International Trade Committee on Sept. 25th, 2012

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

Read the motion.

[The Chair, Conservative, Rob Merrifield]

Could you repeat the motion?

[Don Davies, NDP, Vancouver Kingsway, BC]

Yes. I move that we have the witnesses here from the department for this meeting and that we reschedule the other two witnesses.

[The Chair, Conservative, Rob Merrifield]

All in favour? Opposed?

(Motion negatived)

The motion is defeated.

Okay. Away we go.

We have the department here. We have Mr. Cameron MacKay, from the China trade bureau of the Department of Foreign Affairs and International Trade.

I assume you're leading the delegation to make a presentation, so if you could introduce the rest of your panel and proceed, the floor is yours, sir.

[Cameron MacKay, Director General, China Trade Policy Bureau, Department of Foreign Affairs and International Trade]

Thank you, Chair.

Thank you, Mr. Chair, for this opportunity to appear before the committee and speak to Bill C-24, An Act to implement the Free Trade Agreement between Canada and the Republic of Panama, the Agreement on the Environment between Canada and the Republic of Panama and the Agreement on Labour Cooperation between Canada and the Republic of Panama.

My name is Cameron MacKay, and I was the chief negotiator for the free trade agreement, or FTA, in 2008-09. I am currently the director general of the China Trade Policy Bureau of the Department of Foreign Affairs and International Trade. I am joined today by a few colleagues.

John O'Neill is director of the investment trade policy division, and Jeff Marder,

also from Foreign Affairs and International Trade Canada.

Jeff is director of the bilateral relations division with respect to Panama and Central America.

Also with me is Pierre Bouchard, from Human Resources and Skills Development Canada, as well as Alain Castonguay, from Finance Canada.

The Canada-Panama free trade agreement is a concrete demonstration of the government's commitment to an ambitious bilateral and regional pro-trade plan, consistent with both the global commerce strategy and the Americas strategy. To compete and succeed in international markets in this hemisphere and beyond, Canadian companies need a level playing field with respect to tariffs and market access. The Canada-Panama FTA achieves that goal.

Panama's economy is small, but by virtue of its geographic location, it occupies a strategic position in the global trading system, with approximately 5% of global trade transiting via the Panama Canal. That is why Panama is often referred to as the gateway to Latin America, and represents an entry point and logistics hub for the broader Latin American market.

Panama is also a high-growth emerging market. According to the World Bank, Panama's GDP growth rate over the past five years, from 2007 to 2011, was 10.6%. The IMF forecast for 2012 is 7.5% growth. That means Panama is the fastest-growing economy in Latin America, and, according to the IMF, is expected to grow by over 6% per year during the next five years. Clearly there are opportunities there for Canadian businesses.

But Canadian companies face some stiff competition in this dynamic market. Like Canada, Panama is a strong proponent of open and free markets, and has an active and ambitious free trade agenda. Late last year, President Obama signed the United States-Panama FTA into law, and that agreement could enter into force as early as this October.

Panama has also concluded FTA negotiations with the European Union, and is negotiating an FTA with the European Free Trade Association.

In fact, Canadian companies are already well aware of Panama's potential and are increasingly active there. In 2011, two-way trade in merchandise between Canada and Panama totalled $235 million. Canadian merchandise exports were valued at $111 million, while merchandise imports were valued at $124 million. Canada's two-way merchandise trade with Panama has grown by 78% over the last two years.

Key Canadian exports driving our merchandise trade with Panama include machinery, precious stones and metals, meat, aerospace products, mineral fuels and oils, fruits and vegetables, and electrical and electronic equipment. While the overall size of our trading relationship may not be large when compared with other partners, it is important to recall that Panama's robust economic growth bodes well for expansion.

It was against this backdrop that Canada sought and obtained a high-quality, comprehensive FTA with Panama. Both parties were highly motivated to conclude an ambitious deal. Negotiations were launched in 2008 and concluded a year later in 2009.

If Parliament agrees to implement this FTA, it will help Canadian companies take advantage of the opportunities offered by Panama's growing economy by immediately eliminating Panamanian tariffs on 95% of recent non-agricultural imports from Canada and 78% of agricultural imports. Tariffs on most other products will be eliminated over time, although both countries agreed to exclude a small number of goods, such as Canada's over-quota tariffs for dairy, poultry, and egg products.

This agreement will produce benefits for all parts of Canada, including pork producers in Quebec, frozen French fry producers in New Brunswick and Prince Edward Island, as well as pulse and cereal producers in Manitoba and Saskatchewan.

Canadian investors would also benefit from the FTA's implementation. Panama is already a popular destination for Canadian commercial interests, particularly in such areas as banking and financial services, consulting services, construction, and mining. Some of the Canadian companies with an existing presence in this market include McCain Foods, Scotiabank, Inmet Mining, SNC-Lavalin, and Golder Associates, an Ontario company providing consulting, design, and construction services.

The FTA will establish a stable legal framework to support Canadian investments in Panama, including guaranteeing the transfer of investment capital and protecting investors against expropriation. Investors will also have access to transparent and impartial dispute settlement procedures.

The number of Canadian companies active in the country is also expected to grow in the years ahead, in part owing to the many infrastructure projects planned by the Panamanian government and the private sector.

You may know that Panama's $5.3-billion canal expansion project is expected to be completed by 2014 and is projected to boost cargo flow by roughly 35% through 2025. With the Panamanian government investing in its country's growth and strategic importance, procurement opportunities are another key driver for the negotiation of a free trade agreement with Panama.

I am pleased to say that the government procurement provisions in the Canada-Panama Free Trade Agreement guarantee that Canadian suppliers have non-discriminatory access to a broad range of government procurement opportunities, including those under the responsibility of the Panama Canal Authority. Ongoing operation and maintenance of the canal is expected to generate ongoing opportunities for Canadian companies.

Along with the canal expansion, the Panamanian government has a five-year, $13.6 billion strategic investment plan, including $9.6 billion that will be allocated to infrastructure investments. As we know, Canadian companies are proven world leaders in infrastructure development projects. The FTA will help Canadian investors and service providers to compete for these opportunities on a level playing field against their competitors.

As I mentioned earlier, Canada's service sector also stands to benefit from a free trade agreement with Panama. In 2009, the last year statistics were available, Canadian commercial service exports were approximately $48 million a year, with room to grow. This figure is likely to be propelled by Canadian financial, engineering, professional, and information and communications technology service providers. The FTA will provide service providers like these with a secure, transparent, and rules-based trading environment.

Finally, in keeping with Canada's approach to free trade agreements, Canada negotiated side agreements on labour and the environment. These agreements will help ensure that neither side will weaken existing commitments on the environment or labour in order to gain a competitive advantage with regard to international trade.

Mr. Chair, Canadian companies that do business abroad rely on fair, transparent, predictable and non-discriminatory trade rules. In the case of Panama, Canadian companies have indicated that they want to increase their activity in that market. With the Canada-Panama Free Trade Agreement, we are looking to provide the rules they need so they can compete and succeed abroad, while building a stronger economy here at home.

Thank you, Mr. Chair. My team and I would be pleased to take your questions.

[The Chair, Conservative, Rob Merrifield]

Certainly. Thank you very much.

We will move to questioning.

Mr. Davies, the floor is yours for seven minutes.

[Don Davies, NDP, Vancouver Kingsway, BC]

Thank you, Mr. Chairman.

Thank you to the officials for being here.

You mentioned several times in your presentation the objective of creating a level playing field. I would take it you mean a level playing field for Canadian companies competing on the world market. Would that be a fair comment?

[Cameron MacKay]

To answer the question, we are looking at creating a level playing field in the market in Panama. That's one of the FTA objectives.

[Don Davies, NDP, Vancouver Kingsway, BC]

Of course, if we have a free trade agreement, goods produced in Panama will come into Canada and compete with goods produced in Canada as well. Is that right?

[Cameron MacKay]

Yes. Mr. Chair, the idea would be to open up markets going both ways, in both Canada and Panama.

[Don Davies, NDP, Vancouver Kingsway, BC]

I have a number of questions about Panama. What's the minimum wage in Panama?

[Cameron MacKay]

I'll turn it over to Mr. Bouchard.

[Don Davies, NDP, Vancouver Kingsway, BC]

Whoever wants to can answer it.

[Pierre Bouchard, Director, Bilateral and Regional Labour Affairs, Department of Human Resources and Skills Development]

The minimum wage would be just under $200 per month, and it can go up to $400. It depends on the sector. There are various minimum wages, but that's broadly the range—between $200 and $400 a month.

[Don Davies, NDP, Vancouver Kingsway, BC]

So for an average workweek of 40 hours, say 160 hours a month, we're talking about an hourly wage of about $1.50 to $3.00? Is that what the average minimum wage is?

[Pierre Bouchard]

It's between $1 and $2 an hour.

[Don Davies, NDP, Vancouver Kingsway, BC]

That's the minimum wage in Panama. Do Panamanian employers have to pay into an unemployment insurance fund for all workers in Panama?

[Pierre Bouchard]

Mr. Chair, they would pay into the social contribution fund that you will normally see throughout Latin America. Employers would pay a percentage into that, and then there would be—

[Don Davies, NDP, Vancouver Kingsway, BC]

I'm not sure what that fund is. I'll try to find out. Is there an unemployment insurance fund in Panama that employers pay into for their workers?

[Pierre Bouchard]

If you mean an unemployment insurance fund as it is understood in Canada, such that when they leave their jobs there is immediately a government fund, then no. We can check. Normally there is a severance payment depending on how long the employee has worked in a company, and that would be paid by the company, but we are not talking about a Canadian-style government fund.

[Don Davies, NDP, Vancouver Kingsway, BC]

Would it be fair to say that they don't meet Canadian standards for having a comparable unemployment insurance scheme? Is that a fair comment?

[Pierre Bouchard]

Mr. Chair, first of all I want to clarify that this is not something we are trying to address through our agreement.

[Don Davies, NDP, Vancouver Kingsway, BC]

I'm sorry, but I have limited time, sir. Please answer the question. Do they, in your opinion, have an equivalent EI system or not?

[Pierre Bouchard]

Obviously it's a different system.

[Don Davies, NDP, Vancouver Kingsway, BC]

Do Panamanian employers have to pay into a workers compensation fund in case their workers are injured?