International Trade Committee on Nov. 15th, 2010

[Jason Langrish]

Touching on the NAFTA experience, I would argue that it's been overwhelmingly positive.

When you negotiate trade agreements, it's not always going to work out perfectly in every single sector. Also, times will change. Economic circumstances will change. When we negotiated NAFTA, we didn't think we'd have a massive pine beetle infestation in the forests of British Columbia, as an example. Sometimes agreements are negotiated and concluded in such a way that they're very difficult to open up and refine as time moves on. What was a cutting-edge agreement in 1993 isn't quite so cutting-edge anymore.

With regard to the agreement between Canada and the European Union, we would argue that it probably needs to have a bit more of a degree of flexibility. That's why we push for things like a negative approach to services. It's very difficult not only to bring.... It's more inclusive; let's put it that way. It also recognizes that there will be services 20 years from now that don't currently exist. If we have a positive list approach, we're going to have to be constantly going back, renegotiating, and reapproving all of these new elements of the economy.

With regard to the dispute resolution mechanism, I understand what's being considered is an investor-state provision. We're broadly supportive of that approach. We don't have any issues with that between Canada and the EU.

While it is true that the European Union has 27 member states, it's not quite as disjointed as people make it out to be. It actually has fairly clear rules and procedures for governing how it conducts its activities, both internally and internationally. In fact, they're generally very clear and very streamlined.

We see no reason that this agreement won't benefit Canadian investors in the European Union. If they feel their rights or their commercial activities are being compromised, they will have a robust mechanism to challenge that. It's something that they don't have right now, which causes problems at times for Canadian companies. We've had examples, notably in the mining sector in some of the new member states, in which they've basically been hung out to dry. If they had had an investor-state provision, it would have been a much different situation for them.

[Shawn Murphy, Liberal, Charlottetown, PE]

Do you see the whole issue of climate change becoming an obstacle? It would appear to me the European Union is much more evolved on that issue than Canada is, and we're not really in the same book at all. Do you see that becoming an obstacle as negotiations reach the finalization stage?

[Jason Langrish]

I don't think so. I think they've recognized the differences in our economies. Certain European countries have made no secret of their displeasure at how Canada has conducted itself at times. I haven't seen it creep into this negotiation. They understand we have a vibrant resource sector and they're more of an end user. While they have made great strides in that area, part of it has been driven by a need for efficiencies, because they are resource-constrained in a way in which we aren't.

I don't think they're going to be pushing for any sort of legislative mechanism or regulatory mechanism in the context of the CETA to address climate change. I certainly hope there will be a robust chapter on cooperation on low-carbon technologies, infrastructure development, and research and development. A whole pool of expertise exists in the European Union that could be deployed in Canada. That's one of the reasons we believe that some of the provisions in the agreement, like fair and transparent reciprocal access to procurement markets, will be a benefit to Canada, because it will provide greater choice in terms of accessing these technologies in our efforts to deal with carbon.

[The Chair, Conservative, Lee Richardson]

Thank you, Mr. Murphy.

Thank you for that very helpful answer.

Monsieur Laforest, five minutes, please.

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

Thank you, Mr. Chair.

Good afternoon, Mr. Langrish. You represent the Canada Europe Round Table for Business. Have you looked into assessments of money values? Do you have an idea of how the agreement might affect the GDP increase in Canada and in the European Union? Your round table brings together people who are interested in trade and want to increase their exportation and production. Are you in a position to estimate what that would mean in dollar terms?

[Jason Langrish]

I should preface this by saying that despite the fact that we have very large companies in our membership, we are an organization of modest means. There's only so much we can do, and conducting a study of that scale is beyond the ability of organizations of our size. Typically, you don't find that organizations conduct their own studies anyway. They tend to contract them out almost exclusively. In the United States sometimes you'll see groups that do that, but that's usually because they're capitalized with huge budgets and they have a lot of people on staff. It's not a dynamic that presents itself very often in the Canadian context.

Several other studies have been done independently of us in which we've either contributed or done peer reviews. Of course there's the joint study that was done by the Canadian government that estimated an increase in trade of about $12 billion for Canadians and $19 billion for Europeans. We'd be looking more at those numbers in terms of backing up. The federal government has also conducted several studies over the years as well, dating back to 2003, when Minister Pettigrew was a minister. They generally tend to report the same increases. As a percentage of our GDP, it's not particularly large. These studies tend to be very cautious and they tend to have very long timelines they believe the agreement will reach. You would have seen the same thing, quite frankly, with the MacDonald commission and the FTA as well. It underestimated what the gains were.

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

Despite not having an independent study on an evaluation, what do you think are the main strengths on each side? What sectors might be disadvantaged in Canada and in Europe? What are Europe's weaknesses?

I know that your organization brings together people from the European Union and from Canada, but as a representative, you should have some idea of these strengths and weaknesses.

[Jason Langrish]

I will say that this is going to be a bit of a loaded question, because when FTA negotiations were conducted between Canada and Europe they said our wine sector would be decimated. Well, we saw that wasn't the case; in fact, the opposite happened.

So to try to guess how certain sectors will respond when faced with enhanced competition is difficult. But what we can say is that there will certainly be opportunities for our agricultural exporters and our resource exporters, and there will undoubtedly be opportunities for our service providers.

There will be opportunities in manufacturing, but it will be important that the manufacturing sector responds to what will be enhanced competition. Undoubtedly there will be enhanced competition. It's not a given, but it's a necessary condition, because, frankly, our productivity is quite woeful in Canada, and I would argue that part of the reason for that is that the levels of competition that our manufacturers experience are not on par with what some other jurisdictions experience.

We will see an opportunity for growth in terms of professional services—and certainly if we can increase mobility. We will also see sub-contracting opportunities. Companies tend to establish their supply chains where free trade areas exist, because tariff levels, even if very low, act as implicit taxes all through the supply chain of inter-company trade, which often doesn't get captured in trade statistics. So there will be opportunities that will come about through that in the manufacturing and services sectors, undoubtedly. Also, if we have European investors in Canada with other companies providing contracting services to those large companies, there's no reason to believe that those partnerships couldn't evolve into something that takes place in all corners of the world.

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

Thank you, Mr. Langrish.

[The Chair, Conservative, Lee Richardson]

Thank you, Mr. Laforest.

We're moving right along and have five minutes.

Mr. Julian.

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

Thanks, Mr. Chair.

Thanks to our witness. I think I'm quoting you accurately. You said this deal, despite some losses, would be a sacrifice for the “greater good”. Is that accurate?

[Jason Langrish]

I said that when you conduct any negotiations, sacrifices will have to be made. But I think everybody understands there's a greater good at play here.

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

Yes, so that's not a misrepresentation of your comment.

[Jason Langrish]

Well, it is to a degree, but we'll let it slide.

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

Okay, thank you for that.

I'm just referencing and going back to NAFTA and the Canada–U.S. Free Trade Agreement, because the reality for most Canadians is that they're poorer now than they were two decades ago. What's happened is a major shift in income towards the wealthiest part of our population, as their incomes have skyrocketed—including many of the folks on your list—but the Canadian middle class has actually seen their real income decline, and poorer Canadians have seen an even greater decline. We've lost half a million manufacturing jobs.

If we look at the record so far, whether it's the softwood lumber sell-out or the shipbuilding sell-out or NAFTA, we're seeing a hollowing out of our economy. So the record hasn't been good, except for a very narrow group in our population. So coming back to your comment, you're saying that people should realize what the greater good is, but at what point would your association be willing to say that this is not in Canadians' interests?

We have the only accurate study done suggesting there will be a 150,000 net loss of jobs. We have supply management on the table, and we know how important supply management is for farming communities across the country; it's been the one stable agricultural sector that has managed to generate income from family farms over the past few decades. We have the cultural sector, which is very concerned about the impacts here. We have municipalities like the Union of B.C. Municipalities taking a stand against the agreement because of the impact on local businesses. We have the investor state provisions that drag the Europeans down to a lower standard, when we should have a higher standard.

Given all of these concerns about the negotiations going off the rails, the impacts could be quite devasting. The NDP supported the negotiations at the outset because we thought we would be moving to effective European standards, but it's not the way things seem to be turning out. I'm wondering about the message you're bringing here today. Is it to sign it at all costs? Or are you saying “We're watching, and we're concerned too about the impacts on supply management and the cultural industries and these other sectors”?

[Jason Langrish]

Well, I would question your logic. You're basically stating that the reason we have income disparity is that we negotiate free trade agreements. That's quite a leap.

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

No, actually, sir, what I'm saying is that it is false to pretend that NAFTA and the Canada-U.S. Free Trade Agreement have brought unprecedented levels of prosperity. When we look at the last 20 years, most families have actually seen their real incomes decline.

[Jason Langrish]

Yes, but there's nothing in your argument to back up your point that a disparity in wealth has been a result of NAFTA. You could just as easily make the argument that the reason we have lost manufacturing jobs is because technological innovations have made it easier to off-shore production to the lower cost jurisdictions in Asia and the developing world.

By the way, on the degree of fairness, are we supposed to ring-fence our societies and our economies and say tough luck?

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

Well, that's not fair, because there's more than one choice.

[Jason Langrish]

But we had the opportunity to develop export markets, and now we're saying to them that they don't?

I think if you looked at NAFTA, it's unprecedented in terms of the actual benefit it has brought. It quadrupled trade up until about 2000, with steady gains in trade and investment across the board. It has only been since 2000 that there have been ups and downs. Now you can't attribute those to free trade. What you can attribute them to are housing bubbles, recessions, and security concerns, but to attribute a recent decline in trade and investment numbers to a free trade agreement doesn't make any sense.

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

No, what it does mean is that these economic policies aren't working—

[Jason Langrish]

But it doesn't.

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

—and when you have the middle class earning less now than they were two decades ago, that's a matter of concern.

[Jason Langrish]

So do you now say that taxation policies could be—

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

You've made your point, and now I'm going to make the rebuttal.

The issue is what is the trade template that we have, and does it have a dysfunctional result? When you look at the export figures for each of these markets where we signed bilateral agreements, the exports actually declined.