International Trade Committee on Feb. 10th, 2011

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

Is it 100, 200, 300, 500, 1,000? We have no idea?

[Don Stephenson]

I cannot give you an answer.

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

This committee produced a report back in May 2010. The recommendation included that DFAIT

set up a mechanism to collect economic data regarding the application of the Canada-US Agreement on Government Procurement, and thus enable it to assess the agreement’s impacts on enterprises and employees in Canada. DFAIT should submit a report on this issue to the Committee.

This was recommendation two.

From both Mr. Cardinal's previous answers and your answer, Mr. Stephenson, it gives me the impression that DFAIT will not be following through on that recommendation. Is that true?

[Don Stephenson]

The studies we have done to date have been focused on the negotiations or the discussions that are now being launched. They have been focused on the U.S. market and the priorities for trying to expand access into the U.S. market.

We've also done studies specific to particular industry sectors, such as the water and waste water sector, which was pointed to as one of the priority sectors by Canadian industry.

We have not yet launched a comprehensive evaluation or audit of the results of the agreement.

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

Okay.

I'm just going to reference recommendation three: that what we've been asking DFAIT to do is collect information on the value of U.S. public procurement contracts that Canadian businesses are accessing as a result of the agreement, the value of Canadian public procurement contracts that U.S. firms are accessing, and how many jobs are being created and lost as a result.

From your answers, I can surmise that we will never get that information from DFAIT.

[Don Stephenson]

Never say never.

In fact the policy of the department, and of the government, for that matter, is to evaluate 100% of its policies and programs. This will be evaluated, but we have not yet launched a comprehensive assessment of that.

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

We've had a series of questions on how many contracts were granted to Canadian companies, how many Canadian companies have been denied contracts even though they should qualify under the Buy American deal, and what the value of U.S. companies in Canada is, and you have nothing to share with us, not even anecdotal information. So I think it's fair to say, even though this report is six months old, that we're not going to get that information from DFAIT.

I'm going to pass to another series of questions, but I'd just like to say that I'm very disappointed. We, as a committee, did produce a report with clear direction. Even though we can say, in theory, that any agreement is good, if we're not getting any of the hard data, it's very difficult to accept the government's pretensions that somehow this agreement is working.

Anecdotally, we know that companies are routinely being denied contracts under the Buy American agreements.

It seems clear to me that for this committee to take its report and then report back to the Canadian public.... If we don't have any of that information, and if DFAIT isn't collecting any of that information, it's very difficult to see that the government is being serious about monitoring the agreement.

I'm going to pass now to the softwood lumber agreement. You certainly did put a brave front on what has been a calamity for the softwood industry, particularly where I come from in British Columbia. We're talking about 30,000 lost jobs as a result of implementation of the softwood agreement. It's cost softwood communities so far $1.137 billion.

I wanted to ask--since we've lost every single challenge, I think because of the looseness of the anti-circumvention clause, and certainly witnesses before this committee were very clear that the anti-circumvention clause meant we would lose every challenge the Americans brought forward—about the evaluation of the impacts of losing on B.C. timber pricing. Many analysts have talked about it being in the quarter-billion-dollar range, about $250 million in punitive tariffs as a result of B.C. timber pricing.

Internally, within DFAIT, how do you evaluate that? Do you think it will be about a billion dollars on B.C. timber pricing if we lose that arbitration? Do you see that figure as too high or too low?

[Don Stephenson]

Let me take the two points in order.

With respect to the loss of employment in the industry in British Columbia, I would argue that it's due to the loss of the American market and the recession, the housing crisis. I'm afraid that market will not recover quickly, and that it will in fact trail the rest of the recovery in the U.S. because of the huge surplus supply of houses on the market. I would suggest that it is not a result of the implementation of the softwood lumber agreement.

In fact, the industry tells me, as the manager responsible for the agreement, that their priority is that I should defend and maintain the agreement, because it's the only thing that gives them any stability in a really awful market.

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

You're obviously not talking to the same people I'm talking to.

[Don Stephenson]

Well, we talk every day, pretty much, with the leaders of the industry and the provincial government departments responsible for the forest industry, so I don't know.

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

Is the quarter billion dollars what you're going with as well?

[The Chair, Conservative, Lee Richardson]

Mr. Julian, I think we're going to have time for the answers to just your first round of questions before we get into your second round of questions. I'll let Mr. Stephenson finish, if he's not further interrupted.

[Don Stephenson]

The matter is before the court. Why would I give any estimate of the possible damages or remedies?

[The Chair, Conservative, Lee Richardson]

Thank you. I'm sure we'll enjoy more of that in the future.

We'll go to Mr. Keddy.

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

Thank you, Mr. Chairman.

Welcome to our witnesses this morning.

I know that all of my colleagues have questions, so I will try to share my time with Mr. Allison in my first round.

I want to delve a little deeper into some of the transboundary issues we've talked about here this morning. The whole issue of non-tariff trade barriers at the border is probably best placed to Mr. Rooney. In particular are compliance checks, which seem to be the bane of our existence on the east coast of Canada, at Calais, Maine. I'll give you an example. We have one trucking firm that trucks fish. They take six to eight trips every week across the border into Boston, primarily, but into New York as well. They have been stopped 22 times this year for compliance. That's outrageous. It may sound a little fishy, I know--before someone else says it, right?

The issue here is quite simple. You know, you're stopped at the border. You're required to unload your load. Every industry faces it, but usually not to that extent. It costs about $400 to unload a load of produce, regardless of what it is. It can be more, in the case of Christmas trees. Then everything is checked to make sure that you're in compliance. This particular shipper has always been in compliance. He's never been out of compliance. Then you have to put everything back onto the truck and continue on your way.

Is there anything we can do with the border for a shared vision of perimeter security to have a better level of economic competitiveness that avoids this type of action by the Americans? I'm a huge supporter of continued talks with our American customers, because they are our American customers, about anything we can do to make it easier to cross the border, whether it's for trade or simply for people.

I would like a comment on how we can avoid that particular problem, if there's a joint border group we can actually go to, and follow up on it.

[Don Stephenson]

Well, I will let Michael give his answer, but let me just start by saying that with respect to making it easier for shippers of exports at the border, the long-term answer is to try to get at the underlying regulations that are being verified at the border. See if we can get mutual acceptance of each other's standards, of each other's conformity assessment procedures, and streamline the verification requirements at the border in that way.

The second way is to improve the physical efficiency of the border by investing in infrastructure and high-tech systems of various kinds. I believe that there was a recent investment in the Calais border for that purpose.

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

There was. It was a new crossing, yes.

[Don Stephenson]

As Michael was explaining earlier, programs that get pre-clearance through processes such as the trusted-exporter program are certainly one way to improve the efficiency of the borders for our exporters.

Michael, I don't know what you would want to add.

[Michael Rooney]

Thanks, Don. You've done most of it, so I appreciate it.

Don's talked a bit about the mechanics, but I think what's maybe important to underline is that as we move forward in this process there are going to be a couple of areas where we're going to be able to address concerns, either in the border working group, or the regulatory cooperation council. I think it will be important from the outset. The advice I would give is to look at case studies like your own. We have a report from the chamber of commerce that addresses some of these situations. Do a bit of research and analysis that will be a consultation or engagement part of this declaration, and we'll get out to Canadians and hear it. From that, you use it as a starting point to sit down and discuss some of these issues, so we can improve the flow, and not run into situations like you've described here today.

I had the pleasure to serve in our consulate in Boston in the early nineties, and lobster was the big issue in those days--

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

It still is.

[Michael Rooney]

I know. So it's important that Friday's declaration will help us move forward, and the fact that we've got a willing partner on the other side to look at these things.

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

Thank you.

[The Chair, Conservative, Lee Richardson]

Dean.

[Dean Allison, Conservative, Niagara West—Glanbrook, ON]

Thank you.

Thank you to our officials for being here.

Currently I'm sitting on the red tape reduction commission that our government set up to talk about red tape around the country. Everywhere we've been, one of the top two issues we hear about is getting across the border. I know you guys aren't CRA, but the top issue is the complexity and the challenge that businesses have getting across the border.

I was surprised at 30%--I knew the number was high, so thank you for clarifying that--in terms of the supply chain that goes back and forth. Of course energy-resource-based products are 46%.

My question has two parts. I was going to try to ask one question with 12 parts, like my friend Mr. Cannis, but I don't know if I'll get away with that. So there are two things.

In light of what was addressed last Friday with the Prime Minister and the President, it doesn't seem to me that this is a new initiative. It seems this is something that our government and other governments have been working on. So if you could maybe share your thoughts on that, as really a continuation of what we've been trying to do to work with getting our goods and services across the border, that's the first question.

I'll leave it to two questions, as I'm almost out of time. Secondly, as you've seen our goods and services reduced to 75%, is that because we've opened up more markets? Why is that number decreasing? Because it would appear that both of our economies are moving forward at the same pace.

[Don Stephenson]

With respect to the second question, the share of the U.S. market in our total exports has decreased significantly. In goods trade it was, in the last ten years, reduced from something like 87% to something closer to 70%, or the low seventies. That's for two reasons. The first is the increase in the value of the Canadian dollar, which has regrettably made some of our exports less competitive in the U.S. market. The other part is due to the fact that we are making headway in respect to diversification of our markets. We have doubled our exports, tripled our exports in some cases, to Asia, to Latin America, and even to Europe. I say “even to Europe” because Europe is not a rapidly expanding market. It's a rich market in which we have a small share, and we can grow our share. Otherwise, the growth is in the rapidly expanding, emerging markets that we can all name.

So there's a good reason and a not-so-good reason for the growth of our markets and the decrease in our dependence on the U.S. market, which of course has always been Canada's blessing and curse. We are right next door to the world's biggest, richest market. They speak the same language, they have a system of law that we understand, on which we can rely. It's an easy market to deal with. But we're going to have to learn increasingly how to deal with others.

With respect to whether or not the border and the regulatory cooperation initiative is new, no, I suppose not, in the sense that there are always efforts to try to improve the efficiency of the border and regulatory cooperation. This is just the most recent. I would say, however, that when you have an initiative, particularly on the regulatory cooperation side, that has the kind of senior level--and I mean leaders--attention, it makes it easier to move the file forward.