International Trade Committee on Oct. 25th, 2011

[The Chair, Conservative, Rob Merrifield]

No actually you don't.

Thank you very much.

Mr. Holder.

[Ed Holder, Conservative, London West, ON]

Thank you very much again to our guests.

It was compelling, Mr. Reeder, to hear you talk a bit about the CIDA relationship and the support that we had given to Brazil at a time of their greatest need. It reminds me of when I had the privilege of leading the delegation to Peru on behalf of what is now ParlAmericas. We visited a CIDA site where Canada had made some significant investments in an area that had been struck significantly, or badly, by earthquakes. We were rebuilding some specific areas just outside of Lima.

I'd like to talk about this, if you have some background on that CIDA relationship, because I think it is important. I think it is one of the focal points. We have targeted the Americas, certainly, as trade significant to us. And also, within our hemispheric jurisdiction, that just seems to make a lot of sense.

Can you expand a little bit more, if you would, on that CIDA relationship historically? I ask because I think it's important that we get that point out there of why our foreign investment commitment through CIDA really helped to bring us to where we are in our relationship with Brazil. Or, at least, could you try to make that connection.

[Neil Reeder]

Okay.

I think it's also an example, sir, of changing the channel with Brazil as we move into new areas of cooperation beyond the traditional ones.

In the case of CIDA, in 1968 we started the CIDA programming in Brazil, and according to my numbers, we provided nearly $200 million in official development assistance to Brazil. Now the Brazil of 1968 was not the Brazil of today. So for a period of about 25 years we have been providing assistance to Brazil.

The focus of that program looked at dealing with extreme poverty, education, and health. In that period, coincidentally—though the figures vary—people today say that under the last two terms of President Lula, between 20 million and 30 million people have moved from extreme poverty to the lower middle class, or from the latter to the middle class, however defined. If you look at per capita income across the country, a significant chunk of people have moved up in the scale to almost middle-income status. This is a figure that President Lula would refer to, and President Rousseff now is pursuing this as well as a priority, because of the extreme poverty we saw in the past, which, in the case of the urban centres, is still there today. But there have been tremendous strides and Canada, through CIDA , was very active as part of that process.

Now we have some programming left over--partnerships and multilateral programs, but small amounts--but the dynamic has changed with Brazil, because they're no longer an ODA-eligible country. We've brought Brazil up. We've helped them eradicate poverty, and along with other donors and the host government, we've moved millions of people up to a lower middle class environment. Now it's an opportunity for us to work with Brazil on exchanging best practices as donors, and also to work with Brazil in third countries.

We've done a bit of work with Brazil in Africa. I come back to that because of their lusophone connection with the Portuguese-speaking countries of Africa. We've had small collaborative projects in Mozambique and Angola. We're wanting to talk to them. I'd rather have CIDA expand on this, because it's not really our responsibility, but we in our department would like to see more cooperation with Brazil in third countries, including in Latin America.

Our hope is that we'll be able to move that into a new element of the relationship. It's one that makes us feel very good because we were part of that effort, through CIDA, of strengthening the economy and moving these people into more prosperous economic situations. And now we can work with that country, going forward, to turn it into an aid donor. It's a big donor. It has an aid agency. It's moving forward. But we want to see that as an area of cooperation, because between CIDA and their aid agency, there's much to talk about. We expect that the director general of CIDA policy will go to Brazil in the coming months to begin that conversation.

[Ed Holder, Conservative, London West, ON]

Can you see any correlation, then, between the relationship that Canada has enjoyed with Brazil in terms of its commitments through CIDA and the positive trading relationships that we have today? I'm just trying to get a sense of whether you feel there is some causal connection there.

[Neil Reeder]

I don't know if we could say so directly, but my experience has been that where we have strong, traditional CIDA programming, it generates tremendous goodwill in the host government towards Canada, in their thinking about Canada and their appreciation for us. And that aid will lead to trade, that aid will lead to investment. I can give personal examples from my own career where a strong CIDA presence left a very strong imprint on a country, disposing that that government to work closely with Canada in the trade and investment sector.

[The Chair, Conservative, Rob Merrifield]

Thank you very much.

Madame Péclet.

[Ève Péclet, NDP, La Pointe-de-l'Île, QC]

Good afternoon and thank you for being here.

I'm going to ask my question in English.

Brazil is not a member of the WTO Information Technology Agreement, and Canada and Brazil do not have an agreement on patents, meaning Canadian patents are not recognized in Brazil.

Can you talk to me about it? What negotiations are there in that area between Brazil and Canada?

[Don McDougall]

Regarding the WTO Information Technology Agreement, I guess the question is how it would relate to a bilateral negotiation. The ITA is an agreement under which, essentially, a number of countries have come together and agreed to not charge tariffs on high-tech equipment. There's a specific list of equipment attached to that agreement. We would deal with that in our goods market-access negotiations. We typically seek elimination of tariffs on all non-agricultural products.

I don't know where Brazil would stand on that, particularly with respect to information technology goods, but our position in the negotiations would be that we would seek the elimination of tariffs on all non-agricultural goods.

Generally speaking, in terms of intellectual property, we don't seek a lot of commitments on intellectual property in our trade agreements. We typically affirm the WTO TRIPS Agreement, including its flexibilities as they relate to health and access to medicines. We are open to some cooperation on intellectual property, but we don't typically seek anything that is TRIPS-plus.

[Ève Péclet, NDP, La Pointe-de-l'Île, QC]

Brazil is fairly protectionist and has a buy-in-Brazil policy. There's a 6% tax on foreign capital and restrictions on the amount of rural land foreigners can buy and own. Where are your negotiations and what has been said about free trade between Canada and Brazil?

[Don McDougall]

That is the type of restriction that would be dealt with in the investment chapter. We typically would seek national treatment for investments, subject to certain exclusions. Obviously, the types of commitments that would have to be negotiated with Brazil--

[Ève Péclet, NDP, La Pointe-de-l'Île, QC]

That's what I'm asking. What has been said between Canada and Brazil about these negotiations?

[Don McDougall]

Do you mean about that in particular?

[Ève Péclet, NDP, La Pointe-de-l'Île, QC]

Yes.

[Don McDougall]

At this stage, we're really not into those levels of specifics. Particularly on investment, but even in most topics, it's more a high-level discussion on the type of approach to take, whether they would be interested in discussion, and what types of commitments they would be interested in making. We certainly have not got anywhere near the types of exceptions that we'd be looking for, or anything like that.

[The Chair, Conservative, Rob Merrifield]

You can have a little more time if you want.

[Ève Péclet, NDP, La Pointe-de-l'Île, QC]

Are you negotiating a chapter 11, as we call it in investment disputes.

Are you negotiating a dispute resolution mechanism?

You said that your negotiations touch mainly on investments. Are you carrying out this type of negotiation currently?

[Don McDougall]

I would like to clarify the question. We are not yet in negotiations. But Canada is trying to establish a dispute resolution system for investments, like Chapter 11 of NAFTA or other agreements that Canada has negotiated.

[The Chair, Conservative, Rob Merrifield]

Thank you very much.

We'll go to Mr. Shory.

[Devinder Shory, Conservative, Calgary Northeast, AB]

Thank you once again, Mr. Chair. It's very interesting.

Mr. Reeder, I heard from your comment that there were some negotiations that commenced in 2004, which you said were stopped in 2005. I believe there must be a reason why, whether it was lack of interest or lack of priorities, from the government of the day. But the fact is that the Prime Minister, along with some other ministers, visited that region this year. Also, Minister Fast took 19 companies from the business community with him to Brazil. That visit emphasizes enough, I would say, the interest our government has in expanding its international trade in that region, in Brazil, etc.

I'll come back to my previous question. Of course, for the reasons mentioned before, we all know that our government is very much focused on expanding trade and bilateral relations with other countries in the global market, but the question again becomes: do you think that it is worth pursuing this activity with Brazil? Is our government heading in the right direction--in other words, are we wasting our time?

[Don McDougall]

I could maybe ask Susan Harper to speak. She is leading the process with Mercosur, but before I do, since we've already had some exchanges on this, I'll respond.

At this stage, we don't feel that we're wasting our time. We think there's an interesting opportunity here. There are some unanswered questions in terms of what Brazil and Mercosur would be interested in pursuing with us, and we have to look at what that would mean in terms of the overall package in an eventual negotiation or agreement. But at this stage, we haven't made a decision at all about whether we would recommend proceeding with a negotiation.

[The Chair, Conservative, Rob Merrifield]

Thank you.

Ms. Harper, thank you for making it and welcome. If you have anything to add, the floor is yours.

[Susan Harper, Lead, Mercosur Trade Discussions, Department of Foreign Affairs and International Trade]

I apologize. I had a conflict of interest: we were hosting Rick Hansen at our department and I was the MC. So thank you for allowing me to fulfill that prior commitment.

I think what is clear is the tremendous market and tremendous potential in Brazil and Mercosur, and we've heard about this from the business community for years. If you look at our objectives in the Americas, that's a huge area right in the centre of the Americas. The challenge, of course, will be to see if we can find sufficient interest. And when both sides look at the costs and benefits, will there be a sufficient area of mutual interest that we can proceed with a negotiation? At this point, we're not clear if this particular tool, a trade policy agreement, will be the appropriate tool. I'm sure that Neil has spoken about this already, and we're very clear that there are many tools that we can use to enhance the overall economic and political relationship—we're not confined to one. But this is one in particular and we continue to explore it with the four countries of Mercosur.

Is there a sufficient possibility? We referred to earlier explorations in this regard in 2004 and 2005. That was a different moment for them and for us, as well as globally. So we're very glad to see that those four countries continue to be interested in working with us in partnership, and the big challenge will be to see if there is sufficient interest to move ahead. We just don't have enough information yet to know that.

[The Chair, Conservative, Rob Merrifield]

Thank you very much.

Monsieur Côté.

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

Thank you, Mr. Chair.

To follow on what my colleague Ève was saying, I must admit that Brazil, with its original position, its identity and its place on the international scene, is very interesting. It's a very fine challenge to know the country and, at the same time, to start negotiations to trade with them. The challenges are geared to these new paths Brazil is taking while it is breaking certain moulds. It's basically also a challenge for us to adapt to this new reality.

I'm going to come back to the business world in Brazil. With respect to the difficulty that small enterprises have in doing business in a world where red tape may be a significant obstacle, I would say that I'm greatly concerned about the competitive advantage the larger Canadian enterprises may have, for example with infrastructure contracts, over small enterprises that have nowhere near the resources to deal with the red tape. The reality that many Canadian entrepreneurs experience means that they do not necessarily have the means or that those kinds of contract would be very costly for them. It may even ruin their ability to compete, to enlist legal accounting resources to deal with these challenges. On the other side of things, there are large multinational companies. I'll use SNC-Lavalin as an example. It's already established and has significant resources. So it's really not a problem for that company.

Do you think these obstacles could at this point be significant enough that they would clearly disadvantage small enterprises to the point that they might become less competitive compared with companies that have the means to deal with the obstacles?

[Neil Reeder]

Of course, I think it's more complicated for small and medium enterprises. But we are there to help them too. These companies have the same rights as SNC-Lavalin. They are fully entitled to take advantage of opportunities to move forward with export projects outside Canada, for example. If they have an interest, we here in Canada, with our team in Brazil, to give them advice, knowing, as you said, sir, that they do not have the same infrastructures, the same network as the large Canadian companies.

In this sense, I would say that the key for them is to have good economic intelligence, which we can share with them, and also to have key local partners. It's important to work with credible local partners to avoid being in complex, difficult competitions without knowing the terrain, the market. It's very difficult for these companies. They don't have the same experience, the same knowledge of the terrain as the large Canadian companies. We are there to help them both, not just the large companies.