Thank you very much, Mr. Chair.
In the past when I've appeared before the finance committee, I've been held very strictly to five minutes, so I'm delighted that the timeframe is a little bit looser here at the international trade committee.
I'm here on behalf of the United Steelworkers Union, which represents 250,000 members in all of the different sectors of Canada's economy, many of whom produce products that are exported or that compete with imports within the Canadian market. I'd like to provide a bit of an overview of the state of Canada's international trade and then move into some specific policy proposals.
In January 2009, Canada ran its first merchandise trade deficit since 1976. We did return to a surplus in February and March, but it's very likely that Canada's overall trade balance is still in deficit if one includes services. We'll find out for sure on May 29, when Statistics Canada releases the current account information. This deterioration in Canada's trade balance has really been caused by falling commodity prices, which have reduced the value of Canada's resource exports. This has revealed a severe underlying imbalance in our trade in manufactured goods. In essence, other countries sell far more manufactured products into the Canadian market than they buy from Canada.
It's important to make a geographic distinction. Despite this deterioration, Canada continues to run a modest trade surplus with the United States. Our trade problems really lie offshore. Another set of problems relates to provisions of free trade agreements that do not have much bearing on actual trade flows but restrict the ability of the Government of Canada to make policy in the public interest.
I believe solutions can be found to both of these kinds of problems in collaboration with the Obama administration.
The first specific area of policy I'd like to address is trade remedy loss. One contribution to Canada's trade imbalance in manufactured goods is the fact that some offshore producers dump products into the Canadian markets or use government subsidies to export products to Canada for less than the cost of production. Canada's Special Import Measures Act provides for countervailing duties against such unfairly priced goods. However, the enforcement and scope of this act need to be improved. One of the reasons the Special Import Measures Act has been weakly enforced in Canada is that unions do not have any standing either to make complaints or to participate in ongoing trade complaints under the act. In this area, I believe the United States provides a much better model. South of the border, unions do have standing to file trade complaints, which results in much more robust enforcement of trade remedy laws in the United States.
I'll move on to the scope of the legislation. The act deals with explicit government subsidies to exports. It does not address the subsidies that are sometimes provided when governments turn a blind eye to violations of labour rights or violations of environmental standards. I believe Canada should, in cooperation with the United States if possible, develop a regime that applies import duties that are equal to any cost advantage that foreign producers derive from violating labour and/or environmental rights. Essentially, if a producer in another country is gaining a cost advantage relative to Canadian producers by infringing on internationally recognized labour standards or by not enforcing basic environmental provisions, Canada should be able to have a countervailing duty to remove that cost advantage. This would safeguard Canadian producers against unfair competition, and it would also tend to militate against the international race to the bottom, whereby countries continually weaken their labour and environmental standards in an effort to gain competitive advantages.
An area where this nexus between the environment and international trade is of particular importance is climate change. Of course Canada should put a price on carbon emissions in order to reduce our greenhouse gas emissions.The policy challenge, however, is to prevent corporations from responding to a price on carbon by simply relocating carbon-intensive activity to other countries that choose not to put a price on carbon.
A major part of the solution to this problem for Canada is to have the same carbon price as the United States. I would recommend finding a way for Canada to participate in the Obama administration's cap and trade plan, because if that were the case, Canadian producers would face the same carbon cost as their American competitors, and there would be no incentive to relocate production south of the border to avoid Canada's carbon pricing.
However, even with a North American approach to climate change, North America would still face the challenge of corporations potentially relocating their carbon-intensive activities offshore to avoid carbon pricing. Such a relocation would not only eliminate jobs but would also tend to increase carbon emissions, because it would concentrate more of the world's production in the countries that have dirtier technology and weaker environmental standards.
The solution to this challenge is to apply the same carbon price to all goods sold in North America regardless of where they are produced. The mechanism to achieve this could be a carbon tariff on imports from countries that choose not to price their carbon emissions, or it could involve requiring importers to buy permits under the cap and trade arrangement if they are bringing goods from such countries into the Canadian market.
The final area of policy I'd like to speak about is the North American Free Trade Agreement. As I'm sure members of this committee are well aware, President Obama recently backed away from proposals to renegotiate this deal. But I would submit that part of the reason he backed away is that Canada rejected the prospect of renegotiation. However, there are real problems with NAFTA.
I think a very useful role for this committee would be to develop a set of Canadian proposals to change NAFTA to address these problems. A top priority, in my judgment, should be removing NAFTA's chapter 11, which empowers corporations to directly challenge public policies that allegedly interfere with their potential future products.
There have been some outrageous challenges launched against Canada under chapter 11. For example, in July 2008, approximately 200 American businessmen filed a $155 million chapter 11 challenge to Canadian medicare, on the grounds that it would interfere with the potential business opportunity of setting up private medical clinics in Canada. The last comprehensive summary of chapter 11 challenges that I've seen goes up to January 1, 2008. At that time, Canada had borne the brunt of chapter 11: more challenges had been filed against Canada by foreign investors than against either the United States or Mexico. A majority of all the chapter 11 challenges filed were against environmental or resource management measures.
In contrast to this excessive enforcement of investor rights, there has been essentially no enforcement of labour rights under NAFTA's labour side agreement. In effect, NAFTA provides no material penalties for member states violating labour rights.
In a nutshell, the United Steelworkers Union believes that reforms to the North American Free Trade Agreement should rein in investor rights while at the same time strengthening labour rights, with the objective of ultimately putting them on an equivalent plane.
Thank you very much for your time. It has been a real pleasure to appear.
Now I will turn things over to Mr. Myers.