International Trade Committee on April 28th, 2008

[Dean Beyea]

Yes.

[Gerald Keddy, Conservative, South Shore—St. Margaret's, NS]

That's pretty simple.

I think the other issue I have is more of another macro-issue, if you will. It's the general effect of a free trade agreement on Canada's competitiveness and in particular on our competiveness in the western hemisphere. We've signed five free trade agreements since NAFTA, I think, including NAFTA. The U.S. has signed 20-plus, Mexico has signed 40-plus, and Chile has signed 50-plus. We're being left out of the market and left out of the economy if we don't play some catch-up ball here, to use a worn-out sports analogy.

I would worry a lot more about what would happen to our economy if we continue not to be a player. Compared to the rest of the world, we've generally taken very modest steps in looking at free trade agreements in the last 15 years. If our economy's going to continue to flourish and continue to grow, we need to have free trade agreements. We need to be able to compete with Colombia on an equal footing.

The last time I checked, our farmers in western Canada need to sell wheat, because if you can't sell it, there's no point in growing it. It's as simple as that. And if there's a 15% tariff on wheat, then we're leaving ourselves out of a marketplace that for all intents and purposes is a burgeoning marketplace with great potential--and furthermore, with great potential for the people of Colombia, as tough as things are. There's still violence and there's still not the society we would like to see, but in comparison....

I only have a few Colombian friends, and they left Colombia because of violence as teenagers. Now all of a sudden they're looking at Colombia in a totally different light, having been educated abroad. A number of them married people abroad and are not liable to go back, but there is opportunity in Colombia again today. That's something we didn't see in the past for probably more than a decade. Is that too general? I'm making a statement more than a question, but I think those statistics are important.

[Dean Beyea]

Maybe I can read the IMF summary on Colombia from 2007, because it does reinforce what you said:

Colombia's economic strategy since 1999 has yielded considerable success. Growth has been above the Latin American average over the past three years, supported by structural reforms and prudent macroeconomic policy. Colombia has weathered well the recent turbulence in global financial markets. Large capital inflows, primarily comprising foreign direct investment, have contributed to an appreciation of the real exchange rate. In light of the improved security situation and continued commitment of the government to sound macroeconomic policies and further structural reforms, long-term economic growth in the neighbourhood of about 5 percent per year appears feasible.

It is a market that's certainly pursuing free trade in an aggressive manner. It's a small group of expertise in that country, and they're not in Bogota very often because they're negotiating with Europe. They're negotiating into Asia. They're looking at expanding in South America. They're reworking their agreement with Mexico; they've negotiated an agreement with the United States. Certainly the opportunity is there.

[Gerald Keddy, Conservative, South Shore—St. Margaret's, NS]

I have one more quick question.

Do you have a breakdown by province of the provincial bilateral trade between Colombia and Canada and the result of that in jobs in each of those areas? Without the agreement trade has grown, so surely with the agreement trade will grow even faster. If we go ahead with this agreement, what's the potential? I'm talking about Canadian jobs.

[Dean Beyea]

I don't have a provincial breakdown of the kind you described, but overwhelmingly our first objective is to protect trade that's currently going into the market, the $660 million, and then look at the growth opportunities that opening up the market will have. We haven't--

[Gerald Keddy, Conservative, South Shore—St. Margaret's, NS]

It's $660 million in overall trade from Canada to Colombia.

[Dean Beyea]

In 2007 our exports to Colombia were at $660 million, split roughly two-thirds industrial, one-third agriculture.

[The Chair, Conservative, Lee Richardson]

Thank you, Mr. Keddy.

That completes round two. I think we have time for round three. That's a five-minute round, beginning with Mr. Simms.

[Scott Simms, Liberal, Bonavista—Gander—Grand Falls—Windsor, NL]

Thank you, Mr. Chair.

I appreciate everyone having me here and I appreciate your patience.

I have a general question. I won't put this to anyone specifically. Whoever wants to jump in may do so.

I was reading some of the research from the Library of Parliament that talked about these snap-back provisions in a Canada-Colombia free trade agreement--violation of environmental, labour, or human rights obligations.

Maybe it's because I'm new to this committee or particularly thick--I'm not sure which one is which--but could you flesh out for me what we're talking about in this snap-back provision, in the sense of what triggers this snap-back provision and what triggers, at least in our terms, a violation of environmental, labour, or human rights obligations?

[Dean Beyea]

The only snap-back mechanism--and that's usually what's referred to as a snap-back to previous tariff levels--is the only one I think we as a group are familiar with. It's the bilateral safeguard chapter, where if there is injury caused by the elimination of tariffs over time, there are provisions during the elimination of the tariff period and sometimes a year or two beyond to take safeguard measures.

[Scott Simms, Liberal, Bonavista—Gander—Grand Falls—Windsor, NL]

So the environmental standards or labour standards are all fleshed out in advance? Or is this some kind of moving target?

[Dean Beyea]

I don't think we have that level of expertise here.

[The Chair, Conservative, Lee Richardson]

For clarity, I'm not sure where you get that information, Mr. Simms, but there is no snap-back provision in this agreement at this point. So I think you might have some difficulty--

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

The Library of Parliament. The questions that the policy research analyst--

[Scott Simms, Liberal, Bonavista—Gander—Grand Falls—Windsor, NL]

Maybe we can just ask them generally. If I'm off the mark you can tell me, I'm sure.

[The Chair, Conservative, Lee Richardson]

I'm just saying that for clarity there isn't one in this agreement. I think there may have been reference to the question of whether or not there should be or there might be, or will there be, but at this point there isn't. This is just for your own clarification. I just want to have some sense of sympathy for the witnesses to answer your question in that regard, when there isn't something to answer the question on at this point.

In any event, please carry on.

[Scott Simms, Liberal, Bonavista—Gander—Grand Falls—Windsor, NL]

As you were saying, sir?

[Dean Beyea]

Sorry, I was talking about the bilateral safeguard chapter, which involves the fact that while tariffs on sensitive goods aren't usually reduced immediately, they're phased out over a certain period. Usually what we would negotiate is a bilateral safeguard mechanism that allows you to return to those previous tariff levels, should there be injury caused from imports of those products into the market that resulted from the tariff decrease. It allows you to maintain the higher level for a certain period of time to the end of the phase-out period--for a year or two.

[Scott Simms, Liberal, Bonavista—Gander—Grand Falls—Windsor, NL]

Would you have a prior FTA where this has taken place?

I'm just trying to come to terms with how we gauge these environmental or labour standards indiscretions by other countries.

[Dean Beyea]

No, I think we're talking about two different things. “Snap-back” is generally a term you use in tariffs. I'm not familiar with any snap-back provisions in labour or environment. Again, I would say we were asked to speak here about the market access elements of the agreement.

I don't know if Cam wants to add something.

[Cameron MacKay]

Maybe it would be only to say that when Ms. Carol Nelder-Corvari and her colleagues were here last week or the week before, we had some detailed discussion about the labour and environment side agreements to the FTA, and they have their own dispute settlement and consultation mechanisms. In the FTA itself we're looking at the possibility of chapters to complement that. My understanding of “snap-back” is not involved in those side agreements, and what Mr. Beyea just described is the normal emergency action kind of provision that we would have in most of our FTAs. The side agreements are very broadly like the NAFTA side agreements, but we went into some detail a couple of weeks ago with the experts here describing the many differences and the improvements we've made, we think, since we negotiated the side agreements on NAFTA.

I hope that's helpful.

[Scott Simms, Liberal, Bonavista—Gander—Grand Falls—Windsor, NL]

Thank you, Mr. Chair.

[The Chair, Conservative, Lee Richardson]

I think that clarifies it. Thank you.

Mr. Cannan.

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

Thank you, Mr. Chair; and thank you to our panel of witnesses.

I just want to pick up on something my colleague Mr. Keddy had alluded to. With the slow pace of the WTO talks, I think it's important that we continue to engage in these bilateral trade agreements. So I'm supportive of moving forward as we talk about a free trade agreement, and making sure it's a fair trade agreement as well.

I just recently came back from spending a couple of days in Washington. I know in your discussions you alluded to the U.S. having this agreement, and just because they have an agreement, as Mr. Bains said, it doesn't mean we have to follow suit.

They've put theirs basically in the stall mode in Congress. In speaking with representatives in the House in the past week, it's now hurry up and wait, from their perspective. If we do become first out of the gate, what kinds of advantages would that present for Canadian businesses, if we have an agreement signed prior to theirs?

[Dean Beyea]

The scenario we described works to our advantage. In the scenario that Denis described with respect to pork, where the imports of pork are divided pretty evenly among three sources—Chile, the United States, and Canada—at about 3,000 tonnes a year, we now have a considerable tariff advantage vis-à-vis the United States should our agreement come into force before theirs. Those are just a couple, but it applies across the board.

When you look at developing country markets, markets such as Colombia and Latin America, their tariff framework is much higher than ours in general. In the WTO, their industrial tariffs are bound at 35% and their agriculture tariffs somewhere near 100%. So they have the flexibility to move up to those levels.

They're applied on the industrial side between about 5% and 20%, and on the agriculture side they're considerably higher, as high as, on some products, 80% on beef and 60% on beans. If we were to move ahead and gain that advantage for our exporters into the market, it would be a significant advantage, I would argue, for the majority of our exports into Colombia.