International Trade Committee on Feb. 6th, 2008

[The Chair, Conservative, Lee Richardson]

We have a quorum.

Sorry for the late start, but we had late votes in the House, so it was a little slower getting over here today.

I welcome you to the 12th meeting of this session of the Standing Committee on International Trade. We are continuing our discovery of the proposed Canada-Korea free trade agreement. Today we will hear from witnesses from the Canadian Chamber of Commerce and from Research in Motion.

We have on video conference, from Research in Motion, Robert Crow, vice-president of industry, university, and government relations.

Welcome, Mr. Crow.

[Robert Crow, Vice-President, Industry, University and Government Relations, Research in Motion]

Thank you, Mr. Chair and members.

I'm very pleased to be with you. I had hoped to be there in person, but there is a fair bit of snow and ice between Waterloo and Ottawa just now, and I wasn't able to get there.

As you mentioned, I am the vice-president at Research in Motion for industry, government, and university relations. I have been with RIM since 2001.

Back in 2001, we had BlackBerry service up and running in two countries, Canada and the United States, with four major wireless operators. Today, a few short years later, BlackBerry service is available in 125 countries from 325 wireless carriers. It represents a remarkable growth in the global reach of our company, in our markets. Over the same period, we have been very successful. Our revenue has doubled almost five times and our employment has gone from around 1,200 people to more than 8,000, mostly in Canada.

Today RIM remains focused on growth, and much of what I do with my colleagues is to make sure we have continuing room to grow. To us at RIM, room to grow means fair and open access to markets. In some cases, where doors are part-way open, we work hard to make them wider. Of course, we pay a lot of attention to the policy environment everywhere we do business, to make sure that open markets stay that way.

Mr. Chair and members, I'd like to acknowledge the outstanding work of Canada's trade and diplomatic colleagues in the Department of Foreign Affairs and International Trade. I would also like to commend policy specialists throughout government, particularly in Industry Canada. We have been extremely well served as a growing Canadian company by that network of professional men and women who are part of our national public service.

Korea represents for us an interesting special case. Korea is not yet one of the 125 countries around the world that RIM does business with. It's interesting because Korea has a great many characteristics that would make it an extremely attractive jurisdiction in which to build a BlackBerry business, with a Korean wireless operator.

Korea is a large country with a highly educated population. It is very advanced technologically. Korea has tremendous aspirations. It has the ability to be a global player, perhaps to become a major financial hub in its region. Korea is home to many large domestic and foreign firms that we would like to do business with. In fact, we already do business with many of those firms in other parts of the world.

However, Korea is unique in a couple of ways. The most important way for us is that Korea has a unique domestic standard for cellular phones, particularly for cellular phones sold to the general public. The standard is known as WIPI, which is an acronym that stands for the wireless Internet platform for interoperability. WIPI as a standard was created in Korea. To the best of our knowledge, it is not used anywhere other than in Korea, but it has become for us, and perhaps for others, a barrier to entry into the Korean market.

We have discovered, on the downside, that this unique standard poses a barrier to doing business in Korea. Also, there have been unclear regulatory requirements regarding this application. There has been inconsistent application of the policy by the Korean telecom regulator, and the net result is that after more than a year of trying—in fact, bordering on two years—BlackBerry is still not approved for sale in Korea. This, despite the strong demand and willing partners, despite a written policy promulgated last year that devices like BlackBerry that are sold to business and not made available to the general public would be exempt from this particular requirement; notwithstanding the fact that there has even been an intervention by the ombudsman of investment in Korea at the highest levels in that country, saying that the treatment of BlackBerry is somewhat unfair; even more intriguingly, notwithstanding the fact that more than 30 non-compliant devices from our competitors are currently available for sale in Korea.

With this background—and obviously we are still working very hard with our government colleagues and business colleagues in Seoul—I think it's particularly appropriate and timely to be with you today as you consider and study the Canada-Korea FTA.

At RIM, our general position is that we are free-traders. As free-traders, we have benefited from all of the work that has gone on before in other countries, in both bilateral and multilateral trade agreements. Indeed, they have made possible the opening of markets for RIM. We are very grateful for that work.

In fact, we think it has been absolutely appropriate that Canada and Korea have sat down and had our officials involved in discussions and negotiations over many months. It's even appropriate to have put our respective signatures on documents, for without those signatures, we don't have clear indications of the strong intent of both parties to have free and open trade, nor do we have the opportunity to have the detailed work that would be required.

At this point, given where we are in the approval of BlackBerry for sale, and in particular the rather uneven treatment we have been accorded, we believe it would be inappropriate for Canada to ratify a treaty until such time as there is clear evidence that our trading partner is willing to live up to stated principles.

As you are aware, there has been a recent considerable change in the political environment in Korea. Certainly we take some of the statements that have come as positive evidence, and we trust that during this period we will, with the support and assistance of our colleagues in government, be able to enter the Korean market in due course.

Thank you, Mr. Chair. That's my opening statement. I look forward to our discussion.

[The Chair, Conservative, Lee Richardson]

Thank you, Mr. Crow. That was fascinating.

We also have today, from the Canadian Chamber of Commerce, Shirley-Ann George, vice-president, international, who will also give us an opening statement.

Welcome again, Ms. George.

[Shirley-Ann George, Vice-President, International, Canadian Chamber of Commerce]

Thank you.

On behalf of the Canadian Chamber of Commerce and the 170,000 companies we represent from every region of this great country, I'd like to thank you for asking us to present today on this important but difficult and complex matter of the proposed Canada-Korea free trade agreement.

I'd like to start with the importance of understanding the broader context that must shape any Canadian discussion involving free trade agreements, or FTAs.

First, the number of countries keenly interested in negotiating a free trade agreement with Canada is limited. While the growing market access and international trade is an essential component of securing prosperity for Canada, this makes our need for market access to a particular country often greater than theirs.

To quote a recent published response to Minister Emerson's request for input by the Asia-Pacific gateway and corridor initiative:

Canada is not a driver of the growth in global trade, nor is it a particularly critical participant. If Canada is visionary, bold, and creative in their response to the changes in global trade, then opportunities will naturally flow.

My second point is that Canada's reputation has been damaged by years of negotiations that have led to nothing. Other governments are not interested in wasting their time and political capital on us if Canadian protests always lead to no deal being finalized. This is exacerbated by our intransigent position on some Canadian trade barriers.

Thirdly, Canada is missing a key component of its trade arsenal. We need a mechanism that supports a transition for affected companies. Every deal has winners and losers, on both sides. The OECD reports that countries that are growing and adapting well to global trade often have such mechanisms in place.

Free, open, and fair trade agreements bring about growth in GDP and in jobs, creating the economic well-being to finance vital social programs. Half of what we manufacture in Canada is exported and at least one-fifth of all Canadian jobs are directly linked to international trade.

The last point of context I would like to make is that the rest of the world is rapidly expanding their bilateral and regional trade agreements. Every time one of these is signed, someone else gains preferential treatment, giving our competitors an advantage over Canadian companies and Canadian employees.

Now I will speak to the Korean negotiations. The Canadian Chamber of Commerce has members who represent the multitude of views seen within the key business stakeholders. Like you, we are seeking to reconcile both the various opportunities and the legitimate concerns.

You have a copy of our Korea free trade agreement resolution, which was debated and passed at our 2006 annual general meeting. This is a very difficult negotiation. Canada has a pretty open economy for foreign companies, meaning the little we have left to offer in a trade negotiation will have an impact on someone.

Let me restate that every deal has give and take. What we really need from Korea is removal of non-tariff barriers, or NTBs, something that could be more difficult to nail down in a free trade agreement. It has been reported that Korea has a history of putting new NTBs in place when old ones are removed. This only makes the challenge harder, and it has created a feeling of distrust by some.

At the same time, one only has to look at the China WTO accession agreement to see that a good agreement can have a real impact on removing both tariff and non-tariff barriers. I can think of no other alternative mechanism that has shown such progress.

Negotiations with Korea have been lengthy, and we understand they are in their final stages. Some very difficult issues remain unresolved. The most contentious issue is on automotive. We are very concerned that a number of the uncompleted provisions, including the timing for the phasing out of tariffs, and hard commitments to remove NTBs may not be enough to provide balance. However, we are reserving judgment until we know what the final package will be.

We do know that the auto industry, both those who are feeling the negative consequences of a changing market and those who are benefiting from the same changes, will be impacted by any deal. Some may find opportunities in Korea, but this will take some time. How the deal is structured will have a significant impact on whether those changes are manageable.

There is a need for an automotive strategy in Canada. If there is a Korea deal, there will be a need for additional trade transition measures. There's an equal need to get an agreement with Japan. We know that if the WTO round concludes, our tariffs, including those on auto, will be significantly reduced, decreasing what we have to offer in the negotiations and making our ability to get a good deal with Korea even more difficult to achieve.

Lastly, any new deal must provide real market access gains for Canadian companies, including Canadian-made automobiles, Canadian beef, and important sectors such as insurance and flagship products like RIM's BlackBerrys, both of which are from the very important services industry.

There's one factor that must also be considered. The U.S. has finalized their deal with Korea. Although there is much debate, and it's impossible to guarantee any kind of a trade vote in the U.S., I'm being told by some that they believe a deal may be struck to get the KORUS through Congress. Europe is also negotiating a similar deal that could be concluded in the near term.

As the auto industry moves more and more to giving their assembly plants world mandates, the worst-case scenario for Canada is to be on the outside of the tent, a tent that gives a real advantage to Europe and the U.S. At the same time, the auto industry is a critical sector to Canada, and a great deal of care must be taken to address their concerns. It is not an option to sign any deal.

So how do we move forward? Well, it makes sense to be following the negotiations closely, and we applaud this committee's work. We believe it is too early to come to a conclusion on whether or not the Canada-Korea FTA is a good or bad deal. We need to know more. What is the final package, including the treatment of non-tariff barriers and auto? Although on a separate track, will Korea remove the barriers for our safe Canadian beef? What is the dispute mechanism?

What do the MFN, or most favoured nation, clauses get Canada in the context of the Canada-European-Korean deals? Can we leverage the deal to quickly sign an agreement with Japan? Can we sign a deal and time the ratification so that we know if the U.S. and Europe will actually implement their deals? Can we leverage the signing of a deal, and the pressure this will put on U.S. ratification, into getting more concessions from Korea?

What is the Canadian auto strategy? How does it enable Canadian companies, including our friends that have established manufacturing in Canada, to flourish in this rapidly changing industry? How does it encourage Canadian plants to build for both domestic and export markets? What is the trade transition strategy?

Those are a lot of questions. The bottom line is that a good deal would be good for both Canada and Korea. The Koreans are tough negotiators, so it is up to us to continue to push for a deal that provides a positive balance for both Canada and Korea, and to sign it only when this is achieved. If such a deal can be reached—and this is still an if—by thinking through the timing of our ratification, we'll be better able to understand the impact and manage the consequences.

Only when we have the answers to all these questions--which, for many, are still too early to ask--will we be able to determine if it is a good deal.

Thank you, Mr. Chair.

[The Chair, Conservative, Lee Richardson]

Thank you, Ms. George.

We will proceed to questions on our usual basis. I'm going to ask members to address their questions to Mr. Crow and Ms. George at the same time. You can direct them to one or the other or to both, as the case may be.

In this first round, members have seven minutes for both the questions and the answers. I would ask members to try to keep questions short in order to allow reasonable answers to be given in that timeframe.

So we'll try to keep it to seven minutes in the first round, and we'll begin with Mr. Dhaliwal.

[Sukh Dhaliwal, Liberal, Newton—North Delta, BC]

Thank you, Mr. Chair.

Welcome, Ms. George and Vice-President Crow.

I was amazed, when I was travelling to the small village where I was born, how the Canadian technology worked. I was able to be in real touch with my office and my constituents.

[A voice]

Where was that?

[Sukh Dhaliwal, Liberal, Newton—North Delta, BC]

India.

Mr. Vice-President, I have a question for you. If you are able to get the BlackBerry into Korea, what is the potential value of that market access there?

[Robert Crow]

We haven't worked that out. In any case, in a...I wouldn't disclose it even if we had it.

Let's put it this way: given the size of Korea and its technological sophistication, and given also the size of its business community, it's quite significant.

[Sukh Dhaliwal, Liberal, Newton—North Delta, BC]

Vice-President Crow, you mentioned a technology called WIPI. South Korea imposed this standard, and they claim it will make it easier to create services that could run on any country's cellular networks. I have some questions for you.

Are these standards necessary to make applications work on any cellphone? Is there an easier way to achieve this goal? If it's not necessary, why would Korea introduce these rules?

[Robert Crow]

Korea introduced these rules in good faith some time ago, as digital cellular telephony was getting going, with the hope that this would catch on as the standard platform not only in Korea but also around the world.

It has not. It failed, just as many efforts in standardization fail in our industry and others. However, it remains a standard in Korea, primarily targeted at routine, fundamental cellular phones, rather than at business devices such as BlackBerry that are already programmable.

BlackBerry follows a great many international standards. Our applications are written in a version of Java, which accommodates very wide open standards.

There is actually no demand that we are aware of for any BlackBerry application to be moved over to a Korean cellphone. Indeed, that's something we've not heard of. So from that standpoint, putting the time and effort into making BlackBerry compatible with the WIPI standard would be a sheer, dead-weight loss to RIM. We would be diverting critical technical resources to a project that would have no economic value.

[Sukh Dhaliwal, Liberal, Newton—North Delta, BC]

You said that you're working with government authorities. Is the government doing anything to address your concerns in these negotiations?

[Robert Crow]

Yes, the mission in Seoul has been terrific. The ambassador and the trade commissioner service have been outstanding allies for us in this effort.

[Sukh Dhaliwal, Liberal, Newton—North Delta, BC]

You said it will take a fair amount of work to make BlackBerry comply with the Korean standards. Would you be able to give us a ballpark figure?

[Robert Crow]

We know it is multiple person-years of work—work that would be diverted from other economically important priorities.

[Sukh Dhaliwal, Liberal, Newton—North Delta, BC]

Thank you, Mr. Crow.

My next question is to Ms. George. You mentioned the automobile industry. You say that Koreans are tough negotiators. Would you advise committee members or the government to be tough when we negotiate with Korea, or do you think that when it comes to automobile issues we should move from Korea to other countries where there are automobile manufacturers, like the Middle East?

[Shirley-Ann George]

The Koreans are tough negotiators. They've been tough negotiators with the U.S. and Europe and everyone else. Just because they're tough negotiators doesn't mean it isn't possible to get a good deal. I think it would be premature to walk away at this point and move to another market.

We're facing a couple of challenges. We are a fairly small market. Canada represents about 3% of the world's GDP. There's so much bilateral and regional work going on that every country is struggling to find people with the experience and expertise to negotiate these things. It's a problem we face with India. They have their list of who they want to negotiate with, and we aren't high enough on the list to be able to warrant the use of those scarce resources.

In many of these cases, it's incumbent on us to be aggressive in trying to pursue these deals. We're doing this with Europe, where we are more the demander. We're the ones encouraging Europe to come to the table.

That's just the nature of the environment. But it doesn't mean that we just go get a deal, that anything we can sign is a good deal. That's not the case at all, and that was the point I was trying to make.

[The Chair, Conservative, Lee Richardson]

Thank you very much, Mr. Dhaliwal. And thank you for those answers.

We'll move now to Monsieur Cardin.

[Serge Cardin, Bloc, Sherbrooke, QC]

Thank you, Mr. Chair.

Ms. George and Mr. Crow, welcome to the committee.

This is my first question. Ms. George, you mentioned earlier that before rushing to sign an agreement with Korea -- you also said that signing a bad deal is not an option -- we need to have more information. My question to you and Mr. Crow is this. What exactly do you mean? When considering all the studies made in various sectors, we find that some are favourable and that others are not. Were you able to access all the studies the government and its negotiators are using as a guide or as a basis for their decisions? When you say we need more information, are you referring to studies you were not able to access or to studies that negotiators will use as a basis for dealing with Korea?

[Shirley-Ann George]

Thank you. No, it wasn't that we need to do more studies. The time for that has passed.

What I was referring to when I said we need to know more is that we need to know exactly what would be in the agreement, because there are still some unfinished provisions, and they're in very critical areas. So before we can make a judgment, we need to know what all the details of the agreements are. My understanding is that there are also provisions for what are called “most favoured nation” clauses, or MFN clauses. So if Europe ratifies an agreement that has more in it than what Canada has, through these MFN provisions we might be able to get the same terms. This is important to us, because Europe and the U.S. are larger markets and may be able to gain greater access. So it would be very helpful if we understood exactly what was in the European and U.S. agreements before we made a determination as to whether we should ratify a Canadian agreement. That was my point.

[Serge Cardin, Bloc, Sherbrooke, QC]

Mr. Crow, I would like to ask you the same question.

Ms. George says that we do not need more studies at this stage and that we rather need to know the details of the negotiation which would make a difference as to whether or not we should accept an agreement. Based on the elements of the deal that you presently know of, can you estimate the net economic gains?

[Robert Crow]

It's very difficult for me to say, because of course I see this through the eyes of one company and one sector, whereas Ms. George, my colleague, has the great advantage of looking at this across the entire spectrum of the Canadian economy.

I can certainly say, from the standpoint of my industry, that her points about non-tariff barriers are ones that have been experienced in our sector and that we are experiencing today. Again, it's the clarity--the clarity about what is actually going to happen that would be extremely helpful to us at this point. That's not studies. It's actually more about the behaviour we can expect in the event that a free trade agreement is struck.

[Serge Cardin, Bloc, Sherbrooke, QC]

In an ideal economic agreement, there are only winners. Obviously, there must be give and take, which means that we will have to sacrifice some things. In this case, the negotiators and/or the government will actually make the decisions. The various sectors and industries and the actual people who will lose their jobs or will find new ones will not have a say in this.

In this context, we will be somewhat bound by government decisions. If we do not have more information about the things they are ready to sacrifice and the ones they will insist on holding on to, we will be bound by decisions and policies that would not necessarily have been discussed with the various sectors and industries and with other parliamentarians.

So, how can we proceed in order to get an ideal agreement where everyone is a winner and where sacrifices that have to be made are known to all players? I am actually thinking of a comprehensive decision. So, how can we proceed to get an ideal economic agreement?

[Robert Crow]

Trading one sector's interests against another is not the job of any individual stakeholder in the process. I'm afraid it's the job that you and your colleagues have, as our elected representatives and officials. We support you and wish you the very best.

There are some underlying principles that are important, no matter how this comes out for winners and losers. But we need clarity in how we will be treated, and we need to know that we will be treated consistently against that clarity of rule. Part of the issue we now face is that we do not believe we are being treated equally or consistently today, compared to others in like situations. This is a critical outcome, even if a sector is less fortunate than another in a final outcome.

[The Chair, Conservative, Lee Richardson]

Thank you very much, and thank you for those answers.

We will move on now to Mr. Julian.