International Trade Committee on March 18th, 2010

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

Temporarily?

[Carl Grenier]

No, forever.

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

Ms. George, you say that your organization supports this agreement. You agree that it is better than nothing. Would you not be able to check with your member companies?

Mr. Hammoud told us that we lose either way. We are in competition with American firms here at home and, when we go to the United States, we cannot do business either.

Could you not find a way for your members to tell us whether we really are going to lose contracts at home and whether we are going to win any in the United States? Then we could keep track. I know that the department could very easily do that, it could be done. We could work on that level too, but I feel that the Chamber of Commerce could play a role here, at least an informal one.

What do you think about that?

[Shirley-Ann George]

Thank you very much for that.

The point about how hard it is to collect data is very real. It's not only difficult to find out in the short term who was awarded a contract, but for many Canadian companies who are subcontractors or sub-subcontractors, that information is almost impossible to get. So I think a year from now we're going to be looking back at it and still being frustrated that we don't have enough information. We're reaching out to our members and asking them questions, but some of them are in tough times and they don't have time to start responding to some of these things. They are just trying to make sure they can make payroll this week.

I agree with you that we should do more. We are seeking the information, but I'm not sure that we're going to get what you're looking for.

You also asked a question about energy. Mr. Cannis also asked a question about energy. It is true that we're the largest supplier to the United States, but we need to remember two things. They are also the largest supplier to Canada, as we also buy energy from them. They are our only customer. So it isn't as though we have an alternative and we can direct the pipeline to another country next week. We need to be very careful when we're having these negotiations with the United States. The goal should be fostering greater cooperation.

Just to put one thing on the table, the only trade agenda that has been tabled so far is this notion about increasing exports. For U.S. small businesses, the logical place to export to would be Canada. So it's not about putting up barriers; it's about what we can do together. We want our small businesses to have greater access. You want your small businesses to have greater access. Is there some kind of joint initiative that we might do? It's that kind of cooperation that will move the yardsticks forward for future opportunities as well.

[The Chair, Conservative, Lee Richardson]

Thank you.

Thank you, Mr. Laforest. Our time is a little better, but we're still working on it, so we'll get Mr. Allen to really tighten up on the questions and answers.

Mr. Allen.

[Malcolm Allen, NDP, Welland, ON]

Thank you, Mr. Chair.

Thank you to all who have come.

It is rather insightful. Everyone seems to say the same thing and not just sort of go back to where Mr. Laforest started about this data.

What Mr. Hammoud has talked about is in a way typical of the data we do not have. His company is being stretched on both sides of the border to be competitive with an agreement he thought helped him.

I hate to use the old axiom that this is a bit of a pig in a poke, but we don't know what we have. We don't know what we can get. We don't know, it seems to me from some perspective--and in fact the department said they didn't know how much they could actually go and find. They didn't know how big it was in the first place. They didn't even know how much interest we had on our side.

It reminds me of going to a bargaining table, when I used to do that, without knowing what I was going to ask for. Here I am representing 4,000 members, and they're looking to me to go to the bargaining table and ask the employer for something, and I don't know what to ask for. It almost reminds me of that.

We should have known or at least had a sense of what we wanted, other than open access. We got open access. Did that help Mr. Hammoud? Did it help other small businesses? We don't know.

We are taking it on in the sense that it will, but we don't know how to measure that. I agree that it's difficult, but we need to find a way to measure it. In other instances, when we looked at other trade agreements, we had a sense of how much benefit there would be. I remember the NAFTA debate about how many hundreds of thousands of jobs were going to be created. As for whether they were created or not, that is a different debate, but we said those sorts of things.

With this agreement, we can't say that. We don't know. If that's the case, is this just a feel-good thing so that we can talk to them later about feeling good again about something? I agree with what Mr. Cannan said earlier. There are 50 U.S. states with all kinds of different levels of government. Mr. Hammoud has pointed out quite clearly that they don't get it. We didn't get it. We got it the opposite way in Ontario. The folks I talked to at the municipal level thought that NAFTA said they had an open market. That wasn't true.

Here we had the Canadian municipal governments thinking the total opposite of what the American municipal governments were thinking, that we had an open border with NAFTA and they had to take the lowest bidder. They couldn't say, “No, I just want to buy from a Canadian at a sub-national level.” It's the opposite in the United States.

How do you ever break down that barrier, and how do you make it workable so that we actually get something?

From the Chamber's perspective, I know you said you're hoping to sort of drive some statistics in a year, Ms. George. I appreciate that's kind of the place you're going to be, trying to look back and take a snapshot of the history and figure out what it is.

One of the things I would like--and maybe you can tell me today whether you're going to do this--would be to get a sense of whether it was of benefit to the general economy and to Canadian workers. Did we generate jobs through this? Did small and medium enterprises actually generate jobs because of this open access?

That's one of the things I'd like to come back to see, because it's all wonderful that companies make money--and they should--but I need to see them create jobs as well. One of the things we need in this country is additional jobs. Their having a better bottom line without our creating more employment isn't really helpful for me and the folks I represent in my riding.

[Shirley-Ann George]

Thank you for that.

You raised a number of important issues. One of the issues we're dealing with is timing. I think Mr. Grenier would agree that if an agreement is signed in February and we're in March asking how much benefit have we seen....

Normally when we look back at NAFTA and what not, we have the trade statistics that have come in through Statistics Canada over a considerable length of time. We'll be able to look back and see what happened to the trade statistics quarter by quarter or year by year and get a sense of whether or not any kind of dip turned around. There are so many other factors, it's going to be difficult.

Did we know what we were looking for? I believe the negotiators did know what they were asking for. Did it help? We know for sure that it hurt. During the period when Canadian companies were restricted, we know there was pain. We know there were layoffs. We know organizations were forced to set up manufacturing facilities in the United States.

The real question is, in the coming months will we be able to protect jobs and create new jobs? Remember, this is a temporary agreement. We're only talking about the stimulus, and we have just a few months left. We're hopeful that if nothing else, we'll be able to stop the bleeding, because there were a lot of jobs that were going down to the United States.

Regarding municipalities, I would like to point out one quick thing. The restriction that is harming some Canadian companies of $7.8 million was put in place in part at the request of the provinces. They wanted to be able to protect their local markets for local opportunities. It cuts both ways.

[Malcolm Allen, NDP, Welland, ON]

Yes, because they finally clued in that it was happening from the other side to them. They figured it out.

Mr. Grenier, I know that you have a large history going back in trade deals. In looking at this one in historical context with what we saw in the softwood lumber deal, I'm wondering if you see any parallels or distinctions in how things laid themselves out. I wonder if you could comment on that.

[Carl Grenier]

Yes. Thank you for that.

Yes, I do see some parallels. Unfortunately, this agreement is only the second-worst agreement that Canada has ever signed. The first one was the softwood lumber agreement. My testimony four years ago before this committee is still available, I suppose. I said what I had to say on that one.

This one is a bit different, even though you can see some parallels. Again, Canada approached the United States, basically telling them, “We need a deal at any cost”. If you say that to anyone, you'll get one. We did get one, and that cost is high. It will be seen in the future. I'm not talking about this very temporary deal that will evaporate next year with the end of the recovery act funding. I'm talking about the permanent part of the deal, whereby we committed the procurement of our provinces and cities permanently to U.S. suppliers. That's where we failed the last time.

There was a good reason why we failed. It was because basically more than 20% of procurement was reserved by the U.S. for small business and minority-owned businesses, and that's exactly the very core of what our small businesses and medium-sized businesses were aiming at. We had an advantage over the Europeans and the Asians because we're next door neighbours. We can service these markets by land. That's why we didn't agree in 1995; and this time around, I don't know why we agreed to this one. That fundamental fact has not changed.

I come at this from a free-trader perspective. I spent most of my professional life negotiating, first with the federal government and then as a representative of the Province of Quebec, basically in negotiating market-opening agreements. So I agree that this is what we need, but unfortunately in this instance the U.S. protected its stake and we didn't. And that's a permanent thing, unfortunately.

[The Chair, Conservative, Lee Richardson]

Thank you.

Mr. Cannan.

[Ron Cannan, Conservative, Kelowna—Lake Country, BC]

Thank you, Mr. Chair.

Thank you to the two of our three witnesses we knew before.

Mr. Hammoud, welcome for the first time and thank you.

Ms. George, I liked your comment about the kids playing hockey together. I'm glad that we ratified this agreement on February 16 and didn't wait until February 28 after we won the gold medal. It could have been even more difficult.

Seriously, this is definitely something we've heard from various organizations, like the Canadian Manufacturers and Exporters, who were at our last meeting. It's Canada's largest trade and industry association and they supported the agreement. Also, the Forest Products Association of Canada, FPAC, spoke resoundingly in support of this. I was with them last week at a luncheon and they said the best thing this government has ever done was to ratify the softwood lumber agreement.

Maybe, Mr. Grenier, you don't have the same opinion as those in the industry who have to work day in, day out, but philosophically, I guess, that's the difference between academics and the real world.

The other aspect is the Federation of Canadian Municipalities. I spent nine years in local government. The FCM fought tooth and nail for local government and for manufacturers. They had a news release and were supportive of this. The provinces and territories came out in support.

Where I'd like to bridge to you, Ms. George, is in the fact that your president, Mr. Beatty, was quoted as saying that the Buy American deal “has also resulted in greater cooperation between provinces and territories and the federal government--a long-awaited, but very welcomed accomplishment”. I wonder if you could speak on behalf of your association and your president about what this type of cooperation means for Canadian businesses.

[Shirley-Ann George]

Yes. We see the progress being made on the trade file on federal-provincial negotiations as very important.

First of all, it sets a precedent for other files as well. But just the fact that we were able to come to an agreement quickly, that we were able to use the linkages that were established and leverage those for the Canada-EU negotiations, where for the first time we actually have the provinces sitting around the table during the negotiations, leads things very well as we work towards future negotiations.

Many of the things on the table are either multi-jurisdictional or under provincial jurisdiction, so it's essential that the provinces better understand the nuances and the details of trade agreements but the other opportunities as well. We think it's a great step forward on federal-provincial cooperation.

[Ron Cannan, Conservative, Kelowna—Lake Country, BC]

Thank you, Mr. Chair. I'm going to share my time with Mr. Keddy.

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

Thank you, Mr. Chairman, and welcome to our witnesses.

It's an interesting discussion. I think there is a little bit of what everyone is saying that we all agree with, and probably we may disagree with a little bit of what everybody is saying. Having a long-term strategy is one of the points I think I hear all of our witnesses agreeing on. A long-term strategy to allow sub-national procurement on both sides of the border would benefit Canadian industries and American industries.

Mr. Grenier, I have to say I'm a little frightened. You call yourself a free-trader, but the message I'm hearing is that we would retaliate. I don't know how you would intend to do that, and I don't know where the benefit would be. I can tell you in a very modest way I ran a small business that did business in the U.S. Ninety-nine percent of our business was south of the border. We worked in every state in New England and most of the eastern seaboard states and half a dozen islands in the Caribbean. The Americans are tough trading partners. They don't play by the rules, and they're not fair. My belief is anything we can do that edges them closer to the mark is to our advantage.

I'd like you to flesh that out a little more.

[Carl Grenier]

Thank you for this question. I may have misspoken myself, but I never ever said we should retaliate.

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

Okay.

I appreciate that, and I appreciate the clarity.

I would appreciate having a little more time.

[The Chair, Conservative, Lee Richardson]

You probably have another minute if you want to stay in any league with the others.

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

We'll stick around.

[The Chair, Conservative, Lee Richardson]

There you go. Good man.

Mr. Hammoud wanted a comment.

[Omar Hammoud]

I just want to make a clarification. When you talk about $280 billion in the recovery act and the stimulus package, it's actually much higher, because the cities and towns don't know if they're going to get the money or not. They are on the list, and in order to secure their position to get the money, they will take you out. So you are taken out from $1.2 trillion for the $280 billion that is actually the subject of investment. Let's not be fooled about how significant it is.

In answer to the Chamber of Commerce, Madam George, is it really feasible to find out how much we lost? We know which projects we had secure positions on and from which we were taken out. We were taken out from the Narragansett Bay Commission, which was worth $1.8 million. We were taken out from Decatur, Alabama, which was worth $1.4 million. We were taken out from 20 projects specifically, and those were worth $8 million. These are projects we lost. We also had to discount the remaining projects in order to make them more attractive so our customers would still give us a chance. We lost a significant amount, and we have the numbers showing what we lost. We also had to invest in a manufacturing facility in addition to what we had to keep here. We have already invested $2 million this year. We have specific numbers.

As to what we gained, we really didn't gain anything. If we had not put the manufacturing facility in the U.S., we wouldn't have had a chance on any of the projects. We were told very clearly that for any of those projects that had Buy American, we had a period of time to prove to the city that we had a plant in the U.S. While negotiations were taking place, the designs were progressing. So we either had to make a commitment or we would be taken out from the project.

[The Chair, Conservative, Lee Richardson]

We're going to quick five-minute rounds. I'm going to cut off the mikes at five minutes. These have all been going ten minutes. Let's have a little courtesy to the rest of the people at the table.

Mr. Brison.

[Scott Brison, Liberal, Kings—Hants, NS]

Thank you, Mr. Chair, and thank you very much to our witnesses.

Mr. Hammoud, you said that the exemption for U.S.-made applies to only 8% of the projects. Could you explain that a little more? It would be helpful to understand where you came up with that figure, because we were being told there was a very broad-based exemption for Canadian participation, but you're saying that Canadian companies will still only be able to participate in about 8% of the stimulus package.

[Omar Hammoud]

There is a threshold value of $7.8 million. When the stimulus funding was allocated by the federal government, it was distributed across the major cities and small towns, more to those affected by high unemployment and also following negotiations with regional senators and members of Congress and so on and so forth. So you end up dissecting the money into multiples and among hundreds and hundreds of projects. The majority of them are below the $7.8 million.

[Scott Brison, Liberal, Kings—Hants, NS]

Thank you.

We've been told by the government that this affords us permanent access. In fact, one government document says it provides us with permanent access to local contracts. However, when we had public servants here from DFAIT last week, it was confirmed to us that in fact it provides not permanent access but only temporary. There's no permanent access to local government contracts under this agreement.

Furthermore, when we asked the public servants what potential value was provided to Canadian companies in terms of access, they couldn't answer the question. As for what we are losing or giving up in terms of Canadian projects, they couldn't answer.

Ms. George, you've acknowledged as well that you can't calculate that information either. How many of your members as companies would enter into agreements when they didn't know what they were giving up and didn't know what they were getting?

[Shirley-Ann George]

That's a very valid question. We're negotiating a trade agreement with the European Union now, and it's estimated that it's going to be worth $40 billion. That's something we've had a lot of time to prepare for. We can't say that's going to be worth $10 million here and $10 million there. It's literally just opening up the marketplace.

If you just look at things like NAFTA, it is surprising to find that many of the biggest gains under the NAFTA agreement have been in areas that were already fully open before the NAFTA was signed. It's just that people got focused on the opportunity and went down and started to do more marketing in the United States.

In response to your question about whether we know what the Canadian government and provincial governments are doing, they are removing barriers. Then it's up to Canadian businesses to go in and make the opportunities.