International Trade Committee on May 14th, 2009

[Mario Silva, Liberal, Davenport, ON]

Thank you, Mr. Chair.

I want to thank the witnesses. I think they have been very informative and I appreciate the frankness to which they are having this discussion--and quite intelligent discussion at that.

Mr. Myers, I had asked that you appear before this committee because of the fact that I had also been in contact with companies from IPEX. It's one company that I've known from my days on city council very well. They are extremely concerned about what this buy American provision is doing to their business. They're closing plants, they're laying off workers, so it's a serious, serious threat to that company and, I'm sure, to other companies as well that are members of your association.

In one of your recommendations, you specifically asked that the Prime Minister raise the buy American issue, but you also talked about threats of retaliation. I just want to know how far we should go with that threat. How much more active do you feel the government has to be on this issue because it is threatening jobs in Canada?

[Dr. Jayson Myers]

Well, it certainly is threatening jobs in Canada. We have identified around 250 of our members who are affected just by the Water Quality Investment Act alone here, who are selling into municipal and state water technology and clean water and waste water sectors. Many of these companies had no idea that they would be affected until the contractor came to them and told them they had to sign an affidavit saying that their product is produced in Canada. As I say, we're very concerned that we may be seeing that appear in other pieces of legislation coming out of Congress.

In terms of the threat of retaliation, I think that is very much on the minds of U.S. business groups and U.S. businesses that are our allies in Washington and in the United States who are opposed to the buy America policy. This is not good policy in the United States. It's not good policy to have these restrictions in Canada either, particularly if you want to get the money out the door quickly to infrastructure projects, to keep jobs here in the time of a recession. This is not the way to do it. But I think the threat of retaliation has some resonance. I think it's a strong negotiating tool. I think the Halton Hills resolution that is going to the Federation of Canadian Municipalities is a good form of that threat.

This is not a threat of locking American suppliers out of the Canadian market. It's simply a reciprocal market access resolution, with waivers in it and everything else. There has to be some credible threat, I think, to back up a strong negotiating position here, and the government does not have to threaten. That's our job. That's the job, and I can tell you very strongly that among our membership we're dealing with this all the time. Our business is failing. What are you doing about it? If we're going to be locked out of the American market, why don't we have similar provisions here? That's a widespread sentiment among our members, and I think that has to be communicated by our government to the U.S. officials very strongly. As I say, that's what we can bring to the table here, but clearly it's something that should be used as a negotiating tool by the government itself.

[Mario Silva, Liberal, Davenport, ON]

Thank you.

I have a brief question to Mr. Feldman and Mr. Weir.

On the whole issue of renegotiating NAFTA, part of the problem I find with the U.S., from my study of U.S. politics over many years, is that you're not just dealing with one player. You're not dealing just with the Obama administration; you're really dealing with however many members of Congress there are in the U.S. There is a tendency among those members now to be very protectionist, to protect their interests. They also have a lot of business interests because they get elected with millions of dollars.

If there's any negotiation, I think every single one of them would be fighting for their turf and for their particular business interests, and nothing for Canada. So when Canada is dealing government to government, that's one thing, but when we're dealing with a government with so many members of Congress and they have incredible power....

I just finished a book, Paris 1919 by Margaret MacMillan. The founder of the League of Nations was Woodrow Wilson. When it went back to the U.S. Congress, it was rejected, even though he signed it and he was the founder. So the U.S. Congress has incredible power, and we don't have the same type of negotiating power here in Canada in terms of our legislative body.

[Erin Weir]

I guess we in the United Steelworkers feel a bit more comfortable with the many players in American politics because we also represent workers in the United States and have relationships with American congressmen and all that sort of thing.

[Mario Silva, Liberal, Davenport, ON]

It's not like the Republicans or Democrats. That's not the same type of system. There are no party lines there.

[Erin Weir]

Can I keep answering? Are we out of time?

[The Chair, Conservative, Lee Richardson]

Yes, you're out of time. I'm sorry, Mr. Silva.

Mr. Hiebert.

[Russ Hiebert, Conservative, South Surrey—White Rock—Cloverdale, BC]

Thank you, Mr. Chair.

I thank you all for being here today.

Dr. Feldman, you talked about negotiating a new agreement with the United States. Does that include Mexico as well, or is it just an agreement with the United States?

[Dr. Elliot Feldman]

Thank you for that question, because I did want to remark on the irony of the demise of Pearsonian multilateralism, that a theme emerging in the discussion about NAFTA is the failure of a multilateral agreement and the preference for a bilateral arrangement.

I have been asked this question a number of times. I don't have a confident answer. I think I mean an agreement at this point between Canada and the United States. I don't think I mean an agreement that includes Mexico in the negotiation, but I'm not sure of that. I need to think it through.

As I formulated it in terms of what defines the agenda that can be addressed mutually, I think that's initially a Canadian-U.S. agenda.

[Russ Hiebert, Conservative, South Surrey—White Rock—Cloverdale, BC]

In your comments, you remarked about a dispute with a couple in Blaine, Washington. I represent a community just across the border from Blaine, South Surrey—White Rock—Cloverdale. We have the largest border crossing in western Canada. I see Blaine as I drive to work.

What is the nature of that dispute? Just briefly, what's at stake? You've talked about the commission being at stake. What's the real issue driving this suit?

[Dr. Elliot Feldman]

That's the real issue.

The superficial issue is that a couple built a wall three feet into the boundary vista, which was defined by the treaties and by agreement between Canada and the United States in 1908 that it should be kept clear of all obstruction 10 feet to either side of the border. It is a simple proposition: you can't enforce and secure a border if you can't see it. They built a four-foot-high, 85-foot-long reinforced concrete wall three feet into the boundary vista. It was spotted by the RCMP. It was inspected by a border agent from Vancouver, who concluded the wall needed to come down. The material issue is whether the wall stays up.

The bigger issue is that the U.S. Department of Justice under Attorney General Gonzales, concluded that it preferred private property rights to the public domain and said to let the wall stay up, and he ordered the commissioner from the U.S. side to agree to that. He refused. The President fired him.

What's disputed now in court is whether the President had any power to fire him, because he was appointed under the terms of a self-executing treaty. In Canada this is hard to understand, because you don't have self-executing treaties. You have implementing legislation for this treaty that specifies that the commissioner on the Canadian side is a civil servant of Canada. On the U.S. side, it's a self-executing treaty. He's not confirmed by the Senate. He's not an employee of the United States or an employee of the agency.

The President has asserted that this commission is an arm of the White House, that it's an agency of the United States. That's the big issue.

[Russ Hiebert, Conservative, South Surrey—White Rock—Cloverdale, BC]

Dr. Myers, you've talked at length about the possibility of provincial or municipal retaliation. What would be the cost to the United States? I know that Canada is the largest trading partner with 36 U.S. states. What would be the cost to these states or to the U.S. economy if these municipalities and provinces basically put an effective block on American imports?

[Dr. Jayson Myers]

It would depend on what the range of procurement projects actually is, but if you look at the municipal waste water and clean water industry, you're looking at $1.9 billion coming from the United States into Canada. You're looking at about $600 million of exports going from Canada into the United States.

That does not, though, take into consideration the value of U.S. supply--the component materials that are being sold to Canadian exporters that are losing business in the American market. So probably even more business than that would be at stake here. But then again, I hope we don't have to do that. I think a restrictive access in Canada raises exactly the same problems as it would in the United States. It would slow down infrastructure or complicate projects. Nobody needs that.

[Russ Hiebert, Conservative, South Surrey—White Rock—Cloverdale, BC]

Just to wrap up, then, the U.S. would lose about $2 billion in Canadian imports if they were to proceed.

[Dr. Jayson Myers]

That's right.

[Russ Hiebert, Conservative, South Surrey—White Rock—Cloverdale, BC]

Last, are the municipalities and provinces prepared to work together to retaliate, or at least to make the threat of retaliation?

[Dr. Jayson Myers]

We have three municipalities in Ontario that have signed on to the Halton Hills resolution. That resolution is going to the Federation of Canadian Municipalities at its conference on June 6 and is driven by local municipalities. So we'll see June on 6 if there's a resolution coming out of the Federation of Canadian Municipalities.

[The Chair, Conservative, Lee Richardson]

Thank you.

I'm sorry, but we have to move on to Monsieur Cardin, for five minutes.

[Serge Cardin, Bloc, Sherbrooke, QC]

Thank you, Mr. Chairman.

First I'll make a few brief comments. Yes, we went to the United States to meet with elected representatives, and they had just been made aware of the black liquor situation not long before that. We hadn't either, but the fact remains that they had not been aware of it for long. Those who seem to be the most aware of it were those who had businesses of this kind in their regions. That tells you everything about the direction that will be taken at the end of the year.

There's something here that I find quite surprising and even abnormal, at times disarming, and it's when there are two different treatments for businesses that do business with the United States. In the case of loan guarantees, we have a lot of trouble accepting that. Based on the standards, it's acceptable; it's legal. When it was done for other industries—I'll only name the automotive industry—there was no problem.

The barely veiled criticisms of the Canadian government I can accept. I'm convinced that we could make a number of others.

I would like to go back to the remarks by Mr. Weir, who, to all intents and purposes, referred to social and environmental dumping. Among the solutions, you mentioned implementing a mechanism to avoid a race to the bottom. You're definitely not just talking about the United States, but about a number of other countries. In the United States, do you think we can say that, in social and wage terms, there is a significant race to the bottom?

[Erin Weir]

I would say that labour and environmental standards in the United States are similar enough to those in Canada that these kinds of social dumping tariffs probably wouldn't be applied against the United States. I would envision their being used more with regard to countries such as China, which flagrantly violate internationally recognized labour standards and really don't have any environmental safeguards at all.

However, there are some instances in the United States that I think might be subject to such a challenge. For example, in the southern United States there's the whole concept of a right to work, which certainly goes against International Labour Organization standards. And I'm pleased to mention that the Canadian government recently signed on to a challenge of that through the NAFTA labour side agreement. As I say, there's very little enforcement under the NAFTA labour side agreement, but I think there is at least that one example in the United States that could potentially be challenged as social dumping.

[Serge Cardin, Bloc, Sherbrooke, QC]

You also mentioned carbon pricing. What model do you think we need exactly? The Liberals talked about a carbon tax, and let's say that this isn't necessarily the right way to present the idea in marketing terms. We know that the Conservatives bashed all that.

To prevent this environmental dumping, we clearly have to do something. When you mention pricing, does that mean that we should develop a mechanism and show some imagination, as Mr. Feldman often reminds us? Should we show some imagination in finding an effective way of pricing the carbon of foreign countries, and do it as well by product? Do you have an idea of the form that might take?

[Erin Weir]

Sure. If you think, for example, that North America is likely to have a cap and trade system, which is certainly what the Obama administration is proposing, then I think one relatively straightforward way of making sure carbon costs are applied in a comprehensive way would be to say that if an importer is bringing into North America products that were produced somewhere where they don't price carbon, that importer would have to buy permits under the cap and trade system. That's one way of having a border adjustment seamlessly built into the cap and trade model.

More generally, for other kinds of environmental or even labour measures.... I know it sounds potentially complicated to come up with a countervailing duty equivalent to the cost advantage a foreign producer derives from substandard labour conditions or substandard environmental practices, but essentially we already have the formula for existing trade remedy laws. It's very complicated to determine what kind of price advantage is being obtained by dumping or what kind of price advantage is being obtained from government subsidies. But we do the calculation, and we apply the countervailing duty. I think it would be possible to do the same thing with respect to social dumping, as I think you quite appropriately term it.

[Serge Cardin, Bloc, Sherbrooke, QC]

Thank you.

Do I have any time left, Mr. Chairman?

[The Chair, Conservative, Lee Richardson]

That's it.

We're going to try to get two more in.

[Gerald Keddy, Conservative, South Shore—St. Margaret's, NS]

Do we have business?