International Trade Committee on April 13th, 2010

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

You also said that signing Canada’s first ever free trade agreement with an Arab country was strategic. Does it have more to do with politics or a trade strategy?

[Don Stephenson]

It is more of a strategic move. You have to start somewhere. It is a bit like the minor agreements that we signed and are continuing to negotiate in Latin America. You can build things up over time, but you have to start somewhere. Sometimes you have to dance with the partner that is willing to dance with you.

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

A little earlier, I referred to the relatively low import and export levels. How much could they increase, in your opinion? Have you studied that?

[Don Stephenson]

Not really, but we do know certain things. After they signed an agreement with the Americans, two-way trade quadrupled. We cannot really make any projections, especially with such a small market. When you are talking macroeconomics, you can make meaningful projections, but with a market of this size, just one contract can double the total amount of exports in a single shot. So there are not really any estimates or analyses.

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

If you cannot say that it will improve trade by this or that much, is this agreement not a waste of time?

[Don Stephenson]

When we consulted with Canadian industries and the provinces, especially Quebec and Ontario, where most of these exports come from, they saw the value in such an agreement.

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

The agreement does not contain any provisions on government procurement or the temporary entry of business persons in general, unlike other agreements. Can you tell us why such provisions are not included?

[Don Stephenson]

In our consultations with Canadian businesses, there was very little interest in the service sector, especially given our obligations under WTO agreements. Canadian exports were in the neighbourhood of $2 million a year in the service sector. As I said, there is not much interest right now.

It is always possible to reopen any agreement to add or remove something.

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

That is precisely my next question. Have mechanisms already been established for reopening the agreement, or is it just a general formula?

[Don Stephenson]

It is a general formula, but the board of trade ministers who will administer the agreement always has the authority and the power to reopen it and, as I mentioned, to add or remove things.

I did not answer the other part of your question, which had to do with government procurement. No, it is not included. At the moment, we are working on government procurement at the WTO on two levels. On the one hand, further to our agreement with the Americans, we are going to discuss the WTO agreement on government procurement with the other signatories. On the other hand, we are working with the Europeans, who want to go beyond the obligations in the WTO agreement on government procurement.

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

We have entered into other agreements, with Colombia—an agreement where we disagree—and with Peru. Those agreements carry monetary penalties in the amount of $15 million, I believe, for violations. There are no such measures currently. Is there a reason for that? Are the ceilings....

[Pierre P. Bouchard]

I want to make things clear. The agreement carries monetary penalties. Quite simply, in this particular case, there are no ceilings. The possibility is there, but there are no ceilings in this case.

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

Why is there no ceiling? Why is there a ceiling in other cases but not this one? I want to understand the reason for that.

[Pierre P. Bouchard]

Good question, one that is the subject of expert debate, both in Canada and in the U.S. There were discussions on whether to impose a ceiling or not. The agreements with Colombia and Peru contain such ceilings. It is commonly thought that a ceiling is used only to limit the possible size of a penalty. But from a legal perspective, a ceiling can, in certain situations, be used to raise a penalty. The groups of experts in question have never been faced with these kinds of situations. Imagine a group of experts setting the amount of a monetary penalty with nothing but local legislation as a point of reference. If, for instance, a labour penalty were $50,000, according to local legislation, the panel of experts might consider $100,000 to be an appropriate amount. But if they see that negotiators have set out the sum of $15 million in the agreement, that changes the scale and the point of reference. From our end, at least, it is quite possible that it could lead to an increase in the penalty.

It involves a legal analysis. In the case of Jordan, there was no such analysis. As I mentioned earlier, each agreement is the product of negotiations. We cannot impose the exact same model in every case; it has to be adapted to the negotiations in question. In this case, there was certainly some resistance to the idea of a ceiling for that reason, given that civil society, including the labour movement, often prefers not to have ceilings. Out partner at the negotiating table did not want a ceiling either, and it was a very contentious issue. In this case, the outcome of the negotiations was no ceiling.

It really becomes a technical, legal issue, because there are valid interpretations on both sides, in terms of whether or not to include a ceiling.

[The Chair, Conservative, Lee Richardson]

Thank you. C'est tout.

Mr. Julian.

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

Thank you, Mr. Chair. I want to thank the witnesses for being here today.

Mr. Stephenson, you just said that the department did not do an impact analysis. But you also said that the industries concerned did carry out their own impact analyses.

Could you share those analyses with us today? In addition, which industries were consulted on the economic impact during the negotiation process?

[Don Stephenson]

I want to clarify something. If I did say that, Canadian businesses did not give us any analyses or estimates of potential deals under the agreement. In our consultations, however, they did express an interest in a particular sector. I think all of that is available on the department's Web site, but we could share with you our consultation discussions with Canadian industries. We could also provide you with a report on what they told us during the consultations.

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

Oftentimes, Web sites do not include a list of names. They indicate that consultations took place but do not give much in the way of details. I think it would be very useful for the committee to know exactly which associations, industries and companies were consulted regarding the economic impact.

My second question is in the same vein. We've had many cases of bilaterals having been signed and exports actually falling to those countries. In some cases these are Canadian, and in some cases it is other countries that have signed bilaterals. It's not the act of signing a trade agreement that allows access to a market, but the muscle behind it.

I'm interested in knowing what the total product promotion budget is for Canadian products and services into the Jordanian market right now and whether any increase is foreseen.

My third question is related to our competitors. We've seen in this committee that the United States, the European Union, Australia, and many other countries have budgets far beyond what Canada spends in product promotion, which is partly why our manufacturing capacity is collapsing—half a million jobs lost in the past few years.

So I'm wondering how much we're spending, how much we're going to spend, and how much our competitors are spending.

[Don Stephenson]

I'm going to let my colleague from the other part of the department attempt an answer on the promotion side, because I don't know. But I would say that there are two different aspects to helping countries exploit the market access they get in free trade agreements. The other side, with which I was involved, at least at the multilateral level, is aid for trade; that is to say, aid to help the poorest countries actually build the capacity to export products and thereby take advantage of trade agreements.

For example, in the case of the World Trade Organization, where a good 30 of the 153 members are least developed countries, Canada chaired a process—

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

I'm sorry to cut you off, but I only have 10 minutes, so I'd like just to go to the actual figures for Jordan.

[Thomas Marr]

Yes. In these times we will not be spending a tremendous amount of money with respect to promotion.

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

How much are we spending now?

[Thomas Marr]

We have invested, I would say, in my division about $10,000 to $12,000 for material that, when the agreement is finally signed and ready to be implemented, will advise Canadian industry of the opportunities.

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

So that's an increase; $12,000 would be what we're spending for the entire—

[Thomas Marr]

That is compared to zero for Jordan the year before. Our approach on this is that industry is going to make this agreement work, or not.