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Evidence of meeting #33 for International Trade in the 41st Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was negotiations.

A recording is available from Parliament.

On the agenda

MPs speaking

Also speaking

Ian Burney  Assistant Deputy Minister, Trade Policy and Negotiations Branch, Department of Foreign Affairs and International Trade
Denis Landreville  Lead Negotiator, Regional Agreements, Trade Negotiations Division, Trade Agreements and Negotiations Directorate, Department of Agriculture and Agri-Food
Shenjie Chen  Head, Research Projects Unit, Department of Foreign Affairs and International Trade
Phil Calvert  Director General, North Asia Bureau, Department of Foreign Affairs and International Trade

11 a.m.

Conservative

The Chair Conservative Rob Merrifield

I'd like to call the meeting to order.

I want to thank our witnesses for being here.

We as a committee have completed a study on the EU free trade agreement. We just finished passing a piece of legislation, which has gone back to the House, on the Jordan free trade agreement. We're waiting for the one on Panama. It has yet to come from the House.

We want to embark on a very exciting, comprehensive, and high-level economic partnership agreement between Canada and Japan.

We have with us the Department of Foreign Affairs and International Trade. We have some people from the Department of Agriculture and Agri-Food.

Mr. Ian Burney, you have a presentation for the committee. If you would introduce your entourage, we will yield the floor to you. We look forward to what you have to share with the committee.

May 1st, 2012 / 11 a.m.

Ian Burney Assistant Deputy Minister, Trade Policy and Negotiations Branch, Department of Foreign Affairs and International Trade

Thank you very much, Mr. Chairman.

As you've heard, my name is Ian Burney. I'm the assistant deputy minister for trade policy and negotiations at the Department of Foreign Affairs and International Trade.

It's certainly my pleasure to be here today to speak to you on the topic of the launch of Canada-Japan free trade agreement negotiations, or to use Japan's preferred terminology, economic partnership agreement.

As you've noticed, I have an entourage with me, to which I intend to pass all the tough questions. Let me introduce them.

Marvin Hildebrand is the director general of the trade negotiations bureau at DFAIT. Phil Calvert is the director general of the north Asia relations bureau, which covers Japan. Dany Carriere is the director of the trade policy and negotiations division. And from Agriculture and Agri-Food Canada, we have Denis Landreville, who is the lead negotiator for regional agreements in the trade negotiations division.

I will begin by giving you an overview of the context. Prime Minister Harper and Japanese Prime Minister Nova announced the launch of negotiations towards a Canada-Japan economic partnership agreement, or EPA, on March 25, 2012, in Tokyo. This initiative is an opportunity to expand Canada's trade and investment with one of the world's wealthiest and most innovative economies, and is consistent with the government's ambitious pro-trade plan.

As you know, the pursuit of trade agreements is a key element of Canada's broader economic plan. The government's goal is to create jobs, growth and long-term prosperity for Canadians and Canadian businesses by expanding trade and economic opportunities abroad, an objective recently reaffirmed in the federal budget.

Accordingly, Canada has been pursuing an impressive—and growing—number of trade initiatives with key trade and investment partners.

Since 2006 Canada has concluded free trade agreements with nine countries, the four European Free Trade Association states of Iceland, Norway, Switzerland, and Liechtenstein, followed by Peru, Colombia, Jordan, Panama, and most recently Honduras. Many more are in the works, including free trade negotiations with the EU, Canada's most significant trade initiative since the signing of the NAFTA nearly 20 years ago.

In addition to the ambitious pursuit of free trade agreements, Canada is also expanding its network of foreign investment promotion and protection agreements--FIPAs--science and technology cooperation agreements, and air services agreements. The overall objective is to solidify and expand Canadian access to global markets.

Let me now turn to Japan, which is the world's third-largest national economy, with a GDP of $5.8 trillion in 2011. It's also one of Canada's most important economic and commercial partners.

Japan was Canada's fourth-largest merchandise export market in 2011, with exports totalling $10.7 billion. It was also our fourth-largest supplier of imports for the same year, at $13.1 billion.

Beyond trade in goods, Canadian exports of services to Japan reached nearly $1.3 billion in 2011, while our service imports from Japan were valued at $1.5 billion the same year.

In 2011 Japan was Canada's single largest source of foreign direct investment from Asia, even ahead of China. At the end of 2011 Japan had a foreign direct investment stock of $12.8 billion in Canada. More than 330 Japanese subsidiaries and affiliate companies now operate in Canada, employing tens of thousands of Canadians. Not surprisingly, many Canadian companies are active in Japan as well, with the stock of Canadian direct investment in Japan totalling $8.4 billion in 2011. For example, companies such as Manulife, Magna, Linamar, Celestica, Bombardier, and Scotiabank all have a direct and active presence in the Japanese market.

A free trade agreement with Japan would build on these strengths to deepen our trade and investment ties with this influential economy. In fact, the department's chief economist projects that a Canada-Japan free trade agreement would generate billions of dollars in additional trade and commerce between our two countries.

On March 7, 2012, Canada and Japan released the Report of the Joint Study on the Possibility of a Canada-Japan Economic Partnership Agreement, which examined the potential of an economic partnership agreement between our two countries. According to the findings, there remains much untapped potential in our commercial relationship. A bilateral free trade agreement with Japan could increase Canada's GDP by US$3.8 billion, and boost exports to Japan by as much as 67%, or $7 billion over current exports.

The joint study report further concludes that an agreement would deliver improved consumer welfare, along with strengthened bilateral trade opportunities for energy, other natural resources, food products, manufactured goods, forestry products, and fish and seafood products.

But the benefits of pursuing an FTA with Japan go well beyond commercial gains, as compelling as those are. It would bolster Canada's reputation on the world stage as an FTA partner. It would also contribute to Canada's growing trade policy engagement in Asia, building on our negotiations with India, Korea, and our recently launched exploratory discussions with Thailand.

As the committee is no doubt aware, Canada and Japan have also both expressed an interest in the Trans-Pacific Partnership negotiations. A bilateral FTA with Japan and our shared interest in the TPP negotiations are mutually supportive and compatible. Bilateral negotiation would allow for both Canada and Japan to advance our respective interests with one another, while the broader TPP process could enhance greater regional economic integration, a long-term goal for the Asia-Pacific region.

The Canada-Japan FTA initiative represents a strategic opportunity that has been years in the making. In November 2010 Japan's cabinet adopted the basic policy on comprehensive economic partnerships, which seeks to reform Japan's domestic trade and agricultural policies. Japan has shown strong interest in comprehensive negotiations with Canada. The joint study found “sufficient common ground to launch the negotiation of a comprehensive and high-level economic partnership agreement”.

With that objective in mind, Canada will seek the elimination of Japan's tariffs in areas of export interest to Canada, including in the agriculture, fish and seafood, forestry, and industrial good sectors. The negotiations will also seek to address non-tariff barriers and to create a more secure regulatory regime for services, trade, and investment, including more secure market access in services sectors of export interest, such as professional services and energy-related services. We will also seek to strengthen and enhance our already large two-way investment flows by negotiating high-standard investment provisions.

In addition, Canada and Japan are considering ways in which an agreement should reflect our mutual commitment to high standards of environmental protection and labour practices. Japan is one of the world's leading innovators and one of Canada's most vital trade partners. An FTA with Japan would represent a critical piece in Canada's ambitious pro-trade plan and a valuable opportunity to strengthen our growing engagement in Asia. What's more, this is an important time to be negotiating with Japan, given the ongoing public debate in Japan on key domestic reform initiatives and the prospect that Japan will become much more active in international trade negotiations in the years ahead.

It is also important to note, Mr. Chairman, that Canada engaged in extensive consultations prior to the launch of these negotiations, including through the Canada Gazette and numerous meetings with Canadian stakeholders.

Support from the Canadian business community for this initiative has been overwhelming. Many stakeholders have publicly expressed their support for a FTA with Japan since the announcement last month, including the Canadian Manufacturers & Exporters, the Japan Automobile Manufacturers Association of Canada, Toyota Canada, the Canadian Association of Petroleum Producers, the Canadian Meat Council, the Canadian Canola Growers Association, and the Forest Products Association of Canada.

Canada has also engaged in extensive consultations with the provinces and territories, which were strongly supportive of the joint study process and the launch of negotiations. British Columbia and Quebec have been particularly vocal in their support.

In terms of next steps, both Canada and Japan will identify chief negotiators in the near future. On May 8, I will be in Tokyo and will meet with key Japanese government ministries. My principal objective is to begin discussions with Japan on some of the organizational and process issues related to preparing for the first round of negotiations.

In conclusion, Mr. Chairman, free trade negotiations are increasingly important for promoting Canadian commercial interests around the world, and hence for creating prosperity here at home. Our competitors are negotiating agreements at a pace never before seen. Canada has risen to the challenge with our own ambitious pro-trade plan, and the Canada-Japan initiative is a key element of that. Clearly, we are only just getting going with Japan, but the government is committed to pursuing an agreement that promotes Canada's wide-ranging interests in this market. In so doing, we will continue to consult closely with all interested Canadians.

We thank the committee for this opportunity. My team and I look forward to hearing your views, which will help shape our negotiating positions, and to responding to any questions you may have.

Thank you.

11:10 a.m.

Conservative

The Chair Conservative Rob Merrifield

Thank you very much for the initial overview of the potential that we have before us with regard to a trade agreement with Japan and Canada.

We will now go to our question and answer portion of the meeting. We will start with Mr. Don Davies.

The floor is yours, sir. You have seven minutes.

11:10 a.m.

NDP

Don Davies NDP Vancouver Kingsway, BC

Thank you, Mr. Burney, and all of the other witnesses for being with us today.

The report of the joint study on the possibility of a Canada-Japan economic partnership concludes that such an agreement in general would be an economic benefit to both countries. Have any industries or sectors been identified that you think would be losers by any such agreement?

11:10 a.m.

Assistant Deputy Minister, Trade Policy and Negotiations Branch, Department of Foreign Affairs and International Trade

Ian Burney

What I can say is that during the public consultation process that we had last year in the context of the joint study, we received something like 32 submissions from Canadian stakeholders. Of those, two were in the category of critical or concerned, 26 were in favour, and four were neutral. The ones that were in the area of concern came from the CAW and from the CVMA, the Canadian Vehicle Manufacturers Association. It would be fair to say that there may be some concerns on the part of the U.S.-owned Canadian manufacturers in Canada about the possible implications of eliminating the tariff in the context of a free trade agreement. That's on our side.

11:10 a.m.

NDP

Don Davies NDP Vancouver Kingsway, BC

Okay. That's from the submissions you received. Has the department identified any sectors or industries they think might not be net winners from such an agreement, beyond those two areas?

11:10 a.m.

Assistant Deputy Minister, Trade Policy and Negotiations Branch, Department of Foreign Affairs and International Trade

Ian Burney

The department itself is not indicating that even the automotive sector would be a loser. In fact, we would see some opportunities in the Japanese market. In fact, the basis for the concern the Canadian Vehicle Manufacturers Association conveyed to us is the perception that the Japanese market is closed through a variety of non-tariff measures. The point we have made to them is that it's through a negotiation that we would have the best opportunity to address their concerns.

I guess the answer to your question is no. Our assessment is that an FTA with Japan would be a plus for Canadian business.

11:10 a.m.

NDP

Don Davies NDP Vancouver Kingsway, BC

Would it be a plus across all sectors and industries? You can't identify any industries or sectors you think would be losers from such an agreement? Is that your testimony?

11:10 a.m.

Assistant Deputy Minister, Trade Policy and Negotiations Branch, Department of Foreign Affairs and International Trade

Ian Burney

We expected that stakeholders who had perceived that an agreement of this nature would be negative for them would have brought their concerns to our attention.

11:10 a.m.

NDP

Don Davies NDP Vancouver Kingsway, BC

Regionally, would an increase in trade relations between the two countries benefit a certain region or regions in Canada more than others, in your view?

11:10 a.m.

Assistant Deputy Minister, Trade Policy and Negotiations Branch, Department of Foreign Affairs and International Trade

Ian Burney

Given that Japan is the world's third-largest economy, and the relationship is as big as it is, we would expect that the benefits would be spread across the country and that there would be benefits in all regions.

11:10 a.m.

NDP

Don Davies NDP Vancouver Kingsway, BC

Okay.

My numbers might be a bit off on this, Mr. Burney, but I am led to believe that Canada's trade deficit in manufactured goods was about $18 billion in 2005. I think it's approaching $80 billion today. The report points out that Canada exports mostly raw or almost raw resources, and imports goods that are value-added. Given the current imbalance in our trade relationship with Japan, do you think that the trade deficit in manufactured items would be accelerated or decreased by signing an agreement with Japan?

11:10 a.m.

Assistant Deputy Minister, Trade Policy and Negotiations Branch, Department of Foreign Affairs and International Trade

Ian Burney

The first point I would make is that the trade balance is actually pretty even.

11:10 a.m.

NDP

Don Davies NDP Vancouver Kingsway, BC

It's even in manufactured goods?

11:10 a.m.

Assistant Deputy Minister, Trade Policy and Negotiations Branch, Department of Foreign Affairs and International Trade

Ian Burney

No, it's even in trade as a whole. Our exports and imports from Japan are pretty close. In fact, according to Japanese import statistics, it's almost in perfect balance.

I don't have the detailed breakdown in terms of sector by sector, but the point the joint study makes is that our trade is broadly complementary. That is, we're each exporting products we specialize in.

11:10 a.m.

NDP

Don Davies NDP Vancouver Kingsway, BC

Do you mean it's complementary in aggregate?

11:10 a.m.

Assistant Deputy Minister, Trade Policy and Negotiations Branch, Department of Foreign Affairs and International Trade

Ian Burney

In aggregate, absolutely.

11:10 a.m.

NDP

Don Davies NDP Vancouver Kingsway, BC

What I want to drill into, Mr. Burney, is manufactured goods. I think the thesis I am putting to you is that Canada is exporting a lot of raw resources and primary goods, and we're importing a lot of manufactured items. Is there a trade deficit or imbalance in that respect?

11:10 a.m.

Assistant Deputy Minister, Trade Policy and Negotiations Branch, Department of Foreign Affairs and International Trade

Ian Burney

I think the statistics are pretty clear that we import more manufactured goods from Japan than we export. But I'm not sure that I would accept the thesis that it's all raw materials and low-value products. There are a lot of high-value products within the resource sectors that are going to Japan, and the percentage of our exports to Japan that are in high-valued manufactured and processed goods is actually growing as well. It's entirely possible that trend would be accelerated in the context of free trade.

11:15 a.m.

NDP

Don Davies NDP Vancouver Kingsway, BC

Okay.

I know we're lucky enough to have some beef producers in the room, so I want to turn to agriculture briefly. Agriculture and agrifood producers in Canada are significant exporters to Japan now. We're led to understand that Japan has historic protectionist policies with respect to its agriculture sectors. So I'm wondering what Canada's approach to achieving better access to Japan's market in the agricultural sector consists of, both in relation to tariff and non-tariff barriers. Can you give us some information on that?

11:15 a.m.

Assistant Deputy Minister, Trade Policy and Negotiations Branch, Department of Foreign Affairs and International Trade

Ian Burney

Well, I'll start and perhaps Denis can add to this.

There's no question that, from a Canadian standpoint, seeking better access in agriculture, as well as fish and forestry products, will be a high priority for us. It constitutes nearly half of our exports to Japan now, and those are the areas where the levels of protection in Japan are relatively highest. So that would be very much what we will be going to the table to pursue.

You're quite right that the issues are not confined to tariffs. So in addition to seeking tariff elimination, we would be looking at a range of non-tariff measures as well: everything from SPS and TBT issues to regulatory barriers and other mechanisms that impede the flow of agricultural products into the Japanese market.

So we would be coming to the table from the standpoint that everything is on the table for discussion, but certainly we don't underestimate the challenges in that regard, because these are very sensitive areas in Japan.

11:15 a.m.

NDP

Don Davies NDP Vancouver Kingsway, BC

On Canada's supply management system, we met last week with the egg producers, and I think I can say that all parties have been quite strong in our support for Canada's supply management system. Can we go into these negotiations confident that Canada would not be negotiating away our supply management system in the agricultural sector?

11:15 a.m.

Assistant Deputy Minister, Trade Policy and Negotiations Branch, Department of Foreign Affairs and International Trade

Ian Burney

I think you can be confident that we would be not negotiating away our supply management system. I think I could also add that during all of the exploratory discussions we've had with Japan, we've been given no reason to believe that represents an offensive interest for them.

11:15 a.m.

NDP

Don Davies NDP Vancouver Kingsway, BC

Okay.

Am I out of time?

11:15 a.m.

Conservative

The Chair Conservative Rob Merrifield

You could have one more very quick one, maybe, if it's very quick.