International Trade Committee on March 13th, 2012

[The Chair, Conservative, Rob Merrifield]

We'd like to call the meeting to order.

We want to thank the minister for taking time out of his busy schedule to be with us. He's been around the world in his continual round-the-world trip, and we appreciate the work that he does on behalf of Canada on international trade. It's great to have him here talking about the estimates today.

We encourage the committee to go over to the opening of the Brand India Expo afterwards. We've been invited to go over and take part in it.

Our time is limited, and we want to get started on questions and answers in the time that the minister has. So we'll go right to it. Minister, the floor is yours.

[Ed Fast, Conservative, Minister of International Trade]

Thank you, Chair.

I'm pleased to be with all of you today. It's a real pleasure to be in front of a committee that dedicates itself to an issue vital to Canada's long-term prosperity.

Canada is, and always will be, a proud trading nation. Our past, present, and future prosperity is directly linked to reaching beyond our borders for economic opportunities. Free and open trade has long been a powerful engine for Canada's economy. It is even more so in these globally challenging economic times.

In communities across our country, people's jobs and how they provide for their families depend on how our businesses succeed around the world. Our government understands the importance of trade to our economy. It represents one out of every five jobs in Canada, and it accounts for somewhere on the order of 64.5% of our gross domestic product. I have a focus on connecting the dots for Canadians—the dots between trade and our long-term economic prosperity.

The world economy remains fragile and uncertain. To be sure, our country has fared better than most. About 610,000 more Canadians are working today than when the recession ended. This is the strongest employment performance in the G-7. Our real GDP is now significantly above pre-recession levels, which is also the best performance in the G-7.

These strengths are becoming part of Canada's good story in the markets of the world. I hear it all the time when I meet with my counterparts around the world, who are impressed with our country's ability to remain strong during tough times. But we cannot rest on our laurels. The world is a competitive place. We need to ensure that Canadian businesses and the federal government are working together to tip the balance in favour of Canada. Armed with the right access to the right markets and supported by the right tools and services, Canadians can compete and win against the best in the world, anywhere in the world. In fact, I often say to my counterparts that Canadians are fierce competitors, but we compete fairly. That's my focus as minister, and it's the focus of my department. For Canada there is no better job creator and economic growth generator than free and open trade.

Our government's free trade plan is the most ambitious of its kind in Canadian history. It recognizes one central fact. While the United States will always be Canada's largest and most important trading partner, we know that deepening and expanding our trade—especially with large, dynamic, high-growth economies—will protect and strengthen the financial security of families in every region of Canada.

Canada's economy depends on looking elsewhere for new opportunities. That's why, in the last six years, our government has concluded trade agreements with nine countries, including Panama and Jordan. These agreements are now being debated in the House.

That's just the beginning. We're negotiating with many more global partners, including the EU. Our talks towards a comprehensive economic and trade agreement are moving forward. We're on track to wrap up negotiations by the end of the year. The potential from this agreement is enormous for Canadian workers. The scoping study that preceded these negotiations indicated that our economy would grow by something on the order of $12 billion per year, or the equivalent of 80,000 new Canadian jobs. That works out to about $1,000 in the pocket of the average family.

We're also expecting sizable benefits from a successful agreement with India, one of the world's most promising economies. A joint study concluded that an agreement with India could boost Canada's economy by at least $6 billion per year.

We'll also be discussing Canada's possible participation in the Trans-Pacific Partnership. I just returned from Southeast Asia, where I visited the countries of Malaysia, Brunei, and Singapore. I was pleased to see that Canada's interest in joining the talks has been positively received. It's a great opportunity to increase Canada's trade in Asia.

I also had the honour of joining the Prime Minister on his recent trade mission to China, another good example of our commitment to increase our trans-Pacific trade. That visit to China set the stage for an even more strategic Canada-China partnership in the years ahead. While there, we announced that we'll enter into exploratory discussions on deepening our trade and economic relations following the completion of an economic complementarities study that is presently under way and which we expect to complete in May.

These are great opportunities to bring our partnership to the next level. As we move forward on these and other initiatives, we're also supporting businesses in other ways. That includes supporting it through our Trade Commissioner Service, which I often say is Canada's best-kept secret—and it's my job to make sure it's not a secret any longer.

I really would like to thank the committee for undertaking a study of the Trade Commissioner Service. I have very much come to appreciate the great importance this service has to Canadian exporters, investors, and innovators. Our trade commissioners have been a vital tool in the business plans of Canada's exporters, investors, and innovators for over a century.

In cities worldwide and also in offices across Canada, you can find our trade commissioners helping our businesses, large and small, break into new markets. Armed with market intelligence and expert advice they work closely with Canadian companies as they look to expand and succeed abroad.

The Trade Commissioner Service connects Canadian business people with the right decision-makers overseas so that they can grow their business and create jobs and prosperity in Canada. We want our businesses that are looking for new trade opportunities to be successful, and the Trade Commissioner Service facilitates that.

The Trade Commissioner Service also focuses specifically on small and medium-sized businesses. Last year we served over 13,000 Canadian firms, mostly SMEs, which was a 10% increase over the year before. As I mentioned earlier, the Trade Commissioner Service has a great record.

A recent study showed that exporters receiving assistance from the Trade Commissioner Service enjoy an average export value 18% higher than that of comparable exporters who don't use the service. Since April of last year, trade commissioners have been involved in facilitating $12.1 billion worth of investments, which will create more than 4,200 jobs. New science and technology partnerships have been created with India, China, Brazil, and of course Israel, leading to more than 80 cooperative projects and exchanges involving more than 1,000 highly qualified people.

The Trade Commissioner Service is also constantly adjusting to an ever-changing environment. Since 2006 we've opened 15 new trade offices in key markets, such as Brazil, India, and China, in recognition of the growing importance of emerging markets and also to ensure that Canadian companies can take advantage of these exciting business opportunities.

Simply put, we're making better use of Canada's diplomatic assets in advancing the interests of Canadian businesses around the world. We're ensuring that our resources are geared toward our top trade priorities. This is the best way to help Canadian businesses succeed in high-growth markets around the world.

Throughout our efforts, we'll continue to look to your committee for advice and ideas as we create jobs and prosperity for Canadians through deeper trade and investment ties with our global partners.

Thank you. I look forward to our discussions today.

[The Chair, Conservative, Rob Merrifield]

Thank you very much.

We'll start the questions and answers.

Mr. Masse, you have seven minutes.

[Brian Masse, NDP, Windsor West, ON]

Thank you, Mr. Chair.

Thank you, Mr. Minister, for being here with us today.

One of the concerns I have, coming from a manufacturing area, is with the loss of well-paying value-added jobs and how we reclaim them. The Canadian Commercial Corporation is one of the funded agencies that's supposed to help, but it's reducing its requests by $500,000. I'm wondering what your vision is with regard to manufacturing and trade.

In 2005 this country had a $15.9 billion trade imbalance as a deficit in trade of manufactured goods. In 2006 it went to $27.9 billion; in 2007 it went to $32.3 billion; in 2008 it went to $58.7 billion; in 2009 it went to $75.2 billion. Finally, in the last statistics available there is a trade deficit of $80.8 billion for manufactured goods from our country.

Perhaps you could highlight your specific strategies to reverse this trend. We should be more than just the hewers of logs and stewards of oil, shipping out raw and natural resources. Our value-added industries are certainly struggling, and I'd like to hear about your vision with regard to international trade and how we reverse these numbers since your administration has come into power.

[Ed Fast, Conservative, Abbotsford, BC]

Thank you so much for that question, Mr. Masse.

I can tell you that I as trade minister strongly believe that trade is a key driver of economic growth in Canada. That's why my focus is on opening up new markets for those very manufacturers you've talked about, so that they will be able to sell into new markets. And it's not only about manufactured goods; it's about Canadians providing services around the world, because we can compete and we can do so effectively.

You mentioned the trade imbalance. As you know, in the last year our bilateral trade balance actually had a $10 billion turnaround, and that's good news for Canada. I believe it indicates that our aggressive trade policy, which is looking to open up new markets for Canadian businesses, is working. I believe that going forward that policy will serve us well. We have a long way to go yet to get to the point where Canada is maximizing its potential, but I believe we're off to a good start.

[Brian Masse, NDP, Windsor West, ON]

Do you have anything specific for manufacturers? What do you say to those who invested in our country and who watch our natural resources leave—say, for example, oil and other types of resources used by other countries that then turn around to penetrate our markets here, countries that have lower environmental standards, for example, or health or wage standards, while those manufacturing companies that have invested so much in Canada lose to this and consider it unfair competition because of the subsidies? Ironically, they're competing...it's Canadian raw natural resources versus their investment in not only just the actual manufactured equipment but also the human resources, on this ground.

[Ed Fast, Conservative, Abbotsford, BC]

Thank you.

First of all, I'm not going to make any apologies for the natural resources Canada has been blessed with. This is a competitive advantage that Canada has been given. Every country has been given certain advantages. Our challenge, of course, as a country is to maximize those resources.

One of the ways we do that is to forge new trading relationships, provide new opportunities for Canadians to compete around the world, provide new markets. It's one of the reasons we're focusing on the European Union. It's a market of some 500 million consumers. These are people we want to reach with our goods and services. We're making excellent progress on those negotiations.

As you know, we've also had a special focus on the Asia Pacific, opening doors in China and places such as Korea and Southeast Asia, where I've travelled extensively.

Our opportunity as Canadians is, first of all, the fact that we are highly educated, we are innovative, and we are blessed in natural resources. Putting that package together is the challenge, and opening up new markets for those skills, for that expertise, and for those manufactured goods is also the challenge. I'm working very hard to do that.

[Brian Masse, NDP, Windsor West, ON]

With regard to the EU, can you confirm whether supply management is on the table, and second to that, whether or not your administration will respect city councils such as Toronto's that do not want to be part of the European trade agreement? Will specific motions and requests from the mayor and city council be respected?

[Ed Fast, Conservative, Abbotsford, BC]

On supply management, we have made it very clear. This government's position is that we will continue to defend Canada's system of supply management. We have also said we're prepared to discuss all issues at the table. And we've reminded our trading partners with whom we're either negotiating or hoping to negotiate that in any trade negotiation the parties bring certain sensitivities to the table, as Canada does—as the EU does.

We will vigorously defend Canadian interests, but we've made it very clear that we will continue to defend Canada's system of supply management.

[Brian Masse, NDP, Windsor West, ON]

What about Toronto city council's motion and those of other municipalities?

[Ed Fast, Conservative, Abbotsford, BC]

That's the second question.

As you know, both Canada and the European Union are focused on concluding negotiations for a highly ambitious trade agreement. One area, of course, is the area of government procurement. We believe that if it's done responsibly, it can serve Canada's interest in a very significant way.

You probably know that we have consulted broadly with municipalities right across this country. I've met directly with the leadership of the Federation of Canadian Municipalities on at least two occasions. That's in addition to phone calls we've had on the various issues involved in the CETA negotiation, and I can tell you that the leadership is strongly supportive of an ambitious conclusion to these negotiations.

These are the most collaborative and transparent negotiations Canada has ever undertaken. As you know, the provinces are at the table in areas of provincial jurisdiction.

[Brian Masse, NDP, Windsor West, ON]

Mayor Ford and his council have been almost unanimous with regard to their condemnation of CETA and with regard to procurement and other things. What do you say to them? Obviously they're not swayed by the FCM.

There are others, such as British Columbia, for example. Their provincial body is against CETA.

[The Chair, Conservative, Rob Merrifield]

Time has gone, but you can give just a quick answer.

[Ed Fast, Conservative, Abbotsford, BC]

What I can tell you, again, is that we have consulted broadly across Canada. And the assurance I can provide you with is this: Canada will only sign trade agreements that are in Canada's best interest. As trade minister, I'm not going to sign off on an agreement that doesn't serve Canada's long-term interest. That is what I've communicated to municipalities across the country. I've communicated that to the provinces and territories.

Interestingly enough, we recently had our federal-provincial-territorial meeting of trade ministers, and there was unanimity, a complete consensus, on the fact that Canada needs to complete the negotiation of an ambitious trade agreement with the European Union. And I believe we're on track to do that.

[The Chair, Conservative, Rob Merrifield]

Mr. Keddy.

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

Thank you, Mr. Chairman.

Welcome to the minister, the deputy, and officials. It's a pleasure to have you here at the international trade committee today.

Mr. Chair, that I'm going to share my time with Mr. Shipley, so I'll try not to take all of Bev's time.

Minister Fast, you said a couple of things in your opening statement. First of all, you said that we cannot rest on our laurels, and I totally agree. Then you spoke a little bit about past, present, and future trade agreements, and that brings me to my question.

With the global recession and continuing weakness in the American economy, although we've seen a little bit of revitalization in the American economy recently, how important is it to diversify our markets, in your opinion? And how does that compare to the future of Canadian trade?

[Ed Fast, Conservative, Abbotsford, BC]

Let me start off by setting the context for my response.

The United States has always been and will always be Canada's largest trading partner. I can tell you that I spend more time in the United States than in any other country, because it is our most important trading relationship. It represents 75% of all the trade we do. So it's absolutely imperative that this government continue to deepen that relationship and that it makes sure that the most trusted and most successful trade relationship in the world continues to move forward. That is one of the reasons the President and the Prime Minister announced the border vision and the regulatory cooperation initiatives.

That said, it's in Canada's interest to continue to find new markets for its goods and services. It's one of the reasons I'm spending a lot of time in Southeast Asia. It's one of the reasons I've visited China twice since I was appointed minister. It's one of the reasons we're now refocusing efforts on Japan. We're looking at opportunities for us to continue to grow Canada's prosperity.

Canadians are a cautious lot. You have to understand that. Our businesses understand that there are challenges and risks attached to trying to penetrate new markets. That's why I spent a fair bit of time talking about the Trade Commissioner Service, because it's that service that provides the support our Canadian companies need to enter new markets, some of which are very challenging. But if they do it right, they can be highly successful. The rewards are very significant in some of these emerging markets. That's why the approach I've taken with trade is very much in line with our government's focus on economic growth and job creation.

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

Thanks, Minister, and thanks again for taking the time to be here.

I have been involved in agriculture all my life. We know, even from an earlier meeting this morning, that agriculture is one of those foundational industries for our country of Canada. Through many of those discussions, we've had a number of witnesses in front of us, including those from supply management. Has there ever been any doubt on the part of any of those industries about the value of this agreement, particularly with the EU?

[Ed Fast, Conservative, Abbotsford, BC]

What I would say is that as we have consulted with many other industry groups, we have also consulted with the agriculture community and in fact with the individual sectors—the dairy producers, the poultry and egg producers. We have been in constant touch with them. Our chief negotiator, Steve Verheul, continues to debrief them after each round of negotiations. I certainly believe that these are the most collaborative negotiations Canada has ever undertaken.

Agriculture is of critical importance to Canada's long-term prosperity. That is why we're trying to open up new markets for those agricultural goods and at the same time are defending the interests of all of our farmers, including those who are in the supply management sector.

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

I also understand that there is a new component to this process; that is, the involvement of the provinces, where they actually reach down to the municipality. One of the things I am also thankful for is the opportunity I had for many years as mayor of a municipality.

How do they feel? The Federation of Canadian Municipalities is the spokesperson, and really becomes the umbrella across Canada. Are they continually involved? Have they been part of these negotiations and kept involved? Sometimes we hear they aren't, but we know how important it is, mostly because of your procurement program. Could you just highlight again if they are, and make sure that we are carrying the right message back to our municipalities?

[Ed Fast, Conservative, Abbotsford, BC]

As I mentioned earlier, the Federation of Canadian Municipalities is one of the key stakeholders that we consult, and we consult with them regularly. It is not only the minister who is consulting with them. Our chief trade negotiator is in regular touch with the FCM to provide them with the information they need to continue to support a robust and ambitious trade agreement.

As I mentioned, I have met with them on numerous occasions. We are in regular dialogue with the FCM, and it does represent the municipalities across Canada. Sadly, there are some in Canada who are misinformed as to the impact a trade agreement with the EU would have on the ability of municipalities to contract.

Let's face it, municipalities are facing very significant financial challenges. Taxpayers in municipalities are finding themselves squeezed more and more because of the costs of running municipal governments. An ambitious trade agreement with the European Union will assist in providing more competition in terms of providing value for money for the various contracts municipalities have to enter into on an ongoing basis. In other words, it makes the playing field more competitive because it provides better value for municipalities right across our country.

I would also point out that it is a two-way street. You have to understand that Canada's procurement market is relatively small when you actually compare it to the EU. In fact, it is estimated that the government procurement market in the EU is somewhere in the order of $2.3 trillion. If we make the assumption that Canadian companies are fierce competitors, and compete with the very best, why wouldn't we as a government open up those new opportunities for Canadian businesses to be successful, and drive Canada's long-term prosperity?

[The Chair, Conservative, Rob Merrifield]

Very good.

Mr. Easter, you have seven minutes.

[Wayne Easter, Liberal, Malpeque, PE]

Thank you, Mr. Chair.

Welcome, Minister.

I see that all the questions so far have been on the estimates, so I might as well follow suit.

You said in your opening remarks that free and open trade is important, and that people's jobs depend on trade. To a certain extent, that's true, but only if the net benefit of a trade agreement is to Canada's benefit.

I want to just touch on what Brian said, because there is a concern in Canada that we are losing our middle class. The gap between the rich and the poor is widening. Six years ago the manufacturing labour force was 16%, and today it's 10%. That's where a lot of our middle class, so to speak, comes from.

You mentioned the nine agreements. There is no question that you are moving full speed ahead on nine agreements. But as I've raised with you in the House, I do think you're not watching closely enough the agreements that we already have. For instance, in South Korea we're at risk of losing $1 billion worth of trade because the Americans have a deal and we do not. In the United States, the Buy American provisions, the country-of-origin labelling—which we have done nothing on—and the sea and air entry fee into the United States that we lost as a result of the U.S.-Colombia trade agreement are all problems.

How do you respond to that? A number of us were in the U.S. last week, and we talked about the sea and air fee, and I will have to admit that quite a number of senators and Congress folks didn't know it was in the agreement. Why was either your department or foreign affairs—somebody—asleep at the switch? We didn't see that coming. Based on our discussions in the U.S., I think if we had talked to a few people, we wouldn't have lost that exemption. So what's the problem? Is somebody not paying attention to our existing markets, or what?

[Ed Fast, Conservative, Abbotsford, BC]

I respectfully disagree with the premise of your question. In fact, this government has been singularly focused on strengthening its trade and investment relationship with the United States. You mentioned Buy American. When Buy American first reared its ugly head, it was this government that was able to secure a waiver of those provisions back in 2009. When those provisions reared their ugly head again more recently, it was this government, this minister, my colleagues in the Conservative caucus, my ministerial colleagues, who engaged with their counterparts in the United States and aggressively made the case that when the United States imposes Buy American types of provisions on Canada, it impacts both of our economies. It appears that the message resonated. As you know, the Buy American provisions haven't had the traction that some people thought they would.

As far as focusing on agreements we already have, I've already addressed the United States, our most important trading partner. I spend more time in the United States connecting with my counterparts, businesses down there, business organizations, and members on both sides of the House and Senate there.

I also point you to the fact that Canada is reopening existing trade agreements with countries such as Costa Rica, Chile, and Israel to move first-generation agreements into second-generation agreements to include things like investment and services, making sure these agreements serve both of our countries going forward.

So we are continually looking for new opportunities to deepen our existing trade relationships, while of course also looking for new opportunities around the world.

[Wayne Easter, Liberal, Malpeque, PE]

We've had the first merchandise trade deficit in 30 years. Results don't show it. Adding up the numbers, it just seems to me that getting a trade deal for the sake of a trade deal is not the answer. There need to be results there. All the trade agreements that you've signed on really only amount to the equivalent of about 126.5 hours of merchandise trade with the United States. I'm basically saying let's not ignore the markets we already have while you add up the numbers for new trade agreements.

I have two other questions, which maybe you can answer together, because I'll run out of time. The first is on CETA on procurement. I'm wondering if you have a legal opinion on this. Given that the federal government is responsible for trade, if a municipality does not live up to an agreement—in other words, they ignore the CETA agreement and don't allow the Europeans to tender or whatever on the procurement—who is liable for the compensation or the future lost profits that have to be applied to the Europeans?

I remember, the last time you were here, trying to get an answer out of you on tariffs and access, which you failed to answer. You went back to supply management. You said in a Reuters story that you would not move on tariffs relative to supply management, whether it's TPP or CETA. What about access into the Canadian supply-managed market? Are you willing to negotiate on access?