International Trade Committee on March 8th, 2012

[The Chair, Conservative, Rob Merrifield]

I will call the meeting to order.

We are about embark on the free trade agreement between Canada and Jordan. This is Bill C-23. It has cleared the House and we'll be seized with this, as we move, until we complete it as a committee.

Just before we get into that, though, there are a couple of little things.

First of all, at our last meeting we talked about a reception with the business delegation from India. That will take place. This is good news: it will not be paid for by the committee. There will be a reception on the evening of Wednesday the 14th after votes, at six o'clock at the convention centre. There will be notification going out for all the committee members to meet the delegation there. That will work out very well.

The other thing is that we need to pass a budget for this Bill C-23 piece of legislation we're embarking on. So I'd entertain a motion very quickly to clear that out of the way.

Mr. Holder moves it.

(Motion agreed to) [See Minutes of Proceedings]

Look at that. Who says committees don't get along?

We have with us today, from the Department of Foreign Affairs and International Trade, Marvin Hildebrand, director general, trade negotiation bureau.

I believe, Mr. Hildebrand, you are going to be presenting. You may want to introduce the people you have with you from the department. We are excited about this piece of legislation, and in the previous government it got to third reading. This time our goal is to get it much further than that, and into implementation. With that, the floor is yours. You may proceed.

[Marvin Hildebrand, Director General, Trade Negotiations Bureau, Department of Foreign Affairs and International Trade]

Thank you, Mr. Chairman. Thank you for allowing me the opportunity to speak to the committee about the Canada–Jordan Economic Growth and Prosperity Act, which implements the Canada-Jordan free trade agreement and the related agreements on the environment and labour cooperation.

As you may know, I was Canada's chief negotiator for these negotiations, and today I'll highlight briefly Canada's trade negotiations agenda more generally. We'll note some key benefits of the Canada-Jordan FTA, as well as discuss generally Canada's relationship with Jordan.

Mr. Chairman, permit me at the beginning of my remarks to introduce my colleagues joining me at the table here today. To my left is Ton Zuijdwijk, general counsel with Foreign Affairs and International Trade. To my right is Pierre Bouchard, director of bilateral and regional labour affairs, Human Resources and Skills Development Canada. Also joining me is Denis Landreville, lead negotiator, trade negotiations division, Agriculture and Agri-Food Canada. To my far right is Barbara Martin, director general, Middle East and Maghreb bureau at Foreign Affairs and International Trade.

Following my remarks, we will be available to respond to your questions.

First of all, let's talk about the government's pro-trade plan.

Consistent with government priorities as set out in the Speech from the Throne and the Global Commerce Strategy, the government is pursuing a robust pro-trade plan, which is an essential contributor to Canada's future prosperity, productivity and growth.

A key component of the government's strategy is the ambitious pursuit of regional and bilateral free trade agreements.

As highlighted in both the Speech from the Throne as well as Budget 2011, free trade agreements open doors for Canadian businesses by providing improved market access and other preferences to an increasing number of foreign markets, which in turn helps to make Canada stronger in an increasingly competitive global economy.

To this end, we are conducting free trade negotiations with two major global economic powers, the European Union and India. Trade negotiations are also already underway with a number of smaller partners, including Ukraine, Morocco and the Caribbean Community, CARICOM.

Canada is also exploring opportunities to deepen trade and economic cooperation with other major economic partners, including Japan, China, the nine-member Trans-Pacific Partnership and MERCOSUR—Argentina, Brazil, Paraguay and Uruguay.

To date, Canada has implemented free trade agreements with 11 countries, including with our North American Free Trade Agreement partners, Mexico and the United States; Israel; Chile; Costa Rica; Peru; Columbia; and the member states of the European Free Trade Association—Iceland, Norway, Switzerland and Liechtenstein.

In August 2011, Canada concluded a free trade agreement with Honduras, which is currently ongoing detailed legal review. Implementing legislation for our Agreement with Panama was tabled in Parliament in mid-November 2011, at the same time as Bill C-23.

Regarding the Canada–Jordan free trade agreement, in particular, we still face a measure of global economic uncertainty, Mr. Chairman. In a growing number of countries, Canadian companies are at a competitive disadvantage because their foreign competitors have preferential market access under some form of free trade agreement. The Canada–Jordan free trade agreement addresses these concerns by levelling the playing field with key competitors in the Jordanian market, namely those from the United States and the European Union.

Over the years, Canada and Jordan have built a strong, mutually beneficial relationship. Despite a small decline in our bilateral trade with Jordan in 2009 with the impact of the global economic slowdown, Canada's 2011 merchandise exports of $70 million were more than double the $31 million total in 2003. This free trade agreement provides an opportunity to further enhance this growing relationship.

Jordan's current average applied tariff is 10%, with peaks up to 30% on some products of Canadian export interest, such as certain forest products and articles of machinery. Upon implementation, this agreement will eliminate Jordanian tariffs on the vast majority of current Canadian exports to Jordan, with remaining tariffs phased out over three to five years. There are only a small number of exclusions in the areas of tobacco, alcohol, and some poultry products.

This agreement provides Canadian companies with benefits in a variety of sectors, including agriculture and agrifood, with products such as pulses, frozen potato products, beef, animal feeds, and various prepared foods. Forest products such as paper and wood building products, industrial and electrical machinery, construction equipment, and vehicles and parts are also included.

The Canada–Jordan free trade agreement's focus is primarily goods market access. The context is that our services interests via-à-vis Jordan are being adequately addressed in the World Trade Organization. Canada's investment-related interests are addressed in the Canada–Jordan foreign investment promotion and protection agreement, which was signed at the same time as the free trade agreement and implemented in December 2009.

As Canada's first-ever free trade agreement with an Arab country, the Canada–Jordan free trade agreement will not only help improve market access to Jordan's growing market, but will also provide a platform for expanding commercial ties and raising Canada's profile in the broader Middle East. This FTA will also benefit Jordan, ensuring access to Canadian products at more competitive rates and increasing access to the Canadian market for Jordanian goods.

In fact, Mr. Chair, upon the coming into force of this agreement, Canada will eliminate all tariffs on Jordanian exports to Canada, with the exception of over-quota supply-managed dairy, poultry, and eggs, which are excluded from tariff reduction.

The Canada–Jordan FTA is not about goods market access alone, however. The agreement also contains principle-based chapters on the environment and on labour cooperation, and high-quality side agreements with strong binding obligations, which were negotiated in parallel with the free trade agreement.

The Canada–Jordan FTA is a concrete demonstration of Canada's commitment to enhancing regional peace and security by helping to improve economic conditions in the region.

This agreement also shows Canada's support for Jordan as a moderate Arab state that promotes peace and security in the Middle East, as well as Canada's support for the commitment of His Majesty King Abdullah II and his government to implement comprehensive political and economic reforms in Jordan. Such reforms include measures to enhance accountability and political participation, as well as economic measures to liberalize the Jordanian market and provide support for small and medium-sized enterprises.

Regarding the next steps, Jordan has already notified Canada that it has completed all of its internal steps to allow the agreements to come into force. Should Parliament elect to pass this implementing legislation, officials will then work with their Jordanian counterparts to bring the Free Trade Agreement and the related Agreements on the Environment and Labour Cooperation into force on a neutrally agreed-to date as soon as possible.

Mr. Chair, this concludes my presentation. We would be happy to respond to questions the committee may have on the Canada–Jordan Economic Growth and Prosperity Act.

Thank you.

[The Chair, Conservative, Rob Merrifield]

Thank you very much.

We'll now move to question and answer.

Mr. Masse, you are first.

[Brian Masse, NDP, Windsor West, ON]

Thank you, Mr. Chair.

Thank you for your testimony here today.

I'll pick up where you left off. Can you outline in detail the political changes and reforms that have taken place since 2009, when we inked the deal? You just mentioned the King of Jordan. We're not dealing with a democracy here, and there have been a lot of changes in the Middle East since we actually inked this deal.

[Marvin Hildebrand]

If I may, Mr. Chairman, I'll defer to my colleague from the department, Barbara Martin, to address that question.

[Barbara Martin, Director General, Middle East and Maghreb Bureau, Department of Foreign Affairs and International Trade]

Thank you for that question. It is indeed an important one in the context of this consideration of the FTA.

King Abdullah indeed represents a monarchy. A prime minister was appointed in October. The government has been undertaking a number of reforms in order to open, in particular, the trade regime of the country, and also to try to improve the social and human rights environment within the country.

There are also constitutional reforms, which we consider to represent very significant progress in that particular country.

[Brian Masse, NDP, Windsor West, ON]

What exactly are those constitutional reforms, and how are they enforced for the population of Jordan?

[Barbara Martin]

I don't have that specific information with me, but I can provide it to you later.

[Brian Masse, NDP, Windsor West, ON]

That would be helpful. I would like explicit detail about those reforms. If there is testimony being provided that there have been reforms, I would like itemized information on that for the committee, please, at some point in time.

Could you also provide information on the labour reforms that have taken place since 2009, when we signed this agreement?

Also, what do we know about migrant workers in Jordan? Do we know where they come from and how many there are?

[Marvin Hildebrand]

Mr. Chairman, I'll defer to my colleague, Mr. Bouchard, from the Department of Human Resources and Skills Development, if I may.

[Pierre Bouchard, Director, Bilateral and Regional Labour Affairs, Department of Human Resources and Skills Development]

Thank you for your questions.

About two-thirds of the labour force in Jordan comes from migrant workers. About 70% come from Egypt, and they work mainly in the construction sector and in agriculture. They also come from South Asia, basically. You have Indonesia, Bangladesh, Sri Lanka, Pakistan. Those workers, often women, are concentrated in the textile sector. You have about 40,000 to 50,000 workers in the textile sector right now in Jordan.

[Brian Masse, NDP, Windsor West, ON]

With the agreement and in the time since we signed this agreement, have their labour rights improved, and if so, how have they, specifically?

There are many details about the exploitation of migrant workers, especially women, in Jordan. If two-thirds of their workforce is from that, do they enjoy the same labour rights as other Jordanians do? What specifically has been addressed since we signed this deal to improve their rights?

I'll just leave it there for now. I would like explicit details on this, because we did sign a deal three years ago. I would like to see the measurement of Jordanian labour force improvements that have taken place, similar to the democratic reforms since that time.

The argument has been that if we do this, those things will improve. So I want to see the measurement of those things over the last number of years, since we signed the deal.

[Marvin Hildebrand]

Mr. Chairman, I'll just give a preliminary answer to that, and then again I will refer to Mr. Bouchard.

The agreement was signed at the end of June 2009, as you alluded to. The agreement is not yet in force. We anticipate that it may come into force fairly soon, as I mentioned in my remarks. The Jordanian side is ready to go, in terms of their domestic ratification procedures.

On the details of the labour side agreement and the other two agreements, Mr. Bouchard may want to elaborate a little bit on those.

On Canada’s having recourse and having the mechanisms in force and being able to deploy the options those will present upon implementation, those are not at our disposal at this time. So in terms of what Canada has done since 2009.... Once the agreement is in force, if it does come into force, those options will then become available to us.

Perhaps you want to elaborate a bit more about what those are, and anything else in response to the question.

Is that okay, Mr. Chair?

[The Chair, Conservative, Rob Merrifield]

It's fine.

[Pierre Bouchard]

To elaborate on those options and what the legal obligations are, it's important to underline that our agreement with Jordan is the first agreement where Jordan makes specific commitments concerning the labour rights of migrant workers.

If you look at their labour obligations and how they could be taken to task regarding the labour rights of migrant workers, you have International Labour Organization conventions, you have their agreement with the U.S., and their agreements with us. The agreement with the U.S. in 2000 was considered a breakthrough at the time, but it does not mention anything related to migrant workers. It does not mention anything related to discrimination that could apply to migrant workers. Therefore, legally, the U.S. would not be able to do anything about this. In our agreement now, we have very strong clauses on non-discrimination and the rights of migrant workers. It could be a very effective tool.

To answer your specific question about the measures taken, Jordan has taken a number of measures in the labour area over the past few years. One issue raised in the past was the right of migrant workers to join unions. There has been a cabinet decision on this, and it's now part of the law in Jordan. Migrant workers, just as their Jordanian counterparts, can join unions.

[Brian Masse, NDP, Windsor West, ON]

They need permission from cabinet to do that, though.

[The Chair, Conservative, Rob Merrifield]

Time has gone. We'll move on to Mr. Keddy.

[Gerald Keddy, Conservative, South Shore—St. Margaret's, NS]

Thank you, Mr. Chairman.

Welcome to our witnesses.

I'm just trying to follow Mr. Masse's line of questioning here. I know he had a similar line of questioning on December 14, 2011, about some very problematic and egregious labour practices in Jordan, but it ignored.... Most of it came from an April International Labour Organization report, but it ignored the October report.

The United Steelworkers union stated in mid-May, and later updated in October, that conditions at this particular factory, IBG, Indo-British Garments, in Jordan were significantly improved. It went on to say that if these improvements continue, Jordan, without question, will have some of the best and most modern labour practices in North Africa.

I think that needs to be stated. I would just question which report and which update you were looking at. The United Steelworkers report showed a marked improvement in labour in Jordan.

I'd like a quick answer on whether we have seen significant improvement and whether we expect that to continue. Then I'll have some other questions.

[Pierre Bouchard]

There has been significant improvement, especially in the apparel sector. The government has taken leadership with the International Labour Organization's “Better Work” program, which is essentially a program that was voluntary at first but the government has since made compulsory for all manufacturers in the apparel sector.

It's a corporate social responsibility program, where you get a stamp of approval, you have inspections from the ILO, and brands, instead of having their own separate CSR programs, get a stamp of approval from a United Nations agency.

The government, because this was so successful, has made it compulsory for all plants in this sector in Jordan. Through the monitoring and the reports of the ILO, which are public, there has been a marked improvement.

[Gerald Keddy, Conservative, South Shore—St. Margaret's, NS]

Excellent. That's good to hear.

Mr. Hildebrand, when the Americans signed their agreement with Jordan, they saw a marked improvement in trade. Ten years later, they've doubled their trade with Jordan. For many years, for a decade previous to that, they were doing somewhere around $500 million worth of trade. Shortly before they signed their agreement, as you can see on the graphs, the trade started to ramp up. In 2002 they were somewhere around $1 billion. In 2010 they were about $2.2 billion. I suspect it may even be more than that now.

Should we be able to expect the same type of improvement between Canadian manufacturing trade and Jordan? Have you projected that?

[Marvin Hildebrand]

We are very optimistic about Canada's competitive position in Jordan vis-à-vis the two main competitors, the European Union and the United States. Despite the fact that Jordan negotiated and signed FTAs with both those parties quite some years before they did with Canada, those agreements, particularly with the U.S., involved long phase-out periods of Jordanian tariffs, which was roughly a decade in the U.S. case.

Those reductions were only completed roughly two years ago, I think in January 2010. In the case of Canada, we have negotiated in this agreement immediate tariff elimination on the part of Jordan for 67% of their tariff lines, which represent 99% of current Canadian exports to Jordan. So the day after this agreement comes into force, 99% of Canadian exports, based on what we were exporting at the time of the negotiations, will be duty-free.

That is a significant catch-up advantage to the U.S. and the EU, relative to a scenario where we would be facing ten-year phase-outs, for example. Moreover, on the remaining 33% of tariff lines, Jordan is phasing these out in a period of either three years or five years, which is also relatively ambitious and much more ambitious than they were in their other free trade agreements.

So yes, we would suggest that in terms of doing what the government can do in terms of creating a liberalized and barrier-free commercial environment for our stakeholders, this is a very good scenario. Then once the commercial environment is in place, it's up to industry and their stakeholders to seize the opportunities.

[Gerald Keddy, Conservative, South Shore—St. Margaret's, NS]

Exactly. We can only open the doors; we can't walk them through. Thank you very much for that.

To Ms. Martin, can you expand a little bit on the importance of this agreement vis-à-vis the fact that Jordan is a moderate kingdom, and they hold a very influential place in the Arab world? What is the potential for that to be a gateway to the further trade and liberalizing, quite frankly, of Arab states?

[Barbara Martin]

In your question you've actually captured some of the critical political benefits of this agreement. It is an entree into the region. It's one of the first free trade agreements that we have in the region, of course Israel being the other one that we currently have. But this is a free trade agreement with an Arab country, so it's an important first step, albeit our bilateral trade with Jordan is, relatively speaking, small. It's under $100 million a year. The balance of trade is very much in our favour.

Jordan has been an important ally for Canada and for other countries in the region. It is a moderate country. It is a very poor country and is in need of a certain amount of support and engagement as it undertakes its process of reform going forward.

[The Chair, Conservative, Rob Merrifield]

Thank you very much.

Now we'll move to Mr. Valeri...

[Frank Valeriote, Liberal, Guelph, ON]

Valeriote, as in chariot.