International Trade Committee on Oct. 23rd, 2012

[Bev Shipley, Conservative, Lambton—Kent—Middlesex, ON]

But when I listen to Madam Yako talk about trucking, I wonder how the coordination is in terms of intermodal transportation of goods that we're going to be able to move from ports across Canada and get them to the Japanese market. Most of those are going to go by ship once they get to port. It would appear that we're not getting that coordinated effort for intermodal transportation within the ports that you're talking about. Can you help me with that?

[Michael Bourque]

I think what she's describing is a particular issue that relates to an agreement between truckers and the terminal. What I'm telling you is that in the railway business we have taken great efforts to sign collaboration agreements with performance metrics, with terminals, with ports, with other supply chain partners to make sure that we know exactly what's being held up and why and to keep things moving.

I would counsel them to try to undertake the same thing and not look for government to provide the solution. It's there to be had in negotiations directly with those supply chain partners.

[Bev Shipley, Conservative, Lambton—Kent—Middlesex, ON]

I want to expand on that, because Canada has now walked through the door in terms of the trans-pacific partnership negotiations. I would ask not only Ms. Nott but the other participants about the significance of the Japanese agreement continuing to move ahead. Some have said that if we're in the TPP, what is the value in continuing to push to move forward with an agreement with Japan. Taking that initiative, would there be a negative by not continuing to move ahead with the talks with Japan ahead of the TPP?

[Joy Nott]

Speaking on behalf of the Canadian importers and exporters association, I think it would be a negative if the talks did not continue. Southeast Asia is a varied region. There are all types of different countries, all at different stages of development and sophistication in international trade. Japan is obviously a very sophisticated and well-versed international trader. They also have a long tradition of trading very heavily with China.

If Canada ultimately negotiates a free trade agreement as well as an EPA with Japan, ultimately that would serve as a launching point for Canadian companies within Asia. Japan is slightly different from some of the other Asian countries in that there's rule of law, there's infrastructure, there's a familiarity of doing business in Japan that may not exist in all countries in that region. I agree with what you're saying about the TPP. We think it's imperative that Canada be included in the TPP and keep all of that going, but Japan is a slightly unique entity within Asia and we think that the talks should definitely continue.

[The Chair, Conservative, Rob Merrifield]

Your time has gone.

I don't know if the railways or truckers would want to add to that, but I'd allow a very short answer if they want.

[Michael Bourque]

We're supportive of the agreement because we're seeing quite a bit of two-way trade. We're positioned to enable that and I think it's good for the country.

[The Chair, Conservative, Rob Merrifield]

Go ahead, Louise.

[Louise Yako]

To the extent that we can encourage incremental growth in order to deal with increased volume, going ahead with Japan makes sense.

[The Chair, Conservative, Rob Merrifield]

Thank you.

Mr. Easter.

[Wayne Easter, Liberal, Malpeque, PE]

Thank you, Mr. Chair.

Based on your comment, I would say that we would love to see the government put in place the service agreement with the railways, but that's a discussion for another day.

Thank you, all three witnesses, for your presentations. Really, very little was on the specifics of a trade agreement with Japan, but all three made a point that a number of us have been making for a while. It gets rather tiresome hearing the government talk about how many trade agreements they have signed. Basically, they've now signed another trade agreement, and you're on your own. At a time when we've seen our first trade deficit in 30 years, we need to see a net benefit to Canada from these agreements.

That goes to your point on imports and exports, Joy. I am intrigued by your comments on imports and exports, and I want to expand on them in a minute.

From our perspective on this side, the bottom line is this: What other strategic policies do we need that would allow us to add value in Canada and make the best of a trade agreement from a Canadian perspective?

I would turn to the railways first. One of your slides has the heading: “Will Canada be Ready for Success?” What are you talking about there? Is it infrastructure needs?

I was in Chicago recently at the CN switching yard. I was really intrigued that CN has spent $1 billion buying railways to move around Chicago, which really gives us good flow of product right down to the Mississippi now. What is needed from a federal government perspective that would make this success a greater possibility?

[Michael Bourque]

I'm glad that you mentioned Chicago. It's true that CN bought a line to get around Chicago. That was because 70% of all rail traffic in the United States touches Chicago. There's a bottleneck going right through Chicago. Twice a day, freight rail is held up—45 minutes in the morning and 45 minutes in the afternoon—to allow commuters to go through. They've initiated a public-private partnership called CREATE. They've sought investment from the federal government, from state governments, and from railways. Railways have contributed upward of $200 million already. There are investments in signalling, track, and overpasses and underpasses. All of this is designed so that goods can move more quickly and more freely, recognizing that this has an impact on the whole country. They've done studies. They've shown the economic impact right from the ports all the way to the receiving companies in the east of the country.

If I were to take that example and apply it to Canada—in fact, I should commend the Government of Canada. Some years ago, when we started to see a lot of Asian trade, we had mostly containers coming into the country, and we had a great deal of difficulty dealing with them. Working together in a collaborative fashion, working on a commercial basis, we were able to initiate the Asia-Pacific gateway project, and we have greatly increased our capacity at the port of Vancouver, at Deltaport,and of course, in Prince Rupert. It's that kind of collaboration.

I'm not calling for a specific infrastructure fund, but what I would like to see is the government perhaps starting to paint a picture of what the supply chain is today and what they think it's going to be when we have $650 billion in investments in mining, forestry, and agriculture. It's more of a call to realize that we are going to see exponential growth and we need to be ready for it as a society.

By the way, on grain shipments, my colleague sent me a note saying that grain is at 90% on-time performance this year.

[Wayne Easter, Liberal, Malpeque, PE]

I would agree with you that there needs to be more strategic planning overall, 10 years ahead, and that kind of thing.

I was at a meeting in Burlington, Vermont of all the Canadian provinces from Quebec east and the New England states. I was intrigued at the cooperation within that sector on both sides of the border in looking at moving everything from highway infrastructure to pipelines to rail north-south in that corridor. It taps into the Atlantic gateway at some point as well.

I was really intrigued by how they are planning ahead. That's key on trade agreements. If we're going to increase the volume of trade both in and out, then we need strategic planning to have the infrastructure to make sure we can handle it in an efficient way.

Turning to you, Joy, there's no question that you need this even in the trucking business. We find that in moving potatoes from eastern Canada, often the trucks come back from central Canada. You can't have that. You have to have two-way trade.

Could you elaborate on your point about import-export?

[Joy Nott]

The point I was trying to make overall is that we've heard here about strategy concerning physical infrastructure, whether it be trucking terminals or rail lines or whatever else, but the point I'm bringing to the table is to have a strategy around the policy and regulatory environment.

What I mean by that is shown by the two examples I've put on the table. These are real examples that our members deal with every day.

To go back to the first example, with food, if Canada, for example, through Bill S-11 makes it a requirement that baked goods have fortified flour and it is required in all product that is going to be exported, then if the receiving country has a different regulation, those goods may be prohibited from entering. What I'm asking is, are we prepared for success from a regulatory standpoint?

The second example I brought up was that in a competitive situation with the United States—and we've had long-standing trade with the United States, and I don't need to elaborate for this committee exactly what our relationship is with the United States—it took almost four years to catch up with something that the Americans did simply because it got lost in the bureaucracy.

All I'm saying is that if we're going to enter into more trade agreements with different countries around the world, and we are wholeheartedly in favour of that, we need to start thinking very strategically. Traditionally we've only been focused on the United States, our major trading partner. They are always going to be our major trading partner. We can't take our eye off the United States. I'm just saying that we need to be a little more aware of how other countries are responding when we sign these agreements and they change regulations after the fact, and of what a negative impact this may have.

For those negative impacts not to become lost in the shuffle, we need to have some sort of body that recognizes them and reacts quickly in order to even the playing field again.

[The Chair, Conservative, Rob Merrifield]

Thank you very much.

Mr. Shory.

[Devinder Shory, Conservative, Calgary Northeast, AB]

Thank you, Mr. Chair.

Witnesses, thank you for being here.

Mr. Bourque, I am very happy to hear from you that you have ambitious plans. So have I. I'm very proud to be part of a government that has a very ambitious trade agenda, because on this side of the table we know that trade brings prosperity. Trade brings prosperity for families, for businesses, and of course for Canada.

I have a question for Ms. Nott. You made a comment on the trade deficit. It seems that a trade deficit is looked at as a really bad thing. You made a comment that no Canadian company can export without importing something in its process of manufacturing.

Can you elaborate on how this trade deficit works and how it is good for businesses?

[Joy Nott]

Traditionally, when we started 80 years ago, we were the Canadian importers association. In 2000 we changed our name to add the word “exporters”, and that was more than just a marketing ploy. We realize that compared with 1932 when we were founded and when importing was a discrete activity and exporting was a discrete activity, the lines had really blurred by the year 2000.

It's very difficult in today's global economy to source all of your components, if you are a manufacturer, for example, domestically within Canada. Even if you can purchase or acquire a component in Canada, maybe from a cost perspective it's not competitive.

I'm not talking about the extraction services, mining and that sort of thing where something is coming out of Canadian soil. That's not what I'm talking about. I'm talking about manufacturing and processing facilities.

At some point or another, every manufacturer or processor in Canada is going to have to bring something in, whether it be from the United States or China or wherever. I don't mean to sound flippant, but the price, for example, of a Canadian manufactured fastener, such as a screw or a bolt, might be cost prohibitive when compared with its Chinese competitor. That's just the reality. It's true not just for Canadian manufacturers but for every manufacturer around the world. It's the reality that we're in.

[Devinder Shory, Conservative, Calgary Northeast, AB]

Another comment you made when we were talking about the Canada-Japan free trade agreement is that it becomes critical even when it comes to a developed country like Japan.

What do you mean by that?

[Joy Nott]

What I'm saying is that when Canada starts to negotiate with more underdeveloped economies, the companies within those countries and their traders—I wouldn't say they're unsophisticated; I wouldn't be so unkind or impolite—in Japan, however, they are very good at what they do. Look at where they were after World War II and look at them today. They're very good at what they do. If we're going to enter into commerce with these people, we wholeheartedly agree that we should be doing it. That's the direction in which Canada should be moving; however, we need to be prepared and not show up at the table half asleep.

It's like playing a game of chess. We have to be awake. We have to be aware of what moves we should be making, and when they make a move, we have to be able to counter it.

[Devinder Shory, Conservative, Calgary Northeast, AB]

What are the mechanisms by which Canadian manufacturers, processors, and service providers are consulted prior to the commencement of these negotiations or during the negotiations? Has any process been adopted by the government? Was industry consulted or informed of the negotiations between Canada and Japan?

[Joy Nott]

I don't know the answer to that question. I've been with I.E. Canada for two years, and in the time that I've been with I.E. Canada, we have not consulted on the Japan-Canada discussions. That being said, we've been included in many other negotiations, but not specifically Japan.

[Devinder Shory, Conservative, Calgary Northeast, AB]

The committee will be travelling to Japan this weekend. What would you be looking to convey to the committee as the focus we should have while in Japan?

All of you may comment.

[Michael Bourque]

I'll jump in on that.

One thing I should mention—and maybe I did mention it, but I'll repeat it—is that we have a number of suppliers in our association. We have a relationship with the Canadian Association of Railway Suppliers, and we consulted them before coming here. They are supportive of an agreement with Japan. There are some well-known names such as Bombardier in that group. They obviously have sales around the world now. They realize that fair, balanced trade agreements allow them access to important markets. They also realize that trade agreements help them to maintain their competitiveness here.

My view personally is that if you're still standing in this country as a manufacturer after the recession of 2008, you are globally competitive. Really, what we're talking about here is opening up new avenues of trade, new markets in growing areas.

Now, Japan has had some growth problems, and maybe, thanks to the efforts to enter into the TPP, we may see some agreement with countries that have even higher rates of growth. But Japan is an important market, one where we already have established agreements, established relationships, very good trade patterns. Everything is in place to grow that market.

Certainly, speaking from the $5-billion business of rail supply which employs 50,000 Canadians, I would say let's get a good, strong, fair agreement in place. We'll have that much more of a market to sell our goods to.

[The Chair, Conservative, Rob Merrifield]

Thank you very much.

We have two questioners left, and we're into the second round. We'll just split it between the two. There are three minutes each.

Go ahead, Mr. Davies.

[Don Davies, NDP, Vancouver Kingsway, BC]

Thank you, Mr. Chairman.

Ms. Nott, the figures I saw indicate that Canada had a current account surplus of $25 billion in 2006, and this has swung by $75 billion to a $50-billion deficit today. You're not suggesting that's a good thing, are you?

[Joy Nott]

I'm not suggesting that it's maybe as bad a thing as it might appear to be on the surface. Various studies have been done in the United States to show that imports also create economic activity within the importing country. That's all I'm saying.

I'm not here to take a particular stance one way or the other, other than to say—