International Trade Committee on April 15th, 2013

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

Are there changes other than internal labour mobility changes that would need to occur? Is that what you were referring to concerning the engineering professions and other professions that are similar?

Beyond that, are there other changes that would be required?

[Pablo Heidrich]

Yes, I think there would also have to be changes with registration of companies, with how many foreign directors there can be in different sectors, and which sectors are off limits from foreign investors, as is the case with banking in Canada and also with communications. There are also issues that have to do with the movement of foreign professionals to provide services across the border here.

[The Chair, Conservative, Rob Merrifield]

Thank you very much. We want to thank you for coming forward and sharing this time with our committee. We value your input.

With that, we will suspend the meeting as we bring forward our next group of panellists.

[The Chair, Conservative, Rob Merrifield]

We'd like to call the meeting back to order. We are entering into our second hour.

Just to inform the committee, we won't have any committee business at the end of this, so we can spend our time with the witnesses.

We have with us, from the Canadian Association of Mining Equipment and Services for Export, the real Jon Baird, I understand. That's good; this will be interesting, There will be lots of questions on that, I'm sure.

From the University of Ottawa, we have with us Carlo Dade, senior fellow from the School of International Development and Global Studies.

Thank you both for being here.

We will yield the floor to the real Jon Baird first.

Go ahead, please.

[Jon Baird, Managing Director, Canadian Association of Mining Equipment and Services for Export]

I'm honoured to be here to contribute the view of the Canadian mining supply sector to your deliberations on the benefits of Canada joining the Pacific Alliance as a full member.

Good afternoon everyone. I am pleased to be here today representing Canada's mining supply sector. My presentation will be in English, but I would be delighted to answer questions in French.

My message for you today is really quite simple.

I will speak fairly slowly so the interpreters are able to translate clearly.

Given the relative lack of domestic capacity of emerging nations to supply a modern mining industry, Canadian mining supply firms would benefit from freer circulation of goods, services, capital, and persons within the countries of the Pacific Alliance.

The Canadian mining industry is an important investor in all of Chile, Peru, Colombia, and Mexico, and Canadian mining suppliers have followed our investors into these markets. I would venture to say that in 100 countries or more, our mining industry is the number one commercial manifestation of our nation.

In terms of trade, mining supply is, or can be, the leading edge of the wedge for Canadian exporters in many countries. Putting it another way, I doubt there is another Canadian industrial sector that dominates international trade and investment more than our mining sector, including its suppliers. Before I tell you more about our views on the benefits of freer trade with the countries of the Pacific Alliance, I would like to take about one minute to tell you something about the association that I manage and the sector that it represents.

Founded in 1981, CAMESE, which is the Canadian Association of Mining Equipment and Services for Export, is a not-for-profit trade association existing to assist Canadian companies in exporting to the worldwide mining industry. We are a collective global marketing effort to enhance the mining world’s understanding of the excellence of Canadian mining technologies and services. CAMESE has more than 330 member companies located across Canada.

Now I'll talk about the sector. The Conference Board of Canada has characterized the mining supply and services sector as “a multi-billion dollar, widely varied industry in Canada and around the world, yet it is a 'hidden' sector that is not directly measured or tracked”.

There's some indication that there are as many as two jobs in mining supply for every job in mining.

The mining supply and service sector comprises a wide range of consultants, manufacturers, and engineering and service companies, including mining-specialized divisions of all the major banks, brokerages, and accounting and legal firms. There are as many as 3,000 firms across Canada offering mining-specific products and services.

Looking at export markets, in descending order of priority of market areas for the mining supply and service sector, Latin America is currently number one, followed by Asia-Pacific, U.S.A., Africa, Eastern Europe, and the CIS, the Commonwealth of Independent States, in that order. Indeed, Latin America is a key market area, and that brings us to Chile, Peru, Colombia, and Mexico. I have prepared one-minute capsules on the booming markets in each of these four countries. I would have liked to insert this information now, but in deference to my 10-minute time limit, I would be pleased to tell you more about these opportunities if there were a pertinent question.

No doubt this committee has access to the statistics of what has happened under the free trade arrangements with these countries. The statistics that I have seen point to solid increases in business, such as in Chile, where over the 15 years of the treaty the number of Canadian enterprises exporting to that country doubled to over 1,300. The number of different products exported from Canada also doubled over the same period and our major export to Chile shifted from cereals to machinery.

In all of these countries, I feel it is fair to say that the advances in Canadian import penetration have been led by equipment and services used in the mining industry.

Canadian suppliers are not new to the markets of the Pacific Alliance. Since 1995, for example, CAMESE has organized Canada pavilions at mining exhibitions for our exporters to exhibit their products and services in these countries. Over the past 18 years we have done this 18 times in Peru, 17 times in Chile, eight times in Mexico, and once in Colombia. Every time our exhibitors attend these shows, they find new business.

In conclusion, the Canadian mining industry and its suppliers are indeed the major Canadian commercial presence in all four countries of concern to us today, just as they are in many countries around the world.

Currently, Canada has agreements regarding preferential trade arrangements and investment protection with each of the four members of the Pacific Alliance. CAMESE is not in a position to determine whether we are best off with these individual accords or within a bloc of countries. We'll leave that to this committee and to our trade negotiators to decide.

However, we note that the Pacific Alliance aims to give preferential treatment over a wide range of goods and services with a minimum of 90% of goods being tariff-free. Perhaps this would be a better situation for us than we now have under four different relationships. A freer movement of people and broader recognition of professional credentials that might come within a trading bloc, as well as the harmonization of standards and rules, would certainly be an advantage to our exporters.

We imagine that immigration may be an issue. On this we refer to the labour market studies of the Mining Industry Human Resources Council. They predict that the Canadian mining industry will need 100,000 skilled new workers by 2020. Where are these people going to come from?

The Pacific Alliance countries would be an excellent source of such labour. Their educational and training standards are improving all the time. Also, local people are already employed by Canadian companies learning our way of doing mining, and these people might want to transfer to work in Canada.

In closing, without having told you of the major opportunities that exist in all four of these markets, the Canadian mining supply and services sector has a good deal to gain and little to lose through freer trade and investment with the countries of the Pacific Alliance, and with other emerging nations as well.

I thank you for your interest in our position on this issue.

[The Chair, Conservative, Rob Merrifield]

Thank you very much.

For the benefit of the committee, we have your written remarks in English on those four countries individually. We'll have those translated and given out to each individual member, so your information will get to where you had originally intended it.

With that, we thank you for your remarks.

We'll now move on to Mr. Carlo Dade, senior fellow of the School of International Development and Global Studies.

The floor is yours, sir.

[Carlo Dade, Senior Fellow, School of International Development and Global Studies, University of Ottawa]

Thank you, Mr. Chairman.

I think I should really reconsider my stock portfolio and add some Canadian mining export companies.

Mr. Chair, it's a pleasure to be on the Hill again. I will be making my statement in English, but I would be happy to answer members' questions in either English or French.

[ Witness speaks in Spanish]

It's indeed a pleasure to be back here with the committee talking with you about trans-Pacific trade and the Pacific Alliance, for I believe the second or third time. It is indeed, then, the third or fourth time that I've spoken about this issue in Parliament. I'm delighted the committee is considering this issue and that you've had me here again.

This is an issue that is of importance to Canada. It is probably the most important issue in terms of real potential to impact our prosperity agenda, economic growth, trade, and anything else that we're considering right now, including the EU free trade agreement.

Let me get that point out first. I say this because I've actually been studying and working on the Pacific Alliance and trans-Pacific trade ever since Canada first became involved with the alliance and its precursor back in 2007. For the past six years as the Government of Canada has worked with the varying situations of the alliance and followed it, I've been reading everything written on it in Spanish and English.

Unfortunately, there isn't anything in French right now.

I've also had extensive conversations with foreign governments, foreign ministry officials, and think tanks working on trans-Pacific trade and working particularly on the alliance, both in Latin America and in Asia.

In fact, one of the issues that the committee faces and that those looking at the issue of the Pacific Alliance face is the lack of information available in English on the subject. Indeed the only paper in English over three pages is something I've been working on for the past few years. It's not ready to be tabled and still is not ready to be released, but I will be able to use the research and analysis in this to touch on two things: a bit of the history of the alliance so you can understand exactly what it is and why it's important; and then look at four reasons as to why this is important for Canada. I'd like to leave a major issue on the table.

To begin with the history, six years ago, in 2007, Australia was hosting the Asia-Pacific Economic Cooperation meeting in Australia. There were worries raised in Australia quietly and not so quietly among the Asian countries as to whether or not the next year's host for the 2008 meeting, Peru, was capable and ready to host a meeting of the cooperation forum. Indeed there were also worries in Latin America about this.

In response, Peruvian President Alan García announced a bold new initiative. He wanted to link all the Latin American countries facing the Pacific into a new integrated group to better prepare the region to trade with Asia. This came from two realizations. One was that Latin America, despite its tremendous political and economic progress, had not been able to close the gap with Asia. The second reason, stemming from the first, was that the current set of integration agreements that Pablo and Laura described were not capable of bridging the gap. They had failed in moving Latin America, in helping Latin America.

There was also the realization that while countries compete bilaterally, they tend to succeed as blocs or as groups of countries. Indeed, if you look around, in the European Union, Britain benefits not so much individually, but by access to the full range of markets, resources, and everything the European Union has. In North America we benefit from that relation with NAFTA, and Mercosur in Brazil. There was a realization that current integration agreements weren't cutting it and something new was needed.

Originally García hadn't thought to invite Canada and Chile hadn't thought to invite Canada, but fortuitously, the Prime Minister was invited to take part in the first meeting where this was discussed, and the government has followed it ever since and positioned us extremely well to take advantage of what's emerging.

There are two points about the history. One, you have to understand this as a break from everything else that's occurred in Latin America. The alliance, or the Arc of the Pacific, which was the first iteration of the group, started with an incredible work plan, an incredible agenda put together largely by the Inter-American Development Bank.

A lot of serious work, a lot of heavy lifting, has gone into the agenda, looking at rules and regulations, best practices. The amount of work and heavy lifting that the Inter-American Development Bank has done is extremely impressive, and you can see it today in the work plan for the alliance that has been carried over. That was the good news.

The bad news was that not all 11 countries could agree on the agenda. There were different levels of political advancement, different theories about economic development, and not all the countries were on the same page. Not all had FTAs with each other, so after a year and a half, the four leaders of the Arc of the Pacific—Peru, Chile, Colombia, and Mexico—decided to break off and to form a new group, the Pacific Alliance, taking with them the other two serious members of the Arc, Panama and Costa Rica.

You have to understand that every integration attempt in Latin America before had been based on everything and anything except actually advancing integration. The Pacific Alliance represents a clear break with that past. It's an attempt to formulate a serious agenda, and what they've done to implement it is unheard of. It's unprecedented. We have never seen this serious an agenda. We have not seen such expenditure of political will and capital anywhere in this hemisphere, not in South America, not in Central America, and currently not in North America.

The other bit about the alliance is Canada's privileged position. We were an observer at the Arc, and we continue as an observer at the alliance, something no other country is doing.

Now, very quickly, I'll tell you why this is important.

With respect to integration agreements, we compete globally bilaterally, but we succeed as members of blocs. Think about our relations within North America. In North America we no longer talk about a Canadian automobile sector or a Mexican automobile sector. We talk about a North American automobile industry. We are able to compete globally because of our access to Mexico, to the United States. The U.S. no longer talks about U.S. energy dependence. The U.S. speaks of North American energy independence.

This is a major shift and it is important for us. We have benefited from our relationship with the U.S. not because of the free trade agreement but because of things we've done beyond that. NEXUS was not part of the free trade agreement. Beyond the Border was not part of the free trade agreement. The free trade agreement was a gateway to working on more important integration issues.

Trade does not capture the importance of the relationship. Think about this fact. Every dollar the U.S. imports from Canada contains 25¢ of U.S. input, content services. For every dollar the U.S. imports from Mexico, it's 40¢ of U.S. goods and services. For the next country on the list, you have to go all the way down to Malaysia at eight cents. China, Brazil, and the EU come in at two to three cents.

The importance of integration for competing globally for real economic growth has to be understood. That's the importance of the alliance. It gives us a second kick at the integration can. No one is really happy with the pace of integration in North America. We're stuck with a United States that keeps saying, “No, maybe tomorrow”, but in the Pacific Alliance we have a group of countries saying, “Yes, let's do something.” It changes the dynamic and this is important for Canada.

The second reason is the liberalization agenda. The question for Canada, as committee members have asked, is not about what we're going to liberalize. All the easy free trade agreements are done. The question nowadays is when we're going to liberalize what's left and under what conditions. The Pacific Alliance is the best scenario for doing this.

I have an analogy useful in thinking about the Trans-Pacific Partnership, the EU agreement, and the Pacific Alliance. Imagine working with the Pacific Alliance as a bar, with four countries with whom we're very close friends yelling and screaming about things but never going much beyond yelling and screaming. Now imagine the negotiations on the Trans-Pacific Partnership as going out the back door of the bar into an alley, and waiting for us in the alley are New Zealand, Australia, and the United States, each with a baseball bat or a pair of brass knuckles that say “Canadian dairy” and “Canadian agriculture”. Everything we do beyond the alliance gets more difficult. If we cannot work on liberalization with the alliance, I wonder where we can work. This is the easiest path that we're going to face of our liberalization agenda.

The third reason is Asia. We're more attractive to Asia as part of the alliance. Indonesia is not asking the Association of Southeast Asian Nations to begin negotiations with Canada. They're asking them to begin negotiations with the alliance. We look better as part of the alliance. The alliance looks better with Canada.

It's also a forum where we don't have to worry about the U.S. sucking the air out of the negotiating room when we walk in.

The fourth reason is the Canadian private sector. The committee has asked questions about why the private sector doesn't trade more. You can't ask the government; you have to ask the Canadian private sector. They're the ones who trade. The reason they're not trading more is they still have access to easy money in the U.S., but globally we can see how this is changing. The EU is falling apart, and there's slow and sluggish growth in the United States. Markets like South America, like the four countries of the alliance in particular, which are, in essence, another BRIC, as large as Brazil, are important. At some point in the future the Canadian private sector is going to come to the government of the day and ask why aren't we in the Pacific Alliance; why didn't we take the opportunity; why was this another TPP where we had an opportunity to get in early, but instead we're now faced with begging our way in? Again, we have a huge advantage, and we need to think about that.

Finally, I would hate to say that I have words of advice, but this is an idea. The alliance is the most serious integration scheme we see going on. There are clear benefits to Canada that benefit us as we have benefited through NAFTA. Indeed, the questions about whether we can work with these countries are eerily reminiscent of questions we asked about Mexico and NAFTA. Yet, if you talk to John Manley, Michael Carrigan, and other critics of working with Mexico, you hear what they're saying now: “My God, I was wrong. We need to do more with Mexico. We've wasted opportunities with Mexico. We need to do more.” It's kind of odd that we're having these same discussions about countries like Chile, which has, I think, more free trade agreements than everyone in the Americas put together, but they're similar arguments to those we had with Mexico.

Here's the issue: the seriousness of the agenda by the government has been good to this point. We were there at the beginning. We stuck with it. It's a demonstration of seriousness that stood us well. I would argue that going forward, the Prime Minister really has to be in Cali next month for the summit of the alliance. The Spanish president and prime minister will be there. We've got to be there.

For the alliance, if we're serious about an agenda for Canadian growth, for economic prosperity for Canadians, this has got to be something that's supported by the whole of government. The issue with the alliance is that it's been a national project, not the project of one party, so I would suggest that Mr. Mulcair would have to go with Mr. Harper to Cali, not physically, but in spirit.

[The Chair, Conservative, Rob Merrifield]

Okay, I'm going to quote you down there.

[Voices]

Oh, oh!

[Carlo Dade]

I apologize for not having produced something, but I'm happy to provide individual briefings to members or to the caucuses outside of the setting that we're in now.

[The Chair, Conservative, Rob Merrifield]

Very good.

We'll start with the questioning.

Monsieur Morin, the floor is yours.

[Marc-André Morin, NDP, Laurentides—Labelle, QC]

Mr. Dade, when you look at Latin America, you see that it's far from a monolithic block with a single philosophy. Rather strong tensions exist between groups of countries who don't share the same policy directions.

If we side with one group of countries, do you think we risk alienating another country? Might we alienate a country like Brazil, a huge industrial power whose economy is much more developed than the other countries, who have mainly extractive resources?

Should we spread out our efforts to try to unite Latin America, instead of rushing to side with one particular group?

[Carlo Dade]

Thank you for the question.

I think the first thing to do is to focus on Canada's interests. That means identifying what matters most to Canada, not the regions.

In this regard, the alliance is important as an opportunity for our near-term prosperity. If there are four countries—or, to be correct, six countries—that would be concerned about Brazil, and alienating Brazil, it would be Chile, Peru, Colombia, and to some degree, Mexico. They've thought about this. They've discussed this. This is not an issue. They've made it absolutely clear that the alliance

is not against the client.

The alliance is not against any country. The alliance is simply a pragmatic response to an opportunity vis-à-vis Asia. For Canada, Brazil will be a decades-long project. The work that we've begun with Brazil will require constant effort.

The Canada-Brazil CEO Forum that the government has announced hasn't gone anywhere despite our best efforts. Despite our announcing our members of the council on time, Brazil just hasn't shown the interest to respond. We'll need a long-term effort with Brazil. The alliance does nothing to harm our relationship with Brazil. If it did, Chile, Peru, and Colombia would not have formed the alliance.

With respect to other countries, I'm not too worried what Nicaragua thinks about Canada or what Venezuela thinks about Canada. I'm worried about countries that are actually important to our prosperity and to our future in the hemisphere.

[Marc-André Morin, NDP, Laurentides—Labelle, QC]

Do you think resources could be an issue? My government colleagues make it sound as though we have unlimited negotiating resources. Perhaps if we invested more resources, we would meet with success elsewhere with partners who are more on our level.

For instance, if we disregard Brazil, maybe five or ten years down the line, we'll see that the country has partnered with China when it comes to aerospace or some other similar sector. We could really miss the boat on that.

[Carlo Dade]

That is a real worry and I'm sorry that the folks from Foreign Affairs couldn't address the issue. They do need more resources in my opinion because the trade agenda is that important. The department to a large degree is underappreciated and I would argue to some degree underfunded, but not underpaid, that they do quite well in that regard.

The issue, though, with resources, integration.... We already have a free trade agreement with these countries, so we don't have to go through 15 rounds of negotiations on every point about moving ahead with integration agreements. Most of the work is already done. It's a simple matter of negotiations with them to go over the agenda that they've already produced and how we work with them on that.

The application of resources versus the benefit outweighs anything else we're doing. Cost benefit...I shouldn't use cost benefit with this committee after what we went through with the government, but the cost benefit is clearly there for this agreement.

[Marc-André Morin, NDP, Laurentides—Labelle, QC]

I apologize for saying it so rudely, trade agenda is important as in we need to have one.

[Carlo Dade]

I won't comment on that.

[The Chair, Conservative, Rob Merrifield]

Okay, your time is up.

[Carlo Dade]

It's good like that.

[Marc-André Morin, NDP, Laurentides—Labelle, QC]

A bit of humour always helps to ease the tension.

[The Chair, Conservative, Rob Merrifield]

Thank you very much.

Mr. Keddy.

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

Thank you, Mr. Chairman, and welcome to our witnesses.

It's been a pretty wide-ranging discussion on this topic both from our witnesses here, Mr. Chairman, and our former witnesses. There are a couple of issues I'm trying to drill down into.

Mr. Dade, you made a couple of comments that I want to pick up on. One of them, certainly, is the fact that perhaps there hasn't been a lot of trade critics and analysts writing about this agreement in English, and I think that's unfortunate.

I go back to the basics on this potential agreement. Every time at every meeting we listen to the same criticisms from the opposition, but we still end up the seventh, eighth or ninth, according to which statistics you use, trading bloc in the world, which is significant. The fact that you mentioned that the Prime Minister was at the first meeting in 2007 is significant. That opens doors and provides opportunities for Canadian businesses.

Frankly, I reject the statement and quite honestly find it a bit xenophobic that somehow these countries have lower standards than Canada has. We quite legitimately heard from the witnesses that the standards actually are as high or higher. Application and enforcement of those standards is the problem. I see us as helping partners to obtain a higher level or aspire to their own laws perhaps rather than our sinking to a lower level, so I really don't understand that philosophy or mindset.

There are a couple of issues here. I think it's been rightly analyzed that this is really about seeking greater trade with Asia, an area in which we have a potential to partner. There are a couple of criticisms. One of them was that we already have bilateral agreements, so what's the advantage of the multilateral agreement? The other criticism was on standards, that somehow on the environment, on labour, and on human rights, we're going to lose our standards. Another one was on immigration and visas. Without question, where are we setting ourselves up here? Are we simply going to isolate ourselves and become isolationists?

I guess the other criticism was that somehow this hurts our position with Brazil. If you look at our record with Brazil, we've moved forward. We finally settled, quite frankly, the Bombardier dispute that went on forever and ever and hurt our position with Brazil. We've opened up. I think we are accepting 10,000 Brazilian students presently. We're moving forward on one front with Brazil.

What prevents us from doing the same thing and answering those criticisms on another front with the Pacific Alliance?

It's a bit of a rant, I'm sorry.

[Carlo Dade]

Well, let me see if I can answer a little bit of that.

On issues of different regulatory regimes, we had the same issue about Mexico. It's important to look at not where countries have been but where they are and where they're going. The work these countries are doing in terms of international best practice in regulation is truly outstanding. The work that the Inter-American Development Bank is doing, the best experts in the world, the capacity in these countries.... The college graduates, the educated elite of these countries, the people who run government have qualifications that would have them succeed in New York or London, not to mention Canada. You have to look at where the countries are going, and the example of Mexico is instructive in that regard.

Just on Thursday and Friday, the high-level group of the alliance was meeting in Mexico City. The superintendencias, the superintendents of banks, finance and securities of the countries were meeting to set new standards. This will be better than platinum in terms of the ability to create new financial regulations and rules. Why the heck wasn't Scotiabank there? I'm sure that's a question Scotiabank is going to be asking when they start calling Ottawa. It's important to keep that in mind too.

In terms of trade, movement of people, they're doing the same thing. But this issue about FTAs versus integration groups is huge. It's not just about Asia. It's about creating a market, another kick at the NAFTA can, just as we benefited from NAFTA, not because of the free trade agreement, but because of everything that went beyond that. We've benefited immensely in this country, not from the rules in NAFTA but from regulatory convergence: NEXUS, all the agenda that we've had.... This is another kick at that can.

You've heard statistics from Foreign Affairs and from the ambassadors about how these economies are growing. They're now majority middle class, and that trend will continue. They're going to become richer and they're going to become more dynamic economies. It behooves us to get in now rather than try to fight our way in against Australia, Spain, Japan, other countries that are also looking at these markets.

We have a tremendous advantage. We can leave some of the dysfunction of NAFTA behind in that we're never going to leave North America. We'll never diminish our trading with North America, but North America has reached its limits, because the Americans are no longer interested in doing what's necessary to be successful and to be competitive globally. These guys are. It's the work that they've done. It's not just 90% of tariffs that they've eliminated in a year and half; it's the agenda beyond this. There has been tremendous political heat in these countries from agricultural groups and from others for what they've done, yet they've committed the political will. On the plans that the IDB, the Inter-American Development Bank, and this group have laid out, we just haven't seen this globally in terms of an agenda. This is the type of agenda we want to be part of. We've been frustrated in North America, as have the Mexicans, by the lack of movement and progress. This gives us a chance. Yes, Asia is down the pike, but even without Asia there are things in the near term by working with these groups.

[The Chair, Conservative, Rob Merrifield]

Okay, that's it.

Mr. Baird, if you have a quick comment, I'll allow that, but his time has about gone.

[Jon Baird]

No. As I think I said in my presentation, I'll leave these matters up to people who know more about them than I do. I'm just interested in free trade with emerging countries.