International Trade Committee on March 18th, 2010

[The Chair, Conservative, Lee Richardson]

Welcome to the fourth meeting this session of our Standing Committee on International Trade.

We're continuing our discussion on Canada-U.S. trade relations, today with specific reference to procurement. To help us along, we have invited a witness from the Canadian Chamber of Commerce, our old friend the senior vice-president of policy, Shirley-Ann George. Shirley-Ann, thank you for coming again.

Also, as an individual, we have a former trade negotiator with the Canadian government and I believe the Quebec government, Carl Grenier. As well, we have Omar Hammoud, who's the president of APG-Neuros Inc. in Quebec.

I'm going to ask our witnesses if they would begin today, by way of background and to give us a briefing on this important issue, with an opening statement of ten minutes or less. I'll ask each one of you to do that, starting with Monsieur Grenier.

[Carl Grenier, As an Individual]

Thank you very much, Mr. Chair.

I want to thank the committee for the opportunity to appear today and give my opinion on the Buy American agreement, which came into force on February 16. My personal interest in government procurement goes back to the 1970s, when I was on the Canadian delegation for GATT trade negotiations, during the Tokyo Round. As a delegation member, I took part in the negotiations of the first international agreement to liberalize government procurement. Then, as a senior official in the Quebec government, I took part in the free-trade negotiations with the United States. The issue of government procurement was also on the agenda during those negotiations. It was the same during the Uruguay Round negotiations in the late 1980s and early 1990s, when the initial agreement I just mentioned was renegotiated to assume its current form.

I will limit my remarks to the permanent part of the current agreement, the part that is directly related to the WTO Agreement on Government Procurement, since the part on special access to seven American programs is entirely temporary and impossible to assess at this time, and since the third part on opening talks to expand the agreement is likely of little consequence, at least I hope so. We can come back to these points during the question period.

In my opinion, it is impossible to understand the actual scope of this agreement without first putting it into its historical context. That is what I will attempt to do now. In actuality, the agreement that was just negotiated is a rather pathetic conclusion to some 10 years of negotiations, which Canada put an end to in the mid 1990s, in the face of the U.S.'s unwillingness to compromise. Last month, Canada accepted what it had been refusing for 25 years. You see how things can change.

In the spring of 1979, the Tokyo Round of the WTO trade negotiations had, for all intents and purposes, come to an end. After years of work, a balance of compromises had finally been reached, but a new problem arose, an American problem. In fact, the U.S. delegation raised the issue again and informed the 20 or so countries that had negotiated the first international agreement on government procurement that the U.S. congress was not likely to ratify the agreement without a major exemption. The U.S. administration had concluded that the government procurement agreement was not acceptable to a large number of elected officials in congress. The agreement was an integral part of a huge package. It dealt with tariff reductions, and that included the Agreement on Subsidies and Countervailing Measures, the Agreement on Safeguards and the Customs Valuation Agreement. There was a whole slew of them, and all of these results were potentially thrown into question because congress had decided, by giving permission to the executive branch to negotiate the Tokyo Round, that there would be just one vote on everything. It was the famous fast-track approval procedure.

The stumbling block that brought U.S. negotiators back to the table was a 1953 law guaranteeing a fair distribution of federal government contracts between the country's small and medium-sized businesses. That preference was added to the Buy American Act of 1933, which already gives American suppliers a 6% to 12% advantage over foreign companies that tender a bid for federal procurement contracts.

At the time, there was no question of congress repealing the popular act, especially since this preferential treatment had just been extended to businesses owned by minority groups, on the heels of the civil rights movement of the 1960s. There was even less question of extending that national treatment to foreign SMEs, in other words, treating them the same as American SMEs. So the U.S. requested a permanent exemption from the clauses that would require it to do away with these preferences, which did not adhere to the letter and spirit of the agreement. Time was of the essence, and none of the future signatory countries wanted to reopen the agreement to make adjustments in the face of this new demand by the U.S. The exemption was therefore granted rather grudgingly, but granted none the less. Canada was the country that lost the most as a result. With the possibility of serving the market by land, which compensated for the generally smaller size of its businesses, Canada hoped to carve out a large share of central government contracts for itself with its neighbour to the south.

So it involved federal government contracts; that needs to be pointed out. The government procurement agreement that came into force in early 1981 affected only the procurement of goods by central government entities above a certain value, a threshold, with major sectoral exceptions, such as defence, telecommunications, public transit and heavy electrical equipment. Put off until next time was the liberalization of procurement by federal states, in other words, provinces in Canada, länders in Germany, states in the U.S. and autonomous regions in other countries, whose value exceeds central government procurement contracts in nearly all industrialized nations.

So the expansion of the government procurement agreement was on the agenda for the next round of negotiations, the very ambitious Uruguay Round, which began in 1986 and lasted until 1994. With respect to government procurement, the U.S. subjected the purchases made by 37 of its 50 states to a better agreement, but these new contracts were not open to Canadian businesses, as the two countries were not able to come to an agreement at the time. That part of the agreement will go nowhere until the effective date of the agreement announced on February 5.

The main reason for the failure of the Canada-U.S. negotiations on government procurement during the Uruguay Round was the U.S.'s continued refusal to exempt Canadian businesses from the exemption that it had snatched at the end of the Tokyo Round. Without a similar concession, the majority of Canadian and Quebec SMEs had little hope of landing contracts with the U.S. federal government or state governments, some of which had their own Buy State provisions based on the Buy American measure.

Furthermore, in certain major industries such as public transit, states and cities were subject to specific preferences through federal subsidies, especially public transit. President Obama's recovery plan did not include anything new in this regard.

It should be noted, by the way, that the large Canadian suppliers that had already been forced to set up in the U.S. as a result of American protectionism regarding government procurement, did not have the same appetite as SMEs for the liberalization of government procurement in the U.S. They had already built plants across the border in order to be able to sell their buses and subway cars to American cities. They had solved their problem by investing in the U.S.

The failure of the negotiations to expand government procurement liberalization to the provinces and states under GATT—NAFTA, for that matter, did not change anything because it was largely based on the GATT agreement—did not mean that Canadian businesses were unable to tap into certain U.S. state government contracts. In the absence of restrictive subsidy policies from the federal government, a number of states bought Canadian equipment, and some ten Canadian businesses were able to benefit from that, especially in the public works sector, without any statistics on exactly how much that represented.

Obviously, everything turned upside down on February 17, 2009, when President Obama approved the American Recovery and Reinvestment Act of 2009, a massive two-year economic recovery plan estimated at $787 billion, and around $275 billion of that targeted infrastructure and equipment projects. A large portion of these projects were contracted out to the states, and the use of federal funding was subject to a Buy American clause, in full compliance with the U.S.'s international obligations. That meant that the businesses of the 27 member nations of the European Union, for example, Japan, Korea and some 10 other countries had the right to tender bids for these contracts with the states, but Canadian businesses could not, because the Uruguay Round of negotiations on the issue were not successful, as I mentioned.

This sudden windfall of billions of dollars did not come without strings attached and put an abrupt end to many business relationships that Canadian businesses had managed to build with U.S. states, cities and counties, despite the failure in 1994. You will recall, the Canadian media was highly critical of the American protectionism. At the urging of manufacturers and the Federation of Canadian Municipalities, the Canadian government entered into negotiations with the U.S. in July 2009. It is important to note that no serious estimate of the damage caused by the Buy American measure in the recovery plan was ever released. We do not know just what the damage was. Negotiating head to head with the U.S. to solve a trade issue is always a brave and daring move.

In terms of negotiations, the Canadian government has clearly put itself in a position of weakness with a timeline it had no control over. On October 21, Stockwell Day, the Minister of International Trade for Canada, publicly complained about how slow the negotiations were. With each passing day, potential gains for Canadian companies disappeared as funds were being allocated.

On February 16, 2010, when the agreement reached by his successor, Peter Van Loan, came into force, at least $198.5 billion of the initial $275 billion had been already allocated. But the American requirements remained firm. In hindsight, we can even say that they have increased. What price did Canada have to pay to access a temporary program? The federal government provided the WTO with a list of entities from 10 provinces, and an additional list of 75 cities, including the 15 largest municipalities in Quebec. As part of the Agreement on Government Procurement, American companies will have permanent access when those entities purchase goods and services.

I will close by pointing out that Canada's infamous stumbling block over 10 years of negotiations has remained intact. This obstacle is the exemption clause that allows American authorities to reserve a major part, about 23%, of their federal government procurement for American SMEs. According to a recent estimate, that actually adds up to $130 billion out of $530 billion per year. But no American city is on the list of 37 American states whose procurement is subject to the agreement.

Finally, it is a little strange that the Canadian embassy in Washington had to take it upon itself to let American states know that Canadian companies now have the right to bid on the few contracts that have not been awarded yet. Is that a great victory for Canada? Certainly not. Is it a significant gain for the United States? Yes, it clearly is.

A previous witness noted that this was the first trade agreement signed by the Obama administration. For Mr. Harper's government, of course, it is the second agreement with the United States. We can only hope that it will not be as much of a disaster for the Canadian economy as the first one.

[The Chair, Conservative, Lee Richardson]

Thank you, Mr. Grenier.

We'll move now to Mr. Hammoud, president of APG-Neuros Inc.

[Omar Hammoud, President and Chief Executive Officer, APG-Neuros Inc.]

It's an honour to be with you. This is my first opportunity to have a discussion with members of Parliament.

We hear a lot of discussion about “Buy American” and how it's affecting us, but we hear a lot of theoretical discussions on the impact of “Buy American”. We in fact have been hurt quite significantly in the last two years. We had to take quite rapid and drastic measures. We didn't have the power of negotiation when we had to establish a manufacturing facility in the U.S. We had to act to protect our future projects.

As we heard in the briefing on how the Buy American negotiations were taking place between the Canadian and U.S. representatives, at the same time we were seeing projects being lost, projects we had worked on for three years. They used our designs and our proprietary and technical information, and towards the eleventh hour we were told we were no longer on the project.

We had units. We actually had deliveries at the port of Los Angeles that were held. The customer was not taking them, and they were held at the port. The State of California learned about the situation and actually felt sorry for us, and they gave us a one-time exemption to deliver the product.

To react, we had to take a facility in upstate New York, in Plattsburgh. We would have had 40 employees in the Montreal area, and we were looking at Ontario as well, and we moved to Plattsburgh. Now we have a production facility in Plattsburgh. That's the only solution.

What you are doing here and after as negotiations doesn't make a difference. You have the government ruling. You have the threshold values at $7.8 million. That $7.8 million threshold value represents 80% of the projects.

There are on-the-ground U.S. competitors who know how to work around these rulings and these agreements. They sent protest letters to the counties and municipalities that wanted to buy from us. They threatened to take them to court. They threatened them with losing the stimulus funding that they were receiving from the federal government. The municipalities in the U.S. are not very educated in terms of knowing the law and how it applies.

Their first reaction was that instead of buying from us and taking the risk, they would rather buy from U.S.-based suppliers. Even with our production facility in place in Plattsburgh--and we're spending $2 million just modifying the facility so we can test in it--the U.S. competitors are still putting pressure on their municipalities to not take our product, which we are already committed to building in the U.S. This is the reality on the ground.

If the negotiations around agreements are not 100% without any conditions, without any threshold values, without any borders that separate the U.S. economy from the Canadian economy, they will not be applicable on the ground.

We have to stop looking at what we need to change in the U.S. The U.S. has their own problems. They have a 12% unemployment rate. They will not be able to negotiate more than what they have. We need to focus on what we can do in Canada. We have other markets we can go to. We have to educate our municipalities that still favour U.S.-based manufacturing even though we are the market leaders in our category.

When we try to sell in Ontario or in Quebec, 15 minutes away from our home base, we find we're actually out-manoeuvred by the U.S. competitors that put the pressure on us in the U.S. They stretch our means and make our means thin in terms of financing. Then they can come and compete with us in our own backyard, and they can win against us. So we're hurting on both sides.

We want a strategy to be developed in Canada to help us to regain strength. We want a rescue package to help us do whatever extra we need to do in the U.S. to regain our projects in the U.S., and we want to use that assistance to open up other markets.

We learned one thing, which surprised us. We thought we had a good agreement called NAFTA. When we went full speed and focused on the U.S. to develop the market, we were led to believe there were no restrictions between the Canadian and U.S. economies. That did not prove to be true. What we are seeing now with the new agreement is that it's leading us, the manufacturers, to think that there are actually reciprocities between the U.S. and Canadian economies. It's not true. We know what the situation is. We can go to Europe, and we can go to underdeveloped regions in the world, and that's where we can make the difference.

Also, what we're asking for is more focus on growing Canadian technology companies. We have to work from Canada and go abroad all the time, and most of the companies we deal with actually are subsidiaries. We need to grow our own technology, our own brand name as Canadian technology, and promote that outside of the U.S., outside of the economy that we depend on so heavily.

These are the things that I want to pass on to you as our experiences. We lost specific projects in the U.S. As for the amount, between lost projects and discounts we had to make, we lost over $80 million. For a small company that we started in 2005, that's a huge impact. We need from you the recommendations to create attention to what you can do to help us in Canada, knowing that we had to go through having to expand our financing to build a facility in the U.S. and that we still have to build a facility in Canada. We need you to approve some kind of financing that applies to those of us who have over 60% or 70% of our sales concentrated in the U.S.

[The Chair, Conservative, Lee Richardson]

Thank you.

We'll now hear from Shirley-Ann George from the Canadian Chamber of Commerce.

[Shirley-Ann George, Senior Vice-President, Policy, Canadian Chamber of Commerce]

Thank you very much, Mr. Chair and members of the committee. Please accept my sincerest thanks for asking the Canadian Chamber for its views on the recently signed agreement between Canada and the U.S., which provided greater access for Canadian products to projects funded by the U.S. stimulus bill, known as the American Recovery and Reinvestment Act, or ARRA.

As you know, the ARRA contained provisions that blocked foreign-produced components from being used in projects funded by the American stimulus package. While the value of the stimulus package was $787 billion, much of this money was allocated for other purposes. It is our understanding that Canada was restricted from bidding on an estimated $280 billion of funding that went to state and municipal-level government infrastructure procurement opportunities.

It is important to note that while this number was high, especially by Canadian standards, the amount of business that Canadians would have expected to win is unknown. We can reasonably state that with the competitive process and the variety of products and services that would have been purchased, the potential wins would still have been significant, though much smaller in number.

Given the reality of global supply chains in which very few products are any longer of 100% domestic origin, as well as the interwoven nature of our trading relationship with the U.S., these restrictions have hurt businesses on both sides of the border.

I'd like to make it clear that the Canadian Chamber of Commerce supports this agreement. First, let us acknowledge that the agreement was negotiated through the hard work of Canadian-U.S. negotiators in a period of less than six months. While this may be far longer than what we would have liked, given the normal length of time required to negotiate international agreements, reaching an accord in six months is an impressive accomplishment. When you take into account that the agreement also required the provinces to sign on, reaching an agreement with that group in six months is, frankly, quite mind-boggling.

A number of organizations have been before you already, so I'll dispense with the details of the agreement and sum up our support in a short statement. This agreement is not an amazing breakthrough that gave Canada everything it asked for. It does not solve every problem, but doing so was never in the cards.

Several months into the ARRA, it is also difficult to spread the word that the rules have changed, and some firms are still facing challenges accessing the U.S. market. Both governments will need to continue their efforts on communicating to the states and municipalities that the restrictions on Canadian products have been removed.

Even with this, the agreement is a step in the right direction. It is a good agreement and worthy of the support it got from the federal and provincial governments. Let me tell you why.

It is well known that the U.S. Congress leans towards protectionism. In a period of economic downturn, this comes out in spades. So it is a win for Canada during this time to gain permanent access to procurement opportunities covered by the U.S. government procurement agreement in 37 states and to get preferred access to the remaining funds in seven programs covered by the ARRA. It is a win to get an agreement to continue to talk about the possibility of a permanent procurement agreement between Canada and the United States.

It's also a win to get the provinces and the federal government to come together on a trade position. Our hat is off to the politicians and the government officials who got a group that sometimes has a problem agreeing on the time of day to stand as one on this issue and to gain this agreement in a matter of weeks. This is where the agreement achieved a real breakthrough, and we're already seeing this pay off in other venues, such as the Canada-EU negotiations.

I would like to suggest to you that your debate should not be focused on whether it is good enough, because the agreement was all that was possible, no matter how much we would like to think otherwise. Rather, your discourse should be examining what Canada should be doing in order to get beyond fighting these fires with the United States.

Unfortunately, this protectionist measure is not a one-off. The fact that it is an election year in the U.S. will make 2010 even more challenging for Canada. Coupled with this are the continued high levels of unemployment that are plaguing our southern neighbour. Unfortunately, the inclusion of protectionist language in proposed legislation could make a regular appearance for the next short while.

We have already seen this in a number of other pieces of legislation, such as the jobs bill and a bill by three U.S. senators that requested that a stop be put on stimulus spending for renewable energy projects until it was guaranteed they were using domestic materials.

We are very blessed to have so many dedicated and hard-working diplomats and locally engaged employees working on our behalf in the United States. I think all of you have met with some of them and know how hard-working they are. But even with this, even with their efforts, it is clear that we need to look at additional approaches that involve the whole of government, the whole of Parliament, and strong public-private partnerships that strengthen our ties in order to develop solutions that are beneficial for both countries.

Collectively, we must do even more to educate Americans on why it is to their direct benefit to foster a unique relationship with Canada. We need a coordinated and organized strategy aimed at fostering even greater awareness in the U.S., and I stress that we need to demonstrate the direct benefit, because it is not enough to go to the United States and have them think that we're nice people living in a pretty country, that we're friendly to U.S. visitors, and that our kids play hockey together.

I have two final thoughts, Mr. Chair. We must avoid retaliation, no matter how much it has been encouraged. We will not create job opportunities by cutting off business with our trading partners. And while the United States will be our largest trading partner and closest ally for long into the foreseeable future--and we encourage continuing to foster this with even greater effort--we also agree with Mr. Hammoud that it is clear we must develop trading relationships with other countries and create greater balance in our trading relationships.

Thank you.

[The Chair, Conservative, Lee Richardson]

Thank you, all three of you. This was very useful. We have slightly different perspectives that I'm sure are worthy of questioning, and we're going to begin our questioning today with Mr. Cannis.

Mr. Cannis, I'm going to remind you, as well as our witnesses, that we're going to stick to seven minutes for each of the parties for questions and answers. When we get close to seven minutes, I'll be letting people know so that we can give everybody an opportunity to ask any questions they have.

Mr. Cannis.

[John Cannis, Liberal, Scarborough Centre, ON]

Thank you, Mr. Chairman.

I was going to take a minute or two and pass the rest of my time to my colleague Scott Brison. However, if he agrees, I'm going to take my time and go the second round, or I'll go the second round if he wants to start off--either way--because our guests were moving on and on, and as all three presenters went on and on, they lit a fire under me so that I have more than just the one simple question that I had. So should I go?

[The Chair, Conservative, Lee Richardson]

Why don't you go?

[John Cannis, Liberal, Scarborough Centre, ON]

Thank you.

First of all, welcome to our guests. You certainly shed some more light on this.

I do agree with you, Ms. George, that we must avoid retaliation. Today that is not the way to resolve these issues. We are saying let's be fair and let's use common sense. That's really what it's all about, for the good of both our taxpayers and our societies. My constituents are telling me that it's not fair.

From what I've been hearing, your take is that a deal within six months is better than no deal. That's true in many ways. So let's make a deal, and let's try to refine it. That could be an approach. You talked about there being elections. You know that in the United States they have elections every so often, but we know in politics that the next election starts the very day after an election. So we don't know when that's going to stop. What I'd like to get across to you is this. It has been said, it has been written, and many people have commented that in this agreement some crumbs have been thrown our way.

I really enjoyed your presentation, Mr. Hammoud, and I appreciate and I sympathize with what your company and other Canadian companies have gone through. I know there used to be a program called PEMD-I many years ago. I think we recommended some years ago that that program be reinstated and financially supported so that we could be competitive.

I know you've heard what I'm about to say. We are their biggest energy suppliers, and we must use that, though not necessarily as a trump card. I'd like to get your view on that when it's your time to respond. I don't believe we should use it as leverage, but to some degree.... Maybe you can tell me if you've had this on the table, and if it has been discussed then I can convey that to my constituents. If it has not, then I'm conveying to you on behalf of my constituents that we should be putting that on the table for discussion.

With respect to the American recovery program, can you give me an idea of how we benefit in terms of dollars and cents as well? I know when I was over with the committee on national defence, discussing some of the procurement with respect to military contracts, there were a lot of restrictions in terms of employees. Can you give us an update on that as well? Because that was hindering.... The bottom line here is how do we create opportunities, in all fairness? Where is that?

In closing, Mr. Chairman, I'm disappointed--and I convey this on behalf of my constituents--by the protectionist attitude that still exists today. Politically we understand when we turn on Fox or CNN and we hear some political rhetoric about protecting jobs....

Sorry, sir?

[The Chair, Conservative, Lee Richardson]

You turn on Fox?

[John Cannis, Liberal, Scarborough Centre, ON]

Of course I do. I'm a balanced person. I believe in common sense. Dad said to me, “Read as many newspapers, hear as many broadcasters.... Believe not even half of them.”

So for me, could you just summarize how we overcome this protectionist tendency? I know there has been an undertaking by members of Parliament who try to meet with our counterparts. Have you seen any progress in that, and on that, what would you suggest we do more of?

[The Chair, Conservative, Lee Richardson]

Thank you, Mr. Cannis.

I'll let the witnesses at each occasion decide--and we're not taking this out of your time, Mr. Cannis--whether they wish to respond collectively or individually or at all. I take it that there were some questions directed towards Mr. Hammoud--he may want to respond--and some to Ms. George, so I should advise you that there is probably about three minutes for an answer.

[Omar Hammoud]

Thank you.

We are not criticizing the reaching of an agreement. We live with it. You created the agreement with your hard work and we live with it every day. We are not criticizing the creating of an agreement. We are business people and we sign agreements every day. We do business across the United States and 98% of our sales last year were in the U.S.

We have nothing against the U.S. trying to protect their economy. They have to do it. What we are after is for us to have our own economy and our own strategy to develop our own opportunities without relying on the U.S. We are not there to fight the U.S. They are a good customer. We have to create our own, as they have done by inviting us directly or indirectly to set up manufacturing facilities under the recovery act. We did, they're happy, they complimented us, they wrote about us, and they are thanking us for doing it.

What we have to do is have reciprocal initiatives in our economy. We can modify this in different forms so that it does not have the appearance of protectionism but does have the appearance and the true meaning of investment. When we say that we want to expand in the U.S., we still want to invest in Ontario, we want to invest in Alberta, and we want to invest in Quebec. Our means are stretched.

Our means are stretched and our U.S. competitors are strong, and they come from places where they know the ways to get around the system. They don't come from places where they play just by the rules. This is what you have to face every day. You make the agreement and they know how to work around the agreement.

They come here to Ontario and take projects from us that we worked on for three and a half years and four years, in the region of Waterloo and in Durham County. They go to Repentigny, which is 15 minutes away. They know how to manoeuvre around, and our means are stretched because we had to invest in the U.S. We have no backing locally. We are weak. We had one of them fly over to have a meeting with us, offering to buy us--

[John Cannis, Liberal, Scarborough Centre, ON]

When you say “weak”, what do you mean? In policy? In financial support? Can you define “weak”?

[Omar Hammoud]

The company becomes weak. I give you companies from Nova Scotia. I give you companies from London, Ontario. I give you companies from across the country. We have to double our investment. It weakens our strength to bargain and to negotiate.

They flew over and offered to buy us because they're counting on our weakness. Then we would become subsidiaries.

I'll go back to my initial statements. We want to do business with the U.S. We don't want to be protectionist individuals. We support the Chamber of Commerce in its initiative that we have to be open to trade.

But I will say two things. The agreement is misleading. I don't have criticism of the agreement or the hard work, but we as manufacturers are led to believe that we have a secure position in the U.S. and it's not the case. We don't. Eighty per cent of our projects--and we have $30 million to $40 million in projects in the pipeline--are under $7.8 million. Most of them are. Maybe one or two projects are not. Even if a project is $20 million, all it takes is dividing it into three projects, and then it becomes $7 million each.

[The Chair, Conservative, Lee Richardson]

I'm sorry, Mr. Hammoud. That's a pretty long three minutes. I'll give Ms. Shirley-Ann George time for a brief comment. We're already at nine minutes.

Briefly, Ms. George, if you could.

[Shirley-Ann George]

I'll answer very quickly.

No, we don't have the numbers on how much business Canadian businesses have gotten under the ARRA. That information is not available because often they are subcontractors.

On your point about ITAR and employees, an announcement was made just very recently, on March 10 or March 11, about eliminating some of the obstacles on dual nationals. I'm not sure if you've seen that. I'd be happy to share this little paragraph with you, if you like.

As for overcoming protectionism, that's a long road. There are a lot of incentives in the American system to keep Congress protectionist. We need a long-term strategy that we all work together on. This piecemeal approach of going after individual problems is not moving the yardstick forward.

[The Chair, Conservative, Lee Richardson]

We are going to have to move along a little more quickly in terms of questions and answers if everybody's going to get a chance today.

Monsieur Laforest, you can start. You have seven minutes.

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

Thank you, Mr. Chair.

Good afternoon; welcome, gentlemen and welcome, madam.

When we agreed to hear witnesses on the agreement that came into force last February 16 and is now being applied, my party's goal and my own was to find out whether it was a good or bad agreement. We wanted to know, if it was good, who was it good for, and, vice versa, if it was bad, who was it bad for. I have the growing feeling that it is far from a good agreement.

Mr. Hammoud and Mr. Grenier, your comments today were quite critical of the agreement. While still reserving judgment, at least, I tell myself that it does not seem to have a lot of positive elements.

Mr. Grenier, at the last two meetings, we have heard from officials from the Department of International Trade. But no one was able to tell us on what basis such an agreement could have been reached. We were given no figures to show how such an agreement was arrived at or to show who it would benefit. We have nothing, and that worries me.

Based on your analysis, could you tell us how this could have become a good agreement? I am guessing that it is not a good agreement in your eyes. This is the conclusion that you are coming to here. How could it have been good?

Earlier, the Liberal member talked about natural resources. Should they have been in it, or anything else? Do you have any experience with that? I would like to hear what you have to say.

[Carl Grenier]

Thank you very much, sir.

It is always very difficult to conduct negotiations on a single topic when there is only one party asking. Around the same time last year, when we approached the United States to “solve” the Buy American problem, Canada was clearly the underdog. The United States did not need us. They had nothing to ask from us, except, obviously, they remembered very clearly that they had not succeeded in making us swallow the exemption in the 1990s. They took their old files out and demanded that we make the offer that we should have made in 1994, if we wanted to obtain anything from Buy American. We had not made the offer because, in 1994, there was nothing in it for us. There is still nothing in it for us. Canadian SMEs will have no access to those markets because they have been reserved for the American companies for almost 30 years.

Could we have made a breakthrough in the negotiations, as we did last year and at the beginning of this year? I personally do not think so.

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

Clearly.

[Carl Grenier]

There is no better agreement that we could have got.

You also mention the lack of data. I pointed that out myself in my opening statement. It does not surprise me too much, because data like that is hard to get. That is really the crux of the problem. You can bid on government procurement overseas, but it is quite difficult to establish the likelihood of being successful. With time, we should have a bank of data.

Unfortunately, the WTO agreement stipulates that countries like the United States, Canada and all the members, the 40 or so member countries, in fact, must provide annual reports on the number of contracts that they have awarded under the terms of the agreement. The United States is four or five years behind in its reporting. This is not an agreement that is working very well.

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

So this means that, if you make a mistake once, you should not really make it again. That is what you said in connection with the third part of the agreement that calls for a mechanism to make the agreement permanent. You ended by expressing the hope that that does not happen.

[Carl Grenier]

In the first free trade agreement, in NAFTA, there are paragraphs that are exactly like the ones that were included in the Buy American agreement; it says that we will take time to negotiate the expansion of everything, and nothing has come of it. And, given that understanding, the United States literally got what they had not managed to get for 25 years.

So I ask myself what purpose would be served in sitting down with United States again to discuss government procurement, given that we have conceded our main argument to them.