International Trade Committee on Oct. 18th, 2011

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

I wrote it down.

[Voices]

Oh, oh!

[Roy MacLaren]

He wishes he'd said it.

[Jason Langrish]

Exactly.

When I say far-reaching, it's not necessarily “encroaching”, if I were to use that term; you just have to look at the change in the nature of trade.

One of the reasons we have problems under NAFTA is that our agreement is out of date, and politically we can't reopen it and fix the problems. That's why we run into all these troubles.

When we negotiated NAFTA, as an example, with the EU we would have been primarily in export mode. We are at the point now where our stock of foreign investment has expanded. We're getting close to half a trillion now in bilateral stock of foreign investment between Canada and Europe. The sales of our companies in Europe, the sales of our foreign affiliates, are four times what we export over there. The nature of the game has changed. This agreement needs to be broader to reflect that and to address the issues that come with it.

So that's really what we're saying: negotiate an agreement that reflects the current business realities. A NAFTA-type agreement in this day and age wouldn't do that.

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

Okay.

Mr. Laurin.

[Jean-Michel Laurin]

The short answer is yes. Steve Verheul, Canada’s chief trade negotiator, has actually been quite open to and quite welcoming of input by industry. To our association, to CERT, and to several others I think he's gone out of his way to make himself available. Obviously he wants to get as good a deal as possible for Canada.

There are some challenges in getting companies to provide input in negotiations. You're right to say that most of our members are small and medium-sized manufacturers. I think Canada is pretty active on the trade negotiation front right now, and in hindsight we're starting to think about maybe resurrecting some of the older structures that were in place in order to get broader industry input on a regular basis.

As you know, we're negotiating with India. We've concluded negotiations with a number of countries. We need to develop--because of what Roy was explaining--our bilateral trade agenda. Government is doing that very actively, but I think it puts a stress on businesses to provide meaningful input. In many cases, what industry and companies need to do is assess how these agreements and how these negotiations could potentially impact their sectors.

So the short answer is that the negotiators and the entire negotiating team have been quite good in welcoming and inviting industry input, but that shouldn't stop us from thinking about how we can ensure we get better business engagement, better business input, into trade negotiations--not just this one, but the entire government trade agenda.

I mean, your government has been putting a lot at stake on opening up markets for Canadian exporters. We welcome that, but we need to make sure that we get really good input from our members and from all companies across Canada if we want these agreements to be of maximum benefit to the Canadian economy.

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

Mr. Chair, I'm going to leave a little bit for my colleague.

[The Chair, Conservative, Rob Merrifield]

All right.

[Devinder Shory, Conservative, Calgary Northeast, AB]

Why, thank you, Mr. Chair.

Thanks to the witnesses.

We, Mr. Chair, all know that the NDP has to oppose trade because they have to protect, they like to protect, special interest groups. Here on this side of the table, we understand this clearly, that 60%--

[The Chair, Conservative, Rob Merrifield]

Do you have a question for them?

[Devinder Shory, Conservative, Calgary Northeast, AB]

Well, of course, Mr. Chair. I'm addressing them through you, and I'll be putting my question through you.

Anyway, we do understand that 60% of Canada's annual GDP and one in five jobs are directly or indirectly related to trade. That's why, whereas in 13 years of Liberal government they signed only three agreements, in less than six years our Conservative government has signed nine agreements with nine countries, and is ambitiously negotiating agreements with numerous other countries.

Now I'm coming to the question. I would like Mr. Laurin to comment on two things, because I know the chair will not give me extra time.

One, how have past free trade agreements helped businesses create new jobs? And two, as we are talking about CETA, I'd like to hear a comment on this agreement. Do you think it will help the businesses grow and will help the businesses create new jobs?

[Jean-Michel Laurin]

On whether past agreements have helped create jobs, I think it's quite clear that they have. For example, the Canada-U.S. Free Trade Agreement and NAFTA, the North American Free Trade Agreement, have really helped Canadian companies not only grow their market share in the U.S. market but also restructure the Canadian economy so that now we're really part of one integrated supply chain that spans across Canada, the United States, and Mexico. That has allowed Canadian manufacturers to become much more competitive both domestically and in global markets.

Second, do we expect CETA to help businesses grow? Yes--but the agreement needs to be structured in a way that delivers net economic benefits to Canadian manufacturing.

[Devinder Shory, Conservative, Calgary Northeast, AB]

Mr. Chair, do I have time for one more question?

[The Chair, Conservative, Rob Merrifield]

No, I think your time is gone.

Mr. Ravignat, before I yield you the floor, I believe there's a technical glitch. If the light doesn't go on, press the button. We have technical support coming. We will handle this. It's not a problem.

Go ahead.

[Mathieu Ravignat, NDP, Pontiac, QC]

Thank you, Mr. Chair.

I would also like to thank the witnesses for coming here today.

My question is about my concern regarding the state of readiness of domestic markets, the sub-national markets. I would like to begin my intervention by quoting the coalition of business groups your organizations are a part of. In 2009, a press release said the following: “The coalition feels that the provinces must first of all put their own affairs in order, to avoid having their efforts to obtain the best possible access to European markets stymied.“

That was a little over two years ago. In two years, what has really changed to give you greater confidence? In 2011, do you think that everything is in place to secure the greatest possible access to European markets?

[The Chair, Conservative, Rob Merrifield]

Go ahead, Mr. Laurin.

[Jean-Michel Laurin]

I can go first.

I'm sure you'll want to add something.

I can state that access to sub-national markets, otherwise known as access to provincial procurement, is an important issue for the Europeans. Furthermore, many Canadian companies are not necessarily averse to cleaning up the public procurement markets. I think that the provinces can play a significant role in this matter.

Several of our members are taking an offensive stance. For example, there is the aerospace industry in Quebec, which has a very strong interest in opening up European Union procurement markets. We are hoping that we will have a reciprocal relationship. In other words, we want greater access for the Europeans to our procurement markets to open up the door for us to similar gains in the European Union.

As for the comments you quoted, I would say that the international trade commitments made by the provinces often result in a clean-up of the management of procurement markets, or they make them stronger.

Since 2009, this change has taken place as a result of the broadened procurement agreement negotiated by Canada and the United States, an agreement that included the provinces. The provinces had never signed on to NAFTA. What's changed since 2009 are the international trade commitments made by the provinces with respect to their own procurement markets. So we would be broadening part of these commitments to include the European Union, and we are even trying to see if we can be a little bit more ambitious, to the extent that this would enable us to achieve important gains in European market access.

[Mathieu Ravignat, NDP, Pontiac, QC]

If I still have some time left, I would like to share it with Mr. Côté.

[Raymond Côté, NDP, Beauport—Limoilou, QC]

I would like to thank you, Mr. Chair, on behalf of the extremely intelligent third of Canadians who supported the NDP.

Gentlemen, I have some concerns. In a recent Industry Canada report on small- and medium-sized exporters, it was clearly explained that a very high percentage of these businesses were compelled to move their activities outside the country. Obviously, I am very concerned about the expected impact on both sides of the ocean, and particularly concerned about inequities that could occur in Canada as a result of this delocalization, which would force us to move good jobs to Europe. There would, however, be some European delocalization in order to develop our natural resources, which could accelerate a phenomenon which currently is very significant and puts Canada at the mercy of the world situation.

Do you feel that this agreement is unbalanced? This is my concern.

[Jean-Michel Laurin]

That is a very good question. I believe that I will have to provide you with a very quick answer.

Yes, there are some fears about that. I do think that we should fear the emigration of businesses. Essentially, we should be giving Canada's manufacturing SMEs every reason to invest here.

However, we also have to understand the reality that we explained earlier. We are now talking about a global procurement chain. Businesses are now part of global manufacturing networks. A large number of businesses, particularly SMEs, are saying that they had to invest abroad for a whole variety of reasons. They often talk about access to low-cost labour. However, I would say that the primary objective of businesses that benefited the most from this labour was access to certain foreign markets where the trade barriers are still significant.

As for the agreement with the European Union, I believe that the European Union and we have very complementary markets. I can foresee a great deal of potential in attracting European investment, not only in the natural resource sector, but also in the manufacturing sector. Once again, everything depends on what will be included in the final agreement. Numerous SMEs view enhanced access to European procurement markets as something that will help them increase their production here, in Canada. So setting up operations in Europe is not necessarily on the priority list of many Canadian companies at this time.

[The Chair, Conservative, Rob Merrifield]

Thank you very much.

We have about three minutes left in this segment.

We'll ask Mr. Keddy to finish it off.

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

Thank you, Mr. Chairman.

I have a quick question for Mr. Laurin. If anyone else wants to chime in, they can.

There was some discussion about tariffs being fairly low in the manufacturing sector. However, in the agricultural sector, tariffs are high, particularly in seafood. Tariffs are up to 24% and 25% on some line items.

My question relates to your statement about rules of origin. Certainly in the agriculture sector, I've talked to a number of producers, and they feel that they can separate the supply lines and the rules of origin and get around that and produce a Canadian product.

In these negotiations, why wouldn't we, and why wouldn't your association, be lobbying for a slight difference? Use the WTO substantial transformation rule and look at rules of origin in manufacturing being treated slightly differently than rules of origin in agriculture. I think there's potential to do that. Have you been pursuing that?

[Jean-Michel Laurin]

The answer is yes. I didn't mention that in my comments, but we've been advocating for a flexible approach to how rules of origin requirements are determined. Some industries are more comfortable with a tariff shift approach, which is, by and large, the approach used in NAFTA. Some other industries, and you mentioned the agricultural sector, would be more agreeable to a substantial transformation definition. We've certainly told negotiators that it would be in Canada's best interest to have flexibility in how rules of origin requirements are determined for different classes of products.

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

Perfect.

A quick question...?

[The Chair, Conservative, Rob Merrifield]

A 30-second question, Mr. Hiebert.