International Trade Committee on Oct. 2nd, 2012

[Cameron MacKay]

Indeed, with respect to pork, for example, and I think you heard this from the pork industry representative last week, last year Panama imported $4.9 million worth of pork from Canada, so almost $5 million. With respect to the outcome of the U.S.-Panama agreement, broadly speaking there will basically be a quota, a duty-free quota, that will be implemented immediately upon implementation of the agreement. There will be duty-free access for U.S. pork into Panama, whereas Canadian pork exporters, if we don't have an FTA in place at the same time, would pay tariffs as high as 70%.

We have also negotiated a quota, so we would also be duty-free immediately upon implementation of the FTA, if Parliament approves it.

[Wayne Easter, Liberal, Malpeque, PE]

And when does the American part come into play? Do you know?

[Cameron MacKay]

We don't know that yet. We understand that the agreement could come into force as early as this year, but the Panamanian congress still needs to pass certain legislation in order to satisfy the U.S. This could happen as early as this month. So it's coming soon but we don't know the exact dates.

[Wayne Easter, Liberal, Malpeque, PE]

Once we do the implementation here through Parliament, does the Panamanian congress have to pass legislation to make ours doable?

[Cameron MacKay]

The Panamanian congress has already passed the required measures. They are waiting on Canada at this point.

[Wayne Easter, Liberal, Malpeque, PE]

So we're ahead of them in that regard and the Americans are behind us at the Panamanian end. Now it's up to us on this end.

When the ambassador to Panama was here there were quite a number of questions raised on the Panama Canal Authority. It's a huge project, and there are opportunities for Canadian service industries, Canadian construction, and so on. But is it not true that the United States has already sewn up the major procurement as it relates to the expanded Panama Canal?

[Cameron MacKay]

The information I have is that a Spanish-led consortium won the $3.1 billion contract to build the third set of locks. I believe there were other consortiums. My colleague Mr. Reeder mentioned that the Brazilians have most of the contracts to build the expansion of the canal.

However, the canal is a huge infrastructure project and will require a lot of ongoing maintenance and repair. The Canada-Panama Free Trade Agreement would provide Canadian companies with a level playing field on which to compete for contracts.

[Wayne Easter, Liberal, Malpeque, PE]

Plus, I think there are other Panamanian infrastructure projects coming forward over the next decade.

[Neil Reeder]

Yes, indeed. I think our ambassador to Panama would probably tell you that the subcontracting opportunity is key for us. Those consortia are pretty big even by Canadian standards. What we're looking for is opportunities to subcontract within entities that are making and obtaining these bigger contracts.

EDC has opened up a regional office in Panama covering Central America and the Caribbean, so they are well placed to assist. Those are the kinds of opportunities we are looking for. But we are positioning ourselves now for the future. This economy is going to grow. The projections on infrastructure alone are significant.

I want to come back to one point: I represent a region where the majority of our free trade agreements are with the Americas. Now, if you put a Canada-Panama FTA up against a CETA or the NAFTA, of course you're not going to compare. It's comparing apples and oranges. We are dealing with smaller economies. We are looking for opportunities with the big economies, and we have FTAs with Colombia and Peru. We're talking to the Mercosur Group.

I think the trade will grow, and investment follows trade. The important point for the Canadian business community is that these are confidence-building measures. They give clarity, rules of the road, and opportunities for the Canadian companies. They make the investor community more comfortable going abroad.

It's also a “small p” political statement. We are building confidence and working with like-minded governments in the region, and we're establishing an extensive network of free trade agreements we can work with. So it is true that the numbers on trade are small now, but the potential is there. Much more important, they are also building confidence and opening up new investment opportunities.

[The Chair, Conservative, Rob Merrifield]

Thank you very much.

[Wayne Easter, Liberal, Malpeque, PE]

Thank you.

[The Chair, Conservative, Rob Merrifield]

Mr. Keddy.

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

Thank you, Mr. Chairman.

Welcome once again to our department witnesses. Although we'd love to have you back as many times as you're willing to come, of course, in the short time we have to put this to rest, we'll hopefully be moving onto other free trade agreements and other subjects.

There are a couple of statements I want to make vis-à-vis my good friend Mr. Easter's comments. I realize this is a smaller trade agreement, and I think Mr. Reeder spoke quite well to that point. The $111 million of merchandise trade that we do with Panama is extremely important to those businesses doing that trade. You can't expect, in a country the size of Panama, to compare it to larger trade agreements or larger trading partners. This is not China or Japan or the European Union or United States; this is a much smaller country, but it still has tremendous opportunities for Canadian businesses.

If we take that trade agreement...and, quite frankly, it needs to be stated, we've missed an opportunity here. We didn't get support in the last Parliament on this, or we would have had this agreement signed, and we wouldn't be talking about trying to catch up to the Americans in signing their agreement; we'd already be there. Our exporters, our experts in business and academia and all the sciences would already be there.

To make the comment about the Conservative Party crowing about free trade accomplishments...this is a huge accomplishment, and it's an agreement that should have been signed in the last Parliament had we had support from the opposition parties to do it. I'm not going to back down from that in any way, shape or form.

As to the comment that was made on the financial services, the reality is that if we get this agreement signed and in place, we'll have much more leverage to put on the Panamanians to sign a financial services agreement, and in particular a tax information exchange agreement. It's not about one or the other; it's what complements the initial push and what we want to gain at the end of the day. We want that exchange of information.

My question to our esteemed panel here—and I'll try to get off my statement here, Mr. Chair—is about trade and services. We have a chapter here on financial services. We're looking to enhance mutual market access and cross-border financial transactions. We're looking at mutual recognition of professional licensing and qualification requirements and the procedures to put all that in place, so we can look at financial services, information communication technology, environmental services—and energy services, which no one has even talked about yet. I mean, here's a country that's going to require huge sources of energy for refuelling tankers going through the Panama Canal and we are a net exporter of energy, so there's a great opportunity to take advantage of that.

In the trade and services area, and I realize it's difficult to make a projection of where that would lie, can you break down a little more finely some of those opportunities and the companies that are taking advantage of them now?

[Cameron MacKay]

Yes, I can elaborate a little bit on that.

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

The preamble was a little rough, I know.

[Cameron MacKay]

Canadian companies and service providers, I think we all know, can be world leaders with respect to financial services, engineering, mining, petroleum extractive services, construction, capital projects and environmental services—those are some of the areas in which Canadian companies can be particularly competitive. Canada's trade negotiators are mindful of those strengths, certainly, when we negotiate our trade agreements.

Specifically with respect to this FTA, what we were able to achieve is to move Panama beyond the commitments it has already made to all of the members of the WTO, through its WTO commitments, and take additional commitments with respect to Canada in areas such as mining services, energy services, environmental services, and professional services, including engineering, architecture, legal, and information technology.

Also with respect to financial services, basically in that area and in the other areas that I just mentioned, we once again achieved parity with what the United States had negotiated with Panama. So we're quite satisfied again that we have opened the door for those potentially world-leading Canadian companies to continue and to expand their businesses in Panama on a level playing field with their principal competitors from the U.S.

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

I think there are still opportunities in contracts, and especially some of the subcontracts, in the twinning of the Panama Canal.

But I want to go back to my original statement. There has been a lot of time lost. We have had three incarnations of this bill and we have not managed to get it through Parliament yet. It's been held up by the opposition at every opportunity. Now we have an opportunity for our opposition members to support this.

My point is this: when the Americans relinquished control of the Panama Canal they had had years and years of working with the Panamanians. The statement was made quite widely at the time that the Panamanians would never be able to run the Panama Canal. Well, you know what? They took over the Panama Canal, and they not only ran it, but they did a good job running it. Now they are twinning it with some outside help, and they will increase that trade there.

So why would we not expect them to be able to move forward on every other segment of their economy, and not be just an emerging economy, but a mature economy in Central America?

[The Chair, Conservative, Rob Merrifield]

Mr. Reeder.

[Neil Reeder]

I think you can look at Panama across the board and see they are positioning themselves almost like a Latin American Singapore. It's an entrepôt trade. It's trade in goods and services. They are a transportation hub; their airline now has four flights a week to Toronto and they want more. They are world leaders. We are very impressed by that little economy, and they are growing. That's going to create tremendous opportunities for us.

If I could, Mr. Keddy, come back to the trade mission, I do want to mention our sectors of focus for the next mission to South America and Panama: energy, transportation, water, and infrastructure. That's consistent with what we see as the near-term opportunities for Canadian business.

[The Chair, Conservative, Rob Merrifield]

Thank you.

We'll now move to Mr. Morin. The floor is yours for five minutes.

[Marc-André Morin, NDP, Laurentides—Labelle, QC]

My colleague's comments are somewhat simple because certain things must be done quickly and others must be done properly. The only positive effect of the delay in this project is that Panama has come off the grey list. That is already an improvement. The Americans signed before us most likely because Panama gave them guarantees with regard to what could be done to share tax information.

The other day, the ambassador talked about the Panama Canal as a mature or almost mature project. One of the things being developed is the Panama Metro. Are those people improvising or are they making long-term plans? I am sure that, if they want to build a metro in Panama City, they have probably thought about it and obtained estimates from a number of businesses from around the world. Bombardier is not the only company involved. If an agreement is signed, that does not mean that Bombardier will automatically have the contract. There are other companies from around the world that may be much more competitive.

We should not be blinded by the opportunity for unrealistic contracts, as we have sort of missed out on the canal expansion. Had we been involved 10 or 12 years ago, when Panama was talking about expanding the canal and the initiative was still in a draft stage, perhaps we would be in a great position. However, I have a feeling that the projet is now fairly advanced and the only thing left might be large crumbs, but crumbs nonetheless.

What do you think Mr. MacKay?

[Neil Reeder]

Regarding the canal figures, about $1 billion is set aside for a project whose total cost will be over $4 billion—which has not yet been confirmed. There are still opportunities involved in 20% of the canal projects or expenses. It is still a viable initiative, and is therefore worth our while.

We can also confirm that, based on the figures provided by the Panamanian government, in the 2010-2014 strategic plan, $13.6 billion is earmarked for infrastructure projects, including the metro, ports and airports. That has been confirmed in the government's current plans and is guaranteed. So there is a great deal of potential for Canadian companies.

[Cameron MacKay]

Mr. Chair, perhaps I could just supplement that response a little bit.

The objective in negotiating and implementing the trade agreement is not for the Canadian government to get these contracts, of course, on behalf of Canadian companies. What we are trying to do is open the door for them and allow them to compete on a level playing field with competitors from around the world. We are confident that this agreement does that with respect to all of these potential infrastructure projects because of what we have negotiated in the services and the government procurement provisions of the agreement.

[The Chair, Conservative, Rob Merrifield]

Mr. Morin.

[Marc-André Morin, NDP, Laurentides—Labelle, QC]

What kind of a guarantee is there in the agreement that we will have preferred treatment once all those bids are made over the coming years?