International Trade Committee on Dec. 11th, 2007

[The Chair, Conservative, Lee Richardson]

I call the meeting to order.

We have another item on the agenda that maybe we can clear off, or at least give a few minutes to, while we're waiting for technical assistance. Why don't we try that, if the committee is in agreement?

I might also add while we're waiting to begin, with the consent of the committee, that I think it would be my intention to table the report that you passed last week. We'll table it tomorrow. That would be the report on the previous committee's travels.

Before we get to witnesses, we do have some committee business, and that is a notice of motion from Mr. Pallister that has been given notice. I see that we have Mr. Epp sitting in. Did you want to proceed with that?

Sorry, Mr. Julian.

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

Mr. Chair, I don't believe the motion has been moved by the proposer. If Mr. Pallister is not here, we would have to move on to our witnesses.

[The Chair, Conservative, Lee Richardson]

I'm happy to move on to the witnesses, but apparently we don't have the witnesses quite yet. In the meantime, we were just trying fill in. We don't have any sound.

Excuse me just a minute, while I consult with the clerk.

[The Chair, Conservative, Lee Richardson]

We're going to reconvene. The situation apparently is that we're have technical difficulties at the other end of this call. We may be able to get Mr. Stanford by video; I think they're going to try to do it by teleconferencing. We may have simultaneous video, or we may just get him by conference. I'm not sure how that's going to work.

If there isn't any objection, we could still go ahead. Are we ready to go with that?

They're not quite ready on the teleconferencing, so we are going to reconvene for the second part and that is committee business, notices of motion. Mr. Epp is now duly signed in, replacing Mr. Pallister.

Essentially, to answer your question, the whip tells me that he is acting for Mr. Pallister and that's just fine. Mr. Julian, I'm responding to your question about whether or not an alternate member who's representing another member can move a motion on his behalf, and the answer is yes.

Mr. Epp.

[Ken Epp, Conservative, Edmonton—Sherwood Park, AB]

Thank you very much, Mr. Chair. It's a delight and an honour to be here in Mr. Pallister's place. I assure you all, all of the members of this committee, that I could be just as tall as Mr. Pallister if I just cinched my girdle up real tight. It's got to go somewhere, right?

This is the proposed motion that I'm presenting on his behalf. It has to do with priority of legislation and is of course designed to expedite the work of the House, which we're all very interested in.

This is a motion that the consideration and examination of any bill, government or private member's bill, that is referred to the Standing Committee on International Trade take precedence over any study or non-legislative examination. In such circumstances, the non-legislative study shall be deferred until such time as the bill is reported back to the House.

Do I speak in favour of that, Mr. Chair?

[The Chair, Conservative, Lee Richardson]

I don't know if there's going to be requirement for debate. If you want to speak to it, go ahead. You don't need a seconder, so go ahead and introduce it.

[Ken Epp, Conservative, Edmonton—Sherwood Park, AB]

It's just a routine motion. As many of you know, I substitute in a lot of committees, and this is one of the routine motions at the beginning of each committee formation that is routinely done in other committees. I would strongly recommend that this be done here as well.

As I said in my preamble, in order to expedite the work of the House--which we're all interested in--this of course would also mean that when private members' bills, many of which come from the opposition side as well as from government members, are dealt with, they are dealt with in an expeditious manner and dealt with by the committee instead of by default.

Thank you.

[The Chair, Conservative, Lee Richardson]

I think that's clear.

We have a motion from Mr. Pallister that bills referred to the committee essentially take precedence over other business. Is there some debate?

Mr. Julian.

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

Mr. Chair, I don't think we need to spend a lot of time discussing this. For members of the opposition, obviously, it would make no sense at all to essentially hand over the direction of committee business and the agenda to the government, which is essentially what this does.

As a committee, we've worked together. I've been on the international trade committee now for three and a half years, and essentially we establish agendas by consensus. We work with the chair and the agenda committee.

To have the three opposition parties hand over the agenda priorities to the government would make no sense at all in a minority Parliament. Canadians chose a minority Parliament. The result of the committee composition is the choice Canadians made, so it makes no sense at all for the opposition to hand over the agenda-setting to the Conservatives. This should be done with the approval and consensus of as many members and parties around the table as possible.

So I'm voting against this motion.

[The Chair, Conservative, Lee Richardson]

Is there any further debate? We have a list. Thank you very much.

Monsieur Cardin.

[Serge Cardin, Bloc, Sherbrooke, QC]

Thank you, Mr. Chairman.

I would conclude with what's just been said, but I would add that I prefer that we be free to determine our own actions.

We're sufficiently responsible to judge the speed with which we must consider a bill when it is tabled here in committee. We're capable of doing that. Depending on the stage of examination of an issue, it may be preferable to finish what we've started, if a bill is not that urgent.

I would prefer to see the committee remain master of its decisions and deal with each issue individually. When a bill is presented before us, we'll see where we are in our committee business and according to the urgency of the matter, we will decide if we give it precedence or if we defer it a little to finish what we've already started.

I would be open to any suggestion when the time comes to make a decision.

[The Chair, Conservative, Lee Richardson]

Thank you.

Mr. Allison.

[Dean Allison, Conservative, Niagara West—Glanbrook, ON]

Thank you, Mr. Chair.

I'm amazed at the overwhelming sense of fairness and consistency the NDP picked in this particular issue. Depending on what committee it's at--I know that certainly for HR it's always been the case that we deal with the business of government or private members' bills; that takes precedence all the time. When Bill C-257 came forward, even though we were working on studies, it didn't matter; it was very quick, and easy to push aside what we were doing. Certainly, in the name of fairness and consistency across all committees, most committees handle it this way already.

I would also take into consideration my colleague's remarks. Obviously if we're working on a report there should be some type of mechanism whereby we talk about what priorities to take, but certainly, as is the case in every other committee, bills always take precedence.

Once again, this is a routine motion that happens in every committee.

[The Chair, Conservative, Lee Richardson]

I'm going to have to wrap it up there, in fairness to our witnesses. I do apologize to the witnesses, who are in the room, for this technical delay. I appreciate your patience. It sounds as if we now have some context. I think we'll just defer this until 5:15 to see if we can deal with it then.

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

Why don't we just call the vote?

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

I second that, Mr. Chair.

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

I feel the discussion's taken place, or maybe that's presumptuous of me.

[Ken Epp, Conservative, Edmonton—Sherwood Park, AB]

I'd really like to respond once more.

[The Chair, Conservative, Lee Richardson]

Yes, I think they want to respond further, so that's debate for now. I would like to, for the sake of our witnesses, carry on with the meeting, and that is the consideration of the study of the proposed Canada-Korea free trade agreement.

We have as witnesses today Gerald Fedchun from the Automotive Parts Manufacturers' Association. We also have Mark Nantais from the Canadian Vehicle Manufacturers' Association. I hope we have, via teleconferencing if not by videoconferencing, Jim Stanford, the chief economist from the Canadian Auto Workers Union.

I wonder if we might have a test. Mr. Stanford, are you hearing this?

[Dr. Jim Stanford, Chief Economist, Canadian Auto Workers Union]

I am hearing it just fine, thank you. I apologize for the delays here, technically.

[The Chair, Conservative, Lee Richardson]

Well, I'm sure it's not your fault. We apologize for the delay to everyone concerned. You are coming through very loud and clear, I might say, so we can proceed.

I think we will begin—now that we have the sound up, and if it's all right with the rest of the witnesses—with Mr. Stanford for a brief opening statement. I would ask each of you, if you wouldn't mind, to give a brief opening statement, at which time we'll proceed to questions in the usual format. We do have video here. We may get simultaneous video and the conference call through the wonders of modern science.

Mr. Stanford, could I ask you to proceed.

[Dr. Jim Stanford]

Certainly, sir. Thank you, Mr. Chair.

When you say brief, are you thinking five minutes? I just want make sure I know how brief.

[The Chair, Conservative, Lee Richardson]

Sure, five to ten minutes is fine. Closer to five would be more acceptable. That just gives you more time to answer questions.

[Dr. Jim Stanford]

I'll give that a go. Thank you very much, and again I apologize. My flights were cancelled because of the ice storm here. I would very much prefer to be there in person today.

I think the CAW's organization is well known. We're the largest private sector trade union in Canada. We represent about 265,000 members in a wide range of different sectors, including the auto industry, but other sectors as well.

Our criticisms of the proposed free trade agreement, I think, are well known as well. We have argued that the current state of trade between Canada and Korea is very unbalanced, a one-way pattern of trade, and that will only be exaggerated by a free trade agreement. The deficit is likely to get larger, especially in the higher-value manufactured goods, which we tend to buy from Korea. And we have predicted that will impose serious damage on a range of high-value-added manufacturing industries in Canada. And it's not just the auto industry. I know we have the auto industry representatives here today, but it's important to recognize that a wide range of industrial sectors will be hit by this, including computers, electronics, machinery, metal products, plastic and rubber products. These are likely the most at risk.

We have prepared and distributed to the committee a study that estimates that if the experience of free trade with Korea matches the average experience that Canada has had with the other five free trade partners that we have today--that being the United States, Mexico, Israel, Chile, and Costa Rica--we'll likely be looking at about 33,000 net job losses in Canada.

More recently, we have disaggregated those job loss estimates across the different regions of Canada. Ontario and Quebec, not surprisingly, lose the most jobs. Over 17,000 jobs were lost in Ontario and over 8,000 were lost in Quebec. But the interesting thing is that in every region of Canada the net employment impact is negative; that is, nowhere are the modest jobs created in agriculture and mining because of the free trade agreement enough to offset the larger job losses in manufacturing.

For today's discussion, I'd like to focus on presenting our views on a couple of more recent issues related to this free trade agreement. First, the Department of Foreign Affairs itself has finally released an economic study with an assessment of the economy-wide effects of the proposed free trade agreement. Secondly, DFAIT has also invited reaction to its draft environmental assessment of the FTA. I think both of these documents have very important implications regarding the government's approach to negotiations with Korea that I'd like to bring to your attention.

I'll start with the economic study first. Initially, I have to make a point. It's surprising that it's only now, after some 14 rounds of negotiations with the Koreans and a clearer, concerted push by the government to reach agreement, that the government has actually performed an economy-wide study of the impacts of the free trade agreement. That strikes me very much like the tail wagging the dog. This economic study was prepared as part of the environmental assessment process. I think we should have had a very careful economic study of the economy-wide impacts of the FTA before we even entered negotiations with Korea to make sure that we had a chance to generate net benefits that were worth the risks and costs.

I do want to talk, just briefly, about the methodology of the government's study. It belongs to a type of economic model called the computable general equilibrium model, a very controversial approach in economics. Some of the assumptions that are built into the model include the assumption of sole employment; the assumption that workers are paid the same wage in every industry; the assumption that the whole country consists of one representative household that shares all the income from different industries equally, so there's no income distribution problem; the assumption that Canadians are inherently loyal to domestic-made varieties of different products; the assumption that Korean consumers will behave as aggressively in response to tariff reduction as Canadian consumers do; and other economic assumptions that are very unrealistic.

We've described and critiqued those assumptions in detail in a letter to Mr. Hildebrand, the chief goods negotiator with the Department of Foreign Affairs, which we'd be happy to share with anyone who wants to see the details.

There are some particularly outrageous assumptions that the modellers made in regard to the auto industry. In particular is one crucial but very unfounded assumption. The modellers have assumed that 65% of Hyundai and Kia's automotive production that is destined for Canadian markets will migrate, within the period covered by the free trade agreement, to assembly plants that the company is building in the United States. And the implications of that are, since Hyundai and Kia, in theory, are going to be supplying Canada from the U.S., which we have a free trade agreement with, of course, that the impact of the free trade agreement with Korea on the auto industry will be very mild.

This assumption is very wrong. The 65% assumption is based on an analogy to the experience of Japanese automakers, who in some cases, not all, have located a lot of their production in North America. But Japan had a very different economic situation. It had much higher labour costs than Korea, and it was trying to avoid trade barriers that the Americans were putting in place. Also, Japanese companies are much larger scale than the Korean ones are, and that allows them to produce more vehicles in North America while still offering the full range of vehicles for sale.

We have heard this argument from government negotiators informally many times, but this is the first time we've seen this assumption in written form, and we're very worried about the implications. If federal negotiators wrongly believe that 65% of production from Hyundai and Kia is going to move to North America anyway, that could contribute to an enormous strategic mistake in their negotiations with the Koreans. The implication is that the free trade agreement won't really impact the auto industry, because it's all coming to North America anyway, and if negotiators wrongly believe that concessions they make in the auto talks aren't that important, then they won't get full value for those at the bargaining table.

We could go into more detail on the questions about the model's unrealistic assumptions, and also about its results, because even with those unrealistic assumptions, the model itself presents a very underwhelming case of the benefits of the free trade agreement. They expect an increase in Canadian GDP from the free trade agreement of 0.1% spread out over a period of several years--probably 10 years--so it's an infinitesimal effect on our economy that would be impossible to measure, and under alternative assumptions it's possible it would be a negative impact rather than a positive impact.

Let me take just a minute, Mr. Chair, on the environmental assessment report, which DFAIT also invited comment on. In our view, that report is also very flawed. The environmental assessment totally excludes at least two very important aspects of the environmental impact of our trade with Korea. First of all, it excludes the environmental impact of Korean use of expanded quantities of Canadian resources, including energy resources like coal, which we will be shipping to Korea in increased volumes after a free trade agreement, and this is absolutely wrong. For example, in Korea today there is a gigantic coal-fired power plant, the Poryong coal plant, and it is the second-largest source of coal-fired CO₂ emissions in the world. We will be supplying more coal to Korea, to that plant and other facilities, after a free trade agreement, and we can't ignore the environmental implications of that simply because the plant is in Korea.

Secondly, the study also ignores the emissions resulting from the shipping of goods back and forth between Korea and Canada after a free trade agreement, so we're very unsatisfied with that environmental assessment, as well as with the economic model. Our advice would be for the government to stop the negotiations with Korea, go back and conduct a genuine, more realistic, sector-by-sector economic analysis of the free trade agreement to identify exactly where some possible benefits will come from, and conduct a proper environmental assessment at the same time.

I'll leave those as my opening remarks, Mr. Chair. Thank you very much again for your flexibility, and I look forward to the questions.

[The Chair, Conservative, Lee Richardson]

Great. Thank you, Mr. Stanford, and thank you for staying within the time. That gives us more time to proceed with questions later.

I'd like to now call on Mr. Fedchun, and you might correct me if I'm not pronouncing that right.