International Trade Committee on May 12th, 2009

[The Chair, Conservative, Lee Richardson]

We shall begin.

We have everyone except Mr. Julian....

Well, we'll have to begin. Pursuant to the orders of the day, this is meeting 18 of this session on our discussion of Bill C-24, an act to implement the free trade agreement between Canada and the Republic of Peru.

Today we have witnesses from the agriculture community--and Mr. Brison; welcome.

[Scott Brison, Liberal, Kings—Hants, NS]

This chair was made in America. It's just not reliable.

[Voices]

Oh, oh!

[The Chair, Conservative, Lee Richardson]

That's right.

From Canada Pork International, Jacques Pomerleau, executive director, is visiting us again. From the Canadian Chamber of Commerce, we have Shirley-Ann George, senior vice-president, policy. Joining her today is Ryan Stein, director of international and trade policy. And from the Canadian Labour Congress, we have Hassan Yussuff, secretary-treasurer.

We're going to ask each group to give a brief opening statement.

Shirley-Ann, are you prepared to begin?

[Shirley-Ann George, Senior Vice-President, Policy, Canadian Chamber of Commerce]

Yes.

[The Chair, Conservative, Lee Richardson]

I'll ask Shirley-Ann George, senior vice-president, policy, from the Canadian Chamber of Commerce, to begin. We'll follow that with the other two opening statements, and then with questions from the committee.

We'll go until about 10:30. I have a little bit of committee business I need to discuss in camera with the committee. So if that works for everybody, we'll have questions until 10:30.

Go ahead, Ms. George.

[Shirley-Ann George]

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

As you mentioned, I'm here with Ryan Stein, the Canadian Chamber of Commerce's director of international and transportation policy. The Canadian Chamber is pleased to provide its input into Bill C-24, the Canada-Peru free trade agreement implementation act. We support the government's commitment to enhance our relationships in the Americas and are pleased that the government has concluded this important free trade agreement.

Breaking down investment and trade barriers during these economic times sends a strong message to the rest of the world that more market access is part of the solution. It also makes sure that Canadian companies are not disadvantaged compared to businesses in other countries. As you may know, Peru has already negotiated agreements with the United States and China, and is in the process of negotiations with the EU and Japan.

The Canada-Peru agreement makes sure that Canadian companies are well positioned to take advantage of market access opportunities in the growing Peruvian economy. As a result of political stability and commitment to market openness and disciplined economic management, Peru is realizing sustained growth it has not seen in decades. In 2008, real GDP grew by 9.2%, and even during this economic downturn, Peru's economy is forecast to grow 2.8% in 2009 and 3.9% in 2010. Canadian companies are already positioning themselves in Peru, exporting $391 million in 2008, an 18% increase from the year before.

Canadian investment in Peru, valued at $1.8 billion in 2007, is also on the rise. As our presence in Peru grows, it is important that we have a transparent and rules-based system in which to operate. The Canada-Peru free trade agreement does exactly that. Specifically, Peru will remove tariffs on 95% of Canadian exports within the next five to ten years. Major exports such as pulses, cereals, paper, technical instruments, and machinery will benefit from a rules-based system. More exports abroad mean more job opportunities here in Canada.

On the investment side, the agreement builds on the existing Canada-Peru Foreign Investment Promotion and Protection Agreement by adding the allowance of free transfer of investment-related capital, protecting companies against unlawful expropriations, providing non-discriminatory treatment for Canadian investments, and allowing binding arbitration to settle disputes. The Canadian mining sector is especially well positioned to take advantage of these new rules. Currently only 10% of Peru's natural resources are being explored, leaving a lot of room for growth and for investment.

Before the financial crisis, the Peruvian government was expecting an additional $14 billion in investment in site upgrades. Expanding investment in mining also creates opportunities for mining equipment and mining service providers. The Canada-Peru agreement gives Canadian companies the ability to get in on the action.

Peru is also committed to opening its services sector well beyond the WTO agreement. Increased transparency, provisions for a temporary entry of service providers, and a framework for mutual recognition put in place new market access for Canadian companies. The service sector represents two-thirds of the Canadian economy but only 13% of our trade, making the opening of doors for new service markets especially welcome.

Key services exports, such as in mining, energy, and professional services, are especially well positioned to benefit. In addition, comprehensive rules for the financial services chapter create a transparent environment for banking and insurance and security providers. As you know, Canada has some strategic advantages and well-placed companies in the financial services sector.

This agreement also guarantees Canadian suppliers the right to bid on Peruvian procurement projects. As Peru continues to modernize, it will be investing in its national infrastructure, including energy, roads, and irrigation systems. The free trade agreement positions Canadian companies well to take advantage of government projects.

Accompanying the free trade agreement are strong labour and environmental side agreements. We support strong, responsible business conduct and government efforts to build capacity in these areas in both companies and in host governments. Canadian companies are leaders in socially responsible business practices. They lead by example and raise the standard for all companies to meet wherever they operate. The agreement on labour cooperation commits both countries to follow the ILO's declaration on fundamental principles and rights at work.

The Canada-Peru agreement puts in place health and safety protections, eliminates forced and child labour, protects migrant workers, and meets the minimum employment standards. The labour agreement also has a dispute settlement mechanism with financial penalties as high as $15 million for non-compliance. The agreement on environment commits both countries to comply with and enforce their environmental laws, not weaken them to attract trade and investment. To use voluntary CSR best practices, a consultation option is part of the agreement to ensure compliance.

In conclusion, the Canada-Peru free trade agreement provides Canadian companies with the opportunities to expand trade and investment in a growing Peruvian market. In trade, investment, and procurement markets, a transparent and rules-based system well positions Canadian companies in the fiercely competitive global marketplace. We urge Parliament to quickly pass the Canada-Peru Free Trade Agreement Implementation Act.

Thank you. I'd be happy to answer any of your questions.

[The Chair, Conservative, Lee Richardson]

Thank you, Ms. George.

We'll now hear from Jacques Pomerleau.

[Jacques Pomerleau, Executive Director, Canada Pork International]

Thank you.

Mr. Chair, honourable members, let me introduce the organization that I represent here today. Canada Pork International is the export promotion and development agency of the Canadian pork industry and it brings together the hog producers, pork processors and trading companies.

I thank you for giving us the opportunity to express our views on Bill C-24 pertaining to the implementation of the free trade agreement with Peru.

From the very beginning, the Canadian pork industry has been very supportive of the negotiations to come to an agreement with Peru, even if that country has never been a significant market for Canadian pork as a result of its prevailing high import tariffs. We were and we remain more than ever convinced that population growth and dietary habits will offer significant market opportunities in Peru once tariffs are completely eliminated.

Like many other countries, Peru has always maintained high tariffs on pork and our negotiators were expecting strong opposition to getting them reduced. When they requested that Canada should get the same treatment as the United States, that is, the complete elimination of pork tariffs over a period varying between five and ten years, Peru flatly rejected it.

Knowing that we would never get what the Americans received, our negotiators became very creative in ensuring that we would still get some benefits. They accepted a longer tariff elimination period, 17 years instead of ten, but they were able to get for us a duty-free quota that will allow our exporters to better position themselves at the very beginning.

We have to admit that this quota of 325 tonnes, that will progressively extend to 504 tonnes over 10 years, is relatively small for an industry that exports over one million tonnes every year.

That being said, we have learned over the years that we need to get access to the largest possible number of countries and that some of them, which at the beginning did not look too promising, turned out to be quite significant. With such an approach, our industry, which in the 1980s was shipping more than 75% of its exports to the United States, was able, even when doubling its sales to that country, to reduce the proportion to less than 30%. In the last few years, the US has become a major pork exporter and our exports there have decreased.

You can be assured that, with the implementation of their country of origin labeling legislation, our industry is not regretting having adopted an export market diversification strategy. With the current crisis that we are experiencing, and I do not think there is a need to expand on it, could you imagine where we would be? I do not even want to think about it.

We will be back here when you review other agreements, like those that are currently being negotiated with Central America and especially with the European Union, to endorse them.

In closing, I would like, on behalf of our industry, to thank you and your colleagues of all political parties, in the House of Commons and in the Senate, for your tremendous support during this difficult period. We were very impressed that so many of you came to meet with us at the barbecue that Minister Ritz and Minister Blackburn held with our representatives. In fact, so many people showed up that we ran out of pork. Be assured that, next time, there will be more than enough.

I am ready to answer all your questions.

[The Chair, Conservative, Lee Richardson]

Thank you, Mr. Pomerleau.

Thanks for the pork. I was not one who got there early enough either, but everyone said it was wonderful. And we're very pleased that things appear to be picking up in the country at least.

We're going to go now to the Canadian Labour Congress, to Hassan Yussuff.

[Hassan Yussuff, Secretary-Treasurer, Canadian Labour Congress]

Thanks, Mr. Chair.

On behalf of the 3.2 million members of the Canadian Labour Congress, we thank you for affording us the opportunity to present our views. CLC brings together national and international unions along with provincial and territorial federations of labour and a labour council of 137 district labour councils from across the country. Members work in virtually every sector in the economy, in all occupations, in Canada.

Today we appear here to explain why we believe the proposed free trade agreement between Canada and Peru should be rejected by the committee.

Given the severe economic crisis we face, Canada should move away from a failed neo-liberal model of global economic relations, which brought us the economic crisis in the first place. Free trade investment was supposed to bring us prosperity. Instead, it brought us a crisis.

As we know, the crisis has its roots in inequalities of wealth and income, the deregulation of financial services, and the removal of levers once used by government to support economic growth. Rather, we should embrace the kind of economic partnership that has at its core a commitment to equality, public reinvestment, and economic renewal that is both sustainable and democratic. Together with trade unions across the Americas, we have articulated elements of such an alternative trade and investment agreement in Labour’s Platform for the Americas.

In the wake of the economic crisis, the international trade union movement has made further proposals that would put sustainable economic renewal and decent work at the centre of our recovery efforts. Instead, we see the Canadian government continuing the legacy of failed neo-liberal trade agreements and investment deals.

We share with our brothers and sisters in the Peruvian trade union movement our clear and firm opposition to the Peru free trade proposal. In our joint statement on labour movements, we declare our deep disagreement with this type of treaty, which protects the rights of investors over the human, social, economic, cultural, labour, and democratic rights of its citizens.

The free trade investment agreement between Canada and Peru does not take into account the large asymmetries between our two countries. What would this agreement look like if real development were at the centre of its goals? Where, we must respectfully ask, are the studies showing the positive impact on job creation that the Canada-Peru agreement is supposed to create?

We are also dismayed that the negotiations of the Canada-Peru FTA labour cooperation agreement were concluded in record time, without consultation with workers' organizations or civil society. These agreements were concluded without analysis of the impact of this agreement on employment and human and workers' rights in either country. This model encourages economic, social, and labour policies that result in even more precarious employment.

Experience suggests that labour provisions in the trade deals are unlikely to lead to concrete improvement for workers. Labour rights have never been treated equally with the many rights granted to investors. Labour rights protections remain in a side agreement rather than in the body of the text. There is no provision for real trade sanctions, such as countervailing duties or the end of preferential trade relations.

In conclusion, this agreement is written to protect investors' interests, not workers'. They are not enacted to improve labour standards, and there is little evidence that such an agreement can become a vehicle for the enforcement of labour rights. Why could we not have had an agreement that has as its central goal the creation of decent jobs and sustainable development? Why could we not have an agreement that protects and enforces core labour standards? We will only have a recovery based on job creation and decent work.

The CLC proposes a moratorium on trade deals currently under negotiation. We need studies that will show the likely economic and social impact of this deal on a range of issues. We urge the committee to reject this failed model of economic growth. We ask you not to impose it on Peruvian workers, and we ask you not to impose it on Canadian workers.

Thank you so much.

[The Chair, Conservative, Lee Richardson]

Thank you, Mr. Yussuff.

We're going to go to questions now. We'll begin with Mr. Cannis. We'll try to get everybody through. You have seven minutes for your questions and answers.

Go ahead, Mr. Cannis.

[John Cannis, Liberal, Scarborough Centre, ON]

Thank you, sir.

Welcome, panel, and thanks to all of you for the presentations.

I'm going to be tying my questions in with all three, if I may.

Shirley-Ann, you talked about leading by example. I was really pleased to hear that, especially as we put these trade agreements together. I remember that years ago when we were going to other nations--I'm not going to name them specifically--we were hammered in terms of labour rights, child labour, and environmental issues, etc.

I think the comment we had as a Liberal government at that time was that if we didn't go there to show them new innovative ways and examples and set standards, they'd never change. I can name some; China, for example, has made a quantum leap forward by us being there. I'd like you to elaborate on that, if you would.

If I may quote you, I really enjoyed hearing “rules-based system”. Could you elaborate a little on that in terms of how we've done, what we've negotiated, how they see it, and how they see us as partners coming in?

With respect to the pork industry, first of all, I think, there's the fact that so many were there. It's good news that you ran out; it just goes to show you that we stood behind you and will continue to stand behind the industry.

With respect to the U.S., could you could elaborate for me a little on the duty-free quota that you talked about and how that works? Also, you said it's “not a significant market, but presents an opportunity”. It's not a significant market today, but do you see it as a potential market?

The third part of my question, which I'll close with, is with respect to the Labour Congress. I'm puzzled, because, as I'm sure all others do, I get elected in an area where jobs are very important to pay for mortgages, put food on the table, and pay for kids to go to school. I don't know if I got the wrong message, sir, but if I understood correctly, you're asking Canada to stay away from everything.

You talked about the bad trade deals that we've had in the past. I don't mean to say this to be biased toward my colleagues who are now in government, but surely I recall that in the tenure we experienced as a Liberal government from 1993 until most recently, there was unprecedented growth in terms of jobs. A good portion of those jobs, if I understood correctly, resulted from exports. Are you saying to me that we did not do well by creating growth for Canada and that we should go the other way by staying an esoteric country?

Thank you, Mr. Chairman. Those are my questions.

[The Chair, Conservative, Lee Richardson]

Are you waiting for a response?

[John Cannis, Liberal, Scarborough Centre, ON]

If there is a response.

[Voices]

Oh, oh!

[The Chair, Conservative, Lee Richardson]

Well, I know that Ms. George will always reply.

[John Cannis, Liberal, Scarborough Centre, ON]

Otherwise, I'll take applause.

[Shirley-Ann George]

Thank you. Those are excellent questions.

I'll respond first to the second one you addressed to me, which is on the importance of a rules-based system. Canada, as a middle-sized country, is subject to the whims of larger countries in changing the environment on us and providing preferential treatment to their own companies and to other countries.

If we have a rules-based system, then we're in a much more advantageous position. We're in a position whereby Canadian companies can go in and know that if they make investments, if they hire more Canadian workers to build the products and services they wish to sell in these other countries, the environment they walk into is one that is going to be maintained, that is fair, and that's negotiated. As you know, in some countries, transparency and rules do not always make it to the top of the list.

Thank you for the second question on CSR and Canadian companies leading by example. I think it's very important to note that Canadian companies are in fact world leaders in CSR. We have a large number of examples of Canadian companies that have stepped up and are doing things that other countries and other companies are striving to emulate.

If we may, we'll give you one concrete example from Peru. I'll ask Ryan to do that.

[Ryan Stein, Director, International and Trade Policy, Canadian Chamber of Commerce]

To give you an example of some of the things that Canadian companies are doing to improve the conditions or giving back to the community, I'll give the example of Barrick Gold.

In 2000, Barrick started the Cuncashca business development project, whereby they integrate farming, which is the practice of that community, with entrepreneurship. They made farmers more productive. They started developing surpluses to sell outside of the village. This project created an average household income increase of $46 per month in 2002, which is now up to $166 per month.

I'll give another example. Barrick teamed up with an NGO following a major earthquake in Peru and built 100 new homes in the small village of Cuchillo Viejo. They're building the economic aspect of the community and also giving back to the social aspect as well.

[The Chair, Conservative, Lee Richardson]

Good.

Monsieur Pomerleau.

[Jacques Pomerleau]

Just to answer your question on the duty-free quota, Canada is the only that has it. The Americans only have the elimination of the tariffs over the five to 10 years.

We say that there are significant opportunities because of the economic growth in Peru, and also its increasing population. We've seen that in other developing countries, such as China, where the demand for meat increases right away. It's one of the first things the people will buy. They know they won't be able to be self-sufficient in pork production over the years.

[The Chair, Conservative, Lee Richardson]

Yussuff, do you want to comment?

[Hassan Yussuff]

Thanks.

In regard to the point that Mr. Cannis has made, I'm not saying that we should bury our heads in the sand and not have trading relationships with other countries. As a matter of fact, the congress clearly recognizes the importance of trade to Canadian jobs. There's no denying that. That's not our point.

Our point is in regard to the many aspects of this agreement that have been highlighted. I think we're simply saying, why doesn't the government—or, for that matter, this committee—call for studies that will show examples of the benefits in terms of job creation? Certainly our largest export market remains the United States; to date, some 80% of our exports go to the United States. We're obviously trying as a country....

But in regard to specific language in the agreement that speaks to the labour side of the agreement, I want to be very specific so that we can get into the details of those, if the committee so chooses.

We saw the first model of these types of agreements in the NAFTA agreement, where we were promised that we would have a great deal of protection for workers. Twenty-eight complaints under the NAFTA agreement have been filed. Despite the fact that we have a mechanism for dealing with them, not a single one of them has been resolved with any satisfaction—and this despite the very comprehensive process we have for doing so.

Canada then moved to sign what was said to be a better type of labour protection agreement with Costa Rica. Despite the fact that I have travelled with ministers to Costa Rica to talk about the labour situation and what we can do about it, this model was again promoted as a new and different approach. To date, there's been little done by both countries in implementing the provisions of that agreement—and, of course...an adequate enforcement mechanism.

There's no question in regard to the Peru agreement that the language in it suggests it's an improvement from previous agreements. But again, the larger challenge we face is whether Peru is any more committed to enforcing the provisions of the agreement than other countries we have signed trade agreements with.

More importantly, I think the last point I made in our presentation was that these side agreements are dealt with separately, as opposed to being a core part of the agreement, with the same kind of penalties we would have if they were to deny investor rights, and where you can impose sanctions and, of course, deny special provisions for access of goods to their country.

So despite all the rhetoric, the reality in our experience with regard to the promotion of the labour side agreement to deal with the concerns of labour is that we have yet to see any degree of commitment to a mechanism that's going to give real or true meaning to this. We spend a lot of time in the Americas working with our colleagues to promote labour rights in absence of trade agreements, and while this agreement is being promoted as one that's going to do something to that effect, given our experience, we're very skeptical that will be the reality.

For my last point, I want to respond to Mr. Cannis that we're not coming here to assist you to bury your heads in the sand. That's not the issue. We recognize, obviously, that if we had clear rules that protect workers, that allow countries to develop, and that do not take away the levers of government for dealing with the issues that may be created from time to time, we could have a better model in which Canada would benefit, but also the Peruvian government and the Peruvian people at the same time.

[The Chair, Conservative, Lee Richardson]

Thank you, and thank you, Mr. Cannis.

We'll move now to Monsieur Cardin.