International Trade Committee on April 1st, 2010

[The Vice-Chair, Liberal, John Cannis]

I'm going to call the meeting to order.

[Bradley Trost, Conservative, Saskatoon—Humboldt, SK]

Mr. Chair, I need about 10 seconds to finish a point of privilege.

[The Vice-Chair, Liberal, John Cannis]

Was it from the last meeting?

[Bradley Trost, Conservative, Saskatoon—Humboldt, SK]

It's from the House of Commons. It will take about 10 or 15 seconds--maybe 20.

[The Vice-Chair, Liberal, John Cannis]

If I understand, and maybe the clerks will correct me.... Are we permitted to carry a point of privilege from the chamber to committees? This is the first time I've heard of it.

[Bradley Trost, Conservative, Saskatoon—Humboldt, SK]

We can make it a point of privilege here. We'd be done by now, Mr. Chair.

[The Vice-Chair, Liberal, John Cannis]

I'll have to ask the committee.

[Bradley Trost, Conservative, Saskatoon—Humboldt, SK]

It'll take 10 seconds.

[The Vice-Chair, Liberal, John Cannis]

Go ahead.

[Bradley Trost, Conservative, Saskatoon—Humboldt, SK]

There was a point of privilege raised in the House. It has been dealt with, but the whips did make the point to me that I should probably raise it here.

Let me say that the member, my honourable colleague across the way, has behaved commendably and I have no complaints about that, but it should be noted that photography is not permitted in committee, and we should all remind our staff of that and other rules.

It's one of those small omissions; people sometimes forget. But as I said, the honourable member has dealt with the problem. I consider it closed.

[The Vice-Chair, Liberal, John Cannis]

We consider the case closed. It was dealt with professionally and properly to everybody's satisfaction, so I'm pleased to hear that.

Again, I didn't know the rule, but we're certainly going to look into it just in case it happens in the future.

We're going to move on with our meeting. I've called the meeting to order. Our chair is temporarily held up, so I'll start. You'll excuse me if I don't have my reading glasses, but I'll do the best I can.

Pursuant to Standing Order 108(2), we have a study of Canada-United States trade relations in regard to an agreement on government procurement.

We have with us today witnesses from Vancouver via video conference. I'd like to welcome, from the British Columbia and Yukon Territory Building and Construction Trades Council, Mr. Wayne Peppard, the executive director.

Also, via video conference from Toronto, from the Canadian Auto Workers union, we have with us Angelo DiCaro, who is the national communications representative, and he is accompanied by Jenny Ahn, who is the director of membership mobilization and political action.

Welcome to our witnesses.

We're going to start with you, Wayne.

You have 10 minutes for a presentation. We'll try to stick to 10 minutes each and after that we'll go to questions from the committee.

The floor is yours, Wayne.

[Wayne Peppard, Executive Director, British Columbia and Yukon Territory Building and Construction Trades Council]

Thank you very much.

I want to begin by thanking the committee for this opportunity to appear.

The discussion regarding the Buy American legislation has prompted a debate across this nation that touches the very nerve of economic recovery, which, as of the numbers yesterday, is looking quite good. It is through the development of our regulated banking system and, some would argue, that of successful protectionist action that we have fared better than many other countries through the fallout of the global financial crisis precipitated in the United States.

In my research on this issue, I looked for the benefit gained or, at the very least, for a win-win. Certainly, by looking at the dollar value gained through reciprocated access to infrastructure funded projects, there is no doubt that the United States has gained an enormous advantage. Canadian business access to about $1 billion of infrastructure spending in the United States pales with the $25 billion of access gained by the United States to Canadian infrastructure procurement.

Ken Neumann, United Steelworkers national director for Canada, has noted that this debate is an opportunity for Canada to have its own Buy Canadian policy. Such a policy could be a win-win if it were to develop meaningful language to support Canadian manufacturing while continuing to be a part of an integrated and cooperative North American market. Mr. Neumann represents a significant voice of labour in the manufacturing industry in both countries. In the world of manufacturing, investment equals job creation.

I now turn my attention to the construction industry, because that is what I represent and where I come from. What is or is not in this agreement that speaks to the needs of construction workers or job creation in a migrant workforce market?

In my research and review of this committee's discussion of the issue in the committee Hansard, I note number of issues that raise concerns for me. The first concern I will address is that the benefits of access are lopsided in the extreme.

If the numbers quoted in the committee Hansard are accurate, and if we can be confident that our businesses will be accorded fair access, then this could be considered somewhat of an advantage, minimal or otherwise. However, it would seem there is still a degree of protectionism evident in the balance to the advantage of the United States, through the state and municipal procurement jurisdictions that it maintains.

Across Canada, the municipal procurement provisions in the agreement preclude the favourable treatment of local contractors or goods and service providers, and municipalities are further prohibited from seeking offsets. Many municipal procurement policies contain procurement provisions on quality, qualifications, training, safety, employment standards and, in some instances, fair wage and living wage policies. These social and legal commitments now stand to be challenged.

Union agreements that provide for local hiring or contracting-out language may be at risk. These are mutually negotiated agreements that benefit workers, their employers, and the communities in which they live.

I could not possibly be aware of all of the provisions for tendering and bidding in each of the American states, let alone their municipalities; however, I am quite aware that procurement policies and bidding practices vary from municipality to municipality, even here in B.C., let alone from province to province and across our nation. I am simply not sure that this agreement is well thought out, though it may well be a noble objective.

As for access to Canadian infrastructure project funding, most large prime construction contractors are controlled by U.S. investment or are U.S. owned and not restricted in any way. They currently bid on and are constructing Canadian infrastructure projects, including highways, bridges, and transit infrastructure, even though these are listed as exclusions.

If the provisions remain at the $8.5 million threshold, then there seems to be no advantage, however, as the project packages are broken down. Do the provisions of the agreement flow? Most contractors in the construction industry are small to medium-sized enterprises and are likely more concerned about their access through subcontracting. I am not sure that many local SMEs would risk bidding into the U.S. market based on added costs of mobilizing equipment and labour, as well as the provisions of liability and bonding.

To illustrate this, I offer a few comments from some B.C. contractor associations. These are non-union contractors. In an interview with Monday Magazine, Greg Baynton, Vancouver Island Construction Association president, said that large local companies—which pale in size next to global giants—don’t have the capacity to orchestrate bids for contracts that involve finance and operations components.

Vancouver's Island Equipment Operators Association president, Don Cameron, submitted the following statement on procurement options: “Large multi-national corporations will blow into town and misplace years of meaningful well-paying employment during construction, and then leave town and in their wake the skeleton of what was once a vibrant industry”.

Construction contractor John Knappett wrote earlier, not in reference directly to this agreement but nevertheless a significant comment: In simple terms what this means is that those of us who live, work and help build the community on Vancouver Island are about to get the heave-ho for a consortium of bankers and multinational contractors from far afield. Although some local procurement will certainly be done, such as buying gravel or hiring hourly dump trucks, the management and engineering jobs and the general construction contracts for all the sewage plants and pipelines will almost certainly be handled, like the Sea to Sky Highway or the Golden Ears Bridge, by one foreign company.

When one considers the carve-outs and the exclusions within the agreement, which include road construction, bridges, and transit, what other projects of any significance over $8.5 million fall under major public infrastructure funding between now and September 30, 2011? One is left to wonder just exactly what benefit is to be found.

Is it jobs? One should not confuse investment in construction contracts with the same kind of job creation as in the manufacturing industry. When construction contracts proceed, temporary jobs are created under whatever provisions may apply for access to private or public funding. In construction, our concern is who gets the jobs.

I would ask that this committee give consideration to job opportunities for Canadians given the difficulty we have had getting Canadian workers into the American market and the impact of the foreign labour market as a result of both the American and the Canadian immigration legislation and policies. There are no provisions ensuring that either Canadian or American workers will benefit from the provisions of this agreement. The application of this agreement cannot be considered in isolation from these important and related regulatory regimes.

Is it mobility? We don't even have effective mobility and qualification recognition across Canada, let alone international foreign credential recognition. How will a provincial safety board or an employment standards officer chase an American employer that has violated legislation and returned to the United States? And at what cost?

Finally, I prefer that my tax dollars be spent promoting Canadian contractors and workers contributing to our economy and giving the estimated 12% unemployed and unregistered workers who have fallen off EI an opportunity to contribute to the Canadian economy--the spinoff benefit to the investment of our tax dollars.

When we look at this disparity regarding the benefits of access provided by this agreement--giving the United States access to in excess of $25 billion of our infrastructure funding in return for access to about $1 billion of the United States infrastructure funds when there are no guarantees that this agreement will create jobs for Canadian construction workers and their contractors--one wonders what the actual benefit is. All in all, this agreement appears to be an overreaction to a short-term concern, given the recent numbers on the GDP and the way the economy is moving and recovering at the moment.

Given that the Canada-United States procurement agreement includes the temporary provision to September 30, 2011, and the provision into fast-tracking on future permanent agreements, there must be a commitment to transparency and consultation throughout the negotiation process. I am unaware of any consultations with labour groups or worker representatives in our industry that led to this agreement. I can only hope that workers' concerns will be given full consideration should there be an expansion to the commitments with regard to any permanent agreements with any nation for government procurement.

A true Buy Canadian policy would incorporate language to support the development of strong local economies and of strong international relations that include the interests of both business and labour.

Thank you.

[The Chair, Conservative, Lee Richardson]

Thank you.

We'll go now to the Canadian Auto Workers union and Angelo DiCaro, who is the national communications representative, for another brief opening statement.

[Angelo DiCaro, National Communications Representative, Canadian Auto Workers Union]

Thank you, Mr. Chair and members of the committee, for inviting my colleague Jenny and me to speak with you today.

On behalf of CAW national president Ken Lewenza, we extend our appreciation to the committee for allowing us the space to offer our perspective in regard to the multi-faceted Buy American deal that was recently struck between the federal governments of Canada and the United States.

We commend the committee for having organized these hearings. They provide a good opportunity for Canadians to better verse themselves on the important role that public procurement plays across each level of government with respect to economic and social development.

The Canadian Auto Workers union is Canada's largest private sector union. We represent over 225,000 members across the country in nearly every sector of the economy.

Over the past years, our union has focused a great deal of policy and campaign work on what we see as the underuse of domestic content policies when governments at all levels procure goods and services. Domestic content policies, when used properly, can be a strategic lever to encourage domestic economic and social development, particularly as that relates to maintaining a strong and vibrant manufacturing base in Canada.

Canada's economic climate in recent years, notwithstanding the devastating impact of the global recession, has led to a dramatic decline in Canadian manufacturing capacity and employment. The persistently high Canadian dollar, the current patterns of unbalanced global trade, and the absence of much-needed interventionist policies to spur economic growth beyond the government's stimulus program have contributed to the loss of over 550,000 manufacturing jobs since 2002.

Those are direct jobs. That number doesn't account for the associated spinoffs and supply-chain jobs that are reliant on them. Shockingly, there are more Canadians employed in the retail trade today than there are in value-added manufacturing.

We are aware that our purpose here today isn't to talk about the misfortunes of the domestic manufacturing sector. These remarks will simply provide the committee with the necessary context to better understand the lens through which we see this bilateral exemption deal in question.

With respect to this particular deal, we want to express two areas of concern to you today.

Firstly, we are gravely concerned that this deal was negotiated and signed without tangible evidence that it will deliver meaningful and measurable benefit to Canada in terms of greater economic activity and job creation. We were dissatisfied to learn, after an informative and revealing conversation with representatives of the Department of Foreign Affairs and International Trade, that no cost-benefit analysis had been conducted to determine the strengths and the weaknesses of this deal for Canadians in terms of investment and jobs, both on the temporary and the permanent sides of the deal.

Whether Canada stands to benefit from this particular arrangement is entirely speculative at this point. Estimating annual U.S. procurement dollars, assuming Canadian companies will have the ability to access those dollars, and hoping those companies translate those dollars into economic growth here at home is a dangerous basis on which to establish a groundbreaking and game-changing trade deal.

Considering the gravity of this exemption deal on our collective ability to manage and control our economic fortunes, in both the short term and the long term, it would seem only logical that a thorough costing of this particular deal and the variety of alternatives would have been foundational in determining the actual value of the deal.

It's for these reasons that we find it very difficult to understand how the trade minister and other proponents of this deal can say with any certainty that this deal provides reciprocity of access between our two countries in the area of procurement.

[Jenny J.H. Ahn, Director, Government Relations, Membership Mobilization and Political Action, Canadian Auto Workers Union]

It's this issue of reciprocity that leads us to our second area of concern. For us, the idea of trade reciprocity has meant levelling the playing field of global trade with smart and managed trade policies. Trade reciprocity does not mean blindly and needlessly forcing countries to dismantle policies that aim to achieve positive social and economic ends. Trade reciprocity also does not mean abiding by the strictest doctrines of free trade at any cost.

We recognize the importance and near-universal use of domestic purchasing policies, especially in the area of public procurement. Many of our largest trading partners, including the United States, the EU, China, and Japan, which make up 90% of our trade in goods and services, consistently attach domestic content requirements to public purchases. These policies actively promote domestic economic development and also encourage foreign investment. These are also not all knee-jerk reactionary policies to the economic crisis.

Canadian firms competing on the global stage have had to respect these provisions, and they will continue to respect these provisions moving forward. The competitive landscape on this front has changed very little.

New Flyer bus in Winnipeg, for example, Orion bus in Mississauga, or Nova bus in Quebec will still have to respect U.S. content levels whenever a contract is won south of the border. Bombardier, as another example, will still have to utilize its various satellite rolling stock manufacturing plants around the world to comply with domestic content rules. Canadian shipbuilders will be restricted from exporting vessels to foreign markets.

In fact, Canada remains one of the few major world economies that does not actively utilize domestic content policies as economic levers, although there are some exceptions.

Under this deal, there will now be even fewer rules requiring suppliers to maintain a portion of investment in our domestic economy, and we are now stripping the rights of sub-national governments to enact such rules. We risk further exacerbating the decline in our manufacturing base.

We can provide a long list of examples to the committee of opportunities missed by government to ensure that at least a proportion of public procurement dollars flows back to the Canadian economy. The most recent example was Canada Post's decision to purchase nearly 5,000 new light postal vehicles from Turkey. The crown corporation attached no conditions in their procurement to ensure that the use of taxpayer dollars would spur economic activity in Canada.

However, there are also examples of Buy Canadian policies proving effective in leveraging meaningful economic activity in Canada in recent years. The City of Toronto's procurement of new light rail vehicles maintained a 25% Canadian content provision, which ensured Canada would receive a sizable share of the economic benefits associated with this record $1.2-billion public purchase.

In 2008 a cost-benefit analysis of the deal indicated that over 1,000 Canadian jobs would be created if the winning bidder maintained a Canadian manufacturing presence, 10 times the number of jobs created if these railcars were to be imported from offshore. Additionally, the monetary benefits that would flow back into the economy totaled over $400 million, about half the cost of the project itself.

Even more recently, a 60% Canadian content policy attached to subway car purchases in the Province of Quebec, in line with current Buy American provisions for rolling stock purchases, has actually resulted in a major Chinese railcar manufacturer offering to assemble these cars in Canada to comply with the Buy Canadian regulation. This is expected to create between 750 and 1,000 jobs for Canadian workers.

In our estimation, based on these specific examples and with an understanding of the competitive landscape for public procurement, this exemption deal only serves to limit the ability of Canadian governments in equalizing international trade relations and leveling the playing field.

As our provinces and territories must now abide by the rules and regulations of the WTO, it is even more imperative that our federal government take the lead in studying the merits of what a fair and reasonable Buy Canadian domestic content policy would look like for Canada.

We thank you for the opportunity to address the committee.

[The Chair, Conservative, Lee Richardson]

Thank you.

Thanks for your timing in both cases.

We're going to move now to questions of our panellists. We're going to begin our questions with seven-minute rounds.

We'll start with Mr. Cannis.

[John Cannis, Liberal, Scarborough Centre, ON]

Thank you, Mr. Chair.

Welcome to our guests.

I listened very carefully to the comments from all three of you. I'm going to focus primarily on two areas.

We know that the auto industry has gone through some bumps and bruises over the past couple of years. Governments in our country and the United States--I'm not going to speak about other countries--have stepped in to try to help out the auto industry, to the tune of us even having ownership. Really, I wouldn't call it ownership; it's a responsibility of the taxpayers here in this country.

I, too, became aware of this purchase—and I can't say it's a potential purchase, as I think it's a done deal—of the 4,800 units from Ford, if I understood it correctly. We'll be buying these vehicles from Turkey, where they are assembled. Am I correct so far with the information I'm providing?

[Angelo DiCaro]

That's correct.

[John Cannis, Liberal, Scarborough Centre, ON]

Okay. If I am supporting a company here--non-Ford, for example--any auto company here in Canada, and my industry is hurting, can you explain to me why I would go there and buy vehicles that I could buy here, vehicles that I believe meet Canadian standards and that will do just the same job? If I'm mistaken, please tell me so. Why would I go elsewhere and buy them? Can you give me any good reason? Are the prices the same? Are they comparable?

[Angelo DiCaro]

I guess you raise a good question. In our opinion, there really is no good reason. That's not to say that some particular vehicle models to satisfy a public procurement like this are not better than others in terms of the specifications of the public procurement requirements; the issue is about maintaining some content level to ensure that a reasonable portion of that procurement does circulate back into the Canadian economy. That strikes us as the most fundamental part of any public procurement, including in this case.

With the Canada Post procurement specifically, there are a lot of question marks around it. I can't answer some of your questions about it because I wasn't involved in the procurement. We were under the impression at the time that one of the Canadian models, the Windsor Town and Country model, was shortlisted as one of the vehicles satisfying the procurement project. That's been debated a bit publicly.

In this case, we would have much preferred the contract to come to Canada, although again, I don't want to speak too much more on it without knowing the specifics of the procurement itself.

I hope that satisfies the question.

[John Cannis, Liberal, Scarborough Centre, ON]

If something like this were to happen in the United States, do you think it would unfold as it did in Canada?

[Jenny J.H. Ahn]

If something like this took place in the United States, I believe it would not have unfolded in the same way. Unfortunately, we don't have a procurement policy that enforces a certain level of Canadian content where taxpayer dollars are being spent. The United States, for many decades now, has had the kind of policy ensuring that procurement and taxpayer dollars are used to bring back at least some of that into their economy.

These are absolutely two different scenarios. Unfortunately, this has not played out to support the Canadian economy and to have Canadian jobs staying here.

[John Cannis, Liberal, Scarborough Centre, ON]

To the best of your knowledge, are we in Canada reaping zero from this procurement, these 4,800 units? Are we benefiting in any minute way? Are we benefiting from this purchase in any way?

[Angelo DiCaro]

In terms of the value added, the production of these units, no, we are not.

[John Cannis, Liberal, Scarborough Centre, ON]

Are we benefiting in any other way? In terms of maintenance support or parts or I don't know what...?