International Trade Committee on Nov. 7th, 2013

[The Chair, Conservative, Rob Merrifield]

Just to let the committee know, you'll be the last. I think the minister's got to leave right after this.

[Ed Holder, Conservative, London West, ON]

You saved the best for last. Is that what you meant, Chair?

[The Chair, Conservative, Rob Merrifield]

Yes.

[Ed Holder, Conservative, London West, ON]

All right, thank you.

I understand that the role of the opposition is to oppose, but that doesn't mean they need to be rude. I'm going to take a different approach and ask some thoughtful questions, if I may.

You made a comment, Minister, that with the kind of agreement put in place, engineers in Germany would be able to have their qualifications recognized in Canada, and vice versa. I only wish that interprovincial wisdom took in such considerations in our country. Perhaps that might be another initiative, inter-trade.

The question of supply management has come up in the past. That's always been one of those concerns we heard as the negotiations were taking place. I think it's an interesting story, what I've heard thus far about it. Could you elaborate more, for my benefit and perhaps for the public's benefit, on what the impact of supply management is with the deal that has been struck to this point?

[Ed Fast, Conservative, Abbotsford, BC]

From the very beginning, we were focused on achieving for Canadians a balanced outcome, and when it came to dairy, clearly, like the GIs that Mr. Davies just referenced, the EU had a keen interest in improving its access to our cheese market.

For us, we had other areas of key offensive interests where we wanted to secure outcomes, which we have secured, by the way, so this is what we did. We said to the EU that we would provide it with an additional 4% access to our market for cheese, understanding that at the end of the day, 92% of all cheese consumption would still be produced in Canada. What did we receive in return from the EU? We received unfettered access to their dairy market.

On top of that, of course, there's also the fact that the cheese market continues to grow in Canada. It's somewhere in the order of 1% per year. When you look at 4% over four years, all of that additional cheese access from the EU would actually be absorbed by additional growth in our domestic market. We believe this is a very good outcome for Canada. It's balanced and achieves unlimited access to the EU market. We're now encouraging our dairy producers to start looking at this market of 500 million consumers and find new creative ways of accessing that market, because we know Canadians can compete if they put their minds to it. We make some of the best artisanal cheeses in the world. Quebec is known for its artisanal cheeses, and we're asking why it would just sell to Canadians. There is now this huge market over there in the EU. Quebec should take advantage of it.

Again, we believe we've achieved a balanced outcome that truly serves the long-term interests of Canadians.

[Ed Holder, Conservative, London West, ON]

You know, in the spirit of that, Minister, one of my colleagues opposite and I are actually getting together to bring Quebec cheese producers here, so that parliamentarians can experience their great products.

This is a political question as opposed to a trade question, I think. We're that much farther ahead than the United States in terms of signing a free trade deal. I'm not sure, as a result of some of the things that have happened recently, where they are in the process. I'd be curious for an opinion, but I have a bigger question. For Canada's sake, what do you feel is the benefit of our putting this agreement in place well before the United States does? What does that mean to Canada?

[Ed Fast, Conservative, Abbotsford, BC]

It means what some people have referred to as first-mover advantage. The United States is a fierce competitor of ours. At the same time, the U.S. is also our biggest trade partner. We collaborate with it and we partner with it, but it's always nice to be ahead of the United States and have opportunities to carve out market share before the United States does, and some of our other competitors carve out their own shares.

We're very pleased that we were able to come to an agreement in principle. As I've mentioned, there is still work to be done. The remaining modalities have to be negotiated. Then there's the drafting of the legal text, translation of that text into 24 languages, and of course, the ratification process. Each of the 28 member states of the EU has to ratify this agreement. On our side, each of the provinces and territories has to introduce implementing legislation, but we're confident on our side that our provinces and territories fully understand the outcomes that are in this agreement. They've all come out very clearly in strong support of this trade agreement with the EU.

[The Chair, Conservative, Rob Merrifield]

Thank you very much. Minister, first of all, thank you very much for appearing, given the very short notice you had when we asked you to come before the committee as a witness and share this time with us.

I know we have Mr. Verheul and the team for the rest of the committee time, so I don't want to impose on you any further.

Let's suspend as we bid farewell to our witnesses and grab a coffee.

[The Chair, Conservative, Rob Merrifield]

I'd like to call the meeting back to order.

We will start this round with Mr. Shory, as soon as it is quiet at the back.

Mr. Shory, the floor is yours.

[Devinder Shory, Conservative, Calgary Northeast, AB]

Thank you, Mr. Chair.

My thanks to you, Mr. Verheul, and your team for coming here today. I understand you are not here in a political role. It is so unfortunate that I have to make this comment, that on the one hand, 80% of Canadians, according to an Ipsos poll, support the Canada-EU trade agreement, but on the other hand, everybody knows the NDP is anti-trade. They have never supported any trade. They have already said that it will be the worst trade agreement, that we have sold out our lumber and all kinds of things. They have been asking for the text now, and they have never asked for it before.

Is there enough information out upon which to base a decision on whether to support it or to oppose it?

[Steve Verheul]

Well, this is the first time we have given out this kind of detailed information before we have had a final text. I think the technical summary illustrates all of the issues, where we've landed on the question of ambition, the question of sensitivity. All of the main core elements of the agreement are there. The text, when it finally comes out, is probably going to be about a foot high. I'm not sure there will be a lot of people reading through the entire text to look for things.

What you've seen in that technical summary is the heart of the agreement. The rest is details. We have a complicated language in the trade world, and that's what the text is going to look like.

[Devinder Shory, Conservative, Calgary Northeast, AB]

Like the budget, they will never read the whole text, but that's another story.

How will CETA make it easier for Canadian companies to do business in Europe, and how will CETA impact Canadian families at home?

[Steve Verheul]

First of all, with regard to making it easier for Canadians to do business in Europe, this is something we had as a key objective right from the beginning. We knew that a lot of Canadian businesses have been frustrated in getting into the European Union market. It's not as easy as the domestic market or the U.S. market. Part of our task was to remove some of those concerns, so we have done that. Right from the time that you approach the border, we have simplified customs arrangements. We're allowing for more transparent processes. We have a chapter on customs and trade facilitation that is entirely geared toward getting product across the border more easily than in the past. We also have provisions that will require Canadian companies to be treated in exactly the same fashion as European companies, competing on a level playing field.

For Canadian companies there is the potential for significant benefits. Part of our challenge over the next while is going to be to convince them they should be looking at that seriously and taking advantage of those opportunities. We need to gear up for that.

As to the impact on Canada, we have seen our trade with our largest trading partner decline somewhat over the years. We've seen it become volatile at times. It is in our country's interest to diversify our trade. When you look at it like that, the largest market in the world seems like a reasonable place to focus. Canadians will benefit from this huge new opportunity for the Canadian economy.

[Devinder Shory, Conservative, Calgary Northeast, AB]

Mr. Verheul, you are a person who has virtually all kinds of knowledge on this agreement. You have talked about significant benefits for Canadians and Canadian businesses. I'd like you to put some dollar figures on that. What do you project to be the increase in bilateral trade as a result of CETA?

[Steve Verheul]

It's difficult to put a number on it. The study we did jointly with the EU before the negotiations commenced had about a 20% increase in bilateral trade. I happen to think that this is greatly underestimated, partly because of certain flaws in the study. We can design an agreement, and I think we have designed a good one, but it's going to be up to Canadian companies, Canadian business, Canadian entrepreneurs to look at the European market in ways they haven't before.

The opportunities are going to be limitless, but we're going to have to take advantage of them, so I'm hesitant to put any number on it, but I'm quite confident that in various sectors those increases are going to be much more than 20%

[Devinder Shory, Conservative, Calgary Northeast, AB]

Okay, the last—

[The Chair, Conservative, Rob Merrifield]

No, you've already had the last one. Thank you very much.

Mr. Masse.

[Brian Masse, NDP, Windsor West, ON]

Thank you, Mr. Chair.

Thank you for being here today.

I think it's quite reasonable for Canadians and us to want to see the text. I wouldn't sign a mortgage based just on the pamphlet from the actual provider. That's kind of what we have right now. We have that pamphlet. I'm not saying the pamphlet is misleading, but at the same time, there has to be a lot of trust. I'm not sure that this government has earned the entire trust outright.

Having said that, I'll say that trade agreements have winners and losers. When we signed the NAFTA, we lost the Auto Pact. What happened is that Japan took Canada to the WTO and we lost the Auto Pact. We went from number two in the world in auto production to number nine now. We're losing further footprint under this government in terms of our percentage to the United States.

Have you done an estimate in terms of the winners and losers in this deal and what industries are going to be affected negatively so that we can ameliorate that for them in this trade agreement?

[Steve Verheul]

Well, certainly we've spent a lot of time with each of the industries that are going to be affected one way or the other in this negotiation, and we've tried to accommodate the concerns they have in every respect.

Now, clearly there's been some public attention on the dairy sector, and the increase in access for cheese could potentially have an impact on their interests. This is why the government has indicated that it would provide a compensation in those cases.

At the same time, I think that on that issue, as on many others, we've also built in opportunities into that sector, including an opening to the largest dairy market in the world.

[Brian Masse, NDP, Windsor West, ON]

Is dairy the only sector that could have a negative impact from this agreement? If we provide financial assistance to that sector, could that potentially be contested by other trade agreements as government intervention on those trade agreements that we already have with other countries?

[Steve Verheul]

To answer your first question, no. Certainly there's going to be a bit of a mix over time, and part of that will depend on how things develop after the agreement is in place, because we're essentially removing tariff protection on both sides. We're going to find out what kinds of niche markets can be found and what kinds of advantages can be found.

The more important element is that in the European market we will have an advantage over every other exporter into that market, including the U.S. I think we have the advantage there.

The second part of your question was....

[Brian Masse, NDP, Windsor West, ON]

It was related to it. If we are going to use government intervention for those industries that are negatively impacted by the government intervention on the rules of business that we currently have, could that financial or other government contribution to those industries, the subsidies or grants or whatever it might be, possibly interfere with other trade agreements, and could that be challenged?

[Steve Verheul]

Our assessment would be no, because to begin with, if we're providing compensation to sectors that are being negatively affected, there are various ways we can do it that are not vulnerable to trade sanctions or to being against our trade obligations.

The second thing to remember, particularly when it comes to dairy, is that we may not...we will see that assistance generated towards adjustment in that sector, not towards providing export subsidies to allow them to export more cheaply, which would be a contentious problem. So it depends on how you do it.

[Brian Masse, NDP, Windsor West, ON]

You would be looking for ways around our current trade agreements and our current trade partners to subsidize those businesses that would be affected negatively by CETA.

[Steve Verheul]

Well, I think that would be quite easy to do. Certainly every government provides that kind of assistance. That's understood. There are rules around how you do it, but I'm not anticipating any difficulty on that front.