Thank you, Mr. Chair, for the opportunity to appear again before this committee to speak to Bill C-46, an act to implement the Canada-Panama free trade agreement and parallel agreements on labour and the environment.
You've introduced my colleagues at the table. If needed, I have other colleagues here with me to fill in some holes here and there.
Normally for these sorts of exercises we like to bring forward the actual chief negotiator of the agreement itself. In this case it was our colleague Cameron MacKay, but he was posted over the summer, so you'll have to put up with us. We'll try to address your questions as best we can.
Before I begin I'd like to report that we have received word from our embassy in Panama that the Panamanian government has just completed its approval process for the free trade agreement, thereby passing this agreement into law in that country. I think this is a positive development that has literally just occurred.
As this committee has seen, Canada is pursuing an ambitious trade agenda to open more doors for Canadian companies in the Americas and around the world. Panama is another country where, by deepening our commercial and social relationship, Canadians stand to gain.
Panama is a like-minded country with a strategic position in the global trading system due to its location, connectivity, and role as a global logistics hub.
According to Export Development Canada, as a link between the Atlantic and Pacific Oceans, Panama today processes approximately 5% of global trade. Panama has also had one of the fastest-growing economies in the Americas.
In 2008 its real gross domestic product growth was 10.7%. It posted positive growth in 2009, during the economic downturn, and Panama's real GDP is expected to grow further for 2010.
Canadian companies are aware of Panama's potential and some have already been active in this market. This activity reached the point where on September 23 of this year Export Development Canada decided to open a regional office in Panama to more effectively facilitate the growing levels of trade and investment between Canadian and Panamanian companies.
In 2009 two-way trade in merchandise trade between Canada and Panama totalled $132 million. This current figure may not be large compared to other partners, but that does not mean that it is not significant or that it cannot become more substantial in the future.
In the second quarter of 2009, Canada's merchandise exports to Panama were valued at approximately $22 million. In the same time period of this year, our exports to Panama were valued at approximately $60 million. So that's a threefold increase.
Key Canadian products driving our trade with Panama include machinery, motor vehicles and parts, pharmaceutical equipment, and pulse crops. Once the Panama agreement is in place, trade in these and other products will become easier for Canadian companies. For example, once implemented the agreement will eliminate current Panamanian tariffs on vehicles of up to 15%, industrial and construction machinery of up to 15%, pork products of up to 70%, wood products of up to 15%, and potato products of up to 81%.
In fact, this agreement will eliminate tariffs on 99.9% of recent non-agricultural imports from Canada and 94% of agricultural imports. Panama currently maintains tariffs averaging 13.4% on agricultural products, with tariffs reaching peaks as high as 260%.
Canadian investors will also see benefits from the implementation of a Panama agreement. It is already an established destination for Canadian direct investment abroad, particularly in areas such as banking and financial services, construction and mining. The stock of Canadian investment in Panama reached $93 million in 2008.
Some of the companies with existing presence in this market include CARIS, which is a geospatial software firm based out of Fredericton; McGill University; Scotiabank; Inmet Mining; SNC-Lavalin; and Hatch Ltd., an Ontario consulting company specializing in engineering and construction project management.
The current investment figure is also expected to grow in the years ahead, in part due to the many infrastructure projects planned by the Panamanian government and the private sector.
Once implemented, the Canada-Panama Free Trade Agreement will set up a stable legal framework, ensuring that Canadian businesses can invest with predictability in Panama. It will ensure the free transfer of investment capital, and protect against expropriation. It will give investors access to transparent, binding and impartial dispute settlement processes.
In short, this agreement provides Canadian investors in Panama a higher level of stability, predictability, and protection for their investments.
Canada's service sector also stands to benefit from a free trade agreement with Panama. Right now Canadian service exports are approximately $8 million a year, with room to grow. This figure is being propelled by Canadian financial engineering, mining and petroleum extractive services, construction capital projects, and environmental services. This agreement will provide service providers like these with a secure, transparent, and rules-based trading environment.
In addition, in keeping with Canada's approach to free trade agreements, the Canada-Panama Free Trade Agreement also covers environmental and labour aspects of economic integration through parallel agreements on labour cooperation and the environment. These are important agreements, and they contain strong obligations which clearly demonstrate that trade liberalization can go hand in hand with labour rights and the environment.
The members of this committee have no doubt already heard about Panama’s current canal expansion project. This $5.3 billion expansion project is expected to be completed by 2014, and it is estimated that the cargo flow will be boosted by roughly 35% through 2025.
With the Panamanian government investing in its country’s growth and strategic importance, procurement opportunities were another key driver for the negotiation of this agreement. I am pleased to say that the government procurement provisions in the agreement guarantee that Canadian suppliers have non-discriminatory access to a broad range of government procurement opportunities, including those under the responsibility of the Panama Canal Authority.
Along with the canal expansion, the Panamanian government has recently announced a five-year, $13.6 billion strategic investment plan. Under this plan, $9.6 billion will be allocated to infrastructure investments and other economic programs designed to stimulate further growth. Some of the projects the government is looking to undertake include airport construction, expansions, and upgrades; a new water treatment plant; power generation projects; agriculture irrigation systems; and a $1.5 billion metro system.
With metro systems and other projects similar to these, Canadian companies have proven to be world leaders in infrastructure.
These projects offer a number of opportunities for Canadian investors and service providers, and the Canada-Panama Free Trade Agreement is one way to ensure that Canadian companies can compete on a level playing field for these opportunities.
There is stiff competition in this dynamic market. The U.S. has recently concluded a trade agreement in Panama, and many strong interest groups in the U.S. and Panama are eager to see it implemented.
Panama’s active trade agreement also includes partners such as the European Union and Colombia. The Panamanian government is currently exploring trade deals with the European Free Trade Association countries of Iceland, Switzerland, Norway, Liechtenstein, Peru, the Caribbean, Korea, and others.
Companies that conduct business abroad rely on a number of things. A few of these are access, security, transparency, predictability, protection, rules-based environments, and the ability to establish strong relationships before their competitors do.
In the case of Panama, Canadian companies have indicated that they want to increase their activity in this market. With the free trade agreement, we are looking to provide the elements they need to operate more effectively and take greater advantage of these opportunities.
By implementing this agreement, we not only contribute to the growth of a strategically significant country in Central America, but we help Canadian companies thrive and stimulate Canada’s overall economy.
Thank you. My colleagues and I will be pleased to take any questions.