International Trade Committee on Nov. 28th, 2006

[Carol Osmond]

There may well be certain instances, and we certainly have the procedures in place in Canada for companies to bring safeguard actions. You know, in private practice I was involved in dumping investigations and so on. We certainly have those remedies available in Canada. However, those remedies apply in very exceptional circumstances and under very specific conditions. They don't represent, obviously, a broad policy solution for addressing competition from foreign markets in the Canadian market. We can't rely on those types of protectionist measures, I think, to protect us from globalization and competition from other countries.

In terms of how we compete globally, first of all, as I mentioned, it's not a situation where exports are good and imports are bad. I think imports contribute to our ability to export, and imports are becoming an increasingly greater percentage of the value of our exports, so we have to be able to take advantage of those lower-cost sources of supply around the world.

Certainly if I look at the preoccupations of our members, clearly the cost, the global supply chains, being able to source globally, being able to reduce the costs associated with moving those goods around the world, and having visibility--you often talk about visibility in the supply chain--are critical concerns.

There was a study, actually, that was just released by Industry Canada, and one of the things they address in that study is how critical logistics and supply chain management are in the ability of Canadian companies to compete. In Canada we fall behind other countries, and I guess particularly the United States, in using technology and other procedures to measure the costs associated with logistics and turnover of inventory and so on.

So those are areas where in order for our companies to export and take advantage of export markets, they have to be able to reduce the costs associated with logistics and moving their goods into the country and into export markets. Issues related to logistics are becoming increasingly important in terms of being able to access export markets.

I mentioned the issue of counterfeit and pirated goods that are coming into this country from China. That's clearly a situation where China is not playing by the rules. And yet in this country we've actually paid very little attention to this issue. And our markets, not just the Canadian market but markets around the world, are being inundated with products that don't meet Canadian safety standards and are competing with legitimate products. It has a tremendous economic cost. It has an impact on our tax revenues, and there are health and safety issues as well. So that's another issue, I think, in terms of trying to compete, we need to address with China.

[The Chair, Conservative, Leon Benoit]

Thank you very much.

We'll now go to the Conservatives, to the governing party. We'll start with Ms. Guergis, and then if there's time left, we'll go to Mr. Menzies.

[Helena Guergis, Conservative, Simcoe—Grey, ON]

Good morning. Thanks very much for being here.

I just have a couple of comments. Further to what my Bloc colleague and my Liberal colleague had touched on, the motion we have.... I'm just simply going to read it.

The Committee calls on the government of Canada to stem the current market disruption, in specific categories, in the Canadian apparel industry, by immediately invoking Article 242 of China's accession protocol to the WTO and putting in place restrictions or safeguards on the growth of specific categories of apparel imports from China.

Some of the information I have here indicates that in 2005 we had a few companies--in fact it was less than 1% of the Canadian apparel industry--that made general requests to the government to undertake these consultations with China with a view, of course, to imposing quotas on imports of Chinese apparel products. They were aware that the United States and the European Union had imposed these kinds of safeguards. And apparently these safeguards have caused some widespread disruption in the EU.

I'm wondering if you would have any insight as to what that disruption would be. Could you give us any information on what that was, if you do know anything, and how that might play out here?

[Carol Osmond]

Sorry, could you repeat the last part of the question?

[Helena Guergis, Conservative, Simcoe—Grey, ON]

I was telling you that there were some companies that had asked the Canadian government to impose import quotas on Chinese apparel products, to put the safeguard measures in place. I also had mentioned that the safeguard measures were actually put in place by the U.S. and the EU, and that there was some very widespread disruption within the EU. I'm wondering if you have any insight as to what that disruption was, how it played out, and what we think could happen here.

[Carol Osmond]

Unfortunately, I can't help with that question.

[The Chair, Conservative, Leon Benoit]

Ms. Osmond, you were here to discuss Canada-NAFTA issues.

Go ahead, Mr. Menzies.

[Ted Menzies, Conservative, Macleod, AB]

Thank you.

Thank you very much to our witness for coming on such short notice. We realize that everyone's lives are very busy, and we do appreciate your coming.

I'm most impressed that you've been involved throughout NAFTA, in representing your industry. We recognize the importance of trade, especially to the people and industries that you represent.

When I look at the makeup of your membership, I think the thing that a lot of people don't recognize is that your members are not only exporters, but they're importers of parts of their products, so they need to be aware of import restrictions. They may import a piece, which they add onto before they export it. Most people think of exporters as just being exporters. One of my concerns--and I would like you to share your thoughts on this--is that we need to make sure that we, in our protectionist mode, don't put restrictions on imports that are a base product to which we add value before we export it. A lot of people like to put up barriers to stop imports coming in, and limiting imports can inhibit our Canadian companies from being competitive. Can you share your thoughts on that?

[Carol Osmond]

I think that was the point I made earlier. In terms of our membership, we have members who are service providers, brokers, and lawyers, and so on. In a recent survey of our membership that we conducted, if you just look at the companies that are importers and exporters, over 60% of them indicated that they are primarily importers and exporters. They clearly do both. It's critically important to those companies that they have access to foreign markets, to be able to source raw materials or parts and components, and to be able to bring those into the country and, as you mentioned, incorporate them into products that are then exported from Canada and that may in fact turn out to be components of other products before they're finished.

[Ted Menzies, Conservative, Macleod, AB]

Do I still have a bit of time, Mr. Chair?

[The Chair, Conservative, Leon Benoit]

You do indeed. You have three minutes.

[Ted Menzies, Conservative, Macleod, AB]

You referred to the issue of APHIS. I'm trying to remember the expansion of the acronym. It's food trade, is it?

[Carol Osmond]

I had to write it down.

[Ted Menzies, Conservative, Macleod, AB]

I was trying to remember what APHIS stood for. Is it agrifood import? Is that what it is?

[Carol Osmond]

It's an inspection.

[Ted Menzies, Conservative, Macleod, AB]

Agrifood inspection service, is that what it is? We should have it accurately for the records. I guess we're caught in a bit of a conundrum with that. We realize that food safety has to be the ultimate goal in protecting consumers. Unfortunately, it can be misconstrued and be misused into being a non-tariff barrier. Can you share some of the concerns that your members would ask you to raise about that, keeping in mind that I understand that your members are ultimately concerned about food safety? How those can be used against them as a non-tariff barrier is my point.

[Carol Osmond]

Right. It's the Animal and Plant Health Inspection Services fee--APHIS.

[Ted Menzies, Conservative, Macleod, AB]

Oh, okay. Thank you.

[Carol Osmond]

This APHIS fee applies to all imports into the United States, and traditionally Canada has been exempt from that fee because of the special relationship that we have with the United States. When the interim rule was published in the U.S., this was a key concern for many of our members, and not just members who are involved in the food industry and the agricultural food industry. It's important to realize that the United States is proposing to impose this fee on all commercial vehicles going into the United States, as well as on air passengers. That was one of the concerns--that it's across the board, that it will impact all imports going into the United States and all modes of transportation, and not just food and agricultural exports into the United States.

The other concern associated with the fee was the potential delays at the border, the delays that might be associated with collecting the fee. The fee is, I think, $5.25 per vehicle, so they were envisioning border personnel on the U.S. border having to make change. For the majority of carriers that would not be an issue because they could pay the fee upfront and display a decal on their vehicle and so on, but certainly for a percentage of exports that was a concern. So it was collection of the fee. Also, it indicated that the United States planned to increase inspections of shipments going into the United States.

There are a couple of concerns here. First of all, is this really the best way for the United States to be addressing their concerns? The U.S. has indicated that one of the reasons they decided to impose this fee and to increase inspections coming in from Canada is that they perceived that the risk had increased of goods being transshipped from Canada into the United States. There were instances of Spanish oranges going into the United States marked “Made in Canada”, so they perceived that there was a greater risk from Canada. Actually, there were a lot of responses from Canada from different associations, including IE Canada, but there was also a submission made by the Canadian embassy that went through, in considerable detail, responding to all the various risks that had been raised by the United States. It was a fairly detailed letter, and if you haven't read it, I would suggest that you take a look at it. I think it's very helpful. Essentially the argument from the Canadian government and from Canadian industry was that there are better ways of dealing with these issues, of addressing the concerns of the United States, and that we should work together cooperatively.

On a broader level, if we look at the expenditures made by government, as well as industry, we've been spending billions of dollars to try to facilitate trade between Canada and the United States and to ease the burden at the border. It's an uphill battle. As I mentioned earlier, the sense is that the border is actually becoming thicker, rather than thinner. We're investing all of this effort and resources in trying to improve our infrastructure and to improve customs processes at the border, and then suddenly a separate agency comes in with a new fee and an intention to increase inspections at the border, which clearly undermines this overall goal that we have of trying to facilitate movement of goods between Canada and the United States. I think it's an indication that we have to be constantly vigilant in terms of policies and procedures that are adopted in the United States that can hurt Canadian companies exporting into that market.

[The Chair, Conservative, Leon Benoit]

Thank you.

Do you have a very short follow-up, Mr. Menzies?

[Ted Menzies, Conservative, Macleod, AB]

I have a request.

Could you share that letter with the clerk of this committee, please?

[Carol Osmond]

Sure. In fact, I may have a copy with me. And I can also send on to you the submission made by IE Canada and some other Canadian associations.

[Ted Menzies, Conservative, Macleod, AB]

Good, thank you.

[The Chair, Conservative, Leon Benoit]

That would be very much appreciated. Thank you.

Mr. Julian, for seven or eight minutes.

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

Thank you, Mr. Chair.

Thank you, Ms. Osmond, for coming today on short notice. It's much appreciated.

I want to come back to the actual association itself, because you made reference to the 750 members. It would be interesting to know what the median size is of those businesses, and what the general ratio is between service and non-service. You cited some statistics, both including all manufacturers and service industries, and then without, just limited to manufacturing itself and the percentage of imported components within that manufacturing, and then in terms of sectors themselves.