International Trade Committee on March 8th, 2012

[Pierre Bouchard]

As a counterpart to our Minister of Labour, it would be the Jordanian Minister of Labour.

[Mathieu Ravignat, NDP, Pontiac, QC]

Would there be any trade unions?

[Pierre Bouchard]

It's their choice if they want to include them. Officially, under the agreement, the ministerial council is made up of the two ministers of labour. If the other side wants to invite their trade minister to attend, as well, as an observer, that's a possibility.

[Mathieu Ravignat, NDP, Pontiac, QC]

There's no guarantee of an independent labour voice on the Jordanian side on this review panel.

[Pierre Bouchard]

I'm sorry, we were talking about the ministerial consultation. If we go to a review panel, it is an independent panel. These would be experts. There would be one expert from Canada, one expert from Jordan, and one expert from the third countries, and these are completely independent experts.

[Mathieu Ravignat, NDP, Pontiac, QC]

To even have the right to strike in Jordan you have to get government approval. What guarantees that the people who are going to sit on this review panel for the Jordanian side are independent?

[Pierre Bouchard]

The specific people who can be on a panel can be challenged. They are proposed. There are very detailed procedures in the agreement that say that a country will propose a candidate that can be challenged by another candidate, and so forth.

[Mathieu Ravignat, NDP, Pontiac, QC]

Thank you. I don't have that much time left, so thanks for that.

When we look at this idea of labour rights violations, they can only be considered in the process if it can be proven that they have been expressly designed to encourage trade or investment. That's my understanding.

In your opinion, does this not create an unusual burden of proof and undermine Canada's commitment to upholding human-rights labour issues in the first place?

[Pierre Bouchard]

The clause you're referring to is article 2, the non-derogation clause. That's an additional clause that ensures that a country cannot lower its labour standards to attract trade and investment. We don't have to make that proof for something to go to the review panel.

The proof at the review panel is twofold: there has to be a sustained course of action, meaning that this is not a single case; and it has to be trade-related. There is that proof. So things related to government unions, for example, could not go to review panels. These are the only criteria.

[Mathieu Ravignat, NDP, Pontiac, QC]

As a follow-up, I want to focus on the textile industry. We know that the conditions for workers in the textile industry in Jordan and in Canada are radically different, right? How can we assure our textile industry here in Canada that they can even be competitive in this market?

[Pierre Bouchard]

This agreement is not about ensuring competitiveness. It's the job of the private sector to do that. The agreement is about ensuring a level playing field and ensuring that our companies here will have to be competitive. But at the same time, we are saying on the other side that fundamental labour rights will be respected.

If the workers on the other side want to unionize, they will have a right to do that. If they want to defend their rights, if they want to have higher wages and strike, they are able to do that. We guarantee that right.

Now, what is the ultimate result if those workers want to do that? That's up to them. That's up to the other side.

[Mathieu Ravignat, NDP, Pontiac, QC]

Thank you.

[The Chair, Conservative, Rob Merrifield]

Mr. Hildebrand.

[Marvin Hildebrand]

On the question about the competitiveness of our apparel industry vis-à-vis Jordan's, the other consideration is that Canada's apparel industry typically doesn't make the same kinds of things as the Jordanian apparel industry. They're making very low-cost, mass-produced T-shirts and other simple garments, whereas the Canadian industry, even though it has declined in size over the years, is focused on niche markets—high-end designer, more upscale products.

I think there are two different markets that the industries are generally targeting.

[The Chair, Conservative, Rob Merrifield]

We want to thank you very much for coming in. This gives us a very good snapshot of what we're looking at in this agreement, and it answers a lot of the basic questions. Thanks very much to the team from the departments for spending your time here this morning.

We will suspend while we set up for the next hour of panel witnesses.

[The Chair, Conservative, Rob Merrifield]

We will reconvene the meeting.

We want to thank the witnesses for coming forward.

We have with us, from the Canadian Agri-Food Trade Alliance, Richard Phillips and Kathleen Sullivan. We'll start with you and then introduce the rest of the panel as we yield them the floor.

The floor is yours. Proceed.

[Kathleen Sullivan, Executive Director, Canadian Agri-Food Trade Alliance]

Thank you.

Good afternoon. My name is Kathleen Sullivan and I'm the executive director of the Canadian Agri-Food Trade Alliance. I am joined today by my president, Richard Phillips, who is also the executive director of the Grain Growers of Canada. We would like to thank you for the opportunity to speak to you today about the Canada-Jordan Economic Growth and Prosperity Act.

Canada's agrifoods sector depends on trade. Canada is the fourth-largest agrifood exporter in the world. We export $40 billion per year in agriculture and food products. That is quite literally 50% of everything we grow in this country. If we didn't have access to foreign markets, the size and structure of our domestic production and processing sectors would be radically impacted.

Agriculture and food exports are critical to national, provincial, and rural economies across the country. They account for almost 10% of Canada's total merchandise trade. Across Canada, over 200,000 farms are dependent on export markets. Trade must be a priority for Canada. As we look to the future success of Canada's agriculture sector, we have three major trade priorities. The first is to continue seeking opportunities to conclude a multilateral trade deal that further liberalizes agrifood trade. The second is to aggressively and actively pursue meaningful bilateral and regional trade deals. The third is to address market access issues.

I just want to briefly mention multilateral trade deals. We certainly recognize that the WTO is at an impasse. The reality is that when we look at trade distortions and agriculture around the world, the only way to truly address them is through a multilateral trade deal. We do encourage the Canadian government to continue working with other WTO countries to try to reach some sort of solution to the impasse and breathe new life into the talks.

When it comes to bilateral and regional trade deals, it is critical that Canada act aggressively and uncompromisingly to pursue our export interests around the globe. The Canadian government has in fact put in place the most ambitious trade agenda that this country and its farmers have seen in a generation. We are now looking at the possibility of trade deals with lucrative markets that include the EU, India, South Korea, Japan, and the trans-Pacific partnership countries. These deals combined would increase agricultural exports significantly. In many cases, if we aren't involved in those trade deals it will have a detrimental effect on Canada's farming and food processing communities.

When it comes to Jordan, the truth is that Canada-Jordan trade in agriculture is relatively small. Last year Jordan ranked as our 73rd export market, with just $16 million in shipments. Having said that, like many of our smaller trading partners, Jordan is in fact a very important market for specific agriculture products--in this case, pulses. In 2001, 70% of all of the agriculture exports to Jordan were pulses, in particular chickpeas and lentils. It is a growing market. Our agriculture exports to that country grew by 40% between 2010 and 2011.

We strongly support trade in the agriculture community in Canada. It's critical to what we do. We welcome the government's strong approach to trade, in particular the commitment that both Minister Ritz and Minster Fast have made to finding new trade opportunities for our sector. We look forward to trade becoming a key component of the future of agriculture.

Thank you very much.

[The Chair, Conservative, Rob Merrifield]

Thank you very much. We will be getting into the question-and-answer period, but we will have the panels all present first.

We have Andrew Casey, from the Forest Products Association of Canada. Thank you for coming. The floor is yours.

[Andrew Casey, Vice-President, Public Affairs and International Trade, Forest Products Association of Canada]

Thank you, Mr. Chair.

It is a real pleasure to be here today to testify on Bill C-23.

Thank you very much, on behalf of the Forest Products Association of Canada. We're the national trade association that represents Canada's lumber, pulp, and paper producers across the country. It's an industry that directly employs more than 240,000 Canadians and it's the economic lifeblood of more than 200 communities from coast to coast.

All parliamentarians are very familiar with the economic challenges this industry has faced over the past couple of years: the rapid rise in the Canadian dollar, the U.S. housing market and their economy more broadly, the troubles in Europe, and the changing demographic in terms of readership and the use of paper as everybody moves to electronic devices. All have presented what we've commonly called the perfect storm. Some might argue, in fact, that it's a changed climate for the industry.

The upshot of this—and parliamentarians, of course, are no stranger to this—is that we've been forced to close nearly 200 mills across the country and have lost nearly 100,000 jobs across the country. That has had a devastating impact on regions and certainly on a significant number of communities across the country. As I said, parliamentarians are very well aware of this, as many of you have had a number of communities in your ridings strongly impacted by what is happened in the industry.

I'm not here to say that the industry has rounded the corner and that everything looks bright and rosy, but I can say that the industry has not stood idly by as it has been challenged. It has been reinventing itself, transforming itself, moving aggressively into the bio-economy through bio-products, bio-chemicals, and bio-energy.

That represents a significant part of where this industry is going. But we can't lose sight of the fact that we still need our core products to be strong; that is, the lumber, pulp, and paper products. They need to continue to be a major part of our economic model going forward. Without them, the move to the bio-economy will not happen.

An important part of ensuring that we have a strong core for our industry is our trade markets. Our industry produces about $56 billion worth of product each year. Nearly half of it is exported. Obviously a lion's share of it goes to the U.S. marketplace, but another large chunk of it goes to other markets around the world, Europe and Asia being the primary other markets. In fact, we're the single largest exporter to both India and China.

This leads to the question why we would be here in support of Bill C-23 for Jordan. Jordan represents a market of about $20 million for our products. When you look at that in the grand scheme of things, in an industry that exports more than $24 billion worth of products, $20 million doesn't really represent a large market share.

The fact is that the Jordanian market is growing. It represents a market of nearly $400 million per year in forest products; that's what they're importing. They're getting a lot of their lumber and paper products from other countries with whom we compete. We'd like to have a bigger part of that market share. Having a deal such as this allows us to secure that marketplace and drop some tariffs on certain products. Certainly on the lumber side and on the paper side it drops some significant tariffs.

If I might use this as an example, what we found in previous deals, when we looked at the big deals such as those with India and China, is that we became excited about them, and for good reason. Those are large marketplaces that represent large potential for the industry. When you look at smaller markets, what we have found in cases such as the Jordanian deal is that it represents a very important marketplace for one mill. It's similar to what Kathleen just outlined for her membership. When we dive into these marketplaces, we find that one mill or one particular region is where that product is coming from, and so it represents a very important opportunity.

I'll give you an example. We have a product that comes out of a joint venture between Canfor Pulp, out of Prince George, British Columbia, and Tolko, out of The Pas, Manitoba. They sell cement bags to Egypt. It's a similar deal. They're competing against European producers of that product. The European producers are benefiting from a low tariff rate—in fact, 7% less than what the Canadian producers are benefiting from. This represents $35 million to the joint venture, Premium 1 Papers, in Canada and represents about 500 jobs in Canada. They are losing market share to the Europeans because we don't have competitive access to that marketplace.

In a similar vein, we're looking at marketplaces such as Jordan as a way of ensuring that we can grow and diversify our marketplaces to lessen our dependence on the U.S. marketplace and provide long-term jobs for certain parts of the country.

I'll leave it at that and I'll be happy to take questions once we've gotten through the panel.

Thank you, Mr. Chair.

[The Chair, Conservative, Rob Merrifield]

Thank you very much.

Now we have Bob Kirke, executive director of the Canadian Apparel Federation.

Thank you for coming in. The floor is yours, sir.

[Bob Kirke, Executive Director, Canadian Apparel Federation]

Thank you, Mr. Chair and members. I would like to thank you for this opportunity to appear before the committee on Bill C-23.

My name is Bob Kirke. I am the executive director of the Canadian Apparel Federation. Our association is made up of hundreds of firms in the apparel industry across Canada, representing every sector and product in the industry.

I would like to provide the committee with some background on the industry concerning trade and other policies that impact our operations and to answer any questions you might have.

I would like to focus my remarks on issues that were raised in the debates in the House both in December and earlier this month. I have summarized them under three headings: one is the potential risks to Canadian employment posed by this deal; the second is the labour situation in Jordan, as was reflected in conversations earlier; and third, what I guess might be called the wisdom of signing an FTA with Jordan.

The retail market for apparel in Canada is about $29 billion. Of this amount, about 75% is now imported, in most cases from developing countries. If we look back, 2001 was a high-water mark for Canadian apparel production and employment in recent times. At that time, the Canadian dollar was at 62 cents to the U.S. dollar and the industry had approximately 100,000 employees. After 2001, employment began to decline as the dollar appreciated. This was accelerated with unilateral Canadian tariff concessions to least developed countries or LDCs in 2003 and the ending of import quotas in 2005.

It's not just the source of apparel destined for the market that changed, but the prices in the market declined on a continual basis over the last decade. With 2002 as the base year, the consumer price index shows that prices for clothing have declined by 10% over the last decade, even as other commodities have increased in price between 10% and 40%. Clothing is the only category in which prices have declined over the period. The actual price for clothing in the market has gone down.

I'm just going to go briefly to the impact on domestic employment. I understand that many members would be concerned about granting tariff-free access to the Canadian market to low-cost producers from developing countries such as Jordan. At the same time it's important to understand that the Canadian government has granted tariff-free access to our market to many developing countries—the LDCs that I just spoke of. These undertakings have led to the restructuring of the domestic manufacturing industry. Manufacturing employment is a fraction of what it was a decade ago, both in apparel and in textiles. In many respects these changes are impossible to reverse.

Tariff-free access to the Canadian market granted to least-developed countries in 2003 led to a massive increase in duty-free apparel entering Canada from countries such as Bangladesh, Lesotho, and Madagascar. As an example, last year Bangladesh exported more than $950 million in apparel to Canada, fifty times as much as Jordan does.

Establishing a free trade agreement in Jordan will have virtually no impact on this situation. It will divert production from other developed countries, but it will have no measurable impact on domestic employment in the apparel industry—or the textile industry, for that matter.

In granting the concessions to LDCs, Canada receives no reciprocal benefits. These countries offered no preferential access to their markets for Canadian goods. By contrast, an FTA wherein we can generate export opportunities for some industries—I think of the industries sitting here beside me—seems far preferable as a trade policy.

I would add that some Canadian firms that are or would be producing in Jordan would welcome the agreement, because it would allow them to source duty-free for both the U.S. and Canadian markets from the same source. Jordan has an established trading relationship with the U.S., as was mentioned in the earlier meeting, both under its qualifying industrial zones program, which preceded the U.S.-Jordan FTA, and the FTA.

In terms of labour conditions, during the debates on the floor and just previously in this meeting a number of concerns were raised about the labour standards in Jordanian factories. I encourage the committee to speak directly to firms with operations in the country. Yesterday I referred to the clerk the name of one company that would love to testify. They have been mentioned on the floor of the House in regard to the labour conditions at their factory, a factory that has subsequently been recertified and is working with the ILO.

This is a good example of exactly what happens in the country. I'm confident that these companies whose operations were the subject of comments from members of Parliament would be more than happy to address this committee, if asked.

I was glad to see that there were comments directly about the ILO program in Jordan, the “better work” program. My comments in regard to the labour situation reflect the comments in that report. In general terms—and I just want to repeat—on all measures that it measures, labour standards and the conditions on the ground in Jordan are improving.

Work is being done in Jordan to improve and reinforce labour practices. These efforts are far more substantial than one finds in virtually any other developing country, many of which have been granted duty-free access to the Canadian market.

To repeat, we have given duty-free access to our market to over 40 least-developed countries, many of which have apparel industries that are fundamentally the same as what we find in Jordan. The only difference is that, with one exception, none of these countries have established an internationally supported program to improve labour standards under a credible institution such as the ILO, as is found in Jordan.

I urge you to consider the real progress being made to improve compliance and create an infrastructure in Jordan to provide for continued improvement.

My final comments relate to what has been referred to as the wisdom, if you will, of entering into a free trade agreement with Jordan. As my comments will attest, a free trade agreement with Jordan will not have a major impact on the apparel industry in Canada. In addition, the labour conditions in Jordan are better, and they are subject to greater scrutiny than many of the other countries that currently enjoy duty-free access to our market.

I believe there are positives in the Jordan FTA. While the argument might be made that we need to negotiate free trade agreements with more significant partners, I don't think that precludes signing this agreement with Jordan.

If members of this committee wish to understand our industry's priorities, I would echo the comments made earlier. Our position would be that this committee should urge the government to move forward on our free trade agreements, especially with the European Union.

In reality, we are not cost-competitive on high-volume moderately priced goods, with very few exceptions. At the same time, numerous firms in Canada, such as Canada Goose, have demonstrated that there are opportunities for domestic manufacturers if they focus on high quality and move up the value chain to higher-end products. Free trade with Europe offers real export potential for these types of firms.

Setting aside anything else, I believe it's important to say we have negotiated an agreement with another sovereign country and it has already taken nearly three years to get this bill to this stage. I think longer delays actually harm our reputation.

With that, I'd like to thank you for this opportunity to address you, and I'd be happy to answer any questions.

[The Chair, Conservative, Rob Merrifield]

Thank you very much.

We'll close off the testimony with the Canada-Arab Business Council. We have Ms. Kubba, business development manager. The floor is yours.

[Zaineb Kubba, Business Development Manager, Canada-Arab Business Council]

Thank you for this opportunity.

I am the business development manager for the Canada-Arab Business Council. My name is Zaineb Kubba.

Please allow me a few minutes just to introduce the council. The CABC is the only Canadian non-profit association focusing exclusively on the trade and economic relations between Canada and the Middle East and North Africa region. It brings together representatives from the Canadian private sector, federal and provincial agencies, and health care institutions with interests in the Middle East and North Africa region, which we call the MENA region.

Our chairman, Hugh O'Donnell, attended the government's announcement introducing the free trade agreement with Jordan in the House of Commons. He stated that the economic possibilities for Canadian businesses engaged with Jordan should be dramatically increased. He also noted that this free trade agreement offers incredible potential for businesses to expand throughout the region, with Jordan being the gateway.

We consider this initiative to be an excellent one for Canadian firms that are considering expanding their business interests into Jordan in a variety of sectors, such as health care, education, infrastructure, information, communication and technology, and forestry products. They will also be able to obtain greater access to a competent Jordian workforce, thereby opening up opportunities for lucrative potential partnerships in the region.

We actually have three major companies in Jordan: Bombardier, SNC-Lavalin, and PotashCorp from Saskatchewan, which I think owns 27% of the national potash under the privatization law. Two other Canadian companies are also short-listed for the peaceful nuclear program. Recently in Jordan, uranium has been found in abundance.

Another thing about Jordan is the stability. It is considered a stable country and the region has very good relationships with all the neighbouring countries. It is also considered a gateway to Iraq.

There is the Canadian Ambassador for Jordan and Iraq, who works out of Jordan. There are high literacy rates and access to health care for Jordanians. There are also megaprojects in Jordan. There is the Red-Dead Canal, which is to connect the Red Sea and the Dead Sea. There is also a railway project to connect the gulf region to Europe. There should be at least 500 kilometres of railway.

There are competitors in Jordan. We have a free trade agreement with the U.S., which was signed 19 years ago. Jordan also has advanced status with the European Union. It is second only to Morocco. It's true that the size of export-import is really small, but there is lots of perspective and potential.

Jordan is also a member of 17 international agreements on human rights and is making a lot of progress in human rights, labour, child labour, and women's rights. Other competitors are the U.S. and Australia, Indonesia, and China. Australia has recently been using the Aqaba Port as a hub and gateway to the region.

So we are definitely for the idea of the free trade agreement with Jordan.

Thank you.

[The Chair, Conservative, Rob Merrifield]

Thank you very much.

We'll move now to questions and answers.

Mr. Masse, the floor is yours.

[Brian Masse, NDP, Windsor West, ON]

Thank you, Mr. Chair.

Thank you to our witnesses for being here.

I'm just finishing looking at your testimony. This is one of the things we're concerned about. Obviously we want to open the markets here, but we're always concerned about the rights of individuals when we're doing business with a non-democratic government.

I have a report from 2011 here. I'm going to read from it and get a response. It is International Women's Week, and I think it's important that when Canada looks to markets, if we have overlooked other markets that use child labour or that have environmental, health, or human rights violations and we have provided them access to trade, that doesn't make it right for us to do it for others in the future. I think it's important to make that statement. This is just some evidence we have here:

In April it was reported that around 200 migrant workers from Sri Lanka, Bangladesh and India, 75% of whom are women, were found to have been trafficked to the International British Garments factory--owned by the security company G4S--stripped of their passports and held under conditions of indentured servitude. Allegations of sexual harassment and rape of a young Sri Lankan woman were found credible, and workers reported that at least two of their colleagues were overworked to death.

I would like to know just in general how we can guarantee specifically through this agreement that human rights issues like this are actually going to be addressed and that we're going to have enforcement provisions necessary to ensure that Canadians aren't getting access to another market that's going to use exploitation of women as part of its system. Should we be benchmarking and demanding benchmarks from Jordan about this exploitation to ensure that it's going to be eradicated at a particular date in time?