International Trade Committee on Sept. 29th, 2011

[The Chair, Conservative, Rob Merrifield]

The car is in great shape. We're glad to hear that.

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

But the car won.

[Ron Cannan, Conservative, Kelowna—Lake Country, BC]

Thank you very much, and I appreciate that kind introduction, Mr. Chair.

To our witnesses, it's good to see you back, Mr. Stephenson and your team.

I just wanted to pick up briefly before a second question. Mr. Côté made a good comment about SMEs and the importance of the trading and the economic aspect. I know small business is the economic engine that drives our economy. Locally I have been able to use the trade commissioner office in my riding. Maybe you could expand on that a little bit for the committee and explain to Mr. Côté and some of the newer committee members about the trade commissioners' role and how they can help Canadian businesses and work with your offices to export to our many emerging markets.

[Don Stephenson]

We're having some difficulty deciding who should try to address the question, since none of us really work in the trade commissioners service. It might be useful to the committee, particularly for new members, to have a briefing from the trade promotion side of the department to explain--

[The Chair, Conservative, Rob Merrifield]

I believe that will happen next Tuesday for the committee.

[Don Stephenson]

What an excellent idea, Mr. Chairman.

[Ron Cannan, Conservative, Kelowna—Lake Country, BC]

I'll save that one till next Tuesday. That's great, because I think it is a very important element to help our small-business sector. Ultimately, as a government that's our goal around the table, to grow our economy and create jobs locally.

Looking at your teamwork, Mr. Stephenson, in the WTO and some of the challenges you've been facing at the table there--I know they're having an emergency meeting in December to try to keep that on life support--could you expand on why these bilaterals are so important for Canada in creating opportunities for growth and jobs for Canadian companies?

[Don Stephenson]

When I speak about diversifying markets for Canadian exporters, it has been Canada's tradition to have as its first priority, its preferred outcome, a multilateral agreement, and therefore we have always put the priority on the WTO. We were one of the most aggressive and effective countries with respect to the establishment of the WTO in 1995 because we see that as very much in our interest. The WTO is our FTA with most of the world. It provides for predictable and transparent rules, and most especially it provides for independent arbitration of disputes.

However, with regret, it has not been possible after ten years to make progress to come to a conclusion in the current round of negotiations, the so-called Doha round, and we unfortunately do not predict success any time soon. In that context, Canada found itself to be losing ground to other traders who are more involved in a bilateral set of negotiations and in the government's trade policy strategy, which is called the global commerce strategy. It's now in the fourth year of a five-year plan. It's on the website if you can't get to sleep one evening.

Basically it describes what I've just said and comes to the conclusion that Canada should stop falling behind other countries and get active in the bilateral game. This is not to say that we have less of a priority on the WTO and on multilateral trade and trade agreements. If there is any prospect for advancement in Geneva on those negotiations, Canada will be there, but in the meantime the government decided to significantly increase its effort and its resources in bilateral negotiations and to catch up.

[Ron Cannan, Conservative, Kelowna—Lake Country, BC]

I appreciate that detailed explanation. It is very important, as you said, to help our growth and job strategy.

Speaking about opportunities to grow, not necessarily through bricks and mortar, what has made our world such a global village is availability through air service. Could you expand on some of the air service agreements and how that is helping global trading? I represent a community with the tenth-largest airport, Kelowna International Airport, and it has been a big economic generator for the whole southern region of the Okanagan Valley. Copa Airlines was mentioned. They have a direct-line flight to Panama. Could you speak about some of the air service agreements we have signed and their impact on our global commerce strategy?

[Don Stephenson]

Perhaps the chairman is about to say you've also invited Rob Ready, who is our chief air negotiator, to address the committee and he can take you through his negotiating agenda in detail.

The chief air negotiator is situated inside the trade policy and negotiations branch of the Department of Foreign Affairs and International Trade. This makes the point, I think graphically, that we link our air connections with our trade relationships with other countries. In setting that agenda, we take into consideration the commercial interests of our carriers, first of all, and second of all our airports and the related stakeholders in respect of air transportation services. But we also take into consideration the larger impact in terms of trade more generally. For example, our discussions with India recently concluded, expanding our existing agreement with India. Those negotiations were very much in the context of the broader set of negotiations on trade with India.

[The Chair, Conservative, Rob Merrifield]

Thank you very much, Mr. Cannan.

Mr. Chisholm, you have five minutes.

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

Thank you.

I have a specific question with respect to Panama, but on the point of the multilateral trade, I hope the government and the department have not backed off on understanding how important multilateral trade is. In one of my earlier questions I was thinking about mentioning the fact that we're kind of trotting around trying to beat the U.S. or trying to get in too on these deals. While that's all great, I think it's in the best interest of the global trading community if we have a multilateral deal. So I would encourage you and your department, and certainly the parliamentary secretary and the minister, to not let off on efforts to reach a multilateral deal, understanding how difficult that's been.

On Panama, Madame Hillman, you said 99% of tariffs have been taken off, trade barriers. I guess my question relates to other trade deals—for example, CETA with Europe. Some people would suggest that there are very few barriers left in most of the areas and ask what we are gaining. I guess my questions then to you are these. First, what is the change in the trade barriers and what were they before we negotiated these? Second, have you done any modelling to estimate what the economic opportunity is going to be over the next five to ten years for Canada?

Thank you.

[Don Stephenson]

First of all, with respect to the importance of the multilateral trade negotiations, it is certainly still the policy of the Government of Canada to support multilateral trade negotiations. As I said earlier, if there is movement, Canada is there and will be there. We still understand that there are some things you can only get in multilateral trade negotiations, and serious agricultural trade reform would be one of them. Strengthening of rules for what we call trade remedies, anti-dumping and countervailing measures, you can't get that bilaterally. It's clearly the best for business if there's one set of rules rather than what's been referred to as a spaghetti bowl of rules of bilateral agreements. Finally, the WTO is the most effective place for developing countries, particularly the smallest developing countries, to negotiate to use the leverage of their numbers. In the mandate for Canada's position in the WTO, we are asked to make a contribution to development through trade. So for all of those reasons we understand that multilateral trade is still important, that those negotiations are important.

I will leave the tricky question to Kirsten.

[Kirsten Hillman]

You'll notice I got out my facts and figures. I have a lot of facts and figures, so I will try to highlight some of the analysis we've done on both the specific reductions and some of the benefits we see.

I have a document here that you might find interesting, where we go through some of the benefits region by region in Canada. So let me take you through it. I'll start with the west. That is how my document's set out.

Once the agreement is implemented--there is about a 15% tariff on wood products, and this isn't strictly speaking a western issue—our forest and paper industries will see a 15% reduction. On oils and fats, they have tariffs as high as 30%, and they will be completely eliminated. In our machinery and machines industrial sector, information and communication technology, and some power-generating machinery, tariffs up to 50% in Panama will also be eliminated.

We will see the elimination of tariffs of between 15% and 40% on pulses and cereals. Precious stones, metal, iron, and steel also have tariffs of up to 15%, which will be eliminated. With potatoes, there is a large gain for us. There are Panamanian tariffs as high as 81%, which will be eliminated. Frozen french fries will no longer face Panamanian tariffs of up to 20%.

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

Madam, excuse me, our time is almost up. I wanted the kind of the economic modelling you would have done.

[The Chair, Conservative, Rob Merrifield]

It's not almost up, it is up.

If you have anything on that, I'll entertain a quick answer.

[Kirsten Hillman]

On the actual projected benefits, I'm sure I have that in my binder. I'll look for it and see if we can come back to it.

[The Chair, Conservative, Rob Merrifield]

Thank you very much.

Mr. Hiebert, you have five minutes.

[Russ Hiebert, Conservative, South Surrey—White Rock—Cloverdale, BC]

Thank you, Mr. Chair.

Thank you all for being here this morning. I think it's a great primer on the importance of trade and its impact on our economy.

I'd like to ask you some questions about that, but before I get to that, we've heard a couple of comments this morning. Just a few minutes ago Mr. Stephenson made the comment that Canada should stop falling behind other countries. It made me think about how earlier in the presentation Mr. Reeder said that Panama has a free trade agreement with the United States. Somebody else--maybe Mrs. Hillman--mentioned that Jordan already has free trade agreements with the EU and the United States.

So I got to thinking about our competitive disadvantage. If Canada doesn't sign these free trade agreements shortly, the EU and the United States have these agreements, so their companies can go into these countries on a preferred basis and negotiate great deals. But Canadians are being left behind. We can't compete because the tariffs are still in place for us. Is that not the case?

How would you explain to the ordinary Canadian that we have horses in this race, and right now the United States and the EU have less baggage to carry, less weight on their backs, and they're running ahead of us?

[Don Stephenson]

I'll take a crack.

It's simple mathematics. If your competitor has a lower tariff or no tariff, but you pay one, they have a competitive advantage in the marketplace and will eat your lunch.

I take the point of the other member, who commented that sometimes we also try to get ahead of the United States and Europe. For example, in respect of the Colombian market, we're very pleased to say that we have a competitive advantage now over the U.S. and they're playing catch-up. But that's the nature of the game, and it's simple mathematics.

Even a small tariff difference can be important. In the case of commodities, for example, a 2%, 3%, or 4% tariff can make a significant competitive difference when you're trying to sell into another market.

[Russ Hiebert, Conservative, South Surrey—White Rock—Cloverdale, BC]

Is it safe to say that the tariff amount, whether it's 3%, 4%, 5%, 15% or 50%, could be the margin of profit? It could be the deciding factor whether or not to even seek out business in some of these other countries?

[Don Stephenson]

I think it's safe to say that.

[Russ Hiebert, Conservative, South Surrey—White Rock—Cloverdale, BC]

It's important for Canadians to understand how critical these agreements are to kitchen-table discussions, as the minister likes to put it. In my community there are exporters who are wanting to get into some of these markets, and they simply can't compete because of these restrictions.

This leads me to another question: how do we get this information into the hands of Canadian companies? Of course it's covered in the national news that we're negotiating these free trade agreements. But does the department send out this information to the potential exporters in the country, telling them we've now opened up in such and such a market? It might be frozen french fries. Does somebody call McCain and say, “You might want to call up the Panamanian grocery stores and see if they're willing to take your products, because here's the latest?” Does the department do that?

[Don Stephenson]

Next week, when you're briefed by our colleagues in the trade commissioner service, you will hear how we use this service and our regional offices to identify opportunities for specific Canadian businesses and exporters. They will have information about new trade agreements that they can pass on to individual Canadian businesses.

At a macro level, we principally work through our consultations with the major industry associations--the Canadian Manufacturers & Exporters association, the Canadian chambers of commerce, and the Canadian Council of Chief Executives--so that their memberships are made aware of these opportunities.

Specific to individual negotiations, we might also have more targeted consultations. For example, in respect to the negotiations that I am leading with India, my advisory committee includes many of the Indo-Canadian chambers, business associations, to try to inform my audience of the opportunities that are available. But that briefing is mostly for next week.

[The Chair, Conservative, Rob Merrifield]

Thank you, Mr. Hiebert.

Mr. Côté.