International Trade Committee on Nov. 7th, 2013

[Brian Masse, NDP, Windsor West, ON]

With regard to fish processing in Newfoundland, there are vulnerabilities. Can you highlight specific strategies that can deal with those vulnerabilities?

[Steve Verheul]

With respect to fish processing?

[Brian Masse, NDP, Windsor West, ON]

Yes.

[Steve Verheul]

Well, on what we've done in the CETA, we have said that after a three-year period, Newfoundland and Labrador would no longer have the right to apply minimum processing requirements on exports to the EU.

Now, the minimum processing requirements are generally not applied to the EU as it stands now. These are generally policies that are used between provinces and between Canada and the U.S. When you're talking about a market that's as far away as the EU, they start to lose their relevance, and we do not have a long history of needing to use minimum processing requirements on exports to the EU.

I think the impact of that will be minimal. I think it will be highly offset by the new opportunities into the EU fish and seafood market.

[The Chair, Conservative, Rob Merrifield]

Thank you, Mr. Masse.

[Brian Masse, NDP, Windsor West, ON]

Thank you, Mr. Chair.

[The Chair, Conservative, Rob Merrifield]

Go ahead, Mr. McKay.

[John McKay, Liberal, Scarborough—Guildwood, ON]

Thank you, Chair.

The NAFTA has been, in some respects, a source of frustration for some in regard to the dispute resolution mechanism. I'm thinking back to the lumber issue. My recollection is our industry made nine interventions in a row and lost every one of them, partly because of intervention by Congress and Lord knows what else.

If in fact we've moved from the 20th century on this agreement to the 21st century, what's going to be the actual difference between the NAFTA and this agreement in terms of the dispute resolution mechanism?

[Steve Verheul]

We've certainly learned a large number of lessons from our NAFTA experiences over the years, both with respect to the government-to-government type of dispute settlement mechanism, which was the case in many of the softwood lumber disputes, and with the investor-state dispute settlement approach, which comes to investment issues. We've applied those lessons and have made a significant number of changes to dispute settlement under CETA.

When it comes to government-to-government disputes, this will be by far the most efficient and innovative process of any of our free trade agreements and, I would argue, of any other free trade agreements. Another feature will be that we will have a voluntary mediation option, which is quite thorough and spelled out, to avoid getting into that dispute in the first place. We will have a shorter process than in previous agreements so that these can be resolved quickly and those that are interested can move on.

We have some specialized rosters in certain places for specialized issues. Financial services is an example. The numerous changes that we've made, including a much more transparent approach to dispute settlement, make this significantly different from NAFTA in those respects.

[John McKay, Liberal, Scarborough—Guildwood, ON]

I suppose we'll just have to see how this plays through, because that has been a source of considerable frustration.

My NDP colleagues talk about concerns about the costs around patents and various other issues. When you table this report, will you table provision for what these trade implications might actually cost, either in patents or any other industry that needs to be made whole at some point or another? Will there be a tabling of that amount, and will there be a set-aside in the budget for potential hits on the taxpayer?

[Steve Verheul]

In the cases where we've suggested there could be compensation, in both the dairy and the pharmaceutical cases, those are very difficult to predict from where we are now.

The minister mentioned that after CETA comes into effect, we've still got at least an eight- to ten-year period before we would first start to see some of those products coming off patent protection. We don't know what kind of drugs will be in the system exactly at that point. If there are blockbuster drugs, some of the ones we've seen in the past, then we could see more significant impacts. If there don't happen to be blockbuster drugs, then the impacts will be much less. It doesn't factor in what else is going to happen in domestic policy with respect to patents on pharmaceuticals, at either the federal or provincial levels.

When we talk about patents, we're going to be discussing with provinces and territories in the coming months what kind of approach makes the most sense. I certainly wouldn't want to predict the outcome of that ahead of time, given that's an open dialogue in consultation.

Similarly, when it comes to the dairy side, again we're not sure exactly what kind of impact will occur, because consumption of cheese in particular is continually rising. The economic hit may be fairly minimal if that trend continues, so we would want to see what happens there.

As with pharma, we are talking to provinces and territories about how that process would be designed. We're also holding consultations with the dairy industry to get its views. I wouldn't want to prejudge any of that or attempt to suggest we could put dollar figures on it before we know what the design is.

[The Chair, Conservative, Rob Merrifield]

The time is gone.

Mr. Hiebert, the floor is yours.

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

Thank you, Mr. Chair, and thank you, Mr. Verheul and Ms. Renart, for being here again. It's always interesting to get updates from you. This is one of the more favourable times as we've had a chance to hear about the progress that's been made. Congratulations on that.

My first question relates to the benefits to jobs and GDP that had been emphasized a great deal on a macro scale. We hear about the $10 billion to $15 billion, the 80,000 jobs. I'm wondering if you could help us understand it on an industry by industry basis.

For example, I'm from British Columbia where forestry is an important industry. I'm told that forestry is about a $20 billion addition to the Canadian GDP. There are about 230,000 employees in this industry in Canada.

As a result of CETA, can you help me and the viewers who are watching understand what impact this will have on that industry, for example? Do you anticipate increased jobs or an increase in the value of jobs or increased trade, specifically as it relates to forestry? Could you unpack it as it relates to other industries as well, break down what those big numbers mean industry by industry?

[Steve Verheul]

I'm afraid that's a bit of a challenge at this point. Certainly we've heard from the forestry and wood products sectors that they anticipate significant gains here. Exactly how large those gains are going to be is a bit difficult to calculate. Significant tariffs on things like plywood and other forms of wood will be removed and will give us a significant advantage in the industry.

We've also heard some other industries outline how much they anticipate they would gain in their industry. I think we've heard from the Canadian Agri-Food Trade Alliance that they expect to expand exports by $1.5 billion a year, which is something like a 63% increase. This is really not a matter where the government can entirely predict the actions of the private sector. The openings and the advantages over other trading partners are going to be there, so the potential is huge. How much we can realize will depend on what the private sector does in taking that advantage.

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

I appreciate that.

In terms of next steps, we've been told this morning that there's this need for translation, for ratification. Can you help us understand the European Parliament ratification process and where it goes from here over the next 18 to 24 months?

[Steve Verheul]

Sure.

The first step is once we finish the technical negotiations, we'll submit it to our respective legal counsels for legal scrubbing. We're anticipating that will take anywhere from five to six months. The EU will then have to translate it into a total of 22 languages, which is going to take a bit of time as well. Following that, once we have a final legal text, and it has been translated, it will then go through the ratification process in the EU.

The first step in that is to go through the Council of Europe, the European Council, which has representatives from all member states. If they approve it, it then goes through the European Parliament for a vote. If they approve it, the European Commission would then be in a position to provisionally apply in our case probably 98% or 99% of the agreement at that point.

If there are elements that member states have to approve, they would then go on to the process of member state ratification, but in the meantime, we could have that 98% or 99% of the agreement in place while that is occurring.

We're estimating the time from when we finish the negotiations to get through the scrub, the translation and ratification to be a total of about two years. We're hoping for a little less, but about two years.

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

There's been some talk about a strategic partnership agreement. I know there's perhaps a difference of opinion as to how it's related to the CETA.

Could you explain your view to the committee as to whether or not there's a linkage between the CETA and the SPA and where that's going?

[Steve Verheul]

As you point out, those negotiations are ongoing as well. One key issue is left that relates to whether there would be the ability to suspend the CETA in the event of a dispute between Canada and the EU over weapons of mass destruction or human rights violations.

From our perspective, we have not wanted to link trade agreements to issues of that type. I think, more importantly, we don't want to be in a position where we have that kind of a provision in an agreement we have with the EU and our closest trading partner, the U.S., does not. We have no differences of view with the European Union on those issues, but we would want a common approach with some of our other trading partners.

[The Chair, Conservative, Rob Merrifield]

Thank you very much.

We'll now move to Mr. Davies and Mr. Morin. I believe you want to split your time.

[Don Davies, NDP, Vancouver Kingsway, BC]

Yes. Thank you, Mr. Chairman.

Mr. Verheul, it's been asked why a party can't decide on the most complex and largest trade agreement in the history of Canada based on a technical summary. I'm going to refer to the technical summary and put some questions to you, and we'll see how clear they are.

Under the ISDS provision, on page 14, it says you have negotiated a “transparent ISDS process, making submissions to the arbitral panel public and generally opening hearings to anyone interested”.

With regard to the word “generally”, does that mean there are circumstances where hearings will not be open to the public? If so, what are those circumstances?

[Steve Verheul]

Yes, there will be circumstances where the hearings won't be open to the public. Those are in cases where there is business confidential information that would be prejudicial to the businesses in question.

[Don Davies, NDP, Vancouver Kingsway, BC]

Thank you.

I'll pause by saying that Canadians know that one of the main reasons we've weathered the recession quite well for the last five years is that we had a very strong and well-regulated financial services sector. You told Canadians that you've negotiated “a robust prudential exception that will protect reasonable measures taken for prudential reasons”.

What exactly was negotiated there, Mr. Verheul?

[Steve Verheul]

I think if you look at the prudential carve-out, and you will see it in a text at some point, you will find it goes well beyond what we had in NAFTA with respect to a prudential carve-out. This was an issue that we discussed for a long time with the Europeans. We also included a number of other elements, including that members of the dispute settlement body would have to give due diligence, due deference, to the regulators who were making the decision. In other words, they had to give deference to their findings on fact, the decisions they have made.

The prudential carve-out we have secured here is well beyond anything we have done before in terms of protecting our regulators.

[Don Davies, NDP, Vancouver Kingsway, BC]

Would you agree with me, sir, that the details of that carve-out would be of some significance and interest to Canadians?

[Steve Verheul]

I'm sure there are many elements in the final text that will be of interest, but I think they will reflect what we have been saying consistently in terms of the outcome.