International Trade Committee on May 6th, 2013

[The Chair, Conservative, Rob Merrifield]

I call the meeting to order.

We want to thank our minister and some of his department officials for being here to talk about the 2013-14 main estimates, vote 20, under Foreign Affairs and International Trade.

Mr. Minister, we are very pleased to have you here. It's been a while since you've been to our committee. We look forward to your presentation and then we'll open it up to questions and answers.

These are exciting times in Foreign Affairs and International Trade; the agenda is pretty intense.

Mr. Minister, the floor is yours.

[Ed Fast, Conservative, Minister of International Trade]

Thank you, Mr. Chair.

It's good to be back again before committee. I'm also joined today by Nadir Patel, the department's chief financial officer, Marc Whittingham, the president and CEO of the Canadian Commercial Corporation, and our deputy minister, Simon Kennedy.

It's a pleasure for me to appear before you today and to discuss the importance of international trade to Canada. Simply put, we are a trading nation. The benefits of international trade are reflected across our great country, in our companies, in our cities, and of course in our standard of living.

[Wayne Easter, Liberal, Malpeque, PE]

On a point of order, Mr. Chair, this is the minister and the full department. Do we have a copy of the speech that members could have while he goes through it?

[The Chair, Conservative, Rob Merrifield]

I don't think we have a copy of the speech.

Go ahead, Mr. Minister.

[Ed Fast, Conservative, Abbotsford, BC]

Mr. Chair, these are my personal speaking notes. They're all marked up.

[The Chair, Conservative, Rob Merrifield]

That's fine. We'll all pay very good attention, and this is all recorded.

[Ed Fast, Conservative, Abbotsford, BC]

All right, thank you.

Internationally, Canada has established a reputation as a leading world-class producer of cutting-edge products, innovation, and services. I can personally attest to this from my many trips around the world. We should all be proud of the strong brand Canada has established as a partner of choice in the world. In fact, I would note that in 2010, and I believe also in 2009, FutureBrand of New York ranked Canada as the world's most respected country brand. We can be proud of that brand.

Our government understands the importance of international trade to Canada's economy. The Prime Minister has clearly indicated that trade is a priority for our government. International trade is an important piece of the government's economic action plan to create jobs, promote growth, and support long-term prosperity for Canadian workers and businesses.

In 2012 Canada's exports and imports of goods and services exceeded $1.1 trillion, or $32,000 for every person in Canada. That's approximately $3 billion each and every day. Our international trade is equivalent to over 60% of Canada's gross domestic product, and one in five jobs depends on trade. It's difficult to overstate the importance of open markets to Canada, and it is equally clear why Canada must succeed in international markets. My job, and that of my department, is to seek out new global markets and opportunities for Canadian businesses.

In my opinion, one of the most effective ways to open new markets and increase prosperity is to pursue and practise free trade. Free and open trade is an excellent driver of economic growth, employment, and opportunity. In fact, I would suggest that trade and investment are the twin engines of economic growth for the world economy. That's what drives our government's pro-trade plan, the most ambitious plan of its kind in Canadian history.

The plan recognizes that, while the United States remains Canada's closest and most important trading partner, our future economic success and prosperity will also be dependent on our ability to seek out, compete for, and secure opportunities in other markets.

We also believe that trade is a shared global interest and responsibility, and we'll continue to call on our trading partners to promote open markets and to resist protectionism and other trade-restrictive measures. This is at the core of Canada's pro-trade plan. It is a plan with results.

In seven years, our government has concluded trade agreements with nine different countries, foreign investment protection and promotion agreements with 16 countries, and 51 air transport agreements covering 74 countries. But we're not resting on our laurels; instead, we're continuing to seek new agreements and partnerships with our trading partners.

For example, as we speak, we're pursuing trade and investment opportunities in one of the most dynamic regions of the world, that being Asia, including initiatives with Japan, India, South Korea, and the Trans-Pacific Partnership. We're actively working to conclude our comprehensive economic and trade agreement with the European Union. Canada is also deepening its engagement with the countries of the Pacific Alliance. These countries and trading blocs represent some of the highest growth markets in the world, and it's essential to Canada's continued economic competitiveness that we seek to negotiate preferential terms of access. This is important because I can assure you our competitors are trying to do the same thing.

While trade agreements are important in opening doors for Canadian companies, it's also important that we support these companies in moving through those doors. That's the central role of the Canadian Trade Commissioner Service. In more than 150 cities worldwide, five regional offices, and in a growing number of leading industry associations across Canada, you can find trade commissioners helping businesses, large and small, break into and expand into new markets.

Armed with market intelligence and expert advice, trade commissioners work closely with Canadian companies to reduce the risk and the cost of doing business internationally. They connect Canadian business people with the right decision-makers abroad so that they can grow their businesses and create jobs right here at home. Last year we served almost 14,000 Canadian firms, most of them small and medium-sized enterprises.

Your committee's March 2012 report on the Canadian Trade Commissioner Service was welcomed, and its support for the service is very much appreciated. The government has responded to that report and is working diligently to implement its recommendations so as to maintain the excellent service provided to Canadian clients, and to contribute to Canada's prosperity through global commerce, investment, and innovation.

Allow me to end with a few words on our global commerce strategy, launched in 2007, which allowed Canada to put in place a framework that emphasizes a whole-of-government approach and greater engagement of small and medium-sized enterprises.

In response to a changing global economic landscape, the government announced in 2012 that it would undertake steps to refresh the global commerce strategy, or the GCS, through extensive consultations with Canadians, again with SMEs being the focus.

We've heard from many stakeholders across the country in this undertaking. In addition to meeting with provincial and municipal governments, my officials have met with more than 400 industry and business leaders across Canada.

The consultation process has helped inform a refreshed GCS which will guide Canada's trade plan going forward. The updated global commerce strategy will better align the government's trade and investment resources with our objectives vis-à-vis markets that matter the most.

Through the GCS our objective is to help Canadian businesses, especially our SMEs and education service providers, to compete successfully in targeted emerging markets while maintaining our efforts to strategically advance our commercial interest in important traditional markets.

Economic action plan 2013 reaffirmed the government's commitment to refresh the global commerce strategy and to announce it in the coming months. I will continue to look to this committee for advice and ideas as the government continues to create jobs and prosperity for Canadians through deeper trade and investment ties with our key global partners.

Thank you. I look forward to our discussion today.

[The Chair, Conservative, Rob Merrifield]

Thank you very much for those remarks. It's a broad agenda in international trade.

We'll start with our questions.

Mr. Davies, the floor is yours for seven minutes.

[Don Davies, NDP, Vancouver Kingsway, BC]

Thank you, Mr. Chairman.

Thank you, Mr. Minister, for being with us. My notes indicate you were last at the committee on March 13, 2012. That's almost 14 months ago, so in my opinion, you're long overdue to be here. We thank you for making the time.

Mr. Minister, as you know, economic growth in 2012 failed to meet the Bank of Canada's projections. Bank of Canada Governor Mark Carney said that one of the greatest contributors to this failure was, in his words, “weak exports”. In addition, in an analysis published last month, CIBC economist Benjamin Tal concluded, and I'll quote him as well: ““Regardless of how you look at it, this was a lost decade for Canadian exports.”

Mr. Minister, why has Canada's export performance been so disappointing?

[Ed Fast, Conservative, Abbotsford, BC]

Thank you for the question.

As I'm sure you've taken notice, the world economy has undergone a dramatic change. We've gone through the worst economic crisis in half a century. Markets around the world have been challenged by that crisis. Even the emerging markets, the fastest growing markets around the world, have struggled to keep up with their traditional patterns and rates of growth.

Canada is not immune to the winds of economic change blowing around the globe. We do know for a fact that trade investment, more open and freer trade and investment going forward, is going to be one of the keys not in only unleashing Canada's economy but also in allowing the global economy to recover from what has been a very difficult last five to six years.

Even as recently as this past March, our trade figures, as you know, have bounced back to a surplus. It would be a mistake to focus on any given month or even year to get a broader picture of the opportunities that exist for Canada to expand its opportunities around the globe.

My job as trade minister is to provide new opportunities for Canadian companies to be successful all around the world in selling their goods, selling their services, and selling their expertise. I can tell you from personal experience, having travelled to many of our key trading partners, having also been involved at the World Trade Organization, within APEC, and at the OECD, that Canada has opportunities to work hard to remove tariff and non-tariff barriers to allow Canadians to really benefit from growth opportunities that are all around us.

[Don Davies, NDP, Vancouver Kingsway, BC]

I want to drill into a couple of those things.

You may be right to not look at any particular month or year, but I'm going to look at, say, the last six years, because I think the better part of a decade is a representative sample. Canada has gone from an $18-billion current account surplus in 2006, when your government took power, to a deficit of $67 billion this year. That's an $85-billion swing in a little over six years. It's also a trend that has been getting worse. Qualitatively, our value-added exports as a percentage of overall exports have been declining, and we have a merchandise trade deficit approaching $100 billion. That's on the gross numerical side.

In terms of your explanation of exports and referring to the global economy, Mr. Minister, we asked the Library of Parliament to look at 17 other countries around the world with economies of various sizes and approaches that have had to deal with exactly the same global challenges as Canada, including the U.K., Spain, Chile, Japan, Australia, the U.S., Germany, Mexico, etc., for the same time period as we have statistics for your government, 2006 to 2012.

World Bank statistics, which is where we got the numbers from, show that over that time eight countries have been running current account surpluses, five countries have been running deficits, but those deficits have been improving, and five countries have been running deficits that have been deteriorating. Canada was in dead-last place at the 18th spot with the worst performance over those countries, and they're dealing with exactly the same global conditions, commodity prices, currency fluctuations, and the global recession.

What would account, Mr. Minister, for Canada's trade performance? Why is it so poor relative to that of our competitors?

[Ed Fast, Conservative, Abbotsford, BC]

I'm glad you mentioned the current account balance. As you know, the current account balance is not only reflective of trade balances, but it's also reflective of investment flows into and out of Canada. It's reflective of revenues generated by investment. I don't know if you're aware of this, but it's also reflective of foreign aid flows out of Canada. Last year those alone were somewhere in the order of between $4 billion and $5 billion. When you take that into account, if you were using the current account balances as your only indicator of economic success, you might have made a case, but it would be a big mistake to do that. Most economists would agree with me that it is only one of many different indicators.

The indicator I would direct you to is one which I believe determines the issue. What has Canada done in terms of economic performance, especially when it comes to job creation? As you know, since the depths of the recession in July 2009, the Canadian economy has created 900,000 new jobs. We lead the G-7 in job creation performance. I'm very proud of that record. I won't make any apologies for that record. I'm absolutely confident that as time goes on we'll continue to see very significant job creation from our government, from our economy, I should add, and also a continued focus by our government on the most fundamental issues, which allow our economy to stay healthy, such as low taxes and a highly educated workforce, making sure we're an attractive place for foreign investment.

[Don Davies, NDP, Vancouver Kingsway, BC]

With respect, Mr. Minister, your portfolio is trade, not employment, not jobs.

[The Chair, Conservative, Rob Merrifield]

A very quick question, a very quick answer.

[Don Davies, NDP, Vancouver Kingsway, BC]

Again I come back to the fact that the Bank of Canada says that the greatest contributor to failing to meet their projections is weak exports, and that's what I'm talking about. Of the six trade agreements this government has signed, none of them has been with a major export market: Panama, Peru, Colombia, Jordan, Honduras. None of them are even in our top 25 export markets. None of them are major emerging economies. When it comes to markets for exports, Canada was 89th, and Honduras is 104th.

Mr. Minister, why does the government spend so much time pursuing agreements with countries that don't offer first-order export opportunities for Canada—

[The Chair, Conservative, Rob Merrifield]

That's it. I'll allow a very quick answer.

[Ed Fast, Conservative, Abbotsford, BC]

Mr. Davies, I'll challenge you on one point. You suggested that job creation isn't the responsibility of the trade minister. You're dead wrong, dead wrong. Both investment and trade fall under my portfolio. Trade facilitation falls under my portfolio. Providing the kinds of support for Canadian businesses, even access to capital, falls under my portfolio, and it's all related to our objectives on job creation. If you look at that indicator, clearly we're having success.

I would suggest to you that our government is getting it done. We're considered to be the best place to do business in the world over the next five years. The world has taken notice of our economic performance, and I can assure you that the investments we're making right now in terms of crafting economic framework agreements—yes, with smaller countries, as well as with larger countries like the European Union, a market of 500 million consumers; a market like Japan, a market within the Trans-Pacific Partnership, representing 785 million consumers—those are going to drive job creation, and they're going to drive long-term economic prosperity in Canada for many years to come.

[The Chair, Conservative, Rob Merrifield]

Thank you very much.

Mr. Keddy, you have seven minutes.

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

Thank you, Mr. Chairman.

Minister Fast, we welcome you and your deputy and staff.

Minister, there has been a lot of discussion about the Doha Round, the failure of that multilateral forum, and the challenge of seeking bilateral agreements and arrangements to make up for the impasse at Doha. There are a number of challenges within that. I've heard you speak on it before, on the importance of multilateral trade and rules-based trade. Could you enlarge on where we go with the impasse at the WTO?

[Ed Fast, Conservative, Abbotsford, BC]

Canada has made it clear on many different occasions within international fora that we believe the World Trade Organization should remain the preeminent forum within which rules-based trading takes place around the world. Sadly, the Doha Round is stalled very badly.

There are very significant efforts being brought to bear to try to come up with a meaningful outcome at MC9 in Bali, which is coming up in December. I'm part of that effort, as are many of my counterpart colleagues from around the world. In the absence of significant progress in the Doha Round, Canada has no option but to look at opportunities to remove tariff and non-tariff barriers through other means. We're talking about bilateral agreements, which I just discussed with Mr. Davies. We're talking about regional agreements, like the Trans-Pacific Partnership. I wouldn't want to forget plurilateral agreements. For example, Canada has recently joined in an international services agreement which is looking to liberalize the trade in services internationally. I believe there are 20 or 21 partners involved in that, including the EU, the U.S., and Japan.

The reason I am so excited about that initiative is that Canada is one of the world leaders in the sale of services. We're the fourth largest exporter of engineering services in the world. We're only a population of 34 million in a world population of 7 billion, and we're the fourth largest exporter of engineering expertise in the world. We're that way across many other sectors of the services market. However, we're prevented from taking maximum advantage of those opportunities because of non-tariff barriers in many parts of the world. We're hoping to eliminate, or certainly reduce, those barriers because we know Canada can really benefit from it going forward.

Finding ways to refresh the WTO is a significant challenge for the world's economy. When the Uruguay Round was finalized, there was great optimism that the next round, which was the Doha Round, would lead to a very significant step forward in further trade liberalization around the world. Sadly, what we've seen from many of the key players in the global economy is that there has been a lack of flexibility. These are my own words. This is my own assessment. There's a lack of flexibility in moving forward, because we have different groupings. We have least developed countries looking for outcomes that will serve their interests. There are developing economies looking for certain outcomes. There are the developed economies like Canada, the U.S., the EU, and Japan, which also are looking for certain outcomes.

As we look toward Bali, one of the key things we can do to facilitate trade around the world is to agree on a set of measures under trade facilitation that would remove things such as barriers within customs measures. That would allow us to leverage the strengths of economies by eliminating the barriers we have at the border. Many of those are artificial. Many of them, quite frankly, are essentially there to prevent trade from happening and to protect local economies. We in Canada have been a very strong voice against protectionism in the global economy. We believe protectionism is toxic to the economic recovery that all of us are hoping for in the global economy.

I hope that helps you to divine what our government is hoping to achieve within the larger multilateral context.

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

I appreciate that answer, and it leads me into my next question.

On non-tariff barriers and impediments to trade, we have a situation with our largest trading partner, the United States, where there is some discussion by the Americans that they are thinking of implementing fees at the border. Quite often when they start thinking something, it comes to fruition unfortunately, so we have a challenge with our largest trading partner. We want to facilitate trade. We want to hear them in a reasonable manner. At the same time, we don't want to put up with non-tariff barriers or increased fees at the border.

Do you have some suggestions on how to handle that, or what action we can take against those?

[Ed Fast, Conservative, Abbotsford, BC]

I will say it has been frustrating for us as a government to see from time to time measures taken by our American cousins that appear to fly in the face of the spirit in which Canada and the United States have collaborated.

As you know, not long ago we agreed upon a set of measures under our border vision initiative as well as our Regulatory Cooperation Council initiative, all intended to do the following: to move security to the perimeter of our two countries, to thin out the border, and to collaborate and cooperate on how we do business so we can do it more cost-efficiently. Again, it's about trade facilitation.

When you see new fees being proposed at the border, those who are promoting them clearly see them as a quick fix for some immediate fiscal challenges. We have impressed upon our counterparts in the United States that the best job creator is free and uninhibited trade between Canada and the United States. There's no better job creator than trade between our two countries.

The more we can do to allow that trade to happen in an unencumbered way, the more we're going to drive prosperity on both sides of our border. When a fee is imposed on the American side of the border, it impacts jobs and businesses not only on our side of the border, but also on the American side of the border because of the highly integrated nature of our two economies.

Parts flow across our border many times before a final product has been assembled. Whatever we can do to remove barriers is a very significant step forward to achieving greater levels of trade and doing so more efficiently.

[The Chair, Conservative, Rob Merrifield]

Thank you very much.

We'll now move to Mr. Easter for seven minutes.

[Wayne Easter, Liberal, Malpeque, PE]

Thank you, Mr. Chair.

Welcome, Minister, and the folks you have with you.

I might say, Mr. Chair, I'm a little puzzled by that line of questioning to the minister by his parliamentary secretary. I kind of thought there would be issues. After all, the parliamentary secretary is the junior minister to answer questions in the House, so I kind of thought they would talk about this stuff over coffee.

[The Chair, Conservative, Rob Merrifield]

The question wouldn't be to him. Just ask the minister your question.