International Trade Committee on March 25th, 2013

[Kerry Buck]

We maintain our focus on Brazil. We enhance our focus on Brazil. It's a priority country for us, and it will remain so. We are taking a number of steps to enhance our strategic partnership with Brazil—the Joint Economic and Trade Council, JETC; the joint committee on science and technology and innovation; the Consultative Committee on Agriculture; the CEO forum; dialogues on energy and space; and strong education cooperation. It's really robust. So Brazil is still very much there. But with the Pacific Alliance also, across a range of issues, we have very close working relationships. That's the major foreign policy point, the broader foreign policy and trade point.

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

You quoted a number of statistics in your original brief to committee, for example, that Canada-Mexico merchandise trade has grown almost sevenfold, and Canada-Chile, threefold; Canada-Colombia two-way merchandise trade has surpassed $1.5 billion; Canada-Peru has seen a 49% increase in trade. To me these are huge numbers.

Again, I'm not discounting the Brazilian powerhouse in South America whatsoever. But I take exception to discounting the fact that these four countries have the potential to form a very serious trading bloc. We don't think twice about looking at the European Union—28 member states come July 1—as being one of the largest economies in the world, and certainly the wealthiest economy in the world. But somehow we discount South America.

I don't understand why the opposition parties don't see the value of trading north-south with countries that need our expertise when Canada is a welcome partner and is, quite frankly, many times welcomed to the table because we have the ability to trade into North America. Sometimes it's easier to trade with us than with the Americans.

[Kerry Buck]

Thank you.

That was the point—as the member quite rightly points out—of going over those trade statistics, to give you some hard numbers to help bolster the attraction of the Pacific Alliance, help explain the attraction of the Pacific Alliance. But as I said, it also goes beyond those trade policy and economic considerations.

Beyond the FTAs, a key policy objective of the alliance is to deepen and harmonize current trade rules and market access among members. But this deeper integration also feeds over into better cooperation and coordination in terms of competing for business opportunities in Asia and other international markets, and to help make us more present in markets of the Pacific Alliance. Over and above that, engaging with the Pacific Alliance at a fairly early stage will also, we think, bring a force-multiplier effect to our bilateral relations with Pacific Alliance members on other political security and foreign policy interests.

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

Is there only a minute left?

[The Chair, Conservative, Rob Merrifield]

Yes, or less.

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

Do you have time for one question from my colleague?

[Russ Hiebert, Conservative, South Surrey—White Rock—Cloverdale, BC]

Thank you.

You mentioned in your opening remarks that Canada is the first non-Latin American country to be granted observer status. Then I noted that Australia, Spain, New Zealand, and Japan are a number of other observers that have been granted the same status. What is really the advantage to being an observer when so many of our other trading partners have the same status?

And as a follow-up question, do those other observers also have free trade agreements with the members of the Pacific Alliance?

[Kerry Buck]

I believe we are the only one that has FTAs with all four members of the Pacific Alliance. I'm fairly confident of that. If there's any difference in that....

[Russ Hiebert, Conservative, South Surrey—White Rock—Cloverdale, BC]

So what's the advantage then?

[Kerry Buck]

Sorry, Costa Rica and Panama are getting close.

The advantage of being an observer—

[Russ Hiebert, Conservative, South Surrey—White Rock—Cloverdale, BC]

But there are so many other observers in the same position.

[The Chair, Conservative, Rob Merrifield]

Your time has gone, but—

[Kerry Buck]

We were the first, and I think that's important. We have closer relations with all Pacific Alliance members. We use this to bolster our bilateral consultations with them as well.

The advantage of observership is that it gives us increased contact with Pacific Alliance members. As well, the advantage of being first is that it really puts a marker down about Canada's close engagement with Pacific Alliance members.

Where we go from here remains to be seen.

[The Chair, Conservative, Rob Merrifield]

Just to clear that up, did you say that Costa Rica and Panama have free trade agreements with all four?

[Kerry Buck]

No.

[Cameron MacKay]

They're very close. I believe Costa Rica has three of the four, and they've negotiated the fourth but it hasn't passed their congress yet—

[The Chair, Conservative, Rob Merrifield]

Okay. I just wasn't sure what you said there.

[Cameron MacKay]

—and Panama is in a similar position.

[The Chair, Conservative, Rob Merrifield]

Very good.

Mr. Davies, you have five minutes.

[Don Davies, NDP, Vancouver Kingsway, BC]

Mr. MacKay, I'm going to challenge you a little bit on your terminology that “we've slipped into deficit for a while”. Canada went from a current account surplus of $25 billion in 2006 and we're at a current account deficit today of about $64 billion. That is almost a $90 billion swing in six years.

I think if there were an NDP government in power for six years and we were running a $64 billion current account deficit during that time, my colleagues in the Conservative Party probably wouldn't be so cavalier about it. But I'm going to point out something about deficits. I've done some research—and I won't belabour it now—and there are a lot of countries in the world that have suffered the recession, and many countries are running current account and trade surpluses. Many countries that were running current account deficits or trade deficits are improving their position, and Canada is among a relatively small group of countries that are actually getting worse in their current account trade deficits. That's my speech.

Our analyst has provided us with some numbers about the trade deficit. I can't do a current account analysis, because we don't have full investment numbers, particularly about investment of some of these members in Canada, but when I add up these numbers, we're running trade deficits with all four countries.

With Mexico, the country with which we've had the longest trade agreement, since 1994, we're running a $21.5 billion trade deficit. With Peru we have a $3 billion trade deficit. With Chile we have an $830 million trade deficit, and that's since 1997. So we have long-standing trade agreements under which we're currently running chronic deficits. We just signed with Colombia and we're running a relatively small $78 million deficit, but a deficit nonetheless.

This is a pretty good representative sample of good agreements we've had in place, in some cases for a long time—since 1994, so it's coming up to 20 years. With Chile we're talking about 16 years, and with Peru we're coming up to four years. We're running chronic trade deficits with all these countries. Is the answer really that trade agreements don't do anything about trade deficits, and they just tend to mirror whether we have a trade deficit?

I think what Canadians really want is to enhance Canadian exports, particularly value-added exports. Given this record, it doesn't look as though these trade agreements are doing that.

[Cameron MacKay]

Just broadly speaking on Canada's trade balance with the world, I think the chief economist's office at DFAIT would argue that this is really driven, more than anything, by the state of commodity markets, exchange-rate fluctuations, productivity differences, etc. For example, since 2008, the bilateral FTAs we've brought into force with Peru and Colombia are really not the reason we have gone from being in a surplus to a deficit position. Traditionally, Canada has run very large trade surpluses with the United States and trade deficits with everyone else, and then it all roughly balances out in the end.

We talked about this a little bit last fall with the example of Panama, with which we have a growing trade deficit. The reason it's growing, just to give you one example, is that Canada is now importing significant quantities of gold from Panama for further processing in Canada and then for re-export abroad. This is a good news story for the Canadian economy, in that it's creating wealth and prosperity in Canada because we are doing the work of processing the gold, but our bilateral trade balance with Panama looks, from another perspective, poor as a result because we're importing all of this product.

But this is just in the nature or way that global value chains work now—

[Don Davies, NDP, Vancouver Kingsway, BC]

But other countries are operating in the same environments as Canada is.

[Cameron MacKay]

—so our focus is more on the broader trade balance, and we don't think that Canada's free trade agreements with these individual countries are the reasons for the issues you described earlier.

[Don Davies, NDP, Vancouver Kingsway, BC]

Okay.

Now I want to talk a bit about visa process. The presentation says: The ambitions of its members go well beyond lowering barriers to trade.... They have taken necessary steps to integrate their stock markets, and removed visa requirements for members in order to facilitate the free movement of capital and people.

At least with respect to Colombia and Peru, we've had recent civil wars, insurrections, drug production, and money laundering. Can you give us a reason why we would want to lower visa requirements to facilitate the movement of people and capital from countries like that?

[The Chair, Conservative, Rob Merrifield]

That's his last question. Go ahead with an answer.