International Trade Committee on Nov. 17th, 2011

[Ève Péclet, NDP, La Pointe-de-l'Île, QC]

In your presentation, you mentioned an additional amount of $2.8 billion that the provinces will have to absorb if the European Union's demands on patents are met.

Could you tell us about the potential consequences for access to prescription medicines and the health system for Canadians?

[Scott Sinclair]

The demands made by the European Union for changes to our intellectual property rights protections, particularly in the area of drugs, would have very serious consequences for Canadian health care costs. The specific figure I cited and you repeated was in a study by Toronto- and Calgary-based experts, Hollis and Grootendorst, which I believe was published last year.

It is absolutely critical that Canadians and Canadian governments control health care costs. If these European demands were agreed to, Canada would have the strongest system of structural protection for brand-name pharmaceuticals in the world. We would be combining elements of the American system and the European system in a unique combination that doesn't exist anywhere else in the world. For example, the Europeans don't have a patent linkage system like ours, copied from the United States.

So I think this is a critical area. It's absolutely essential that we control health care costs. I don't think this should be seen simply as a contest or a difference between the generic industry and the brand-name industry. You certainly heard that testimony. This is a public health care issue. Certain provincial governments have expressed very strong views on this because of their absolute imperative that they get control of drug costs in the health care system.

[Ève Péclet, NDP, La Pointe-de-l'Île, QC]

We could talk about investor rights. You said in your ending statement that there is little or no justification for including investor state arbitration in the CETA. You were talking about the consequences the NAFTA had to Canada. Could you expand a little on those consequences?

[Scott Sinclair]

When the NAFTA was negotiated and signed, Canadians were basically told--if they were told anything--that investor state arbitration in chapter 11 of the NAFTA was needed because of structural problems of corruption in the Mexican court system, and it wasn't really an issue that should concern Canadians. Since then the international trade bar and others have very aggressively used those provisions to challenge Canada--and too many times successfully. There have been 30 investor state claims.

I think there's growing awareness in Europe of the hazards to environmental protection regulation with these types of rules. Canada and Europe have highly regarded democratic systems of justice that are open to everyone, including corporations. I don't really believe that the risk of entrenching this investor state arbitration system, which would be new for Europe in a regional trade agreement, is an appropriate one.

[The Chair, Conservative, Rob Merrifield]

Thank you very much.

Mr. Cannan.

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

Thank you, Mr. Chair.

Thanks to our witnesses.

I would like to ask my first question to Mr. Sinclair. I follow local government and local politics very closely. I spent nine years in local office—I was elected three times—and spent a couple of years in our provincial association in British Columbia. It's very important. In fact we have our elections for the municipalities across the province of B.C. this Saturday. It's very important. It's crucial that all levels of government work together, as there is only one taxpayer.

You made reference to a paper you had presented in Halifax in June. You talked about the proposed thresholds for some national governments being approximately $300,000 for goods and services and $8 million for construction and concession contracts. These thresholds are quite low by international standards. I would just like to clarify that those are actually WTO standards, the World Trade Organization, so they are international standards.

During the discussions you made some reference to the fact that municipalities are covered under the CETA procurement provisions, and local governments would lose a valuable policy tool for creating employment, protecting the environment, and assisting marginalized groups. However, we've heard from president of the Federation of Canadian Municipalities. We've had representation actually at committee from the Federation of Canadian Municipalities. It did also meet with International Trade Minister Fast and said:

FCM welcomes the federal government's commitment to a CETA deal that creates new jobs and opportunities for Canadians while protecting the local decision-making that is the lifeblood of strong, healthy Canadian communities.

Because of my interest and passion and support for local governments, I understand the hard work they do. They all represent their constituents at the grassroots. They are happy with the CETA.

Mr. Sinclair, are you claiming to know what's best for municipalities and saying FCM is misguided?

[Scott Sinclair]

I think that the level of knowledge among certain municipal officials about this agreement is certainly very low. I was quite shocked to learn at the FCM convention in June in Halifax that City of Toronto councillors were not even aware if their procurement was about to be included in the Canadian offer, which I believe was tabled about that time.

FCM does have a committee that meets with the Department of Foreign Affairs and International Trade. I'm not privy to the discussions there. They developed a number of principles, as you're aware, that they insist be satisfied in this negotiation.

I believe, particularly if the thresholds are low, that the administrative costs on municipalities from complying with these rules could be quite significant. All you have to do is talk to your own Treasury Board officials in Ottawa about those administrative costs, which can be quite significant, even in a streamlined, centralized organization such as the Treasury Board.

More importantly, for the major contracts, for public transit, green energy, and areas like this, I think municipalities such as Toronto and others—and certainly in Quebec—have applied local development criteria that have been beneficial to their communities.

It's the 20% of municipal contracts that are over the threshold that probably account for about 80% of the value of the total contracts covered by these types of agreements. They are the contracts that can have the greatest development impacts.

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

Well, we will have to agree to disagree on some of that, because I know there are many hard-working, very knowledgeable mayors and councillors across this country who dedicate their services to their communities, and they have indicated support of this agreement. I would like to stand behind the FCM's position.

Mr. Blackburn, you haven't had a question yet, and I don't want you to feel lonely there. I appreciate your coming and sharing your experience and enthusiasm for this agreement.

Maybe you could tell us a bit about the tariffs and some of the non-tariff barriers facing the industry. How do you think CETA will help your company and the industry overcome some of these barriers?

[Robert Blackburn]

Well, it isn't really a tariff question for us. We don't manufacture anything. We're a services company and sometimes an investment company.

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

And the P3s--I know you've done several.

[Robert Blackburn]

Yes, including some in Europe, and some in Canada, and some elsewhere.

I guess our priority is trying to be on a level playing field around the world in various markets. For instance, we're very much hoping that the free trade agreement with India will go someplace. As I said earlier, we've been growing our resources there. Also, the Prime Minister talked this weekend about joining the Trans-Pacific Partnership, which I think is really important, because otherwise we are going to get left behind as the other countries around the Pacific lower their trade barriers. In some cases there are tariffs, and certainly a lot of discrimination against foreign companies coming in.

Our priority is having unimpeded access so we can go bid and work in as many markets around the world as we can. We're pretty good at that. We're facing stiff competition these days from all sorts of places. Competitors from France, Spain, and the U.K. are very important in the markets we work in. We hear about India and China as well, but our European competitors are pretty strong too. It's sometimes hard, despite the 3,000 people we have working in Europe, to get treated as a European company. We've seen that in Spain. We've seen it in France, for reasons that you can understand.

One of the things I would say about the benefits of investments for local development is that our experience around the world, wherever we go, is that for competitive reasons as much as anything else, we work with local people, with local goods and services suppliers. If we tried to take Canadians everywhere, it wouldn't work. We couldn't be competitive. We even go to the extent of training thousands of industrial workers and local suppliers, which we are doing right now in Madagascar, and have done in South Africa and Mozambique. It's a standard way of proceeding. We work with local people. There are strong local development efforts. In Europe, we haven't been involved in this kind of training because there are lots of local skills there.

[The Chair, Conservative, Rob Merrifield]

Thank you very much.

Mr. Easter.

[Wayne Easter, Liberal, Malpeque, PE]

Thank you, Chair.

Thank you both for coming.

I think you said, Mr. Blackburn, regarding the use of the talent pool globally, you'd like to see a comprehensive agreement on qualifications.

The topic here thus far does seem to be the investor state arbitration agreement. Scott, you had a fair bit to say on it. Can you both explain fairly concisely how it would impact local development criteria? I know in Ron's question there was some discussion on that. Do you have different opinions on local development criteria? In your answer a moment ago, Mr. Blackburn, you mentioned that you couldn't do it if you didn't hire local. You can't move Canadians all around. What's the threshold at the municipal level? As I understand it, smaller communities are not affected, and it's quite a high threshold. Would you both explain local development criteria? I do think that is important.

Scott, do you want to start, or Mr. Blackburn?

[Scott Sinclair]

Sure.

As a clarification on the enforcement of different aspects of the agreement, the investor state arbitration mechanism is used to enforce the investment chapter of the agreement, and the procurement provisions are normally enforced through a domestic administrative tribunal. So in Canada at the federal level it would be the CITT.

These administrative tribunals still have quite draconian powers. They can tell a municipality or a provincial government, if they run afoul of the rules, to re-tender the contract. They can award compensation to a supplier who has been unfairly treated, or treated in a way that is not compatible with the rules.

A big issue I have with these rules, sort of the standard template of rules, is this prohibition of offsets. Offsets, as I've said, are defined simply as any local development condition. So the kinds of local training provisions that were described in the case of Madagascar, which I believe is standard practice around the world and a reasonable thing to expect when governments go out and procure with public money, would actually be illegal and inconsistent with these rules unless Canada were to take some kind of a reservation or protection or exemption, which, if we're going to commit ourselves to these rules, we should. It is certainly reasonable for governments to apply a different standard of best value from that of a private company when they go out and purchase.

[Wayne Easter, Liberal, Malpeque, PE]

Mr. Blackburn, do you have anything to add?

[Robert Blackburn]

I would only say that the projects I'm describing aren't government projects at all. It simply makes sense from a business point of view to do these things. We weren't under any obligation from Madagascar or Mozambique or South Africa.

It is interesting that our experience in Mozambique and South Africa is a case study and was used to train people at the World Bank about good ways to do resource development in the developing world. And it was paid for by our client. They wanted it.

[Wayne Easter, Liberal, Malpeque, PE]

I'm likely going to run out of time here, but are you the folks who are doing the airport in Ecuador?

[Robert Blackburn]

No.

[Wayne Easter, Liberal, Malpeque, PE]

Okay, because I was there, and it was 98% local people. It is EDC. Canada is behind that development.

On the use of a talent pool globally and a comprehensive agreement on qualifications--that's something we need in Canada internally--do you want to expand on that a little? I really think that's an extremely important area within this country, and we aren't anywhere on this. Why would it make such a difference on investments in terms of the CETA agreement?

[Robert Blackburn]

Well, I'm not an investment expert. It's not particularly investment grounds I'm talking about. But we use our talent pool, Canadians and our 11,000 people who are outside Canada, and project by project we put together our teams.

As it happens, I was at the Commonwealth business forum in Perth two weeks ago. We have a good-sized local office there in the mining business. When I was there I had dinner with the local managers, a couple of managers from South Africa, and one from London, England. Together, they were making a presentation to a local client the next day. So to the extent we can enrich our pool, it will help us build our business in Canada and internationally. Of course, as I said, we run across skilled Europeans wherever we go. To be able to make those effectively part of our domestic talent pool would be a huge benefit to us.

[The Chair, Conservative, Rob Merrifield]

Thank you.

Now to Mr. Holder.

[Ed Holder, Conservative, London West, ON]

Thank you very much.

I'd like to thank our guests for attending today and providing testimony.

There's a comment I can't let go by, because I struggled with it as I heard it at the very opening of Mr. Sinclair's comments. I'll take this part as a direct quote. He said this deal won't “provide that much of a kick” to Canada's economy. I find that shocking, frankly. Perhaps in all your research you haven't reckoned or done the calculations that due to this trade agreement with the European Union, the anticipation is that Canada's economy is going to be boosted by some $12 billion, it's going to increase two-way trade by 20% and create 80,000 jobs in Canada. That might not be much of a kick from your perspective, but I have to say, sir, with great respect, that from our standpoint we think that's absolutely critical for Canada's success.

Folks, I want to put this into a bit of perspective. One of every five jobs in Canada is trade-related. And there are members opposite who, in all of my time in the trade committee, have never supported a free trade deal. I hope, as I look at my colleagues opposite, that when you look at what's good for Canada....

I appreciate that I really need to be speaking to our guests, and I will. Thank you, Chair, for helping me find my way home.

Again, gentlemen, to put it in perspective, Canada is a market with some 35 million people. In Europe, the countries we're dealing with, we're talking about a market opportunity of 500 million people. Let's just put that in a bit of perspective here. Today we heard Mr. Barutciski say that Canada needs to pursue this as a high-quality agreement because the CETA deal would be the most far-reaching, high-quality trade agreement, which would even surpass NAFTA. It means we would be dealing with the world's wealthiest economy, and it would make Canada the only country in the world to have FTAs with the two largest economies in the world.

Mr. Blackburn, as it relates to procurement, what would unimpeded access to CETA mean to your firm? We know that SNC-Lavalin is a significant player worldwide. What does that mean to you? Because you did start to illustrate some of the business that you're doing in Europe, and I know you have extensive interests worldwide. What would CETA mean to you?

[Robert Blackburn]

As you say, it's the largest and richest market in the world at this stage when you put all the EU countries together. We've grown there. This is my 15th year with SNC-Lavalin, and when I joined we had just bought a small company that basically made champagne establishments around Rheims and Epernay in France. There were about 60 employees. Over this last 15 years, we've built that now to over 3,000 people, and we're continuing to grow there.

So for us to be seen and treated as a European company, which in many ways we are, it just makes sense to us to have that company with our expertise from Canada being able to flow in and work on projects in Europe and vice versa and internationally. Right now, our European companies are also working in Africa on some of our projects along with some of our people from India. It just makes sense to us. It helps us grow further. I can't put a number on it, but you can see there's a fairly fast growth trajectory. We don't go in huge steps, but it's a smooth growth we've been having. We would like to be treated in every respect like a European company in the markets we're dealing with there.

[Ed Holder, Conservative, London West, ON]

You may have heard in prior testimony today about the comparabilities, if I might call it that, between Canada culturally and Europe and how in so many different ways there are a lot of comparables.

When you've provided testimony in the past to this committee, I know you've talked about SNC-Lavalin's corporate social responsibility. How does that apply to this arrangement from SNC-Lavalin's perspective?

[Robert Blackburn]

It seems to me that in the case of Europe it is less an issue than it is in the developing world, where they haven't had a cultural tradition, or an economic ability, or a regulatory history that equips them to deal in some of these areas.

Mr. Sinclair said it would impede ability to protect the environment. I'm not aware that governments are abandoning their ability to regulate in the environmental area. If people were regulating as a market-protecting rule rather than an environment-protecting rule, then I could see where that would be challenged. But I would have thought that all levels of government would have an ability under an investment accord to continue to protect the environment as they see fit. I may be missing something, and I could well be.