International Trade Committee on Oct. 25th, 2011

[Wayne Easter, Liberal, Malpeque, PE]

Thank you, Mr. Chair.

Welcome, gentlemen.

I don't think there's any question about Brazil having tremendous potential over the long term, albeit probably with a lot of complications in the medium- and short-terms.

You mentioned in your remarks that Minister Fast led a successful mission to Brazil. In what sense was it? Did he sign any agreements or was it just a nice chat?

[Neil Reeder]

Well, at least one agreement has been signed, and I can provide further details, sir. There was a road infrastructure lighting agreement that was signed as a direct result of that visit and further conversations during the Prime Minister's visit. We follow up directly with the companies that took part, both in Ottawa and also through our embassy and our consulates there. We don't see these visits as one-offs. We may have news to announce at the conclusion of the visit, but we also follow up with the companies to ensure they're getting support.

Their position, as you know, is that it opens doors. It gives them opportunities; it gets them talking to the right people; it shows the Government of Canada's stamp of approval for closer business ties with Brazil. And in many economies, that's very important in itself.

But in this instance, I know at least of one deal that came as a direct result—in fact, it was a company from the Maritimes.... But I could give you more precise details on this separately, if you like, sir.

[Wayne Easter, Liberal, Malpeque, PE]

Okay, thank you.

My concern is that what we seem to be seeing from this particular minister is that if he visits a place, it ends up in the success category, while at the same time he seems to be surprised and disappointed when we're cut out of the American market in a number of areas or when we face a new fee. Anyway, I just make that point.

One of the biggest complaints that I get from the agricultural community is about Brazilian beef coming into Canada and undermining our beef producers. Now, I do find it a little difficult in this area, because I actually defend the government in this case. I don't believe there's a huge amount of Brazilian beef coming in. I don't believe the government has authorized any import permits over and above the global arrangement we have. But could you expand on that, because we really need to know the facts.

Is there an increase in Brazilian beef? Has the government approved any import certificates to do that, over and above the normal global arrangement? Or can you answer it?

[Don McDougall]

I don't have a lot of statistics with me on beef imports from Brazil. I'm not sure that we have a quota system for the import of beef, so I'm not sure. But in terms of certificates, it may be more on the phytosanitary requirement side of things. I know we've had some issues with meat from Brazil, in terms of foot and mouth disease and things like that.

[Wayne Easter, Liberal, Malpeque, PE]

I wonder, Mr. Chair, if you could get back to us on that, because it is a contentious point. There are only certain conditions on which the government is supposed to authorize import permits for most countries around the world, and I don't think they have. So could you get us the figures on that and the conditions surrounding it. I ask because when beef prices go down, producers will be calling, saying that the government shouldn't be allowing Brazilian beef in—and I don't believe that's the case.

The other question I had is on the Mercosur agreement. I understand what you said, that we have to negotiate with the four countries. Where are the Americans at? Do they have any agreement? Are they negotiating any agreements? What is our gateway, as a country, into the South American market? Is there one given country that gives us a gateway? Or is it Mercosur? What is it?

[Don McDougall]

On the first question, I don't believe the U.S. has an agreement with any of the countries. They're certainly not currently in negotiations with Mercosur. Mercosur is in negotiations with the European Union and a number of other partners, but the U.S. isn't present there.

In terms of a gateway to the market, or at least in terms of our free trade agreements, we don't necessarily use any particular country as a gateway to the overall market, because our agreements are all bilateral. We have access duty free to a number of countries now—Peru, Colombia, Costa Rica, Chile, and some others to come soon—but those are all bilateral agreements. With Mercosur you could conceivably see a product entering that market as a customs union, and then having access to the four countries. But, again, it would still be subject to duty if that product left the Mercosur region and went elsewhere.

[The Chair, Conservative, Rob Merrifield]

I'll allow a brief question.

[Wayne Easter, Liberal, Malpeque, PE]

How do they come to an agreement on Mercosur? I've been involved in the previous GATT discussions, and Brazil has always been a heavy player at the WTO in opposing Canada's supply management. When they're dealing with four countries in the Mercosur, how do they come to a decision on whether they go with an agreement or not? Do you know? Do they have to approve it in their countries as well as within the group, or is it just a group approval?

[Don McDougall]

The decision on whether to launch an agreement is a national decision. So they would each make a national decision. Then once all four had agreed to move ahead, the Mercosur decision would essentially be made.

[The Chair, Conservative, Rob Merrifield]

Thank you.

Go ahead.

[Neil Reeder]

I want to be clear on South America. We have free trade agreements now with Columbia, Peru, and Chile, and we're negotiating or discussing with the Mercosur four, those being Argentina, Brazil, Paraguay, and Uruguay. I would say in looking at our export posture vis-à-vis Mercosur that about 96% of our exports go to Brazil and Argentina within the four. And 99% of our imports from Mercosur are from Brazil and Argentina, so those are the dominant players.

[The Chair, Conservative, Rob Merrifield]

Thank you.

Mr. Cannan, the floor is yours.

[Ron Cannan, Conservative, Kelowna—Lake Country, BC]

Thank you, Chair, and my thanks to you gentlemen for the opportunity to learn a bit more about Brazil.

I traveled there with my wife in the 1990s to volunteer at an orphanage, and I spent some time in Portalegre, so it's good to see that we have some embassy representation there. It's a coastal community, very vibrant with lots of opportunity.

I looked at a Library of Parliament report from April 1, 2004. It says that the Brazilian and Mercosur partners approached the Government of Canada to propose the launch of a free trade negotiation, with the goal of finalizing the agreement by July 2005. The Hon. Jim Peterson, who was the minister, expressed Canada's reciprocal interest.

Here we are in 2011. Nothing ever happened then. Were you involved back in 2005?

[Don McDougall]

I wasn't personally involved, but I have some history.

[Ron Cannan, Conservative, Kelowna—Lake Country, BC]

I'm wondering why it stalled? It has been six years. It has been a priority, and they haven't been able to get it across the goal line.

[Don McDougall]

There were a number of challenges. The interests at that time didn't align well enough for the conclusion of a negotiation. We never launched full-fledged negotiations with Mercosur. We were in discussions with them as part of the negotiations for the Free Trade Area of the Americas. When those negotiations stalled, we tried to proceed with some bilateral discussions with Mercosur. When the Free Trade Area of the Americas negotiations were put on hold more formally, then the negotiations with Mercosur ceased as well.

[Ron Cannan, Conservative, Kelowna—Lake Country, BC]

Prime Minister Harper has now made this a priority, and I hope Minister Fast can move forward on it.

I have one other question on Mercosur before I move on. Is Venezuela still trying to get involved in that partnership? We met with the former Brazilian ambassador for lunch, and that was his comment last year.

[Neil Reeder]

As far as I understand it right now, Paraguay is the last country in Mercosur that has to endorse Venezuela's accession. They have to formally endorse this through their congress or their senate, and that hasn't happened. I believe Venezuela has observer status within Mercosur, but it is not formally a member until each of the congresses of the other four countries provides its accord.

[Ron Cannan, Conservative, Kelowna—Lake Country, BC]

They could create some problems, if they're part of Mercosur as well.

What Canadian businesses would really benefit from expanding trade with Brazil?

[Don McDougall]

Currently some of our key exports to Brazil are fertilizers, coal, newsprint, and gas turbines.

I think you could expect to see those expand if we were able to get a comprehensive trade agreement. But it's obviously a very large market with important demand for industrial goods like automotive ones, as well. It would clearly depend on the type of agreement that was reached. At this point it's a little difficult to know exactly what the outcome would be.

[Ron Cannan, Conservative, Kelowna—Lake Country, BC]

Can you expand on some of the other opportunities for Canadian companies other than for power?

Minister Fast said that the mission was very successful. There were 19 Canadian companies in the delegation, and my understanding was that it was very successful. You mentioned that you followed up on these. So what are some of the future opportunities for these businesses?

[Neil Reeder]

I think infrastructure, sir, is one of the big ones now.

As Don says, which sectors would be impacted by free or freer trade depends on the nature of their discussions. The opportunity we see is infrastructure, in particular, and oil and gas. You can go across a range of sectors where you've got this economy in full expansion, an economy that hasn't been affected by the economic downturn. Inflation is a challenge, but the GDP growth numbers are still significant.

As this country rises in the international environment, we want to catch the wave ourselves and benefit across the board. We're seeing good numbers, but we also believe that we have to do a better job in informing Canadian companies of the opportunities there as well.

There is a lot of interest in the Asia-Pacific region, once people move beyond the United States. There is interest in Latin America, and the Caribbean, yes, but I think with Brazil that we have to make a special effort to bring people to those opportunities.

[Ron Cannan, Conservative, Kelowna—Lake Country, BC]

I have one final comment.

You mentioned the FIFA World Cup. Being a soccer fan, are there some Canadian business opportunities in infrastructure there?

[Neil Reeder]

Yes, we're looking for opportunities in subcontracting with larger contractors, for example, for stadium development, roads, lighting, the infrastructure associated with the FIFA activities, but also with the World Cup specifically. The SNC-Lavalins of this world, for example, which are quite active in Brazil, would be able to subcontract opportunities within a larger contract won by a Brazilian company.

We find ourselves head-to-head with Brazil in the engineering sector internationally, because we've both got large and very prominent engineering firms. So in the case of projects being let from within Brazil, we're hoping to come in collaboratively, working with them and providing components to a larger contract. That's the focus right now.

Apart from that and the Olympics, of course, there's this whole infrastructure momentum that we're seeing in that country, because, if you travel to the São Paulo or Rio airports, you will see the roads. These are not exactly at a level that one would expect, given the size of the economy. There are still many challenges, as you know from your own travel.

[Ron Cannan, Conservative, Kelowna—Lake Country, BC]

I spent the night in the São Paulo airport. I know it well.

As you said, the soccer stadium needs our western investment. I think its capacity was 150,000; it was phenomenal.

Thank you.