International Trade Committee on March 10th, 2008

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

Thank you.

Now, looking through the agricultural chapters, the three agricultural agreements, there are supply-managed sectors for which there are tariff reductions. Could you lead us through how that would work if we're reducing tariffs on the supply-managed areas, such as dairy products and poultry products? We are provided more access on things like cloves and coconuts and olives. I'm not sure which part of Canada they come from, but we do have some tariff access into Europe. How would that work for the supply-managed sector, then, if we're lowering the tariffs?

Could you lead us through that, please?

[Frédéric Seppey]

I will give you the example of butter. In the agreement with Switzerland, we have undertaken to reduce our tariff on the imports coming in within the tariff quota, which is around 4,000 tonnes. Under the WTO, we have committed to allow up to 4,000 tonnes of butter into Canada at a low rate of duty.

The concession we have exchanged with Switzerland vis-à-vis the butter coming from Switzerland is that instead of applying a tariff of 7%, which is what we exchange with all the WTO members for up to 4,000 tonnes, we allow them to export their butter subject to no tariff. However, the over-access tariff—whatever amount is exported beyond the 4,000 tonnes—is still subject to a 299% tariff, and we are not, as a result of this agreement, allowing entry of butter beyond 4,000 tonnes at a low rate of duty.

So the 300% rate, which is in fact what is ensuring that we maintain supply management with respect to butter, is unaffected by this agreement.

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

Do I have time for a quick final question?

[The Chair, Conservative, Lee Richardson]

Well, you're at 12 minutes now. You may as well go for it.

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

Thank you, Mr. Chair. I appreciate your patience.

Could you make the consultations held with the supply-managed sector, such as with the Dairy Farmers of Canada, available to committee?

[Frédéric Seppey]

These consultations largely took place in the course of meetings, and therefore there was no record of minutes. In the course of these negotiations, our negotiators, when they were facing a specific question, were often in direct communication with representatives of these organizations, so it was mainly taking place orally.

[The Chair, Conservative, Lee Richardson]

I'm going to have to stop you there. Thank you for those questions and excellent responses.

We're going to move now to Mr. Allison.

[Dean Allison, Conservative, Niagara West—Glanbrook, ON]

For 14 minutes? Thank you, Mr. Chair.

Mr. Plunkett, I think you mentioned that there had been seven or eight negotiators before you. How long have you been in the role as the chief negotiator for this deal?

[David Plunkett]

I returned to Ottawa from London, where I had been the senior trade commissioner, and took up my current post as director general for bilateral and regional trade policy in September 2006. One of the first jobs I took on, as part of the many things we have on the go right now—because we have a number of irons in the fire—is EFTA. I dabble in a lot of other things, but I was appointed chief negotiator at that stage. So it's since September 2006.

[Dean Allison, Conservative, Niagara West—Glanbrook, ON]

Thank you. I want to congratulate you and put on the record that I think you people have delivered a good agreement that will help not only Canadian families but certainly Canadian industries.

A lot of times we forget that it is Canadian industries that actually employ Canadians, and that when those industries do well our citizens do well. I need to point out, because my good friend over at the NDP wants to always talk about the loss of manufacturing jobs—which we understand, but we also need to look at the fact that we've created, under this government, just in February alone, 43,000 new jobs, in the last year 361,000, and almost 800,000 new jobs since we became government—that I'm sure this agreement will go a long way to continuing that great growth.

The other thing I want point out to my friend in the NDP is that in February we were up almost 5%, and that is in terms of wage growth. I know the argument is always that we're losing manufacturing jobs and just creating low-paying jobs when we deal with trade agreements, etc. I'm not sure exactly how we could continue to see our hourly growth go up if we're losing all those high-paying jobs.

This is just a comment for the sake of the record, if we could add it.

I want to read some comments that have been made in the House. One member stated, “It is the same thing with the EFTA sellout where Liechtenstein outmanoeuvred, outnegotiated and outclassed this inept and incompetent government.” I take a bit of exception to that in terms of—

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

Nice words.

[Dean Allison, Conservative, Niagara West—Glanbrook, ON]

Chicken Little said that over there.

I wonder whether you could comment on the notion that we were in any way outnegotiated or outmanoeuvred or outclassed in this particular job. Do you have some comments for us?

[David Plunkett]

We have brilliant negotiators who had the foresight and the wisdom to come forward with an agreement that we believe is very beneficial to Canadian exporters and producers. I'm not sure how modest you want us to be in terms of responding to your question, but I don't believe we were in any way outnegotiated.

If you ask some of our trading partners, generally—not necessarily our EFTA partners here—our system is held in very high regard. We have some people who are held as highly competent individuals, one of whom, for example, is our ambassador in Geneva, who's chairing one of the most difficult negotiating groups in the World Trade Organization. The only way the system of 150 countries would ever put that much responsibility into the hands of an individual is if it thought the individual was competent.

So I don't think we have anything to be apologetic for, sir.

[Dean Allison, Conservative, Niagara West—Glanbrook, ON]

Thank you very much.

I know this agreement was started almost nine or ten years ago. I realize you weren't there for all of it, but certainly for the sake of my understanding, why is it that something like this takes 10 years? Is it because we walked away for six? Could you talk a bit about the process in terms of trying to get to an agreement like this, either the complications or whether you have to walk away to negotiate certain things, and why almost nine or ten years? Would you see this happening in other agreements, and what would that depend on?

[David Plunkett]

Some negotiations are easier than others.

I'll contrast this with the one we announced the conclusion of at the same time as Minister Emerson formally signed the EFTA: the negotiations with Peru. On June 7, Minister Emerson announced the launch of negotiations with Peru. That one took five or six months to pull together, to conclude the negotiations.

We had other ones launched at the same time, and they are proving to be a bigger challenge. We're engaged with a number at various stages. With Korea, I think we're up to 13 rounds. There really is no one-size-fits-all. It very much depends on some of the issues in play.

This one stalled for five or six years largely because we could not find a way through the ship issue, which was fundamental for one side, and we didn't have any flexibility at the time. We struggled with how to deal with it, but it was there on the table and creative minds looked for ways to get around things. Fortunately, we found a solution that allowed us to bring it to a head.

When we start, there's no.... I could never tell you that we would be definitely finished on day x, because we're only one side of the negotiation. The other side may have its own reasons for stringing it out or speeding it up. That's out of our control.

[Dean Allison, Conservative, Niagara West—Glanbrook, ON]

What you're suggesting is that part of the reason you stepped away from the deal was because of listening and consulting with the shipbuilding industry. You couldn't negotiate or you couldn't get what you thought would be beneficial for some of our builders. Is that part of it?

[David Plunkett]

Certainly, in all instances, we will only ever conclude a deal that we believe is good for Canada. If the terms of an agreement with whatever country.... It doesn't do us any good to bring home an agreement that's going to be ripped to shreds. It has to be one that we're proud of and that we feel does the job.

[Dean Allison, Conservative, Niagara West—Glanbrook, ON]

Thank you very much.

[The Chair, Conservative, Lee Richardson]

Thank you, Mr. Allison.

Mr. Temelkovski, seven minutes.

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

Thank you very much, Mr. Chair.

I'd like to ask a number of questions and then you can answer them, because I find we don't get to ask all our questions with all the answers that are coming through.

The Shipyard General Workers' representative testified to this committee that Canada is the only major seagoing country that has not had a strategic plan to guide its shipbuilding sector. In your opinion, is the absence of such an industrial policy act an obstacle in negotiations with EFTA?

Second, you mentioned earlier that there have not been any economic impact assessments done, and therefore this question may be easier to answer. In which sectors did Canadian exporters face the most restrictive tariffs in EFTA markets, and in which sectors do market access restrictions remain?

One of the chief advantages of a free trade agreement with EFTA is that there's a heavy degree of economic integration between EFTA and the EU. In your view, can Canadian business use this trade agreement to help access the EU market?

Finally, what prohibitions does the World Trade Organization impose on subsidies to shipbuilding, and what remedies are available if they are breached?

So there are four easy questions.

[David Plunkett]

I'll let Ton speak to the subsidy issue. And further to the discussion with Mr. Julian, I think we also have a bit more clarity of information here.

The major trading partner for EFTA is the EU. For the processed agricultural products covered in the agreement and set out in annex G, this will definitely give our exporters an advantage. An MFN “forward”, to use some jargon here, is that any time the EFTA countries would give a benefit to the EU, we would automatically gain that same benefit as part of the treaty. So we would hope that this would give some of our industries an advantage in that area.

In discussions of this agreement with some of our trade commissioners in the EFTA markets, in particular in Switzerland, they have noted that improved access to the EFTA market will give an opportunity for Canadian business to sort of trial-market products in a European country to see if they work. It could be in packaging or it could be in seeing whether the product connects with a European audience. If it works with Switzerland, then, given the similarities with other markets, it might embolden a Canadian exporter to take on a larger European market, such as the EU.

So I think there are commercial tangible and intangible benefits with respect to the EU. The other thing, obviously, is that you get into this whole concept of global value chains. You might be able to join up in a commercial activity that's part of a larger process. If it's either coming out of the EU towards Canada or vice versa, through the EFTA, you might find that there are opportunities to take advantage of there.

With respect to the industrial area in terms of economic impact....

I'm going to have to look for the number; I'm not sure where it is right now.

At any rate, the impact for the EFTA on the industrial side will probably be less than on the agricultural side. In large part, many of the industrial tariffs in these four countries were already relatively low. The products that we have identified are the ones that might have been facing tariffs....

Just a second, I can give you some exact numbers.

In Switzerland, 18% of non-agricultural tariff lines were duty-free; 70% in Iceland; and 94% in Norway. We're working with those numbers in terms of potential access.

In terms of the product range where we think there might be some benefits--some of these I've already mentioned--in Switzerland we're looking at cosmetics, aluminum bars, something called tufted carpets, and some apparel items.

With respect to Iceland, you have prefabricated buildings, cathode ray tubes, steel structures, aluminum structures, doors and windows, and cold-water shrimp.

Again, in Norway you have apparel, in part because so many of their duties were already at zero.

You really have to go through each of the products, and each industry, each sector, is going to have to look at this and make its own judgment as to how significant a difference this makes to its ability to compete in that particular market.

The final point I wrote down was your first point, which was linked to the whole shipbuilding policy more generally. As I said, I think I would suggest that those questions be posed to our colleagues in Industry Canada, because they know the shipbuilding framework against which we've been operating.

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

Thank you.

[David Plunkett]

I'm sorry, there was one specific question on the legal front, Ton, on the breach.

[Ton Zuijdwijk]

Yes. On the question of what Canada could do if, hypothetically, subsidies were reintroduced by Norway, I've already pointed out that Canada does reserve or maintain it's rights under the WTO. So that's clear.

In addition, we have built into the agreement the concept of non-violation, nullification, and impairment, which is a concept peculiar to trade law. This will allow Canada to bring an action against, hypothetically, Norway if this were to occur, because there was a clear understanding between the parties at the time the agreement was negotiated that Canada was going to reduce tariffs on ships and related items in return for Norway, in particular, not subsidizing. We built that specifically into article 29, paragraph 4, where reference is made to a benefit that reasonably could have been expected to accrue to Canada or any other party that is being nullified or impaired as a result of the application of any measure that is not inconsistent with the agreement.

So here we are beyond the written text. Canada could then take an action against Norway, and if successful, we could then expect that the Norwegian measure would be removed pursuant to article 30, paragraph 2, or that Canada would receive some other form of compensation.

This is to clarify that we are not without remedies under the agreement, if we were to get into this hypothetical situation.

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

Are some of these irritants difficult to spot—for instance, some subsidies to the shipbuilding industry by Norway? That's usually the problem, right, David?