it's going to be too popular here. This would be unilateral liberalization. I think it would be great to see a headline in the newspaper saying that Canada really believes in trade--so much so that we're willing to unilaterally liberalize. Obviously if we want to do something like this, some deep sectoral analysis would need to be done, but I think it is a good option for Canada.

I don't know if the final option is really an option. It is to do nothing, to continue on and not look for bilateral deals--just give it time, see how things go with the U.S. negotiations, and see what happens at the WTO.

I'll leave it at that. That can be a framework for your discussion.

[The Chair, Conservative, Leon Benoit]

Good. I'll now look for hands. Mr. Menzies....

But I want to comment on the unilateral option. You say it may not be well received here, but in terms of interprovincial trade, Alberta took that approach, and it's worked extremely well, so it's not something to be dismissed out of hand. It's an interesting concept.

[Ben Tomlin]

I like that option. I just don't know if it's politically viable.

[The Chair, Conservative, Leon Benoit]

It is interesting.

Mr. Menzies is next.

[Ted Menzies, Conservative, Macleod, AB]

Well, Ben, I hope your final thesis isn't on your last option. I don't think that's good for Canada. I realize you just threw it out for discussion, and I think you'll find that most people around this table will realize it's not an option.

I find it interesting that so many of you have raised the importance of the WTO. I've always been a strong supporter of the multilateral, because we can get some dispute settlement mechanisms with some teeth in them, some sort of international trade rules that can protect us. If I could, we're looking for a way to restart this. I'm hoping that on November 8, after the U.S. election, we actually might have a snowball's chance in you-know-where to get this thing going again, because it is so critical for this country. I would like some ideas specifically on how we may restart it, if you would share those with us. Is there something this government is missing, something we can do to help kick-start it?

Glen, you made a comment about competitiveness, and I see that investment protection is an issue you have talked about. Something that I'm trying to get back on this government's agenda is the ICSID convention. I'm not sure how familiar you are with it; it's the International Centre for Settlement of Investment Disputes. Something like 130 countries belong to this ICSID convention; Canada is one of them, yet we're not a signatory to it, so basically we have left Canadian companies that invest in other countries vulnerable to piracy of their investments.

We're trying to get this. We're very close. We have legislation there that we can put back on. Would you share your thoughts on how important it is that we actually sign on to this? I realize it's a provincial and a federal issue. We have most of the provinces on side; a couple of them are this close.

Could we have your comments about that, please?

[The Chair, Conservative, Leon Benoit]

Go ahead, Mr. Hodgson.

[Glen Hodgson]

Perhaps I can take on both points.

First of all, I think all of us around the table would agree that multilateralism is the best option, so why is it not happening?

I hate to disappoint you, but my own view is that the Doha Round will not restart until there's a new U.S. President. The current President is going to have a very exciting election in a month's time and may well lose control of the House--perhaps not the Senate, but the House. Even the degree of American commitment to Doha is quite questionable, including their willingness to put some of the hard stuff on the table, such as agricultural subsidies in the United States. My own view is that Doha has no chance of restarting in a serious way until we have a new U.S. President, who then will have to go to Congress to get delegated authority from the new Congress. We're looking at 2009. I wish the government great luck in trying to get things going between now and then, but for me that's realpolitik, which means we have to think about things to do in between, and we'll come back to that.

About ICSID, I don't know. I do know, though, that Canada's strongest interest is in having a rules-based system, a system of strong and clear rules toward dispute settlement. If ICSID is driven by that, then it is absolutely desirable. One of the sad things that happened globally in the last decade was the failure of the multilateral agreement on investment. We pursue bilateral investment protection as a substitute, but the optimal would be to have a global system protecting investment on an aggregate basis.

If anything can be done to make Canada both a signatory and a ratifier of ICSID, I think--without having deep expertise--it would be the right thing to do. On a principle basis, pursuing vehicles that protect investment is absolutely a good thing, because Canada is now a net investor in the world. We're no longer just a receiver of foreign-directed investment; we now have outward flows of investment that are far greater than the inflows, and the sales abroad from those outward flows are almost as big as our goods exports. Outward investment is a critical piece for successful Canadian international business.

I like Jay's line a lot about international business. I tend to use that myself, Jay, when I go out to talk to people. It's not just trade and investment; it really is looking at this as an integrated piece of how our businesses are going to succeed in the world.

[The Chair, Conservative, Leon Benoit]

We'll go to Monsieur André and then to Peter Julian, but before we do, if any of the participants who have been invited would like to ask questions of others, feel free to notify the chair of that too.

Monsieur André.