International Trade Committee on May 1st, 2007

[The Chair, Conservative, Leon Benoit]

Good morning, everyone. We're here today to continue with the study on Canada-U.S. trade, dealing with investment issues and the security and prosperity partnership of North America.

We have as our witnesses today, from the Association of International Automobile Manufacturers of Canada, David Adams, president; from the Canadian Association of Importers and Exporters, Mary Anderson, president, and Carol Osmond, senior policy adviser; and from Council of Canadians, Maude Barlow, national chairperson.

We will start with the presentations. I will enforce the eight-minute limit on presentations. They've been kind of getting a little bit longer and a little bit longer over the past few meetings, so I'd ask you to respect the eight-minute time limit. When you're finished, we'll go directly to questions.

We will go in the order on the agenda, so we will start with David Adams for eight minutes.

[David Adams, President, Association of International Automobile Manufacturers of Canada]

Mr. Chairman and honourable members, thank you for the opportunity to appear before the committee today to review Canada-U.S. trade and investment issues and the security and prosperity partnership.

By way of background, the Association of International Automobile Manufacturers of Canada is the national trade association that represents the Canadian interests of 13 international automobile manufacturers that distribute, market, and manufacture vehicles in Canada.

In 2006, AIAMC members sold over 733,000 new vehicles in Canada, representing 45% of Canada's new vehicle market. Additionally, our members sold 61% of all passenger cars in Canada.

While our members' sales have grown, so has their Canadian investment. AIAMC members have invested over $6 billion in manufacturing facilities alone. Annual production in 2006 reached a record of 900,839 new vehicles out of the 2.58 million vehicles produced by the three member companies with production facilities in Canada, which are Honda, Toyota, and Suzuki, through a 50-50 joint venture with General Motors in Ingersoll.

While the majority, 77%, of the vehicles produced by our member companies are exported out of the country almost exclusively to the United States, each of these companies sell more of the vehicles they build in Canada to Canadians. For instance, 45% of Honda and Acura vehicles sold in Canada were produced at Honda of Canada Manufacturing, and 36% of Toyota and Lexus vehicles sold in Canada were built at Toyota Motor Manufacturing Canada. Furthermore, compared to other companies producing in Canada, these three companies have a higher percentage of their NAFTA production in Canada

While many would view the membership of the AIAMC as being importers in the context of the NAFTA, fully 50% of AIAMC members' sales in Canada in 2006 were produced in the NAFTA region. When Kia's recently announced $1.2 billion plant is open for full production in 2009, Porsche will be the only one our 13 members not producing vehicles in the NAFTA region.

If we look specifically at Canada, which is a necessary thing to do in light of some of the SPP initiatives, it's important to remember that Canada has no indigenous auto manufacturers. All auto manufacturers manufacturing in Canada are subsidiaries of multinational companies. Whether or not those companies have head offices in Detroit, Stuttgart, or Tokyo, they are all foreign-owned, but some have been operating here longer.

The SPP is comprised of about 107 key initiatives, 80 of which are oriented towards prosperity, as I'm sure you're aware, and 27 of which are oriented towards security. There are about 300 work items associated with those 107 key initiatives.

With respect to the automotive industry and the members of the AIAMC, the issues pertaining to border facilitation, the development of a regulatory cooperation framework, and national critical infrastructure protection and emergency preparedness are of significance.

The first two items I mentioned were to be pursued sectorally under the auspices of the Automotive Partnership Council of North America, which was originally intended to support the ongoing competitiveness of the automotive and auto parts sectors. Patterned after the Canadian Automotive Partnership Council, this initiative was to be up and running in late 2005, but membership and governance issues have hampered its development. However, the issues the APCNA was envisioned to champion have advanced independently without the council's formation.

In the interests of time, I'll skip down a little further.

As noted earlier, the vast majority of Canadian vehicle production is exported to the U.S., and likewise, the vast majority of vehicles that Canadians buy are imported from the U.S., Asia, and Europe.

With respect to border facilitation, the trade in automotive goods accounts for 25% of all two-way trade between Canada and the United States. The ease with which parts and components move across the border is an important component of an integrated North American supply chain.

Unlike perhaps any other industry, 9/11 added cost, complexity, and thickness to the Canadian border as security measures were imposed on cross-border traffic. While many manufacturers have become FAST and C-TPAT approved to achieve low-risk status, the full benefits of those programs remain unrealized in many cases. While there are now about 20 border crossings with FAST capability, access to those FAST booths at major border crossings has not yet been fully resolved.

With respect to cross-border trade facilitation, it is widely acknowledged that pre-clearance away from the border, prior to arrival at the border, streamlines border crossings and minimizes the delay. However, it became apparent last week that land pre-clearance still requires some work between the Canadian and U.S. governments for it to move forward, but we remain optimistic.

Also of concern to border facilitation is the imposition of the western hemisphere travel initiative at land borders, for instance. It will come into place no later than July 2009 and will require citizens who leave and enter the U.S. to produce secure identification documents. While the American administration has suggested that it will show some flexibility, this requirement has the potential to cause significant backlogs at the border crossings.

With respect to the regulatory framework, differing standards and regulations can be significant inhibitors to trade. The AIAMC and its member companies are aware that the North American Competitiveness Council has focused much of its work on the development of a trilateral regulatory framework for cooperation, with a target date for realization prior to the end of this year. As an industry that is highly integrated on a North American basis, we can fully support the concept of making standards and regulations in all three countries more compatible, as well as eliminating the need for redundant testing and certification procedures.

Given its relatively small market size compared to the U.S.--Canada has about 8% of the total North American auto market--Canada has always worked closely with U.S. regulators in both safety and emissions regulatory development. There have been 14 voluntary agreements between the automotive industry and the Government of Canada that have assisted in creating regulatory alignment with the United States. These voluntary agreements have allowed Canadian consumers to benefit from the most advanced safety and emissions technologies in vehicles at the lowest possible cost. Whether the standards are motor vehicle safety standards or fuel economy and emission standards, given that the vehicles offered for sale are essentially the same in Canada as in the United States, there is no compelling reason why such standards should be different. Thus, we support the notion of the three countries' working together to develop regulations that are as compatible as possible.

This joint regulatory development process should also include the regulation of fuel quality. The automobile operates as a system, and the emissions control hardware on a vehicle will operate only as effectively as the quality of fuel that is combusted in the vehicle. In this regard, we were pleased to learn last week that Transport Canada and the Department of Transportation in the United States had signed a memorandum of cooperation concerning the research and development of a North American fuel economy standard. The objective, as we understand it, is to underpin the development of a stringent, dominant, North American fuel economy standard for regulation beginning in 2011. A fuel economy regulation for Canada that is aligned with that of the United States provides the least disruption in the marketplace and best balances consumers' purchasing requirements pertaining to vehicle utility, safety, fuel economy, and emissions.

The AIAMC and its member companies, with respect to critical infrastructure protection and emergency preparedness, view this as critical. We're referring not only to border crossings, but also to electricity generation, oil pipelines, dams, and telecommunications in each country. We need to have protection strategies in place as quickly as possible. Due to the integrated nature of the North American economy, a failure in the critical infrastructure components of any one country is likely to have a significant impact on trade and business in each of the other North American countries. Likewise, it is important for North American countries to establish individually and collectively an emergency preparedness plan so that in the event of an incident, emergency response officials know what needs to be done and how they can work together with a view to being very quickly able to address the human needs, and within time to be in a position to outline when commerce can be recommenced, based on the establishment of pre-incident protocols.

I do have some other comments with respect to the actual recommendations of the committee, but in the interest of time, I'd be happy to answer questions on those later on.

Thank you, Mr. Chair.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Adams.

We'll move on to Ms. Anderson.

You're presenting on behalf of the Canadian Association of Importers and Exporters, I believe. Go ahead, please, for eight minutes.

[Mary Anderson, President, Canadian Association of Importers and Exporters]

As president of I.E. Canada, the Canadian Association of Importers and Exporters, I'd like to thank you on behalf of the members for the opportunity to appear before the committee to discuss Canada-U.S. trade and investment issues.

Joining me today is Carol Osmond, the senior policy adviser for the association.

I.E. Canada has been the leading voice of the trade community since 1932. It serves small, medium, and large enterprises across Canada. Membership comprises importers and exporters, as well as a range of service providers to Canada's trade community. We have a growing membership that now exceeds 800.

In a recent survey conducted by Export Development Canada, EDC, 85% of 1,500 Canadian business executives surveyed agreed that international trade is an important and a significant contributor to Canada's economy. However, no longer can simply expanding exports improve competitiveness. Imports are also an important engine of the Canadian economy. The import content used to make up Canadian exports has been growing steadily, with 61% of Canadian exporters indicating that their companies' exports of products or services include imported component materials. If Canadian companies are to be globally competitive, there is a need to be able to use both imports and exports.

Therefore, in developing a Canadian trade policy, it is important to take into consideration that Canadian competitiveness depends on global supply chains, as many inputs incorporated into those products from both domestic consumption and export to the United States and elsewhere are sourced globally.

Given the nature of our association and its membership, our trading relationship with the United States, especially with our shared border, is clearly a key area of concern. Our association is a supporter of the security and prosperity partnership of North America, in particular, for initiatives intended to facilitate the movement of low-risk goods and persons across the Canada-U.S. border.

Even before the tragic events of 9/11, Canadian business was becoming increasingly concerned about the delays associated with and the costs of crossing the Canada-U.S. border and the impact on Canadian competitiveness. At the time, our challenge was to convince the U.S. government that the border was a problem that deserved its attention. We could never have foreseen how suddenly and dramatically our shared border would become a priority for the United States. There are still those in the United States who believe 9/11 terrorists entered the United States through Canada.

The prosperity of Canadians and our ability to maintain and create jobs depend on our ability to trade and, in particular, our ability to trade with the United States. Whether we like it or not, the U.S. will set the terms for access to its market. Today access to the U.S. market increasingly means satisfying U.S. concerns about security. Through mechanisms like the SPP, the Canadian government has the means of influencing the measures adopted by the U.S. to ensure that the interests of Canadians and Canadian business are taken into consideration.

The cross-border relationships between businesses and associations, such as those being developed through the North American Competitiveness Council, as well as independently through our sister associations in the two countries, such as I.E. Canada's relationship with the American Association of Exporters and Importers, are also crucial to influencing U.S. decision-makers.

We have to be constantly vigilant. Laws passed in the United States have an impact on Canadians and have unanticipated ramifications. The western hemisphere travel initiative and the new APHIS, or Animal and Plant Health Inspection Service, fees are two examples of initiatives that threaten to undermine the efforts to thin our border.

However, it's not only about maintaining access to the United States market, as pointed out earlier in the remarks by a representative of the Canadian Chamber before this committee last week. Canadians and Americans not only trade with one another but they also manufacture together. Since NAFTA, some 13 years ago, large sections of our economies have become highly integrated, and our industries are becoming truly North American. Thirty-four percent of the bilateral shipments of goods is comprised of inter-company trade, and over 70% is comprised of inter-industry trade. To compete against emerging economic titans like China and India, Canada, the United States, and Mexico have no other choice but to work together.

We recognize that members of this committee are concerned about transparency of the SPP process. There are over 300 action items under the SPP, and Canada works most closely with the Canada Border Services Agency, which is involved with 100 of these.

CBSA has had to establish priorities that fortunately largely coincide with those of our members. They include implementation of an advanced commercial information e-manifest, to which the government recently committed $369 million over the next five years; establishment of bilateral border contingency and business resumption plans in the event of a pandemic, natural disaster, or terrorist act, and whether this could impact either a partial or a complete shutdown of the border; and making Canadian Partners in Protection, PIP, compatible with the U.S. customs and border partnership against terrorism, which will hopefully result in mutual recognition of these two programs.

Members of our association have been involved and will continue to be actively involved in these consultations relating to these initiatives. We're a member of the CBSA steering committee on external stakeholder partnerships. That network was established by CBSA to develop consulting with the trade community. We've been involved in a variety of other projects with CBSA, including border contingency planning. Our members have participated in table-top exercises, and our association has been part of the PIP program to make it compatible with C-TPAT. We are participating in consultations with Transport Canada on air cargo security, and we believe that this will ensure success of these initiatives.

It's essential to consult members of the trade community so their concerns and business realities can be taken into consideration. We're very pleased with the excellent working relationship we have with CBSA.

We're also pleased with the level of consultation by the Canadian Council of Chief Executives, which as you know serves as the Canadian secretariat for the NACC. As it was preparing its report on enhancing competitiveness in Canada, Mexico, and the United States, we were able to ensure that our members' concerns and priorities with respect to the border were incorporated into the report. We also contributed to the section on standards and regulatory cooperation, particularly in the areas of food and agriculture, and intellectual property rights.

Another key area of concern for our members includes border infrastructure. Our members are less concerned about border release times than the time it takes to reach the custom inspection booths due to inadequate infrastructure at the leading points of entry. It is critical that other government departments on both sides of the border participate in programs to make customs clearance fully electronic. It is also important that the government agencies and departments involved in security programs, like CBSA and Transport Canada, coordinate their efforts to avoid unnecessary duplication and cost of business.

On transportation policy, a hefty surge in imports and exports during the last few years has been good news for Canada, as it has created jobs and economic growth. However, it also revealed the shortcomings in the country's transportation infrastructure and policies that need to be dealt with if Canada is to continue to be a player in world trade.

It is appropriate that this committee take an interest in the SPP. We urge you to support the work that is being conducted by governments of the NAFTA countries under the SPP, and in particular, initiatives that will facilitate the movement of low-risk goods and people across our shared border with the United States.

Thank you again for the opportunity to appear today. We'll be very pleased to answer questions.

[The Chair, Conservative, Leon Benoit]

Thank you, Ms. Anderson, from the Canadian Association of Importers and Exporters.

Now, from the Council of Canadians, we have Maude Barlow for eight minutes, please.

[Maude Barlow, National Chairperson, Council of Canadians]

Thank you very much.

Thank you for the opportunity to present to you here today.

The Council of Canadians is Canada's largest public advocacy organization. We have been working on the security and prosperity partnership since before it was signed into effect in Waco in March 2005, in fact since it was a twinkle in Tom d'Aquino's eye.

The security and prosperity partnership is not, as its proponents claim, about eliminating the tyranny of small differences among the three NAFTA countries. It is quite literally, we believe, about eliminating Canada's ability to determine independent regulatory standards; environmental protections; energy security; and foreign, military, immigration, and other policies.

We could speak on any of these, but I've chosen to speak briefly on only three.

The first is the failure of the democratic process. A major concern of our organization and of many Canadians—and we think it should be of yours—is that the SPP process has been done without any parliamentary debate or public input. To date, the only stakeholders involved or consulted in the SPP process have been representatives of big business. Apparently when it comes to the future of North America, the public doesn't count, nor do elected officials, who, according to SPP documents, are only to be briefed after decisions are made.

In a move that cements the primacy of big business in this process, the North American Competitiveness Council was created at the second of the meetings of the heads of state. In their own words, the NACC was created to “engage substantively and pragmatically on trade and security issues without undue deference to political sensitivities”.

Ron Covais of Lockheed Martin, one of the major companies of the NACC, told Maclean's magazine last fall, “we've decided not to recommend any things that would require legislative changes...because we won't get anywhere”.

This came home to us last month when we met with senior officials of the U.S. embassy, at their request, to talk about what our concerns were. At that time the officials told us clearly that there was no appetite, and I quote, “for another bruising NAFTA battle”, and that that was the reason the SPP was not going before the legislatures of the three countries. I don't think there is any greater proof of the appalling lack of democracy that has characterized the SPP process than that we should learn from the U.S. embassy why the SPP is being withheld from Parliament.

On the other hand, representatives of big business, who are driving this process, remain fully involved. All of Canada's representatives on NACC are members of the Canadian Council of Chief Executives, led by Tom d'Aquino, who also co-chaired the original Task Force on the Future of North America that helped launch the SPP back in 2004 and 2005. That task force's recommendations, among many others, called for a North American resource strategy and was tabled only weeks before the SPP was signed in Waco, Texas.

The second concern we have is around our water. While the NACC and our current government vehemently insist there are no discussions on Canadian bulk water exports currently under way, minutes from that original task force meeting clearly showed they were talking about it. These minutes got leaked to us at the Council of Canadians. They said the three governments, and I quote, “were likely to meet with stiff resistance“ on Canadian water and Mexican oil and were therefore best considered “long term goals”. The task force members agreed that “contentious or intractable issues will simply require more time to ripen politically.” And since then there have been a number of other statements made from American think tanks about Canada's water.

Documents obtained by the Council of Canadians several weeks ago describe a closed-door meeting of government officials and business representatives from the three countries that took place last Friday in Calgary where, clearly, bulk water exports were to be discussed. Under the title “North American Future 2025 Project”, the U.S. Centre for Strategic and International Studies, in collaboration with the Conference Board of Canada and a Mexican research institute, CIDE, were sponsoring a series of seven closed-door round-table meetings, and this is their mandate: “... to strengthen the capacity of Canadian, U.S., and Mexican administration officials and that of their respective legislatures, to analyze, comprehend, and anticipate North American integration...”.

One of the round tables, the one that was held on Friday, talked about “creative solutions beyond the current transboundary water arrangements”--which we are presuming means the Canada-U.S. Boundary Waters Treaty of 1909--and “water consumption, water transfers, and artificial diversions of fresh water” with the aim of achieving “joint optimum utilization of the available water”. It's very clear that what they're talking about is that Canadian water would now be North American water, just the way Canadian oil and gas are North American now.

These meetings, which have been funded in part by the U.S. government and the private sector--and this was also confirmed to us by the U.S. embassy--are about drafting policy, not making recommendations. According to the leaked documents, all three governments have agreed that there would be a “tremendous benefit to the current decision-makers” if a round table on border issues could serve “as the underpinnings to develop a blueprint for future border infrastructure and logistics systems as it relates to labor mobility, energy, the environment”--by which they mean water--“security, and competitiveness”. This report is to be reviewed twice by the governments, and then it will be resubmitted in English, French, and Spanish with the aim of “maximizing the policy impact”.

Very briefly, we are also very concerned about the resource pact on energy. We are now sending well over 60% of our oil and gas to the United States, up from 25% before we signed the North American Free Trade Agreement, in which we signed a proportional sharing agreement. The problem with the North American resource strategy proposed by the SPP is that it leaves Canadians victims of an official policy that renders Canada not only unwilling but also unable to provide for the energy needs of its country and its citizens now and in the future. It programs the Canadian government to fail in any effort to meet the international obligations under the Kyoto Protocol, as well as Parliament's obligations to its citizens to ensure that our natural resources are managed in the public interest.

The push under the SPP and NAFTA to serve the corporate, as opposed to the public, interest explains as much as anyone needs to have it explained our current government's failure and refusal to develop a national environmental policy that would serve both Canada and its citizens.

I'll leave you with four recommendations we are calling for. We believe we have broad support for them across the country.

We're asking that the Government of Canada cease all talks leading toward deeper integration between Canada and the United States until there has been meaningful public consultation on the issue.

We want full disclosure of a complete listing of the security and prosperity partnership working groups and the minutes of their meetings.

We call on the government to disband the North American Competitiveness Council. Corporations such as Manulife Financial, Home Depot, Wal-Mart, and Lockheed Martin should not have a say in shaping the economic policy between Canada and the United States and Canada's economic, social, and environmental policy here.

Finally, we're saying bring the security and prosperity partnership to the House of Commons for a full debate and a vote. The current government has promised that “significant international treaties will be submitted to votes in Parliament”. We submit that the security and prosperity partnership of North America goes further than NAFTA and is going to have a more profound influence on Canada, and that we have the right to a debate and a full democratic process in our House of Commons.

Thank you very much.

[The Chair, Conservative, Leon Benoit]

Thank you very much, Ms. Barlow.

I would ask that you table with the committee the documents you referred to in your presentation.

We'll go directly to the questioning, starting with Mr. Bains from the official opposition.

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

Thank you very much, Chair.

I want to thank all of you for your presentations and again bringing very clear perspectives of the SPP.

It's got a very clear-cut mandate that we all recognize. We've been talking about the importance that the security and prosperity partnership has in terms of cooperation and information sharing for better integration, and you alluded to that in terms of our exports and how important imports are becoming of that export component.

I recognize this is not a treaty or an accord and is nothing similar to what NAFTA is in terms of a binding agreement; however, there are issues around transparency and accountability, and I believe Ms. Barlow has alluded to those concerns.

My question is for Mr. Adams and Ms. Anderson.

In terms of the changes, in the past many of the committee members have discussed and said these are just incremental changes, these are very small initiatives, these are just harmonizing issues, these are regulatory issues, they're not major issues per se. But if you look at it, in your presentation, Mr. Adams, you allude to 107 key initiatives currently being discussed under the SPP, and 300 work items associated with those 107 key initiatives. My view is that they're incremental changes, but they will have a profound impact overall once you combine all the initiatives when they take full effect.

Do you share that viewpoint, or do you still believe they are incremental changes and they're not as profound as people make them out to be?

[David Adams]

I think in terms of the goal of the SPP, it's to try to have the whole North American economy work in a more efficient and effective way. With respect to those issues that directly impinge upon the automotive industry--for instance, some standards harmonization issues, motor vehicle safety standards--in our view, those are minor changes that need to be brought into alignment.

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

The 14 changes you've indicated. There have been 14 voluntary agreements between the automotive industry and the Government of Canada, but you believe they're small changes? They're not major changes, just incremental changes?

[David Adams]

Let me take you back to 1965, when the Auto Pact was signed, which put the two economies together in terms of the automotive industry. From that perspective, we had an integrated North American automotive industry, and since that time the automotive industry in Canada has taken its lead from regulatory activity in the U.S., rather than putting in our own regulations. In some cases, in any event, we merely adopt those regulations through a memorandum of understanding to have put in place the regulations that have been put in place in the United States already.

So that process has worked well, and as I said in my remarks, I think the beneficiaries of that process have been the consumers, who have the most technologically advanced vehicles, the safest vehicles, at the lowest possible cost in the marketplace.

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

The other question is this, and Ms. Anderson, perhaps you can speak to it. The common understanding is not the standards vis-à-vis the United States, but also comparing our standards to Mexico's. There's a discrepancy and disparity in terms of the quality of standards and regulations we have in Canada versus those in Mexico. If we start to harmonize those in incremental changes, does that improve our regulatory standards overall or does that compromise Canada's position?

[Mary Anderson]

I think you've addressed an interesting point. Although the security and prosperity partnership has the opportunity to work within the NAFTA area--that is, Canada, the U.S., and Mexico--it is possible that any two jurisdictions can work. If they are more aligned or closer, they can work together. There isn't the need to have all three at once. I think this allows a leadership role in taking into effect ones that are already available and ready to go on.

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

Ms. Barlow, you talked about various aspects of water, and that's an issue I raised at the last committee as well--water diversion, and the fact that selling Canada's water supply and making it North American is a major concern. You wrote about that and have raised that in the past as well. Could you elaborate on how serious you think that is? I know you touched upon it in your comments, but when we spoke to witnesses, they said it wasn't on the table; it's not something serious. When you say it's going to be discussed in the foreseeable future, do you have an estimate of the timeline? Do you see how this will unfold, or is it sheer speculation?

[Maude Barlow]

There are two things I would say. First of all, it's become quite clear only recently how serious the water crisis in the United States actually is. There's a new Environmental Protection Agency report that says that 36 states are in crisis. The issue of water as a national security issue has moved up to the top of the political agenda in the United States. This same CSIS, the same group, the American research institute that is the American component of this Future 2025, was also tasked the same year to put something called the Global Water Futures together, which is a whole blueprint for the United States government on water, both water around the world where there are going to be conflicts, and also where the United States is going to get water.

So suddenly the United States is looking at water like it's looking at energy, and realizing you can't be a superpower if you don't have both. So they are beginning to take this very, very seriously, and they're looking north to us, and they're looking south to the Guaraní Aquifer in South America. Those are the two places.

The concern we have is that we don't have water to spare. It is a myth that we have 20% of the world's water. You'd have to drain every lake and river. We have about 7%. More importantly, that water is in huge rivers that run north, in the north, so to shift to move massive amounts of water, we would have to introduce huge engineering feats that would have to reverse the flow of that water, and it would have to be taken by pipeline. There's no other way that would be cost-effective, and it would be very expensive. But so is running out of water if you're a state like California.

I think the openness with which the head of this team, this CSIS group in the United States, spoke to the media last week and said, “Yes, of course we're interested in your water, Does the sun come up in the morning?”...that kind of thing. He didn't even understand why there would be a concern about it.

In October, the Global Water & Energy Strategy Team, which is a Washington-based group, was at a business meeting in Calgary, and they said there would be water flowing from northern Canada within five years. They're working with some think tank groups and energy organizations in Manitoba, and they were talking about the first exports from northern Manitoba.

So I think the political resistance will hold it off for a while, but I think it's only a matter of time before we're really going to have a full-blown discussion on this.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Bains. Your time is up.

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

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

Good morning, everyone.

Ms. Barlow, I listened to your statements with regard to water. You know that at the present time the issue of obtaining water is on the agenda of certain American states, as you mentioned. As far as we are concerned, we have water. A meeting with the government will be held in Calgary in the near future to discuss the problem surrounding water.

First of all, in your opinion, where do negotiations stand regarding the possible sale of bulk water?

Secondly, with regard to the Canadian Council of Chief Executives and the security and prosperity partnership, last week we met with some individuals who told us that one of their objectives was to slightly harmonize the healthcare and social systems in all three countries. However, several of the member enterprises involved with the security and prosperity partnership have interests in the three countries. They are multinationals.

From that perspective, how can they defend the interests of Canada and Quebec, while at the same time trying to further harmonize the healthcare systems and the rest?

My third question involves dependency.

In your report, you spoke of—and the others may also comment a little on these statements—of our major dependency on American exports. At the present time, some industries are more vulnerable than others, such as agriculture, the manufacturing sector, especially the furniture sector, and softer sectors such as textiles. For example, in the furniture sector there are a lot of exports from the United States. There seems to be a tendency to continue that way, even though other more distant markets would be accessible. It seems that our immediate reaction is to turn even more toward the United States because it is a habit, a way of doing things.

Could you provide some explanation for this? Why are we still hesitant to turn toward other export sources? Why do we continue free trade with the United States without looking any farther? Do we have trouble entering into bilateral agreements with other countries?

[Maude Barlow]

If you don’t mind, I will answer in English. I understand French, but I am more comfortable in English.

I'll start with the first.

This was always our criticism of NAFTA. One of our criticisms of NAFTA was that it would place Canada in a very vulnerable position to have almost all of our exports—I think it's close to 87% now—going to the United States, so that we would then be helpless, or in a very difficult position, if ever there was a reason to close that border. And sure enough, this border has been closed. As my colleagues here have said, this was even starting before 9/11.

I would posit that with all we have offered and already given up under the SPP and other processes, it has not helped change that border situation. It's tighter than it ever was. As you know, the lineups for passports are so long and there are unmanned drones--American war planes--between the Montana and Canadian borders, for instance. The border security is tightening and everything we do does not seem to change that. So it is a very serious problem.

On your concern about harmonization, our concern around the regulatory convergence is not a more efficient way for my colleagues here to have a good trading system. That's not our concern; of course that makes sense. Our concern is that they have set up cross-border committees that are going to make decisions around regulations, from seeds to food to health care to social programs to environmental standards, that will then not be decided in the Canadian or Quebec parliaments, but rather by these cross-border committees, and it's an anti-democratic process.

Further, take a look at the regime of George Bush. Since he came to power, he has deregulated massively in everything from energy to automobile standards to the environment. One of the conservation groups said that he has cut 400 environmental programs, for instance. We are harmonizing to a superpower that has massively deregulated in many areas, and of course, then there's the problem of having Mexico in the mix as well.

So we're not talking here about sensible harmonization--nobody could be opposed to that--but we are talking about setting up a process of moving into a race to the bottom.

On the current status of water, here's the situation. Under NAFTA we are not forced to export our water; however, once we do start exporting, once any province starts to export its water, the terms of NAFTA come into being. NAFTA defines water as a good, and you're not allowed, under the terms of a trade agreement, to stop the import or export of a good for any reason, even environmental or conservational. So if any province decides to start exporting commercial exports of our water to the United States, the terms of NAFTA say that the Canadian government can't then come in and say no, you can't do that.

Mr. Baird, last week, said that Canada had a ban on the export of water. He probably thinks we do, but we don't. What we have is a voluntary agreement with the provinces, which are a mishmash. Not all of them have signed it; any one of them could break it, and if anyone breaks it, then that water is open, from all the provinces, to whatever corporation has got into that one province.

Moreover, they only banned the transfer of transboundary waters from the Canadian side. But the Americans aren't interested in transboundary water; they're taking what they need from the Great Lakes through the new annex. What they really want is that water in those rivers going north, and that's not touched by this.

We need a national water act in this country. We need water taken out of NAFTA as an investment, as a good. We need to protect this most previous resource politically, ecologically, and for future generations.

[The Chair, Conservative, Leon Benoit]

Thank you, Ms. Barlow.

Merci, monsieur André. Your time is up.

We'll go to Mr. Cannan, from the government side, for seven minutes.

Go ahead.

[Ron Cannan, Conservative, Kelowna—Lake Country, BC]

Thank you, Mr. Chair.

Thanks to our presenters this morning. I appreciate your advice and words of wisdom.

As the chairman alluded to, we've been studying this to provide some direction for our government and all our small manufacturing enterprise businesses throughout Canada, which we are very concerned about.

I congratulate you, Ms. Anderson, for your 75th year of business. I look forward to hearing more.

I also want to set the record straight. There's a lot of fear-mongering from organizations such as Ms. Barlow's. It reminds me of a German proverb: fear makes the wolf bigger than she really is. This security and prosperity initiative isn't some kind of scary treaty or secret agreement; it's basically a series of common-sense discussions with our neighbours. We're trying to work together. A cordial relationship with your next door neighbour is a lot better than an adversarial one. I think this is what we're trying to do.

You need to also realize that about 80% of Canadians live within 160 kilometres of our border. We're looking at close to $2 billion worth of trade that transfers across the border daily. Those are the jobs of the men and women, Canadians, we're trying to protect.

In my own riding of Kelowna—Lake Country in the interior of British Columbia, we're not afraid of a seamless border. As a matter of fact, we're looking for a more efficient border. For small business folks, an efficient border saves money. I have a candle distributor in my riding, and it was 10 days of holding up their distribution at the border. Another manufacturer--and I'll put a little plug in for it--of a product called Beaver Buzz, which is taking on Red Bull, an energy drink, was stuck at the border for days.

It costs money for small enterprises. These aren't large corporations; these are independent business folks who have invested their hard-earned money. They want Canada and Mexico and the U.S. to work together.

I think you need to set the record straight and not send out the fear-mongering literature that you do. It's very disturbing. Canada is trying to work in a cooperative manner.

I'd like to ask Ms. Anderson and Mr. Adams whether they believe we need to work collaboratively with the United States to form a strong North American foundation and create borders that are impervious to security risks but are thin and non-disruptive for trade and investment to ensure the seamless movement of goods and services.

[The Chair, Conservative, Leon Benoit]

Ms. Anderson, go ahead, please.

[Mary Anderson]

I certainly agree with your comments, and thank you very much.

I think we are fortunate to live where we do, geographically positioned to the largest economy in the world. That allows us the options and opportunities, from small enterprises along the border to those in the interior, to export products and create and develop wealth. I think this particular program of the SPP is one that really accelerates opportunities to look at ways in which we can harmonize, and there are opportunities for improvements.

You also raise an excellent point, that it's very much in a consultative arrangement among colleagues and friends, where you get more open dialogue and discussion to develop consensus in terms of excellent solutions. I see this as an ongoing opportunity for us in Canada to take ideas from the business community. We are a group of small, medium, and large enterprises. We have been consulted, and we can bring our ideas forward so we can have borders that work.

There are opportunities for improvements. I totally agree that there are issues related to the border. We need to thin that border so we can have access to work collaboratively with our U.S. colleagues, especially with other government departments. I understand you touched on a couple that are very dear to us as well. For example, we would like to look at some of the opportunities with groups in the United States like the FDA. We might be able to develop a way of looking at allowing FDA accreditation with more labs, which would create expediency if they need to do sample analyses. When we create an open dialogue and discussion, we can come up with creative solutions.

Thank you.

[The Chair, Conservative, Leon Benoit]

Thank you, Ms. Anderson.

Mr. Adams, go ahead.

[David Adams]

Just briefly, the automotive industry is critical to Canada. On your point, I think we want to ensure that we don't have a situation where the border becomes an issue in terms of where multinational corporations decide to place their investment. Surely it makes sense to have a border that is seamless, so goods can move back and forth in an expeditious and unencumbered manner.

I think we are fortunate to have the newest automotive plant investment in 20 years going into Woodstock--from Toyota. We want to make sure we have a situation set up where we can encourage more of that investment into Canada and not have it go solely to the United States.

[The Chair, Conservative, Leon Benoit]

Mr. Cannan, you have about a minute and a half.