Thank you very much.
I'd like to focus on a few elements that have been recommended to be put on the table by the Europeans. My argument is that it is within our own personal self-interest to resolve the difficulties in these four areas. While I fully appreciate that we want to be in a position to negotiate with the European Union in a manner that we don't give up what we don't have to give up, what I'm suggesting is that we should consider correcting the deficiencies in these four specific areas, whether or not there is an agreement with the Europeans. The four areas are agricultural supply management, government procurement, intellectual property, and labour certification. Let me just quickly go through those.
On the agricultural supply management side, basically, we have an anachronistic situation, which, as we well know, interferes with other trade arrangements. I'm sure everybody here is familiar with the comments made yesterday by the New Zealand trade minister that suggested that Canada is not going to be able to be at the table on the TPP if we're going to stand alone, basically, in the industrial world behind our supply management mechanisms. It harms Canadian consumers. It may very well harm Canadian producers. The evidence of that comes from what has occurred in some of those countries that have eliminated supply management, like Australia and New Zealand. The consequence has been better production, better profits, new markets, and increased exports. Of course it also interferes with internal trade.
The Europeans themselves, in their background report behind these negotiations, appeared somewhat puzzled when they said:
Although Section 121 of the Canadian constitution prohibits the use of inter-provincial tariffs, subsequent judicial interpretation has allowed provinces to implement non-tariff barriers which have fragmented the country's internal market and provide obstacles to pan-Canadian standards.
They go on a little later:
While internal trade barriers impede a number of different sectors, the most prevalent internal trade impediments exist in the agriculture and agri-foods sectors. For example, restrictions are in place that limit inter-provincial shipments of supply-managed commodities such as wheat, dairy and poultry products;
Clearly, it seems to me that it is in our own self-interest to resolve the supply management dilemma, regardless of whether it's on the table with the Europeans. Yes, by all means let's bargain with that tool, but at the end of the day I certainly hope that supply management is eliminated.
The second area I want to talk about is government procurement. It's a small matter between Europe and Canada, at least as it stands now. It's a big advantage unilaterally--that is, within Canada. Let's cure the problem in Canada. Basically, buy local programs are essentially “beggar thy neighbour” for provincial barriers and national barriers, as we've seen with respect to trade with the United States. Again, it's an anathema to economic efficiency.
Now, there are a few things that are a little bit hopeful at this stage. I think it's a good sign that the provinces have been engaged actively in the negotiations. But Europe faced basically the mother of all procurement issues a couple of decades ago when the union was formed, probably 15 or 16 countries at the time—now it's 27 or 28 countries—all with essentially national procurement policies, and they overcame them. We should be able to overcome them, when we are one national country.
Look what the Europeans got--and this is, again, their assessment:
An impact assessment of the increased intra-EU competition for foreign procurement resulting from the EU's procurement directives is estimated to have delivered price reductions of around 30%, according to European Commission studies. The EU has already experienced improvements in the effectiveness of public procurement through increased foreign competition, both within Europe and from outside Europe.
Now, in these straitened times, 30% on our budgets would look very, very nice indeed. It's in our self-interest.
The third area I wanted to talk about is the Europeans' wish to harmonize intellectual property regulations with Canada. Why are they so concerned about that? I think, essentially, it's not because they're greatly concerned with Canada, but because they're more interested in the next stage in their discussions, which will be the EU-U.S. discussions.
I think it's important to put into context how important R and D is to Canada. We have a tendency to think it's peripheral, but it's a long way from being peripheral. Canada is right in the middle of the OECD pack in terms of the proportion of GDP it devotes to R and D and the number of people engaged in R and D. Even just in dollar terms, without relation to per capita, without relation to the size of the economy or the size of the country, there are very few countries in the OECD that actually expend more on R and D than Canada. Fifteen percent of our R and D spending comes from foreign investment. Canada is at the top of the G-7 per capita in environment, health-related, and biotech patents. We've got a lot vested.
In the past, we talked about trading patent protection for R and D spending. There seemed to be some desired trade-off. The past is no longer. Today, for example, the big pharmaceutical companies in Europe are greatly concerned about the loss of R and D to the U.S. U.S. companies and the U.S. government are greatly concerned about the migration of R and D spending to Korea, to China, and to India.
China and India will become the largest R and D spenders, the nations mostly engaged in the state-of-the-art activities that give the highest value-added employment. As important or more important in many ways is that, as they reach the stage of becoming upper- and middle-income countries, they will also be among the world's largest consumers of health-related products. So I think it's very important for us not to think in terms of trying to make inroads in global R and D but to actually maintain our toe hold. We are in a difficult situation, and I think we need to be sure that we, in conjunction with the Europeans and ultimately with the Americans, are on track with respect to our intellectual property regulations, to ensure that as these new markets become the mature markets, we are able to participate in those markets and not be alienated.
The last point I would like to make very briefly is on the whole question of labour certification. In many ways, that's been pre-empted by what has occurred. That is, at the provincial level the internal trade agreements are now focusing on the importance of getting certification across provincial jurisdictions. Immigration interests are concerned about making sure that some of the foreign individuals who have taken up residence in Canada are fast-tracked into their occupations. Why? Because of demographic pressures. Reality is actually outpacing the whole issue of labour certification. As the population ages over the next several years, certainly in the province where I live right now, we're expecting significant labour force contraction. We're going to need all of the skilled workers we can attract to the region.
Those are basically the points I wanted to make. I have prepared a submission, and it's probably not available for circulation yet, but I guess it will be. At the end of that submission there is a reference to the paper we recently penned, about a month ago, and it gives you an idea of where you can get that online.
Thank you.