International Trade Committee on March 25th, 2013

[Kerry Buck]

I'll pass that to Mr. MacKay.

[Cameron MacKay]

My point really is that focusing on the trade surplus or deficit with individual trading partners, like Peru or Colombia, or with individual countries is not, frankly, that relevant. Our overall trade surplus or deficit with the world is driven not by individual free trade agreements with these countries but rather by the other much broader forces in the global economy which I mentioned before, including commodity-market prices, exchange-rate fluctuations, differences in productivity, etc., as well as by broader issues of Canadian government policy.

So we don't see any strong link between a trade balance with one country and the impact of an FTA on that.

[The Chair, Conservative, Rob Merrifield]

Thank you very much.

Mr. Shory, go ahead for five minutes.

[Devinder Shory, Conservative, Calgary Northeast, AB]

Thank you, Mr. Chair.

Mr. Sandhu has brought up what the Conservative government believes in, and I guess it is very clear that we are pro-trade. I don't want to say what their belief is. Everybody knows that the NDP is not pro-trade for sure; it's anti-trade. But I'll tell you about my belief in trade. I strongly believe more and more trade is better, and I also strongly believe that more and more involvement with our trading partners is also good for us.

When we say we are involved in TPP negotiations and we're thinking of getting involved in a Pacific Alliance partnership, the question is—and I'm sure the department will have some comment to make—whether involving ourselves simultaneously in negotiations with TPP and PA would be of any benefit or would be a waste of time.

[Kerry Buck]

Again, I'll answer briefly and then turn to my colleague Mr. MacKay to add to that.

The Pacific Alliance and TPP are separate initiatives. They're complementary. They have some shared objectives, but involvement in one does not preclude involvement in the other. The composition of the TPP is different from that of the Pacific Alliance. TPP trade negotiations are in advanced stages, having recently concluded the 16th round. The Pacific Alliance is a little newer than that.

I'll turn to Mr. MacKay to talk about how the two agreements are complementary and what the different elements are.

[Cameron MacKay]

Maybe just to build a little bit on that and on some of my comments earlier, they really are two very different initiatives. The TPP, frankly, is much larger and builds new trade rules, including those between partners that don't already have free trade agreements with each other. It's a much bigger grouping, and it's a much more ambitious grouping than is the Pacific Alliance. The Pacific Alliance involves these four countries that already have free trade agreements with one another, and they want to harmonize and build on that platform from there, so they have very different objectives.

With respect to being involved in one or the other, frankly, they're just two different initiatives, and the department, as you know from this and other briefings, is already engaged in many trade negotiations with different individual partners and groups of partners, so I don't see a conflict in that.

[Devinder Shory, Conservative, Calgary Northeast, AB]

Let me ask this. For example, if we do not move further and other observer countries become part and parcel of this group of countries, is there any potential loss or disadvantage to Canada by not joining this group? If others, say Australia and New Zealand, joined this group and became full partners in this group, would we miss any opportunities, specifically in Asian countries?

[Kerry Buck]

Canada has a privileged relationship now with the Pacific Alliance members because of our web of FTAs and the extent to which we're in their markets already—and they're in ours, to be frank—and because of the richness of our bilateral relations with each of those member countries.

There would be a technical answer to your question once the Pacific Alliance is more advanced and we know what harmonization would be happening beyond our FTAs. That's a technical question that can't be answered until the Pacific Alliance is more advanced.

On the broader foreign policy level, right now we have that privileged relationship with Pacific Alliance countries. In the hypothetical situation where other countries outside our hemisphere are joining the Pacific Alliance and we're not, can I see them surpassing that privileged relationship we have with the Pacific Alliance member countries? It's possible, but that's on a broader foreign policy plane.

As I said, there's a technical answer to your question that can't be answered yet. Would we be missing something by not becoming full members? Quite feasibly, but we don't know yet what that might be, because it depends on how they surpass what we have in our FTAs.

[The Chair, Conservative, Rob Merrifield]

Thank you very much.

Mr. Easter, for five minutes.

[Wayne Easter, Liberal, Malpeque, PE]

I have just one question, Mr. Chair. It won't take five minutes.

You mentioned, Mr. MacKay, in terms of the global value chains, how they add to GDP etc. when you are importing. I'd like you to answer how specifically that happens. I really believe that's an area we need to be looking at as a committee. That's why I've been pushing, and still will push, because I think this hearing is a waste of time—not with you folks, but I think the Pacific Alliance is something we're wasting our time on as a committee, when we should be looking at how to enhance.... How do we as a country take advantage of the trade agreements that we have in place and that are already being negotiated? Your point on global value chains is an important one, and we need to understand that as a committee. We should be meeting with some companies that are involved, that can tell us what more needs to be done from a policy perspective as a country to enhance those companies' interests. Our time would be better spent doing that. I still don't understand the Pacific Alliance; maybe I'm too thick. This, in my view, is busy work.

Perhaps you could explain just how that works in terms of global value chains, how even when you're importing it creates jobs and some economy and GDP within the country.

I might ask as well, does the department have any kind of analysis in its own right, I guess an economic analysis of how all that works that we could be provided?

[Cameron MacKay]

Mr. Chair, it's a very interesting question. Certainly, the emergence of global value chains and the strengthening of them in the last few years is something that the Canadian government and other governments around the world are grappling with and trying to analyze, and the Canadian business community is competing in that world every day now.

I don't have briefs in front of me to support a lot more than to say that clearly, in terms of the percentage of global trade of intermediate products for further processing in the next country that are then processed and re-exported to the next country, this kind of trade is growing in importance. The WTO and the OECD have done some interesting work just in the last few months on global value chains and so-called value-added trade, and how analyzing trade balances through the perspective of value-added can actually change the numbers that they produce in terms of surplus or deficit here or there.

I gave the example before of gold. There's the famous example of how iPods imported into the United States from China may appear to be, let's hypothesize, a $300 import from China, when in fact, only about $50 worth of the value is actually added in China and the rest is from components that are imported into China from the rest of the world. It's a very complicated question. It's a very important question, I agree. I think the chief economist's office is beginning to do some work here, and there are other policy institutes and think tanks in Canada, the C.D. Howe Institute and the Conference Board and others, that are looking at these questions.

[Wayne Easter, Liberal, Malpeque, PE]

Thank you, Mr. Chair.

[The Chair, Conservative, Rob Merrifield]

Thank you.

I think you'll get more answers as we go into the private sector part. We have three meetings scheduled on the Pacific Alliance that will give us some of those answers.

Mr. Keddy, you're the last questioner.

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

Thank you, Mr. Chairman.

I just have a couple of points.

I appreciate, Ms. Buck, your intervention that Canada does exist in a global economy, that we actually do make things with other countries and that other countries make things with us. I'm sure that's news for some of my colleagues. But seriously, to me this is not a colossal waste of time; to me this is an opportunity. It may be simply because I'm an optimist and not a pessimist. It's not anything about being part of government. It's about a fledgling group—I think the word you used, Ms. Buck, was “embryonic”—that makes up the ninth largest economy in the world. Together we have an opportunity to look at this for very little cost. We're in at the ground floor. The very idea that somehow we wouldn't pursue this, I can't grasp the logic of. I challenge the opposition members to produce logic saying that we shouldn't look at this trading block, because there is no great cost and there's not liable to be for some period of time.

I brought up the comparison with the European Union early on for a reason. Sixty years ago they were shooting at one another in the European Union. The new member states from the Eastern bloc countries suffered under communist and socialist dictatorships. The newest country has only emerged in the last decade from a civil war and an occupation of its territory by neighbouring countries. The world's not a perfect spot. Either we're going to trade together and we're going to live together, and we're going to figure out that there's a benefit for all of us in that, or we'll become this little isolationist country that goes back to the previous government's record of free trade agreements, when yes, the economy was good and we were trading with the United States, with close $2 billion worth of trade going across the border every day and the dollar was inflated at a buck forty. A whole bunch of negative things happened from that as well.

But my point is simple. You folks are trade people. Here's an opportunity to get in on the ground floor. This can go sideways, it can go nowhere, or it can go up. Why would we not want to participate?

[Kerry Buck]

Thank you.

As you put, sir, a little better than I've been able, there are some clear benefits to Canada from obtaining observer status. I'll set out three of them right now: one, it deepens our relationship with Pacific Alliance members, which is already good; two, it leverages our engagement with the Pacific Alliance to develop new links in the Asia–Pacific region; and three—and this is the one where we don't know where it will take us—it allows us to get in on the ground floor and participate in the alliance's meetings and discussions, including bilaterally, thereby allowing us to assess mutually beneficial opportunities for closer cooperation with a group of like-minded, open economies.

Where that latter analysis will take us is not yet clear, because it's not clear inside the Pacific Alliance yet. I think what is clear is that Pacific Alliance members individually and jointly as an alliance are very important partners to us, both on the economic front and the broader foreign policy front.

Our observer status can't do anything but help us enhance those relationships that have already proven to be important to us.

Thank you.

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

Thank you.

[The Chair, Conservative, Rob Merrifield]

Thank you very much.

With that we'll conclude this part of the meeting. Not very much of the meeting is left, but we do have one quick motion to deal with. I want to thank the committee.

Before members get up—

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

Do you want to deal with the motion first?

[The Chair, Conservative, Rob Merrifield]

Yes, let's just deal with the motion.

Mr. Holder.

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

Is anybody against the motion?

[The Chair, Conservative, Rob Merrifield]

Members, just very quickly, let's deal with the motion right now.

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

We're going to vote on the motion and then say goodbye.

[The Chair, Conservative, Rob Merrifield]

It's just a routine motion for the Pacific Alliance study. Does somebody want to move that motion?

[An hon. member]

So moved.

[The Chair, Conservative, Rob Merrifield]

Yes.