International Trade Committee on Nov. 3rd, 2010

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

It would take some time.

[David Plunkett]

We can tell you quickly that the tariff on X has gone from 15% to 5% or whatever. So based on current dollars, current amount of trade, that can be translated into a saving of whatever that happens to be. That's sort of looking back. It doesn't necessarily take into account potential growth. One of the advantages of getting in before the Americans is that there might be opportunities of being first into a market, at least ahead of some of our American competitors, which might have a potential growth factor. But certainly we can look and see and try to translate some of the key products, if nothing else, into some real examples to show you what that could mean to individual sectors—

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

At least at couple of commodities broken out would give us a substantially better idea of what it's worth. A 15% tariff on $10 million worth of product coming from a hundred different farm gates is a substantial amount of money going back per producer. And I think it does make a difference in Canadians' understanding what this agreement is all about.

The only other issue I have is maybe just a closing comment before I hand it over to Mr. Cannan. Absolutely, I will never be able to understand opposition to free trade agreements. You use a list of terms here that are absolutely perfect: access to markets, security, transparency, predictability, and protection of rules-based environments. I think every agreement we sign that promotes these activities promotes and protects trade for every manufacturer and every producer in the country. So for your part in that, thank you.

Ron.

[Ron Cannan, Conservative, Kelowna—Lake Country, BC]

Thank you, Mr. Chair.

Thanks to our witnesses.

I did have a chance to travel with the committee a few years ago to Panama and was very impressed by the opportunities there. I know I have constituents who have bought property there and are looking to retire there, or use it as a recreational location as well.

[An hon. member]

Not for money laundering.

[Ron Cannan, Conservative, Kelowna—Lake Country, BC]

No, they're stalwart constituents, outstanding people.

I just think the opportunities for Canadian businesses, as Mr. Keddy alluded to, have levelled the playing field.

Just to clarify this, 94% of the agricultural products will have tariffs eliminated, but what are the 6% that aren't protected?

[David Plunkett]

Panama excluded some agricultural products from tariff elimination, including some dairy, poultry, and egg products, as well as some other products, such as certain vegetables, rice, and coffee products. A lot of these areas aren't of potential strong interest to us.

It reflects the fact that everybody going into these negotiations has certain sensitivities that have to be addressed in one way or another.

[Ron Cannan, Conservative, Kelowna—Lake Country, BC]

I have a strong agricultural community in my riding—cherries, apples, the orchard industry, and of course our wines—so we're looking to open markets for these.

The agreement that the United States has in place does not yet have congressional approval, but as of last night it looks like it's more likely to happen sooner than later.

Just comparing the U.S. agreement with Canada's, does the U.S. have in its agreement a taxation information exchange agreement or a double taxation agreement?

[David Plunkett]

No.

You raised the matter of the election last night in the U.S. Obviously we're keeping an eye on that, because there are a number of agreements that are hung up in the American system right now, and it's going to be of interest to us to see whether the change of the guard in the U.S. plays a role in movement of any of these agreements down there. It's day one, so it's a little early to say, but we will obviously be asking our embassy and others for their best assessments as to what this election means to the trade agenda more broadly.

[Ron Cannan, Conservative, Kelowna—Lake Country, BC]

I would say, regarding the players who are being brought back into the House, it's more likely that time is of the essence for the Canadian government to get our agreements in place if we want to have a competitive advantage for our Canadian businesses. I'm very sure that this type of economic analysis in the United States will be front and centre for the newly elected officials going back to Washington. I think they got their marching orders from their electorate.

[David Plunkett]

I suspect many of the businesses that see potential benefits here would share your view.

[Ron Cannan, Conservative, Kelowna—Lake Country, BC]

Thank you, Mr. Chair.

[The Chair, Conservative, Lee Richardson]

Thank you, Mr. Cannan.

Thank you, Mr. Plunkett.

I don't wish to be presumptuous here, but as we have finished the first round I would like to do another round. We have interest from members in that. We normally ask you to be here for an hour of questioning, and I'm going to beg your indulgence to perhaps go another 20 minutes to half an hour, if that works for you.

[David Plunkett]

We're in your hands, Mr. Chairman.

[The Chair, Conservative, Lee Richardson]

Thank you.

I think everyone would like to do that, and I hope you're getting well informed with all the information you're getting here today.

We're going to go back to the Liberals and hear from Ms. Hall Findlay again.

[Martha Hall Findlay, Liberal, Willowdale, ON]

Thank you very much, Mr. Chair.

I would just caution that the American electorate tends to be pretty protectionist, and I am not at all convinced that this new batch of Republicans is necessarily any stronger in terms of free trade. Maybe they might have been in other circumstances, but right now I'm not holding out a whole lot of hope that the new batch is going to be any more in favour of free trade than before. However, I couldn't agree more with my colleague that time should be of the essence anyway, so we want to make sure that we take advantage of the opportunity of pushing this through from a Canadian perspective as much as possible.

Mr. Castonguay, could you tell us a little more about this? First of all, is there a double taxation agreement with the United States only? We need to know if an information exchange agreement was concluded along with the trade exchange agreement. Is there a double taxation agreement in place with the United States?

[Alain Castonguay]

Are you talking about Panama and the United States?

[Martha Hall Findlay, Liberal, Willowdale, ON]

Yes.

[Alain Castonguay]

No.

[Martha Hall Findlay, Liberal, Willowdale, ON]

Okay.

[Alain Castonguay]

No.

[Martha Hall Findlay, Liberal, Willowdale, ON]

If Panama would prefer to conclude a comprehensive double taxation agreement, but Canada decides to go with an information exchange agreement, it appears that it would be simpler.

Why is that? Why would Canada prefer not to conclude a double taxation agreement with Panama?

[Alain Castonguay]

That's a good question. Generally speaking, the purpose of a double taxation agreement is to reduce the tax barriers our companies face when they invest in other countries. The idea is to eliminate double taxation and to reduce the rates of withholding tax, which is payable on dividends, interest, and so on. However, since the agreement is bilateral, we consent to do the same thing and to reduce our withholding tax rates, among other things.

In this case, taxation in Panama is already extremely competitive. Its withholding tax rates are similar to what we would obtain by negotiating a double taxation agreement. For our part, the advantages are already there. Panama also has in place certain tax regimes through which companies can earn tax-free profits. We're not convinced that double taxation will make enough of a difference to justify a double taxation agreement with Panama.

[Martha Hall Findlay, Liberal, Willowdale, ON]

Okay, thanks.

Could somebody describe a little bit what the advantages would be for Panama? Is there anything that we will see in the near future once this is passed that we will see in this country in terms of just examples? I mean, we're dealing with numbers and sectors.

As my colleague said, you have all of these numbers grouped together, but it's kind of hard to see anything specifically. For somebody out on the street there, we want to go out and say that this is why it's going to have an advantage. An example would be a Panamanian company that would benefit from this and maybe correspondingly an example of a Canadian company.

Again, I don't want confidential information, but I want a more graphic example of this is a really good idea because....

[David Plunkett]

We have undertaken to immediately eliminate tariffs on over 99% of current imports from Panama, so it's probably easier to work from the exceptions than from the other end. The remaining tariffs will be eliminated over 15 years, and those would include refined sugar and certain sugar-containing products, some prepared foods such as ketchup and prepared pizzas, some alcohol and tobacco products, and animal feed. Plus, of course, we exclude any over-accessed supply management products, just as a given.

In looking at how we do this with any country, we will consult closely with Canadian industries to see what are their sensitivities—where they are nervous about certain products—and we will try to come up with a package that takes into account these sensitivities as best we can, recognizing as always that you have to give to get. We try to be as comprehensive and as ambitious as possible in all these agreements.