International Trade Committee on Oct. 19th, 2006

[Dr. Jayson Myers]

I'm a little worried that the problems of the global marketplace are sometimes so daunting. We all know what the issues are, we do analysis really well, and then when it comes around to doing anything, we all throw up our hands and say we can't do anything. I think we have to focus on practical steps that can be done.

One of the issues here, which I think is very important for this committee, is that maybe trade agreements aren't the best way, necessarily, to encourage international business—or at least traditional trade agreements, as Glen was pointing out. Negotiation of air and transportation agreements is crucial; the negotiation of investment agreements is crucial; tax agreements are pretty important. It just means that maybe we should be looking elsewhere to deliver the types of infrastructure, the types of market access, and the types of business services that are necessary to grow our business.

We're negotiating a trade agreement right now with South Korea. For many sectors of the Canadian economy this agreement really doesn't mean very much, because tariffs are already non-existent or very low. The problems in South Korea are in non-tariff barriers, the regulatory barriers, and I don't think this trade agreement is going to be able to remove those.

Those are some of the issues: how do we negotiate multilaterally, bilaterally, regionally on the real restrictions to trade, without giving up any leverage we have right now? I hope the trade agreement with Korea is successful, but it's not going to be successful unless we can get guaranteed access to the Korean market.

That's just one example. We wring our hands because we have a rising trade deficit with China—and North America has—but what that really means is that you can buy a container in Canada or rent a container in Canada for a tenth of the cost you can rent it for in Shanghai. Dofasco and Stelco in Hamilton can ship a tonne of steel at lower cost to Shanghai than manufacturers in Shanghai can buy it from northern China.

Why don't we take advantage of that? And what do we have to do in order to do it? What you find is that there are a lot of regulatory and tax issues that railways are faced with that don't allow these containers to move easily within North America. Maybe we should be looking at tax and regulatory issues within North America that would allow us to take advantage of these low-cost containers, so that we can fill them with product and ship them to China.

Why are the tax and regulatory issues constraints? It's because those regulations have been put in place since the 1800s. It's time to review them. I think there are practical things we can be doing, which government should be taking the lead in identifying.

But in all of these cases, policy and the federal government cannot do it alone; they all require that the ports, the railways, the truckers, the customs people, the security people in this instance, be involved. Nobody is going to do it unless there is some leadership, a vision, and a strategy aimed at practical outcomes, and I think those outcomes have to be in response to where business is going.

We do a lot more business with Australia and Africa than with a lot of Asian countries, so why are we negotiating trade agreements necessarily with Asia? Why can't we look beyond it and figure out what has to be done to enable the international business that is actually going on? Again I don't think this is led by policy; it is led by finding what the problems are in business and taking the lead in providing practical solutions, bringing the right people to the table who have to be there to get those solutions done.

[The Chair, Conservative, Leon Benoit]

Thank you.

We are down to about five minutes before we need at least five minutes to discuss Bill C-24.

Apparently we could continue this. At eleven o'clock we could get our sandwiches and food and come back to continue the discussion as it has been going, for at least a while—maybe a half hour or so. Does that sound reasonable?

Mr. Hodgson, you have to leave at 11, I understand, but we'll continue with the other three, if that's okay.

All right. It sounds as though everybody else can stay.

We'll now go to Mr. Maloney. I know it's been a long wait.

[John Maloney, Liberal, Welland, ON]

The consensus of our panellists is that our trading future predominantly lies with the United States and that we should nurture it and expand it. The United States has a galloping debt, and my concern is that if the U.S. falters, we will fall. We rely on it so much. If their economy declines, will we be more seriously impacted here in Canada?

This then leads us to the two-track suggestion, that we should be looking at China, Brazil, and India, but Mr. Murphy ended his last commentary with a question: how do we strategically get into these emerging nations?

The question would be, are we concerned about too close a contact with the U.S. from a trade perspective, and how do we strategically get into the emerging markets of Brazil, India, and China?

[The Chair, Conservative, Leon Benoit]

We'll start with Mr. Murphy.

Thanks, Mr. Maloney.

[Michael Murphy]

I'm not one of those who would stand up and say we're too close to the United States in terms of our membership and their desire to continue to do business with the United States. One of the factors we haven't talked too much about today is the mix of companies and the size, in particular, of companies in Canada. As we know, small and medium enterprises form the bulk of our membership--obviously, because that's what the Canadian business community looks like. We have few very large firms, though we have them in many sectors of the economy. But we have lots of small firms, and they have their own challenges, even dealing with the United States, for a number of reasons that we've covered here today. Some of these would apply equally to larger companies, and some would be unique in terms of the nature of small companies and trying to do business outside of our own borders. From that standpoint, I think there's still more to be done vis-à-vis the U.S. Whether you want to use SPP, as I've suggested, and the 300 initiatives there, focusing on important things like how we can do better with the border and how we can fix--that wonderful phrase--the tyranny of small differences on regulation with the United States...I think that's beautifully said. All of those still need to be front and centre.

In terms of dealing with other economies, we're in an incredibly competitive game with respect to that. Looking at bilaterals, I think the numbers I saw recently show that our friends south of the border have market power, if I could put it that way, in terms of going to other economies and saying, “Let's negotiate a free trade agreement.” I think they've put about a dozen of them through Congress recently, with three more ready to go and another eleven in the negotiating stage. That's a pretty formidable level of activity. We don't have that going on today.

With China, we tried to do two things in terms of the document we produced. One was to acknowledge the fact that the opportunity is there. I think Glen's quite right in terms of saying that there are challenges. There are lots of challenges. Some of them are inside our own economy, in terms of our ability to do infrastructure development to allow us to cope with the opportunity to do business with China.

What we did was we tried to look at all of the aspects of the relationship. One of the things we did end up focusing on--and it's one of nine or ten that we included in our document--was this relationship question that Mr. Temelkovski raised in terms of how well positioned we are in China. One of the things the government made a fairly big deal about in the last year or so was--and it's something we supported--opening more consulates in the United States. That was a good thing to do. We're now in many more areas and regions of the United States than we were before. We don't do a very good job of that in China yet.

There's much more that can be done, in terms of thinking. That's one small thing.

Governance, in terms of the file inside the Government of Canada, needs to be looked at. How are we focused? Do we have somebody who has a primary responsibility to think about leadership on the file? I don't think we're that well coordinated yet. I think we're just getting going on this. One of the reasons we produced our piece was to try to make a contribution to the trade department's thinking on this process that is under way now.

I think there are a number of specific things you could do, but that would be one of the ways, from a framework perspective, to start it.

[The Chair, Conservative, Leon Benoit]

Mr. Hodgson, I know you have to leave at 11. I also know that Mr. Williams has to leave at 11, and he'd like a question.

Could we go to Mr. Williams' question and then go back to other responses to yours after, Mr. Maloney?

John.

[John Williams, Conservative, Edmonton—St. Albert, AB]

I really didn't have a question. It's more of a comment.

If we're talking about trade policy, we have to get it into different layers of the philosophy of what we're trying to do, the strategy of what we're trying to do, and the details of what we're trying to do, and identify the things that detract from free trade and things that enhance free trade.

If we look at the past, at the things we've done well, like the Great Lakes, the seaway, NAFTA, and other great issues that have helped trade in the past...we have to look forward and ask what's coming down the pipe that we need to do. As Mr. Myers pointed out, if we have antiquated regulations that inhibit the movement of goods to take advantage of cheap containers going to the east, I can't imagine why that's still hanging around and why somebody isn't addressing these particular issues.

We have the big announcement on the Pacific Gateway, but what about Halifax and transcontinental shipment? What about the Arctic? Is it going to open up in twenty years, and what is that going to do for us? Where can we get the advantage so that we're thinking ahead and being strategic?

Take a look at what we have. We have resources; we have value-added, which we've ignored for so many years; we have manufacturing; and we have knowledge.

Knowledge is the thing of the future. India and China are really going to give us a hard time on manufacturing. We have to recognize that this is moving to that part of the world. We have intellectual capital, and unless we invest in intellectual capital to ensure that we can trade in what they need, then our standard of living is going to be seriously eroded. Therefore, we have to be much more strategic than just talking about NAFTA needing a little bit of a tweak, and so on.

I look at the past, and the manufacturers' sales tax hung around for years, which was a serious detriment to exports, but nobody bothered to do a thing about it. The Wheat Board is the same thing, a serious detriment to value-added. Nobody has been doing anything about it.

The Auto Pact was a great thing, and now we have a bottleneck and can't get our stuff across the border. Who is doing something about that? These issues have been around for years and nobody is doing anything about them. So when we talk about a trade policy, we should identify these things, address them, and fix them.

[The Chair, Conservative, Leon Benoit]

Thanks, Mr. Williams.

Those bells aren't because of votes. There was a fire alarm in the Centre Block, and people are returning now--just so you know.

[An hon. member]

Is the fire over?

[The Chair, Conservative, Leon Benoit]

No, the fire is still raging madly, but we don't have to worry about it. We're in the West Block.

Go ahead, Mr. Hodgson.

[Glen Hodgson]

I wanted to close, in fact, by picking up on Mr. Williams' comment. In fact, Ben and I did a paper together as co-authors, because he worked with me at the Conference Board last year. It was a paper on services exports. It's ironic; we've talked for an hour and a half now and we haven't once talked about services, and that's why we wrote the paper.

The paper was called Opportunity Begins at Home, and the core message was, if we're going to expand things like services, which is 70% of our GDP, it won't be through trade agreements, Jay. Arguably, yes, we need feet on the street in the Chinese cities, but in fact it's going to start by domestic reform.

I guess that's a good wrap-up theme for so much of the discussion, because we pointed to unilateral action within Canada, the fact that we're not prepared to actually talk about free trade in things like health care services, or education services, or transportation services. We tried to push forward the idea--and we were being a little bit radical in this--that perhaps through unilateral action or by taking real initiative on getting our act together within Canada, that would actually position our service exporters, which are potentially massive, to play a much, much bigger role within the world economy. That's where the real value-added is down the road. It's not selling rocks and logs, and it may not even be selling automobiles, but it might be selling brain power.

I know the Chinese are investing in brain power as well, and so are the Indians, so are the Europeans, and so is everybody. But you know what? We don't have to dominate the entire global market for brain power. We have to find the niches where we can do well. Our share of global GDP is 2%. Imagine if we found the right 2%, the best 2%, to actually create wealth on an ongoing basis. We're going to talk about this in our report as well, which will come out in early January.

[The Chair, Conservative, Leon Benoit]

We very much look forward to that report.

Mr. Hodgson, I know you have to leave.

[Glen Hodgson]

Yes, in five minutes.

[The Chair, Conservative, Leon Benoit]

Just leave when you have to. Thank you very much for coming, and we look forward to your report.

[Glen Hodgson]

Thank you for the opportunity.

[The Chair, Conservative, Leon Benoit]

Is the Maclean's version of your report kind of like the Reader's Digest condensed version?

[Glen Hodgson]

It's a preview.

[The Chair, Conservative, Leon Benoit]

Almost a whole issue dedicated to this...that sounds fascinating.

[Glen Hodgson]

It's in their own words, of course, because they're trying to reach a bigger audience than we normally aim at.

[The Chair, Conservative, Leon Benoit]

Okay, thank you.

I notice lunch isn't here, but we'll suspend for maybe five minutes.

Gentlemen, you can stay at the table, or you can take a break if you like. We will have some very brief discussion on our business for Bill C-24, the Softwood Lumber Agreement, and it may take very little time. We'll do that, then we'll have lunch and continue the discussion.

So perhaps the members could stay for a few minutes for discussion on Bill C-24 and what will happen on Tuesday with that.

We suspend. I don't know if that's the right term because we're going on with our meeting.

On Bill C-24, there are really only two things I have to say. The department officials, of course, will be the first witnesses to come on Bill C-24 and they'll be here on Tuesday. That's the standard procedure. The other thing is it's going to be important in this discussion, and as a committee we've discussed this before, to stick with the implementation agreement and not to get into debate on the Softwood Lumber Agreement. Of course, that agreement has been signed and it's a done deal. Not only that, Parliament has passed the money, approved the spending. Clearly that's been agreed to.

What we will be focusing on are expert witnesses giving advice on the implementation agreement. We have four witnesses as well as the departmental officials who have been suggested. Three are from Mr. Julian, and one, I'm not sure from whom. The three from Mr. Julian are Elliott Feldman--we've had him at the committee before--Steven Shrybman, from Goldblatt and Mitchell; and Darrel Pearson, from Gottlieb & Pearson in Montreal. We can decide how to arrange those. We also have the Maritime Lumber Bureau because they have some technical concerns about the implementation agreement.

Any discussion on this?

Mr. Julian.

[Peter Julian, NDP, Burnaby—New Westminster, BC]

Mr. Chair, I thought we had agreed to go on a strictly legal basis. If we're talking about technical implementation and the Maritime Lumber Bureau is invited, then there are also B.C. organizations, I think, that would want to approach it from the same standpoint. It enlarges the scope of what we discussed. I'm not opposed to having the Maritime Lumber Bureau here at all; it's just that I don't want to disadvantage other industry groups that would have similar comments to the Maritime Lumber Bureau.

[The Chair, Conservative, Leon Benoit]

Maybe I misspoke. They do want to come to deal with the legal aspects of the agreement itself.

[Peter Julian, NDP, Burnaby—New Westminster, BC]

If you don't mind, Mr. Chair, I'd like to take that under consideration and get back to folks in my part of the country.

[The Chair, Conservative, Leon Benoit]

Yes, Mr. LeBlanc.

[Dominic LeBlanc, Liberal, Beauséjour, NB]

Mr. Chair, perhaps I can help.

Colleagues, on that specific issue, and I don't pretend to speak for the Maritime Lumber Bureau, my understanding is they are in discussion with government officials and some government members. There appears to be a language issue. The language of the agreement in one particular sentence is not reflected in the implementation legislation. They have some legal advice that there's a phrase they would like changed. They're hoping the government member would bring an amendment to that effect. I don't think we need to hear from them. Again, our clerk could check with them. I saw them this morning and that's why I was a few minutes late. I didn't understand they wanted to come before the committee.

I respect exactly what Mr. Julian said. Our intention was to keep the study to the strict legislation, and frankly, this discussion this morning and the one we had on Tuesday are interesting enough. If we want the committee to look at some of these other issues, our inclination would be to do a study of the legislation, but not to procrastinate and not to drag it on. I think the concerns of the Maritime Lumber Bureau could be answered in an amendment that may come from the government with respect to a language issue and they don't need to appear as witnesses. Obviously, if they can't come to an agreement on the language--we don't want to go into that now--then they'll probably push to come here. If we open that floodgate, then we're getting away from the initial discussion of Mr. Maloney and others.