International Trade Committee on Nov. 22nd, 2011

[Raymond Côté, NDP, Beauport—Limoilou, QC]

Mr. Chairman, we have to know what we are getting into. In fact, this is the type of concern they may have on the European side as well.

I will see, Mr. Fisker, what you know about Toronto, Toronto businesses. Would such an agreement provide opportunities to a greater number of businesses, or do the current conditions allow most businesses to trade with the European Union, with or without a free trade agreement?

[Anders Fisker]

I don't think the market will be restricted to Toronto. I believe the opening of markets with the free trade, so to speak, CETA, will give an overall spread over the country—perhaps not evenly, but definitely opportunities will be there for all Canadian companies and all EU companies with an interest to cooperate and exchange trade.

As far as the dollar amount, I cannot comment. I don't have that knowledge.

[Raymond Côté, NDP, Beauport—Limoilou, QC]

My question, rather, was whether businesses are waiting for this agreement to decide to do business with the European Union.

[Anders Fisker]

There are already a lot of companies doing trade with the EU. I think with CETA,they will open up new opportunities for other companies to participate.

I think the problem that is coming out.... Maybe I can address your question a different way by making a statement. I find personally that Canadian business people are lax to get involved with a new agreement and pay attention to a new agreement until the deal is done. They're not really lining up to come and hear about CETA. But I can say that from the time of the CETA beginning to now, there has been a lot more interest. We see that in the number of participants in our meetings. Initially we were looking at 20 to 40, then 40 to 60, and now recently, when we had the delegation from Europe and the seven members of Parliament, there were maybe 140 people.

There was a one-hour complete business in a closed room in the Marriott Courtyard in Toronto, where people were sitting up theatre style and paying attention to real business. Then we had the reception following that. The same with the TD VP on October 13, when we had really a good question: has the European crisis had an impact on CETA? Essentially, from the banker's perspective, he was saying that the markets have a huge thirst for hope. I think it's common for everyone. He was also saying that the Canadian economy will continue to grow as long as the merchant markets and other markets keep buying our oil and gas, minerals, and agrifood products. The western provinces are expected to lead the economic growth parade. He was also saying something that I really enjoy hearing: that the interest rates will remain low, at least until 2013.

[The Chair, Conservative, Rob Merrifield]

Thank you very much.

Mr. Shipley, you can finish this off.

[Bev Shipley, Conservative, Lambton—Kent—Middlesex, ON]

Thank you very much.

I really want to thank you for coming in.

Mr. Seligman, it looks like maybe it's your wife or your daughter who is the vice-president, so I congratulate you again on a strong Canadian company.

I think what we're hearing, quite honestly, is that every business, every organization, every manufacturing company—whether they're looking at agriculture or whether it's manufacturing—is very excited about coming to a conclusion and getting to a great agreement with the EU on this. It is seen in Canada as a business builder. It is a business builder. It is seen that when you build businesses, it creates jobs.

Bruce, I'm excited to hear you talk about your company and what it means, since it started out small and it looks like there are opportunities in this agreement for you to grow.

You have laid out some of the issues for military search and rescue and oil. What sorts of limits do you see for this product? When I'm looking at it, on a logistic thing, how do you create a ballast when it is that top-heavy-looking? When you're actually coming in and out of the terrain that you're doing, how do you keep it upright?

[Bruce Seligman]

That is very important, especially the self-righting craft. You have to get all the weight as low as you can. It looks top-heavy, but the things that are on the top are fairly light. All the engines, transmissions, and tracks are all low down.

[Bev Shipley, Conservative, Lambton—Kent—Middlesex, ON]

When you don't have the competition, is it basically just those barriers of getting in? You don't have another company that you really have to compete against.

[Bruce Seligman]

No.

[Bev Shipley, Conservative, Lambton—Kent—Middlesex, ON]

You just have to be fair and sell yourself--sell a helicopter, I guess, to the countries that have never seen one before.

[Bruce Seligman]

Yes. It's very much driven by the requirement of the job that has to be done. We wouldn't sell one if we weren't doing a special job that they couldn't do any other way.

[Bev Shipley, Conservative, Lambton—Kent—Middlesex, ON]

Are you a part of the manufacturers and exporters organization, by chance, as a company?

[Bruce Seligman]

No, we're not.

[Bev Shipley, Conservative, Lambton—Kent—Middlesex, ON]

Okay.

[Bruce Seligman]

We should be, but we're so busy. I've been to Russia three times this year, I'm going to Brazil for a second time, and I'm running the company at the same time, so it's not very easy.

[Bev Shipley, Conservative, Lambton—Kent—Middlesex, ON]

You're growing, and that opportunity likely will come. Their presentation shows how important it is to use that networking and the facilities they offer to help companies get their products into countries also.

Mr. Fisker, in terms of the EU Chamber of Commerce—and I don't think they differ much from our chambers of commerce across Canada—would it be fair to say, if I've listened to you correctly, that the businesses represented in your chamber are promoting and are supportive of this agreement, in terms of what they see in it so far, as being something they're still keen to see come to completion?

[Anders Fisker]

I would say that's correct. A number of companies show up at most of our meetings, and then there are companies that don't. We're still hoping for more participation.

[Bev Shipley, Conservative, Lambton—Kent—Middlesex, ON]

One thing, too, and this is something we've never done before, is that we have now, because of the number of countries in the European Union, become involved and have brought in our provinces, which then actually bring in the municipalities, and have simply said that from Canada's position, the provinces and the municipalities are very supportive of this. They see the procurement process as being fair and they see it as an opportunity for them to increase opportunities for business and for jobs, as the whole economy in Canada is struggling, as it is in other parts of the world. Even though we're fiscally doing very well, it's all about getting jobs.

Is this still how your businesses look at it, that they see an opportunity to strengthen their economic business plans?

[The Chair, Conservative, Rob Merrifield]

We'll close this session off with that answer.

[Anders Fisker]

I see that. I'm involved with Copenhagen Capacity and GTMA. It's about attracting jobs and head offices to their particular cities. I see this as very much the case, that Canadian companies that are members in our EUCOCIT chambers are definitely looking to increase their size of business and thereby gain new jobs and grow the economy that way.

[The Chair, Conservative, Rob Merrifield]

I want to thank you very much for the questions, and thank you for taking the time to come in and give your presentations to the committee. I know you're both very busy people, and we wish you very well as far the specific craft that is built here is concerned. And to the chamber as well, thank you very much for your presentations.

We'll suspend for a few minutes as we set up the table for the next hour.

Thank you.

[The Chair, Conservative, Rob Merrifield]

We'll call the meeting back to order. I see that we have our witnesses at the end of the table. We want to thank both of them for coming in.

Mr. Ian Lee is assistant professor of strategic management and international business at the Sprott School of Business at Carleton University, and Mr. Trew is a trade campaigner for the Council of Canadians.

Thank you both for coming in. We look forward to your testimony, and then we'll move to questions and answers.

Mr. Trew, I believe we're going to start with you. Go ahead.

[Stuart Trew, Trade Campaigner, Council of Canadians]

Thanks very much, Mr. Chair, and thank you to the committee for this opportunity to address you today on CETA.

The Council of Canadians was founded in 1985. It is Canada's largest citizens' organization, with more than 50,000 members from coast to coast to coast, and that number is growing. We work locally, nationally, and internationally to promote policies on fair trade, access to clean water, energy security, public health care, and other issues of social and economic concern to Canadians.

Since the negotiations began on this proposed Canada-EU comprehensive economic and trade agreement in 2009, we've come to understand CETA not as a simple trade deal but more broadly as an agreement on economic governance. CETA will set new legal limits on social and environmental policy in ways that compromise our democracy.

For this and other reasons, the negotiations have been criticized by a growing number of environmental, labour, indigenous, student, and farmers' groups on both sides of the Atlantic. A recent collective request from a few dozen Canadian groups—actually, it was about 60 Canadian groups—to meet with Canada's international trade minister was turned down on the grounds that we all have access to Canada's top CETA negotiator in briefings following each of the past nine rounds of negotiations.

However, during the last briefing with DFAIT in October, civil society groups on the call were told that there are no plans to produce a report summarizing their feedback, as is the norm in the European Union. The negotiators were not even taking notes on what we were saying, apparently.

So these parliamentary hearings into the CETA negotiations are truly the first opportunity for groups such as the Council of Canadians to go on record with their concerns. While we have publicly called for the negotiations to stop and for an informed public debate to decide the scope and content of any deal with the EU, I recognize that this committee is not likely to take the same position. I would like to use this opportunity instead to propose a few changes to Canada's negotiating position, which would limit the potential of CETA to undermine the public interest in a number of important areas.

The first area is transparency. I could hear from the past speakers that you've been talking about this already today.

Canadian MPs should have the same access to CETA documents as their European Union counterparts. For example, I understand that members of the EU trade committee have access to Canada's and the provinces' services and investment offers and potentially their procurement offers as well. The former were exchanged shortly before the last round of CETA negotiations in October; procurement in goods offers were exchanged in July.

Access to those offers would provide this committee with a much better sense of the scope of the proposed agreement, including where it may fall short in the protection of public services or strategic sectors, which I will get to in a moment.

I have not seen this information, but it's difficult to understand why Canada's trade committee should not be able to see the information that MEPs are studying right now in Brussels.

The second change would be related to investment protection. We strongly believe that there should be no investor state dispute resolution process in CETA, as there has been in NAFTA and in subsequent Canadian free trade agreements. This is also the preference of the EU Parliament, as expressed in a June 8 resolution on the Canada-EU trade deal. The resolution says that

Given the highly developed legal systems of Canada and the EU, a state-to-state dispute settlement mechanism and the use of local judicial remedies are the most appropriate tools to address investment disputes.

The same advice was provided to the European Commission in a sustainability impact assessment of CETA produced by a consulting firm this summer. Their report says:

There is no solid evidence to suggest that investor state dispute settlement will maximize economic benefits in CETA beyond simply serving as one form of an enforcement mechanism.

The assessment adds that policy space reductions caused by the dispute process would be enough to cast doubt on its contribution to net sustainability benefits. Investment protections in trade agreements or stand-alone bilateral treaties give foreign investors incredible rights to bypass local courts in order to sue sovereign states before international tribunals, if they feel they have not been treated fairly. The lack of clarity in what constitutes fair treatment and the lack of transparency in the proceedings have given arbitrators enormous leeway in deciding what constitutes acceptable government policy. Investors are increasingly using this kind of arbitration to challenge social, environmental, and economic regulations that affect their profitability.

I know this committee has recently studied this process because of last year's $130-million settlement with Abitibi Bowater. Since then, Ontario has been the target of an expensive $275-million NAFTA claim by a Brazilian-owned cement company that was denied approval for a quarry outside of Hamilton, Ontario. We learned this week that Philip Morris will be challenging Australia's plain packaging laws for cigarettes because it feels that these also hurt its investments, even though the policy itself was a health measure enacted democratically.

I urge the committee to consider the position of the Australian government on investor-state arbitration. The Gillard government released a new trade policy in April that discontinues Australia's former practice of negotiating investor-state dispute procedures in trade agreements. The policy states:

If Australian businesses are concerned about sovereign risk in Australian trading partner countries, they will need to make their own assessments about whether they want to commit to investing in those countries.

I would say that most companies, by and large, do this already.

In other words, the Gillard government believes it is not the job of the government to absorb the risk that these firms take when investing in foreign countries. The new trade policy also insists that foreign firms operating in Australia should be entitled to the same legal protections as domestic businesses. Investment treaties, on the other hand, discriminate against local firms by giving foreign firms more rights to challenge government policy.

If this committee is not prepared to recommend against investor-state protections in CETA, it could push for simple reforms to the process. For example, Canada and the EU could agree that firms must exhaust local legal remedies before moving to investment arbitration, as the EU Parliament's resolution suggests.

The third point I'd like to make is on public services, water in particular. The public services exception in CETA needs to be broad and precisely worded to protect the right of governments to regulate in areas such as health care, education, or water delivery and sanitation. Provincial and local governments must also insist on maximum space to maintain or create new public monopolies or universal programs in these areas, even where some degree of private sector involvement currently exists. If Canada's reservations are too narrow, unclear, or incomplete when it comes to public services, we risk inviting expensive compensatory claims by investors who feel that government regulations or social services interfere with their profits. This is also the position of the European Trade Union Confederation and the European Federation of Public Service Unions.

With regard to water, it is our understanding that the EU has taken a broad exclusion for water services and utilities, not only protecting existing public utilities from competition from the private sector but also making sure that governments at all levels have the right to re-municipalize previously privatized utilities in the future. The examples in France are good examples of where they brought services back in-house because they had been dissatisfied with the private delivery of those services.

We understand, however, that Canada has not--not yet, I should say--taken a similar reservation in its own offers to the EU. We feel this example underlines the importance of this committee having access to the Canadian and EU offers so that it can play a stronger role in assessing the risks and benefits of the proposed trade agreement.

On local procurement, I know this committee has heard several witnesses already on the issue. We certainly share the view that procurement commitments for municipalities and the so-called MUSH sector should be excluded entirely, because we don't think they're worth the sacrifice to local autonomy and policy space.

In almost all cases, local procurement happens in Canada in a completely transparent and fair way. There are no restrictions to EU firms bidding on Canadian contracts; they win quite a few. In the vast majority of cases, municipal councils make decisions based on value for money. So we're not sure there's necessarily a problem here.

The net result of CETA commitments on procurement, however, will be to prohibit local governments from adopting buy local or buy Canadian policies, or from otherwise considering the value of local sustainable development when tendering for goods, services, and construction projects over certain thresholds.

Japan's WTO challenge of the Ontario Green Energy Act, a challenge that the EU joined this fall, shows that the EU will use trade and procurement agreements and rules to undermine job creation strategies in their trading partners.

Who loses from a blanket prohibition on local hiring or content requirements? Well, mostly it will be small and medium-sized businesses as they are outbid by their considerably larger European counterparts. This is already happening in Canada in the P3 market, the public-private partnership market, according to the Canadian Construction Association in a recent article. The sustainability impact assessment that I referred to earlier also predicts much bigger gains for the European Union than for Canada in this respect, in the procurement chapter.

In conclusion, experience with past trade deals shows that there's little room in Canada, at the parliamentary level, to make amendments once a deal is signed. Clearly CETA is about much more than trade. As such, I hope this committee considers how it might take on a greater role in studying the negotiating texts as their European counterparts are doing, and in proposing amendments, where suitable, to protect public services and other important policy areas.

Thanks very much.

[The Chair, Conservative, Rob Merrifield]

Thank you very much.

Now we'll move on to Mr. Lee.

[Professor Ian Lee, Assistant Professor, Strategic Management and International Business, Sprott School of Business, Carleton University, As an Individual]

I'd like to thank you for the opportunity to appear before your very important committee.

Before starting, I want to provide a disclosure statement concerning my own personal interests. I think every witness should in fact make such a disclosure statement.

First, I do not consult for any organization—government, union, non-profit, or business—directly or indirectly, anywhere in the world.

Second, I do not have any investments of any kind, except for my personal house in Ottawa and my share of the Carleton University pension plan. You could say that I'm just a poor professor.

Third, unlike non-profit organizations, I receive no donations or gifts of any kind from any person or any body.

Fourth, due to the first three disclosures, I appear before this committee with no conflicts of interest whatsoever.

Fifth, because I will be speaking very critically about supply management, I must disclose that I did grow up on a farm in eastern Ontario, in Lanark Country, Beckwith Township, in the pre-supply-management days of the 1960s. I know what it was like to be on a farm in those days.

Sixth, I volunteered to be a speaker with Carleton University's speakers bureau in 1988 and again in 1991, I think it was, during the FTA and NAFTA debates, in support of the free trade agreements. On several occasions I found myself debating the Council of Canadians.

Seventh, I am a tenured professor. That means that I can say what I wish without threat of being fired by anybody. I teach strategic management and international business.

Eighth, I have taught on every continent on the planet Earth, with the key and only exception of Africa, and not because I don't want to teach there but because I was turned down on several occasions when I applied. I've taught in pretty well every country in central and eastern Europe and in almost all the former communist countries. I've taught eight times in Iran and the Middle East, and I've been teaching once per year in China since 1997.

Finally, because of my travels to countries that have practised protectionism, and because of my research and teaching of international business, which includes comparative advantage and the advantages of trade, I strongly support liberalizing, expanding, and extending free trade agreements with both the European Union and the Trans-Pacific Partnership, and indeed with any country anywhere that wants free trade or trade with us.

I will now address two serious and significant barriers to an EU-Canada or CETA trade deal and possibly to a future TPP deal. I'm going to deal mostly with supply management practices, but I will touch at the end on intellectual property rights.

As background material for what I'm going to say on supply management, I refer you to my op-ed piece, which was published in this morning's Toronto Star, called “The Milking of Canadians.” Actually, I submitted the op-ed to the paper on the weekend, and I proposed calling it “The Plucking and Milking of Canadians Under Supply Management”. However, they condensed the title.

I also refer you to my paper on which the op-ed was based. It was published yesterday by the MacDonald-Laurier Institute, a think tank in Ottawa. It was called “Straight Talk: End Supply Management to Give Better Value to Consumers, Secure New Trade Deals”.

I'll run through this now very quickly.

The key metrics concerning supply management are that 34 million Canadians are being plucked and milked by approximately 14,000 dairy farmers, 2,800 chicken farmers, 1,200 egg producers, and 500 turkey farmers under a system of government protectionism called supply management. Farmers under supply management represent $8.6 billion, or 19% of the total 2010 farm income of $44 billion. And total farm income is 1.7% of GDP. It is very small. It is a very important sector, but it's a very small sector. These are all Stats Canada data, and I'd be more than pleased to provide the citations for those who want them. Notwithstanding that, these farmers in supply management, specifically in dairy, are earning, on average, $100,000 a year net profit under supply management.

A 2008 OECD report found that the price of dairy in Canada is more than double the market price, while the Conference Board of Canada found that, on average, consumers are paying 60¢ more per litre of milk than are Americans, where they have no supply management

This is rank protectionism. This is the 1% exploiting the 99%, and none are more exploited than low-income Canadians, who pay much more of their budget on food than the rest of Canadians.

This protectionism also makes the quotas very valuable and makes it more costly for a farmer to enter farming. For example, it now costs north of $25,000 to buy quota for one cow and about $140 for the quota for one hen. Indeed, Stats Canada 2010 reports that the total value of the supply management quotas across Canada is $31 billion.

It's argued that supply management is necessary to save the family farm. Yet the number of farms has been declining steadily for a half century, according to Stats Canada, from 574,000 farms in 1956 to 229,000 farms in 2006. That is a 60% reduction.