International Trade Committee on March 11th, 2010

[The Chair, Conservative, Lee Richardson]

Yes. I always take care of Mr. Guimond.

Thank you.

Mr. Allen.

[Malcolm Allen, NDP, Welland, ON]

Thank you, Mr. Chair.

I'm pleased to hear that Mr. Guimond will be looked after, and I'd appreciate you looking after me as well.

I appreciate you coming today.

I've listened to the explanation to Mr. Brison's questions about trying to assess value and how difficult it is. At the end of the process, there's money here, it goes to state level, then it goes to local level, and perhaps even sort of their regional sense, if there's that sort of piece going on as well. Flowing it is difficult. We don't flow it, and they do, so you have to try to find where it went. It's sort of a “find the pea under the shell” sort of thing, sometimes.

Do you have any sense of how much it was before it even started? I don't just mean the number that gets bandied about: Obama says we'll spend x number of dollars. But when you were thinking about going into this negotiation and were instructed to do so, did you have any sense of how much you were really looking at chasing? So you'd have a number that you thought you were going to chase, because it seems at the end that we're not sure how much we ended up with because it's difficult to extrapolate from all the different places it flows to, to come up and say, “Well, it's $1.50”. It could be $3.50, and then we could add zeros to all of those numbers.

So I'm wondering if there was any thought process going and how much it was worth to chase in the first place.

[Marie-Josée Langlois]

As I mentioned, it kind of goes back to the initial answer. We've looked at the information that was available. We have to remember that the information in the recovery act is the number of U.S. dollars being put into the stimulus bill. So that doesn't tell us what contracts Canadian companies would have received or would be able to obtain. That just tells us this is the amount the U.S. is putting in its economy for the stimulus project.

You remember the act has a number of other projects, social spending to tax credits, etc., so you have to look at infrastructure amounts. That, combined with the fact that Canadian suppliers are often second-, third-, fourth-level suppliers rather than prime contractors, makes it very difficult.

Beyond the figures, though, there's also the broader economic relationship between the two countries. Over the years, a number of value chains have been created, which work in tandem on both sides of the border, so the measures were impacting those value chains and our companies and our provinces were coming forward saying there is an impact and we want to re-establish open markets.

That all went into the analysis we did before we started the negotiations.

[Malcolm Allen, NDP, Welland, ON]

Which leads to the obvious question: What was the impact? Can we quantify the impact? If you're saying the provinces came to you and said there's an impact, what was it?

[Marie-Josée Langlois]

Again, as I'm saying, a lot of companies were expressing concerns--

[Malcolm Allen, NDP, Welland, ON]

Okay, that's fair, Madam.

What I hear you saying is that at the end we don't know how much we chased. The provinces said there was an impact, but we're not sure what the impact was. We entered into negotiations on a good-feel basis, in the sense that this should be a good relationship-building thing, but we don't know how much we get out of it.

There is an impact at the end of the day, right? The impact for Canadian workers is whether or not they work. That's really what I'm asking. If we didn't know how much we lost, we're not sure how much we got, and we don't know how many people lost or gained jobs, so how do we measure this?

I'm not trying to be cruel about it, but when I talk to my constituents, they say to me, “Well, we got a new agreement. Did we get any jobs?” I say, “You know, it's really hard to count this. We don't know.”

Really, that's what I've heard so far. We don't know how much it was worth, we don't know how much we got, and we don't know what the impact was from the provincial level. They couldn't tell us how much we were going to lose. Dalton McGuinty couldn't say to us, “Well, you know we've lost x number of jobs because of Buy American”--not the old Buy American but the new one, the recovery act.

At the end of it, we don't have any hard data at all that tells Canadians this is something that ended up as a benefit to us. We think it is, from what I'm hearing, but you're not sure it is, because at least to this point you haven't been able to put together any data, and if I'm hearing you correctly I'm not sure you could tell me that you could absolutely put it together if given enough time to do so. It seems it would just be that difficult to do. So I guess I'm asking how we bargain something when we don't know what we're going to get.

I used to bargain collective agreements. I kind of knew what I was asking for. I kind of knew what the other side had. I kind of knew what I wanted to get, and at the end, I had something in my hand. I could say I lost two cents or I got three cents. I'm hearing, “We didn't know if there was a nickel out there to get. We don't know if we lost any jobs or gained any jobs, and we don't know if we got a nickel taken out of our pocket at the end or if we got the dime.” That's what I've heard so far.

You can help me be corrected on that, because I'd be happy to be corrected on that, but so far that's what I've heard, to be honest, when it comes to hard data. Again, I don't mean to be mean. So let me move away from that, because we're sort of going around on the data piece.

In the negotiations, did we look at any sort of dispute systems in the sense of how we resolve these? As Mr. Brison correctly pointed out, there are a gazillion exclusions all over the place, whether in the States or up here: we're going to exclude this; we're going to exclude that. I think we all know that when we start to make exclusions, that can lead to someone saying, “I don't think it was that piece we meant to exclude. It was maybe that other piece.” Then we get into the debate about whether it was that or it was not that. How do we resolve those disputes that obviously creep up? Heavens, they creep up all the time between the provinces and the federal government, never mind cross-border provinces, states, and municipalities. I was wondering what we looked at in that regard.

[Dany M. Carriere]

It's actually part of the agreement. In the first instance, for the commitments under the World Trade Organization agreement on government procurement, the normal dispute settlement procedures are applicable. That's the normal process. In terms of the temporary, which expires in 2011, there's an explicit consultation process that's listed in the agreement itself.

[Malcolm Allen, NDP, Welland, ON]

Does it have teeth?

[Dany M. Carriere]

Yes.

[Malcolm Allen, NDP, Welland, ON]

Okay, I just wanted your opinion on whether or not it had teeth. I'll take your word on that.

[Dany M. Carriere]

It's a dispute settlement process of the WTO.

[Malcolm Allen, NDP, Welland, ON]

I hear you.

Then we end up back at data. We signed the temporary one at least with a day left in the recovery act. My understanding of the recovery act was that it was going to end on February 17. Is that the day the awarding of the tendering of the moneys was supposed to end? There's a belief out there that this flowing to the system of a magical number of dollars was actually going to end on a specific date. If you're going to tell me that's not true, I hope you can tell me when that ended. There's a perception out there that there was basically a day left for us to go bid on this so-called money that we all agreed is very difficult to track because of the way it flows out to everywhere. I'm not being facetious. I agree. I used to be a municipal councillor. I understand it's hard sometimes to figure out, when someone sends you money, whether it goes to the region or it goes to another sub-part, who belongs to that, the water rates, and all that kind of stuff.

Do you have any sense of what was left for us to bid on?

[Marie-Josée Langlois]

There is one program under the Environmental Protection Agency, the EPA, in the U.S. that had asked for submissions for initial funding allocation to be in by February 16. Any money left would be reallocated after that. We're following the reporting to see when that will be made available, but it's unclear at this time how much will be reallocated.

Regarding the general funding in the recovery act itself, various departments manage it in various ways. The funding is to be disbursed by September 2011. There will continue to be contracts that will become available. Which ones and where will depend on each program and each department.

[The Chair, Conservative, Lee Richardson]

Thank you, Mr. Allen--

[Malcolm Allen, NDP, Welland, ON]

It begs the question, so we don't know how much percentage is left of it to be re-tendered through the EPA. On the other piece, of course the question is we don't know much of the other stuff is still available to us to actually go and find, because we don't know where it is, do we?

[The Chair, Conservative, Lee Richardson]

It begs the question? I don't think it begs the question.

[Malcolm Allen, NDP, Welland, ON]

Sorry, Mr. Chair.

[The Chair, Conservative, Lee Richardson]

That's all right.

Thank you. We're going to have to move on.

We'll begin on this side with Mr. Keddy, with seven minutes to start.

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

Thank you, Mr. Chairman.

I'll try to keep within the time restraints. It is getting late on Thursday. I'm never too good at that, and the opposite side obviously isn't either.

I would like to welcome our witnesses. On behalf of all Canadians, thank you for the hard work that you and your department have done on this file. This is not an easy file. Our closest neighbour and our largest trading partner is not always easy to do business with. There are a lot of little stumbling blocks along the way.

Just to review some of what my colleagues have said, and maybe to shine a slightly brighter light on it, we never got an agreement for a proposal from our provincial-municipal counterparts until almost the end of August. A month later, the department was able to sit down with the Americans in round one. Four and a half months after that, in the middle of February, we were able to sign an agreement. That is absolutely record time on any kind of bilateral international agreement, I'm certain, anywhere on the planet. We have firm commitments that include 37 states straight across the board. I do believe you deserve to be commended on that.

The American Reinvestment and Recovery Act of 2009 has hurt Canadian business and Canadian enterprises, without question. It's been asked a couple of times, what are the benefits? Frankly, one of the chief benefits, I think, is the fact that for the first time we were able to get provincial and municipal agreement to open up sub-national procurement. I'm going to ask a question on that, after I finish my opening comments, but that's certainly one of the greater benefits. For the first time in many of our agreements, our provinces and municipalities had a definite stake. I'd say our provinces had a place at the table where they could help negotiate their own terms in this agreement.

Again, getting back to the benefits, programs that we were not able to bid on under the American Reinvestment and Recovery Act of 2009 we are able to bid on, with the remaining funds available. The U.S. Department of Agriculture rural utilities services, water and waste disposal programs; rural housing under USDA; the conservation block grants under the Department of Energy; the U.S. Department of Energy, Office of Energy Efficiency and Renewable Energy, state energy programs--suddenly all these programs, or what's left in them, because I realize the difficulty of finding that out, are open. Housing and urban development, environmental protection, clean water, drinking water--all are projects that were not available and were not open to a competitive bidding system prior to this agreement.

I realize that the carve-outs balance one another, but I think there's a section here that most Canadians are not as aware of, and that's the fact that much of this prior to the agreement was more one-sided. The Americans did have a competitive advantage in bidding on Canadian bids.

I'd like you to explain that a little more. Some municipalities had actually opened up their bidding to international bidders, to my understanding.

[Dany M. Carriere]

As I think I said in my opening statement, prior to the recovery act, Canada and the United States enjoyed relatively open government procurement at the sub-federal level despite the lack of formal commitments. The new Buy American provisions really upset that balance.

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

Okay.

My next question is this. Given that we're on much more even footing now.... I realize that there are still some challenges facing us, but we are on much more even footing. As well, when we get to the end of 2011, it's the expiry of the ARRA. At that time, then, since this negotiation has already taken place, I would expect us to be in a much better position. First of all, hopefully our American colleagues will have seen the light. More importantly, we already have a template that we can work on to help prevent greater protectionism from our American trading partners. To me, that's probably one of the greater gains out of all this, that now we can work on, for the first time, a real long-term future agreement that will benefit our industry and, quite frankly, American industry. It will benefit North America.

As the international trade department, do you look at that? Have you looked at that? In round two, ARRA 2012 or whatever it will be called, do we have that possibility?

[Dany M. Carriere]

That's what we were really aiming for, getting a commitment from the United States, in writing, to explore within a specified timeframe the scope of something that goes beyond what they've done in the agreement on government procurement and the NAFTA.

I want to turn the floor over to my colleague here. She can expand a little bit more on that.

[Lynda Watson, Director, North America Commercial Policy, Department of Foreign Affairs and International Trade]

I've been quite quiet so far, because my job is to work through our embassy in Washington and our consulates across the country, through our trade commissioners and our advocacy officers. This question provides me an opportunity to tell you what we've done so far and to explain a little bit about what we see is going to occur in the next few months.

Even from the earliest days when the Buy American provisions of the recovery act appeared, we could already see that this was going to have an impact on companies. My colleagues in our consulates and our colleagues in our regional offices across the country were receiving phone calls from companies saying, “My customer is telling me that I can't bid, and now what am I going to do?” or “I've been trying to bid on this, and I can't understand what they require of me.”

So we've been doing troubleshooting for many months. We held workshops in 10 locations across Canada for a whole cross-section of Canadian companies in many industries, very often for those working in water and waste water, heating, ventilating, air conditioning, or industrial controls. Generally speaking, as Dany explained, they were not at prime contractor level but at sub-contractor level. We've done webinars.

The fact is that very often we've not been successful. Quite often we've indicated to a company that it could apply for a waiver, and this is what it should do, and while some companies have been successful, others have said they thought it was too much paperwork to bother with.

One of the benefits of this agreement is that now we have something concrete that a company can put in its hand and take into the contracting authority and say, “This is the exemption for Canada, and these are the seven programs where we're exempted. Also, these are the 37 states, and these are the programs in those 37 states that are covered.” They have a piece of paper they can take in, and they can prove what their rights are. Before that, all we could say was that we had guaranteed access at the federal level. We had no protections at the sub-federal level, whether it was recovery act funding or normal state funding. That made it very difficult to, as a trade commissioner, be able to give our companies a tool to be able to go and push for market access and try to capture contracts. So now they have a tool. It's maybe not everything we might have hoped it would be in the beginning, because it isn't everything, but some companies that could not be successful before will be successful now.

As Dany has explained, the important goal now is really to go after a permanent comprehensive agreement that can overcome some of the carve-outs you've identified in the coverage of the 37 states and to obtain some kind of certainty for these companies that we work with. It won't be easy, because in Canada the agreement is pretty well known even though there are questions about what it covers and doesn't cover. In the United States, however, it's not as well known, so our trade commissioners and our advocacy officers have been reaching out to governors' offices, mayors' offices, business associations, and individual companies to try to explain to them that the agreement exists. They've been making photocopies and sending links to websites regarding these opportunities so that when a Canadian company wants to bid, they're going to say, “Yes, we just heard about this arrangement from your consulate”. Hopefully, they'll hear about it from the U.S. government as well, but we want to be sure, so our consulates are doing this outreach.

As we go forward into the future, we are trying to identify those companies that are indeed benefiting from access to the Canadian market, or benefiting from being able to use Canadian suppliers in their supply chains so they will say to the federal government that it's good for America to advocate and to engage in future negotiations.

This is a long way down the line, but this is a systematic process of building our networks and trying to draw people's attention to the benefits for individual enterprises.

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

Thank you.

[The Chair, Conservative, Lee Richardson]

Thank you, Mr. Keddy.

We have time for a quick round. I'm going to do five minutes for questions and answers in this round.

We're going to begin with Mr. Silva.

You have five minutes.