International Trade Committee on Sept. 29th, 2011

[Kirsten Hillman]

Thank you for the question.

Of course I'd like to say yes, absolutely.

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

And I'd like you to say yes.

[Kirsten Hillman]

These things are challenging to predict, but hopefully we'll do better. I think, though, what is significant is, as I mentioned in my opening remarks, that this is a country that has had very high tariffs and some extremely high peaks, so we anticipate the benefits from those significant drops in tariffs to have quite an impact on our trade. I think the consultations we've done with stakeholders in the areas that are of interest to us demonstrate that they're ready to take further advantage of these opportunities. Unfortunately, none of us can predict exactly how that will take place, but I think conditions will be good and right for the trade to increase.

[The Chair, Conservative, Rob Merrifield]

You have thirty seconds for a question and an answer.

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

In thirty seconds, I can't clear my throat.

[The Chair, Conservative, Rob Merrifield]

Mr. Easter.

[Wayne Easter, Liberal, Malpeque, PE]

Thank you, Mr. Chair.

Thank you folks for coming.

I too want to start, Ms. Hillman, with the labour cooperation and environmental agreements. I think one of the concerns many Canadians have is that in a lot of the countries we enter into trade agreements with, our business costs are substantially higher. Whether it's in terms of the wages themselves, health and safety, pensions, or a whole range of things, we find ourselves competing against a low-wage economy. On the other hand, we have environmental regulations that are all put in place for the right reasons, but because we're competing with a country that has low environmental standards, we sometimes end up really exporting our jobs to that low environmental regulatory economy. So we lose the business here, but we don't do anything for the environment, because they pump the crap into the environment anyway.

So I'm wondering what authority there is under these labour cooperation and environmental agreements. Is there any authority the way there is under the trade agreement itself, or is it just nice wording?

Secondly, how do the labour and environmental agreements that we establish compare with the labour and environmental part of the agreements that the U.S. has? I understand theirs are not so much side agreements as parts within agreements. I could be wrong on that. Could you answer that?

[Kirsten Hillman]

I'll start with the premise of your question, which I think is quite right. The policy motivation behind concluding these side accords on labour and the environment in our bilateral free trade agreements is precisely that. There is more than one motivator, I suppose, but one may be ensuring that investment isn't attracted and business isn't attracted to a market that has either lower environmental standards or less stringent labour requirements.

[Wayne Easter, Liberal, Malpeque, PE]

If I may just interrupt for a second, then how do we enforce that?

[Kirsten Hillman]

In the labour side accords, as I was mentioning, the standards are set in accordance with the ILO convention. There is a graded system of consultation that at its most serious level is the striking of an assessment panel, and the allegation of non-compliance with the labour standards is assessed. It has the authority to render a judgment requiring monetary assessments to be paid by the country found to be not in compliance. So that's a financial penalty.

The financial penalty—and I'll check the figures for you—I think is up to $15 million. That money, then, is put into a fund and the fund is used to promote the increase in labour standards or to address the specific problem that was identified by the panel.

[Wayne Easter, Liberal, Malpeque, PE]

On India, you mentioned in your document here that the free trade agreement between the two countries has the potential to boost Canada's economy by $6 billion to $15 billion, creating jobs and prosperity for Canadian workers and for businesses of all sizes in every corner of the country. Do you have any analysis to back that up that has the figures in it? Can that be forwarded to the committee at some point in time?

There's another thing I always run into with India. If Ed were to lose his suitcase flying with Air Canada, we're dealing with a call centre in India. Where do those call centres come into the picture in terms of the calculation of trade figures?

[Don Stephenson]

We did an econometric study in the run-up to the agreement to launch the free trade negotiations with India. That joint study is available to the committee and can be provided. I think it's also on our website.

So yes, we have an analysis to back up those numbers, but I want to make the point that these are theoretical econometric studies. They are projections. What really happens depends on real Canadian companies taking advantage of the opportunities after it's over. I guess like Kirsten, I'd like to say that these are absolutely accurate assessments and predictions, but they can't be.

With respect to call centres, they would have been captured in our data on services trade, and in that sense they would have formed part of that estimate.

[The Chair, Conservative, Rob Merrifield]

Thank you, Mr. Easter. We'll move on to Mr. Holder.

[Ed Holder, Conservative, London West, ON]

Thank you very much, Chair.

I'd like to thank our guests for being here today. Mr. Stephenson, it's great to have you back to our committee.

It's rather interesting when I think about Jordan. I think since I've been on this trade committee, for the last three years, we've had some seven committee meetings on Jordan, and we were almost there, quite frankly. The agreement was signed, it came to committee and then it went back to the House, and regrettably, it was stalled. What I find interesting about its being stalled is that I thought around the table in the last session there was general thought that if you can't do a Jordan deal--I think at some point we called it a no-brainer, in the sense that it was so clear and so advantageous to do something like Jordan--if you can't do that kind of trade deal, how can you do any deal. It seems to me--and I say it respectfully to all of my colleagues as we go through this process again--that it is clear that this makes some sense.

Mr. Keddy talked about why it's important to put rules in place with companies around the world. Clearly, we already trade with every country around the world. It does two more things, though, and I'd like to expand on Mr. Keddy's comment. One is that beyond putting rules in place, it increases trade both ways. And secondly, from a competitive standpoint it reduces tariffs so that it makes it easier for us to engage in business both ways. From our standpoint--certainly from my standpoint--it certainly made a tremendous amount of sense.

Ms. Martin, if I could ask you, please, you mention in your comments the global economic slowdown challenging Jordan's gross domestic product, that export-oriented sectors such as manufacturing and so on and the transport of re-exports had been hit hardest. Just clarify for me what you mean by re-exports. Can you clarify what exactly that means?

[Barbara Martin]

I'll start, but I may defer to the trade experts on that point.

Re-export is when a product is imported into a country, there's value added by further production or manipulation of the product, and then it is re-exported with those changes embodied in that particular product.

[Ed Holder, Conservative, London West, ON]

But then when I listen to Ms. Hillman.... Clearly, with some $86 million in two-way trade from our most recent year 2010, that's pretty small by any standards that you would imagine. Can you give me some sense of why it is so critical that we do this thing with Jordan? Why does it matter?

[Kirsten Hillman]

There are a few reasons why this is a strategically important agreement.

This will be only our second free trade agreement in the region; we have one with Israel. This is an economy that is important. It's a country that is a moderate and useful ally in the region.

We find that when we increase economic ties, and I think actually your example of re-export is a very good one.... An import and re-export situation is where you have companies that are working together. It's not just a company that's producing a product and selling it to the citizens of another country, but you have a value chain, or a transformation relationship. That requires an integration of the business communities to a certain extent, the building of relationships. So strategically, having our companies build their working relationships with countries in the region is a very positive thing that goes beyond simply the benefits to the Canadian economy of selling more of product X, let's say wheat or some product that is going to be used in its final form.

Those would be my two answers: it's an important country in the region, and the agreement itself will give us a platform for not only selling more products, but building tighter business relationships.

[Ed Holder, Conservative, London West, ON]

Mr. Stephenson, a question that has come up--

[Don Stephenson]

I'm sorry, Mr. Chairman, but could I expand on that answer a little bit?

[The Chair, Conservative, Rob Merrifield]

Yes, sure, please.

[Don Stephenson]

With respect to the government's trade policy or trade negotiations agenda, I would certainly agree that Jordan, in terms of its size, would be relatively small and relatively low on that list, but I think you have to put it in the context of the broader agenda. With respect to our trade, obviously the United States is still job one. It's still 75% of our trade, and that trade is largely either tariff-free or at least has very low tariffs, so the issues are really policy and regulatory differences. That's why the government has focused on the Regulatory Cooperation Council and the border initiatives to try to address some of those issues.

With respect to our trade with the U.S., however, our share of the U.S. market is in decline. That's because others have become more competitive, so it's perhaps good news, but we are challenged in our major markets. So diversification of our markets is job two and becomes increasingly important in a globalized economy.

With regard to diversification, we focus on the major prizes, the major markets, the major emerging markets, like India, and we have established dialogue with China and Brazil that hopefully will produce results. We're negotiating with Europe, and we are in discussion with Japan. So those are the major prizes and everyone is after them.

The next groups of negotiations are what I like to call “keeping up with the Joneses”. The Europeans or the Americans--typically, the Americans--are doing a deal and our exporters are at risk of losing their markets in those countries because of the tariff advantage of the U.S. or the EU. So that's just trying to keep our markets.

The third group is those negotiations where there are foreign policy objectives as well. I think Kirsten has described Jordan in that last category.

[The Chair, Conservative, Rob Merrifield]

We'd like to offer you another round, and perhaps there will be time, but not right now, Mr. Holder.

Madame Péclet.

[Ève Péclet, NDP, La Pointe-de-l'Île, QC]

Thank you, Mr. Chair.

I would like to thank the witnesses for joining us today.

Could you tell me what specific measures, what monitoring mechanisms are in place to ensure compliance with the agreements, especially when it comes to labour rights? We have been talking about an independent review panel. Who is responsible for striking the panel? Who is going to be on the panel? Why is there no financial penalty in cases of non-compliance?

There are several parts to my question. Could you tell me why we have not adopted the American approach, under which those measures are apparently enshrined in the enforcement provisions of the free trade agreement with Panama?

[Kirsten Hillman]

First, under the labour agreement, the panel is formed according to a mechanism that is already in the agreement. Once the agreement is in effect, the mechanism in the agreement is used to create the panel, based on need and after a request has been made. There is a dialogue first, followed by this process, if necessary. We have not negotiated it under the agreement because we have always negotiated agreements this way. We feel that it is very useful to discuss those topics with labour and environmental experts, rather than combine them with obligations that are strictly related to trade.

As I said earlier, the treaty refers to those agreements and it specifies that we are going to sign them at the same time. That means that they are philosophically related. We think that it is actually better to apply individual systems that are not necessarily related to trade and that ensure that those two areas of activity are protected.

[Ève Péclet, NDP, La Pointe-de-l'Île, QC]

Could you tell me what specific measures, what mechanisms are used in Canada to ensure that Canadian businesses in the field comply with labour and ILO legislation?