International Trade Committee on Dec. 3rd, 2013

[Ailish Campbell]

Yes, we were. Broad stakeholder consultation was conducted by the negotiating team.

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

I guess you would mainly represent companies, but in your presentation you stated that consumers would benefit. Would you see that the consumers would get more of a benefit from the free trade agreement or would your member companies get more of a benefit?

[Ailish Campbell]

We'd have to do a more in-depth analysis, but I can safely say that tariffs are a tax on consumers, and the elimination of tariffs should be passed on by the seller. In other words, the savings should be passed on to the consumer, and we believe that's a significant benefit. I will certainly take 7%, 10%, 25% and gladly keep it in my pocket.

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

Will your members be doing that? Because your members are going to be distributing the products to the consumers.

[Ailish Campbell]

They should be if they want to retain their customers.

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

Then you said something that was interesting that nobody else stated. The costs are also going to be reduced for some of your member companies.

[Ailish Campbell]

Inputs will certainly be reduced.

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

Inputs. But what we've also heard is that a lot of companies don't require investments to expand their markets and enter the European market. Your general view is...will they be able to enter the European market without additional investments or will they be required to invest whether it be in capital equipment or human resources?

[Ailish Campbell]

Certainly to expand to new markets requires investment. The good news that I would encourage this committee of international trade to take a look at is two things, the first is that trade is increasingly becoming disaggregated. We don't necessarily just trade wholesale products like iPads, like BlackBerrys. They're becoming much more complex. They require inputs that come from all over the world, so you need supply chains and access to diverse markets.

The second is that our foreign affiliate sales of Canadian multinationals using Canada as a headquarters and then basing subsidiaries abroad is also increasing.That's not well captured. The sales of those foreign affiliates is not included in GDP, for example, because of course they're abroad, not domestic, so we're not necessarily getting a full picture of the global economic footprint of Canadian firms.

[The Chair, Conservative, Rob Merrifield]

I'm sorry, time has gone.

Mr. Cannan, the floor is yours.

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

Thank you, Mr. Chair.

Thank you, ladies and gentlemen. It's always good to have you back.

Ms. Cox, we've talked many times over the years on these negotiations, so I thank you for being here, and Mr. Keon, as well. We appreciate your cautionary support for CETA. As you know, it's a historic agreement for all of Canada.

In your opening comments you mentioned, Mr. Keon, that Canada has a strong patent regime. From my understanding, and maybe you could clarify and help me understand, this patent extension in CETA basically harmonizes or brings our patent regime in line with the U.S., Japan, and the EU. Is that correct?

[Jody Cox, Director, Federal Government Relations, Canadian Generic Pharmaceutical Association]

I would say that's not correct. When you look at intellectual property measures, they're different in every jurisdiction you go to. So the measures that are in effect in Canada are different from the measures in the European Union, in the U.S., and in Japan. You go around the world, and everyone has a different approach to doing things. As a starting point, everyone has their international obligations under the TRIPS agreement, and then they may choose to go further than that.

You talk about the U.S. and the EU, so, for example, as Jim mentioned earlier, patent linkage is a core component of the U.S. system. There are also patent term extensions and other features. In the European Union, that automatic block on competition—which is sort of a fundamental feature of some of the implementation of the patent linkage systems in Canada and the U.S.—is not present. Again, if a generic company wanted to come to the market, you go through your health and safety approval, and then you can launch your product. If there's a difference of opinion, you'd go straight to an infringement action. It's not really about harmonization. I would say it's more akin to cherry-picking in some respects, in terms of where the original asks were coming from.

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

Thanks for the clarification.

I represent Kelowna—Lake Country, the third-largest senior population in census metropolitan, and drug costs are a big concern to my constituents. UBC Okanagan, UBCO, and the UBC campus in the Lower Mainland did a study last year, released in April, and it said that in 2012 Canadians spent $33 billion on drugs. It said that Canada is losing out on negotiating lower drug prices. It goes on to talk about the cost per person of about $947. It says that Canada pays about 20% more for brand name drugs, yet Canada pays 90% more for the supply of generics compared to countries that negotiate the pricing.

I think the present program isn't correct as far as showing the competition; we're paying so much more for generics. Maybe you can share some ideas you might have on what our government can do to help the generic industry to grow R and D. Do we need to review the pricing structure? What are some of your suggestions so we can help bring those prices down for all Canadians?

[Jim Keon]

Yes, generic prices have come down dramatically over the last five years. For example—

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

This report was just last year. It was released in April this year.

[Jim Keon]

I'm not sure what they were comparing, but the PMPRB study, the most recent one, would show that prices are approaching parity internationally.

As I said, now in Canada generic prices are regulated at the provincial level. There's a pan-Canadian agreement; the provinces have banded together. The top six generics, for example, can be priced at no more than 18% of the brand name product. Most other products have to be at 25% or you can't get on the formularies.

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

You were able to come in the market at 70% before, right?

[Jim Keon]

You used to be able to, yes.

One of the problems with that, quite frankly, is now you're coming in at a very low price. That's why this patent linkage system and the reform of it is so critical. What's happening now is that you're coming forward with a litigated product, you have approval from the court, Health Canada gives you your science and regulatory approval, and then you launch the product and you're sued for patent infringement. You're selling the product at 18% of the brand name price, and they're suing you for their loss damages, so it's a very complicated thing now for generics. We've actually seen some generics holding back, not launching products to the detriment of the health care system, simply because the risks and rewards are now out of balance.

The best thing that we could do here in Canada at the federal level is simplify that litigation system so there's a final decision when we launch our product.

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

Excellent. Thank you very much.

I have one quick question for Ms. Campbell.

I appreciate your wise words and the fact that the U.S. has been our number one trading partner and will continue to be our trading partner. We need to diversify, so maybe you could share a few moments about the fact that Canada is the first in with this historic 21st century trade agreement, about the advantage of being the first mover with an agreement with the EU, and about the opportunities you see from your association's perspective.

[Ailish Campbell]

I think first and foremost it's an interesting stylized fact that Canada actually has more stock of foreign direct investment, over $160 billion in the EU, than the EU, in fact, has in Canada. So I think this is an interesting opportunity to not only introduce Canadian firms to the European market—as I say, over 500 million of the world's richest and most sophisticated consumers—but also introduce Europeans to fantastic Canadian products.

We're particularly interested in the agricultural aspects of this, the reduction of protectionism, the opportunities that we think this provides for the fantastic global Canadian brand in beef, pork, for seafood producers who have their eyes clearly on the EU market and are looking from this now to Japan, to the Trans-Pacific Partnership, to Asia. As a beachhead, we will see seafood prices into Europe come down over 10% as a result of 96% of all tariffs coming down as of the day this agreement enters into force.

Canada is one of the most diversified economies as measured by the OECD. We have everything the world needs: food security, a stable supply of energy, fantastic R and D, and globally recognized excellence in financial and insurance services.

Canada has what the world needs. That's why we're firmly in favour of this agreement, a broader EU-NAFTA agreement. We think there's particular importance in terms of looking at even perhaps negotiating the automobile aspects of the trade deal alongside the U.S. because of rules of origin. To ensure Canada remains a location for auto parts and original equipment manufacturers is also important.

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

Innovation and opportunities. Thank you very much.

[The Chair, Conservative, Rob Merrifield]

Thank you. Your time has gone.

We're going to, as I said, finish this off a little bit early, but we have two more questioners and we're going into the second round, so we'll split the time.

Mr. Sandhu, three minutes, and three minutes to Mr. Holder, and that will end it.

[Jasbir Sandhu, NDP, Surrey North, BC]

Thank you, Ms. Campbell.

Canada has a large trading deficit; it's $62 billion right now. We also have a large trading deficit with Europe. In the last 13 years, we have bought $19 billion per year. We have a trade deficit with Europe; in fact, it's the second-largest trade deficit behind China. In 2009, for every dollar of goods we exported to Europe, we imported $1.52.

Some economists and politicians would argue that reducing tariffs will simple amplify this established trend. Can I get your comments on that?

[Ailish Campbell]

I would say two quick things.

The first is, I would fundamentally disagree in assessing the health of an economy on the basis of a trade deficit. We are a country of 35 million; the EU has 500 million. They can make a lot more stuff than we can and we want to consume it. We have a choice. Consumers have choices: that's the beauty of our democracy, our economy. We can choose to consume those products or not. I am fully in favour of consumer choice. That really is, in essence, what trade provides.

Overall, our terms of trade for Canada—that means the difference between what we pay for imports and what the world pays us for our exports—have been incredibly healthy. We've enjoyed a great terms of trade run here over the last 15 years in Canada.

I would argue, if anything, we should take that focus that you have on the trade deficit and move it over into true challenges like our infrastructure challenge in terms of landing our energy assets in Asia. Right now, we are leaving $35 on the table for each barrel of gas because we are selling it at a discount into U.S. markets, and we can't land it in Asian markets where we would earn more money—

[Jasbir Sandhu, NDP, Surrey North, BC]

Ms. Campbell, I only have three minutes—