International Trade Committee on Sept. 30th, 2014

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

That's a good point.

That leads me to my next question about what is better: are we looking to increase our trade numbers or our investment numbers? You were saying that Koreans invest much more than Canadians, but I would imagine it's because Koreans have more money than Canadians would, in terms of availability.

[Ian Burney]

I think a lot of different factors go into investment decisions. We would like to see an increase in trade and investment, and in both directions. We would like to welcome more Korean investment in Canada and we would like to—

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

Is there are target? Do you set a target?

[Ian Burney]

No, but what we do is we create the conditions to maximize the opportunities. I think the investment protections that are built into this agreement will make it more desirable to invest in both directions, particularly for Canadian companies which may be a bit wary about entering the Korean market. I think having the state-of-the-art investment protections may help.

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

Okay.

I don't believe too many Canadian companies will be able to supersede the advantages the Americans have in certain areas. You mentioned that Australia might be one of the countries also coming in on January 1. Are there other countries where we'll be able to get a foot-up? Europe already has free trade. With what other countries will we be able to get a foot-up, and in which industries?

[Ian Burney]

If you're talking about Korea, it's negotiating with a number of other countries right now. The agreement with Australia is done and will come into force soon. They're also negotiating with China. They're negotiating with New Zealand. The New Zealand deal is close, we're told.

I think over time Korea will negotiate more and more trade agreements, and that makes this one even more vital. If you're asking about Canada, we have a wide range of negotiations ongoing under the global markets action plan.

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

Will any of those trade agreements be, and I don't want to put words in your mouth, more beneficial? For example, if China were to use heavyweight tactics, would they be able to negotiate a better deal with Korea and leave Canada on the outs? Or is it tariff-free is tariff-free?

[Ian Burney]

To date China doesn't have a record of a great many free trade agreements, and those they do have tend to be quite a bit lower in ambition than the ones that we've historically negotiated. I know that the Koreans are having some challenges in negotiating with China. I think it remains to be seen what might come out of that process.

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

Okay.

Now, Korea is not part of the TPP, but in your opening remarks you mentioned something about this free trade agreement benefiting our TPP negotiations.

[Ian Burney]

To the extent that current TPP members such as Japan compete in our market against Korea, they will be more motivated to conclude a negotiation with us inside the TPP. Japan is a very direct competitor of Korea's in the automotive market but in other sectors of the Canadian economy, so having this agreement on the books creates a competitive pressure on Japan. Basically any country that competes with Korea in our market would now be more motivated to seek an agreement with Canada.

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

Okay. Thank you.

[The Chair, Conservative, Randy Hoback]

We'll now move to Mr. Cannan.

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

To Mr. Burney and your team, thanks for your great work.

It was a pleasure and an honour to be with the Prime Minister and Minister Fast to see President Park in Seoul, Korea, in March for the initial signing and then recently inviting President Park here. One of the big wins for my constituents in Kelowna—Lake Country is the reduction of tariff on wine. Minister Fast was out in March to meet with the winery. It's not only wine but also blueberries where he comes from: Abbotsford.

Perhaps you could share a little bit about what the implications are here. I think about 95% of the wine market right now is icewine, but in terms of the potential for the wine, what is the tariff reduction now, and what will it be reduced to on implementation date?

[Ian Burney]

Thank you very much.

Indeed, Korea is a significant market already for Canadian wine, particularly icewine, but the potential is much, much greater. At the moment, the icewine tariff is 15%. That will be eliminated on implementation.

You spoke primarily about wines, but rye is also a growing business for us. We also have protections on rye in this agreement from the standpoint of geographic indications, but there's a 20% tariff, and that will also be eliminated immediately.

With respect to other table wines, the tariff elimination period, I believe, is three years.

Within three years, all Canadian wines will be duty-free in the Korean market, but the most important one duty-free immediately.

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

I have the largest cherry grower in my riding, too, and China has made it a very happy time for them this summer. The cherry growers are there and all so excited about the opportunities in the gateway to the Asia-Pacific, with its 50 million-plus population.

My colleague Mr. Davies talked about the investor-state provision within this trade agreement. Maybe you could elaborate on a little of the difference as to why the investor-state provision is so important and also how it's different from the FIPA. This is market access, whereas FIPA isn't. Sometimes there's some confusion in the public as to why it's so important to protect our investors and specifically Canadian businesses.

[Ian Burney]

Sure. The investor-state aspect is a core element of our mandate and our objective in any investment negotiation, whether it's as part of a stand-alone FIPA, a foreign investment protection and promotion agreement, or as part of the investment chapter in an FTA. This is what gives our investors recourse to impartial dispute settlement to ensure that the rights we negotiate for them in the investment agreement are enforceable. From the standpoint of our stakeholders, this is an absolutely key element of our investment negotiations.

By and large, the terms don't differ all that much, I would say, between foreign investment protection agreements and FTAs. You have a variation in the termination provisions, basically because we feel there's a higher risk with a stand-alone FIPA that it could be terminated by the other side than there is with a comprehensive FTA. In an FTA we would typically have a much shorter termination provision.

The substantive obligations tend to be similar. In the case of Korea, I can say that we have state-of-the-art obligations across the board. That's one of the features that I think is strongest in this agreement.

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

My last question has to do with procurement. Under this agreement, Canada and South Korea have deepened their commitments they made under the WTO GPA, which I believe is the agreement on government procurement. On agreeing to lower thresholds for access to central government entities, can you maybe elaborate and clarify for any constituents and folks who are listening exactly what that means and what those thresholds are?

[Ian Burney]

Sure. The way government procurement access works is that for entities that both sides agree to cover, they set a threshold above which procurements are covered and therefore subject to open competition with the trade partner. In the government procurement agreement at the WTO, Korea and Canada already have a list of covered entities, and the threshold that is set in the WTO is equivalent to roughly $200,000 at the present time.

Under this FTA, what we've done is reduced in half that threshold; all of those covered entities at the central government level only—in the FTA, we haven't gone into sub-federal coverage—the thresholds are reduced in half. This means that all of the procurement that's now above that lower threshold is subject to open competition. Canadian companies have an ability now to compete on all of the procurements for all of those government entities in Korea, for a much higher volume of procurement.

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

I have one last quick question.

For the timeline, my colleague mentioned that time is of the essence. What do we have to do in order to get this implemented by the end of the year, by January 1, 2015?

[Ian Burney]

The implementing bill in Canada needs to be passed by Parliament, and then we'll take the final steps to be able to ratify the bill. On the Korean side, they have to go through the same process in their National Assembly.

We're anticipating that the implementing bill, or the ratification bill, will be tabled sometime in the near future. We don't have an exact date. There has been a bit of an impasse in the National Assembly on the Korean side that relates to the tragic ferry disaster from back in April. It appears that this is being resolved. Our hope and expectation is that the implementing bill for the Canada-Korea free trade agreement will be tabled in the National Assembly in the coming days, and that it also will move on a very quick track towards being adopted.

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

Thank you very much.

[The Chair, Conservative, Randy Hoback]

You have another minute if you want it, Mr. Cannan.

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

Okay. I thought I only had five minutes. I appreciate that.

Again, on one element of the benefits, I know that some of the folks were with us, like Joy Nott, representing the importers and distributors, and there are the Canadian manufacturers, but there's the agriculture industry, especially pork and beef, and what are we doing in regard to helping our Canadian businesses take advantage of this new Asian gateway market? It is new for a lot of people. I think almost 85% or 90% of our free trade right now is with the U.S.

In regard to trying to get Canadian businesses to take advantage of these new trade agreements, maybe you could expand on what you and your colleagues on the ground, the trade commissioners, are doing to help Canadian businesses.

[Ian Burney]

Sure. Those are among the areas where we expect to see some very significant benefits.

I mentioned that the beef tariff is at 40% and we've achieved a tariff phase-out outcome that is equal to what the Americans got, over 15 years. In the case of pork, most of our exports are of frozen pork, and they came under a line where we managed to get a five-year phase-out. That's very aggressive and will help reposition the Canadian companies in those two sectors.

Clearly, once the agreement is in place, the whole effort has to shift to marketing and promotion. Our department is already involved in that. I know that Minister Fast has been out talking up the agreement and the opportunities. I believe other ministers have been doing the same.

The trade commissioner service, which I am not directly responsible for but is the other part of the trade business line in our department, is actively now looking at how to ramp up its promotional efforts to help and to work with Canadian business to take advantage of the opportunities. It's a very important follow-on phase that is in fact happening already.

[The Chair, Conservative, Randy Hoback]

I'll have to step in here.

Ms. Liu.