International Trade Committee on Feb. 4th, 2014

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

I understand.

How do you come to a decision—

[The Chair, Conservative, Rob Merrifield]

No, I'm sorry, Mr. Hiebert, your time is done.

Please make it a very quick answer.

[Steve Anderson]

I mean, it would be complicated, but we've seen through WIPO and other international agreements that they aren't all done in secret. There are many agreements where I would think the members of this committee, for example, who are supposed to be representing the Canadian public, would at least have access to the documents.

There's a whole range of participation and openness. Right now we're at the closed, secret end. There's a whole completely participatory end, and we could move over to this side even by having MPs have access to the text so that—

[The Chair, Conservative, Rob Merrifield]

I'm sorry, the time is done.

We have a very tight timeline here, so we'll take a couple of quick minutes for our second round.

Go ahead, Ms. Crowder.

[Jean Crowder, NDP, Nanaimo—Cowichan, BC]

Thanks, Mr. Chair.

Mr. Anderson, this question is directed to you, and it leads very nicely from Mr. Hiebert's comment.

We know that the U.S. allows all its legislators to read the actual text on TPP at the U.S. Trade Representative's office. We know that with regard to the EU-U.S. negotiations, the EU will publish draft investment chapter text in the ongoing negotiations and ask for public comment so that there is more transparency.

Would you agree that those two models might be something that Canada might want to consider?

[Steve Anderson]

Yes, absolutely. I think it's common sense that members of Parliament at the very least have access, but I think it should be completely public. I think citizens should know what negotiations, what positions, are being advocated in their name.

I think that's a basic tenet of democracy. Yes, it makes it maybe more messy and complicated, but I think that's better than having a closed-door process that will create, in the end, laws that are binding.

[Jean Crowder, NDP, Nanaimo—Cowichan, BC]

Mr. Anderson, on that point, once the TPP is negotiated, would you think it reasonable that we could have a public process to allow the public to comment on the agreement before it's signed?

[Steve Anderson]

Yes, absolutely. I would love to see that process happen before—as in right now, while the conversations are happening—but absolutely, involving the public at any stage, before it's actually put into law, would be a marked improvement to what we see right now.

[Jean Crowder, NDP, Nanaimo—Cowichan, BC]

I think it's very troubling that whether people have been in support of TPP or opposed to TPP, what they're basing their comments on is leaked documents, and it may not be the most current stage. So whether it's Ms. Es Sabar commenting on a document, which I presume was a leaked document, and certainly you've admitted that as well....

Thank you, Mr. Chair.

[The Chair, Conservative, Rob Merrifield]

That's it. Thank you.

Mr. Holder, you have two minutes.

[Ed Holder, Conservative, London West, ON]

Thank you, Mr. Chair.

Thank you to our guests today.

Mr. Anderson, you said that in preparation for today's meeting, you put the word out that you were meeting today to whoever follows you, by whatever means you've done that.

I do a weekly email blog—it's actually quite famous in Ottawa, less so in Vancouver—and I do a question of the week. These are not light questions. They vary, depending on the subject. But I find the best I'm able to get is “yes”, “no”, or “not sure” in my responses.

Assuming you have a following, I would be curious to know if you'd be able to say roughly how large it is, how many respondents you have, and how you're then able to flush out the...because I can't read the hundreds of responses I get. My distribution is only 25,000, and I try to read as many of those responses as I can, but I find that very challenging with my other responsibilities.

How were you able to have the inputs to be able to come forward today with your view? I'm sincerely curious about and interested in how you do that.

[Steve Anderson]

For the call-out I did for today, I think I got about 150 comments. I like to go where people are, so I put the call-out on Facebook, Twitter, Google+, and our website. We also have engaged about 12,000 people in a kind of survey tool, asking them what they think copyright policy should be.

The way we analyze both of those, really, is that we go through the comments—I have a small staff, so it's not just me—and we break them up into themes. Then we try to get a kind of consensus point on those different themes.

That's how I had those three points—just from reading the comments and breaking them down thematically.

[Ed Holder, Conservative, London West, ON]

Okay.

My time is done, but thank you both.

[The Chair, Conservative, Rob Merrifield]

Thank you, both. I appreciate you being here and sharing with the committee. With that we will suspend as we set up our next panellists.

[The Chair, Conservative, Rob Merrifield]

We'd like to call the meeting back to order. We'll move on to our second from last panel of the day.

We have, as an individual, John Calvert, who is an associate professor of health sciences at Simon Fraser University. Thank you for being here.

From Ballard Power Systems Inc. we have Mr. Kassam.

We'll start with you, Mr. Calvert. The floor is yours.

[Dr. John Calvert, Associate Professor, Health Sciences, Simon Fraser University, As an Individual]

Good afternoon.

Let me begin by thanking the committee for giving me the opportunity to express my views today on the proposed Trans-Pacific Partnership trade agreement. This initiative has important public policy and public health implications, which I believe do merit extensive examination. Let me also note that I am here as an individual and not as a representative of Simon Fraser University, where I teach.

I'd like to start by making clear that I am not opposed to trade. We all benefit from trade. My focus is on whether the terms of this proposed agreement constitute a reasonable way to ensure that Canadians—and other parties to the TPP—achieve the benefits of trade in a fair, balanced, and equitable manner.

This committee hearing is also challenging because the full draft text of the agreement is not available. While secrecy is normal in trade negotiations, there is a powerful democratic argument that the public does have a right to know what is being negotiated on its behalf, given the major public policy and health implications of the TPP and given that once ratified, it is almost impossible to reverse. The limited information accessible to Canadians contrasts with the privileged access given to 600 of the world’s largest corporations that have been included as U.S. advisers in the negotiating process.

I believe the Canadian government should engage in a much wider process of consultation to enable Canadians to make an informed choice about whether they support the TPP. Canada should publish the full draft text of the agreement and provide adequate time for full legislative scrutiny and public debate before it considers ratification. It should follow the lead of the EU, which suspended negotiations with the U.S. on a new trade agreement until the completion of extensive public consultations on enhanced investor rights proposals.

Trade agreements are very complex, both in terms of the obligations in individual agreements and in terms of their interaction with other agreements. This makes it very difficult to know, in advance, how particular provisions will be interpreted by dispute panels. Complexity and interlinkage also open the door to costly trade challenges, the prospect of which can chill government initiatives. The increasing number of agreements—we have nearly 3,000 bilateral investment agreements globally and numerous other free trade agreements—also facilitates venue shopping by those who wish to challenge government policies. Dispute adjudication is handled by a small number of trade law experts who may have little background in health, increasing the risk that their decisions may ignore important population health considerations.

The proposed TPP, like other trade agreements, places restrictions on the policy tools available to governments. These restrictions are meant to minimize any policy on regulatory barriers to trade or investment flows, regardless of the actual intent of these policies. Public regulations to protect health or the environment or to achieve socially beneficial purposes can be challenged if they violate trade treaties.

However, there is a long history of public-health-based regulations that have contributed significantly to improving population health. In light of the well-documented benefits of public regulatory capacity, it is essential that nothing in the proposed TPP erode or restrict the ability of future governments to protect public health, or require governments to adopt measures that subordinate public health considerations to other policy objectives. Governments must continue to have the policy tools needed to protect and advance population health, including the policy flexibility to address future challenges.

The scope of the TPP is very broad, as you know, with 29 chapters covering matters such as intellectual property, public procurement, state enterprises, market access, investment, and so on. In the time available, I can comment on only a limited number of issues and will focus primarily on health implications. A more thorough analysis of the impacts of the TPP on population health is clearly needed. I hope the committee will do this.

Let me turn to some of the major health and public policy concerns raised by the proposed agreement. As the committee knows, intellectual property rights—IPRs as they're called—cover patents, copyright and trademarks. The U.S. has advocated stronger IPRs than exist in TRIPS and stronger than those Canada currently provides or may provide under CETA.

The proposals would extend the duration of pharmaceutical patents, that is TRIPS-plus; lock in data exclusivity, further restricting the ability of generics to enter the market; and include for the first time medical procedures, something the U.S. did not get in its recent agreement with Korea. They would also provide additional protection for biologics. If implemented, the changes will increase the time-to-market for lower cost generic drugs and increase the range of life-saving measures that may be patented, making it more difficult to provide affordable medicines and implement universal public drug coverage.

Canada’s past experience with patent extensions has not been favourable. In the mid-1980s under compulsory licensing, prescription drug expenditures represented 6.3% of total health spending. In 2012 they were 13.6% or $27.7 billion. Drugs have been the fastest-growing component of health expenditures over the past 25 years.

A recent analysis of patent extensions in the proposed CETA estimated that this would add between $850 million and $1.65 billion annually to our drug bill. High drug costs adversely affect many Canadians. Many patients do not fill prescriptions due to cost, or use less than prescribed amounts to make them stretch to fit their budgets, risking their health.

The multinational drug corporations promised to increase research and development in return for increased patent protection from Bills C-22 and C-91. The research and development target was an extremely modest 10% of revenues. While reached between 1993 and 2002, it has now fallen to 6% of sales despite the huge increase in industry revenues.

Much of this R and D is not basic scientific research, but rather applied, that is, clinical trials, marketing, and sales research. Almost half of the R and D is funded by federal and provincial subsidies and tax credits. Our ratio of R and D to sales is a fraction of that of other OECD countries.

[The Chair, Conservative, Rob Merrifield]

I'm going to slow you down a little and just remind you that you're not quite halfway through and your time is crowding.... I think what you really want to do is hit the points that you want to drive home and then we'll capture the rest in questions.

[Dr. John Calvert]

I'll be quick as I can. Thank you.

Canada’s balance of payments in pharmaceuticals has also deteriorated. In 1987 under compulsory licensing, we had a trade deficit of $334 million. In 2012 our trade deficit had ballooned to $7.6 billion. Once our Patent Act changes were locked in by NAFTA and TRIPS, the multinational drug corporations had little reason and no obligation to locate production, employment, and research and development in Canada.

In light of the extensive evidence of this policy failure, it's not clear how further extensions of patent protection for pharmaceuticals will benefit Canada.

I'm going to jump down the page a little in light of your comments.

What Canada should demand is a clear commitment by all TPP parties to the Doha “Declaration on the TRIPS agreement and public health”, including “the right of WTO Members to make full use of the safeguard provisions of the TRIPS Agreement in order to protect public health and enhance access to medicines for poor countries”.

We should also oppose any proposals that would undermine existing protections for health in TRIPS.

The TPP proposes additional protection for trademarks, an area that's already witnessed numerous health-related trade disputes.

According to the World Health Organization, tobacco kills almost six million people annually. Over 168 countries have signed the 2005 WHO Framework Convention on Tobacco Control, but not the U.S. This treaty advocates numerous regulatory measures to restrict tobacco marketing and promotion, but the multinational tobacco industry has opposed these measures, launching numerous trade challenges to strike down public health measures designed to reduce tobacco consumption.

Canada should be particularly concerned about this. In 1994 we drafted new legislation that required manufacturers to sell cigarettes in plain packaging, based on evidence from the public health community that industry advertising linked logos and images on cigarette packages with attractive lifestyles and thus encouraged smoking. Despite the health rationale, Canada abandoned plain packaging, fearing it would lose a NAFTA trade challenge from U.S. tobacco interests. These fears were based in part on the testimony of Carla Hills, who was the U.S. negotiator representing R J. Reynolds.

We don't know how many Canadians might have stopped smoking had this legislation passed.

Other labelling requirements are also at risk. We see that Philip Morris has initiated arbitration to stop Uruguay from placing graphic images of smoking victims on its cigarette packages. There are several others that I cite in my paper.

Canada must also ensure in terms of technical barriers to trade that the provisions in the TPP be no more extensive than those in the current WTO TBT. This means that we need to have the right to an explicit guarantee for the right of governments to require health warning labels on all such products.

Another area is alcohol, which has numerous health and social problems. The WHO estimates that 2.5 million people die each year from its harmful impacts. The liberalization of alcohol markets and the elimination of restrictions on alcohol promotion have serious health consequences. In 2010, the UN’s World Health Assembly adopted the global strategy to reduce the harmful use of alcohol. However, TPP commitments to regulatory harmonization and easier market access may pose significant barriers to achieving this goal.

Food safety is another—

[The Chair, Conservative, Rob Merrifield]

I'll just stop you there, but I'll allow you a final concluding remark if you'd like.

[Dr. John Calvert]

Okay.

This is the last point I'd like to make. In terms of investor rights, the TPP does go beyond NAFTA, and there are some very important issues here that we need to address, particularly, for example, the Eli Lilly challenge to Canada's court decision regarding its patents. The TPP proposes essentially to fold in IPRs within the definition of intellectual property, which is far beyond what we have in NAFTA and would expose us to further trade challenges.

Thank you for your tolerance.

[The Chair, Conservative, Rob Merrifield]

That's fine. We will translate the text and get the full text to the committee.

Thank you very much.

Mr. Kassam, the floor is yours.

[Karim Kassam, Vice-President, Business and Corporate Development, Ballard Power Systems Inc.]

Thank you very much.

I'm here today to speak to you from an industry perspective. I apologize that I didn't have notes for you in advance, but I just landed from a three-week trip abroad, and I'm a little disoriented from jet lag. Hopefully you'll indulge me over the next five to ten minutes.

The clerk asked that I perhaps give you a bit of background on Ballard Power Systems. Ballard is a fuel cell technology company based in Vancouver, Canada. We've been in this business for approximately 25 years. Our business is essentially the development of intellectual property, the sale of products and services, and the licensing of some of our technologies to our customers and partners.

To give you a sense of our revenue streams and where they come from, in 2013 Canada made up approximately 10% of our revenue. From a trade perspective, then, 90% of everything we do happens outside of this country, so anything that happens with regard to removing trade barriers to increase competitive forces for us is a very positive move and endeavour, given our reliance on trade for our business.

When I look at our business over the course of the last couple of years, and specifically in terms of market focus, we have four areas of business focus.

Number one is telecom backup power. Here we provide fuel cell solution systems that essentially replace diesel generators as backup power systems for telecom base stations around the world. As of today, we have about 10 megawatts of these systems operating in different parts of many of the countries you're looking at in terms of the TPP, which affects us, because in many of them we have customers who are buying our solution today.

The second key area of business for us is what we term “engineering services”. In this area we help companies who are looking to advance their fuel cell developments. Specifically we work with automotive companies, such as Volkswagen, Daimler, and others, who are looking at various things in terms of moving ahead their fuel cell technologies, specifically for introducing them in vehicle applications.

We're also involved in material handling. Here we provide our core technology, particularly in the United States, to one of our customers who then builds fuel cell engines for forklift applications. We have approximately 4,000 of our fuel cell stacks operating in these engines in various distribution centres in the United States today.

Finally, we're also in the business of licensing our technology. Here is where we look at our core business, our core competency. We're trying to advance growth in different markets, and particularly markets such as the ones you're looking at, where we would partner with companies to essentially take on the manufacturing, sales, and distribution of the product where we would retain the core technology here in Canada and essentially license our know-how to these companies.

We have about 355 people working at Ballard, many here in Vancouver. These are engineering positions, with key employees who really are responsible for developing the technology and supporting our customers around the world for the deployment of these. We have R and D operations in Bend, Oregon, and in Hobro, Denmark. We also have a manufacturing facility here in Vancouver as well as in Mexico.

In terms of our focus and our real interest here, approximately 35% of our revenue in 2013 occurred in the countries that you've identified as being part of the TPP, so this is an area that's near and dear to us as it relates to the importance.

Really there are three things that matter to us when we're looking at doing business with companies in these various countries around the world.

First, are the governments, when they're talking about renewables, including fuel cells? Oftentimes we'll get into countries and they'll say, “Are you wind? Are you solar? If you are, you're eligible for a whole bunch of incentives.” But oftentimes fuel cells don't get included on that list. One of the things I'd like to ask, then, as the market leader for fuel cells coming from Canada, is that you consider making sure that fuel cells are on that list of renewable applications.

Second, and just as important for us, is the reduction or elimination of tariffs and duties.

If we're going to compete in these markets, oftentimes there is a 20% to 30% tag to our price, which already, in terms of new technology, is trying to compete with diesel generators and other incumbent types of technologies. So that puts us at a disadvantage in these countries, and the elimination of these duties and tariffs greatly supports our export business. That would be the second area in which I'd encourage your commitment and support.

The third area, which is really key to our business and decision-making with regard to who we do business with and what countries we'll get involved in is the protection of our intellectual property. As is the case for most companies in the technology space, our core business is the development of patents and the development of know-how, and if we can't protect that when we're selling abroad, then we'll have real problems in terms of protecting our ability to continue to compete in these markets.

When I look at the role of trade barriers and I look at the role of trade negotiations from an enterprise perspective, I would say those are the three main issues that we grapple with on a day-to-day basis in our decision-making as to whether or not we're going to do business with companies in specific countries, and they are what drives us to have that growth.

When I look at our growth over the course of the last three years, 80% to 90% of our growth has been coming from either Asia or Latin America or from Africa and India. Really it's in the emerging-market space where we're seeing a tremendous amount of growth, and with the increase in trade barriers being dropped, we see our business as one that will continue to see growth in those markets. Obviously, our interest is to remain in Canada, because we see that we have the core competencies, the core personnel, and the core IP here. Our objective therefore is to leverage that to then export our know-how, our products, and our services to these other countries around the world.

With that, I'll pause and indulge in your questions.

[The Chair, Conservative, Rob Merrifield]

Thank you very much to both of you.

We'll move to questions and answers.

Mr. Davies, the floor is yours.

[Don Davies, NDP, Vancouver Kingsway, BC]

Thank you.

Mr. Kassam, you're saying there's an international tariff on fuel cells?

[Karim Kassam]

Yes. What happens is typically we get listed under generators or commercial products whenever we sell to other markets, and the tariffs and duties—duties in particular—depend on what parts of the world we are selling into for telecom application, because we simply get bundled into the telecom product category. That is the challenge we have. It is really an uneven playing field because in the same categories, solar and wind get basically a free ride on the duties, whereas we don't.