Thank you, Mr. Chair, members of the Standing Committee on International Trade.
My name is Guy Caron and I am the national representative for Special Projects at the Communications, Energy and Paperworkers Union of Canada, CEP. CEP represents 150,000 members concentrated in the forestry, energy and telecommunications sectors. I thank you for the opportunity to appear before your committee.
I would like to start by stating that, as we see it, history is repeating itself. On the altar of so-called “free trade”, Canada gives a lot and receives little. It is a story we have witnessed during the first FTA negotiations, when, to gain a deal the U.S. were not that interested in, we agreed to give away access to our energy and its control, accepted to eliminate our 25-year security reserve, and agreed to a proportional sharing clause that even Mexico rejected at the time. These concessions were provided in order to obtain, or try to obtain, privileged and guaranteed access to U.S. markets, which we did not even get, as was shown later in the softwood lumber issue.
To draw from a more recent example, let us recall the Canada-U.S. softwood lumber agreement, where Canada gave up on a mountain of favourable jurisprudence and even agreed to subsidize this agreement to the tune of $1 billion. Part of this $1 billion, half of it, in fact, was used to subsidize Canada's opponents, Canada's accusers, the Coalition For Fair Lumber Imports, in exchange for a system of quotas and export taxes that turned out to be unfavourable. In this case, we contend that Canada gave a lot to get little. Let me substantiate this statement.
Ultimately, what did Canada gain from the agreement? It received three things.
First, Canadian firms gained the faint possibility of winning bids of no more than 2% of the $275 billion that the U.S. injected into their economy under their stimulus package.
Second, Canadian firms will receive limited national treatment in 37 U.S. states that have signed onto the WTO Agreement on Government Procurement. It is limited because this latter access is mitigated by the numerous exemptions, to which I will come back.
Third, Canada gained a “fast-track consultation process”, whereby the U.S. government will alert the Canadian government to Buy American preferences in impending U.S. federal legislation. However, there is no guarantee that binding and satisfactory settlements can come from these fast-track provisions, and this consultation process might very well simply be a mere notification.
What did Canada fail to gain from the deal?
In terms of interim and permanent arrangements, one of the main exemptions from the U.S. commitments I was referring to is the 23% of U.S. federal procurement dollars set aside for small businesses and minority-owned businesses. Similar set-asides exist at the state level.
Second, in the interim arrangement, U.S. municipal government procurement is still not covered by the agreement, while Canada provides access to American bidders in 50 Canadian cities.
Third, in terms of interim and permanent arrangements, Canadian suppliers still will not be allowed to supply construction-grade steel, vehicles, coal or printing services to the United States.
Fourth, contracts and tenders worth less than $7.8 million are still not exempted from the Buy American clause.
Fifth, in terms of permanent arrangements, the Agreement also leaves inaccessible the government procurement in the 13 states that have made no commitments at the WTO level. No provincial or territorial government outside of Nunavut will be spared.
Sixth, as to permanent arrangements, which will survive the tax and economic stimulus issue, we must remember that the initial position of the Canadian government was that any deal should protect Canada against Buy American rules in future U.S. legislation. This was not obtained, and we know full well that several pending U.S. bills, including the $US 100 billion “Jobs for Main Street” legislation, contain Buy American preferences. This is important because, if a state or local government project is even partially funded by federal grants, Buy America conditions must be met.
What did Canada have to give away to get what it got? As to interim arrangements, U.S. firms will have the opportunity to bid on infrastructure and construction procurement by Canadian provincial and municipal governments for the next year and a half, until September 2011.
These are estimated at over $25 billion. For Canadians, the deadline for the projects has already passed and we can only hope to have a few subcontracts spilling over from money already spent in the American economic recovery initiatives.
Provinces and territories did not make commitments under the WTO GPA or NAFTA Chapter 10 mainly because of concerns regarding the previously mentioned exemptions. Even though we failed to end these exemptions, provinces and territories are now expected to make commitments under WTO GPA.
Third, as to permanent arrangements, procurement is one of the few economic tools for local development left to Canadian provincial governments in this age of globalization. So it is probably the most important issue for your constituents. This tool will be taken away when they agree to a permanent commitment under the WTO GPA. It will be more and more difficult, especially for the provinces, to stimulate their economy with economic and fiscal measures, insofar as outside companies can benefit from this potential stimulus and, as a result, the role of the government will be diminished.
The question of local procurement will also be eliminated because, according to the rules of the WTO, the only condition or the only factor that must influence the decision is the lowest cost.
It is clear that Canada had the rough end of the bargain. The U.S. Department of Trade certainly has no doubt that it won. On the World Trade Online website, an American publication, we can read that U.S. trade representative Ron Kirk said that the value to U.S. firms from the provinces and territories signing on to the GPA will be tens of billions of dollars. By contrast, the extent of the benefits for Canada under the tentative agreement is limited, according to a U.S. trade official.
It is clear that Canada gave too much for too little of the access it sought. This is unfortunately a pattern we have witnessed from recent years, when we gave up our control on our energy resources for the FTA. We also gave up our agricultural subsidies in the unfulfilled hope that the U.S. and Europe would do the same. That was not the case. We gave up all the jurisprudence that stated that we were right, in addition to a billion dollars, to get limited access to the U.S. softwood lumber market. In the last few weeks, we stated that we would be weakening our foreign ownership restrictions on telecommunications when the U.S. understands how critical a backbone the telecommunications architecture is for their country. Section 310 of the Communications Act imposes foreign ownership restrictions that are quite strict on foreign ownership in telecommunications. But it seems that the direction we are headed in is to relax these restrictions.
In conclusion, I would like to remind you that the thousands of workers we represent in the forestry and energy sectors understand the importance of international trade, since we depend on it. We do believe that Canada and the U.S. must be welcoming markets to each other. But we also believe that this must be done on a level playing field. A level playing field, this agreement does not provide. While the U.S. commits to no more than a crack in the door and still allows their 37 states to use government procurement as a legitimate tool of local development, we are blowing our doors open by putting shackles on our own provincial and territorial governments. Trade negotiations constitute a game of give-and-take. For such negotiations to be successful, there must be as much giving as taking from both sides. It is clear that, by this count, once again, Canada lost.