International Trade Committee on Dec. 12th, 2006

[The Chair, Conservative, Leon Benoit]

Good morning, everyone.

We should get right into the committee meeting. We have a real time issue to deal with this morning because we have two witnesses. We have an hour to deal with the witnesses and with Mr. Julian's motion. We were considering extending it until 11:30, but in fact most of the members just can't stay, so we really have to try to get this finished by 11 or very shortly after.

We're going to have to have short presentations and get right to questioning. We may only get one round of questioning. Hopefully everyone's carefully considered their discussion on Mr. Julian's motion so that can be done briefly and concisely and we'll get to the vote.

If that's agreed, that's the way we'll proceed. We'll go straight to the witnesses. By the way, this is meeting number 41 of the Standing Committee on International Trade. We are dealing with Mr. Julian's motion on the clothing and textile industry.

We have as witnesses today, from the Syndicat Conseil du Québec, Lina Aristeo, director; and from the Canadian Apparel Federation, Elliot Lifson, president, and Bob Kirke, executive director.

We'll go right to presentations starting with Ms. Aristeo.

[Lina Aristeo, Director, Syndicat Conseil du Québec]

Good morning, and thank you for having us here. I am Lina Aristeo. I am the director of UNITE HERE in Quebec. UNITE HERE is a union that represents traditionally apparel and textile workers not only across Canada but across North America. Since our merger with the Hotel Employees and Restaurant Employees union, we also represent employees in the service sector, but I am really here to talk to you about the concerns that we have regarding the apparel industry and the loss of jobs in the apparel industry.

I believe Wynne Hartviksen came to see you last week, so I will try not to say the same things as she did. However, I did have just a brief period of time to read her notes.

I am also international vice-president of UNITE HERE and the vice-president of the Quebec Federation of Labour. I have brought with me here today--and I think it is worth noting, although they are only observers and I will dedicate part of my time to their presentation--some important people: Claudio Corsetti has worked for Peter Stone Fashion and has worked in the apparel industry for 28 years. He came from Italy, and this is the only job he's ever known. Marie-Sylvina Jean has worked in the apparel industry for 21 years, and this is the only job she has ever known since she came from Haiti. Francesca Uccello has worked in the apparel industry for 11 years. After taking care of her children, this is the only job she's ever known. Solange Jean-Pierre has worked in the apparel industry for 27 years since coming from Haiti in 1978. Chantal Corriveau has worked in the apparel industry for 28 years. And Eric Lavoie has worked in the apparel industry for 23 years.

I am taking some of my eight minutes to present these people to you because Wynne has made the case for having safeguards, and it's clear that I would also like to see that happen.

The motion brought by Mr. Julian passed with regard to limiting the increase of Chinese imports. But sometimes, and far too often, we forget to think about what these black words on white paper mean. What they mean is that these people here, all the people I've presented to you, were advised about two or three weeks ago that their shop is going to close in March.

Since we began this campaign in April 2005, nothing has happened except that people like these have lost their jobs. I would like the Canadian government to do something, and what they can do is to put safeguards in place.

I'm also accompanied by Amarkai Laryea and Luis Millard, who work for UNITE HERE and who have been supporting this campaign throughout its length.

So what have we done since 2005? Since 2005 this problem has gotten bigger. More jobs have been lost. There hasn't been an end to the loss of jobs. The job losses have been increasing dramatically since 2002. In fact, since 2002, in the apparel industry there have been 50,000 jobs lost in Canada, about 25,000 of which have been in Quebec.

Why do I specify Quebec? Because this is really a Quebec issue. Although it is a federal issue and we are presenting this to the federal government, the majority of the jobs in the apparel industry are located in one province, essentially in one city, Montreal. Montreal is the second most important manufacturing centre for apparel in North America. It's a place of distinction, and I think we should save what we can of the apparel industry.

I think when we talk about T-shirts being made in other countries, or socks, or underwear, all these things can be done to a great extent in Canada, but I think we've reached a certain point where we need to figure out what our apparel industry is going to be. What are our niche markets going to be? Montreal still makes some of the best suits in the world. I think that's one of the industries that we should put as much effort into protecting and safeguarding as we can. Limiting the growth of Chinese imports is one step in the right direction.

Last week's announcement by the government of $4.5 million to cut tariffs on imported textiles is a step in the right direction, but in my opinion, it's a drop in the bucket. The first question I asked our researcher was whether this is per company or for the entire industry, because $4.5 million will not save these jobs, even the eight jobs in this room, let alone the over 30,000 in the country.

We've met with several different ministers, especially those from Quebec, in particular Minister Bernier. We have members in Beauce who make jeans--there are very few places that still make jeans in Canada--have met and talked with Minister Bernier, who has been receptive, but who hasn't taken any action to date.

We have begun to educate our members as to what's been going on. On October 20, we had a rally where 2,500 members walked off their jobs, and when you make $8 an hour, losing four hours of pay is a big deal.

Mr. Julian was there. Mr. Cardin's party had sent representatives. As well, the Bloc and the NDP were there to support us in this. What's important is that there weren't just 2,500 workers saying, “Someone has to stand up for us, because we're doing what we can, but someone has to bring it back. We can throw the ball. The ball has to be thrown back as well.” What's important is that we had employers marching there with the union.

These aren't times anymore where we get to sit at a negotiation table and claim for these huge raises or fight against the boss. Now more than ever, unions and companies need to work together so this industry can survive. So that's just one example of how the employers of the places where we represent members are in support of this campaign. Although many large companies will have the funds and the budget to do this—can come and lobby, can come and talk—most of the people are taking all their time to just figure out how they can get their company to survive, to find a new product, to find new markets.

When, for instance, we ask Samuelsohn to come and speak here today, and I would have very much liked them to come, and we were trying.... They don't have time to come to Ottawa; they really don't, because for them it's a daily struggle. It is a daily struggle. They support this campaign nonetheless, and they wish to see safeguards implemented as much as I do, but for them, between getting their order out today and coming to see you, unfortunately, you come second. That's just the state of the industry.

When I sometimes speak as if I'm exasperated, it's because the industry is exasperated. When I say “the industry”, aside from just the employers I speak with, I mean it's the workers. They don't know what to do anymore. Again, they're losing another full day of pay so they can come here, just so that at least someone can see their faces. In March they're all going to lose their jobs, and what are they going to do? Don't tell them you want to recycle them. I've done the survey: with one exception, these people are all over 50 years old. Although they have great talents and great skills, I just don't see them working at a call centre for Sears, if that call centre still is in Canada.

This is important to us, and the safeguards are a measure that is at our disposal. According to the agreements in the World Trade Organization, a country that feels its economy has been perturbed—and I'm not taking the exact words—can put in place safeguard measures, can limit the increase of apparel imports into our market.

The United States has done this; the European Union has done this. They have negotiated with China. South American countries have; South Africa has done it. The question we ask you is this. Why is Canada not doing anything? There is no justifiable reason not to put in place a measure, which all our competitors have put in place, that is at our disposal.

I'm not going to take any more time, but I will answer questions if you have any.

Thank you.

[The Chair, Conservative, Leon Benoit]

Thank you very much.

We will now go to the Canadian Apparel Federation. I guess Elliot Lifson is going to present.

[Elliot Lifson, President, Canadian Apparel Federation]

Thank you, Mr. Chairman, for the opportunity to appear. I am pleased to be able to provide our comments concerning the issues and the motion under consideration by your committee.

My name is Elliot Lifson, and I am president of the Canadian Apparel Federation. I am also vice-chairman of Peerless Clothing, the largest Canadian apparel manufacturer and the largest single facility in North America manufacturing men's suits. We employ over 2,500 people in our Montreal facility. Sixty cultural communities are represented. I am also chairman of the Chambre de commerce, or Montreal Board of Trade, so I have a great interest in our industry because it's concentrated in Montreal. I also co-chair PROMIS, which promotes the integration of new arrivals in our community, and I do that under the chairmanship of Henri Massé, who is president of the Quebec Federation of Labour.

I am joined by Bob Kirke, executive director of the Canadian Apparel Federation.

In my opening remarks, I would like to speak briefly about our industry, then explain why we do not think imposing safeguards will provide much help to our industry, and then talk about policies that would be of help to our industry. How can we help that industry?

The Canadian Apparel Federation represents over 600 Canadian companies involved in the apparel industry in Canada. The Canadian apparel industry produces a broad range of women's, men's, and children's apparel. At the beginning of 2006, the Canadian apparel industry directly employed approximately 60,000 people, produced over $5 billion of clothing, of which close to $2 billion was exported, 90% of it to the United States.

The apparel industry draws on a range of skills, from relatively low skill and low technology employment to very creative fashion designers, to highly advanced engineering and software development.

As you are all aware, the apparel industry is facing a unique set of challenges, including the effects of trade liberalization, the appreciation of the Canadian dollar, and other trade issues. For these reasons, you are considering the motion at hand. We welcome your interest in our industry.

Last week, Statistics Canada released a study entitled Trade Liberalization and the Canadian Clothing Market. I recommend highly that committee members review the report. In it, Statistics Canada does an excellent job explaining the changes that have taken place in the Canadian apparel trade over the past 15 years. It demonstrates how imports from the United States have declined and how various developing countries gradually took a greater share of our market.

Finally, it documents the market share now taken by China, and that a large portion of increased imports from China replaces imports from other countries, which have been drastically reduced. The report provides an excellent perspective to the discussion you were having concerning safeguards. To quote the report:

Much of the attention paid to trade in clothing focuses upon the recent growth of imports from China, but this mistakenly identifies the shifting composition of the Canadian clothing market as a recent phenomenon, according to a new study published today in the Canadian Economic Observer.

In reality, the turn to China that made it Canada's top source of clothing imports at $3.0 billion in 2005, was just the latest in a series of changes in Canada's trade in clothing over the last two decades.

Clothing imports for the January to September 2006 period were 15% higher than 2005. On a practical and business planning level, apparel manufacturers have known about the end of quotas since 1995. Companies need to adjust. Some have, some have not, so even though the motion says “time to adjust”, those that have adjusted and survived will survive and go forward--and that's related to management, unfortunately not to the workers, with all due respect to all who are present.

We are living in an era of globalization and freer trade. The world is flat, and we must all learn how to adjust and find our market niches. Many successful Canadian companies have adopted a strategy of producing higher-end or more complex apparel in Canada that requires proximity to market while supplementing the lower end of their apparel line with imports from China or elsewhere. Our big competitive advantage is proximity to the U.S. At 90%, that's our big customer. This business strategy allows Canadian apparel manufacturers to remain competitive and maintain Canadian production.

I will now address the issue of China safeguards. Some have suggested that safeguards against China are a potential remedy for the challenges facing our industry. Our view is that the scope for Canada to enact safeguards is limited, and safeguards are not likely to offer any tangible benefits to domestic producers.

I base this on the facts presented in the Statistics Canada report I mentioned and on the practical considerations involved in establishing China safeguards. Those considerations include six matters.

First, as witnesses told you last week, safeguards cannot reverse the damage that has already been done.

Second, they will allow a 7.5% increase in the current Chinese import volume per year.

Third, at best, they will only be in effect until the end of 2008.

Fourth, the imposition of safeguards on China will only lead to increased imports from other developing countries that are more than able and willing to replace China. It must be remembered that worldwide apparel production capacity is twice worldwide apparel demand. Manufacturers of low-cost apparel in countries such as Bangladesh--and by the way, I was surprised when the LDC initiatives were put in and Bangladesh goods could come in from Bangladesh, never mind quota free, but tariff free. I can tell you that on that one, both the union and I appeared at the table--don't include Bangladesh, include African countries only. The big increase was Bangladesh, 300%, and nobody yelled. India and Indonesia are more than willing to take China's place. Therefore, any safeguards placed on China would likely cause trade diversion to other countries, with little or no benefit to Canadian apparel producers.

Fifth, safeguards will hinder apparel companies that are blending domestic production with imports from China and cause unpredictable bottlenecks in the supply chain that would likely harm a wide range of firms.

Sixth, the motion again stated “time to adapt”. We've known about this for 10 years. In our view, we need to continue to focus not on safeguards, but on the future and on market realities. We need to understand where we can fit in in the highly competitive and highly global apparel market. Leading Canadian apparel companies are increasingly focused on fashion and product development, marketing and supply chain management to differentiate themselves and maintain their position in a very price-competitive marketplace in Canada and the U.S.

Canadians can compete based on superior design and customer service and by meeting the needs of their retail customers throughout North America. We cannot be the low-cost producer, but we can be successful if we offer superior value to our customers.

I must put in an aside. I have a little hobby. I am a professor at McGill in the School of Management in the MBA program and a visiting professor at HEC in the same program.

Let me now turn to the issue of policies for the Canadian apparel industry. If we are to ensure the Canadian apparel industry remains a viable and competitive industry, our industrial strategy must be cohesive and coordinated. Our association appeared before this committee on November 30, 2004, on the eve of WTO quota elimination, which came into effect on January 1, 2005. We identified the conditions we faced then, which we still face today.

They include increased import pressures and reduced competitiveness in export markets, owing to the rise of the Canadian dollar. At that time, we advocated policies that would assist our competitiveness: safeguards were not one of them; tariff reductions on imports and other industrial policies are. Policy recommendations, the textile tariffs, no questions about it.

As we have mentioned in our previous appearances before this and other parliamentary committees, our most important issue remains the elimination of duties paid on imported raw materials. It is our position that duties should be removed on all imported textiles used to manufacture apparel in Canada and that are not made by the Canadian textile industry.

Two years ago this week, December 14, 2004, the previous government announced its intention to eliminate duties on all textiles not made in Canada. The second round of tariff cuts following from that announcement was made last Friday, totalling $4.5 million per year in duty savings, and this one, I agree with Lina, is a drop in the bucket. We're looking forward to more. But this will allow us to keep our jobs here by providing the value-added activity here.

Combined with previous announcements made a year ago, this brings us approximately halfway toward the goal of $70 million. And we were able to make this announcement, as the Honourable Michael Fortier made the same announcement in our facility last Friday.

The Canadian government has made substantial progress in meeting this commitment, but more needs to be done. There are another $35 million in duties being paid on imported textiles that are not made in Canada and for which the Canadian apparel industry should not be paying duties. That's our biggest cost. Certainly in the men's suiting business, fabrics are our biggest cost. So it would be a great help.

Other programs and initiatives. Until 2004, individual firms could access resources that supported adjustment measures through the Canadian apparel and textile industries program, the CATIP program. Currently apparel firms generally cannot access funding under CANtex. We would support changes in line with the amendments to the motion being considered by the committee.

The Canadian Apparel Federation work closely with Industry Canada, through the Canadian apparel and textile industries program, to deliver a range of services to apparel manufacturers. Most of the funding under CATIP is set to end in March 2007. Any extension of this support would be welcome.

Finally, we work closely with the Apparel Human Resource Council, and never mind the need for a well-trained workforce who are working very hard; we have to change the thinking of the management level who direct this workforce. That's where HRDC helped out a great deal in strategic reports, especially for small companies.

I thank you. Remember, you can compete three ways. We're not the lowest-cost producer; we will never be in this country. First is price/value; number two, innovation and creativity; and number three, service, service, service. And it's our proximity to the U.S. market. That's our big market

Thank you very much.

[The Chair, Conservative, Leon Benoit]

Thank you very much, both of you.

Now we'll get directly to questions, and I will be tight on the seven-minute guidelines. We will start with Mr. LeBlanc for seven minutes.

[Dominic LeBlanc, Liberal, Beauséjour, NB]

Thank you, Mr. Chairman.

I'd like to welcome the witnesses, our invited guests and industry workers who are joining us today. Thank you for being here.

Madam Aristeo, I have two questions I'd like to ask you.

Mr. Lifson referred to this briefly in his introductory comments or at the beginning of his presentation, but do you have any figures or details that might further enlighten us on the presence of the Chinese imports in the Canadian clothing industry?

I think all presenters have referred to an increase in China's market share in the total supply of Canadian clothing, but I'm wondering if you can give us some more precision with respect to the increase in the Chinese market share. Also, I'm wondering--and this will come up amongst colleagues, perhaps later on in the discussion about the motion, and this perhaps could be addressed to Mr. Lifson as well--if both witnesses would comment on whether it would be advisable for Canada, once we have triggered the safeguard mechanisms, to negotiate some sort of agreement with China, as I understand the European Union and the Americans have, with respect to imports of clothing and textiles from China.

I wonder if you have any views on whether that might be, as I understood your presentation, Madam Aristeo....

Once safeguard mechanisms have been triggered, do you feel that in the long term, a bilateral agreement could be beneficial to the industry and the workers you represent?

[Lina Aristeo]

Thank you, Mr. LeBlanc.

To answer your first question, I will quote the same feature article as Mr. Lifson has on trade liberalization and the Canadian clothing market. So I quote, as well:

Since joining the WTO in 2002, our clothing imports from China increased by nearly $1.8 billion, an 86% increase. This contrasts with a $0.8 billion drop for clothing imports from all other countries.

China's share of Canada's total clothing supply, which is comprised of imports as well as Canadian clothing manufacturing for the domestic market, has increased fivefold from 6% in 1995 to 31% in 2005. It is second only to Canadian clothing manufacturers who continue to supply 32% of the domestic market.

And then I continue:

Subsequently, in December 2001, China joined the WTO, which meant that in 2002, China's quotas increased for the first time, in accordance with the WTO's Agreement on Textiles and Clothing. As of December 31, 2004, all quotas on apparel imports from China to Canada were lifted. Consequently, in 2005, Chinese imports totalled $3 billion, nearly $2.5 billion more than imports from the US or Bangladesh and twice the value of Chinese imports in 2002. This amount represented an increase of 47% in nominal value over 2004, or an increase of approximately $1 billion.

So I think these figures you all have access to--and I can leave a copy with the clerk if you wish--state the situation.

Although imports in general are a problem, China is a specific, more extraordinary problem. I may be the first union person to come here and tell you that, yes, we should negotiate with China. This comes to your second question, because you know what? China is not going to go away. And they think Canada will have to continue to import.

We have no choice but to continue to import. We have no choice, as much as I wish we could buy only Canadian-made products in Canada and close all trade barriers. Right? That would a utopia for unions. We just can't live that way. Some people may roll their eyes. I'm saying it a bit to contrast from saying we should put the safeguards in place, send whatever notices we need to send to China to put a band-aid on this bigger problem. Because, that's right, what we are asking for is a band-aid measure. But let's start negotiations, and let's talk to China in the same way the European Union and the United States have.

We can compare to South Africa and Peru and these other countries, but let's look at who the players are who are on the same level as we are: the States and the European Union. And so they've done it, and I think we should do it as well.

Thank you.

[Dominic LeBlanc, Liberal, Beauséjour, NB]

Mr. Lifson, did you want to comment on whether we should have a negotiated arrangement, as the European Union and the United States did?

[Elliot Lifson]

It's an interesting question. But if I do the second part, I have to agree with the first part of your question, and I really don't, because I won't negotiate for something that I don't believe is going to function.

My firm belief is that the safeguards, which I agree are a temporary measure, are not going to do anything. In the United States--and I can only do the men's suits--even with safeguards, China was up 4%, because they didn't reach the safeguard level. But Indonesia was up 92%; Vietnam, 13%; and Chile, 40%.

[Dominic LeBlanc, Liberal, Beauséjour, NB]

Excuse me. I don't want to interrupt you, but perhaps you can enlighten me, because I don't know the answer to this. When the European Union and the United States arrived at a bilateral arrangement, had they invoked prior safeguards? What led them to negotiate a bilateral agreement, if it wasn't concerns exactly as explained by Madame Aristeo?

[Bob Kirke, Executive Director, Canadian Apparel Federation]

If I can answer that.

As for what happened in the United States, I'll use as the first example. A number of industries tabled requests for safeguards according to processes that were laid out. Although it's not quite the same, we have the Canadian International Trade Tribunal here that could hear those kinds of safeguard cases.

Essentially what happened was chaos in the marketplace, because once you trigger a safeguard, it's: get in, move it faster. So everything gets moved up faster and creates an amazing disruption in the marketplace, because that's just good sense. If there's going to be a safeguard in place with a certain cap, you move like heck to get in there before the cap takes hold.

Faced with that level of confusion in the marketplace, China agreed--although it did not have to--to negotiate a broader quota arrangement with the United States. And again, the same sort of thing happened in Europe. But if we were to look back about a year and a half, on the cover of BusinessWeek, I think, were the bra wars in Europe. All the retailers were bringing in bras from China and they hit the cap.

There are many opinions about what should be done. But I would not want this committee to think it's just one-two, we'll notify them on the safeguard, they'll say okay, and we'll negotiate a bilateral.

If you were looking at some of the growth rates in 2005 into the States, they were up 700% in some categories, they were up 20%, 10% in some, and the cap was at 7.5%.

So again, I would encourage you to speak to the people at International Trade to have them clearly lay out what the scenarios would be, because it is not a simple process, by any means. Setting aside that our position is in general that they're not appropriate, even if you chose to move forward on them, it's a rough road.

[The Chair, Conservative, Leon Benoit]

Mr. Lifson.

[Elliot Lifson]

In this comment and this study, the conclusion really summarizes the whole thing that we've been referring to. It's really an up-to-date study, and it says:

Most people have come to associate Canada’s trade in clothing with increased imports from China. This paper has shown that the dynamics of trade liberalization are much more complex. Canadian producers initially profited from the introduction of free trade with the US, raising output and employment during the 1990's. Then, trade liberalization gradually allowed increased imports from less-developed countries outside of China. With the extension of this liberalization to China when it entered the WTO late in 2001 and the removal of the remaining restraints on trade in recent years, China’s share of the Canadian market has soared.

—that is correct—

This has been at the expense of imports from other countries, although some remain competitive (such as India, Bangladesh and Mexico). As well, domestic producers have paid a stiff price in terms of lower production and jobs

—that's a fact—

although consumers have benefited from lower prices.

It's a matter of readjusting. It's a new world out there. If closing China was the answer, terrific. That's not the answer. That's not how we can compete in the new global environment. It doesn't work.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Lifson, Mr. LeBlanc.

We now go to Monsieur Cardin and Monsieur André for seven minutes.

[Serge Cardin, Bloc, Sherbrooke, QC]

Thank you, Mr. Chairman.

Good day, ladies and gentlemen. Thank you for joining us today.

Before I begin, I'd like to clarify a comment made by Mr. Lifson. According to our agenda, you represent the Canadian Apparel Federation. Do you in fact represent apparel industry entrepreneurs?

[Elliot Lifson]

I do.

[Serge Cardin, Bloc, Sherbrooke, QC]

How many businesses are represented by the federation?

[Elliot Lifson]

Seven hundred.

[Serge Cardin, Bloc, Sherbrooke, QC]

Has this number decreased substantially in recent years, or has it remained constant?

[Elliot Lifson]

We've lost some members, but gained some new ones as well.

Yesterday, there was a good article in La Presse about a chap from the Beauce region who maintained that innovation was the key to survival in the apparel industry. So then, we certainly do have some new members.

[Serge Cardin, Bloc, Sherbrooke, QC]

I agree with you. To ensure the future of the apparel industry, and of other industries as well, it's important for businesses to face international competition head on, to innovate and to modernize their operations in order to become increasingly efficient.

[Elliot Lifson]

That's right.

[Serge Cardin, Bloc, Sherbrooke, QC]

However, as far as your federation is concerned, it appears that the safeguard mechanisms are still temporary. Madam, on the other hand, represents employees and is especially sensitive to labour issues. I'm not implying that businesses are not particular sensitive to employees, but their focus is primarily on business.

[Elliot Lifson]

I need to set you straight about one thing. I represent the federation, but I also speak for Vêtements Peerless Inc. I don't just represent management. I also speak for the 2,500 employees who work for this company. Make no mistake about that.

[Serge Cardin, Bloc, Sherbrooke, QC]

Ms. Aristeo is calling for safeguards, even though we know these would are only temporary, in order to give business time to adjust. Other measures are needed, because older workers who belong to her union are losing their jobs. One such measure that the government has yet to institute in POWA, the Program for Older Worker Adjustment.

In light of the current situation, what steps must the union, the employee representative, the industry representative and businesses take together to develop safeguards so that textile companies in Quebec and in Canada can truly perform at an outstanding level and even outshine their competition? Perhaps Ms. Aristeo could give us an overview of the situation in terms of safeguards and innovation.