International Trade Committee on June 19th, 2012

[Don Davies, NDP, Vancouver Kingsway, BC]

But what if a contractor...? The City of Hamilton privatized water some time ago, did it for I think 10 years, and figured out that the price was actually more expensive and they didn't like the quality. So at the end of a contract, if they decide to take it back to public, is there anything in CETA that would inhibit a municipality's ability to do that without being sued?

[Steve Verheul]

No. If the government in question is going to take it back—out of the private sphere and back into the public sphere—when there's no contracted issue and there are no losses at risk, then that's fair game.

[Don Davies, NDP, Vancouver Kingsway, BC]

Thank you, sir.

[The Chair, Conservative, Rob Merrifield]

Thank you very much.

We'll now move to Mr. Keddy.

The floor is yours for seven minutes.

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

I'm still thinking about a Newfoundland example. I'm just kind of shaking my head a little bit.

Just to revisit the idea of an investor-state provision for protection of investment, maybe we can just explore that a little more, because that is a concern, and it's certainly an issue raised by the opposition on a regular basis. To me, the concept that government shouldn't be all powerful and shouldn't simply have the right to expropriate private property at whim.... Although that right is there, the other part of that right is just compensation.

So the idea of having a foreign investment protection and promotion agreement, or the chapter 11 in NAFTA, or investment protection in any free trade or economic partnership agreement, is to protect—and I'm going to say this—both the government's ability to privatize, because they can privatize, but also the investor's right to have fair compensation for that. Is that an oversimplification or is that pretty well what we're talking about?

[Steve Verheul]

It's a bit simplified, but generally that's the kind of notion that's at stake.

I think we already invest a fair amount from Canada into the European Union, into various member states, and the European Union also already invests a great deal into Canada. As part of this agreement, we're looking to encourage a lot more of that investment going both ways. That's part of the opportunities we see coming out of this.

If you're going to encourage and develop investment in that kind of environment, you want to assure investors that it's going to be a secure environment and one in which they can make those investments with confidence. Investor-state provisions such as that help build the confidence that they have avenues if things happen to go wrong.

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

Yes.

I want to take that to the municipal side as well. The third level of government in this case is represented at the table by the provinces, but we've made a constant attempt, through both myself and Minister Fast, to continually brief the municipalities on what is going on.

Again, the same principle would apply, I think. There's nothing in this agreement, to my understanding, that prevents the municipalities from making a public service, if they're willing, out of a private service, if they're willing to pay just and fair compensation to do that. And take that a step further, I guess, to look at the right of municipalities to pass laws on behalf of the environment, on behalf of social services, on behalf of...and provinces as well for health care delivery and all of those things are exempt from the clauses of the CETA, as I understand it.

[Steve Verheul]

Overall, I think, despite some of the attention this has gotten in the public, we would expect the actual impact on municipalities to be quite limited. They already have obligations under other agreements, including the agreement on internal trade, that go beyond what we're talking about within the CETA negotiations.

We're not anticipating that the impact will be that significant.

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

Very good.

One issue, though, that I actually do think is quite important is that at the beginning of this agreement, there was some discussion that we may be able to get around some of the rules of origin, which can be quite restrictive, simply by saying, if it was Parma ham, that it was “Canadian-style” Parma ham or something like that.

The Europeans seem to be fairly entrenched on what they're asking for. Many of those battles have been fought. There's no discussion on champagne anymore. That's gone through the court system. It's been challenged; Scotch whisky, the same thing.

But apparently they've not all been fought. Are we getting closer on reaching some kind of agreement?

Not that my only two examples were alcoholic-based there, folks, but....

[Voices]

Oh, oh!

[Steve Verheul]

When it does come to issues related to geographical indications of the type you mentioned, champagne and others, we have made a significant amount of progress on that issue. We haven't gotten to the most difficult issues yet, but we have clearly moved in the EU's direction.

We've made it clear, though, that if we're going to start talking about common names, generic names in the Canadian marketplace, that's a different kind of issue. If we're talking about conflicts with trademarks in the Canadian market, that's a different kind of issue. If we're importing a lot of the same product from other countries, which would then have an impact on that trade, that's another issue. If there's a lot of Canadian production, it's another issue. All of those factors are being taken into account.

In this area, the EU is mostly interested in some varieties of cheese, some processed meats, but they're also interested in some far less controversial products, such as olive oil. A lot of their lists contain olive oil, which, as you would know, isn't produced that commonly within Canada.

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

Yes, exactly.

At the beginning, it certainly looked as if we were going to get a very good agreement on fish. What I'm hearing now is that the EU is starting to look at some regulatory changes within the EU itself. We get back into that old game of non-tariff trade barriers, and I think that's a concern for everyone.

Is there a way to prevent some of that, at the end of this agreement?

[Steve Verheul]

Well, yes, there certainly will be. We're doing what we can at the moment to prevent the kinds of actions you're talking about from actually coming to pass. We've received some positive reception to that within the EU. Clearly, once we reach a final agreement, they would not have the scope to take any measures of that variety. When it comes to fish and seafood, the EU has offered us complete duty-free, quota-free access to their market, which would be locked in. There's really no way of moving away from that. This is something they haven't offered to all that many trading partners because it is a sensitivity within the EU.

[The Chair, Conservative, Rob Merrifield]

Thank you very much, Mr. Keddy. Your time is gone.

We'll move to Mr. Easter.

[Wayne Easter, Liberal, Malpeque, PE]

Thank you, Mr. Chair.

Thank you, both, for appearing before the committee in an open session.

Steve, as you did in your former capacity on GATT, we know you do the best you can for the country given the mandate you receive from the government. I do want to say in the beginning that I think all of us who were in Brussels really appreciated the opportunity to meet with you and the European negotiator.

I don't believe you've had any sessions yet since the Prime Minister gave his little lecture to Europe. We're wondering if that will have an impact on the discussions in that the Europeans certainly know that since this Prime Minister came into place, the accumulated debt of the country has gone up by $140 billion. They do their research.

Do you think there will be any impact from this kind of attack on Europe, and from not being there to support them, in terms of our ability to get an end result on the CETA. It seems to me that last week we saw that the trade minister had basically been replaced by the Prime Minister's chief of staff to try to get a TPP concession, and the Prime Minister's priority seems to have moved to the Trans-Pacific Partnership. So we're wondering if the government's real priority is still CETA and whether there will be any impact from the Prime Minister's lecture to Europe.

[Steve Verheul]

I certainly have not received any indication that completing this negotiation is less than a top priority of the government. I think they see tremendous value in completing this negotiation with a trading partner the size of the European Union. So certainly no message was received on that front.

On the broader issue, I'm in quite regular contact with my counterpart from the European Union. They have not raised any concerns about statements outside of the negotiations. To be honest, we're more than fully occupied with trying to bring this negotiation to a conclusion, and our focus is purely on the negotiations themselves.

[Wayne Easter, Liberal, Malpeque, PE]

External factors, though, do have an impact, especially when it's the Prime Minister of the country who's talking. I think we have to realize that.

On the pharmaceutical side, as you know we have the generic industry saying that health care costs will go up by $2.8 billion. We have the pharmaceutical industry saying that cost is not right, that it will basically be a balance, and that it will create a lot of investment in Canada and develop new products. Has the Canadian government itself done any independent analysis to determine what the actual figures really are? The pharmaceutical industry is pushing their line and using research to do it, and the generic industry is doing the same, but has the government itself done any independent analysis to see what your figures might be?

[Steve Verheul]

I'm certainly aware that the departments that would be most involved in this—the industry department and the health department—have been doing some consideration of these issues with respect to potential impacts or the impact of not taking any action. They haven't shared those studies with me, and I'm not even sure to what level of detail they've gone into. Clearly, with the kinds of requests the Europeans are making, we always evaluate those, whether we intend to move on them or not.

[Wayne Easter, Liberal, Malpeque, PE]

I guess the other side of that coin is that you have the European pharmaceutical industry with its rules and patent restrictions and so on. On the other side of us you have the United States, and then you have us in the middle with a different set of rules. Given that complication, I think there is some worry that making certain concessions to the Europeans will drive capital out of Canada and into the U.S. for research in the pharmaceutical areas. Can you say anything on that or is there any analysis?

I think these are huge concerns: one, the cost to our health care system, and two, the possibility of losing investment to the United States if we don't consider all three issues—those of Canada, the United States, and Europe—in terms of the pharmaceutical industry.

[Steve Verheul]

Well, I think those issues are being considered. I think they're being considered more from a domestic perspective than a trade perspective at this point because of some of the factors that you're talking about.

Obviously, government policy in this area is going to be.... We've been hearing quite a bit from both the EU and the U.S. on these issues, but I think all of those factors are being taken into account, including the potential impact on health care costs and the potential impact on provincial governments, which have been raising the issue with us as well.

So there's an active domestic debate going on at the moment, but I wouldn't say that it has shown itself in the trade negotiations to this point.

[Wayne Easter, Liberal, Malpeque, PE]

It wouldn't be right if I didn't raise supply management. Can you tell us where discussions are at in that area? I know that both Europe and Canada have sensitive commodities, and for both of us I think that's to our advantage in terms of this discussion, but is there any move to increase access for European cheeses as part of the concessions?

Or is there any move that you're aware of to lower tariffs? There's a huge difference between the two, but what kinds of concessions are being considered there, if any?

[Steve Verheul]

Well, these discussions remain not very well advanced at this point in time. The EU has clearly expressed—and has for a long time—some interest in our dairy market. We've expressed a lot of interest in their beef market and in their pork market in particular, among others. We have not had any kind of exchange of specific requests, or no formal offers have been put on the table in these areas.

But I think that from our perspective we have to look at this across the balance of the entire agreement. We're responding to the EU's most important offensive issue, which is government procurement. We're going a considerable way on issues related to intellectual property that are also of concern to them, and we're expecting the balance to be achieved through the achievement of greater market access for us when it comes to those types of products, including beef and pork.

[Wayne Easter, Liberal, Malpeque, PE]

Thank you, Steve.

[The Chair, Conservative, Rob Merrifield]

Thank you.

Mr. Hiebert, you have seven minutes.

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

Thank you.

My first couple of questions deal with the context of the negotiations. I know you've mentioned that last fall the EU debt crisis was having some impact on negotiations. I'm wondering, since the debt crisis has escalated in the last six or seven months, what impact that would be having on your negotiations with your counterparts.