International Trade Committee on Dec. 4th, 2007

[David Emerson, Conservative, Vancouver Kingsway, BC]

Well, I'm inferring your question, but that's precisely why we have a special automotive committee advising us on the Korea-Canada trade negotiations, because we know. When I was Minister of Industry, I heard about the non-tariff barriers in Korea. So we have consulted, and continue to consult, with the industry.

In the negotiation, we're attempting to get at all those non-tariff barriers that we can identify and that can be made specific enough to action in a trade negotiation sense. We're talking to them about ongoing monitoring mechanisms, committees that would be early-warning committees to identify quickly and deal with any new measures that might be put in place. We're negotiating and talking about dispute resolution that would be very quick and automatic if there were those kinds of issues.

It's tough going and it's very detailed work, but I do not see any other way than to carry on the negotiation and get down into the muck and try to deal with it, because the reality is that if Korea does a deal with the Americans, and they have, and that will get ratified—despite all the political rhetoric that's going on around right now, it will get ratified—when that happens and we don't have a deal with Korea, Korea won't want to do a deal with us any more. They won't have to. They can deal with North America through the U.S., and we will see the 85% of our product that's exported to the States seriously affected by competition into the U.S. market from Korea, and it will have a very big negative impact on Canada.

So we have to keep it going. We have to triangulate what the Americans are doing with Korea with what we have to do with Korea, with what our industry has to do to evolve and continue to be globally competitive.

[The Vice-Chair, Liberal, John Maloney]

Thank you, Mr. Minister.

Mr. Miller.

[Larry Miller, Conservative, Bruce—Grey—Owen Sound, ON]

Thank you, Mr. Chairman.

Mr. Minister, to you and all your staff, thanks for coming here today.

I'm interested in your opening remarks. You were talking about some of the future possibilities out there. I think you mentioned some countries like Iceland, Norway, and a few others. I wonder if you could enlarge there what the potential is in some of those countries.

Iceland is one that we kind of brush off, that we're only able to bring ice and snow from there, but I think we know that's not the case.

Could you talk about some of the value in some of these countries that are possibilities, the potential there, and specifically what commodities Canada may benefit from?

[David Emerson, Conservative, Vancouver Kingsway, BC]

I outlined in my written remarks all the countries we are dealing with, so I won't go back into those. That's a trade negotiation agenda that will probably take two years even if we were extremely effective and successful in executing it. But those are all markets where we've gone through consultation with Canadian industry, and industry has identified those markets.

A good example would be some of the Central American markets, where the Americans have a free trade agreement with the Central American four, plus the Dominican Republic. Well, all of a sudden, Canadian companies that were selling into those markets are finding themselves at a competitive disadvantage because the American producers are now getting preferred access to the markets. Those are issues we're trying to deal with.

I didn't mention the gulf cooperation states. I was over to the Middle East, and members of this committee were over there recently. There are enormous opportunities in the gulf states. If you look at the United Arab Emirates, if you look at Kuwait, and to some degree Saudi Arabia, there are huge opportunities there, and there's a very positive view of Canada and Canadian companies there. It's not just the regulars that are always there—the Bombardiers and SNCs. You have Cirque du Soleil now as a permanent fixture in Dubai.

So you're getting cultural industries and just tremendous opportunities there to export high-end, high-quality Canadian services and goods, and educational opportunities for universities.

If you look around North Africa, there are other opportunities, potentially—Algeria, and Libya. Depending on the circumstances, there can be some real opportunities for Canadian agriculture, for example.

And Vietnam is a coming market. It has huge rates of growth, huge potential, and it's a market where Canada and other competitors have not gone in such a way that we would be starting from far behind. The opportunities are huge, and it covers a range of sectors.

Canadian agriculture and agrifood has massive global trade opportunities as we get into niche products and high-quality products—Atlantic seafood, western seafood, the same thing.

[Larry Miller, Conservative, Bruce—Grey—Owen Sound, ON]

I'd like to leave a bit of time for Mr. Cannan, but Mr. Gero never got a chance to comment earlier on the agriculture text at the WTO. If we could briefly hear something on that, I would appreciate it.

[John Gero, Assistant Deputy Minister, Trade Policy and Negotiations Branch, Department of Foreign Affairs and International Trade]

As you know, the agriculture text came out in July. Since then, in September, there have been intensive negotiations on agriculture. Our agriculture negotiator, Mr. Verheul, has been in Geneva basically for nine of the last twelve weeks, and he's there this week as well negotiating on behalf of our export interests and defending our own sensitivities.

Negotiations have gone quite well. In fact, part of the delay of the text, which we were hoping would come out before the end of this year, has been the fact that negotiations are very much engaged. There will be further negotiation sessions in January before our next reiteration of the text will emerge, as the minister's said.

[The Vice-Chair, Liberal, John Maloney]

There's about half a minute left, Mr. Cannan. Thanks for waiting.

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

Thank you, Mr. Chair.

My thanks to you and your staff for attending, Minister.

Coming from British Columbia, I know you and Premier Campbell have discussed this Pacific gateway many times. I just want you to quickly elaborate a little bit more on the benefits. You said it's a billion dollars lost if we don't sign this agreement with South Korea, and if we do, there's a potential of five to 23 jobs. There's obviously a billion dollars' worth of economic input in all kinds of other sectors that will benefit, so can you maybe elaborate a little bit more?

[David Emerson, Conservative, Vancouver Kingsway, BC]

What I said was that based on 2005 trade data, if we had a good trade agreement with Korea—and we don't yet have an agreement, so one has to make assumptions—there would be about a $1.6-billion improvement to Canadian GDP. I said that the best analysis that we have done on the auto sector—I'm not talking about all the other sectors, but the auto one is the hot-button sector—suggests that the impact would be relatively small. Like I said, it's minimal. So that would be what we need to be focused on.

I also said that if the Americans go ahead with a Korea deal and we do not, over $1 billion in damage to the Canadian economy could flow from that.

[The Vice-Chair, Liberal, John Maloney]

Thank you, Mr. Emerson.

Mr. Bains.

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

Thank you, Chair.

Again, just as a continuation of the discussion we were having earlier, Minister, at one point you were very bullish. You thought we were going to sign a deal. You actually thought it was a possibility that by the end of this year we'd sign a deal with South Korea. You seemed to indicate in your remarks that there has been a bit of change in direction with respect to a potential deal being signed with South Korea now.

What happened? Is it because of job loss scenarios? Is it the fact that you've projected a trade imbalance going forward with a potential free trade agreement?

My colleague Judy mentioned a lot of non-tariff barrier issues and the fact that if you look at all the OECD countries, only 4% of vehicles manufactured abroad are really sold in South Korea. There have to be issues around that. It's a very low number relative to other countries.

You also indicated that you're consulting certain sectors. You indicated that you were consulting the auto sector and are engaging them, for instance. But when I speak with them or other people speak with them, they tell us a very different story. They're very frustrated. They feel they're not being listened to. They feel their analysis isn't being incorporated properly. Yes, they might be listened to, but they're not generally heard and are not properly consulted.

So my question to you is, what happened? From your original viewpoint a few months ago to now, what changed? Is it like I said in terms of the job losses or the trade imbalance, the non-tariff barriers, the consultations with various sectors? Something happened. Could you maybe explain what that was?

[David Emerson, Conservative, Vancouver Kingsway, BC]

There have been changes, but not the changes you have cited.

For one thing, the Korean trade minister has changed. Minister Kim, who was my counterpart when we began these negotiations, has gone on to other opportunities, so we've had that change. We also have Korea pursuing trade negotiations with the European Union and pursuing negotiations with, I believe, India.

I'm not sure the appetite of Korea today is as strong as it was six months to do a deal with Canada. To the degree that they believe they're going to get a deal with the United States without doing one with Canada, they're going to be less inclined to negotiate a favourable deal with us. What we're finding at the table is that when we think we're making progress, when we think we're getting the issues that are sensitive and important to us dealt with, it's not moving as quickly from the Korean side as we would like. We're therefore just going to take the time it requires to get it right.

It's very sensitive publicly, as you know.

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

Absolutely.

You also mentioned that there's a potential agreement that will be ratified between the United States and South Korea, and you talk about the implications for our economy. We recognize—I think that needs to be qualified—that there are rules of origin that come into play under NAFTA. If South Korea is to sell cars through the United States to Canada, there are certain rules of origin content to it—62.5%, I think, or something to that effect.

There's an impression that one gets, and maybe you can clarify. When you say there's going to be an economic loss, are you implying that because of that free trade agreement, those vehicles now sold to the United States will somehow come to the Canadian market?

[David Emerson, Conservative, Vancouver Kingsway, BC]

There are two factors at work. One is that if 85% of our cars are sold in the U.S., we're going to face stiffer competition selling those cars in the U.S. It has nothing to do with rules of origin; it's just that Korean cars are going to come in and are going to be cheaper than the ones we're selling.

The other one is the investment by Korean car companies in the United States market; their rule of origin will apply in terms of whether those cars produced in Georgia and Alabama will come duty-free into Canada.

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

They sell, I believe, twenty vehicle lines. The proposals I've seen of the plants potentially from these manufacturers from Korea represent maybe three or four vehicle lines at approximately 200,000 to 300,000 vehicles sold in a year. That doesn't seem to be a substantial amount in terms of their being able to penetrate our market with vehicles that are manufactured in the United States so that they can somehow take advantage of the Canadian market.

[David Emerson, Conservative, Vancouver Kingsway, BC]

All I'm saying is that if those vehicles produced in the United States meet the rules of origin threshold, and I believe they will, they will become competition in the Canadian marketplace. But that's only competition for the Canadian consumer.

Well, I shouldn't say that. It's competition for the Canadian consumer and it's competition for the cars we're trying to sell in the U.S. Add to this the Korean-produced cars that will be coming in duty-free and you get a fairly negative competitive impact on the Canadian industry.

[The Vice-Chair, Liberal, John Maloney]

Thank you, Minister. We've come to the end of our time and now we're being summoned to the House for a vote. We appreciate your presence and we appreciate your frank response to all these questions.

Thank you very much. We look forward to seeing you again.

[Some hon. members]

Hear, hear.

[The Vice-Chair, Liberal, John Maloney]

The meeting is adjourned.