International Trade Committee on Feb. 24th, 2009

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

That's a great suggestion.

[The Chair, Conservative, Lee Richardson]

Thank you, Mr. Keddy.

We're going to move to Monsieur Cardin.

[Serge Cardin, Bloc, Sherbrooke, QC]

Earlier, Mr. Laurin, you said that the economic crisis we are going through currently is amplified or exasperated by the "doping" of resource and commodity prices. Allow me to make an editorial comment: doping is forbidden in sports; could it also be prohibited in the business world, the financial world? Business and finance carry a lot of influence today. Earlier, each one of you said that the business sector is looking for new markets to grow. Philosophically speaking, in the context of business and economy, it is still aberrant to maintain the same economic growth principles. Growth has limits. There are 200 countries in the world, each one seeking to trade with the other. To this end, countries must produce more than they need for domestic markets. There is, therefore, overproduction, whose goal is to spur over-consumption. There are limits to this. I would dare hope that your respective economists will start to think about this seriously, because at some point, we are going to have to strike a more human and realistic balance.

You also talked about equality of chances, and business leaders seem to be in agreement with you. Since we are talking about equality of chances, let's take shipbuilding as an example. For decades, Norway benefited from subsidies, whereas Canada and Quebec were not able to take advantage of similar subsidies. It has been 15 years. If, for the last 15 years, nothing was done to restore balance between the industries in Canada, Quebec and Norway, one can presume that things will become worse over the course of the next 15 years. You talked about being in favour of a level playing field, at least that's what I'm gathering from your comments. That means that notwithstanding the agreement, government, as the Bloc Québécois believes, must support this industry during a period of crisis. Research and development, innovation, and modernization of technological equipment must be supported by government.

Have I properly understood your definition of equal chances in this context?

[Jean-Michel Laurin]

Absolutely, I believe that your comments accurately summarize my own thoughts. When considering all that can be done outside the context of this agreement, we can look at how public procurement was used in the last 15 years alone... I believe that procurement in Canada is not used sufficiently to truly sustain economic development. Here, in Canada, very often there is too much fear of violating free trade agreements. I'm not saying that this is bad. Canada relies heavily on international trade, so we always have to be careful when we are putting measures forth. However, there is significant leeway that we enjoy when implementing and complying with free trade agreements to which Canada has signed on.

As regards shipbuilding specifically, there is a lot that can be done, in the area of research and development, tax measures, procurements, agreement compliance; all of these things can help us develop our own industry and keep it competitive. As my colleague, Mr. Sam Boutziouvis said earlier, the industry must be able to develop new markets, be it in Norway, or elsewhere in the world. However, as my colleague David Stewart-Patterson said, unfortunately, because of the Jones Act, it is difficult if not impossible to trade in the United States.

As for the Canadian shipbuilding industry, we have the expertise and know-how. It would be a pity to allow the sector to disappear. In my opinion, we can do a lot of things in compliance with this agreement, if it is passed, that would allow the industry to restructure and place itself in a better competitive position and develop new export markets.

As for your first comments, your brief editorial on the speculative bubble, etc., there is a lot of debate within the community of economists on the subject of monetary policy. The Bank of Canada sets inflation targets, and takes into account the consumer price index. I know that some economists argue that the price of assets, such as real estate, stocks, indexes, etc. should also be taken into account. There is a lot of debate within the community of economists on this very topic. There is no consensus. We, as an association, do not have a position on this subject, but I believe that it is important to remind people that there is no consensus. There is therefore no magical solution to this problem and no way of preventing other speculative bubbles from happening which temporarily artificially inflate the economy.

As you were saying though, fundamentally, we have to add value to our economy if we want to remain competitive, if we want to maintain prosperity as we know it.

[The Vice-Chair, Liberal, John Cannis]

You've gone one minute over your time, Monsieur Laurin. Merci.

[Jean-Michel Laurin]

Okay, I'll just close on that.

[Serge Cardin, Bloc, Sherbrooke, QC]

That's not my fault, Mr. Chair, it's theirs.

[The Vice-Chair, Liberal, John Cannis]

I'm noted to be a fair chairman.

[Jean-Michel Laurin]

No, it's okay. I'll just yield my time to my colleagues.

[The Vice-Chair, Liberal, John Cannis]

Do you have a quick comment before I go to Mr. Holder?

[David Stewart-Patterson]

I have just a quick one.

I would suggest that there is more to creating a level playing field than simply preserving the status quo. What we need to be looking at is how to help Canadian companies, whether in shipbuilding or in other industries, be more competitive in terms of adding value into the global market.

You've touched on some of those things: more research and development, and how do we encourage more modernization of equipment. That kind of forward-thinking policy, of how do we enable Canadian companies to be more successful in a global market, can be applied in every industry. And it's that long-term question of how do we improve our competitiveness that I think is particularly important to look at in a time of economic downturn, like we're in right now.

[The Vice-Chair, Liberal, John Cannis]

Merci, Monsieur Cardin.

Mr. Holder, the floor is yours.

[Ed Holder, Conservative, London West, ON]

Thank you, Mr. Chairman.

I'd like to thank our witnesses for being here today.

Mr. Stewart-Patterson, you said that a failure to ratify the Canada-EFTA agreement would send a profoundly negative signal about Canada's intent in pursuing closer ties with Europe. Personally, I agree with that.

I'm struck by the fact that we've been in negotiations with our partners for just over ten years now. To me, it feels somewhat like the never-ending story—and I'm not sure if that's our fault at the political level.

I really ask our colleagues around this table, is that our fault at the political level? I underscore this twice, because our European partners have approved this deal. We've been in negotiations for ten-plus years. For all of us who care about this country and about the Canadians who make up this country, I would like to ask the opinion of our witnesses, what is the impact, from a financial perspective, of our delaying approval of EFTA? What's the impact on the Canadian worker? What's the impact on Canadian business—which, ultimately, comes down to the Canadian worker—because if that's not what we're caring about when this is said and done, then why are we here? So I would respectfully ask our witnesses if they have any thoughts on the impact of delay.

[David Stewart-Patterson]

Perhaps I can just put it in terms of how we deal with the current economic downturn.

One of the most important elements of recovery is restoring confidence. I think to restore confidence you have to give people hope that there is a better future, that we can grow, and that we can move forward, as opposed to just hunkering down and hoping for the best.

Trade talks always seem to take a long time because they involve a host of complex issues. That's understandable. It's even more understandable, obviously, at the multilateral level. I cut my teeth as a rookie journalist back at the beginning of the 1980s talking about softwood lumber. It's only in the last couple of years that this has gone away--and who knows, it may not stay away.

So I think it is particularly important when we have an opportunity like this, when we've got a deal negotiated, to act decisively to show that there is hope for a better future, that we can negotiate deals, and that we can bring down walls at a time when too many people around the world are talking about putting them back up again, even though we know that's the wrong thing to do and it's going to hurt everybody.

That element of confidence, that element of credibility, and Canada's willingness to move ahead and move in the right direction is a very important signal to send at this time.

[Sam Boutziouvis]

If I may add, Mr. Holder, we've been talking a lot about trade but we haven't talked enough about investment. We have a positive investment account with respect to the EFTA countries. We have more investment from the four EFTA countries than we have invested in those countries. And I would say to you that if we were to not ratify this deal, that balance could be affected.

I'm sure there are companies ready to invest and that have been ready to invest in Canada as a result of this deal, and I'm sure there are Canadian companies that are looking--sort of kicking the tires--and seeing whether or not to invest in that country as a precursor to doing more trade.

I would put it to you that we believe this overall agreement to be a net win for Canada, especially in the agriculture sector but also in other sectors of the economy, like wood, metal products, apparel, cosmetics, and other areas as well. On the investment side we look to potentially see more investment coming to Canada from the companies based in EFTA countries, and that would be more positive for Canada, because we need more investment; we need more liquidity and capital moving around.

[Ed Holder, Conservative, London West, ON]

Mr. Laurin.

[Jean-Michel Laurin]

I can add a few comments.

I think the higher the stakes are going to get, the likelier it is that it will take time for an agreement to be resolved, just because of the nature of what we're talking about.

Where I think there is some potential and where I'm optimistic is with the timing. If you're looking at passing an agreement now and launching negotiations with the European Union over the coming years, I know from our membership and from the business community in general.... I haven't been around long enough to make an historical comparison, but I would say that in the recent past this is the best timing we could hope for in terms of getting the support from the business community. As I said before, businesses, exporters that are seasoned and companies that don't have a lot of experience doing business outside of North America, are actively looking to grow their business outside of Canada and the United States. And Europe is a logical market outside of North America for a large proportion of manufacturers and exporters.

So in terms of the political will and the timing, I know you can expect support from the business community I represent, and I'm sure it's the same thing for my counterparts for any trade agreement that would be negotiated with industrialized export markets.

[Ed Holder, Conservative, London West, ON]

Thank you for your response, sir.

Mr. Stewart-Patterson, you said in your comments, and Mr. Boutziouvis said in his, “if we don't ratify this deal”. I don't sense there is the political will to not ratify this deal. I come back from the standpoint of how long it takes to get this. Here I look at this and we have been at this over ten years now and we're trying to do a broader European free trade arrangement and it just seems that we're stuck in neutral on a few points. Frankly, they are key points, but we're stuck in neutral and we've got to move this forward. If we have any hope, as free traders, of moving this forward we've got to be able to deal with four countries that represent almost $13 billion of two-way business. I'm just challenged by how much time it takes to get that far.

This will be my final quick question. How crucial is it that we do this fast--and I say fast, but this has not been fast--that we do this now?

[David Stewart-Patterson]

We need to do it now because I think we're on the eve of launching something very important with the 27 countries of the European Union, and that's something that is going to matter a great deal to a great number of Canadian workers and to a great number of Canadian enterprises. I think it's really important to move this deal through ratification as almost a stepping stone to those broader negotiations.

[Ed Holder, Conservative, London West, ON]

For Canada's sake.

[David Stewart-Patterson]

It is important for Canada to do this now.

[Ed Holder, Conservative, London West, ON]

Thank you, Mr. Chairman.

[The Chair, Conservative, Lee Richardson]

Thank you, Mr. Holder.

Mr. Silva.

[Mario Silva, Liberal, Davenport, ON]

A lot of the questions I had were already posed by members, so I don't want to be repetitive. Obviously, I realize that there were issues of concern that people had, as well people who were expressing their support for the agreement.

The shipbuilding industry was one issue that came forward, and they certainly raised some issues. I tried to state some possibilities to lessen some of their concerns, but I wasn't sure whether I got support for my suggestions or not.

However, as important as committee work is, at the end of the day it is the prerogative of the executive of the government to decide trade deals. We're either going to support this or not, but at the end of the day we're not going to be able to amend it here on this committee, that's for sure.

We're all fond of European countries; they're healthy democracies; they're global leaders, friends, and allies. Trade with Europe is very much something we're interested in pursuing, and there are no problems there that we might have with other countries on issues like human rights, for example. These are wonderful countries and we're all very proud to have good relationships with them.

But there is one thing we also have to keep in mind in these deals. Having grown up in Europe and having studied European politics, I know they are protectionist in their own way and they know how to take care of themselves. The various European loans that are handed out--by certain major partner countries in particular--tend to always have strings attached, such as buy from this country and that country, and rarely do they tend to go outside of their own market. It's been a very good success story. We should all be very proud of the European economic union. It's been a huge success story for most Europeans and it has brought a lot of countries that were impoverished into first-world status, so it's a major plus.

I know that you are supportive of the deal, but maybe you can help me understand the European perspective. How much are they trying to get a deal that would basically be lopsided towards them, and how much is it from our side? Like I said, Europeans are free traders within their market but they're very protectionist as well.

[David Stewart-Patterson]

I take it you're talking now about the broader European potential here. I think any country or group of countries going into a trade negotiation is looking to come up with a deal that is to their advantage. The whole point of doing trade agreements is that we all gain somewhere. Inevitably there are things we have to put on the table, and you have to give things to get things. You're aiming for something that on balance is going to be good for your side. The nice thing about trade is that more open trade flows tend to be better for both sides. We're waiting to hear what officials have been able to hammer out between them in terms of the scope of the negotiations, and I'm hoping to hear on that front soon. What's on the table at the moment in the initial discussions is a very broad range of topics that goes well beyond the notion of a trade agreement. It's about how we work together more effectively, and it includes things like regulatory convergence, a topic that has come up a lot in terms of the financial crisis.

But more to the point, one of the things you have to keep in mind is what might be in this for the European Union. Why should a 27-country bloc like that be that interested in negotiating with Canada on a bilateral basis? One reason is that Europe has been so much within itself, in terms of its commercial flows. Similarly, since we did our deal with the United States and then with Mexico, North America has become a highly integrated bloc. The Canada-EU discussions offer an opportunity to bridge the Atlantic in a way that hasn't been done before. We may be able to work out on a bilateral basis the kinds of things that may set precedents in Europe's ability to negotiate with the United States and perhaps open up that broader transatlantic flow.

So we have an opportunity to be pioneers here, and doing so could be very much in Canada's interests as well as in Europe's interests. I think that's an area of potential we should keep in mind. The Canada-EFTA agreement is a precursor and sends a signal that we have the potential, as Canada, to negotiate with the broader European Union. However, those Canada-EU discussions have broader implications in terms of what can be done between North America and Europe and perhaps on the global stage as well.