Evidence of meeting #39 for International Trade in the 41st Parliament, 2nd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was agreement.
A recording is available from Parliament.
3:55 p.m.
Conservative
The Chair Conservative Randy Hoback
On clause 12, unamended.
(Clause 12 agreed to)
(Clauses 13 and 14 agreed to)
(On clause 15—Orders re Article 21.11 of Agreement)
We have amendment NDP-5. Mr. Davies, would you like to take the floor?
3:55 p.m.
NDP
Don Davies NDP Vancouver Kingsway, BC
Thanks, Mr. Chairman.
This can be summarized by describing this as an auto snap-back provision—
3:55 p.m.
Conservative
The Chair Conservative Randy Hoback
I'm sorry, do you want to do both the amendments at the same time, or do you want to do them individually?
3:55 p.m.
NDP
Don Davies NDP Vancouver Kingsway, BC
Mr. Chairman, both amendments have to do with the snap-back provision, the first one for the auto sector and the second one for the Canadian steel sector. They are worded identically, and the concept is identical.
In terms of autos, we know in the KORUS deal the U.S. was able to negotiate with Korea a provision that, if there is a surge in Korean auto products into the United States and it has been determined by a panel that that has done damage to the domestic U.S. auto production industry, there is a provision for the 2.5% auto tariff against Korean imports to be snapped back into place.
There's some sound reasoning and factual basis for that. Of course, the auto sector in the United States and in Canada are very important industries, not only for direct jobs but indirect jobs in our countries. We know one of the historic concerns of the North American auto sector has been that the Korean auto market is very closed to North American products through a variety of tariff and non-tariff barriers, but the North American market is relatively open.
In order to make sure there is fair trade between the two jurisdictions, there is a provision to protect our domestic production, again not from competition and not from Korean products, but from a surge in those Korean products that we believe is caused by, and is found to be caused by, trade practices that are not in keeping with the trade agreement.
We find the snap-back provision is an effective tool, and it has been called for by a number of industry sources in Canada.
I'll talk briefly for a moment about steel, before I conclude, Mr. Chairman. I had occasion to meet with representatives of the steel sector in Canada. When we were in Nova Scotia studying CETA and the TPP, concerns were expressed about European steelmakers and the effect it will have on Canadian steel producers. But also there has been a fairly long-standing concern in Canada about Korean steel manufacturing. While not necessarily constituting dumping—although that has been alleged—there have been a lot of Korean steel products coming into Canada at very low prices that are pushing out Canadian-made steel production, without concomitant steel access from Canadian producers to the Korean market.
We think there's a solid justification to help the Canadian steel industry make sure they are competing on a fair, level playing field, and if that turns out not to be the case, that the tariffs on steel have the ability to be snapped back if it turns out Korean steel products are surging in Canada and causing damage to the Canadian steel industry.
4 p.m.
Conservative
Ron Cannan Conservative Kelowna—Lake Country, BC
Thank you, Mr. Chair.
When I read this, I thought “this is capital NDP protectionism at its finest”. I can't believe you would even propose this. When I heard my honourable colleague speak in the House eloquently about supporting the agreement, I was very excited and appreciated his support.
Reading this was very subjective and hard to define. As I said, it's very protectionist and the fact that “or threat of serious injury”.... When you're competing in a global marketplace, you want to have a level playing field and a mechanism in place. I agree with the fact that, with our accelerated dispute mechanism in place, it's going to help or even be superior, as has been indicated by others, as far as the snap-back provision is concerned.
I think my colleague across the way could maybe check out for sound reasoning the safeguard mechanism. Chapter 7 of the agreement provides for a transitional safeguard mechanism that applies to all products. I know with regard to how integrated our supply chain is....I heard six or seven times a car goes across the border, so any actual protective value snap-back would also cover Canada.
Since we have our panel of expertise here, I wonder, Mr. Chair, if I could call on our chief negotiator, Mr. Burney, to clarify. It seems to me there's some misunderstanding of the agreement, and my colleague has maybe muddied the two as far as the accelerated and the snap-back provisions go.
4 p.m.
Ian Burney Assistant Deputy Minister, Trade Policy and Negotiations Branch, Department of Foreign Affairs, Trade and Development
I think there is perhaps some confusion between the safeguard provisions and those that pertain to dispute settlement in the case of a violation of the agreement.
In the case of a safeguard action, which was intended to protect either market in the event of a surge, the provisions in the Canadian agreement are the same as those in the KORUS agreement with the United States. In fact, they don't apply just to autos, as they do in the case of KORUS, but they apply to all sectors. If the issue is protecting the Canadian market from a surge in either automotive or steel goods, the protections in the Canadian agreement are equal to or surpass the KORUS.
The element of snap-back that is sometimes referred to is not in the Canadian agreement. It is the notion of fixed retaliation in the event that the other party doesn't comply with the dispute settlement panel. Hypothetically, if the Koreans were to violate the non-tariff provisions in the automotive chapter, in the KORUS, the United States would have the right to reinstate the automotive tariff. In Canada, we would only have that right to the extent that the violation matched the level of damage we were imposing through our retaliatory measure.
Our view is that this is not a material difference. We think that the impact of being able to reinstate a 2.5% tariff is not that great, that it can't actually be snapped back in the first four years because it's still in place. Most importantly, in the KORUS, that provision will sunset in 10 years if there hasn't been a violation against the Koreans in the interim. The Koreans, of course, will be highly motivated to avoid that situation from arising.
To the extent that there is any value from that snap-back provision, we think we would benefit indirectly anyway. As a practical matter, it would be hard for the Koreans to impose a non-tariff barrier in a way that discriminates between Canadian-built and U.S.-built cars.
The upshot is that we think under our deal we would benefit from the provision in the KORUS for as long as it lasts. Then, in the likely event that it sunsets, we would still have the benefit of our accelerated dispute settlement procedures that last permanently, whereas those same provisions in the KORUS would sunset. On balance, we think we actually got the better deal.
4 p.m.
NDP
Don Davies NDP Vancouver Kingsway, BC
Thank you.
I'll respond briefly to Mr. Cannan and then to Mr. Burney.
The provision we're proposing would require that the complaint of surge be put to an independent panel, so it's not something that would be unilaterally invoked or decided by the party.
In terms of whether this is protectionist, I think it's hardly the case that we would accuse the United States of being protectionist. This is a provision that the United States has negotiated and is present in the Korea-U.S. trade agreement. It's not protectionist at all.
This is—and Mr. Burney kind of confirmed that—a way of dealing with something that all parties acknowledge needs to be dealt with, which is a potential surge in products. The current agreement deals with that. Obviously it's not protectionist, or else the Canadian government has been protectionist in negotiating the provisions that are already in the agreement about dealing with surges. With great respect, that's absurd.
What our amendment proposes is that there be, as Mr. Burney put it, a specified retaliatory measure.
By the way, I have to tell you that if you get excited about my speeches in the House, you have get out more, Ron.
4:05 p.m.
NDP
Don Davies NDP Vancouver Kingsway, BC
In response to Mr. Burney, I respect that position, but I would say that it's not universally held.
It's unanimous with the people I've talked to in the auto sector. They do believe that the ability to have snap-back provision of the tariff is a superior retaliatory measure than leaving it simply open. In fact, the auto industry executives I've talked to prefer the snap-back provision. I think it's a question of fair comment as to whether the provisions we've negotiated, as opposed to the Americans, are better or worse. That's a subjective call. I think there's fair comment and perspectives on both sides.
On the 10-year provision in terms of the U.S., I think the parties recognize that with phasing out of tariffs and having provisions that deal with surges over a 10-year period, that recognizes that the industry will adjust. Over a period of time, like a decade, I think everybody assumes that the auto producers will make the adjustments necessary so they'll be able to competitively deal with each other. The concept of surges after the agreement because of tariff reductions won't be the cause of problems, and the industry will be able to respond.
I can see where the respective parties sit on this. It's our view that the KORUS provision of having a specified 2.5%, where in our case it would be a 6.1% snap-back on auto, will help to protect the Canadian auto sector.
I'd urge all members to support it.
October 9th, 2014 / 4:05 p.m.
Liberal
Massimo Pacetti Liberal Saint-Léonard—Saint-Michel, QC
Thank you, Mr. Chair.
I'm wondering if I can ask the officials where the clause is on the surge. Where would that be in the legislation?
4:05 p.m.
Assistant Deputy Minister, Trade Policy and Negotiations Branch, Department of Foreign Affairs, Trade and Development
It would be in the provisions dealing with the Canadian International Trade Tribunal. The provisions later on, dealing with the tariff, have provisions that deal with how we would be able to invoke a safeguard action in order to protect the Canadian industry from a surge or threat of surge of imports. And those provisions, as I said earlier, are exactly the same as in KORUS, but they don't apply only to autos, they apply to all sectors.
4:05 p.m.
Liberal
4:05 p.m.
Assistant Deputy Minister, Trade Policy and Negotiations Branch, Department of Foreign Affairs, Trade and Development
It's in the bill.
4:05 p.m.
Scott Winter Senior International Relations Officer, Tariffs and Market Access, Department of Finance
The amendments to the Canadian International Trade Tribunal Act provide the tribunal with authority to make such a determination on the request of domestic industry and then, specifically clause 51, the amendments to the customs tariff provide the Governor in Council with the authority to either suspend tariff concessions or reimpose the pre-FTA tariff levels as a result of a positive determination from the Canadian International Trade Tribunal.
4:05 p.m.
Liberal
Massimo Pacetti Liberal Saint-Léonard—Saint-Michel, QC
Okay. Another quick question.
What would be the definition of a surge? Is there a percentage or a range of percentages?
4:05 p.m.
Assistant Deputy Minister, Trade Policy and Negotiations Branch, Department of Foreign Affairs, Trade and Development
No. The standard is serious damage or threat of serious injury. Is that right, Scott?
4:05 p.m.
Senior International Relations Officer, Tariffs and Market Access, Department of Finance
Yes, that's correct. It's imports increasing in such a quantity and under such conditions so as to cause serious injury to the domestic producers of competitive goods. Effectively, that can be a range of economic factors that are considered by the tribunal: lost sales, lost market share, things of that nature.