International Trade Committee on Nov. 27th, 2012

[Wayne Easter, Liberal, Malpeque, PE]

Thank you, Mr. Chair.

Thank you again for coming, Mr. Stephenson, and thanks to the team of folks with you.

Although I know it's not your area, you mentioned the standard FIPA model. You will know there was a lot of concern expressed on the China FIPA. We still haven't had answers on it. One of the big concerns is unlimited liability to the federal government as a result of provincial actions. I will say to you that we have a motion on the floor—which we started to debate at a previous meeting, but we ran out of time—asking that officials come here from the Department of Foreign Affairs and International Trade on the Canada-India FIPA.

I really think we need to do that, because the difficulty is that there seem to be more broad-based discussions on the trade agreement, but on the FIPA, it's just tabled in the House and not debated. That is a concern. I really think that there are probably greater dangers to Canada under the unlimited liabilities of the FIPAs than there are on the trade. This is an issue that I think impacts the trade side and that we need to deal with.

So first, what is the involvement of the provinces in the Canada-India negotiations? We know where they are on the Canada CETA, but what involvement is there from the provinces, and how do they have input? Or do they?

[Don Stephenson]

The provinces are closely consulted on the negotiations with India, first of all through the long-standing permanent mechanism for consultation between the federal government and the provinces and territories. It's called C-Trade. It's the committee on trade. It meets at least quarterly to review all trade matters.

As well, we've had a number of special meetings on the CEPA, specifically on services negotiation issues. I have visited all of the provinces, although not yet all of the territories, to consult with not just the trade department but all interested government departments.

I can tell you that all of the provinces are supportive of the negotiations. They are comfortable that their interests are being advanced and protected in the discussions and that they are being closely consulted.

[Wayne Easter, Liberal, Malpeque, PE]

When they're consulted, are they.... I've heard how well the provinces supported a number of trade agreements now, but sometimes when you talk to them—and I've talked to several provinces as well—they actually know very little about the details. That's what we're finding.

If you look at how New Zealand's consultations on their trade go, everything is on the table. Everybody seems to know what's going on. Our problem is that it's all guess; when I talk to the provinces, they never seem to know specific details. Are you talking theory or are you talking specifics?

[Don Stephenson]

You make a point that they support the negotiations in general, but the devil is in the details. That's true of all trade negotiations.

The fact is that I just came from two hours of sitting around a table like this with all the provinces to debrief them on what happened at the last discussion. At the end of each day of negotiations, even from India, we debrief the provinces by phone. We provide them with the texts on the table in the negotiation, and each sort of generation of text, so they can see them.

In particular, in respect of the services negotiations, we took them through—in detail—the proposed Canadian approach, because we had to adopt a slightly different approach in the services negotiations rather than use our traditional model. We took a great deal of time to take the provinces through that model. I don't want to speak for everybody's negotiations, but I think that in respect of my negotiation they're not guessing.

[Wayne Easter, Liberal, Malpeque, PE]

So it would be fair to say, then, probably, that the only ones who seem to be in a position where they're left guessing, if you want to put it that way, are the MPs who are elected from across the country to represent constituents Canada-wide, because we don't know the details. I think that's a troublesome thing. I'll just make that point. Maybe the government could consider being a little less secret and a little more transparent.

On the labour and environment side, you did day that wage costs are one of the principal Indian advantages. No question: if you lose your suitcase now with Air Canada, you're calling an Indian call centre. I'm rather sensitive on call centres, because both in New Brunswick and in Prince Edward Island we have had call centres pull out on very little notice and move to India or elsewhere in the world.

Also, I don't think it's a good policy to have a trade agreement that is going to force wages down in our own country. How do we get around that? What do you sense that could be in this trade agreement to protect especially our wage levels and our health and safety standards? I mean, I looked at today's Globe and Mail. There was a huge fire in Bangladesh. Somewhere around 1,100 people burned to death. The doors were locked. They couldn't get out. It was a six-storey building, a garment factory. I don't think that's what we should be competing against.

I'm not saying that's the case all over India, but we are competing against health and safety standards that are much less stringent than ours, and wages that are not much above slave rates. How do we protect ourselves?

[The Chair, Conservative, Rob Merrifield]

That's the end of the questioning—far beyond the end of the questioning.

[Wayne Easter, Liberal, Malpeque, PE]

You're a generous chair, though.

[The Chair, Conservative, Rob Merrifield]

I'll allow a quick answer.

[Don Stephenson]

Well, Canada cannot prevent Canadian firms from taking advantage of low-cost services—call centres, or software development, or other kinds of services—in other countries. If it's available to them, that helps them remain globally competitive, because that's what their competitors are doing, and it still provides for a lot of quality jobs in Canada. In the medium- and longer-term, one of the principal obstacles to economic growth in Canada is labour shortage. So accessing services in other countries, either cross-border or through temporary entry of professionals into Canada, is actually accessing the labour that we need for our companies to operate.

With respect to labour and environment, Canada's approach is relatively well known. We try to promote in our trade discussions adherence to international standards for labour and environment protection, and we will do so in the discussions with India.

[The Chair, Conservative, Rob Merrifield]

Mr. Keddy.

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

Thank you, Mr. Chairman. I'm going to share my time with my colleague, Wai Young.

I want to welcome our negotiating team today. It's always a pleasure to have you here.

I don't know where Mr. Easter is getting all his facts, but it's nice to see and hear that one of the great successes of our free trade negotiations has been that ongoing dialogue with the provinces and territories, and also the fact that they are kept in the loop in these negotiations and other ongoing negotiations, such as the CETA with the European Union. The importance of this is that there are no great surprises at the end. For the record, Mr. Chairman, obviously you have to negotiate in privacy and secrecy, and then everyone has a chance to vote in a democratic way on the final results.

I would like to mention a couple of points that haven't been mentioned. I think we sometimes take it for granted, but the fact is that we have that huge market in India, with what will soon be the largest population of any country in the world. They have English as an official language—one of our official languages—which is a tremendous competitive advantage for many of our unilingual businesses in Canada. Also, there's the fact that they are concerned about food security. They can't supply the food for especially their growing middle class.

I forget the number—I'm sure, Mr. Stephenson, that you have it at the top of your head—but I think they're expanding by somewhere around 150 million people a year—some phenomenal number. They need about 9% to 11% growth just to supply that growing middle class, whereas they obviously don't have quite enough growth now. I'm going to stop there to leave some time for Ms. Young, but would you comment on that growing middle class in India and what they're going to consume?

[Don Stephenson]

You hear a lot of different numbers, but in India they're all big numbers—

[Voices]

Oh, oh!

[Don Stephenson]

—because if you multiply anything by 1.22 billion people, it's a big number. I've heard that anywhere between 250 million and 300 million people are in what India refers to as the middle class. I'm not entirely sure it's the same definition as ours, but affluent consumers number 25 million and they can afford whatever they want. I heard an Indian minister comment that the year before last, they added the population of Australia to the middle class, so it's rapid growth.

[The Chair, Conservative, Rob Merrifield]

Ms. Wai Young, welcome to the committee.

[Wai Young, Conservative, Vancouver South, BC]

Thank you so much.

Thank you to the panel for that most interesting information.

I just wanted to ask you about the fact that I'm from Vancouver South, where we have a very large South Asian population, and we are on the gateway, of course, to Asia Pacific. What do you see as barriers, once we finish the CEPA—or opportunities, really—for Canadian businesses in reaching that $15 billion doubling and tripling in trade that we want to accomplish? What would you recommend?

[Don Stephenson]

First, with respect to the Indian diaspora in Canada, it is a tremendous asset, particularly in a market where relationships matter. In India, you have to invest a lot in the relationship before you get the deal, and you need relationships to be able to navigate in that market. It's a different kind of business culture, a different kind of bureaucratic culture, and a different kind of consumer. Relationships in this particular market matter a great deal, so the people who still have strong linkages to India can be a real asset.

With respect to the opportunities that this will create, well, it will be as mundane as tariffs that are lower than other countries get in selling the same products. So in trying to sell into the Indian market, our suppliers, including our small and medium-sized companies, will have that advantage over their competitors.

We hope, of course, that this would extend into various areas and services, including the temporary entry of our professionals into the Indian market. Oftentimes in the debate around temporary entry, it sounds as though Canada should be on the defensive because there are so many Indian workers, but Canada also has offensive interests in being able to move our service suppliers into the Indian market to deliver architecture and engineering and legal services, and financial services.

In fact, even our goods producers need to access the market to service the products they sell, in order to be able to go in and market their products. Even in temporary entry we have very strong interests. We hope that this deal would give our companies an advantage over others or at least a level playing field.

[Wai Young, Conservative, Vancouver South, BC]

Mr. Chair, do I have time for another quick question?

[The Chair, Conservative, Rob Merrifield]

Yes.

[Wai Young, Conservative, Vancouver South, BC]

You've emphasized the importance of relationships, particularly in a culture like India's, where it's who you know, and those ties and strengths, and trust and faith and confidence, obviously.... How do we then take something like this, that is not tangible, and build that into a CEPA, and/or build that into, downstream, applying something like a CEPA to increased trade with India?

[Don Stephenson]

My answer would be, principally outside the CEPA; the government's strategy to build a relationship with India involves using all of the tools in the tool box. CEPA is only one of them. The foreign investment protection agreement is one. The social security agreement is one. The nuclear cooperation agreement is one. We're negotiating an audiovisual co-production agreement. We have MOUs of all varieties.

Perhaps the most important in respect of your question is that we're expanding the Trade Commissioner Service on the ground in India to help companies find partners and find opportunities.

[Wai Young, Conservative, Vancouver South, BC]

Thank you.

[The Chair, Conservative, Rob Merrifield]

Thank you very much.

Mr. Sandhu.

[Jasbir Sandhu, NDP, Surrey North, BC]

Thank you, Mr. Chair.

Thank you for being here today. In your testimony, you mentioned that Prime Minister Harper signed the Canada-India Social Security Agreement. That would look after how we could coordinate our pension benefits. Can you explain a little bit of the details?

[Don Stephenson]

No, but perhaps my colleague, Luc Santerre, might be able to.