International Trade Committee on Nov. 7th, 2013

[Don Davies, NDP, Vancouver Kingsway, BC]

Mr. Verheul, you're aware that many Canadians are concerned about the investor-state provision. Nobel laureate in economics Joseph Stiglitz has expressed concerns about investor-state provisions. The worry, of course, is that Canadian governments can be sued by corporations for legislation taken to protect the environment, or for the health of Canadians, or for social services or public enterprise, if they deem it to interfere with their profits.

Can you give Canadians the assurance that will not be the case with CETA?

[Steve Verheul]

I can tell you that the CETA outcome is very much different from other approaches we have followed in the past. There will be no ability to overturn environmental decisions or restrict governments from regulating in the interests of environment, or anything along those lines, whether it's social services, health services, or others.

I can also tell you that under CETA, the investor-state dispute settlement will be much more transparent. We will have open hearings. Anybody that has an interest can go to those kinds of proceedings. I think we have a number of other elements there, too, in terms of not allowing frivolous claims to proceed, which we have seen in the past, sometimes successfully. We've introduced a number of additional elements.

There's one that's probably most fundamental. One of the debates we had with the Europeans, having experienced NAFTA over the years in chapter 11, is that we wanted to have a very strong representation, a very strong protection, on the right to regulate, giving and defending governments' ability to regulate. That's in the text.

[Don Davies, NDP, Vancouver Kingsway, BC]

Thank you.

[Steve Verheul]

That balance is definitely going to preserve the ability of governments to act.

[Don Davies, NDP, Vancouver Kingsway, BC]

Thank you.

I'm going to pass it over to my colleague.

[Marc-André Morin, NDP, Laurentides—Labelle, QC]

Good morning. Thank you for having come here to answer our questions.

The government should follow up on the impacts, and provide compensation to the dairy industry if there are negative repercussions. What form could this compensation take? Is there an estimate of the cost of these measures?

[Steve Verheul]

I think at this point we have been doing a lot of work on how that would be designed. We want to consult closely with the Government of Quebec, the Government of Ontario, and other governments that have a strong interest in this.

Essentially, what we're going to do is monitor the income and revenues received by dairy farmers throughout this period and after the agreement comes into effect. If we see declines in revenue as a result of the increased access to cheese, we will fully compensate the producers who have been affected.

Some of those design elements remain to be determined, but that's the general overview of the design. If producers are seeing their revenues decline because of this, the government will compensate.

[Marc-André Morin, NDP, Laurentides—Labelle, QC]

In other words, we are going to have to wait for the negative repercussions to occur before we know how much the compensation amounts will be. Is there no way of introducing some mitigation measures ahead of time?

[Steve Verheul]

I think there will be other avenues that will be looked at to make sure that the industry, particularly the cheese producers, is in the best position it can be to compete, and this will involve marketing and plans.

Trying to guess the actual numbers at this stage when we're quite far away from seeing this come in to effect would be a disservice. The government has made it clear that if there were losses, those would be compensated, but they haven't set a limit on it. We don't know exactly what they are now, but we will as we get a little closer.

I can tell you that there are ongoing discussions between dairy farmer representatives and the government to figure out how best to do that in Quebec, Ontario, and other provinces.

[The Chair, Conservative, Rob Merrifield]

Thank you very much.

Mr. O'Toole.

[Erin O'Toole, Conservative, Durham, ON]

Thank you, Mr. Chair, and thank you, Mr. Verheul.

I asked the minister briefly about the engagement of stakeholders and the provincial and territorial teams. I know that many of the provinces had a chief negotiator. I think that's one of the more novel and important parts of the CETA process.

Can you describe how your team interacted with the chief negotiators from the provinces and territories, and how that brought the group together towards the deal?

[Steve Verheul]

When we started this process, there was a certain amount of apprehension on the part of the federal government, on the one hand, and the provinces and territories, on the other, because we'd never done anything like this before.

Essentially, we had briefing sessions with the provinces before every negotiating session so that they could understand what would be expected and what our strategy was.

We would regularly report back to them. We had a debriefing session every evening after the negotiations were finished to tell them exactly what had been achieved, to get their reactions, and to make sure we had their support on an ongoing basis. On many issues we would take them into the room and have a debate on what Canada's position should be.

When we first went to Brussels, there were up to 60 provincial and territorial representatives who came with us. We briefed them every evening, without exception. We met them individually if they had one-on-one concerns. Over time, and bear in mind this has been more than four years, we've developed a very cohesive and constructive team, and I think we've all been extremely pleased with how it's worked out.

[Erin O'Toole, Conservative, Durham, ON]

Thank you.

Recently, the Government of Newfoundland and Labrador, with some assistance from the federal government, has come up with some money to modernize the seafood and fishing industry to take advantage of the tremendous new market of 500 million consumers in Europe.

In your discussions with stakeholders and key industry groups, have you seen other groups evolve and start designing strategies in order to take advantage of this export market?

Can you suggest what roles government could play to help some of these industries come up with an action plan to take advantage of this new market? Some of this market had high tariff barriers and wasn't previously on their radar, but now industries are going to have to adapt to come up with an export strategy.

Can you talk about any sectors that are working on this, and is there a role for government?

[Steve Verheul]

Yes, certainly. There are a number that are well under way in terms of developing their strategies. Others are certainly getting started and still others we will want to try to coax a bit to make sure that they're ready to hit the ground running.

Agriculture...I've certainly spent a fair amount of time with some of those groups. They are very well advanced in terms of being able to access the EU market. They're already starting to make decisions about how to prepare for that. Similarly, on the fish and seafood side, I think there was some skepticism about whether we would ever achieve something like this with the European Union. Now that we have, that has certainly geared up in Newfoundland and Labrador, and in B.C. and other provinces as well, particularly in the Maritimes.

I think we've seen it in some of the other areas of more manufactured products. Chemicals and plastics are very well advanced in terms of being ready to enter the EU market in a bigger way than they do now.

There's quite a long list. We were hampered a bit by the fact that some were perhaps having a few doubts about whether this would be achieved. Now that the announcements have been made, now that the signal has been given, I think there are all kinds of companies and sectors that are gearing up to start preparing for when this comes into effect.

[Erin O'Toole, Conservative, Durham, ON]

Thank you.

You referenced supply management in some of your earlier remarks. I have several dairy producers in my riding of Durham, and I've been talking to them one on one about CETA and the outcome, and the fact that the three pillars of supply management were maintained with an adjustment to import levels. On average, there have been around 6,000 tonnes of new growth in specialty cheese in Canada—the minister mentioned 1% growth—and the phase-in time for CETA should see the demand rise to an extent that it absorbs the new imports. Beyond that, on the mechanism that will be in place if those measures or those volume estimates don't come to pass—farmers will be made whole—was the dairy industry consulted? The three pillars of supply management, were they an important part of our negotiating posture?

[Steve Verheul]

Yes. The dairy farmers, the dairy industry more broadly, was also consulted very closely throughout the negotiations. I met with them regularly. We were somewhat constrained in terms of what we could tell them, particularly near the end of the negotiations, because those issues were sensitive inside the negotiations, but that consultation did take place.

I think we need to bear in mind that one of the early messages we have received not just in this negotiation but in any negotiation is the dairy farmers' position that under no circumstances should over-quota tariff cuts take place. Other than milk protein substances where we already provide duty-free access from the U.S., no over-quota tariff cut is going to take place under CETA.

Full protection is remaining at the border. We excluded poultry and eggs entirely from any kind of increased access or tariff cuts, so the only dairy commodities we're touching really are cheese, and to a lesser extent the milk protein substances. That's not to say cheese isn't an important commodity in dairy. Of course it is, which is why we've said that we would monitor any potential impact that may take place as this is being implemented. As you point out, cheese is also a product where consumption is continually rising, or has been over quite a period of time. If that trend continues, then we do anticipate that would be absorbed fairly quickly.

[The Chair, Conservative, Rob Merrifield]

Thank you very much.

Mr. McKay.

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

Thank you, Chair.

I just want to follow up on the issue of making producers whole at the end of the day. One of the frustrations that frequently happens is that in the course of these negotiations, promises get made, the industry has an understanding, etc., etc., and then two or three years later, the rubber hits the road and the producer has to hire a flock of accountants and lawyers just to prove that he lost something.

Can you tell me whether you have, with the industry, particularly cheese and dairy, a methodology whereby a loss will be easily and simply recognized so that producers don't have to waste tons of money on lawyers and accountants?

[Steve Verheul]

In the case of dairy, that is one of the driving features of the design for compensation that we'll be looking at. In its simplest terms, if revenues decline as a result of new imports, then we will compensate.

It's fairly easy to measure declines in revenue. I think we'll be able to design it in quite a simple fashion. That's certainly our intention, so that that does not create a problem.

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

[Inaudible--Editor]...Mr. O'Toole's riding can actually do it?

[Steve Verheul]

Mr. O'Toole is going to be part of the process represented by his organization that's going to be a part of the design of this. They will provide their input.

We have the desire to have a very simple system. I think that's shared by Ontario and Quebec, who are also going to be part of this process. I don't think, even if we wanted to, we would have much of an interest or ability to come up with a system that was clearly not going to work.

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

I guess I'm going to have to accept that answer, aren't I?

[The Chair, Conservative, Rob Merrifield]

Sounds like a good one to me.

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

The European Union has a particularly aggressive attitude towards GHG emissions; here not so much. Clearly, the argument is that in order to be able to reduce your GHGs, you have to enter into systems of either direct mitigation or other forms of compensation.

Is Kyoto, or the absence of Canada’s being in the Kyoto treaty, affected by this particular set of negotiations and treaty?

[Steve Verheul]

No, it hasn't been. We don't have any provisions relating to those types of measures in the agreement. We do have a very strong environment chapter. We do have various mechanisms of cooperation that would touch on elements of this. I think we do have a strong interest in bringing both our scientific communities together, much more closely than they have been in the past, as well as those experts following the environmental issues, and that has been set up as part of the process under the agreement.