International Trade Committee on Dec. 13th, 2007

[Brian Pallister, Conservative, Portage—Lisgar, MB]

Mr. Cannan.

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

Thanks, Mr. Chair.

Thank you, witnesses, as well.

I just wanted to add one comment. Coming from the west coast, from the interior of British Columbia, Pacific gateway, we're all anxious. Premier Campbell has been very bullish on the Asia Pacific gateway and expanding the market into Asia. Our forest industry, as you know, has been affected, receiving a triple whammy with the high increase in the dollar, the American economy going down the tubes, and the aspect of the pine beetle.

Ms. Morgan, it's really encouraging to hear your positive comments for the forest sector. We need a shot in the arm. Have you, as an industry, looked at the benefits of this agreement, not only for British Columbia but also for Quebec and Ontario, which have been impacted severely by the forest sector?

[Marta Morgan]

We haven't done any quantitative estimates of the benefit of the agreement, but we have seen quite rapid growth on the solid wood export side already--about 25% over the last two years. We would expect that that would be even more rapid if we could get rid of some of the tariffs that are in place currently, at a minimum of 25% a year and possibly more. We currently already export about $125 million a year in solid wood products, mostly out of the west coast, so it would be a substantial benefit, and it would further diversify the market.

One of the things we see over and over again is that because we do export so much to the U.S., when the currency shifts or we get a trade problem, we're less vulnerable if we have other markets that are strong.

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

Thank you very much.

Merry Christmas, and may 2008 be an even more prosperous year for all of you. Thank you.

[The Chair, Conservative, Lee Richardson]

Thank you, Mr. Cannan and Mr. Pallister.

We will wrap up with seven minutes of questions and answers from Mr. Stoffer.

[Peter Stoffer, NDP, Sackville—Eastern Shore, NS]

Thank you very much, Mr. Chairman.

It's a pleasure to be with this committee. It's the first time I've been on the international trade committee.

I think if we just built large ships out of wood and had half of them built in Quebec and exported, we'd solve our problem right now. Maybe you should all talk together after this.

As you know, the American free trade deal with Korea is stalled until after the next presidential election. One of the reasons it's stalled is that there's a lot of controversy about what this deal means for the future of Americans.

But there is one thing the United States does that we don't do. In 1924, in the first FTA agreement that the United States had, and right up to today, in every single free trade agreement they have, they block out, carve out, and don't even discuss marine and shipbuilding industries, because it is a vital industry to their shores and to their country. Yet in this country, a former finance minister said that shipbuilding was a sunset industry. It is not. I come from a region of the country that probably would build ships for a long time. Shipbuilding in this country can produce a tremendous amount of high-tech jobs, not just in steel and riveting and hammering away but in the high-tech sector of computers and technology. I remind everyone that when the frigate program was in, in the 1980s in Saint John, 25% of those benefits came out of Ontario and Quebec, and we're about to lose this.

So my question quite clearly is, if we're worried, as Mr. Pallister said, about the Americans signing a deal with Korea, and if it goes through but they leave out a very important segment of their economy, shouldn't then Canada do the same in order to protect what I consider a very vital industry in this country?

Before you answer that, because I probably won't get another question in, I want to say that every time we negotiate free trade deals with other countries, the labour rights, environmental standards, and so on always seem to be treated as a side deal. The reality is that it's very difficult to negotiate a trade deal with China when the wages are a fraction of what they are in our country. They may not be unionized; they may not have the health standards that we have. Doesn't that already put our producers and our workers behind the eight ball when we negotiate with countries where the salaries and wages and maybe certain labour laws or environmental laws are different?

And—I just say this as the sort of fiend that I am—when we negotiate free trade deals with other countries, shouldn't we try to match and increase the true labour standards and the health benefits of workers of other countries? We tried to do that with Mexico and it didn't quite work. So if we're negotiating that in other countries, shouldn't we—not as a side deal but entrenched in the deal—make sure labour and health standards and environmental standards are equal to what we have in this country?

Thank you.

[VAdm Peter Cairns]

Let me answer your first question first.

It would be nice if we had a Jones Act.

[Peter Stoffer, NDP, Sackville—Eastern Shore, NS]

There you go.

[VAdm Peter Cairns]

I know there are a lot of people in this country—not only shipbuilders but shipowners—who would appreciate that.

We almost have one, to be very fair. It's called the Coasting Trade Act, and it protects those who actually operate ships in this country. But we didn't put the shipbuilders in it. That's really where the major difference is between what the United States has and what we have in this country. One of the ways we could solve that is to just open up the Coasting Trade Act and drop us in, and we'd all be fat, dumb, and happy, if I could say that.

Our problem is that we can't get into the United States because of that. And as you say, this is your biggest market. So we sit up here north of the 49th parallel, really where geography is an impediment to us now. We don't have a Romania around the corner where we can get cheap welding. We can't do a lot of this stuff. In the days of yore in Nova Scotia, where all those tall ships came, geography was not an impediment. But now geography is an impediment to our industry.

I would pick up on what my colleague here said. I myself agree with him with regard to the WTO. I believe an economist—of which I am not one, and you can see that just by the way I talk—would tell you that all these bilateral agreements are actually negative towards opening the world to free trade. What happens is that you then start to distort the whole trade picture by bilateral agreements. So I myself think that the WTO is the way to go, but unfortunately people do not have the patience for that.

Did I miss a question?

[Peter Stoffer, NDP, Sackville—Eastern Shore, NS]

Not necessarily, but you mentioned the FTA deal we've done, and you know Norway subsidized its industry heavily for many, many years. Now when they're up and running and they've cancelled those subsidies, they're ready to compete—

[VAdm Peter Cairns]

One of the interesting things about the shipbuilding industry—and this is where we're completely different from anybody at this table—is that we're not in the WTO. We have no rules. There are no WTO rules that really apply to us. We are the last of the wild west shootouts. Countries and governments can do any darn thing they want; there are no real regulations.

The OECD tried to regulate the shipbuilding industry and failed. The European Union is trying to regulate their portion of it, but it has failed. If you look at China, Vietnam, Korea, and Japan, when they started, they were right out of the wild west. The guy who puts the most effort into it and the country that throws the most money at it are the winners. So that's the situation we find ourselves in.

What we find very difficult is that these people have all gone through that, they've matured, they now have these dynamite industries, and we're still sitting here wondering how we deal with that. When we get to a bilateral free trade negotiation, there is nothing in Korea for Canada's shipbuilding industry. There's lots in Canada for Korea's shipbuilding industry, but they'll never let us in the door. We just will not be able to get in the door. No one will expect us.... That's a non-tariff barrier, but there are a million ways of doing that.

Subsidization. Everybody says they don't subsidize. Korea doesn't subsidize, Norway doesn't subsidize. That is really a lot of malarkey. As you quite rightly pointed out, all the Asian countries have pools of cash from which they give industries below market rate loans so that...and those loans are made politically, nothing to do with the risk assessment of the business. I can show you that, if you want all the paper.

[Peter Stoffer, NDP, Sackville—Eastern Shore, NS]

Mr. Chairman, perhaps I may say in conclusion that we know we have approximately $20 billion worth of work on domestic refurbishment and resupply of various vessels from the military, coast guard, our laker fleets, ferries, etc., but if a free trade deal like Korea happens, there is a good chance more yards may shut down. If more yards shut down, we may lose the capacity to build our own naval fleet in the future.

This is one of the dangers, because the shipyards require long-term investments and long-term plans, not just for their structured financing and capital allowances but for their workers, to ensure they have the trained workforce to do that job down the road. I would certainly hate to see the day we require new JSS ships, for example, and they have to be built somewhere else because we simply don't have the capacity. That would be a sad day.

Merry Christmas to you all.

[The Chair, Conservative, Lee Richardson]

Thank you, Mr. Stoffer, I'm glad you got that in. I thought we were going to have to invite you back as a witness.

I want to thank everyone for that today. I think it was very useful. I also very much appreciated your presentations. On behalf of the clerks, if you do happen to have them in electronic copy, we would welcome them so we can deal with them more expeditiously at this end.

With that, I will thank the witnesses again for appearing today.

To all the committee, we are adjourned.

Merry Christmas, and I'll see you in the new year.