International Trade Committee on Oct. 18th, 2011

[Jason Langrish]

We've been around since 1999, as you say. It's a response to a commercial necessity. Trade has increased and investment has increased, and we don't have a framework that governs it properly or that recognizes the realities of it. That's what our members want, ultimately. They want clear rules that govern the exchange of people, of investment, and of goods between Canada and the European Union. There's no secret to what they want.

I think that if you were to talk to the Canada-India Business Council, you would hear that they probably want the same thing for their members with regard to their relationship with India, and the Canada China Business Council would want the same thing with regard to China. We prosper when we have meaningful, rules-based structures that govern our commercial relations.

Then there's also the corollary to that: the cultural and the political exchanges that inevitably come on the back of these things. You can have academic exchanges or cultural exchanges, but they're facilitated by modern technologies and air transportation and things of that nature.

These things need to be free and they need to be reciprocal and that's what our members want.

[Ed Holder, Conservative, London West, ON]

It's interesting to hear Mr. MacLaren say that what we're really creating here is basically the template. What it really means, then, is that we have the opportunity as businesses in Canada to then take advantage of the building blocks we've put in place.

It's interesting, Mr. Langrish, to hear you talk about the need for a clear, rules-based system. The irony is that we trade with all these countries anyway, we truly do, but you have the issue of tariffs and you have the issue of not having a clear, rules-based system in place so that when there are disputes, when there are opportunities for us to take advantage of business scenarios in Europe, we just don't have that clear, rules-based system.

It's very clear to me that if we're going to engage in trade with countries around the world--and that has been a very aggressive agenda for Canada--we must have a clear, rules-based system that sets out the expectations so that business knows this, and in an era of uncertainty, that's when business has the most and the greatest challenges. Quite frankly, as a business person, as long as I know the rules I can work within them to my advantage, but if I don't have a clear, rules-based system, which we're putting in place here, I think that creates greater challenges.

Quickly to you, Mr. Laurin, if I may, you've talked about why you support this agreement, CETA. Can you tell us about some of the tariffs and the non-tariff barriers that are facing the manufacturing sector and how that affects our businesses here in Canada?

[The Chair, Conservative, Rob Merrifield]

A short answer, please.

[Jean-Michel Laurin]

Tariff barriers, as Roy said, tend to be low because we reduce them through multilateral efforts, but what we're hearing from a lot of our members is that when we're trying to do business in Europe we have some of the highest gross margins. In other words, it's a market that will pay a premium for quality and for good Canadian-made goods. However, tariffs that are sometimes at around 4%, 5%, 6%, 7%, 8%, or 9% can really eat into your profit margins and turn a profitable situation into a loss.

With the non-tariff barriers, we're often dealing with regulatory barriers to trade. A lot of these barriers are in procurement markets; we have some information we have received from our members. By nature, these barriers tend to be complicated, but what we're looking for in some cases is more alignment or a mutual recognition of standards. There are certain industry sectors looking for that. For example, the chemical sector has been pushing for that, while in some other areas I think we respectfully understand that we have different standards and there's not necessarily a need to harmonize them or have them be mutually recognized.

I don't have a lot of time, and it's not easy to summarize technical barriers to trade, but I think that by and large we're talking about regulatory barriers to trade. We want to make sure that there's more of a science-based approach to some of these things, because in many instances what we've seen is Canadian companies being shut out of markets because they've changed a rule and a couple of European companies can qualify. So having an effective dispute resolution mechanism is one thing, but having a mechanism for dealing with some of those regulatory barriers is important as well.

[The Chair, Conservative, Rob Merrifield]

Thank you very much.

Mr. Easter, you have seven minutes.

[Wayne Easter, Liberal, Malpeque, PE]

Thank you, Mr. Chair.

Thank you, gentlemen, for coming in.

Mr. Laurin, in the beginning, you mentioned and emphasized how important it is that at the end of the day the negotiations provide a net benefit to Canadians. The numbers that the government continues to give us are an analysis that was done prior to round one, so they're dreams. They're wishes.

Have you seen a net benefit analysis of either the sixth, seventh, or eighth round of negotiations and, based on the results of those negotiations, what the net benefits to Canadians would be?

[Jean-Michel Laurin]

That's a very, very good question. The short answer is no. The joint scoping exercise that was done prior to the launch of negotiations was looking at the potential benefits for an agreement and the economic impact of liberalizing I think most if not all trade and investment between Canada and the European Union.

It's hard to do an economic impact assessment while you're negotiating, because a lot rides on what we're giving up and what we're getting in return, but this is a point that we've made to negotiators. At some point in time, I think it would be good, especially as we're looking.... There are going to be some trade-offs made and I think several industry sectors will be asking questions as we get deeper into the negotiations. I think it's important to have a better sense of it, not just in the aggregate but also for specific industry sectors, to assess what the impact could be. It's also important to do that because it gives you a sense of how markets might react as a result of an agreement.

We expect the result of an agreement to deliver net economic benefits, not just to Canadian manufacturers. I think Europeans expect the same thing. That's the great thing about international trade. If you do things the right way, it's mostly a win-win proposition, but it's important that we structure the agreement in such a way that this result indeed does happen.

So the short answer is no, but this is something that we think is going to be important.

[Wayne Easter, Liberal, Malpeque, PE]

When the minister and chief negotiator were here, we were having extreme difficulty. He did mention that they had a list but didn't provide the list, and I do think it's important that we be open and honest with Canadians. Yes, it would be nice if it would be all win-win, but there will likely be some losers.

In fact, Peter Clark, a former Canadian trade negotiator, is quoted as saying that “we'll pay for it dearly”, albeit he's saying that we still need to go ahead with the negotiation and open up that market. We certainly support trade, but we really need the government to be more straightforward, transparent, and honest with us in where they're going.

Mr. MacLaren, you said in the beginning that tariffs are reduced to the point that they have very little meaning, and with few exceptions. Again, when the minister and chief negotiator were here, we asked them some fairly direct questions on supply management, and of course the government said they support supply management. But what makes a supply management system work is the three pillars under which it operates. One pillar is tariff protection, another is price control, and the third is control over certain imports.

[An hon. member]

Do you have a question?

[Wayne Easter, Liberal, Malpeque, PE]

Yes, I have a question.

Where do you see this being at on the supply management industries and the tariffs that are so important to them?

[Roy MacLaren]

Supply management...we'll see where that goes in the course of the negotiation. The European Union has its own forms of protectionism in agriculture, as we do here in Canada, in the form of supply management in the poultry and dairy industries.

If, however, as I personally would hope to see, this is the occasion when Canada can finally phase out supply management in agriculture, the examples of Australia and New Zealand are already there as an effective way in which to do it. Australians and New Zealanders found that not only were they able to assure their farmers of compensation where it was needed, but they also discovered, somewhat to their own surprise, I think, that the export markets for Australian and New Zealand dairy products expanded enormously. I think that will be the case under the European agreement.

For Canadian cheese producers, which is, after all, what we're talking about, as no one's planning to ship raw milk across the Atlantic, the opportunity will open up to a degree we do not yet foresee. It will provide all sorts of opportunities to Canadians.

Therefore, I would hope that the committee and the government will take a positive attitude towards a sensitive phasing out of supply management under this agreement.

[Wayne Easter, Liberal, Malpeque, PE]

How am I for time?

[The Chair, Conservative, Rob Merrifield]

You have another minute.

[Wayne Easter, Liberal, Malpeque, PE]

Okay. That will do. I'll take the minute.

[Voices]

Oh, oh!

[Wayne Easter, Liberal, Malpeque, PE]

Roy and I have had this discussion before.

I disagree with your analysis on Australia and New Zealand and supply management, but that's beside the point. There's no need to get into that here.

On the enforcement side, in our agreement with the United States, we're finding that the United States today has put in more marine regulations, which is going to affect our traffic in the St. Lawrence Seaway. The Canadian government seems to cave in to the Americans when they do these kinds of things rather than challenge them. On CETA, what do you see as the requirements to basically police the agreement and to do it quickly, so that if there are problems you're not put out of business before enforcement kicks in, and so you get the issue dealt with?

[The Chair, Conservative, Rob Merrifield]

I'll cut you off there. A very quick answer, please.

[Roy MacLaren]

I'm not sure that it wasn't a statement rather than a question.

[The Chair, Conservative, Rob Merrifield]

Yes, I think it was. Let's go on.

Mr. Shipley.

[Wayne Easter, Liberal, Malpeque, PE]

Mr. Chair, the question was on enforcement. Enforcement is important.

[The Chair, Conservative, Rob Merrifield]

You have seven minutes.

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

Thank you very much, Mr. Chair.

Thanks to the witnesses.

My first question is for Mr. Langrish. I'm from agriculture. Supply management, as we know, has always been protected by this government. In fact, it's the only government that has acted when an issue has come up. I do want to talk about something you said. You said that this agreement is more far-reaching than any agreement before it. Can you help us understand that a little bit? Sometimes those statements raise a flag. I see it, though, as a benefit in terms of being able to reach out further with this agreement than others. I wonder if you can explain why that is good.

My second part will be for Mr. Laurin. You've talked about your Canadian manufacturers and exporters, the 10,000-plus companies, which tells me that there are a lot of small and medium-sized businesses. We rely on 8% exports and 12% imports. You've raised some concerns. Obviously you support the discussions and the development of CETA, you've said, as long as it works for us. Those are all very legitimate questions, but is there a listening ear? When you're talking about negotiations in terms of those who are dealing with this agreement, do you have a listening ear with those folks?

I'll start with Mr. Langrish.

[Jason Langrish]

I'm not sure I said that, but that's fine. It might have been one of my colleagues.

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

It must have been Mr. MacLaren, then.

[Jason Langrish]

In any event--