International Trade Committee on May 10th, 2007

[The Chair, Conservative, Leon Benoit]

Good morning, everyone.

We will now start our meeting number 62, which is dealing with a study of Canada-U.S. trade and investment issues and the security and prosperity partnership of North America.

From 11 to 12 today, we have as our witnesses, from the Department of Industry, Alain Beaudoin, executive director, Innovation Partnerships Branch; and from the Department of Foreign Affairs and International Trade, William Crosbie, director general, North America Bureau, and Peter Fawcett, deputy director, U.S. relations.

If you would go ahead, gentlemen, for up to eight minutes in presentation, and then we'll get right to the questioning.

[Alain Beaudoin, Executive Director, Innovation Partnerships Branch, Department of Industry]

Good morning.

My name is Alain Beaudoin and it is my pleasure to be here today to discuss the Security and Prosperity Partnership of North America, the SPP.

I am the Executive Director, Innovation Partnerships Branch at Industry Canada. Among my responsibilities, I am in charge of coordinating the prosperity pillar for the Government of Canada. First, I would like to give you a bit of background.

The Security and Prosperity Partnership of North America was launched in March of 2005 as a trilateral mechanism to strengthen North American competitiveness and enhance the security and quality of life of the citizens of the United States, Canada and Mexico through greater cooperation and information sharing.

In Canada, the Minister of Foreign Affairs has the mandate to manage our North American relationship, of which the SPP is one component. The Minister of Public Safety leads on the security agenda. And the Minister of Industry oversees the priorities of the prosperity agenda.

While respecting the sovereignty and unique heritage, culture and laws of each country, the prosperity agenda of the SPP seeks to enhance the competitive position of North American industries in the global marketplace. It also aims to provide greater economic opportunities, while maintaining high standards of health and safety. To this end, the United States, Mexico and Canada work together with stakeholders to strengthen competitiveness, reduce the cost of trade and enhance the quality of life.

Because of its trilateral nature, the SPP is a complex mechanism. It is implemented through the activities of trilateral working groups that are responsible for outreach with a variety of stakeholders within each country.

The prosperity agenda is comprised of nine trilateral working groups in key sectors of economic activity. They are e-commerce and ICT; energy; environment; financial services; food and agriculture; health; manufactured goods and sectoral and regional competitiveness; movement of goods; and transportation.

With input from stakeholders, working groups have agreed to work on a number of bilateral and trilateral initiatives to advance the prosperity agenda. All these initiatives have been made public. If you have not already done so, I invite you to look at the SPP website at spp-psp.gc.ca. It provides detailed work plans, and it documents the progress achieved so far in implementing these initiatives.

Briefly, this is how the SPP works. Now the question is how Canada can benefit from it.

As you know, key factors have fundamentally challenged the way global firms, including Canadian businesses, operate. Low-cost telecommunications systems and transportation and the availability of low-wage skilled workers in other parts of the world continue to profoundly transform business activities into global supply chains.

There are advantages to this transformation. Even small and medium-sized businesses that use supply chain integration and technology can expect significant cost reductions in quality and time to market, but North American businesses are feeling intense pressure to remain competitive.

While Canada is one of the most prosperous countries in the world, our prosperity depends, in large part, on our ability to access international markets. To remain prosperous, it is essential that Canadian businesses adapt accordingly and be able to deal with issues of supply chain management, such as seamless logistics. For Canada, these issues culminate at our border with the U.S.

It is common knowledge that nearly $2 billion is traded each day between Canada and the United States. Our economies are highly integrated and increasingly work in a seamless fashion. For example, 34% of our bilateral trade is intra-firm and more than 77% is intra-industry. This has led to the emergence of integrated and globally competitive commercial platforms fundamentally rooted in North America.

This is where the SPP can be instrumental. The SPP aims to enhance and encourage continued prosperous trade between North American countries while ensuring security.

The SPP is but one part of Canada's positive and productive relationship with the governments of the United States and Mexico. The SPP is a non-binding partnership. It seeks to find practical solutions to concrete issues. It is one mechanism to ensure a strong relationship with our NAFTA partners, and it is not intended to duplicate or replicate existing mechanisms. As such, the SPP is not intended as a replacement for NAFTA, nor is it intended to serve as an alternative to existing trade negotiation mechanisms.

At their last meeting in March 2006, the three leaders of Canada, the United States, and Mexico agreed to focus on five priorities to advance the SPP and ensure tangible results. They are strengthening competitiveness; emergency management coordination; cooperation on avian and human pandemic influenza planning; energy security; and ensuring smart, secure borders.

This renewed focus reaffirmed the leaders' commitment to advance a positive agenda for North America.

Achieving regulatory alignment within North America is one of the most important contributions to strengthening competitiveness. Through enhanced cooperation under the SPP, Canada, the U.S. and Mexico seek to make their regulations more compatible to reduce costs, by eliminating duplication and redundancies, and minimize barriers to trade. This is being achieved while ensuring continued high standards for health and safety, and protecting our environment.

The leaders also agreed to create the North American Competitiveness Council, or NACC, to provide governments with advice and recommendations on ways to improve competitiveness.

To build on this agenda, on February 23, Ministers Bernier, Day and MacKay met with their American and Mexican counterparts. They reviewed progress on the five priorities in advance of this year's leaders' summit, currently scheduled for August 2007.

Ministers also received the NACC's report, which was released publicly. David Stewart-Patterson appeared before the committee recently and also provided you with a copy of the report in both official languages. This report made 51 recommendations in three areas: border-crossing facilitation, standards and regulatory cooperation, and energy integration.

In conclusion, the SPP has been conceived as a step-by-step, practical approach to improve the way governments work together to enhance competitiveness, ensure our security and quality of life. All of this takes time and continued commitment.

Thank you very much.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Beaudoin.

Now we will go to the Department of Foreign Affairs and International trade.

Mr. Crosbie, are you going to make the presentation?

[William Crosbie, Director General, North America Bureau, Department of Foreign Affairs and International Trade]

No, actually Mr. Fawcett and I do not have presentations. I gave a presentation a week or so ago. Basically, we're here to answer questions.

[The Chair, Conservative, Leon Benoit]

Okay, very good.

We will go directly to questions then.

From the official opposition Liberals, Mr. Bains, for seven minutes.

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

Thank you very much, Chair.

Thank you for the presentation.

Essentially, the purpose of this meeting—and we've been meeting frequently on this subject matter over the past few weeks—is to discuss two options. The two options that have come forth are, how do we improve the security and prosperity partnership, or do we need to abolish it altogether? It seems to be the school of thought in this committee that those are the two issues that are being discussed.

I say that because we've met with various stakeholders—civil society representatives, unions—who've expressed concern that they haven't been involved in the process, that they haven't been consulted, that they've had to really force their viewpoints in the process by aggressively presenting their positions on this matter, and that they haven't been allowed executive-level permission to get involved. I believe that concern has been raised ever since this initiative was launched. This is not a new issue.

How do we improve the process to include civil society, unions, and other stakeholders who have expressed concern, so that their views are taken into consideration in this process?

[William Crosbie]

Thank you.

I think there's a bit of a mismatch between people's expectations of the SPP and the way in which governments have constructed the architecture. Governments have conceived of the SPP as a mechanism for departments and officials who have particular expertise to talk to one another about potential initiatives that governments could individually undertake.

The thinking behind the SPP was always that it was a cooperative mechanism that was not binding of one government to another and that was not a negotiating agenda. Hence, governments perceived that the mandate to make changes or to consider and to talk to stakeholders would remain with the areas of expertise in our respective governments. So if it is a matter involving health, then Health Canada would be responsible for consulting with the stakeholders who have a particular interest in health. We did not create an architecture that was an umbrella for the SPP.

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

For example, if the departments were consulting and they did not consult the stakeholders...you're saying the onus lies with the departments to do this?

[William Crosbie]

If Canada wishes to make any changes to its laws, regulations, or indeed policy, then the individual departments and ministers who have a responsibility for those policies, laws, and regulations are the ones who would have to consult with the stakeholders.

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

Take, for example, the recent issue that has come up with respect to pesticide standards. It's been reported that obviously we've got better standards, simply because we use less pesticide. Now we've harmonized with the United States, which in effect increases the level of pesticide use. That has ramifications for our environment and our health.

This speaks to the point in the presentation that was made on page 2, where it says the aim of the SPP is:

—to provide greater economic opportunity, while maintaining high standards of health and safety. To this end, the United States, Mexico, and Canada will work together with stakeholders—

—and that's what I'm talking about, stakeholders—

—to strengthen competitiveness, reduce cost of trade, and enhance quality of life.

How does this particular change in regulation enhance the quality of life? In your opinion, does it enhance it or does it compromise it? Yes, there might be benefits in terms of trade, because now the regulation matches up, but what kind of impact does this have in terms of the standards we set versus the standards the United States has? I would like your opinion on that.

[William Crosbie]

Minister Clement has responded to the article that was in the media about this, as is appropriate, because Health Canada is the lead department. They're the ones who need to defend, to explain any changes they intend to make.

The three governments don't jointly consult with stakeholders. We leave it to our respective departments with the expertise to do so.

[Alain Beaudoin]

The stakeholders, wherever they come from, are welcome to provide input and to communicate with the various working groups and the experts, or with the coordinators, such as me or the one on the security side or at Foreign Affairs, for example. We met with some labour groups, with the Canadian Centre for Policy Alternatives, in advance of the ministers' meeting in February, to try to explain to them what SPP was, what it was not, and to have a discussion.

What we've said as well is that we would welcome continuing these conversations with them, and it would be our pleasure to direct them to specific working groups to talk about specific initiatives.

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

In terms of better transparency and accountability—and I want your feedback on this—in your opinion, should any changes to regulations that are decided by the departments, pesticides, for example, be brought forward to the committee on a quarterly or semi-annual basis for review and public discussion for better public oversight? Is that a way to improve the process?

The concern is that we always find out about this after the fact. My suggestion is that before any regulation is changed, those proposed changes be brought to committee for discussion and debate. Therefore, there's no element of surprise, and at the same time it allows the stakeholders to present their case in public.

Is that, in your opinion, a way to improve the process? We have to find a solution, and I think that might be a viable one.

[Alain Beaudoin]

With regard to your question in terms of transparency of the process, as I said in my opening remarks, and as I think Bill emphasized in his previous testimony, all the information pertaining to SPP has been and will be made public. We've made a report available to leaders; it's on the website. All the initiatives and the work plans of the various working groups have been made public and continue to be made public. They're available at all times.

With regard to your question in terms of changes to regulations, the SPP is trying to increase cooperation among governments to have access to the best science possible for them to make decisions. If any regulatory changes take place following this particular issue, or another one, it would follow due process within governments. Governments remain sovereign in their capacity to make decisions on regulatory issues. Whatever regulatory changes take place under the umbrella or somewhere else, it would still follow due process in terms of public transparency, Canada Gazette, and calling for comments as well.

The process doesn't change; it's the same process. Any regulatory changes would go through the usual process for regulatory changes.

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

Mr. Crosbie, I know you were nodding while I was making my remarks. Do you have any thoughts on that as well?

[William Crosbie]

Again, we haven't conceded that the SPP be an extra oversight mechanism or filter through which Health Canada, for example, would have to determine the changes they decide to make to Canada's policies falling within their mandate. They're the ones who best know the stakeholders with knowledge or interest in a particular area. I think the onus would rest, and should rest, with them. It would then go through the appropriate parliamentary committee—I'm not sure which—so the people who follow those issues are able to provide input and oversight.

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

So, in your opinion, it's good value-added to go through a committee?

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Bains. Your time is more than up here.

Monsieur André, for seven minutes.

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

Good morning, and welcome.

I would like to talk to you about a report put out by the Montreal Economic Institution on Canada-U.S. relations. This study, which was done by Manning and Harris, applauds the efforts being made by Canada at the moment to strengthen its military and defence capabilities, among other things. There is reference to strengthening our ties with the United States in the area of free trade. In this regard, the authors recommend:

That Canada's federal government revisit the decision not to participate in the ballistic missile program and not to broaden the mandate of NORAD.

That Canada and the U.S. work together to create a more open and secure common border for the movement of people and goods.

The report also talks about eliminating the supply management system. It recommends:

Eliminating supply management and business subsidies; dropping ownership restrictions in transportation, telecommunications, and financial services; and allowing Canadian firms to become more productive and competitive in international markets.

I would like to know whether you both agree with the idea of Canada being involved in the ballistic missile defence system and with the recommendation about abolishing supply management in order to strengthen our ties to international markets. What are your views on these issues?

[The Chair, Conservative, Leon Benoit]

Gentlemen, that question isn't on the topic we're here to discuss today.

Feel free to answer it, or not, if you choose.

Monsieur André.

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

Mr. Chairman, I would just like to say that in my opinion there is a connection between these international relations with the United States and the North American Security and Prosperity Partnership.

[The Chair, Conservative, Leon Benoit]

As long as you make a link, Mr. André, that's fine. It's up to the witnesses, always, of course, to decide whether they stray from the area they were intended to come here to deal with.

Go ahead, gentlemen, if you wish.

[William Crosbie]

If I understand correctly, you want to know what I think about the ideas put forward by these two authors.

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

Are these issues being discussed in the context of the North American Security and Prosperity Partnership?

[William Crosbie]

I see.

The subject of our discussion in the context of the SPP appears on our website. In my opinion, the issues you mentioned are not part of the partnership's agenda.