Thanks very much, Chair.
I represent the Council of Canadians. I'm the trade campaigner. I think some of you may know that we're Canada's largest citizens advocacy organization. We have about 75,000 supporters across the country and we work locally, nationally, and internationally to promote fair trade; access to clean water and sanitation; energy, security, and climate justice; public health care; and other issues of social and economic concern to Canadians.
We very much appreciate this opportunity to make some general observations on Canada’s interest in pursuing a trade treaty with Japan. Before I get to my comments, I’d like to congratulate the committee for taking this step prior to a negotiation being completed. I know that normally the committee gets a signed agreement and is asked to either approve or not. This is a good opportunity to take a look at how an agreement might look differently, essentially. I want to congratulate the committee, in that respect.
In the presentation I'm about to make, I'd like to do two things. The first would be to draw your attention to a set of business and labour principles for a 21st century U.S. trade agenda that was released a few weeks ago in response to the Obama administration’s free trade agenda. I think four in particular are quite relevant to what Canada could consider when going forward with any partnership with Japan.
Second, I'd like to propose that Canada should make any negotiations with Japan contingent on its dropping its WTO challenge to the Green Energy Act. A second hearing into these disputes is happening today in Geneva, perhaps as we speak. Canada is defending the sustainable development policy, so it would seem contradictory to embrace a free trade deal with Japan while this dispute is still alive.
The first point concerns the 21st century trade agreement principles. This month the Coalition for a Prosperous America--it's a coalition of manufacturing, agricultural, worker, consumer, and citizen interests—issued a list of what they call 21st century trade agreement principles. For those not familiar with this group, its members include the Copper & Brass Fabricators Council, the Ranchers-Cattlemen Action Legal Fund of the United Stockgrowers of America, AFL-CIO, Penn United Technologies, Lapham-Hickey Steel Corporation, and other groups. I’d like to draw your attention to four of the principles, which I think could inform Canada's possible negotiation with Japan.
The first principle is balanced trade, the idea that trade agreements must contribute to a national goal of achieving a manageable balance of trade over time. This is to say that when signing a deal, Canada should not just think about export gains in a few areas but also about the impact of imports on the Canadian economy. Outside of the United States, Canada has a trade deficit with most of its free trade partners. The government’s own numbers show that the deficit will increase with the EU, for example, if the comprehensive economic and trade agreement is signed in its current form.
Like the EU, Japan is a leader in high-value-added manufactured exports. There is already a high trade deficit in autos, although the Canada-Japan relationship is fairly balanced, as I understand it, in other areas. A results-oriented goal of manageable trade, in the words of the U.S. coalition, would avoid free trade deals that are designed or destined to worsen Canada's trade balance.
The second principle would be a national trade and economic strategy. Like the U.S., Canada has tended to pursue trade liberalization as an end in itself. Our export priorities are often very similar to those of the United States—grains, meat, fish, other agricultural products—and like the U.S., Canada in its trade deals has focused narrowly on reinforcing existing trade patterns. This does nothing to improve the value-added content of our exports.
The DFAIT web page for the Japan negotiations makes it clear that the government sees mainly gains for these same raw resources, this same set of exports. Let’s call them “limited vested interest groups”. The committee has already heard from some of them during these negotiations, I understand.
Japan also calls the Canadian pattern “external dependence”. Instead of reinforcing this external dependence of the Canadian economy on exports or certain types of exports, perhaps trade negotiations should be conducted to further a national trade, economic, and sustainable development strategy. Canada’s existing free trade deals prohibit many but not all of the ways in which a government can seek to move its economy up the value-added supply chain by turning raw resources into finished goods here in Canada. The benefit of a more hands-on approach to developing our economy is that it allows you to do this in a much more sustainable way and to avoid the resource trap we seem to be getting into.
The fourth principle is temporary versus permanent agreements. Again, these are all part of the U.S. set of principles for a 21st century American trade policy.
Trade agreements should contain sunset clauses or otherwise be subject to renegotiation and renewal. This makes sense for a couple of reasons. First, under existing agreements, a country can pull out if a deal is unsatisfactory, but it's almost impossible to do so. I think having a three- or five-year period when you could renegotiate or pull out if it's not in your interest makes a lot of sense.
Trade deals can also create more hassles for governments than they’re worth. I'm thinking, for example, of investment protections and the investor-state dispute settlement provisions in NAFTA and other bilateral trade agreements. They have not improved investment flows across borders or encouraged new FDI either into or out of Canada. At least there's no evidence for it. They have been used again and again to challenge legitimate environmental public health and resource conservation measures. Canada is the sixth-most-sued country under this process, according to a recent UNCTAD report.
The fifth principle would be the domestic procurement. I'll relate this to Japan’s challenge to the Green Energy Act. The Coalition for a Prosperous America also says that trade agreements must preserve the ability of federal, provincial, and local governments to favour domestic producers in government or government-funded procurement. We agree with this principle. But successive procurement negotiations—first with the United States, then at the WTO, and now with the EU—have limited spending freedoms by provincial governments, and risk doing the same with Canadian municipalities.
We think this is the wrong way to go, and Canada in its defence of the Green Energy Act at the WTO seems to agree. The Canadian submission claims GATT rules allow governments to use procurement to pursue public policy if the purchase is for governmental purposes and not for commercial resale. This is related to the Green Energy Act dispute.
The submission also quotes Japan’s Ministry of Economy, Trade and Industry, which has claimed that GATT Article III:8(a) permits governments to purchase domestic products preferentially, making government procurement one exception to the national treatment rule. This exception is permitted because WTO members recognize the role of government procurement in national policy. For example, there may be a security need to develop and purchase products domestically, or government procurement may, as is often the case, be used as a policy tool to promote smaller business, local industry, or advanced technologies.
Given this position of the Japanese government, I think it's strange to see Japan claiming the opposite at the WTO. We strongly urge this committee, as part of Canada’s vigorous defence of the Green Energy Act, to make any negotiation with Japan contingent on their dropping this WTO challenge to Canada’s landmark sustainable development and climate change measures.