International Trade Committee on Sept. 29th, 2011

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

Thank you very much.

I am going to focus on the proposed free trade treaty between India and Canada.

First, we see from your presentation that, at the moment, most of the bilateral investments are actually Indian investments in Canada. There is a real imbalance. So I am concerned about the possible repercussions. First, do we have a way of regaining some balance, of encouraging Canadian investments in India? Won't there be all kinds of financial consequences that will not be in Canada's interests?

[Don Stephenson]

First of all, I should say that our figures on Canadian investments in India are partial. Perhaps mainly for tax reasons, at least a large percentage, though we cannot say the majority, of Canadian investments in India go through a third country, generally Mauritius and Sri Lanka. So it is difficult to rely on our figures completely. As negotiations proceed, we will have to work out a way to get better estimates. That is the first thing.

Second, it gives me the opportunity to properly stress the importance of investment in international trade in the modern world of commerce. In a way, actually, trade follows investment. Especially in a market that is so different from Canada or North America, such as China and India, it is critically important to invest so that production happens in the country itself.

Through those negotiations and the ones on the foreign investment protection agreement, which we hope to see wrapped up soon, we want to promote investments directly. This is extremely important for the competitiveness of Canadian businesses. It must be said the businesses these days are no longer just exporters. For the reasons that Kirsten explained, they import inputs, they export finished products, they invest in other countries in order to be able to produce there, they develop intellectual property in order to make use of it all over the world. So we are dealing with a much more complicated business model these days.

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

When you say that it goes through third countries, do you mean tax evasion?

Do we have ways to observe and understand the phenomenon over the long term, or are we missing those ways at the moment?

[Don Stephenson]

We have the ways. It is just that the sources of our information on investment data, like Statistics Canada, do not perhaps show the entire picture of our trade.

I would not like to go so far as to say that it is tax evasion. I would prefer to say that going through other countries is a more effective way of dealing with the taxes. The committee might do well to hear from an expert in that area.

[The Chair, Conservative, Rob Merrifield]

Thank you very much.

Mr. Holder, you have five minutes.

[Ed Holder, Conservative, London West, ON]

Thank you very much, Chair.

In my first opportunity, I spoke about Jordan. I'd like to move it over to Panama if I could.

I recall the prior comments about bilaterals versus multilaterals. Mr. Stephenson, I think you've explained with pretty good rationale why If bilaterals are the only pond we can play in, then that's the pond we play in.

I'd like to acknowledge the government's position on that--very aggressive in trying to do bilaterals for the very reason that you mentioned when we spoke in terms of 75% of our trade being dependent on the United States. I live to see a day when we decrease the percentage with the United States but increase the numbers with the United States and increase them worldwide. I know that's why the Prime Minister and the international trade minister travelled throughout Central and South America fairly recently.

Mr. Reeder, I want to ask you a question if I can. You spoke about a couple of things that struck me as very interesting. In particular, you talked earlier about the importance of increased engagement with Panama, and you felt that it would be challenged because of the recent signing of an FTA between the United States and Panama. Why should it matter to us that the U.S. is there in front of us having already put that in place? I'd like you to try to put on record so that it's clear to me and to all colleagues why it does matter for us, even though it feels like a little bit of catch-up, and why it's important that we do this now.

[Neil Reeder]

I can answer that generally, but I think Don may want to extend that discussion about this question of getting into markets where the United States is not. I'm just thinking of your comments on the Prime Minister's visit to the region--for example, Colombia. Our FTA with Colombia entered into force August 15.

The United States FTA with Colombia is held up in the Congress. So there was great interest in that agreement among the Canadian investment community in Colombia and among Colombian exporters to Canada because they could see an opportunity for tariff reductions, and better access for exports in an environment where their biggest market—the United States in the case of Colombia—would not benefit from tariff reductions because of the complications surrounding an FTA. So the immediate gain in the case of the Colombian exporters was that they would have tariff-free access to Canada for a number of these exports and they were talking about easily doubling their exports into the Canadian market as the tariffs decline.

In this larger chessboard that Don manages more than I do, obviously if we're first into a market with an FTA ahead of the United States, it does give us some advantage. They may catch up. We're not really competitive in that sense, but you have to recognize that we do have certain gains from these agreements on the basis of being first in.

On the other hand, if we aren't first in, then we also have to catch up in a sense in the other Central American countries where the United States, for example, has an agreement with the CA4, Central American Four. They had that before we did. We're now concluding with Honduras; that's done. We're talking to the other three. But obviously they've already positioned themselves in those countries to focus on the U.S. market, and we have to sort of catch up a little bit.

[Ed Holder, Conservative, London West, ON]

Mr. Stephenson, do you want to add a little bit to that?

[Don Stephenson]

If only to reiterate what I said earlier. We talk a lot in trade negotiations about levelling the playing field for our exporters, but you know we're evil mercantilists. If we can actually imbalance the playing field in our favour, we'll do that too. It's about getting advantage or being competitive in foreign markets for Canadian exporters.

[Ed Holder, Conservative, London West, ON]

It sounds obvious, but I think it's important that be put on the record.

Ms. Hillman, in your comments you talked about something I haven't heard us discuss today, which is the issue of government procurement as it relates to the Panama Canal and what's going on with its expansion, which seems fairly significant. Procurement is obviously an issue we talk about a lot these days in trade and throughout other committees. Could you expand a little and help me understand the impact of the widening of the Panama Canal, what it's looking to do, and why that matters to Canada?

[Kirsten Hillman]

As I mentioned in my earlier statement, we have a significant chapter on procurement in this particular FTA. It gives Canadian companies in construction and other sectors access to the contracts that are being let within this enormous project in Panama. We have not taken advantage of procurement opportunities; we can now consider doing that. To build upon earlier comments, we can establish relationships and business links via this kind of megaproject, which will presumably have lasting effects once the project is done and it is then in maintenance mode.

If you'll permit me to make one more comment on your earlier question—

[The Chair, Conservative, Rob Merrifield]

Be very quick.

[Kirsten Hillman]

Would you like me to stop?

[The Chair, Conservative, Rob Merrifield]

Yes, maybe we'll pass on that for right now. It's mainly because we have a notice of motion on the table that we're going to deal with today, and our time is very tight.

Mr. Easter, you're the next to speak. There are two on the speaking list, and I'll share the time to leave us about five minutes for the motion. Is that fine?

[Wayne Easter, Liberal, Malpeque, PE]

It shouldn't take that long. I expect government support.

[Robert Chisholm, NDP, Dartmouth—Cole Harbour, NS]

I wanted to ask the presenters.

[The Chair, Conservative, Rob Merrifield]

What would you like to ask them?

[Robert Chisholm, NDP, Dartmouth—Cole Harbour, NS]

Ms. Hillman mentioned a regional benefit breakdown paper. I wonder if that could be tabled with the committee along with the information she mentioned on the economic benefits. That's all.

[The Chair, Conservative, Rob Merrifield]

That's fine.

Mr. Easter, I'll give you a couple of minutes and Mr. Keddy a couple of minutes, and then we'll move to our motion.

[Wayne Easter, Liberal, Malpeque, PE]

Mr. Stephenson, several people have referred to the importance of expanding trade elsewhere and lessening our dependence on the United States. I certainly agree with that. But your document “Canada's State of Trade - Trade and Investment Update 2011”, makes it clear that the United States will remain Canada's largest trading partner far into the future. In 2010, the United States market accounted for 74.9%, which is down a little. They're estimating by 2040 it will still be 75.5%. That's 2040, well out into the future. In terms of these recent negotiations, are you expecting those figures to change?

Second to that, in the throne speech the Prime Minister set a very tight target for negotiating the Canada-India agreement. Yet Wendy Dobson, in her article “Does Canada have an India strategy?”, reported in Embassy this year, said that those negotiating positions are very far apart. Are we going to rush to hit the deadline and put the country in difficulty in that negotiation?

[Don Stephenson]

First, with respect to the importance of the U.S. market, I don't disagree with the brilliant departmental economists who put together that report.

[Wayne Easter, Liberal, Malpeque, PE]

Good stuff.

[Don Stephenson]

But I would note that the U.S. represents 75% of our trade, and it's an awfully long way to second place. In that regard, I think we can count on the U.S. being our most important trading partner for as far as one can see into the future.

[Wayne Easter, Liberal, Malpeque, PE]

Until you and I grow hair.

[Voices]

Oh, oh!