International Trade Committee on Nov. 29th, 2007

[The Chair, Conservative, Lee Richardson]

I call to order the fifth meeting this session of the Standing Committee on International Trade. We are connected today by video conference to Vancouver, where we have our witnesses appearing.

Before we get to that, I'm just going to have one moment on routine business. I think we generally had agreed at the last meeting that we would go until 5 p.m. today with the witnesses' testimony and the questioning, and that at 5 p.m. we would return to orders of the day and set our agenda for the next meeting.

If that's agreeable to everyone, I'd like to commence the meeting, and I'll do that by introducing our witnesses. We have a witness from Vancouver representing the Asia Pacific Foundation of Canada, Yuen Pau Woo, the president and co-chief executive officer.

In addition to Mr. Woo, we have from Korea Ms. Joan Baron, the president and CEO of GBD Canada and also the vice-chair of the Canadian Chamber of Commerce in Korea. I think she was also the past chair for some time, and we're delighted to have her here.

In addition, we have Scott Sinclair, a senior research fellow with the Canadian Centre for Policy Alternatives.

Those three witnesses are here today to give us some more background on our topic of discussion, a proposed Canada-South Korea free trade agreement.

With that, I think we will start with brief opening remarks. I will cap them at 10 minutes, so I would ask our witnesses to maybe give a brief opening background statement.

Mr. Woo, if you're prepared to begin, I'll ask you to start.

[Yuen Pau Woo, President and Co-Chief Executive Officer, Asia Pacific Foundation of Canada]

Thank you very much.

Good afternoon, ladies and gentlemen. Let me first of all apologize for not submitting a written statement. I only received notification about the call late on Monday, and I wasn't able to put together a submission. Also, I do have to leave after an hour. I hope the message, through the clerk, made its way to the members. I apologize for that as well, but I have a prior engagement.

Let me get to three or four general points to set the context of my thinking on the proposed Canada-South Korea free trade agreement.

The first contextual point is that the Korean economy has gone through some very significant changes, obviously in the post-war period, but more particularly since the Asian financial crisis of 1997.

While there is much to say about the Asian financial crisis and how it affected Korea, I want to draw your attention to my own observation that, post-crisis, the Korean economy has embarked on what I think is quite an ambitious, though still unfinished, program of economic liberalization and opening up to a world that relies more on market forces and competition externally, as well as domestically, and the liberalization of sectors previously closed to external competition.

At the same time, I think the Korean economy and the Korean people are starting to find their place in the world. You may recall that they joined the OECD in 1996, just prior to the crisis. While the crisis set them back, they are again on track to find their place as one of the leaders of global economic governance.

The fact that Ban Ki-moon is Secretary-General of the UN is I think symptomatic of Korea's ambition to be a player on the global scene. To that extent they are similar, you might say, and perhaps even aspiring to have the kind of role that Canada has seen in global international economic relations.

Lastly, on this first general point of change in the Korean economy and its emergence in the world scene, let me observe also that trade with Korea is growing modestly, and not particularly strongly. The free trade agreement might make a difference to that, but we are seeing very robust exchanges between Canada and Korea in the area of people-to-people contacts. Here in Vancouver I am looking out the window, where I can see the throngs of Vancouverites enjoying the nice weather we have today, and I would suggest that many of them--students, recent immigrants--are from Korea. The affinity that Koreans feel with Canada, for a wide range of reasons, is very strong. These human relationships form a basis for stronger trade, investment, and business ties that can be augmented by an FTA. That's point number one.

Point two is to draw your attention to the context for bilateral negotiations with Korea, and that is the proliferation of free trade agreements we see throughout the Asia Pacific region, but particularly in east Asia. Korea is in the thick of these manoeuvres to sign agreements with neighbouring countries and countries further afield. This is a trend that is not going to go away, whether or not the WTO Doha Round concludes.

The point is to ask if Canada wants to be part of this trend and this phenomenon, where many Asian economies and economies on this side of the Pacific feel the need to enter into formal arrangements to enhance their access to markets in trading partner economies. While many of the deals struck so far among east Asian countries have been weak, and perhaps lacking in detail, we are starting to see a number of deals across the Pacific that look to be much more substantial and that could have a real impact on the economies involved, as well as on third countries, such as Canada. I'm referring of course to the Japan-Mexico deal, the Korea-Chile deal, and the recently concluded Korea-U.S. deal. I'll come back to the Korea-U.S. deal shortly.

Thirdly, as a matter of context again--the committee will know this well, but I hope you'll think about it very hard--is the fact that there has been a conclusion to the U.S.-Korea negotiations. It will be put to Congress. The suggestion is that Congress will allow for an extension of the President's trade promotion authority so the deal can be voted on, on a yes or no basis. If the deal goes through, it will obviously create some benchmarks for any similar Canadian deal, but it will also create the possibility that the Americans might have preferential access to Korea where Canada does not.

Finally, let me say a few quick words on Canadian interest in any potential deal. I'll be very broad here. I'm not an expert on any particular Canada-Korea sector, but I would say we would want to look for as comprehensive a deal as possible. From what we can see of the high-quality deals Korea has signed with Chile and the U.S., this is possible, so we will be looking for across-the-board tariff reductions. We will be looking particularly for tariff reductions, indeed tariff elimination in the so-called sensitive sectors of agriculture, including forestry, seafood products, and so on. It's very important to also make sure there is coverage of non-tariff barriers on both sides, but particularly on the Korean side.

Also, very importantly, because this is the future of the Canadian economy, we need to make sure there are some serious concessions and trade-offs made in the areas of service exports, opening of service markets in Korea, and the transparency of investment regulations in Korea so Canadian companies can gain a foothold in that market.

Thank you, Mr. Chairman.

[The Chair, Conservative, Lee Richardson]

Thank you, Mr. Woo. That was very concise. We appreciate your keeping to the clock, because we did start a little late.

I think we'll go to Ms. Joan Baron, vice-chair of the Canadian Chamber of Commerce in Korea.

Ms. Baron.

[Joan Baron, CEO, Vice-Chair, Canadian Chamber of Commerce in Korea, Global Business Development Canada]

Good afternoon, Honourable Chairman Richardson and honourable committee members.

My remarks are based on working with the Canadian business community in Seoul since 1996 and being active during that time with the CCCK, the Canadian Chamber of Commerce in Korea. I was chair for six years. I am currently, and have been for the past three years, the vice-chair.

The CCCK serves as the voice of business for Canadians in Korea. We have some 200 members. We believe this FTA will be positive for Canadian businesses, the economy, and Canadian consumers. Canada, as you know, is a trading nation; 40% of our GDP comes from trade. Korean tariffs are double Canadian tariffs and apply to four times as many products--about 54%--so we think Canadian businesses stand to benefit substantially from the conclusion of an FTA. In addition, on some key products such as fisheries, Korean tariffs average 18%, whereas ours are 2%. So the Canadian Chamber of Commerce in Korea strongly supports this agreement.

With respect to services, services account for 60% of our Canadian GDP. Our service exports to Korea have doubled over the last 10 years based on 2004 data, so we think this is a very promising opportunity for us.

That having been said, the CCCK wrote to the Canadian government in 2000 to request beginning FTA negotiations. There have been 12 rounds of negotiations, and we feel it's time to get on with it. The previous speaker mentioned that the Korea-U.S. FTA is nearing ratification, so those tariffs I mentioned will be coming down for U.S. businesses, but not for Canadian ones, and this places Canadian companies at a substantial disadvantage.

We run the risk of trying to perfect something, and we should really just get on with it. There is an example from Ken Blanchard that talks about asking a child to say perfectly, “I want a glass of water”, before giving him something to drink. The end result is that he dies of dehydration. We need to say we'll use the WTO to get the best dispute resolution mechanisms that we can, and let's get on with concluding the deal. I should say that I believe Canada has some very experienced trade negotiators, and given 12 rounds, it's time.

I'd also like to speak to the issue of reciprocity. We have the opportunity to use this FTA to move the goalposts in the right direction and to be innovative at the same time. Korea and the U.S. have discussed removing many barriers to investment. Their discussions have encompassed removing all restrictions to facilities-based telco investments except for the dominant land line and dominant wireless facilities providers, which would be limited to 49%. In Canada our current position restricts direct ownership to 20%, whereas it is 49% in Korea. Therefore, if we looked at doing reciprocal agreements under which Korean companies could invest 49% directly here, we would probably see more direct investment in Canada in the telco sector. Based on our current state, that might be quite a good thing.

Further, we should use this opportunity to identify and remove hidden trade barriers. Every country has those. I just mentioned one in Canada, but in Korea we similarly have issues on testing of food products and with the BlackBerry, a Canadian icon, which can't be launched in its 3G mode, although it does exist in an older technology. These barriers can be dealt with through WTO mechanisms and through public pressure, so I do not think they constitute a good reason to delay in concluding an agreement.

I would also like to mention the aspect of having all the eggs in one basket. A Korea-Canada FTA will help to disperse the focus from being so continentally oriented. When we did the FTA with Chile, we saw trading increase threefold to fourfold in 10 years, and a similar FTA with Korea could have that result.

As the previous speaker mentioned, the relationships between Canada and Korea are very warm. I couldn't think of a better partner with which to conclude an FTA.

Services are very important for Canadians. We have thousands of Canadian teachers teaching English in Korea--8,000 or so, we think--and some of these Canadians stay and open businesses in Korea. They eventually come back as really global entrepreneurs. This is the new wave of entrepreneurs for Canada, because they won't hesitate to use a global service chain. They will have received an incredible education in one of the most competitive markets in the world.

In addition, tens of thousands of Koreans come to Canada to study English, some beginning from the age of six. They also go to universities. There are 15,000 Korean alumni of Canadian universities in Korea.

So in the services sector—in 2004, Canada's services revenue was $700 million—I believe we could see a lot of increase, and these are good, high-quality jobs that could be very important to us.

An FTA also needs to integrate related government policies, such as visa and immigration. Right now our education sector, for which those tens of thousands of Koreans come, benefits from the absence of visa requirements. You can come to Canada for six months if you're Korean--and it's the same for Canadians. The U.S. is considering a similar lifting of their restrictions, and that would be a disadvantage to us.

Finally, I'd like to speak on the importance of nurturing the relationship. I believe we all have a responsibility to educate Canadians on the importance of our officials travelling to Korea. This goes from ministers to members of the House. These trips are not jaunts, as you well know. They create a good element of the relationship, and we need that. Our competitors do that without hesitation.

Finally, we have little islands of Canadian content throughout Korea and Asia, whether it's alumni of Canadian universities, Canadian teachers, Canadian chambers, or Canadian culture. We need to look at having a budget to bring these together and multiply them so we can have more of a Canadian effect in Korea.

In summary, the Canadian Chamber of Commerce has been in favour of this agreement since 2000, when we first wrote to say that we recommended beginning negotiations. Twelve rounds of negotiations have been completed. We believe that we should conclude this agreement, and that there are huge advantages to Canadian businesses and Canadian jobs in doing so.

Thank you.

[The Chair, Conservative, Lee Richardson]

Thank you. Again, that was very concise. We appreciate that. It's useful to have that on-the-ground experience.

We will go to our third and final witness today--from the Canadian Centre for Policy Alternatives, Scott Sinclair, senior research fellow.

Mr. Sinclair.

[Scott Sinclair, Senior Research Fellow, Canadian Centre for Policy Alternatives]

Thank you, Mr. Chair, and thank you to the committee for the invitation.

Thank you to my fellow presenters. I can certainly vouch for the importance of--

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

Mr. Chair, I'm getting a lot of feedback. I don't know if other members are. People are applauding and talking.

It's like our systems have crossed circuits or something.

[Yuen Pau Woo]

I think it might be on my end, in Vancouver. I'm in some kind of a shared office space where they have video-conferencing facilities, and apparently there's a Christmas party next door.

The door is shut. I've done everything I can. Presumably the party will start winding down soon.

[Scott Sinclair]

Now that we've cleared up the background noise, which I was also hearing, what I had begun to say was that I can certainly vouch for the importance of and the increasing interchange between Koreans and Canadians. My nephew is about to marry a young Korean woman this Christmas.

Today, however, I think we have to focus our attention on the deal that is actually on the table. I'm very grateful for the opportunity to raise some serious concerns about that agreement.

In the time allotted, I wish to address three issues: the Canada-Korea trade in goods and Canada's manufacturing crisis, the pursuit of WTO-plus intellectual property rights in the talks, and the deal's investor-state dispute resolution mechanism.

Since the Asian financial crisis in 1997, Canada-Korean trade in goods has been very unbalanced. Canada has consistently run large merchandise trade deficits with South Korea, $2.5 billion last year. Moreover, Canada's largest exports to Korea are natural resources--for example, wood pulp, coal, aluminum--while Korea's biggest exports to Canada are manufactured goods--for example, finished vehicles, TVs, radios, electronics.

As you are well aware, Canada-Korea automotive trade is especially lopsided. In 2006, Korea sold $1.7 billion in automotive products to Canada, while Canada sold only $11 million worth in Korea, a ratio of 153:1.

The Canadian Vehicle Manufacturers' Association, representing the North American and Japanese manufacturers, is concerned that the deal would provide disproportionate benefits to Korean automakers. Only last week, Ford Canada warned it would have to re-evaluate its current investment position in Canada if the Canada-Korea deal goes ahead as planned. The Canadian Auto Workers Union has released a study that estimates significant job losses from the deal.

The proposed agreement would certainly include rapid, perhaps immediate, tariff liberalization for manufactured goods. The negative impacts in Canada would be felt not only in autos and shipbuilding, which have received the most attention, but also in a broad range of high-tech manufacturing sectors, such as electronics, machinery and plastics.

The proposed deal would worsen Canada's large bilateral manufacturing trade deficit with Korea and reinforce an unhealthy and unbalanced trade pattern, where Canada's primary exports to Korea are low value-added natural resources, while our main imports are high value-added manufactured goods.

Canada has lost 291,000 manufacturing jobs since November 2002, due mainly to the rise in the exchange rate of the Canadian dollar against the U.S. dollar and the rising non-North American--mostly east Asian--share of the North American market.

The proposed deal would be a blow to Canadian manufacturers and manufacturing workers at a critical time when they are struggling to cope with this crisis. They are justifiably looking to Canadian governments for supportive policies, not initiatives that would make their current situation even more difficult.

Turning to intellectual property, in a significant departure from its approach in previous bilateral free trade agreements, Canada is negotiating an intellectual property chapter in both the Canada-Korea and Canada-Colombia-Peru deals. Since the conclusion of the WTO Uruguay Round, no Canadian bilateral FTA has included an intellectual property rights chapter.

Since Korea and Canada are both WTO members, to which the WTO Trade Related Intellectual Property Rights, or TRIPS, rules already apply, the only rationale for including an IP chapter is to negotiate WTO-plus obligations.

What types of TRIPS-plus rules are Canadian negotiators seeking? Even at this late stage in the negotiations, the public does not know for sure. This committee can play a vital role in lifting this veil of secrecy.

It can be surmised, however, that Canadian negotiators are actively considering so-called data exclusivity and linkage provisions that reduce access to affordable drugs here at home and would have harmful impacts on access to medicines in FTAA partner countries.

The monopoly protections afforded by data exclusivity can delay generic competition in cases where a pharmaceutical product is not patent-protected or where a compulsory licence has been granted on a patent. Such provisions can also compel generic drug companies to conduct time-consuming and redundant clinical trials before they are able to market cheaper medically equivalent versions of brand name drugs.

Canada recently extended its own minimum period of data protection from five to eight years, among the longest in the world. It would be a serious mistake, however, for Canada to lock in these new rules by binding them in its bilateral trade treaties, which would make them very difficult to change. It would also harm public health in partner countries by driving up drug costs and reducing access to affordable medicines.

Another concern is that the intellectual property chapter would include rules that prevent health regulatory agencies from granting approval for a drug if another company claims a patent. Health regulatory agencies should not be saddled with patent enforcement. The practical effect of such rules is to frustrate and delay the introduction of cheaper generic medicines through pointless and costly litigation.

Pursuing monopoly protection beyond what is required by WTO rules in the Canada-Korea or the Canada-Andean pacts would set a very bad precedent, locking in domestic policies that Canadian governments may want to change in the future and reducing access to essential medicines in FTAA partner countries. An analysis by Oxfam, for example, estimates that similar provisions in the U.S.-Colombia draft FTA would cost Colombians an extra $940 million a year to buy more expensive medicines.

I urge this committee to investigate why Canadian negotiators are breaking with past practice by pursuing intellectual property rights in these bilateral agreements and to recommend a halt to this practice.

Turning finally to the investment chapter, the Canada-Korea deal and the Andean deals would also contain investment chapters replicating NAFTA's controversial investor state dispute settlement mechanism, which allows investors, as you know, to sue governments over public policies that allegedly breach stringent investment protection rules.

Binding arbitration can be invoked unilaterally by investors without first seeking consent from their home government. Tribunal decisions are final, although they may be reviewed on narrow procedural grounds in the domestic courts. Although tribunals cannot compel governments to change inconsistent measures, they can impose substantial fines.

The Canada-Korea agreement would expand these investor rights, which are unparalleled under multilateral trade rules. Under NAFTA there have been, by my count, 49 such claims. The number of challenges to U.S. government measures has fallen off in recent years, but new claims continue to mount against Canada. There were three in 2006 and another three already in 2007.

I will just tell you briefly about a couple of these disputes. One of them pits ExxonMobil, the world's largest and most profitable oil company, against development policies in Newfoundland and Labrador. Exxon, which is a partner in the Hibernia and Terra Nova oil and gas fields off Newfoundland, alleges that Canadian guidelines stipulating that energy companies active in the offshore invest in research and development within Newfoundland and Labrador are prohibited by NAFTA's investment rules.

In another recent case, the Adams Mine case, the U.S. investor is challenging the Ontario government's decision to halt a highly contentious project to dispose of Toronto's solid waste in a man-made lake on the site of a former open-pit mine in northern Ontario. In fact, nearly half of the investor state claims have involved challenges to environmental protection or natural resource management regulations. Beyond the immediate impact of such claims, there is concern about the chilling effect; the government may avoid regulating for fear of becoming involved in a potentially costly dispute.

At a time when Canadians are more concerned than ever about protecting the environment and ensuring that communities share equitably in the wealth created by resource development, the Government of Canada should not be expanding or entrenching such provisions through bilateral trade agreements.

To conclude, I commend the committee for holding these hearings. There needs to be full public and parliamentary debate on all aspects of this deal. The deal should not be rushed ahead simply for the sake of getting an agreement.

Trade expansion should be based on the principles of fair and balanced trade. Excessive intellectual property protection and investor rights have no place in Canada's bilateral trade treaties.

I just want to conclude by saying that my intelligence on the U.S.-Korea FTA and its prospects for ratification is very different from that of the previous two speakers. I think it appears very unlikely to come to a vote in the U.S. Congress before 2009.

Pending the results of the U.S. presidential and congressional elections, the fate of the deal is uncertain. Key provisions could certainly be changed. Given this, I think Canada, and also Korea for that matter, would be well-advised to bide their time and to delay or suspend their current talks.

Thank you.

[The Chair, Conservative, Lee Richardson]

Thank you, Mr. Sinclair.

We'll now move to questions. I might just remind the committee that we have established an order of speaking, and that's clear. The first round will be seven minutes. The order of speakers will be Mr. Bains, Monsieur André, Mr. Allison, and Mr. Julian for seven minutes each.

Before we proceed to that, I want to remind the committee that Mr. Woo has to leave in about half an hour, so if there are specific questions you want to direct towards Mr. Woo, who is president and co-chief executive officer of the Asia Pacific Foundation of Canada, you might ask those early to make sure he can respond.

Sorry?

[Sukh Dhaliwal, Liberal, Newton—North Delta, BC]

Do we have the presentation of Mr. Sinclair here? If not, may I request that Mr. Sinclair give us that presentation?

[The Chair, Conservative, Lee Richardson]

Yes, that's fine. I apologize to the committee. Because of the short notice given to the witnesses, we were not within our usual practice of providing the statements in both official languages prior to the meeting.

With that, I'd like to begin the questioning and go to Mr. Bains.

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

Thank you very much, Chair.

I'd like to thank all the witnesses who are presenting before the committee.

This is an important issue, and I'm glad we're having this discussion in committee. There were certain remarks that the Liberal Party made very clearly with respect to the proposed Canada-Korea free trade agreement.

We are a trading nation. As Ms. Baron mentioned, 40% of our GDP is attributed to trade, and we recognize that. The Liberal Party has a long history of free and fair trade, and we signed many trade agreements when we were in government, but we have some legitimate concerns with the free trade agreement with South Korea. Primarily, the first area of concern revolves around market access. This is an area in which we have concerns with respect to non-tariff barriers.

I'm glad, Ms. Baron, that you mentioned RIM. That's a case I want to cite as an example of non-tariff barriers. My understanding is that RIM had considerable difficulty penetrating the South Korean market and getting their product out there.

There is a WIPI platform currently in place in South Korea, which has prevented not only RIM but other international companies from being able to sell their product in that market. That's an example of a non-tariff barrier. It's not tariff-related, but this particular platform creates a cost structure that makes it very difficult for RIM to be competitive to sell their product. RIM, as you know, is a Canadian success story and wants to do well not only in Canada but abroad as well.

Obviously the other concern with non-tariff barriers has to do with the automotive sector. Of the $2.5 billion deficit that was cited by Mr. Sinclair, roughly $1.6 billion of that is attributed to the auto sector and the parts sector. So a lot of the trade imbalance exists in that industry as well, and their concern--they've cited this on numerous occasions--is with non-tariff barriers.

There is the issue of market access. We want to know, in your opinion, how this free trade agreement would genuinely deal with that, because it has nothing to do with tariffs, but with these non-tariff barriers.

The second issue is jobs. There are going to be winners and losers in this free trade agreement, so there are going to be some jobs lost and some jobs gained. The concern I have, which has been expressed by many others, is that we might lose good, high-paying Canadian jobs. What will they be replaced with? While the unemployment rate might be low, there is a concern that high value-added, well-paying Canadian jobs are being replaced by lower-paying jobs with fewer benefits. That isn't necessarily reflected in the macroeconomic numbers that are shown.

The third question is about the dispute mechanism. Do you have suggestions for how we can enforce that? Because when a country is in violation and we go through the WTO process, by the time the issue is resolved the market is already distorted, and jobs are lost. It's therefore very difficult to replace some of the concerns that revolve around that.

My last question is for all the speakers, if they have time. Why do you think we have separate deals for the environment and labour cooperation? Why do you think that exists? And why can't that be incorporated as part of the original FTA that we are currently negotiating?

Those are some of my questions.

[The Chair, Conservative, Lee Richardson]

Is that directed to all three?

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

Yes, all three, if they can. Thank you.

[The Chair, Conservative, Lee Richardson]

I will ask the witnesses, then, to keep their answers rather brief, because we have left about one minute each, if each is going to speak.

[Joan Baron]

Perhaps I can start.

First, with regard to RIM, I think that problem can be resolved without being part of an FTA, and it shouldn't be, because it would involve us giving up concessions that we probably don't have to give. We just need to put more public pressure on. This is an anomaly that should not have happened.

So I think that can be resolved. RIM already exists there in an iDEN platform, and with a little more pressure, this one will go away.

On the automotive, it is more substantial, but I'm not sure there are hidden trade barriers in the automotive area. I'm not an automotive expert, but when I look at the statistics, foreign cars in Korea have doubled since 2004. Even this year, January to October, year-to-date the sales are up by 32%. Ford sales are up by only 8%, but everybody else is doing great.

I think what it says is that you need to adjust culturally to the market and provide the kinds of services. Of cars made in Canada, there are a million cars a year sold in Korea. Cars made in Canada, the smaller cars, should be very attractive and very well priced.

We see some cars—Toyota Corolla, for instance—that have been brought over by Canadians there. There's a lot of interest in that car.

So I believe there are opportunities. What we have now is the worst of all worlds. Canada is relatively open. We don't have a lot of barriers here, but there are a lot of barriers in Korea. That's why the FTA, to the mind of the people who have their feet on the ground over there, is valuable for Canadians, because it will remove these barriers.

I do think we need to think about how to help companies to adjust, not in terms of sheltering them from global competition—we need to get out there and compete—but there should be some kind of adjustment to help them, whether it's training for the people or whatever. But based on the growth in services and the fact that we can address our gap in trade through things like automotive, I believe this is a good opportunity.

I'm running out of time here.

[The Chair, Conservative, Lee Richardson]

I'm sorry, but we do have to move on. Each member gets only seven minutes for their questions and answers.

Mr. Woo.

[Yuen Pau Woo]

I have just two quick points on the issue of NTBs, or non-tariff barriers.

My view on NTBs is that this is a tremendous opportunity for negotiators to shine a light on these NTBs and to include them in the negotiations, and hopefully to address them through successful conclusion of a deal. But in order to do that, we have to know what the NTBs are.

I think the onus is on the industries in Canada who feel that there are some serious non-tariff barriers in Korea to spell out in as much detail as possible the nature of these problems so that we can shine a light on them, embarrass the Koreans perhaps, but more importantly, put to our negotiators the proposition that these may be very serious issues that can be dealt with through negotiations and see if they can be dealt with in that fashion. It is not, however, to simply assert that the NTBs, in some kind of vague, scary way, without any possibility of verification...using it more as a stumbling block to the agreement than an opportunity to address those problems.

The second point I would make, of course, is that the Americans, in their concluded negotiations, not ratified, have apparently addressed some of these NTB issues. They have established a working group with the Koreans. They have outlined a number of areas in which the Koreans have committed to address non-tariff barriers in the auto and auto parts sector.

We have to ask ourselves, how did the Americans do that? Should we not be aiming for the same conclusions?

The Americans also, I would say, have negotiated a very interesting snap-back arrangement where, if there is a determination through the dispute settlement mechanism that the Koreans violated their commitment to deal with NTBs, the tariffs in the U.S. would snap back to the MFN rates in an automatic fashion.

Again, what I am trying to say here is let's think about NTBs not as the reason to end negotiations but the reason to continue negotiating.

[The Chair, Conservative, Lee Richardson]

Thank you. I think we're going to have to cut it at that point, because we're over eight minutes. I'll start the next response with Mr. Sinclair, if that works for everybody.

We're going to move to Monsieur André.

[Guy André, Bloc, Berthier—Maskinongé, QC]

Good afternoon and thank you all for your excellent presentations.

There is a basic principle to follow when we negotiate any free-trade agreement: we have to make sure that the results are as beneficial to Canada and Quebec as to the other country. When one negotiates a free-trade agreement, it is important to ensure mutual access to market.

We know that we export mainly agricultural products, minerals, metals, woodpulp. It is also true that there has been tremendous growth in those exporting sectors in the past few years.

However, you also export many manufactured products such as automobiles and auto parts, electrical equipment, computers, rubber and steel.

We have heard the representatives of an association of Canadian automobile manufacturers who have expressed serious concerns about the Canada-Korea agreement, as you all know and as Mr. Sinclair has indicated. On the other hand, Mrs Baron, of Global Business Development Canada, seems to be very much in favor of this agreement.

I would like to put some statistics to you. In 2006, Korea sold 1.7 billion dollars worth of automobile products to Canada whereas Canada only sold 11 million dollars worth of such products to Korea. The ratio is 153 to 1. People working in the automobile industry are extremely concerned about this agreement which, they fear, will cause damages to their sector. As you know, the automobile industry is in crisis at this time in Canada, just like the manufacturing sector.

Obviously, we should not negotiate an agreement aggravating this crisis. On the contrary, we have to find solutions to provide support to our industries. We have to conclude free-trade agreements that will benefit one country as much as the other but, at this time, we are not convinced that this will be the case and we would like to be reassured.

Some predictions have been made about the automobile industry. According to some estimates, Quebec might lose more than 8,000 jobs and Ontario, more than 17,000 jobs. There are figures about this, studies have been done.

Mrs. Baron, I would like to hear you about this. Do you have any studies? You may say that Toyota wants to export automobiles in Korea but do you have any statistics or studies that could reassure us, showing that the Canada-Korea agreement will lead to job creations in both countries and will be economically beneficial to both instead of creating economic problems as is presently the case with other agreements that we have concluded within the WTO framework, particularly relating to the manufacturing sector?

I would like to hear you on this.

[The Chair, Conservative, Lee Richardson]

We have four minutes here, so I think we should start with Mr. Sinclair. He didn't have an opportunity to respond to the previous question.

Perhaps I could get you to take the first turn, and then Ms. Baron, because she was asked specifically to respond to Mr. André.

[Scott Sinclair]

Thank you, Mr. Chair.

Both members have raised some very important points.

I think the data on trade, particularly in automotive, with the 153:1 ratio, speaks to the extreme difficulty in selling cars into the Korean market.

I am not certain that a trade agreement can actually address societal barriers. It is very difficult to design a trade treaty to actually get at that. Trade treaties are designed to get at government measures. When you have an industrial strategy that's based around very close ties between government and national industrial champions, it's very difficult to get at that through a trade treaty. The provisions that have been included in the U.S. free trade agreement I don't think will be effective, and I think that's the conclusion of many in the U.S. Congress.

Both members have pointed to what is basically the high job content of our imports from a country like Korea and the relatively low job content of our resource exports. But I think it's important--and the resource sector is doing very well--not to put all our eggs in that basket. The manufacturing sector, as has been stated, is going through a very difficult time. This is not really the moment to be piling more misery on them.

There have been some very serious warnings issued--as I said, by Ford last week--and these are things that Canadians have to take very seriously. If they are saying that they are prepared to re-evaluate their investment position in Canada over this particular deal, that is a very serious matter.

[Joan Baron]

My apologies, because I didn't hear all of your remarks due to translation, but let me address what I thought you were asking me.

You asked specifically if there are studies that can give some comfort, because there's a lot of pain in the manufacturing sector right now. No, I do not have those studies, but I do have some facts that might help.

First, on the Chilean agreement, our trade has increased by three times as a result of that FTA.

Secondly, we are seeing Magna in Korea, so they see opportunities.

Thirdly, statistics show that the sale of foreign cars in Korea is on a huge upward trajectory: 32,947 were sold a year ago, and 44,000 were sold this year, year to date. That's a 32% increase. Canada should be able to get its share.

Ford is struggling. They're not getting 32%. They're getting 8%. I don't think Koreans don't want to buy foreign cars. I think some other issues might be at play. When you're doing one of these agreements, it's difficult to understand all the issues, but I think there is hope for that sector. We should explore that, because if there's an opportunity to participate in a million-car-a-year market, if our cars are well priced and well made, this takes us from being continental to being global, and that should be attractive to us.

That's all I can offer on this one issue.

[The Chair, Conservative, Lee Richardson]

Thank you very much.

We are staying a little closer to time, and I appreciate that.

We're now moving to Mr. Allison.