International Trade Committee on Feb. 6th, 2007

[John Maloney, Liberal, Welland, ON]

I'm John Maloney, a member of Parliament from Ontario for the riding of Welland, which is in the Niagara Peninsula.

[Navdeep Bains, Liberal, Mississauga—Brampton South, ON]

My name is Navdeep Singh Bains, and I'm the member of Parliament for Mississauga—Brampton South. It's just west of Toronto.

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

My name is Lui Temelkovski. I'm the member of Parliament for Oak Ridges—Markham on the north side of Toronto. I was born in Macedonia, a part of the world you come from.

[Serge Cardin, Bloc, Sherbrooke, QC]

Good morning, ladies and gentlemen. I am Serge Cardin and I am the member for the riding of Sherbrooke, which is located between Montreal and Quebec City. I am a member of the Bloc Québécois, the sovereignist party in Ottawa which represents the majority of Quebeckers.

[Guy André, Bloc, Berthier—Maskinongé, QC]

My name is Guy André, a member of the Bloc Québécois for the riding of Berthier—Maskinongé.

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

I'm Peter Julian. I'm a member of the NDP from British Columbia, representing the riding of Burnaby—New Westminster.

My party, the NDP, is a member of the international association of social democrat and labour parties.

[The Chair, Conservative, Leon Benoit]

Thank you all very much.

I will explain the role of this committee and a bit about how we operate. We usually meet twice a week. Sometimes we'll have a meeting of the subcommittee on agenda. Some committees have subcommittees operating as well, but ours doesn't at this time.

The committee studies and reports to the House on all issues that the committee members together decide they want to study. We study those and then report to the House. The report will be tabled in the House as a recommendation to government. That is, of course, on any issue dealing with international trade, in the case of this committee.

The committee is currently doing a study of Canada's trade policy. We're looking to others from other countries to help us determine, from their own experience, what has worked in improving trade in their countries. We'd certainly welcome any of that advice from you today as you speak to us, answer the questions, and make your presentation.

The committee, as you know, is made up of members from all parties in the House, divided roughly according to their percentage of members of Parliament in the House of Commons.

I want to introduce the staff here at the committee as well. There is Michael Holden, Peter Berg, and Elizabeth isn't here today. We have as well the clerk of the committee, Norm Radford. He's the person who did the work in setting things up with you so that you could be here today. The researchers provide expert advice, and we appreciate it very much.

This is a regular meeting of the committee. We will be breaking for lunch sometime shortly after noon for about ten minutes to get some sandwiches. You can bring them back to the table, and we'll carry on with the meeting. We only have roughly an hour and three-quarters left and we want to use that time to best advantage.

Having said that, we'll get right to our presentation. I understand just one member of the delegation is making the presentation. If you would go ahead and do that, we're looking forward to it.

[Gudlaugur Thordarson]

Thank you, Mr. Chairman and committee members.

I would also like to introduce our staff. We have the secretary of the delegation, Mr. Andri Luthersson, and also Céline Nerny and Stigur Stefansson.

My constituency, because I forgot to mention it, is Reykjavik, the capital of Iceland. And my party is the Independence Party, which is a conservative libertarian party. I know that may seem strange, but that's more the European view.

But allow me, first of all, to thank you for your warm hospitality here in Ottawa. My committee has for a long time been looking forward to this visit, and to being able to exchange views with the honourable members of the Parliament of Canada. In fact, the EFTA parliamentary committee has, ever since free trade negotiations between EFTA and Canada were launched in 1998, sought to visit Ottawa and thereby add its weight to a successful conclusion of negotiations.

As you may know, for many years negotiations were not producing any results, as they were de facto stalled. However, last year things moved quickly in the right direction, and without being privy to information on the actual status of the negotiations, I hope that Canada and EFTA will be able to conclude a free trade agreement very soon. Of course we, the members of the EFTA parliamentary committee, like to think that negotiations have been stepped up after the word got out that we were planning this visit. Whether or not this was the case, I am sure that all of us gathered around the table can agree that a free trade agreement between EFTA and Canada would be a hugely important step that would bring benefits to all parties involved.

Before giving the floor to my colleagues, both the EFTA countries and Canada are important players in international trade and have a vested interested in seeing the Doha Round come to a successful conclusion. The EFTA countries are committed to a positive outcome of the Doha Round and have stated that this is the first and foremost goal. On the other hand, we cannot overlook the current rush towards bilateral free trade agreements in all parts of the world. The reason is the obvious troubles in which the Doha Round finds itself. This rush, which has by many been labelled as a global race for FTAs, entails a growing potential of discrimination for economic operators. EFTA, for its part, views bilateral trade agreements as complementary and not as a substitute to the multilateral trading system.

These days, the free trade arena is a highly competitive one. EFTA's main competitor on the trade scene is the European Union, of which none of the EFTA countries is a member. Since the early 1990s, EFTA has sought to gain access to the same markets as the EU and has by and large followed the same goals as the union. EFTA has established an extensive network of contractual free trade relations in central and eastern Europe--now mostly part of the EEA--as well as in the Mediterranean region.

Free trade agreements with Mexico and Chile, with Singapore and Korea, and with SACU extend the network across the Atlantic into Asia and Africa. At present, the EFTA network consists of 15 free trade agreements and nine declarations and cooperations. Lately, however, EFTA has taken on a more proactive role on this, in many instances one step ahead of the EU in its efforts. EFTA has recently concluded free trade agreements with Egypt, the South African Customs Union, and Korea, and several more agreements are currently under negotiation or preparation.

We, the parliamentary committee, are very supportive of EFTA's third-country policy and have done our utmost to encourage the EFTA Council to embark upon an ambitious trade strategy that would include the up-and-coming players such as India, Russia, China, and Japan. This seems to have borne fruit, since EFTA and India recently launched a joint feasibility study that could lead to a comprehensive economic agreement soon. As for the other nations I mentioned, EFTA or individual EFTA countries are currently exploring ways of strengthening existing trade relations.

Earlier I spoke of the European Union. It needs to be kept in mind that the EU is our biggest market and that three of the four EFTA countries are participants in the internal market through our membership in the European Economic Area, the EEA. The fourth country, Switzerland, conducts its trade relations with the EU through bilateral agreements. I emphasize this to draw your attention to the fact that although the EU is our main competitor in international trade, as I explained earlier, at the same time the EU constitutes a hugely important market for us, an internal market of which we are full members, and of course the EU is one of our closest friends.

Mr. Chairman and honourable members, our purpose with this visit is to add our weight to a successful conclusion of a free trade agreement between EFTA and Canada, but it is not only that. We are obviously very keen to learn about your views in all respects linked to international trade.

It would be extremely interesting for us, the EFTA parliamentarians, to hear your committee's view on the Doha Round in general. We would also be very interested in hearing your views on NAFTA's current status and future prospects.

Lastly, it would be very beneficial for us to learn about Canada's foreign trade strategy and your committee's views on the current state of play in international trade.

Thank you, Mr. Chairman.

[The Chair, Conservative, Leon Benoit]

Thank you very much for your presentation. We will now go to questioning.

In terms of our views on NAFTA, you will find some differing views, depending on whether you're speaking to members of the government side, the official opposition, or the member of the New Democratic Party, as we've heard at this committee before, but you'll find that out yourselves.

We'll go directly to the questioning now.

Mr. Bains, from the official opposition, will begin the questions. He has seven minutes.

[Navdeep Bains, Liberal, Mississauga—Brampton South, ON]

Thank you very much, Chair.

I'd also like to thank the parliamentarians, the ambassadors, and the chairmen for your presentations. Welcome to Canada. I hope you enjoy our beautiful country.

As you know, Canada is a trading nation. We have a population of 34 million, based on the latest census data. We're an exporting nation and look for markets with which to trade our goods and services. The vast majority of our jobs are linked directly or indirectly to trade. Trade is a very important component of our foreign policy and our foreign strategy. There seems to be a bit of a standstill when it comes to our ability to sign free trade agreements, especially in the past few years. We haven't signed any major free trade agreements with any of the countries or nations we're currently negotiating with.

One of the areas that were discussed at this committee--which I read about, since I recently joined this committee--is the focus on emerging markets. There's been a clear direction for us to focus on emerging markets like China, India, and Brazil. But I think there are opportunities with developed markets, especially Europe, so I'm glad to see you here today.

I know we have trade that amounts to about $11 billion, and there's close to $15 billion of foreign direct investment in our country. So I'm encouraged to see that a meeting took place last month, and that this trade agreement with the EFTA is coming along and we're nearing its conclusion.

But there are some major concerns that have been expressed to me by my Atlantic caucus and members who represent major shipbuilders. The area of concern in this free trade agreement is subsidies by countries. The example that has been brought to my attention by my caucus colleagues from Atlantic Canada is subsidies to shipbuilding companies and shipbuilders. We want to know what your views are on the elaborate direct subsidies that are given to shipbuilders. Is that something that has changed or will change, based on these negotiations that are taking place?

[The Chair, Conservative, Leon Benoit]

Go ahead, please.

[Gudlaugur Thordarson]

When it comes to free trade agreements, there are always sensitive issues with every country. What you mentioned is a very sensitive issue in your country and at least one of our member countries in EFTA. So it's not as if EFTA has any common views on those things. We know that when we sit down at the table, it doesn't matter what country or economic area we're dealing with, there are always issues that are sensitive to the governments of member nations, such as subsidies and things like that.

Maybe my Norwegian colleague would like to add to that.

[Svein Hansen]

Thank you, Chairman.

In Norway, we have faced big changes in the shipbuilding industry over the last 20 years. In my home town of Fredrikstad, two big shipbuilding companies have closed down. I think we have succeeded in specializing some of our shipbuilding industry, which is now doing very well, but there are no subsidies in the shipbuilding industry from the Norwegian state. We think that's how it should be. So I can say that there is no subsidization of our shipbuilding industry.

[Navdeep Bains, Liberal, Mississauga—Brampton South, ON]

Is there any government intervention in the shipbuilding industry that you're aware of, or are you saying there's absolutely no intervention and no subsidies currently?

[Svein Hansen]

No intervention. No.

[Navdeep Bains, Liberal, Mississauga—Brampton South, ON]

Okay. Would anyone else like to comment on that?

The second question I had with respect to EFTA is this. One of our major trading partners is the United States. Because of NAFTA--as discussed earlier, people have different opinions--we have a strong trading partner. In terms of international trade agreements, we tend to follow their lead in some areas where they have done a great deal of work ahead of us. South Korea is an example. Are you engaged in any trade deals with the United States, and is that being used as a negotiating tool with our trade deals with you?

[Gudlaugur Thordarson]

No. It's easy to answer that. There are none at all. The only member state that has been seriously negotiating with the U.S. is Switzerland. I don't know if my colleague wants to comment on that. But the answer is no.

[The Chair, Conservative, Leon Benoit]

Go ahead, please.

[Eugen David]

This government had negotiations for a short time with the United States about the possibility of coming to an agreement, and we stopped these negotiations because we had agricultural issues that were not at the same level of discussion with the United States. But we think that's not the end of the story. We have a very pragmatic attitude toward free trade. We try to do something, and if it's not possible, we'll not say that we've stopped.

In future, we have also some negotiations with other big countries, such as Japan. We have also started, together with our friends from the EFTA states, in India, China, and Indonesia. Therefore, we must try to find common ground in a pragmatic way and then we should have a result. Perhaps it will be a small result and a first small steps, and then we can build on this. Therefore, we will also be very happy if we can find an end to this long discussion with Canada, because it's a first step, and we can build up for further steps here in North America.

[Navdeep Bains, Liberal, Mississauga—Brampton South, ON]

A first step for us in terms of our access to the European Union would be this agreement, whenever it comes to a conclusion. It would also be a benchmark for us to ultimately have free trade discussions with the European Union as well.

I have identified a clear area from a Canadian perspective when it comes to the shipbuilding industry. Are there major concerns you feel from your perspective that we need to be attuned to or we need to be sensitive to when we're talking about free trade between EFTA and us?

[Gudlaugur Thordarson]

As I mentioned before, I think it's a little bit different among the member states, but you could say—and I think it's no secret—when it comes to the same problem that we are facing in the Doha Round.... When it comes to Europe, it's usually agriculture, which is the biggest obstacle. But of course it's different among the member states, both of the European Union and EFTA.

[The Chair, Conservative, Leon Benoit]

Thank you very much, Mr. Bains, your time is up.

We go now to the Bloc Québécois, Monsieur Cardin, for seven minutes.

[Serge Cardin, Bloc, Sherbrooke, QC]

Thank you, Mr. Chair.

Good morning, ladies and gentlemen. It is a pleasure to have you here today, and of course, we hope this meeting will benefit both parties.

Negotiations begun quite a while ago, but the main roadblock has been the naval industry. I heard you say earlier that your naval industry does not get any subsidies. And in your view, Canada could be granting some, directly or indirectly.

Let me take a very concrete example. In Quebec, in last October or November, the Norwegian company Teco Management tried to take over the Davie shipyard. To make this transaction, it needed financial support. The Quebec government granted a 50% guarantee on a $15.5 million loan, and wrote off $16.4 million on a debt obligation. This governmental measure helped a Norwegian company in the naval industry.

A free trade agreement sets rules, but this does not necessarily prevent private businesses from having operations in various areas, including the shipbuilding industry.

In your view, what are the factors that should be eliminated or mitigated in the shipbuilding industry in Quebec and Canada?

[Gudlaugur Thordarson]

Mr. Chairman and committee members, when it comes to these details, it's not the role of the parliamentary committee to go through those things. We have people who take care of our negotiations. We have not done those things. We have set some limits, as a parliamentary group, for each sector. That's just not the way we work.

Quite honestly, when you ask me about those details, I can say they haven't been discussed at this table. We are more strategic in terms of what we want to do with EFTA. Of course, when it comes to finalizing the negotiations, each parliament has to accept it, and so on and so forth.

I don't know if my Norwegian colleagues want to comment on this, but when it comes to these details in this and other areas, they are not discussed at this committee.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Thordarson.

Mr. Hansen has indicated that he would like to respond.

Of course, this is an issue between a private Norwegian company and the Government of Quebec, so it's very difficult for you to answer, but go ahead, Mr. Hansen.