Thank you for introducing our team here. We're here to respond to any questions you may have about Bill C-24.
We're very pleased to have this opportunity to speak to this bill, which is an act to implement the Canada-Peru trade agreement and parallel agreements on labour and environmental cooperation. This bill implements the legal framework and the legislative amendments required to deepen the economic and social relationship between Peru and Canada.
This initiative dates back to 2002, when Canada and the Andean Community countries agreed to begin discussions on a possible free trade agreement. The government carried out extensive consultations with domestic stakeholders in Canada, which revealed broad support for pursuing an FTA. Through the ensuing exploratory process, it became clear that not all of the Andean countries were prepared to move forward with a comprehensive trade agreement. Peru, however, clearly stood out as a country that was actively engaged in economic reform and seeking free trade partners with priority countries such as Canada.
This FTA is part of the government’s comprehensive efforts under its global commerce strategy to open new opportunities for Canadian businesses. It also forms part of the government’s efforts to strengthen Canada’s engagement in the Americas by fostering economic development and strengthening democracy and security.
The current global economic downturn creates an additional urgency to these efforts for both Canada and Peru--not only as an instrument to increase economic activity, but also as a means to fight trade protectionism that could seriously undermine global recovery efforts. The FTA with Peru will give Canadian exporters, investors, and service providers preferential access to a dynamic economy of approximately 28 million people that has experienced GDP growth of over 9.8% in 2008. This is higher than that experienced by China and India.
In its April 2007 report, entitled “Ten Steps to a Better Trade Policy”, this committee instructed the government to give priority to negotiating defensive FTAs to address competitive disadvantage. This FTA with Peru responds to this recommendation. As it stands, Canadian exporters are at immediate risk of losing markets in Peru due to the entry into force of the trade promotion agreement with the United States on February 1 of this year. Peru has also recently completed trade negotiations with China and EFTA and is currently negotiating with the EU, South Korea, Mexico, and Thailand. Each one of these preferential agreements will erode the competitiveness of Canadian businesses. Our firms and Canadian workers deserve FTAs that address this situation and allow them to compete in international markets on a level playing field.
In the area of market access for goods, Peru will eliminate tariffs on virtually all of Canada’s current exports, including on key products such as wheat, barley, lentils, peas, as well as wood and forestry products, cotton and other fabrics, and a range of industrial machinery. Canadian tariffs on the vast majority of imports from Peru will be eliminated immediately.
On services, the FTA will provide enhanced market access for a range of services in key sectors of interest to Canada. These include mining, energy, and professional services like engineering, architecture, and information technology. Canada’s banking, insurance, and securities sector will also enjoy greater access to the Peruvian marketplace.
The FTA also builds on the existing foreign investment promotion and protection agreements and gains new ground for Canadian investors. Strong obligations ensure the free transfer of capital related to investment, protection against expropriation without adequate and prompt compensation, and non-discriminatory treatment of Canadian investments.The investment chapter of this agreement clarifies that the parties can take non-discriminatory measures to protect legitimate public welfare objectives, such as health, safety, and the environment.
To compete effectively in global markets, Canadian firms must import, export, and increasingly invest abroad to improve efficiencies through global supply chains. Research shows that foreign investment facilitates improved R and D, innovation, and productivity. According to the Export Development Corporation of Canada, every dollar of investment abroad is expected to generate approximately two dollars of additional exports in emerging markets. We are seeing this demonstrated in our relationship with Peru. Our stock of investment stands at $2.4 billion and our exports have more than doubled over the last five years.
Imports from Peru are also increasing, and they are, in many cases, directly related to our mining investments. Seventy-five per cent of the imports from Peru are in the form of metals that are imported for further processing in Canadian facilities or for use in Canadian production.
Given these facts, it is important that we view these FTAs holistically. They are not just about exports; the success of Canadian firms and jobs in Canada is also linked directly to investment and imports. This is the nature of the globally integrated trade. Canadian direct investment abroad connects Canada to global operating platforms that are critical to our competitiveness. These investments need to be protected or they place our companies and Canadian workers at risk. In this regard, the investment provisions of the Canada-Peru FTA, like our many FIPAs, are intended to provide such protection.
On government procurement, the FTA guarantees Canadian suppliers the right to bid on a broad range of goods, services, and construction contracts carried out by Peru’s federal government entities. Opening up government procurement ensures that benefits negotiated in other chapters, such as tariff cuts, are not eroded by barriers behind the border, such as procurement policies that favour domestic suppliers or other trading partners.
Accessing the government market in Peru represents a significant opportunity for Canadian exporters. The total value of government contracts in Peru was approximately $5.6 billion U.S. in 2006. This is projected to increase to $9.8 billion U.S. for 2009. In addition, in response to the current economic downturn, approximately $3 billion U.S. has been set aside for stimulus spending on infrastructure in Peru. American suppliers already have preferential access to this market; our firms deserve the same.
This FTA also includes new provisions on trade-related cooperation and commitments to support corporate social responsibility and prevent corruption. These commitments complement Canada’s broader efforts, which include the following:
First, CIDA has helped to create, and continues to support, the Peru Office of the Ombudsman, which monitors the rule of law and protects human rights.
Second, the government’s new CSR strategy will enhance the ability of Canadian mining, oil, and gas companies to meet and exceed their social and environmental risks while operating abroad by creating a new office of the extractive sector CSR counsellor to assist in dispute resolution; developing a new CSR centre of excellence to provide information to companies; offering continuing CIDA assistance for capacity-building in developing countries; and promoting internationally recognized guidelines for CSR performance and reporting.
Third, the development of Peru’s mining tool kit for aboriginal communities–adapted from the Canadian version–is an example of cooperation between Canada and Peru on CSR activities that involved over 60 stakeholders. The tool kit attempts to help communities get a better grasp of the risks and opportunities of extractive industries and, in so doing, help mitigate social conflict;
Fourth, Canada is also supporting Peru’s implementation of the Extractive Industries Transparency Initiative, or EITI, through the Multi Donor Trust Fund. The EITI is a global initiative that supports improved revenue transparency through the verification and full publication of company payments and government revenues from oil, gas, and mining.
Fifth, the Prime Minister’s announcement at the Summit of the Americas to commence a five-year technical assistance program to assist our free trade partners in the Americas is also supportive of our CSR efforts. This is essential to ensure that both Peru and Canada can fully access the benefits of the FTA.
Canadian companies operating in Peru have made CSR a key objective and have been leaders in Peru’s foreign investment community. For example, Canadian mining companies provided transport and machinery as emergency assistance immediately following the August 2007 earthquake in Peru.
Moreover, Canadian companies, such as Scotiabank, invest in communities in Peru by supporting poor children and women through housing, nutrition, and health initiatives. Export Development Canada reinforces these efforts through its own commitment to CSR, which includes regular review of its human rights processes and ongoing engagement of stakeholders, including Canadian companies and civil society.
The Labour Cooperation Agreement will also help strengthen labour rights and the protection of workers. Peru has committed to ensuring that its laws respect high standards of labour rights, including the International Labour Organization’s 1998 declaration on fundamental principles and rights at work. This declaration covers the right to freedom of association, collective bargaining, the abolition of child labour, the elimination of compulsory labour, and the elimination of discrimination.
The labour agreement opens up new pathways for cooperation. Canada is offering its resources and expertise to help Peru fully implement this agreement, and the government has announced a $1 million labour-related cooperation program.
With respect to the environment, both countries have committed to pursuing high levels of environmental protection. Special focus is being given to corporate social responsibility and the preservation of biodiversity, which is an important issue for Peru, given that it is home to some of the world’s most diverse biological resources. Canada is committed to working with Peru and Canadian companies to help protect and conserve these resources.
Mr. Chair, I’d like to conclude by noting that Peru has achieved remarkable economic progress in recent years. This success has reinforced social progress with a decline in poverty rates, a halving of infant mortality rates, and a significant advancement of the role of women in the workplace and in political office.
Even in the face of the current economic crisis, Peru is still expected to grow by 3.5% this year. We have a growing and mutually beneficial relationship with Peru, and this FTA will deepen and solidify these benefits. This agreement has the support of key exporters and investors across Canada and responds directly to this committee’s call for the negotiation of defensive FTAs in a timely manner.
Thank you, Mr. Chairman. We would be pleased to answer any questions you may have.
