International Trade Committee on Nov. 29th, 2007

[John Maloney, Liberal, Welland, ON]

Some parallels or comparisons have been made with the U.S. agreement, which has, apparently, been agreed to in principle. There is an expedited dispute resolution mechanism that deals specifically with disputes in the auto sector. Can you explain this dispute mechanism to us?

[Joan Baron]

No, I'm sorry, I'm not the person to give you the details, but I can speak anecdotally to the fact that I believe it makes sense to have very strong responses when we're offside. China, for instance, in the famous garlic dispute with Korea, implemented tariffs that were about one thousand percent, and things were resolved quite quickly. I believe the snap-back mechanism, which, it is my understanding, is inherent within the U.S.-Korean agreement, will ensure compliance because the impacts of going to most favoured nation on everything are really huge.

I believe our negotiators are very competent. I haven't seen the agreement yet—you gentlemen may have—so I would merely put the onus on them to provide the right kind of attention to an issue. And we also shouldn't forget about the attention of public publicity. We can put a lot of pressure on any corporation, whether Canadian, American, or otherwise, for being offside on something, and we need to use that more effectively as Canadians.

[The Chair, Conservative, Lee Richardson]

Thanks very much, Ms. Baron.

That is five minutes, Mr. Maloney.

Thank you very much for your precise questions and answers.

Mr. Nadeau, for five minutes.

[Richard Nadeau, Bloc, Gatineau, QC]

Thank you very much, Mr. Chairman.

Mrs. Baron and Mr. Sinclair, welcome.

There seems to be some difficulty. We talk mainly about Canada exporting natural resources while importing mainly manufactured products from Korea. If I understand correctly, we send our natural resources to that country, they use them to make products, and after that we buy them back. Considering that economic reality and this process of resource transformation just when our manufacturing sector is in crisis, whether it be in various manufacturing industries or in the forest industry, I fail to see how this can be an argument in favor of opening our markets.

There is another aspect to this issue, which is related to what we have seen with the US. We have signed free-trade agreements and, in some areas, they are taking us to the cleaners, and that is a huge understatement. I am thinking of the softwood lumber industry and of the mad cow crisis. What happens in the US ends punishing Canada or Quebec. I should add that British Columbia is also paying the price, as well as Ontario and New Brunswick. In those sectors where Quebec and Canada are particularly strong, natural resources, we are being clobbered by the US.

Mr. Sinclair, are there any studies or statistics that would allow us to decide if this agreement is going to lead to job losses? Of course, one can talk about benefits for consumers but one should not forget that we also need our jobs. To be a consumer, one has to have an income and to be able to buy those things. Do you have any data that would throw some light on this issue or am I being too pessimistic? Am I being mistaken in thinking that this is what will happen?

[Scott Sinclair]

Thank you for the questions.

I think you have put your finger on a very important issue, this unbalanced and unhealthy relationship, from the Canadian point of view, where we have relatively low job and value-added content to our main exports, and the Koreans have a very high value-added and job content to theirs. Obviously, in the abstract, theirs is the more desirable position.

Canadians have to pay attention to the quality of trade. It's not just a question of export expansion. We have to have a balanced trade policy. We have to have supportive government policies for our innovative and high value-added high-tech industries, those that have the greatest employment impacts directly and indirectly throughout the economy. That is what we used to call industrial policy, but the whole thrust of trade treaties is actually to try to prevent governments from adopting those policies and to rely on, simply, export expansion to achieve that. We have to rethink that.

In terms of studies, I will leave with the committee a very interesting study that doesn't directly address the Canada-Korea free trade agreement. It is a study by Informetrica—very new—commissioned by the Canadian labour movement, that basically stresses the importance of manufacturing and manufacturing exports for the Canadian economy. I can certainly ensure that the committee gets that.

Several members have raised the issue of dispute settlement, and you rightly point out that one of the reasons that Canada supposedly pursued the original free trade agreement with the United States was for an expedited dispute settlement mechanism, which would work better and faster than the WTO. That has not occurred. The softwood lumber deal dragged on for years, and in the end, when it was clear that the U.S. was about to thumb its nose for having finally lost yet again, Canada caved in and came to an agreement so that the inadequacies, if they weren't already clear to everyone, might be hidden.

In the Korea case, again, I doubt very much the experience of dispute settlement under bilaterals is unlikely to improve upon the WTO experience. The WTO dispute settlement mechanism may have problems, but being expeditious and timely is not one of them. It's quite expeditious and timely.

[The Chair, Conservative, Lee Richardson]

That's five minutes. Thank you, Mr. Nadeau.

Again, thank you, Mr. Sinclair, for that answer.

We'll go now to Mr. Obhrai, for five minutes of questions and answers.

[Deepak Obhrai, Conservative, Calgary East, AB]

Thank you, Mr. Chair, for giving me this opportunity.

Of course one can expect the NDP to always oppose a free trade agreement, so I'm not really surprised by some of the questions, but I am quite surprised that the Liberal Party follows the NDP lead in opposing....

Well, it's my time for me to ask questions, right? Let me just go on.

I'm just surprised that the Liberal Party is following that lead here. I would say that it's not surprising that the labour movement says we caved in and everything; that's their position, and it's understandable.

The main issue here is about the global aspect of the free trade agreement. I just returned from Korea. I was in Korea about three weeks ago, and I met with the agricultural committee chair and with the foreign affairs committee chair. They're also all excited about moving towards this direction. You know, when I was talking to the chair of the agricultural committee, he said he wanted to protect his farmers. That's why they would not let BSE come in. That's why they had Canadian beef stopped. They're trying to protect the small farmers; that's exactly what he told me. The result is that the beef in Korea is such an expensive commodity, Koreans can't even enjoy it...and here the market that gives us....

The failure of the WTO taking place around here on the world scene, with the Asian economies booming and China and India and all this looking for free trade agreements--where is it going to put Canada in all of these things here? It is critically important for Canada to have these bilateral agreements and free trade agreements with countries so that we can participate in that.

Now, when there are some questions, you know, the questions are about negotiations. It's not about free trade agreements. That's why it really surprises me that the objections come from the Liberal Party. As I said, I don't mind the NDP; I know where they're coming from, so that's not a big deal.

Nevertheless, I would say we can of course all cite any kind of report--a report by the labour movement, a report by Industry Canada, everything that can cite what is good and so on--but overall it has proven to be that free trade agreements are a positive way for Canada to go, considering the roadblocks that are coming around the European Union and everything, and the failure of the WTO. This is one of the ways that it is critically important for us, right?

What's your view on that?

[Some hon. members]

Oh, oh!

[The Chair, Conservative, Lee Richardson]

Did you want Mr. Bains to respond, or the witnesses?

[Deepak Obhrai, Conservative, Calgary East, AB]

Well, sir, he would have the opportunity to respond, but I'm just putting in my point of view here as to how surprised I am at the Liberal Party--

[The Chair, Conservative, Lee Richardson]

We got that. Now, did you really have a question you wanted answered?

[Deepak Obhrai, Conservative, Calgary East, AB]

Yes, I did. I asked for their point of view.

[The Chair, Conservative, Lee Richardson]

Go ahead, Ms. Baron.

[Joan Baron]

The Canadian Chamber of Commerce is firmly in support of this free trade agreement. We think it can be a high-quality agreement with an excellent trading partner, one whose GDP per capita is $20,000 per year. We've got a partner who can afford to buy some of our goods.

As well, we might consider that with the tariff barriers removed, isn't there an opportunity to attract a Korean car manufacturing assembly plant here into Canada? They've got them in the U.S. Why would we not be more attractive here?

We can look at all the negatives we want and we can cite all the statistics we want on both sides, but Canada needs to be a trading nation. We already recognize on all sides that we are. The balance of economies and growth is switching to Asia. If we do not have these agreements with Asia, and our competitive partners in Europe and the U.S. do, we will be disadvantaged. Not many businesses can stand a 10% hit to their bottom line just due to the tariff alone.

So we have to remove these barriers. Then businesses need to figure out how to adjust and compete and become global.

[The Chair, Conservative, Lee Richardson]

Thank you again, Mr. Obhrai.

Thank you for that concise response. We're on schedule. Because of that we're able to go to round three.

Go ahead, Mr. Temelkovski.

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

Thank you very much, Mr. Chair.

There's never an answer for Obhrai's questions.

I have a couple of questions. First, what are some of the aspects that you're looking at in the American-Korean agreement that would work for us or not work for us? As well, have you modelled the agreement for the next five years or ten years into the future to see whether the trade deficit between the two countries would increase, stay the same, or decrease?

[Joan Baron]

I'm sorry, was that one for me?

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

Yes, for both of you--but not for Obhrai.

[Joan Baron]

Mr. Sinclair, would you like to start first?

[Scott Sinclair]

Sure, thank you.

In terms of provisions that we would not want to adopt from the U.S.-Korea agreement, the intellectual property rights provisions that I refer to, data exclusivity and so-called linkage provisions--I know those are complicated terms—that would push up the price of drugs, are driven by the brand name manufacturers mainly based in the United States. They have been pushed through U.S. bilateral free trade agreements, and somewhat through European, but up until now, not by Canada.

Canada is in a somewhat different situation. As I mentioned earlier, and one of the committee members mentioned, drug prices are a driver of costs in our system for provincial governments in particular, but also for consumers and employers who pay out of pocket for those higher prices.

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

We've heard that already.

[Scott Sinclair]

In terms of the automotive provisions, they have set up a bilateral automotive council, U.S.-Korea, and, as has been mentioned, what's called a snap-back provision. So if, through this expedited dispute settlement mechanism, they determine that the Koreans are not moving quickly enough to open their domestic market, they can put the tariff back to the previous rate, what's called the MFN rate. In the case of the United States, it's actually only about 2%; in the case of Canada it's 6%. It's not clear it will be part of the Canada-Korea text.

There is, I would say, a great deal of doubt in the U.S. Congress and in the American and Canadian auto industries--who I think you'll hear more from at this committee--that even those provisions would be effective.

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

Perhaps you can finish on that trade deficit, and then we'll move over to Mrs. Baron.

[Scott Sinclair]

I haven't modelled the impacts.

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

Okay.

Madam Baron.