International Trade Committee on Oct. 6th, 2011

[Ed Holder, Conservative, London West, ON]

Thank you, Chair, and thank you to our guests.

Mr. Verheul, it looks as if you're doing the primary responding, but either of you certainly is welcome to do that.

I listened with great interest to what the minister said. I've been on this committee now for some three years, and we've had a lot of discussions around the issue of the EU and the agreements. I was struck by one thing in that Canada's trade represents well over half of our gross domestic product, that one in five jobs is dependent on trade.

My question of you is this. I heard the minister speak in terms of 80,000 new jobs being created as a result of this, and maybe it would have been a fairer question for the minister, but if you've done some of that backup work, can I ask how we came up with that statistic? Eighty thousand new jobs is significant, but I just wonder how we came up with that number.

[Steve Verheul]

That number is also derived from the Canada-EU joint economic study that we completed before we initiated the negotiations. That was a very in-depth examination across the economy of the benefits that could be gained on both sides in this negotiation, by top economists both in Europe and in Canada. When you take the kinds of GDP gains that were foreseen in that study, you can then extrapolate what that would most likely mean in terms of jobs. That's where the number of 80,000 jobs came from.

But as the minister stated earlier too, our view is that that study probably underestimated the gains by a significant amount, because one of the assumptions made was that the Doha Round of WTO negotiations would have been completed. Since that has not yet happened, the gains we will see out of this negotiation are that much greater because tariffs won't be cut by the Doha Round in any near future, so the advantage we will have over other trading partners will be that much greater.

[Ed Holder, Conservative, London West, ON]

In what sectors particularly would you imagine the greatest growth? One might assume agriculture, but where might we assume the greatest job growth would come from?

[Steve Verheul]

Certainly agriculture would be a significant one. Fish and seafood will be very important, particularly to the east coast. Probably the greatest job gains would be in the manufacturing sector where we'll have access and a preferential edge over other suppliers, in particular the U.S. That potential allows us to produce and export to the largest market in the world. Those job gains will be significant.

[The Chair, Conservative, Rob Merrifield]

Thank you very much.

Mr. Chisholm.

[Robert Chisholm, NDP, Dartmouth—Cole Harbour, NS]

Thank you, Mr. Chairman. I did want to say that regardless of the game playing by the members opposite, on this side we in no way will back away from protecting the supply management sector. In fact, you're going to see that as we stand up against the attempt by this government to do away with the Canadian Wheat Board. People in the industry are saying the Wheat Board is coming, so what's next under supply management?

Let them play games and try to distract farmers, but people in agriculture understand exactly where the threat is, and that's from the Conservative government.

Let me ask you about the whole question of regulatory controls. Are there disagreements with respect to specific professions or designations in that whole discussion?

[Steve Verheul]

That's been a big focus of our discussions with the EU, and in particular we have attached a lot of priority to labour mobility as part of the outcome of this agreement. We are very close to finalizing a chapter on mutual recognition of qualifications, which will allow a framework to be established for architects, engineers, various professions, skilled technicians, to be able to work in each other's market. So an architect licensed in Canada would be able to work in the EU as an architect, and that has been a big part of what we're trying to achieve. It's also a very high priority of the provinces and territories as well.

[Robert Chisholm, NDP, Dartmouth—Cole Harbour, NS]

Could you please explain where things are with regard to the issue of cultural exemptions as it relates to Quebec? I know these are also concerns of some of the member states in the EU. Please talk a bit about that.

[Steve Verheul]

Sure. We have had some discussions on the cultural exemption, and we come to this negotiation from a somewhat different direction from the EU. Traditionally the EU doesn't have a broad cultural exemption in their free trade agreements, as we do. They have a fairly narrow one that only applies to those chapters where it has immediate relevance. So one of the things they've done with us is question why we need an exemption that cuts across the entire agreement when it has no relevance for a number of the chapters, and in particular they have some concerns that there could be contradictions in a chapter on intellectual property rights that would provide value to artists and other cultural sectors.

So this is a discussion more over form than substance. As you say, there is a lot of sympathy within the European Union for maintaining the ability to pursue cultural interests and to protect culture, and in fact we've worked on cultural issues in other international forums with the EU for many years. I was in France earlier this week. They certainly reconfirmed to me their interest in protecting culture in this negotiation, so we have a lot of common cause on that issue.

[Robert Chisholm, NDP, Dartmouth—Cole Harbour, NS]

In that regard, we've certainly heard from some in the music industry and others in Canada about the issues of copyright being on the table. There are some serious concerns. Bill C-11 is before the House. People in the industry are quite concerned about that, but they're just as concerned, if not more so, about those issues being on the table in these negotiations with the EU.

I wonder if you could perhaps give us some indication of where those discussions have taken you.

[Steve Verheul]

Yes, the EU has certainly expressed concerns about our copyright law, as have other governments around the world, and that's partly because we haven't updated that law for many years, and obviously technology has been moving at a fairly quick pace during that period. So I think there is a shared recognition and a desire to update some of the copyright protection we have. The EU was of course very interested in the bill that was tabled last week. It contains many elements they would welcome and have been looking for. I don't think it contains all the elements they're looking for in the area of copyright, so we'll probably be having some further discussions, but we don't expect this to be a major challenge in the negotiations.

[The Chair, Conservative, Rob Merrifield]

Thank you.

We'll go to Mr. Keddy.

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

Thank you, Mr. Chairman.

Welcome, again, to our witnesses. Thank you for the good work you're doing on this agreement.

I'm going to enjoy these committee meetings because correcting the NDP record is going to be a matter that I think will be quite a bit of fun.

I want to go back to supply management for a brief moment. As a government, we've been solid on supply management. I've talked to farmers across the country in the supply managed sector, and every single one of them has been pleased, more than pleased, with the position and direction our government has taken on supply management.

To compare it to the Wheat Board--for someone listening who doesn't have an agricultural background or just refuses to look at the facts--is just an unfair comparison, because the Wheat Board is not national, and supply management is from coast to coast. The Wheat Board doesn't exist in Quebec and it doesn't exist in Ontario, so those farmers have an exemption. They can sell their grain or their barley or their wheat wherever they want, and that's the difficulty. No one is talking about getting rid of the Wheat Board, that I've heard. It's that there'll be a dual system so that farmers will have a choice. Apparently choice is a dangerous thing in a democracy.

Half-truths and misinformation aren't going to solve the problems here.

We do have some issues, in the fishery in particular. I've spoken to a number of stakeholders in the fishery this year, from B.C. to Newfoundland and Labrador, Nova Scotia, P.E.I, and New Brunswick.

My understanding is that in all areas of this agreement we're looking for reciprocity and a recognition of the regulatory regimes. That's a recognition of the regulatory regime, the equivalent of CFIA on the European side, and of course recognition of CFIA on our side. I suspect that some of those areas are going to be a little bit more difficult in negotiations than some of the ones we want to discuss.

Can you just give us a little more background in recognition of the regulatory process?

[Steve Verheul]

Yes, I'd be happy to.

This is one of those areas where we've focused a lot of attention, because as I mentioned earlier, access to markets is not just about what you do at the border with tariffs. To get effective access and to be able to compete, you need to deal with the regulatory issues.

When this agreement is completed, we will have, for the first time in any free trade agreement we're aware of, a full chapter on regulatory cooperation. That's intended to set up a situation so that EU and Canadian regulators can start in on issues from the beginning, before they become problems, and try to go in the same direction when new regulations are being developed. That's certainly one of the innovative things we're doing in this agreement. The other, and probably more important one, is that for the first time, the EU is also talking to us about recognition of conformity assessment bodies. In other words, for many of our products that we wish to sell to the EU, we won't have to go over to the EU and get that product tested and approved to meet EU regulatory standards. We'll end up being able to do that at home. That will save a lot of money, a lot of time, and will be a significant advantage for many of the sectors of our economy that require this kind of testing.

We've had a very strong focus on regulatory cooperation, and regulatory standards generally, and we have made it one of our top priorities in the negotiations.

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

The other issue mentioned by the NDP member, of course, was with regard to fish: our rules of origin and traceability.

After speaking to the industry and to fishermen, I can tell you that not a single processor I spoke to, not one, said that it was an impossibility to separate the product line. If they're buying fish out of the U.S. or they're buying fish from Alaska or they're buying fish from the Gulf of Maine from American vessels, that's coming by the boatload or by the container load, or it's already processed and frozen, and it's very easy to separate out of the product line.

I didn't look at it as being unreasonable on the EU's behalf in these negotiations to ask if they're going to allow in Canadian fish, caught in Canadian waters, tariff-free. They need to make sure that this is not adulterated, if you will, with product coming out of the U.S.

I don't know if you've--

[The Chair, Conservative, Rob Merrifield]

That's very good. Let's let him answer.

[Steve Verheul]

The rule-of-origin issue has been a challenging one across many sectors. It comes partly from the fact that just as the EU 27 member countries have integrated their market, our market is to a large extent integrated with the U.S., especially in some sectors. This has added another element of challenge to rules of origin.

As to fish, there are many species that are strictly Canadian. There's little trade back and forth before they're put onto the market. Much of our processed shrimp, for example, is not involved with cross-border trade with the U.S. Other species, like lobster, are different. We catch some lobster in U.S. waters and eventually this catch comes through our processing system.

Certainly, the ones that are Canadian and meet that definition in the negotiations will have full duty-free access. But we're also trying to work out a process whereby even some of the fish caught in other waters but processed in Canada will have access to the EU market.

[The Chair, Conservative, Rob Merrifield]

Thank you.

Mr. Holder.

[Ed Holder, Conservative, London West, ON]

One of the things that struck me when the minister spoke was the issue of procurement. We haven't talked a lot about it in this session today. I was surprised to hear that the potential in the EU was $2.4 trillion. That is staggering to me, and I think it tells us why this is so important.

From the standpoint of the Canadian government's negotiations on procurement, can you clarify what our involvement with the provinces and territories has been? We've heard some concerns in some corners about procurement being an issue that would put Canada up for sale.

As for opportunities on the European side, could you help me understand what those opportunities are? But before you do that, could you explain who we've been talking to on our side? Has this been a comprehensive dialogue with all of our partners in Canada, including the provinces and territories?

[Steve Verheul]

Yes, it certainly has. We've spent at least a few days every month with the provinces and the territories in face-to-face negotiations. We've spent a lot of time going through these issues, and government procurement has been one that we spent more time on than others. When we put an offer on the table with the EU on government procurement, it is fully endorsed by the provinces and the territories, which were a great help in constructing those offers. So the consultation process has been unlike any we've ever had before on these issues.

With respect to government procurement, bear in mind that we will be opening up some markets to the European Union, but for the most part we're not anticipating any big changes. Our procurement system in Canada is largely open to begin with. Municipalities, provinces, and the federal government often have contracts with foreign suppliers, so we're not anticipating a huge change.

Within the government procurement chapter that we're preparing, there would be a number of flexibilities available to municipalities or any level of government. You could have contracts that are completely unrestricted below the thresholds that will be set in the negotiations. Municipalities or other contractors would be able to set out the terms of the tender, what they expect to receive. As far as contracts go, they can include social and environmental factors, job training, and assessing relevant experience, which may only be available locally. So we're building in a lot of flexibilities.

[Ed Holder, Conservative, London West, ON]

Do you think the upside is for Canada going into the European market versus the other way around, based on your comments about how open our system is already?

[Steve Verheul]

I think you pointed out the most relevant fact yourself. It's a huge market in the EU, $2.3 trillion. That is a market that we have left virtually untapped up until now. It's not just a market of direct sales from Canada to the EU. There are a lot of global value chains that go into and end up in those contracts, and we need to be part of more of those.

[Ed Holder, Conservative, London West, ON]

I'm not at the table myself, and I can't imagine what these negotiations would be like. I'm trying to understand what the most challenging aspects would be for doing this deal.

We've set 2012 as the date for this to be completed, and we've done eight rounds. Is 2012 realistic? Are there impediments to that target?

[Steve Verheul]

As far as the most challenging parts of the negotiations, I think if you talk to anybody involved in negotiations of this type, the most difficult is the work at home. It's all of the consultations you need to establish your positions, and all the work we need to do, especially in our case, with provinces and territories, to make sure we're lined up in the right direction. By the time you actually get to the negotiating table with the other side, that tends to be the easiest part. You're well prepared, you know what you need to do, and you understand clearly what your objectives are. So the hardest part is lining up all of the domestic support behind you.

On the deadline of finishing negotiations by 2012, we do feel this is quite realistic. We had a discussion in Brussels last week with my counterpart, and he is of the same view. The Europeans want to move very quickly on this negotiation to finish it, as do we. So after the October round, we will be entering into an even more intensive phase of the negotiations, aimed at reaching agreement on most of the major issues by the first couple of months of next year.

[Ed Holder, Conservative, London West, ON]

Thank you very much.