International Trade Committee on Nov. 3rd, 2010

[Jean-Yves Laforest, Bloc, Saint-Maurice—Champlain, QC]

Could you send us some documents regarding the issue?

[Pierre P. Bouchard]

Yes, all of the documents are publicly available. We could definitely send you information on the subject.

[Jean-Yves Laforest, Bloc, Saint-Maurice—Champlain, QC]

Excellent. Thank you.

I have no further questions at this time, Mr. Chair.

[The Chair, Conservative, Lee Richardson]

Thank you. We'll get back to you for further questions if you have them.

We'll turn now to Mr. Julian for seven minutes.

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

Thank you very much, Mr. Chair.

I beg to differ with you on just one matter: this is actually the first testimony we've heard on the implementation act and the Panama trade treaty itself. We did have a couple of years ago some hearings on the principle of having an agreement with Panama, but this is indeed the very start of the witnesses, and we're glad to have them here today talking about this particular agreement and what is in it. So we're starting and we'll certainly be submitting witnesses, because I know there'll be lots of people who want to speak to this.

I think the primary concern, as both Ms. Hall Findlay and Mr. Laforest have raised, is the issue of money laundering, particularly from the drug trade. There's an excellent book, which I'm sure you've read, that came out from Cornell University just a few months ago. It mentions that about 75% of all sophisticated drug trafficking operations use offshore secrecy havens, and states that it is evident to all who have studied the offshore banking business that its growth has been fueled by the phenomenal increase in cash from the U.S. drug trade. Moreover, it says that of the criminal cases cited by IRS investigations, 29% have involved the Cayman Islands and 28% Panama. So they are the two worst countries in the world as far as laundering of dirty drug trafficking money is concerned. And one of the authors states that organized crime tends to use techniques of concealment in tax havens and that their professional services are used by individuals and corporations there. So it's not a minor issue.

What I'd like to find out from you is what parts of this bill actually deal with money laundering and the use of drug money. If you could lead us through that, I think it would be helpful.

Secondly, what consultations were held with the RCMP and CSIS about drug money laundering and the use of Panama tax havens for this?

So could you lead us through the consultations that were held and the opinions that came back from the RCMP and CSIS, and tell us whether there were consultations abroad with the Drug Enforcement Administration in the United States?

[David Plunkett]

Let me start by saying obviously some of the issues you've raised are of concern to us, and not just here but more broadly.

With respect to the agreement itself, if you look at article 20, which is part of the overall transparency chapter of the agreement, you'll see there are anti-corruption provisions that use language that tries to address some of these corruption issues more generally. In terms of specific negotiations with the RCMP and/or CSIS, I'm not aware of that. I'll have to double-check on that side of things.

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

So you're not aware of any consultations--

[David Plunkett]

I just need to check, because I was not the negotiator on this particular agreement. So we'll need to check with our colleagues to see whether there were specific consultations with the RCMP during this period about the issues you have raised.

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

Yes, but what you are telling us is you're not aware of any consultations that were held. It's not as if you're--

[David Plunkett]

I'm saying I'm not personally aware and that we commit to get back to you once we've looked into it.

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

To say you're not personally aware of that is helpful for us to know, and as you cited, anti-corruption measures are not at all what we were talking about.

Are there any other parts of this agreement that deal with dirty drug money laundering at all, aside from that aspect? I was familiar with article 20, but it doesn't deal with that.

[David Plunkett]

I think that's as close to it as we have.

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

I think, Mr. Chair, this obviously then begs the question. We should have the RCMP, CSIS, and the Drug Enforcement Agency coming forward as witnesses. I think that would be helpful for the committee of course to find out what the process is, particularly if there is nothing in the trade agreement that deals with dirty drug money laundering.

I wanted to come back to the tax information--

[David Plunkett]

If I might, Mr. Chairman, many issues are not covered in a trade agreement. A trade agreement is limited to the key issues: goods, services, trade, investment. So the fact that an issue is not addressed in the trade agreement doesn't necessarily mean it's not being addressed elsewhere.

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

That is a very good point, although we have heard from the minister that it was dealt with by a letter going from Canada to Panama. I think on balance--I'm sure my Conservative colleagues would agree with me--if you have an anti-crime agenda, then you have to walk the talk, and it would certainly take more than a letter to deal with that.

But thank you for that. I wanted to come back to Panama's refusal to sign a tax information exchange agreement, because of course that's the other issue. If we're not dealing with dirty drug money laundering in the bill itself, it's worrisome to all of us who believe in a solid legal tax system that the government is refusing to sign a tax information exchange agreement. That should be a matter of some concern.

I just wanted to get that on the record then, that Canada did officially approach the Panamanian government, and there was an official refusal.

[Alain Castonguay]

There was an official approach by the Government of Canada and there was no response. So we're still waiting for a response on this. Panama even said at a recent meeting at a global forum where peer review takes place that they have never refused to enter into a tax information exchange agreement. What they have been doing so far is negotiating with countries that were prepared to sign a comprehensive double taxation agreement, but I think there are several countries like Canada that are only interested in a tax information exchange agreement.

So the issue of Panama is much broader than just Canada. A lot of countries will say to Panama that they want a tax information exchange agreement. Panama must be reflecting on that right now, because I think they will run out of countries that are prepared to sign the comprehensive double taxation agreement.

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

I understand, Mr. Castonguay, but when did the federal government make a proposal to the Panamanian government? Do you know?

[Alain Castonguay]

First of all, we had informal contact for over a year, and the minister wrote at the end of July.

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

Was it July 29 of this year?

[Alain Castonguay]

Yes.

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

So there was no approach prior to that, even though the agreement had been negotiated.

[Alain Castonguay]

No. They were approached at the official level before that. Panama kept telling us it preferred to negotiate a double taxation agreement. And we said we preferred a tax information exchange agreement. Panama had written the minister in November 2009, and then the minister decided to write in July to record that we preferred to negotiate a tax information exchange agreement. We're still waiting for an official answer from Panama on this.

[The Chair, Conservative, Lee Richardson]

Okay, I think we got the gist of that one. We're going to have to move on.

Mr. Keddy.

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

Thank you, Mr. Chairman. I will be sharing my time with Mr. Cannan.

Welcome to our witnesses.

To flesh this out a little further, from the testimony I've heard, it seems there is a negotiation in process over taxation. We're looking for one thing; Panama is looking for something slightly different. Negotiations take time. There was a letter written three months ago. Government to government, 90 days is not an inordinate amount of time not to have an answer. I'm not looking for any secret agenda here. I know some of the members of the committee are looking for a secret agenda, but I think this is pretty straightforward stuff.

To me, the issue here is quite simple. We have an agreement that we've signed with Panama. We have a very small country in Central America that has 11% growth, handles 5% of the world's trade, is expanding the Panama Canal, which will increase its share of world trade beyond 5%—I wouldn't pretend to know the number, but it will certainly increase—and is the gateway to much of Asia for the east coast of North America. It only makes sense that we would apply some rules to trade that would benefit Canadian companies.

I do have one question. I've noticed this in other agreements, and I think it would be beneficial if we could do it. That is, to break down the real advantage it gives to Canadian companies. For instance, we know that on some commodities we'll reduce tariffs by 5%, some by 15%, and some by 70%, but those also can be translated into real dollars. So does that mean, for instance, on agriculture commodities, on wheat or on pulses, that it's a $10 million gain to the producers? In the pork industry, if we reduced the tariffs by 70%, would that mean it's a $5 million gain to the farm gate? I think it would benefit us as a trade committee, and it would benefit all Canadians who are watching this, to understand what it gives back to our exporters, in terms of real dollars.

Do you want to touch on that?

[David Plunkett]

Yes. It's a good question. And I think it is something we'd probably have to do some homework on.