International Trade Committee on April 16th, 2008

[Cameron MacKay, Director, Regional Trade Policy Division - Americas, Department of Foreign Affairs and International Trade]

Was there a question about the U.S. political system? Is that what the question was?

[Serge Cardin, Bloc, Sherbrooke, QC]

The United States has signed a free trade agreement with Columbia, but it has not yet been ratified by Congress because it claims to want to see evidence of a significant improvement in human rights. All indications are that Congress is not even close to ratifying the agreement. We could therefore deduct that the United States does not believe the human rights situation has significantly improved. Americans like to do business. They choose to ignore human rights in some countries, but in this case, they are using human rights as a reason to refuse to ratify the agreement.

[Cameron MacKay]

Maybe I can just confirm that there hasn't been a vote yet in Congress on whether or not to ratify the U.S. agreement with Colombia. There has been a lot of debate about it in the last week, and the rule was changed in terms of the deadline for the vote on the Colombia FTA. My understanding is that there is an ongoing debate in Washington about the human rights situation in Colombia, also a bill on so-called trade adjustment assistance. There's also a debate in Washington in the same rooms about an economic stimulus package for the United States.

All of this is happening, of course, in the context of an election, so we don't know when the vote will be in the United States. But we're of course watching it closely.

Thank you.

[The Chair, Conservative, Lee Richardson]

Thank you for that clarification. I think that's what we needed there.

Mr. Julian.

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

I'll start off there, Mr. Chair, because what happened last week in the House of Representatives is that the House of Representatives of the United States refused fast-track approval, and by changing that fast-track rule, essentially they've put off any obligation to hold the vote. Most members of the House of Representatives are opposed to the deal. That's been very, very clear. There is no longer any obligation for house leadership to actually bring that vote forward. So Mr. Cardin's comments about the fact that the United States' elected representatives have pushed this off because this is a deal that is so controversial is very legitimate.

So I ask the panel this. You have been following events in the United States, and the fact is that this has been perceived by many observers as being a de facto rejection of the agreement--you do understand that?

[The Chair, Conservative, Lee Richardson]

I wonder if I could interject, Mr. Julian. I don't think it's the position of our representatives today to comment on it. If you want to ask that of the minister or government policy, I think that's one thing. They've got a job to do, and that's to negotiate a free trade agreement. I'm sure they would welcome any questions on Canada's relationship with Colombia in this regard. I don't think we need to take the time of this committee to comment on matters in the United States.

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

Well, Mr. Chair, it is relevant, because the presentation indicated that businesses in Canada will be placed at a disadvantage once the U.S. deal is passed, not “if” a U.S. deal is passed. So I'll move on to my next question, but I think for the record, very clearly the presentation is inaccurate, to say the least,. Essentially, in the United States there has been a pushing back of the possibility of a U.S.-Colombia trade agreement. I think, for the record, that's important enough.

[The Chair, Conservative, Lee Richardson]

I thank you for that clarification. I didn't mean to cut you off in your direction, and you did get it on the record, so let's proceed with this one.

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

Thank you, Mr. Chair.

I'd like to go on to further comments, because I get the sense, from reading and listening to your presentation, that essentially we're looking at a NAFTA template agreement. Would that be an accurate description of the agreement that is being brought forward, which would include investor state rights--chapter 11 provisions?

[Carol Nelder-Corvari]

Thank you for the question.

Yes, we're looking at a comprehensive model like NAFTA.

With respect to investment, what we are seeking in investment provisions will not enable companies to force governments to lower non-discriminatory regulatory standards, including environmental standards. So we're using our FIPA model, which is further refined from the NAFTA chapter 11 in these negotiations.

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

But it does mean that a Canadian company, for example, that wants to move into Colombia and is facing opposition from a local democratically elected municipal council could seek compensation if any decision impinged on their right to get profits from that particular enterprise.

[Carol Nelder-Corvari]

I apologize, because I have to be respectful. The negotiations are ongoing, but I will just reiterate that we're using our FIPA model. The most recent example, I think, was with Peru. It was put into place last year, so this is what we're pursuing, but these negotiations are ongoing. Investment negotiations are a key instrument here, given our presence in the Colombian market, so I apologize that I can't go into detail.

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

I think you've answered it adequately. If it's based on a NAFTA template, then investor state rights apply. I think that would be a source of greater concern for many of us on the committee, that indeed there would be other ways for companies to override the rights we're supposed to be bringing into this agreement.

I want to reference another point in your presentation stating that respect for workers rights requires that Colombia's labour laws reflect internationally recognized core labour principles and that these laws be effectively enforced. How would we require that to take place? What are the mechanisms by which this would go into effect? What are the consequences for no respect for labour rights?

This is not just an academic question, as you know. We've had many human rights organizations identify that to be a labour organizer or trade unionist in Colombia is more dangerous than anywhere else in the world. If we're in negotiations when trade unionists--I believe five so far this month--are being killed, that's a matter of great concern.

What is the mechanism that requires Colombia's labour laws to be effectively enforced if we are in negotiations, when, very clearly, labour trade unionists are being killed even now?

[Pierre Bouchard]

We are seeking a robust dispute resolution mechanism in the side agreement. That would provide the opportunity for members of the Canadian public to bring forward complaints for non-compliance with the obligation to effectively enforce laws. Also, with the breakthrough arbitration we were talking about, these laws must reflect internationally recognized labour standards.

Therefore, the process is that members of the public bring a complaint to our office--a point of contact, if you wish, within government. We then analyze the merits. If the complaint falls within the framework of our agreement, then the dispute resolution process starts. An investigation is made and a report is written, which can lead to ministerial consultation. If the problem is not solved at the level of ministerial consultation, a dispute resolution panel, which functions along lines similar to the dispute resolution panels for trade matters, is then formed. They study the cases if there is non-compliance.

What I'm describing are the same sorts of things you have seen in previous agreements, except this time we are seeking that this dispute resolution applies to a greater number of obligations. This panel can then impose financial penalties, to be deposited into a cooperation fund. That money can then be used to resolve the matter at hand.

We are seeking to achieve a balance between a sufficient deterrent--a hard agreement, if you wish--that will ensure compliance while remaining with a problem-solving approach. By creating a fund, not pocketing the money for the Canadian government but keeping the money in Colombia to solve the problem, then both governments would agree on the mechanism to ensure compliance.

It is robust, transparent, and open to the public.

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

So as the trade unionist dies, we have some dollar amount that will be deposited in a development fund. Thank you for that.

Have you met with Holman Morris, who is a noted journalist, with individuals like him, or members of groups such as Human Rights Watch? And what did they say about the possibility of an FTA with Colombia?

[Pierre Bouchard]

No, I haven't met with...I'm sorry, who?

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

Holman Morris. He's a noted journalist who has spoken out about human rights abuses in Colombia. Or Human Rights Watch, which is a human rights organization.

[Pierre Bouchard]

No, I haven't spoken with that individual.

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

Has any member of this panel?

[James Lambert]

I haven't met with the specific individual you mentioned, but we have ongoing and regular consultations with NGOs and with experts in the academic sector, the human rights advocacy sector, and human rights defenders.

Our embassy regularly meets with Colombian NGOs. Our Minister Bernier met with human rights advocates when he was down there, as do our officials on a regular basis. In fact he met with Jorge Rojas, the director of Consultancy on Human Rights and Displacement; as well as Antonio Madarriaga, who is the director of Viva la Ciudadanía; and Kimberly Stanton, whom I've met with as well when I was down there--project counselling services. In Canada we deal with KAIROS, with Amnesty, and with Alex Neve. We facilitate when they bring human rights observers and defenders from Colombia to their meetings, not only with my department, but we've pulled together interdepartmental groups to discuss the human rights situation in Colombia.

We're very much in an open mode for exchanges with civil society, with real sources of expertise on the human rights situation in Colombia.

[The Chair, Conservative, Lee Richardson]

Thank you, Mr. Lambert, and thank you, Mr. Julian. It was very helpful.

Mr. Cannan.

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

Thank you, Mr. Chair, and thank you to our witnesses here today.

Thank you to the hard-working negotiating team for getting an agreement to this stage. I believe the conclusion of a free trade agreement with Colombia will definitely receive strong support from many sectors and Canadian businesses from coast to coast to coast.

When we heard from the Colombian ambassador in the committee on Monday, we talked about dealing with a democratically elected government and about trying to expand to have a more liberalized trade agreement, with the protection and promotion of human rights as a complementary exercise, with mutually supporting economic growth at the same time to try to bridge the economic gap within this country for so many years. We've heard about a lot of civil unrest there for over four decades, so we're trying to bring some stability to the country.

This committee is also dealing with a trade agreement with South Korea. I'm sure you're familiar with that. Looking over the information from the witnesses on South Korea, and hearing some of the information from witnesses today as well the previous information we received, I see there seems to be some similarity between the negotiations of the free trade agreements with Korea and Colombia.

I guess what I'm trying to say, using a sports analogy, is that sometimes the best offence is a good defence.

Ms. Nelder-Corvari, in your presentation you talked about a defensive free trade agreement, and you alluded to the United States having concluded a deal with Colombia, whereas the negotiations have still not been finalized on a Canada-Colombia agreement.

We've heard from our study on free trade with Korea that should the U.S. get a deal with them and Canada not secure such a deal, there would be a lot of negative implications for Canadian businesses. And after doing some of my homework, I see that agricultural tariffs in Colombia right now range from 15% to 60% on certain products and that many Canadian manufacturers who export a great deal to Colombia are affected by these tariffs.

So my question to you, as the lead negotiator, is whether you could elaborate on how a potential U.S. agreement with Colombia would impact on our Canadian exporters and investors in absence of a Canada-Colombia free trade agreement.

[Carol Nelder-Corvari]

Thank you for that question.

At the outset, I want to point out that it's not just the United States that Colombia is negotiating with. That is our key competitor in that market, but Colombia is also negotiating with the European Union, with EFTA, and it is expanding its trade agreement with Mexico and concluding, I think, an agreement with Chile. That agreement is now moving through their congress.

The entry into force of a U.S. deal is of particular concern. It would be a definite setback for a number of Canadian companies currently doing business with Colombia. Our estimates tell us that over 1,000 Canadian companies exported to Colombia last year. Many of them are SMEs. We talk about big investors in the oil and gas industry, but as is the case, investment is a driver for trade, so a lot of these large investors are bringing with them their partners from Canada. So we're seeing more activity there; there are over 1,000 now. With the passage of the U.S.-Colombia FTA, these companies will face a significant competitive disadvantage, as they will not benefit from the same preferences as their American competitors will.

As I noted in my statement, Canadian exports to Colombia have grown significantly in recent years. In fact, they're more than double what they were five years ago; they're now at $660 million. Most of these exports are subject to significant tariffs, as you've indicated. For example, on paper and machinery products tariffs are as high as 20%, and on some agricultural products they're much higher; and there are also complications from what are called price bands in Colombia.

These are all part of the negotiations. For example, in the case of all of these exporters, they would be placed at a competitive disadvantage in that range of tariff levels, and this is not only with respect to the U.S., but also with respect to the other trading partners I indicated, who are now in active negotiation with Colombia.

Colombia is an important destination for Canadian investment. Our embassy in Bogota estimates that it's about $3 billion now. That's very significant, considering that we have a stock of foreign direct investment in India and China of about $1.8 billion, so we're looking at a significant presence in Colombia. These investments, particularly in the extractive sectors, have led the way to other exports, such as mining equipment and machinery, which are linked, I believe, to the activity of small and medium-sized enterprises as well.

The Canadian businesses who have established operations in Colombia would be at a disadvantage if the U.S.-Colombia FTA were passed, as their investments would not enjoy the same level of protection as investments made by U.S. companies. Ultimately, this could affect the amount of Canadian direct investment in Colombia and weaken the positive spinoffs that are generated through this investment, including economic development in Colombia.

I think it's worth mentioning an important study this committee should be aware of. Professor Xavier Sala-i-Martin of Colombia University produced a paper just when we were launching these negotiations with Colombia, and it speaks directly to the issue of economic integration, growth, and poverty. Going back to some of the other questions here, the paper talks about the fact that investment will be the main driver for Colombia's benefit in terms of providing economic opportunities, and it speaks to some of the broader issues of institution-building and fortifying democratic principles. It's worth looking at, because he does highlight that issue, and he also highlights the fact that economists don't always capture these benefits in their economic models—and these are the key benefits, the institution-building parts of this, and the issues related to investments.

To get back to the key point of your question, we will be placed at a significant disadvantage in the Colombian market if the U.S. secures an agreement with them and we don't. Our exporters are there and are growing; the government should be there with them.

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

Just to expand on that, it's not only agriculture but also the manufacturing industry that would specifically be affected seriously without an agreement, if I'm hearing what you're saying correctly.

[Carol Nelder-Corvari]

Absolutely. Machinery and equipment are expanding. Our exports of paper and services are as well. It's not just in manufacturing. Environmental and engineering services are related to the larger investments that are there.

As I noted, Colombia has now become the primary destination for off-road dump trucks from Canada over the United States. So we're seeing an expansion here, and it's very important to many of these manufacturers. It's a large market of 45 million people. The IMF is predicting growth of 5% between 2008 and 2012. That's much different from the predictions for many other countries. So we're looking at a very dynamic economy, and our manufacturers are looking there as well.