International Trade Committee on Feb. 11th, 2008

[The Chair, Conservative, Lee Richardson]

Welcome.

We will begin meeting number 13 today of our Standing Committee on International Trade for this session. Our topic, of course, is the free trade agreement.

Today, as I say, we're continuing our discussion of the proposed Canada-Korea free trade agreement. We're welcoming witnesses from the Fédération des travailleurs et travailleuses du Québec, the Fisheries Council of Canada, the Shipyard General Workers' Federation, and Bombardier Inc. I don't think we have any other business today.

We have a bit of a logistics problem with the second motion; Mr. Julian is not here. He will be coming. We'll just tell him we dealt with it. We will deal with that later; I'm going to get to our witnesses who have been patiently waiting.

I'll ask each of you to present a brief opening statement. At the conclusion of your statements, we will proceed to questions, beginning with the Liberals, with seven minutes for questions and answers. We'll try to keep the questions tight so that you can have lots of time to answer within the seven minutes allotted.

We'll begin today with the top of the order: Monsieur Pierre Laliberté from the Fédération des travailleurs et travailleuses du Québec.

Please go ahead, Monsieur Laliberté.

[Pierre Laliberté, Political Advisor, Manufacturing Sector, Fédération des travailleurs et travailleuses du Québec]

Good afternoon. My name is Pierre Laliberté and I represent the Fédération des travailleurs et travailleuses du Québec. We thank you for giving us this opportunity to express our views.

As you undoubtedly know, we represent 550,000 workers in Quebec in nearly all fields, be it the manufacturing sector and in private and public service.

I must tell you quite frankly that generally speaking, we are disappointed in the approach that the current government has taken once again to the whole issue of free trade agreements. As we have often had occasion to say in the past, we are not against free trade or the expansion of trade from a philosophical standpoint, but we feel that it is a matter of how these things are done. We feel that in the past 20 years—and we can talk about a record that goes back to the signature of the free trade agreement with the Americans—the Canadian government has tended to replace industrial policy with trade policy. The government's approach is to allow our champions in the industry to do what they need to do and consider that its own responsibility is mainly to open doors through trade agreements.

We have a different viewpoint. Indeed, we have observed on the one hand that in the real world, each country tries to come up with champions and structuring policies which we do not tend to do as much here in Canada in many ways. Moreover, what is important to us is to determine whether this leads to greater prosperity for the people we represent and more generally for our workers. We have noted that for the past 25 years—and this does not apply only to Canada but just about everywhere, especially in OECD countries—treaties and accords signed in the framework of freer trade generate economic activity, but it does not necessarily translate into an improvement in the standard of living of workers. This leads us to question this agenda.

Moreover, the decision to undertake negotiations with Korea seems to us somewhat arbitrary. Our government seems to want to follow the decision of the American administration. We do not want to be left behind, so we do the same thing they do. We see that the Americans are also seriously questioning whether this accord is a good idea. We share that hesitation.

As we have already mentioned, we think that it would be better for Canada to act in the framework of multilateral negotiations. In that context, it is in a better position to influence the agenda which, needless to say, goes beyond a bilateral framework, and to obtain some degree of influence that transcends its economic power. We are quite disappointed to see that efforts are made to sign bilateral agreements, given there is a program underway at the WTO and that under that program, we could perhaps promote our assets far better. We think that in the long term, things should be done under that framework. This is the only way we will manage to ensure that our main economic partner, that is the United States, will respect rules that are quite clear.

We obviously object in principle to the fact that no one is taking into account more explicitly the whole issue of protecting workers' rights. You will no doubt hear that comment from other labour confederations or unions.

For us of course, the goal of trade promotion is first and foremost to ensure that people who work in industry here or abroad do better. The fact that these considerations are not taken into account more explicitly is, in our opinion, a sort of technical flaw. In fact—and here I will put things more bluntly—we hear a lot of those speeches about Kyoto, about the need to bring about change and to restructure our economy in order to address the problems of the environment and sustainable development. And yet, the negotiations that always seem to attract the most attention in the framework of trade agreements do not take these issues into consideration. That concern is non- existent because no one cares about goods and services are produced: we only care about the goods and services themselves. Whether an item was produced in conditions of extreme pollution at the border as no significance for Canada. In the 21^st century, we think that these considerations should be far more present.

I'm slowly coming to my conclusion. We also think that the current context is not particularly favourable to the signing of this kind of agreement with South Korea. We are obviously talking about the situation of the manufacturing sector. The auto sector, for its part, would be more affected by this agreement. It's not going particularly well, and if the forecast for recession in the United States comes to pass, it won't go any better. Given these conditions, we see in this agreement far more dangers than promises. Especially since the problem with regard to Korea—and I imagine that you will hear more about this—is not so much the customs tariffs as is the non-tariff barriers. That's always more delicate. As we can see in the case of the Americans, there is a certain degree of arbitrariness. Sometimes conflicts are based on interpretation of a public health or public safety issue, for example.

That said, I recommend that you look at all this with as critical an eye as possible, even if it means putting this agreement on ice until we have a clearer idea of the impact it could have. Let me point out that studies published to date are not particularly significant nor are they as solid as they could have been. At least, that is our opinion. I think that when hearing witnesses discuss the situation in their sector, you will probably be in a better position to assess whether or not it would be a good idea to move forward on this.

Thank you very much.

[The Chair, Conservative, Lee Richardson]

Thank you very much, Mr. Laliberté.

We'll proceed to Patrick McGuinness, president of the Fisheries Council of Canada.

Mr. McGuinness.

[Patrick McGuinness, President, Fisheries Council of Canada]

Thank you very much.

I thought I would start off by giving a brief description of the Fisheries Council of Canada. We're primarily a processors and exporters association, but at the same time we do represent harvesting fleets. We have pretty well all the harvesting vessels in British Columbia. In Atlantic Canada, the deep-sea shrimp vessels, the scallop vessels, and the groundfish vessels are members of the Fisheries Council of Canada.

We started off as a federation, and we're now a bit of a hybrid between the federations, being members of the Fisheries Council of Canada and direct member companies. Basically, if there's a provincial processing association, the companies are members of the Fisheries Council of Canada through it. So we have members in British Columbia, Ontario--and I should say in Ontario the Fish and Seafood Association of Ontario is made up primarily of importers and distributors--Quebec, Nova Scotia, New Brunswick, P.E.I., Newfoundland and Labrador.

Canada is developing its northern fisheries with respect to the Inuit areas, so we also have representations from Nunavut, Nunavik in northern Quebec, and a new territory in Labrador, Nunatsiavut.

In summary, we represent the vast majority of fish and seafood production and exportation in Canada.

I'll make just a short comment on the fishing industry of Canada. We are a $4.7 billion industry. We have 100,000 workers. About 53,000 are on the sea as harvesters. There are 47,000 working in processing plants throughout Canada. There are 23,000 fishing vessels on our waters, and 950 fish processing plants.

We are a $4.7 billion industry, and we export $4 billion. We are an export industry, as 85% of our production is exported. What we have out there are four what we would call traditional markets. To the United States, we export $2.6 billion. That's 50% of what we produce in Canada.

The Canadian market is also important. We supply about $1 billion into the Canadian market, and that represents about 15% of our production. As well, we export to the European Union $470 million or 10%; and to Japan $340 million or 7%. Those have been our long-standing traditional markets, which have been with us for many years. We export to a lot of countries, but we do see three emerging and significant markets. One is China, including Hong Kong, to which we export $380 million. The second is South Korea, at $47 million. The third is Russia, at $44 million. So we have traditional markets, including Canada, capturing about 87% of what we produce. But we see three significant emerging markets for us, notwithstanding the fact that we export to many, many more countries.

I should note that with respect to Russia, I identified them at $44 million, just below South Korea, but there is no question that in 2007-2008 they will be, for Canada, a $75 million to $100 million market.

I just want to make some comments. Internationally, fish and seafood is the most highly traded commodity in the world. In terms of world commerce, it exceeds oil and gas and grains and so forth.

The other comment I want to make is that in the food sector, fish is considered to be a high-cost protein. So in targeting our efforts, what we look for are economies, countries, or cities that have a middle class with disposable income that can afford the type of relatively high-cost protein, compared to chicken and other products.

As I said, 50% of what we produce is exported to the United States. As you know, in the last four or five years the American dollar has weakened quite substantially. Our strategy is to diversify, obviously out of the United States, but also into countries whose currencies are not pegged to the U.S. dollar.

So you can appreciate that one of the reasons I say Russia is increasing this year is that we're also having some difficulties in China, because the Chinese currency is pegged to the United States dollar.

We see Korea as an opportunity, for a number of reasons. One, of course, is that it is an expanding economy. There is significant development of the food service sector, restaurants and things of that nature, which is providing lobsters to its population.

Also, its fishing industry is changing. In 2005 South Korea, for the first time ever, imported more fish products than it exported. To a certain extent that reflects the fact that the rather significant long-distance fishing fleet of Korea would not fish in Korean waters but on the high seas, including off Canada's east coast. That type of fishing has become less viable, for a number of reasons: one, stocks on the high seas are declining; and two, we see more and more of these regional fisheries organizations such as we have off Canada's east coast, NAFO, being established on the high seas, so that means more regulations and so forth.

A big issue as to why the Korean fleet cannot supply their market as they have in the past is that with the amazing increase in fuel prices, long-distance fishing is becoming very uneconomic. In fact, as I mentioned, we have a regional fisheries organization off Canada's east coast called NAFO, which manages the straddling stocks and some discrete stocks. Korea is a member of that, but its vessels have not been in those waters for two or three years solely because of the economics.

Also, I think there's a recognition that there are emerging Chinese and Russian fleets that are moving quite significantly into long-distance fishing. I think countries such as Korea are no longer really wanting to invest in that.

With respect to Korea--as I said, $47 million of exports--the main item is lobster, about $15 million, which currently has a 20% duty. With respect to shrimp, Canada is the largest producer of cold-water shrimp in the world now, and it has been a real challenge to find markets for that product. Korea has stepped up, and we have $6 million into Korea--over 27% duty. Having had significant reduction in the cod and grounfish fishery, the fishermen in Newfoundland and Labrador put in private investment and restructured from a groundfish fishery to a crab and shrimp fishery. So this is pretty important that we are able to find markets for that type of product, and it's pretty important for coastal communities, particularly Newfoundland and Labrador, but also Quebec and New Brunswick.

With eels, that's $3 million--over a 10% tariff; clams are $3 million, again, over 10%; redfish/ocean perch are $2 million at 10%; and mackerel, about $2 million at 10%.

I should say that of those six or seven products, three of them--eels, redfish/ocean perch, mackerel--don't have that much of a market opportunity because of their distinct taste. It's a developed taste. So that Korean market is a little more important for those types of products than for others.

What we're looking for, as I say, one of the three top significant emerging new markets for Canada in fish and seafood.... We're paying tariffs anywhere from 10% to 27%. If we can get duty-free access, we see not only an expansion of that trade but a needed diversification of our export profile, and I hope with reduction of tariffs we can see better margins and try to see some improved financial performance in this industry.

I shouldn't leave without talking about imports. We export $47 million to Korea. We import $9 million, and the $9 million is miscellaneous fish. About $2 million comes in duty-free already. Oysters, about $1 million, there's a 2% type of duty, with $800,000 free.

As you can appreciate, in fish and seafood Canada has always been an export nation, and our market is a duty-free market except for a few selected items.

In conclusion, the Fisheries Council of Canada fully supports the Canada-Korea free trade agreement, and this is not just following the U.S. lead. From our perspective, if we get free trade in fish and seafood, it puts us on a level playing field with some already important fish exporters in the world, namely Chile and also the FTA countries. In the FTA countries, our major competitors in the European market are Norway and Iceland. They're there already with their free trade, and we hope Canada will be there fairly soon with our free trade.

As you know, other countries are lining up. The European Union is lining up. Of course a major exporter of fish and seafood around the world is Denmark, and of course, as my friend here said, the U.S.A.

So there you are. Thank you very much for your attention.

[The Chair, Conservative, Lee Richardson]

Thank you, Mr. McGuinness.

We'll now hear from the Shipyard General Workers' Federation. George MacPherson is the President.

Mr. MacPherson.

[George MacPherson, President, Shipyard General Workers' Federation]

Thank you, Mr. Chairman.

I appear before you today to represent the approximately 2,000 skilled workers of the Shipyard General Workers’ Federation of B.C., who work in the shipyards, marine manufacturing and supply industries, and metal fabrication shops in British Columbia’s coastal communities. Except for a few medium-sized shipyards, the majority of marine and metal manufacturing plants in B.C. are small operations supplying capital goods to the local market.

I am here to echo what many representatives from the transportation and metal manufacturing industries have said before me, and that is to state that we are strongly opposed to yet another free trade agreement that seriously threatens to undermine the viability of our manufacturing industries in our province and country.

First I would like to say that we very much appreciate the undertaking of your committee to conduct extensive hearings on the implications of the free trade agreement currently being negotiated between the governments of Canada and South Korea. We appreciate the opportunity to make this presentation.

One of the objections we have to the Canada-Korea negotiations is the complete absence of any prior consultation with our industry representatives before the formulation of Canada’s trade agreement proposals. We also object to these negotiations proceeding before there has been a full impact assessment--with participation by labour unions and civil society groups--of the economic and social impact of the standard FTA model on workers in both Canada and Korea.

One would be led to believe, from only reading the documents concerning the FTA negotiations on the government’s website, that nothing but positive results are possible from such an agreement. But we all know from our experience with the NAFTA and subsequent FTAs that this is just not the reality. There are all kinds of serious negative consequences, especially for Canada’s struggling manufacturing industries and our workers and communities.

Our marine and metal fabricating industries in B.C. have already been seriously undermined by NAFTA, and more recently Canada’s FTA with the European free trade area countries, through elimination of the 25% tariff on ships imported from the United States, Mexico, Norway, and Iceland. Both Norway and Iceland are among the world’s leaders in ship construction. United States shipyards have traditionally had the significant unfair advantage of Jones Act protection and, in recent years, a heavily subsidized naval reconstruction program. In addition, we have suffered the serious loss to a German shipyard of four B.C. Ferry Corporation contracts to build large new ferries, car and passenger ferries, for B.C. coastal waters.

By now choosing to enter into a similar FTA with South Korea, the Government of Canada will drive another stake into the heart of a viable Canadian shipbuilding and marine manufacturing industry. But this stake, in comparison to others in the recent past, has all the signs of being the fatal one.

Korea has by far the largest and most price-competitive shipbuilding industry in the world. Korean shipyards now build over 40% of all new ships delivered in the world, and Korea has six of the ten largest shipyards. But this strength and competitiveness was not built on the rules of free and open market competition, either domestically or internationally. It was built during several post-war decades of an unholy alliance between an authoritarian nationalist government and a few very wealthy families granted monopoly power to create large industrial conglomerates with significant government aid and assistance. As a result, successive Korean governments have contributed in many ways to help Hyundai Heavy Industries, Samsung Heavy Industries, and Daewoo Shipbuilding and Marine Engineering--the top three shipbuilders in the world--consistently dominate the global shipbuilding market for well over a decade.

In addition, the Korean shipbuilding industry is notorious throughout the world for pricing their ships at below the cost of production in order to gain market dominance. This is achieved through a number of government support measures. In 2002 the European Commission decided to challenge South Korea’s below-cost ship-selling practices before the World Trade Organization. As a result, the WTO found in 2005 that the Export-Import Bank of Korea loan guarantees to Korean shipyards constituted prohibited export subsidies.

Projecting into the future, it is evident that the Korean shipbuilding industry will be forced to be even more price-competitive as its dominance in global shipbuilding is increasingly threatened by Chinese shipyards. For example, in 1999 the Chinese government embarked upon a long-term strategy of overtaking Asian shipbuilders South Korea and Japan by 2015, and in 2004 began building the world’s biggest single shipyard at the mouth of the Yangtze River, north of Shanghai. And this is just one of several large government and private sector partnerships there to build massive shipbuilding capacity.

For our sector the issue is not about forcing the Canadian shipbuilding industry to be more competitive so as to be able to compete in the export market for new or rebuilt ships. Canada has never been a significant exporter of ships, and never will be. Without the current 25% tariff on imported ships, Canadian shipyards will never be able to compete with Korean, Japanese, and Chinese shipyards for the supply of vessels to the Canadian maritime industry.

So for us the issues are about sustaining a viable heavy manufacturing industry in this country to supply just the domestic market, and protecting it from destructive forces of competition from subsidized major exporters of marine transportation equipment, especially South Korea. If our government does not do that in these FTA negotiations, our industry will be all but dead in a matter of just a few years.

The Canadian shipbuilding industry is already operating at about one-third of its capacity. Canadian demand for ships over the next 15 years is estimated to be worth $9 billion in Canadian jobs. Under the FTAs with Norway, Iceland, and now planned with Korea and then Japan, these Canadian shipbuilding jobs are in serious jeopardy. In these terms, this government's plan is sheer folly and an outrage.

As stated by the president of the Shipbuilding Association of Canada, it is impossible to envisage anything positive for the Canadian shipbuilding sector in a Canada-Korea FTA unless significant changes are made to Canadian government shipbuilding policies, both federal and provincial.

Without tariff protection, Canadian-built government procurement policies, a comprehensive industrial strategy, and other domestic industry supports, FTAs with Norway, Iceland, Korea, and Japan will totally undermine the cooperative efforts of all Canadian shipbuilding participants over the past two and a half decades to bring the Government of Canada to the point of implementing a comprehensive strategy and viable long-term plan for the sector.

For over two and a half decades, all parties in the industry have been calling on the Government of Canada and demonstrating the need, through numerous studies and submissions, to develop a strategy for the development of a viable, modern industry available to meet future Canadian requirements. Finally, in June 2001, then Minister of Industry Brian Tobin gave his reply to a March 2001 report of the industry-labour shipbuilding national partnership project committee, which had appealed to the minister to take practical and feasible steps to assist in revitalization of the shipbuilding and marine fabrication industry across Canada.

In his reply to the national partnership committee report Minister Tobin acknowledged that

Canada's shipbuilders systematically encountered competition from production subsidies, generous financing, market protection, state ownership and, in Canada's large potential market, the United States, the Jones Act that excludes them from large parts of the commercial market.

Among the 36 recommendations made by the national partnership project committee, one addressed the hidden subsidy to vessel purchasers from shipyards in South Korea and China through the mechanism of very low wages and intolerable working conditions imposed on their workers. Minister Tobin acknowledged:

In some countries, the workers themselves are subsidizing their industry by working for low wages under conditions that would not be tolerated in Canada. By deliberately suppressing labour and social rights, some foreign shipbuilders are effectively filling their order books at the expense of their workers. In light of this reality, the National Partnership Project Committee believes that an international social clause governing labour standards in the shipbuilding industry should be developed and promoted by the Canadian government.

In his June 2001 announcement of a new policy framework for the Canadian shipbuilding and industrial marine industry, Minister Tobin stated that the Canadian industry is recognized as an important contributor to national and local economies, and that a viable, competitive domestic ship maintenance and repair capacity is important to Canadian operational needs. However, since that announcement each succeeding government has stepped further back from Minister Tobin's modest commitments to the industry. Therefore, the opening of free trade negotiations with the world's largest and most notoriously anti-competitive shipbuilding nation, without so much as prior consultation and input from Canada's shipbuilding industry, is nothing short of a final act of betrayal.

Canada has coasts that face three oceans. It has the longest coastline in the world and a maritime responsibility extending over an ocean greater than its land mass. The St. Lawrence Seaway transportation route is longer than the Atlantic Ocean is wide. Yet we have a maritime transportation manufacturing industry that has been floundering for over 30 years because of the failure of the government to recognize and act in the interest of this vital and strategic sector.

The governments of all the great shipbuilding countries of the world, including U.S., Norway, Iceland, Japan, Korea, and more recently China, have long recognized the strategic importance of domestic shipbuilding and built up their industries through all manner of procurement policies, subsidies, tax relief, loan guarantees, infrastructure development, and tariff protection. Canada is the only large maritime nation to not have a plan and development strategy for the industry for the past 50 years. To have to confront the Korean shipbuilding industry under a standard FTA under these circumstances will result in disaster for our industry.

For all the above reasons, we call upon the government to cease FTA negotiations with Korea until the following have been done.

One, all manufacturing industry parties have been consulted on the trade agreement model best suited for entering into an FTA with Korea.

Two, a social clause governing labour standards in metal fabricating manufacturing, especially shipbuilding, is incorporated to prevent competition from undercutting domestic industry on the basis of labour costs, suppression of labour and social rights, and non-adherence to international labour organization conventions.

Three, comprehensive economic and social impact assessments have been conducted under alternative FTA models, with participation by labour unions and civil society groups in both Canada and Korea.

Four, a comprehensive industrial strategy has been developed by the government for the Canadian transportation manufacturing industry, and has as its primary objective the long-term stability and viability of a shipbuilding and marine fabrication industry on the east and west coasts.

Thank you.

[The Chair, Conservative, Lee Richardson]

Thank you, Mr. MacPherson.

Our final presenter this afternoon is George Haynal, from Bombardier.

Mr. Haynal.

[George Haynal, Vice-President, Government Relations, Bombardier Inc.]

Thank you, Mr. Chairman.

Thank you very much for having given me an opportunity to present our viewpoint on this rather important and thorny issue.

I'll be reasonably brief, and I look forward to a wide-ranging conversation.

As a quick introduction to Bombardier, we make planes and trains. We have 55,000 employees around the world. Thirty-four percent of those employees are in Canada, although 95% of our sales are outside of this country. Our workforce here is 19,000, including roughly 16,000 in the aerospace field and about 2,500 in the rail transportation field. We have six manufacturing plants across Canada and roughly 500 suppliers in this country.

Bombardier Aerospace is the third-largest manufacturer of civil aircraft in the world. Our competitors are Boeing, Airbus, and Embraer. It's a small playing field with some very large bodies on it.

Bombardier is the only manufacturer that creates regional aircraft that are both turboprop and jet-driven. There are over 22,000 Bombardier regional aircraft flying around the world. We also produce business aircraft and there are roughly 3,400 Bombardier business jets flying around the world. Bombardier is the largest manufacturer, by value, of business jets in the world. This is just to give you a little perspective on that side of the company.

Most Canadians would know less about Bombardier Transportation than about aerospace because most of its activities are based in Europe, although we have two very important plants in Canada. It is present in more than 60 countries around the world. It has 42 production facilities in 21 countries, including in Canada. There are roughly 100,000 Bombardier-manufactured rail vehicles now in service around the world.

We are a reasonably global company and very proudly Canadian, but operating under all sorts of different conditions in many markets. Those markets include the Republic of Korea, which is a great economy with a GNP per capita that is roughly half that of Canada. It is a very advanced and sophisticated economy that is well organized and efficient. It is home to many formidable competitors in global businesses, including our own.

Nonetheless, Bombardier has been successful in penetrating the Korean market, thanks really to the fact that we had unique technology. The automated People Mover that is built in Thunder Bay, by the way, was our first breakthrough in Korea. We sold a system to the city of Yongin, which is essentially a suburb of Seoul, and we are part of a consortium of companies that are in the process of completing a very large project in that municipality. We also have prospects for selling rail vehicles and systems in this technology to Inchon, which is a major port city.

We are there; we are involved, and so far we have been successful. There are inhibitions to being successful in that market, and also in competing with Korean competitors, who, as I said, are formidable in this field.

Perhaps I'll spend a moment on the issues that concern us. These are all issues that should and would, in the normal course of events, be addressed in a free trade agreement. If anything, a free trade agreement--given the current situation in the world with the absence of progress on the WTO--is important. Although it would be extremely important to shape the world in the image that we would like it to be--one of free trade and level playing fields--unfortunately, the world does not yet heed Canada as much as it should. In the meantime, as we shape the new order, we have to live with what is in place.

At the moment, what is in place still calls for a special effort in bilateral trade negotiations, particularly with Korea. As you know, Korea has in fact concluded a free trade agreement with our central trading partner, the United States, and hence is perhaps in a less accommodating mood to grant us what we need. Nonetheless, the effort has to be made and it has to be pushed with intent.

I would mention three preoccupations we have in the rail sector. They may not seem enormous, but together they are a significant illustration of the fact that we are facing--in the case of Korea, as in many others--an imperfect market situation.

The issues relating to local content in public procurement are unclear in Korea, as they are in many jurisdictions. I think, to make this conversation brief, it is up to local authorities to impose whatever level of local content Korean manufacturing they wish. I should note parenthetically that this is the case, or that there are even more severe local content requirements, as part of the policy framework for the procurement of public transit and other infrastructure in most markets in the world, including the United States where there's a demand for 60% local content and a demand for a complete final assembly.

Canada is an exception in this field. The absence of a level playing field is an interesting one to note in this context, particularly because in another dimension of an unlevel playing field, Korea, as you know, Mr. Chairman, still qualifies under the general system of preferences for duty-free entry of manufactured products, including rail vehicles, into this country, whereas we face a tariff structure of roughly in excess of 8% for sales into Korea.

So, if I may put it that way, there is a levelling of the playing field that may be useful and can only be pursued through bilateral negotiations. There are other non-tariff barriers, as these all are, that were referred to earlier. The issue of certification, for instance, is an interesting one whereby we are required to certify vehicles that have been certified in other major jurisdictions all over again when we sell them into Korea. This is extremely expensive and difficult. It's not life-threatening, but it is a barrier. Issues related to intellectual property protection, though the system in place in Korea is of a high standard, also always pose a problem and a challenge.

I should stop there, though I will just mention that we are also successful in selling aircraft into Korea. Bombardier regional aircraft are flying in that country without let or hindrance, although the tariff could be improved to allow us a better opportunity in that market.

To summarize our position and our view on this question of whether Canada should have more intense and better regulated trade relations with Korea, our answer is yes. Not only is it yes, it's important. Not only is it important, it is a matter of some urgency, given the state of the international trading system today.

Thank you, Mr. Chair.

[The Chair, Conservative, Lee Richardson]

Thank you, Mr. Haynal.

We will move now to our questioning. As is our usual procedure, we will, as I mentioned, have our members pose questions to you either individually or collectively.

I'll begin with Mr. Bains.

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

Thank you very much, Chair.

I'd like to thank the witnesses for coming before us to speak. The cross-section represented here I think is significant in light of the discussion we're having on the potential free trade agreement with South Korea.

There were some legitimate concerns raised, and that's what prompted this committee to decide to undertake this particular initiative to examine all the various aspects of the free trade agreement with South Korea.

Many of you have very clearly illustrated in your remarks not only the economic wealth that you generate but the number of jobs generally here in Canada, as well as abroad, and how important it is for you to succeed here in Canada, but you also need access to export markets, so there's a recognition of that.

What we are concerned about, which is what prompted this study, was that various studies came out. There were three in total with respect to job losses. One was done by the government, which indicated maybe just a handful of job losses. Another one was done by CAW, which indicated job losses in the thousands. I wanted to hear your perspective, if you have conducted any analysis to examine any potential job losses or job increases--it could go the other way as well--that might occur, in connnection with the potential free trade agreement with South Korea.

This is open to all four of you, if you care to address this.

Has there been any study or analysis done by your--

[George MacPherson]

We've not done a proper analysis as to what the impact of the agreement with Korea will be. But we've worked very closely with the federal government for the last two and a half decades to try to formulate a policy that would make some sense going forward for our industry. We're talking about our industry now coast to coast.

It was Minister Tobin who put the committee together back in 2001. We were moving down the road of actually having a policy put forward that would make some sense for the industry. All of a sudden there was a change in government; the committee was disbanded, and the policy was sitting out there. It's a very weak policy, and we see ourselves heading down this road of the free trade agreements, with the EFTA agreement being the worst for us. Korea is a devastating blow, with no policy in place to protect the industry and keep it going in the foreseeable future.

We are surrounded by three oceans. We have a tremendous amount of marine property out there that we're responsible for. At the end of the day, in a very few years, you're not going to have an industry left in Canada that will be able to support the vessels that have to be out there to do the work. They're going to have to be going offshore, not only for shipbuilding, but for ship repair.

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

How many jobs does that translate into? Do you have a number, a gauge, a rough idea of what the exposure to that would be?

[George MacPherson]

We looked at the B.C. ferry project on its own and those three vessels that went to Germany. Those three vessels, built over a period of four years, involved 5,000 jobs--direct and indirect jobs--that were lost to Canada.

They were lost to Canada because clearly the provincial government didn't step up. The Ferry Corporation decided they could get a better deal somewhere else. And they may have got a better deal, but we'll never know that. The B.C. industry was excluded from the bidding process. Therefore you'll never know whether you got the best price or not. The B.C. industry did guarantee they would match the German bid.

Unless there's a clear policy put in place in this country, you're going to see more and more of this going down the road.

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

How about Bombardier or from the Fisheries Council or from the union--was any type of study conducted?

[Patrick McGuinness]

We haven't had a study. But what we're saying is that what we see with an expanded opportunity in Korea, particularly for cold-water shrimp.... I have to go back to that point that Canada is now the largest producer of cold-water shrimp. We came from zero to being the world's largest producer. There really is an ecosystem out there. The demise of the cod groundfish allowed the shrimp resources to bloom.

Having said that, at the same time, we produce a particular type of product, cold-water shrimp, which is a smaller shrimp and which we feel is much tastier. But as you perhaps know what's happening in the world in terms of aquaculture, warm-water shrimp is just expanding exponentially every day. So what we've had in that industry is amazing expansion, but the prices of our product have decreased quite substantially and they're just starting to rebound. Our supply is stable.

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

So you think there will be job creation with this potential free trade agreement?

[Patrick McGuinness]

What I'm trying to say is not job creation, but right now that industry is financially distressed. If we can rebuild prices, what we're saying is that will enhance or enable the viability of a number of fishing vessels and fish processing plants.

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

Thank you.

[Pierre Laliberté]

I did look at the study that came out of the environmental assessment and I also looked at the CAW study. The problem with any such studies is that they are mathematical exercises.

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

Right. They're a model.

[Pierre Laliberté]

Just to give you an example that I think does reflect a little bit, Industry Canada did a study a few years ago that tried to establish the impact of the U.S.-Canada Free Trade Agreement. And they came up with controlling for exchange rates and the growth rates and all of those things with the notion--and I think it's fairly believable--that 90% of the growth in trade or exports from Canada was due to the fall of the Canadian currency.

Was it 90% or was it 60% or 50%? God only knows, but the fact of the matter is these things are always like--

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

Of the two reports, which one would you deem to be a more reasonable assessment?

[Pierre Laliberté]

In one month in Quebec, we've lost 30,000 manufacturing jobs. I might well believe the CAW's assessment, because it's not that outlandish.

I think the key here for us is really--and this is a problem with the agreement--what sorts of jobs we are creating for ourselves. If you look at what we export, for the most part it's raw materials or slightly processed materials. What are we purchasing? A lot more labour-intensive and job-intensive and value-added products.

This is where I think the analysis needs to go. If I look at Industry Canada's verdict, basically it leaves the GDP unchanged, literally. So we're just shuffling jobs in different directions. But to us, that matters.

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

So to that point, have any of you been consulted? And I apologize, I know I haven't got your opinion on Bombardier's perspective on job losses, but have any of you been consulted by the government to provide input into that environmental assessment, or have you been consulted in any capacity to help the negotiators get a better understanding of your particular industry and how that might be impacted by the free trade agreement?

[Patrick McGuinness]

I've had extensive economic policy consultations with the Department of Fisheries and Oceans almost since day one. They recognize that we're dependent on exports. They sought our analysis, and we went through the tariff lines and things of that nature. That was quite an extensive consultation.