International Trade Committee on Nov. 15th, 2010

[The Vice-Chair, Liberal, John Cannis]

Ladies and gentlemen, I'm going to call the meeting to order. Our chair, Mr. Richardson, is unexpectedly slightly delayed, so as the vice-chair I'll call the meeting to order for this Monday, November 15.

We have today, pursuant to Standing Order 108(2), the study of free trade between Canada and the European Union.

We're very pleased to have with us from the Department of Foreign Affairs and International Trade Mr. John Kur, director general, Europe and Eurasia. With us also is Mr. Steve Verheul, chief trade negotiator, Canada-European Union. Then later on, between 4:30 p.m. and 5:00 p.m., from the Canada-Europe Roundtable for Business, we have Jason Langrish, executive director. Then later on we have Sandy Boyle, Jean-François Bence, Rose D'Sa, and José Isaias.

We welcome them all and we welcome our chair. As I said, he was just a little bit late.

Mr. Chair, we're ready to go. Get back in your chair.

[The Chair, Conservative, Lee Richardson]

Thank you very much. Thank you, Mr. Cannis--as always, very efficient and effective.

I take it we're ready to hear from our first witness. Mr. Verheul, are you going to start? Thank you. I'm sure you've been duly introduced. Welcome back, and thank you for coming. I think you know we're essentially going to have a briefing on an upcoming visit, so I'll let you carry on.

[Steve Verheul, Chief Trade Negotiator, Canada-European Union, Department of Foreign Affairs and International Trade]

Thank you very much, Mr. Chairman.

Good afternoon, everyone. Thank you for inviting me back to speak to you about your upcoming trip to Europe to study and promote the negotiations toward the Canada-European Union comprehensive economic and trade agreement, known as the CETA.

As you requested, I will focus today on your trip next week and then provide you with an update on the negotiations. To complement today's briefing we have also prepared materials on specific issues that may come up during your trip. Embassy staff will also brief you on additional countries' specific issues prior to your meetings.

First I'd like to offer you some context on the roles of member states in the European Parliament post-Lisbon. Neither member states nor members of Parliament participate in the negotiations themselves. We negotiate with the European Commission exclusively. However, member states and Parliament are kept abreast of the progress of negotiations, and they have a real influence on the substance of what is negotiated.

While member states have always had a role in treaty-making, there was a new role for Parliament as of December 1, 2009, when the Lisbon treaty came into force. The European Parliament now has an enhanced role in EU decision-making. One of its most important new powers is that its consent is required for all international treaties, including trade agreements, negotiated by the European Commission. As such, the commission now provides regular briefings on the progress of negotiations, resulting in a better informed Parliament that can exert influence over the commission on the substance of an agreement.

This has greatly increased the visibility and importance of the European Parliament in EU policy-making, and has resulted in the need for non-EU countries to ensure that clear and open lines of communications are established between them and European parliamentarians.

Canada must ensure that its views, policies, and positions are understood and appreciated by parliamentarians as issues pertinent to us come up for votes in Parliament.

Member states also have a role, beginning with the development of a negotiating mandate, as well as decision-making on the progress, approval, and implementation of treaties. The commission provides regular briefings to member states in the trade policy committee, the TPC--formerly called the 133 committee. This group is instrumental in developing negotiating positions, preparing offers, and reviewing the texts. The trade policy committee meets every week, and in this context I will tell you about the program and member states you will be visiting.

First of all, the United Kingdom, one of the European Union's big three member states, is generally seen as supportive of the CETA. The current coalition government sees trade as a key focus for its foreign relations. Although attention has recently been drawn toward China and India, the U.K. still has a strong affinity for trade with North America and Canada. The U.K. has expressed particular interest in professional and financial services, intellectual property, and sub-federal government procurement.

However, the U.K. is sensitive on labour mobility, one of Canada's top interests in these negotiations. We have provided a brief for you on this issue, and you might like to talk to interlocutors about this subject in particular.

The embassy is planning a round-table discussion with the Canada-U.K. chamber of commerce members and business guests, a meeting with the minister responsible for trade, and a meeting with the House of Lords EU subcommittee on economic and financial affairs and international trade.

Moving on to Strasbourg, our mission to the EU is working to develop a program of meetings with members of the European Parliament, including a meeting with the European Parliament's international trade committee as well as the European Parliament's delegation for relations with Canada. This will be an excellent opportunity to signal strong support for the CETA negotiations in Canada as well as to underline the importance Canada sees in enhancing close and open trading links with the EU. It will be important to underline Canada's continuing commitment to rejecting protectionism, reducing barriers to trade, and promoting environmentally and socially responsible trade. You should expect to hear a wide variety of views expressed by members of the European Parliament, ranging from strong support for the CETA negotiations to strong criticism and skepticism of free trade agreements in general.

In addition, it is quite probable that members of the European Parliament will want to discuss other trade files, including Canada's FTA agenda, the anti-counterfeiting trade agreement, intellectual property reforms in Canada, as well as oil sands and seals. We have prepared background briefing materials on these issues as well.

After Strasbourg the committee will split into two groups, one heading to Rome and the other to Budapest.

For the group travelling to Rome, the prospective program entails a meeting with Italian deputies and senators; a meeting on agricultural issues of importance to Italy, likely with the national association of food producers; a meeting with Italian government trade officials; and a meeting with Confindustria, Italy's main industry association.

The Italians are supportive of the CETA, and our economic relationship is important. One of Italy's strongest interests in these negotiations is geographical indications. A GI is a name that links a product's quality, reputation, or characteristic to a specific geographic location or origin--for example, Champagne or Bordeaux. We already have a wines and spirits agreement with the EU that recognizes certain GIs, and we are currently analyzing an EU proposal that seeks recognition of GIs for other agricultural products and foodstuffs. You will also find more details on this issue in your briefing package.

Last is Budapest. Hungary will be the next country to hold the rotating presidency of the EU, beginning in January 2011. This covers the period of the next two rounds of negotiations. Although the role of the rotating presidency has been reduced following the EU's Lisbon treaty, the country holding the presidency will still chair key meetings of EU ministers, including the trade policy committee.

The prospective program in Budapest includes a joint meeting with the Hungarian Parliament's EU affairs committee and the economic and informatics committee, the committees responsible for the CETA and Hungary's economic and trade policy, respectively. A meeting with the newly formed Canada-Hungary Parliamentary Friendship Group is also planned as well as meetings with an expert on Hungarian and regional economics and a senior Government of Hungary interlocutor. If time permits, a session with a representative of a Hungarian business group will be added.

Given the important role the European Union member states play in both policy-making and the eventual ratification of any international trade agreement, we anticipate that this overall program will provide the CIIT with the opportunity to underscore Canada's priorities in these negotiations to key interlocutors in the U.K., the European Parliament, Italy, and Hungary.

Now I'll give a quick update on the negotiations.

Since I was last here, we had our fifth round of negotiations, in mid-October, in Ottawa. Negotiations continue to progress well, even though we've moved to a tougher stage in the negotiations.

There are some key milestones to report. We have had a consolidated text covering all 22 areas of negotiation since last fall. Of these, we have already completed or parked four chapters and expect four more to be parked or closed at the next round in January.

We have already exchanged initial offers on goods, which would have 90% of all tariffs go duty-free immediately upon implementation of the agreement, and we've exchanged detailed requests in the areas of government procurement, services, and investment.

We expect to exchange second offers on goods and our first offers on GP--government procurement--services and investment in the next few months.

On the key areas of focus, government procurement remains one of the EU's top priorities, particularly at the sub-federal level. We are working closely with the provinces and territories towards a high level of ambition on procurement, as this will, to some extent, set the level of ambition in other areas.

In the area of goods, the remaining 10% of tariffs on which we have not yet made offers will involve some sensitivities, including some with respect to agriculture, on both sides, autos, and fish for the EU.

As I mentioned to you during a previous briefing, we are paying particular attention to and have made good progress on non-tariff barriers, especially in the area of regulatory cooperation. In fact, we are negotiating a chapter on regulatory cooperation, the first time such a chapter will be included in a free trade agreement.

On services and investment, we have been working hard to convince the EU to adopt a more ambitious approach to a negative list, which means that everything is captured by the commitments except for areas that are specifically excluded. This is the approach we have used in all of our agreements, including NAFTA, but the EU has never used this approach. Reports from the commission on their discussions with member states in this regard are encouraging.

We are also pressing the EU to go further in the area of labour mobility, including easing the temporary entry of business people and professionals and mutual recognition of qualifications.

Finally, intellectual property is also an important area, as the EU has been pressing us on copyright protection, enforcement, patents, and the protection of geographical indications. The copyright bill tabled by the government a few months ago is also likely to come up in your meetings.

Provinces and territories continue to be engaged and are well represented during negotiating rounds. We had just over 60 provincial and territorial representatives in Ottawa for the October round, and we continue to meet with them frequently, both in Ottawa and across the country.

Our consultation process in this negotiation has been the most extensive and open process we've ever had in a trade negotiation. We consult regularly with industry and civil society after each round through teleconferences and have frequent meetings with stakeholders, on request.

That's where we are now in the negotiations. We have two more formal rounds scheduled, one in January in Brussels and the other in April in Ottawa, and we continue toward the goal of completing the negotiations in 2011.

We also anticipate that ministers will meet to take stock of progress in the negotiations later this year.

CETA is a unique and important opportunity for Canada. That the committee travelled to the EU should serve to underscore Canada's commitment to an ambitious agreement.

I would be pleased to answer any questions you might have.

Thank you.

[The Chair, Conservative, Lee Richardson]

Thank you very much, Mr. Verheul.

I think we'll continue our normal practice of going around the table and allowing seven minutes to each party in the first round. I'm sure individual members may have specific questions, and we'll see if we can get to all of those. We have 40 minutes anyway.

I'll ask Mr. Cannis to begin. Of course, you can share your time if you like, and thank you again for opening the meeting on time.

[John Cannis, Liberal, Scarborough Centre, ON]

Thank you, Mr. Chairman.

Thank you for a very in-depth and a very brief statement. I appreciate it very much.

I'd like to start by asking you if you could elaborate a little more for the benefit of the committee. You talked about our relationship with the U.K. They're favourable; that's great, but they have a concern. You used the word “sensitive”. If I may quote, you said “the U.K. is sensitive on labour mobility”. Can you add a little more on why they're sensitive, and describe the issue in more detail for us?

[Steve Verheul]

I'd be happy to.

Part of our challenge in negotiating labour mobility provisions is that this issue falls under the competence of member states, by and large, so we're going to need member state support in moving that issue forward.

When it comes to that issue, the U.K. is particularly sensitive, and there have been a number of discussions ongoing within the European Union because the EU is attempting to limit immigration from other EU member states in some ways. They're sensitive to the potential of various types of technicians or business people coming in and replacing jobs that already exist in the U.K. It's a sensitivity that's particularly acute in the U.K.

[John Cannis, Liberal, Scarborough Centre, ON]

I'd like to pick up on limiting immigration.

They have the Schengen agreement; once a member is a full member, then their residents have the ability to freely move from state to state. How does that tie in, hopefully, when we sign on with this agreement? When we achieve the 90% that you mentioned and keep working on the 10%, how does that tie in with our labour movement? Will a Canadian, for example, have the ability to say that since we're in this free trade agreement with the European community, he or she has the right to go and work as an engineer, as an accountant, as a lab technician, as a labourer, as a mason, or whatever? Can you add something to that?

[Steve Verheul]

Sure. Essentially, that's what we're trying to negotiate.

We're trying to negotiate a framework whereby we would get recognition of qualifications on both sides, so that an architect in Canada would be able to go to any EU member state and work as an architect and be recognized as such in that EU member state. In fact, we're making some initial early progress in the area of architects, but we also hope to make progress for engineers and a whole host of other professions. That's part of the issue, and I think we can make some good progress there.

In some previous trade agreements we have extended that to include technicians as well. The EU, and the U.K. in particular, are more concerned about technicians. This goes back to a lot of the fear that was around within the European Union about the Polish plumber stories; when Poland joined the EU, there was concern that there would be a flood of Polish plumbers coming into the U.K. and elsewhere and taking all the plumbers' jobs away.

It's still a sensitive issue within the EU, but we're hoping that because of Canada's reputation and because we're not going to be a big threat in most of their job markets, they'll give us an easier ride than they might some others.

[John Cannis, Liberal, Scarborough Centre, ON]

How do you see it in the other way? I think previous governments and the current government--all of us--are very sensitive to this issue of acceptance and recognition of credentials. Aside from the plumber, we have engineers, doctors, and what have you; do you see these negotiations enhancing or helping us move that file forward?

I met a constituent of mine not too long ago who had come from Europe. He said he had worked as a doctor and was recognized, etc., and here he was having difficulty. He said, “Show me the way. Map out for me what I have to do, or at least inform me before I arrive about whether I'm approved, so that I know what I'm dealing with and then have a better choice to make.”

Do you see that process improving with this treaty?

[Steve Verheul]

No, that's exactly what we see happening. By necessity, there are going to be a fair number of complicated negotiations, because when it comes down to it, it will have to be the associations that represent the professions who will have to do a lot of the actual negotiation of the terms. Provinces will also have to be involved to some extent, because it's within their jurisdiction that these issues fall.

But the notion will be that we do get agreements—and we will have to go profession by profession—that will allow an architect from Canada to work anywhere in the EU and an architect from the EU to work anywhere in Canada, and the same with various other professions.

So it will take some time to actually work through those things, but we're very ambitious in this area.

[John Cannis, Liberal, Scarborough Centre, ON]

That's very important to all of us, and I don't speak along party lines here; I just speak along Canadian lines.

If you could elaborate for me a little bit further, you said you've addressed almost 90% of all tariffs. But what are the 10%? What are some of the tariffs in that 10% we are having more difficulty with or will be addressing as time goes by? Could you brief us on those?

And do you have you any ideas what we could do with our visit?

[Steve Verheul]

The remaining 10% of our tariffs on which we haven't made offers yet include things like autos and auto parts, textiles and apparel, furniture, tires, and a few things like that. Agricultural products contribute a certain amount to that. Those are probably the main ones on our side.

On the European side, they have things like aluminum. They have also kept autos back in the 10%. They have fish in the 10%, which is an important objective of ours. The rest are mainly agricultural products on their side too.

[John Cannis, Liberal, Scarborough Centre, ON]

Thank you very much. I appreciate that.

[The Chair, Conservative, Lee Richardson]

Thank you, Mr. Cannis.

We'll now move to Monsieur Laforest.

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

Thank you, Mr. Chair.

Good afternoon, Mr. Verheul. Correct me if I'm wrong, but, according to your presentation, the European Parliament appears to be rather well informed about the developments in the negotiations taking place. You say that the European Parliament has new roles. One of the major changes is that international and trade agreements negotiated by the European Commission now cannot be concluded without the consent of the European Parliament. You also say that the European Commission regularly briefs the European Parliament on the progress of the negotiations, resulting in a better-informed institution that can really exert influence over the Commission.

I feel that our Parliament is not provided with as much information. We are actually told that, when it comes to negotiations, it's best to keep information secret for as long as possible. Is the European Parliament better informed than the Parliament of Canada and the legislatures of the various participating provinces?

[Steve Verheul]

It was certainly quite a shift within the EU structure to move toward having a role for the European Parliament, because prior to the passing of the Lisbon treaty, they weren't that well informed on the negotiations. There is no requirement for them to be kept particularly well informed, other than the fact that I don't think anybody wants them to be surprised at the end of the day when they have to approve a treaty or not. The European Commission has started to inform them of developments in the negotiations.

As to whether they may be better informed than us, I'd have to say they probably are not, because certainly we do fairly extensive briefings here. I actually had the occasion while in Europe at one point to brief the EU's trade committee in the European Parliament as well. The reaction I received after that briefing was that I had been much more detailed and substantive in my briefing than they were getting from the commission, which brought a bit of a reaction from the commission.

So I think we are at least as much informed as, and probably more informed than, the EU Parliament.

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

Despite all that, the trade agreement can't be concluded without the consent of the European Parliament. Here, trade agreements are concluded without the consent of the Parliament of Canada. I assume that the European Parliament at least asks for more information before an agreement is concluded. Here, a bill is introduced in Parliament so that we can ratify an agreement that's already been concluded. There is a world of difference between those two approaches.

I believe that certain exemptions have already been prescribed with regard to government procurement, as exemplified in the free-trade agreement concluded between the European Union and Korea. So, I think that the departments are not governed by the principles behind the trade agreement.

Is the agreement between Canada and the European Union headed in the same direction? Will the agreement contain the exemptions included in agreements the European Union has concluded with other countries?

[Steve Verheul]

There will certainly be some exemptions from government procurement on both the EU side and on our side. The EU has existing exemptions from government procurement that remain in place now, and they're unlikely to change those. As to whether they would be the same as the ones that were negotiated with Korea, I wouldn't want to suggest that will necessarily be the case, because we're both starting from different places. The biggest element that's new to us is of course that we're negotiating government procurement with the provinces' and territories' procurement on the table. So this is going to be a different kind of negotiation from the EU-South Korea negotiation, but without a doubt there will be some exemptions on both sides.

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

I just heard the simultaneous interpretation, and it said that negotiations will be involved. Is that really what lies ahead? Has nothing been agreed to regarding government procurement so far? No agreement has been negotiated for government procurement, but those negotiations are pending, right?

[Steve Verheul]

Yes. The next stage of the negotiations is that we'll be exchanging offers with the European Union on all of the market access issues, including government procurement. In those offers we will put down on paper for the European Union where we expect to be able to put on the table procurement both at the federal government level and the provincial and territorial level, and even with respect to municipalities. We will be doing that exchange sometime in the next few months. That's where we will be putting out our offers, which will then be negotiated from there. But that will give a clear indication specifically of what will be subject to disciplines under government procurement and what won't.

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

In Quebec, the cultural exemption issue is of great importance. Quebec is the only francophone community in North America, and it has already inquired about this.

Do you have any information about this to give us? Will it be a complicated process? Are there already agreements on the key exemptions? Will we be able to hold on to what we already have in Quebec and to continue developing our markets, without necessarily being completely affected by tariff barriers that would take over and compromise the French-language culture in Quebec?

[Steve Verheul]

I don't think there's anything we will negotiate or contemplate negotiating that would threaten Quebec's culture—or indeed the culture of the rest of the country as well. We are committed to pursuing the kinds of cultural exemptions we've had in the past.

We haven't agreed to anything yet in the negotiations in relation to culture, but the EU has brought two main issues to the table with respect to culture. One is that they feel that our existing cultural exemption is too broad and that it covers everything in the agreement. They've expressed concern that we would have a cultural exemption that would effectively mean that if we negotiated intellectual property rights for artists in another part of the agreement, the cultural exemption would override that—which obviously wouldn't make a lot of sense. So I think we will have some discussions about the structure of our cultural exemption, but that's more of a structural issue.

The second issue they've raised concern about is that they have a commercial interest in books, publishing, and distribution. They have expressed interest in pursuing discussions on that. We haven't reacted to that as of yet.

But overall I would have to say that we're not coming from places that are all that different. They have their own cultural concerns. They exempt audio-visual services. France is certainly a big supporter of the cultural exemption, and we've had discussions directly with France as well on this.

So I'm not sure this will be that significant a problem.

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

Thank you very much.

[The Chair, Conservative, Lee Richardson]

Thank you.

Now, from the NDP, Mr. Julian.

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

Merci.

Thanks very much for coming.

I'll start by following up on your prepared text. You say there are 22 areas in negotiations.

We have...completed or parked four chapters and expect four more to be parked or closed at the next round in January.

How many are parked, and how many are completed?