International Trade Committee on Nov. 7th, 2013

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

My final question is the technical summary says “no change to current rules; locks in future liberalization”. What does that mean?

[Steve Verheul]

Could you point me to where that is?

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

This is in the telecommunications sector.

[Steve Verheul]

Okay. I apologize if this is a bit arcane. We have two types of reservations for services and investment provisions.

Annex II reservations provide complete policy flexibility. You're essentially taking something off the table and saying you're not liberalizing it.

In the case of telecoms, we've moved it to an annex I reservation, which means that any unilateral liberalization you might make over a period of time would be captured, and you would be locked in at that new level of liberalization.

[The Chair, Conservative, Rob Merrifield]

Thank you very much.

Mr. Cannan, the floor is yours.

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

Thank you, Mr. Chair.

Thanks again, Mr. Verheul.

At the beginning of the year, there was a lot of pressure for you to sign this agreement. Many Canadians didn't realize that you had been working on this for a while and asked what the holdup was. At one point you had a five-week span at the table.

Maybe you could enlighten Canadians and our trade committee on how the process evolved to the point it did. A good agreement is when both people leave the table happy, and it appears that way from the reports we're hearing from both sides. Maybe you could share a little bit about that, as well as some of the biggest challenges you encountered during the couple of years of your life that you invested in this agreement.

[Steve Verheul]

I think it's getting closer to five years of my life and the lives of some others that we've invested in this agreement, and it did include many ups and downs.

The first few years were really about laying the building blocks. We certainly ran into some challenges through that first period, but I had a clear understanding with my counterpart that when we ran into a roadblock, we would look to solve it by moving the level of ambition up rather than lowering it to find a common ground. We consistently stuck to that, which is why we have the level of ambition in the agreement we have now.

Over the last year or year and a half, we essentially got through all of the issues except for the most difficult ones. We came close to being able to have a crunch point in the negotiations once in November of last year and again in February of this year, and we came very close at the end of July of this year. Things didn't quite hold together at that point, but we were very close. We had to pick up some of the pieces again in September. Then we had a core set of issues where the gaps were quite narrow but the issues were still quite difficult.

This has been a big effort that's taken numbers of people from provinces and territories. Our first delegations to Brussels were 120 people, including provinces and territories. Now we're down to negotiations that involve a handful of people. Basically we've been working seven days a week and in many cases twenty-hour days for a very long time. The remaining issues always are the most sensitive, the most difficult, and those require a particularly sustained effort to get through.

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

Well, on behalf of all Canadians, thank you for doing this for, as I've said, a historic agreement. Sometimes the last mile is the hardest. With your patience and perseverance, I'm confident you'll complete the agreement.

There is another aspect. As you mentioned, this is the building block for this agreement, but it is also, as Minister Fast said, a 21st century trade agreement. From your perspective, is this going to be something that you and others will be able to use for future agreements? Canada is a trading nation. For those who want to turn back the clock and are against globalization, the reality is.... I'd like to hear from you. I believe that our Canadian businesses can compete in the world if we have a level playing field. With this building block template in place, will that provide Canada with that competitive edge going forward?

[Steve Verheul]

I'm certainly entirely convinced of that.

In many sectors we have relied for a long period of time on the domestic market or the U.S. market. The European market is—we've all said it—the largest market in the world. Gaining preferential access to that not only gives us an advantage in that market, and a significant advantage, but it also positions us to go further into other markets, Asia and other markets that others are trying to get into. We now have a competitive advantage. We have an ambitious agreement with Europe, as well as the NAFTA that we have with the U.S.

As far as its setting the standard is concerned, I think that's important in two respects. In one respect, in many ways, what we did with the Europeans was that we created a bridge between what the European Union had done internally with its 28 countries and what Canada and the U.S. had done in terms of the North American market. We integrated that. There are different paths, different structures, different approaches to individual chapters. We built the bridge between those, which will serve the U.S.-EU negotiations well, but more broadly, this will be seen as a model going forward. There are many innovative elements to this, many improvements over previous practices. I think we've set a marker in terms of the level of ambition that will be difficult for others to achieve.

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

I have one last question. My colleague Mr. Holder asked the minister about this.

As for our situation to the south, about 75% of our trade is with the U.S. right now. It continues to be our biggest ally and trading partner, and it will always be. With our getting our agreement signed before theirs, do you think it'll be ratified and in place before the Americans have theirs, or are they planning on working in parallel, similar to what we did with Colombia? We tried to get in the door before them, and they're in South Korea, so we're always battling and we want to stay competitive and at least have a level playing field for our Canadian business. Will we have an advantage, being first out of the gate in this case?

[Steve Verheul]

Yes, I think we have a significant advantage. For one thing, in the negotiations themselves, in the way we've designed the outcome on a lot of the chapters, a lot of the provisions are obviously done in a way that's favourable to Canada. The EU will be taking a lot of that to the negotiations with the U.S., so we already have a model that's going to be represented that way.

When the agreement, the CETA, comes into effect, we will have a significant advantage over our U.S. competitors. In many cases, it's going to be a 10% to 15% advantage, which is not huge but will make the difference in a lot of contracts. In other cases, it's far, far larger than that, and we will be into markets that the U.S. will not be able to negotiate their way into. I think we have an advantage in forming customer relationships in the EU ahead of the U.S. All of that we'll be able to pursue first.

We need to keep in mind that in a negotiation like that it's not a given that you're going to be able to complete it. We certainly had periods where we weren't certain. The U.S. and the EU are going to have a number of significant obstacles to get over in order to complete an agreement between the two of them.

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

Thank you for looking forward and not back. It's a great future.

[The Chair, Conservative, Rob Merrifield]

Thank you very much.

Mr. Davies, the floor is yours.

[Don Davies, NDP, Vancouver Kingsway, BC]

Mr. Verheul, page 12 of the summary states, under services and investment, “Recognition of governments' right to regulate and right to sovereign control over the development of natural resources.” That's as you've talked about, but later on it states, “Binding of future autonomous liberalization (i.e. the “ratchet”—whenever a government liberalizes, that level of liberalization is locked in).”

Can you give me some examples of the kinds of things that will be locked in once the government liberalizes? Can you tell me, does that mean those services can never be brought back within the public sphere or regulated in the same way again?

[Steve Verheul]

Again, it depends on which parts of our concessions under services and investment we have placed in this annex I reservation type that I've explained before. If you placed your reservations in annex II, you're not subject to the ratchet. You can have full policy flexibility going forward. We've done that and the provinces have done that for any areas that we consider sensitive or where we want to protect the policy space going forward.

In those areas where we were prepared to go further and put them in annex I, we've recognized that we're probably moving towards a more liberal regime in most of those anyhow.

[Don Davies, NDP, Vancouver Kingsway, BC]

Are those annexes available to the public?

[Steve Verheul]

Not at this point, no. That will be part of the final text.

[Don Davies, NDP, Vancouver Kingsway, BC]

Would you agree with me that whether something is in annex I or annex II is of relative importance in terms of the ratchet effect?

[Steve Verheul]

Certainly I do, and we're happy to respond to individual questions.

[Don Davies, NDP, Vancouver Kingsway, BC]

Thank you.

Under procurement on page 16, it says that Canada has “maintained ability to include social and environmental criteria in contractual requirements”. I take it that means tendering. Will this allow local governments, municipalities or provinces, or any type of government in Canada to pursue local job creation initiatives?

[Steve Verheul]

Well, I think, in consultations with the municipalities, that we've managed to preserve that ability in a number of different ways. Certainly, there are no rules that will apply underneath the thresholds, and the thresholds are quite high under CETA. In construction, for example, the threshold is close to $8 million. Any—

[Don Davies, NDP, Vancouver Kingsway, BC]

For capital projects.

[Steve Verheul]

For capital projects, yes.

[Don Davies, NDP, Vancouver Kingsway, BC]

And for service contracts, it's $300,000?

[Steve Verheul]

For service contracts, you're right; it's about $300,000.

Underneath that, there are no obligations at all. There is full flexibility to specify environmental and social criteria. There's full flexibility to have relevant experience as part of the requirement for the tender, which would tend to favour local operations, and—