International Trade Committee on Feb. 24th, 2009

[David Stewart-Patterson]

I think, as my colleague has said, these are both sectors that have heavy government involvement in a lot of countries. My sense is that Canadian negotiators in this agreement have gone to great lengths to make sure the interests of those sectors are properly protected. If we want to discuss some of the specifics, that's fine, but I think the agreement has found a good balance.

[Serge Cardin, Bloc, Sherbrooke, QC]

Thank you.

[The Chair, Conservative, Lee Richardson]

We had very good questions. That was an interesting exchange.

Mr. Julian.

[Peter Julian, NDP, Burnaby—New Westminster, BC]

Thank you, Mr. Chair.

I've got a lot of questions, so I'd like brief answers.

I'll start off with you, Mr. Stewart-Patterson. I have looked at the list of the members of the Canadian Council of Chief Executives. Are there any shipyards represented?

[David Stewart-Patterson]

Not directly. We have a member from the Irving Group, but from the oil side rather than the shipbuilding side.

[Peter Julian, NDP, Burnaby—New Westminster, BC]

Yes. As you know, the Irving shipyards have said that this deal will be catastrophic for the shipbuilding industry. There are actually no members of the Canadian Council of Chief Executives who are impacted in the shipbuilding domain. That's important for the committee to know.

I would like to continue. I would like to take issue with your comments around the “buy American” provisions and the strongest opposition coming from the American business community itself. As you well know, those were businesses in the United States that actually had strong operations. We're very much in favour of the “buy American” provisions. The companies that had essentially shut down their American operations and moved overseas for sweat-shop operations were the companies that were opposing “buy American”. Regardless of the fact that there was as much support in the American business community as opposition, the reality is that the Democrats were elected on a fair trade mandate. That is why “buy American” got through. “Buy American” is there. It hasn't been opposed by President Obama. Quite the contrary, he was very supportive of that. I take issue with your comments around that. Would you not agree that it's a bit misleading to say that there was opposition from the American business community when the American business community was divided on this issue?

Secondly, we have President Obama. He's made a call for fair trade, for renegotiating NAFTA on a fair trade model. There are stronger labour and environmental provisions reducing the negative impacts of things like chapter 11. Do you support or oppose that approach on NAFTA?

[David Stewart-Patterson]

If you don't mind, I want to come back to this question of the “buy American”.

We work closely with our counterparts in the United States. We're talking about a business round table, similar broad-based business association with the U.S. Chamber of Commerce, the largest and most inclusive business organization. The letter I referred to in my opening remarks was signed by 50 different associations across the board as well as a whole series of major U.S. companies. My point is, the U.S. business community, writ large, understands the extent to which the United States, like every other major industrialized economy, depends on trade to maintain and to grow jobs.

[Peter Julian, NDP, Burnaby—New Westminster, BC]

You admit that American businesses were also supportive of the “buy American” provisions?

[David Stewart-Patterson]

Our work with the U.S. business--

[Peter Julian, NDP, Burnaby—New Westminster, BC]

That's all I wanted you to say.

[David Stewart-Patterson]

In any democracy there are going to be people on both sides.

[Peter Julian, NDP, Burnaby—New Westminster, BC]

Exactly. That's my point. You didn't reflect that in your presentation.

[David Stewart-Patterson]

Where is the balance of opinion in the American business community? I'm confident that it was in opposition to the “buy American”.

[Peter Julian, NDP, Burnaby—New Westminster, BC]

Okay, thank you.

I'd like to move on to Mr. Laurin.

You had an excellent report from the Canadian Manufacturers and Exporters, February 2008, Renewing Canada's Infrastructure: An Opportunity to Invest in our Future. It's an excellent report. I'll reference it particularly for my Conservative colleagues. On federal funding and Canadian content, the CME recommends that the Government of Canada make its funding for projects realized by provinces, municipalities, and agencies under their responsibility conditional to the application of rules and regulations favouring Canadian content--a “buy Canada” program.

You went on in recommendation three to say that this must be a common strategy as well for provinces. It's a very strong series of recommendations and is very much in keeping with what the NDP has been saying all along.

Would you not agree, then, that having the “buy Canada” provisions that you support and putting those into place would allow us to negotiate managed trade sectoral agreements on things like iron and steel with the United States? In other words, use our “buy Canada” to offset and leverage the “buy America” provisions and essentially allow, because of the integration of those industries, the mutual use of Canadian and American materials in government procurement.

[Jean-Michel Laurin]

First of all, thank you for your comments about our report. I appreciate them.

When you look at this issue, I think there's been a lot of politics played over the last few weeks. I would echo the comments my colleague just made in terms of how this fits into the overall or big picture. When you look at those markets specifically, any federal funding in the United States provided for highways, roads, bridges, airports, and mass transit projects had “buy America” provisions even before we started talking about the federal stimulus package in the U.S.

“Buy America” has been around since 1933. When we took that report, we had members coming to us saying that they were not asking for protection; they just wanted to make sure that there was a level playing field. That comes back to what I was saying in response to Mr. Cardin's question. I know that when you talk about sectors in which trade is not open, and when there are subsidies or preferences given, well, we need to make sure that our Canadian companies have the same or a similar business environment as exists in other countries. And when you look specifically at those sectors we outline in our report, what hurts in the United States and in Mexico, China, and Europe--actually, pretty much all around the world--is that there is some level of support or preference when it comes to infrastructure spending. So our call to government when we issued that report was to say that we have major infrastructure spending coming up, so let's make sure we use it in a way that is providing our manufacturers with a level playing field.

That being said, we strongly object to what's proposed right now in the United States, and we actually worked very closely with our U.S. counterpart, the National Association of Manufacturers. As my colleague David mentioned, there is strong opposition within our counterpart organization in the United States to that bill.

I think we need open markets. It is what we were asking for. And what we need to realize is that these are markets in which traditionally there has been some level of preference. Our members were able to do business in the United States before this federal stimulus package in the U.S. We've been able to do business for a number of years in sectors where “buy America” applied. It's just that there are some preferences for U.S. suppliers, so they have a little bit of a price advantage. But we can still do a lot of business in the United States.

Now we're concerned that we're going to be pretty much excluded from that market when it comes to federal infrastructure spending, so we're obviously quite concerned. I think this is an issue the government needs to take a look at in terms of providing a level playing field and of being in line with whatever countries are doing around the world.

[Peter Julian, NDP, Burnaby—New Westminster, BC]

Yes, and it makes sense to have “buy Canada” and use that as leverage. So we support each other, the NDP and the Canadian Manufacturers and Exporters.

[The Chair, Conservative, Lee Richardson]

Mr. Julian, I'll give you an extra minute. I think Mr. Boutziouvis wanted to respond as well.

[Sam Boutziouvis]

Thank you.

I just want to say, Mr. Chair and Mr. Julian, the following. The Canadian Council of Chief Executives is an organization, yes, that's made up of 150 chief executives of some of Canada's largest enterprises and of chief executive officers and entrepreneurs. But one of the unique aspects of the organization is that one of the requisites is that the CEOs who come must contribute to the organization and to the priorities of the organization. In particular, they have to leave their corporate interests, essentially, at the door, and they must come and provide input on policy priorities that are in the Canadian national public interest.

To that end, the Canadian Council of Chief Executives is here today because our members have basically said to us that this deal, this Canada-EFTA agreement, is in the national public interest. That's why we're here today. We strongly support it.

We also are supportive of the government's exercise over the past ten years of engaging in a very broad consultative exercise, especially in the areas associated with the sensitivities of this deal, namely shipbuilding and agriculture. In particular, with respect to shipbuilding, the government has reflected the views of a broad number of stakeholders, especially in the shipbuilding industry, and to our mind, they have come up with the best deal they can possibly put together with respect to the shipbuilding industry. In some instances, the specifics of the shipbuilding provisions in this deal are unparalleled. This is about the longest phase-out of tariffs, certainly, we have had with another developed country.

I'll just finish in 30 seconds, Mr. Julian.

In another study that was tabled with this committee last year, a legal expert suggested that in her study of 100 FTAs, this was only the second FTA that actually had such a long phase-out provision for such products. We'd be happy to reintroduce the study to this particular committee as it goes through its deliberations. But last year's report actually referenced it as well.

So with those comments, thank you.

[The Chair, Conservative, Lee Richardson]

Mr. Julian.

[Peter Julian, NDP, Burnaby—New Westminster, BC]

Thank you, Mr. Chair.

My point is that there are no shipbuilding entities within the Canadian Council of Chief Executives, so you can have a theoretical approach; we have to deal with the practical realities.

I'm not asking a question, sir, I'm making a comment back. I do have other questions, so please allow me to make them.

The concerns that have been raised by shipbuilding--they have been very clear that this will be devastating for their industry--are in part linked to the fact that there has been very little government action. We've had specific recommendations about a carve-out in EFTA, and certainly the committee will be looking at carving out shipbuilding. There are also concerns about the lack of support with any sort of structured financing facility.

You raised the issue, Mr. Laurin, of credit. That's extremely important for all manufacturing sectors, including the automotive sector, the accelerated capital cost allowance.

My final question is for both of you. Do you support those provisions--certainly a carve-out, but also the structured financing facility and the accelerated capital cost allowance--so that we don't lose our shipbuilding industry in a country that has the longest, by far, coastline in the world?

[Jean-Michel Laurin]

I can go first.

In terms of reopening the agreement that's already been negotiated with EFTA, I'm concerned that this would just add to the length of time it would take to actually get this trade agreement implemented. That's something we're obviously quite concerned with, given that it has already been ten years. When we look at a specific sector like shipbuilding, I think we should take a sector-by-sector approach. We should look at such things as capital cost allowances and different sector-specific strategies and measures that can be put in place to make sure that they have a level playing field on which to compete.

I'm not familiar with the specifics of what was negotiated with regard to shipbuilding. I think you might want to invite them just to hear their thoughts and comments.

Overall, if we look at the big picture, we need to make sure that this trade deal gets implemented quickly. We have looked at it and discussed it with our membership. We're supportive of the agreement as it's been negotiated. Are there some things that we would like to have seen in there? Maybe. But it's a trade agreement; you have to give and take.

Again, if you look at specific sectors, let's work to make sure that, within our own country, we do everything we can to put chances on their side rather than try to reopen the agreement, which could lead to more delays. As I said, I think we should shift our focus now to the European Union agreement, which has a lot of potential for Canadian exporters.

[The Chair, Conservative, Lee Richardson]

Mr. Stewart-Patterson, very briefly, please.

[David Stewart-Patterson]

Yes, I'll keep it short.

I would simply note that when this committee studied this in the previous Parliament, it suggested that we should in fact move ahead with the agreement, but recommended that the government implement an aggressive maritime policy. I note that in the latest federal budget, a total of $175 million was allocated for coast guard procurement, refits, vessel extension.

Taking your point, Mr. Julian, I won't presume to speak for the shipbuilding industry in terms of whether that's adequate. However, I did note the testimony at this committee a couple of weeks ago by Karl Risser of the CAW shipbuilding council. He was, as you were, emphasizing the importance of such measures as capital cost allowance and putting more money into the structured financing facility.

I can't speak to how that would affect the individual industry, but I would note that as a broad-based association, we've been supportive of capital cost allowance measures as a tax strategy that is useful across the board. We also, on the budget, emphasize that the most important part of the budget, in our view, wasn't so much the stimulus spending side of it but what was done in terms of improving access to financing. We've commended in particular, for instance, the extension of more capital for the Business Development Bank and for the Export Development Corporation, which of course speaks to the ability of Canadian companies in shipbuilding and other industries to improve their export performance.

So in principle, better access to financing, better tax rules? We can support that.

[The Chair, Conservative, Lee Richardson]

Thank you, Mr. Julian.

Mr. Harris.

[Dick Harris, Conservative, Cariboo—Prince George, BC]

Thank you, Mr. Chair.

I did have some other questions, but I want to just make a couple of responses to the NDP's opinion on this.

It seems to me that just about two weeks ago we had representatives from the shipbuilding industry, including a union leader. As I recall, in some of the closing comments they said they were pleased with a number of things. They expressed some pleasure with the 15-year extension in the tariff arrangements, the structured financing provisions, and also, of course, the accelerated capital cost allowance, which all things go into. On the overall look at EFTA, there are things that will assist some of the things that may appear to be not quite good enough for the shipbuilding industry. This will help offset those things, and I think they've done a good job.

As I think was stated by Sam, when you're doing these free trade agreements, the countries involved have to be acting in the broad national interest of business in their countries. And while there are some on this hill who like to kind of cherry-pick the negative parts and base their arguments on those, I think in this case we truly are acting in the broad national interest. And while there will never be a perfect free trade agreement between any countries, it's the broader interest that has to prevail at the end of the day.

Now I have a couple of questions.

Mr. Laurin talked about some opportunities that existed even in these challenging times. We all know that challenges do bring opportunities. I just wonder if you could touch on a couple of opportunities specifically that exist now, or that you see, and how we, as a government, can make sure maybe some of these come to fruition.

And then Mr. Stewart-Patterson could perhaps talk on how these times have forced Canada to look at a much broader global market. We've been very comfortable having most of our eggs in the U.S. basket. I mean, it's convenient, it's profitable, but it's times like this that show us that maybe we should have been expanding our vision of our global trade opportunities to kind of mitigate things like this that happen.

I'll just leave you gentlemen with that.