International Trade Committee on May 11th, 2015

[The Chair, Conservative, Randy Hoback]

Good afternoon, ladies and gentlemen. It's great to have you here.

Today we have a special guest, Minister Ed Fast, the Minister of International Trade.

Welcome, Minister Fast.

Pursuant to Standing Order 81(4), we are considering the main estimates of 2015-16, vote 1 under the Canadian Commercial Corporation, as referred to the committee on Tuesday, February 2015. The minister is here to speak on that, and a few other things, I'm sure.

Minister, I'll turn the floor over to you.

[Ed Fast, Conservative, Minister of International Trade]

Thank you, Mr. Chair.

Before I begin my comments, I want to introduce a number of other people at the table. First of all, I have my deputy minister here, Christine Hogan, along with my chief financial officer, Arun Thangaraj, as well as Martin Zablocki, the CEO and president of the Canadian Commercial Corporation, and, of course, Benoit Daignault, the president and CEO of EDC.

I'm here to discuss with you the 2015-16 main estimates and to highlight how our government has been supporting small and medium-sized businesses as they seek to grow and succeed in new markets around the world.

Let me start briefly with some of our recent trade achievements. Canada is of course one of the great trading nations of the world. Trade generates approximately 60% of our GDP and is responsible for one in five Canadian jobs. In 2014, for the first time in our history, Canada's two-way trade topped $1 trillion. Last year, Canadian exports to the world increased by more than 11% over the previous year, reaching more than $524 billion. These numbers matter because increased trade leads to increased prosperity and better jobs for all Canadians.

This past April, the Minister of Finance tabled economic action plan 2015 in Parliament. This plan fully recognizes that international trade and investment are vital to the continued growth of the Canadian economy.

Mr. Chair, since coming to office in 2006, our Conservative government has made opening markets around the world for Canadian businesses a cornerstone of its economic policy. Today, Canadian businesses are more competitive in foreign markets through preferential market access, through better investment conditions, and through reduced barriers to international trade.

In August of 2014 we completed negotiations on an historic free trade agreement with the European Union. The EU is the world's largest integrated market, representing more than 500 million consumers and annual economic activity of $20 trillion. Once this trade agreement comes into force, Canada will be the only country to have free trade agreements with both the U.S. and the EU—I should say that we'll be the only major developed economy to have free trade agreements with both the U.S. and the EU—significantly improving our reputation as a preferred destination for foreign investment.

Canada will also be experiencing greater export success in another key market, thanks to our free trade agreement with South Korea, which entered into force on January 1 of this year. That agreement is expected to boost Canada's economy by close to $2 billion and increase Canadian exports to South Korea by over 30%. Also, of course, it makes Korea Canada's preferred gateway into the larger dynamic Asian marketplace.

Mr. Chair, this government knows that while traditional markets remain vitally important for Canadian trade, we have witnessed a remarkable shift of economic power to Asia. China, India, and the Southeast Asian family of nations are the high-growth markets of the future, and that is why we continue to engage with these countries, including in last week's announcement of the launch of exploratory talks on a Canada-Philippines free trade agreement.

To ensure our long-term prosperity, Canada must continue to expand its trade and investment opportunities around the world. Trade is really our lifeblood.

You may recall that back in the late 1980s it was the then Conservative Prime Minister Brian Mulroney who masterfully brought into force the Canada-United States Free Trade Agreement. That was soon followed by the North American Free Trade Agreement.

However, between 1993 and 2006, under the previous government, Canada fell way behind other countries that were aggressively negotiating trade agreements. In fact, over those 13 years, Canada signed a paltry three small trade agreements, forcing our government to play serious catch-up, and that is exactly what we've done.

Over the last nine years we have concluded forward-thinking trade agreements with 38 different countries, with many more to come. Soon our exporters will have preferential access to over half of the global marketplace.

In fact, when you add up the actual dollar value of the market access represented by all of Canada's concluded free trade agreements, 98.5% of them were negotiated under Conservative governments. We're very proud of that record. Trade, when done right, creates more jobs, higher wages, and greater prosperity for Canadians.

Canada cannot afford to allow the U.S. and our other competitors to ever outpace us again when it comes to market access. Indeed, with our free trade agreement with the EU, we expect that we will gain first-mover advantage over our American cousins.

With that in mind, our government continues to advance negotiations on a number of other ambitious trade agreements, including the Trans-Pacific Partnership. The TPP, as we call it, includes 12 Asia-Pacific countries, representing 800 million consumers and a $28 trillion market. That is why we're at the table negotiating the very best agreement for Canadians. We're also negotiating bilateral trade agreements with countries like India, Japan, and Ukraine.

Colleagues, in November 2013 I released the global markets action plan. That's our government's blueprint for creating jobs and economic growth through trade and investment. This global markets action plan, or GMAP as we call it, aligns Canada's trade, development, and foreign policy tools to advance our country's commercial interests around the world. We have placed a special focus on small and medium-sized enterprises, or SMEs, which are the backbone of our economy.

It might surprise you to know that there are more than one million SMEs across Canada, but only 41,000 export anywhere in the world. Of that number, only 11,000 actually export beyond North America. We need to improve that performance. Our goal under the GMAP is to nearly double the number of small and medium-sized enterprises that export to emerging markets. We want to move that from 11,000 to 21,000 SMEs that export to emerging markets.

That is why budget 2015 highlighted two new programs that deliver additional resources to support SMEs as they develop their export capacity. The first is a new export market development program that delivers a total of $50 million over five years in direct financial assistance to entrepreneurs who are seeking to expand into new markets. It is expected that each year this funding will help between 500 and 1,000 small and medium-sized businesses explore and expand their export potential. Funding could include dollar-for-dollar matching support to incent Canadian SMEs to join trade missions or develop web-based export prospecting solutions.

The Prime Minister also announced additional funding of $42 million over five years, with another $9.25 million ongoing thereafter, to expand Canada's trade commissioner service. We expect that this will allow us to deploy an additional 20 trade commissioners around the world where we need them the most, promoting the interests of our small and medium-sized enterprises

Historic free trade agreements require historic trade promotion. That's why in the fall of 2014 I launched the Go Global workshop series across Canada. These workshops are a partnership between our trade commissioner service, EDC, BDC, the Canadian Commercial Corporation, and the Canadian Manufacturers and Exporters. The workshops will ensure that our SMEs are aware of the markets we have opened up for them and the tools we've made available to them so that they land successfully in those new export markets.

In just a few months the program has reached over 2,000 participants, and we expect that this program will continue. We've gone all the way from one coast to the other, helping our SMEs gain awareness of the tools that we've made available to them. We're breaking down the silos between our export agencies, taking a whole-of-government approach to trade, and bringing the resources of Ottawa to Main Street, directly to our businesses and the communities in which they operate.

Additionally, we have embedded 27 of our best trade commissioners in business associations across Canada. The goal is to allow our trade representatives to gain a better insight into the specific needs, challenges, and opportunities within each sector of our economy, in turn informing the development of policies and strategies that will better support our SMEs.

Finally, I want to inform the committee that last month I hosted the inaugural meeting of my global markets action plan advisory council. The council is composed of nine industry leaders from across the country representing key sectors of the Canadian economy who provide me with strategic insight and real-world perspectives to ensure the GMAP reflects the priorities, needs, and interests of Canadian businesses and that our government's trade policies stay ahead of the curve.

As one final note, over the last four years I have led many trade missions to our priority markets of interest: six trade missions to China; 13, soon to be 14, missions to Southeast Asia; four trade missions to India; and others to the Middle East, Europe, and Africa. Trade missions representing a non-threatening environment within which Canadian SMEs can experience a new market, touch base with key stakeholders, and reach prospective customers, retailers, distributors, investors, and partners.

Our government is proud of its record of opening up new markets for Canada's exporters and investors. We believe our efforts will deliver unparalleled prosperity for future generations of Canadians. We are also confident the host of trade promotion tools we are providing to Canadian companies will free up and realize Canada's true export potential.

Mr. Chair, this government is fully committed to ensuring Canadian companies, especially SMEs, have the tools they need to seize some market opportunities available to them.

Thank you for your time. I look forward to your questions.

[The Chair, Conservative, Randy Hoback]

Thank you, Minister.

Colleagues, we're going to try to get everybody's question in, if we have a chance, to the Minister. Of course, we do have a little bit of house cleaning at the end in regard to the main estimates. I'm going to be very strict on the seven minutes, so please allow time for the answer in your question.

Mr. Davies, we'll start off with you for seven minutes.

[Don Davies, NDP, Vancouver Kingsway, BC]

Thank you, Mr. Chair.

Welcome to the committee, Minister. We appreciate your taking time to be here, and welcome also to your staff.

Minister, as you know, in March, Canada posted a record $3 billion trade deficit. That's the largest monthly trade deficit in Canadian history. This followed a huge trade deficit in February of $2.2 billion. We know that varying sectors and commodities go up and down, but there's no hiding the bottom line that Canada's 2015 trade balance is going in the wrong direction. Is this performance acceptable to you?

[Ed Fast, Conservative, Abbotsford, BC]

Mr. Davies, let me say that from the beginning my goal has been to increase Canada's export performance and to use trade and investment to drive economic prosperity in Canada.

What you failed to mention is that the sudden decrease in the value of our exports is almost exclusively attributable to the fact we've just encountered a significant global oil price shock. As you know, oil exports are a significant commodity for export for Canadians, and when you see a sudden precipitous decline in the price of oil, obviously you're going to see that affect the bottom line.

The reality is that if you look at volumes of exports, those exports are up by 5% this last month, and over the last quarter. So the economic activity taking place has actually grown, but the value of the exports of oil because of the dramatic drop in oil prices has affected the bottom line.

The other thing I would add is that when we look at trade and investment performance abroad, we don't look at it primarily from month to month to month. We look at the long-term trajectory. When you look at last year, we had a significant turnaround in our trade performance. We posted a surplus of $5.2 billion, which was a turnaround of $12 billion over the previous year. I expect that as oil prices recover, we'll see an improvement in the dollar performance of our exports. Our export volumes are still up there.

The other thing we're going to do is to continue to focus on opening up new markets for Canadian exporters. We're going to focus on promoting our trade tools to the very companies that need those tools to be successful in new markets. I'm confident that in terms of the long term, and even the medium term, you'll see excellent trade performance.

[Don Davies, NDP, Vancouver Kingsway, BC]

Thanks.

Minister, we know that the United States, Australia, and New Zealand are aggressively pushing for Canada to dismantle our Canadian supply management system in the TPP talks. Will you clearly state your government's commitment to fully protect our dairy, poultry, and eggs supply managed industries in any final TPP agreement?

[Ed Fast, Conservative, Abbotsford, BC]

Mr. Davies, you know that we have consistently stated our government will continue to promote and defend the interests of our supply managed sector, as we promote and defend our agricultural industry more broadly speaking.

[Don Davies, NDP, Vancouver Kingsway, BC]

Can I take that as a yes?

[Ed Fast, Conservative, Abbotsford, BC]

We did that within the CETA negotiations. We will do that in our Trans-Pacific Partnership negotiations. At the end of the day, what we are looking for is a balanced outcome that promotes Canada's trade interests, that promotes economic growth within Canada, and that provides a benefit to all sectors of the economy.

[Don Davies, NDP, Vancouver Kingsway, BC]

Is that a yes, Mr. Minister?

[Ed Fast, Conservative, Abbotsford, BC]

I've made it very clear. We will continue to promote and defend the interests of all agricultural producers, including those in the supply-managed sector.

[Don Davies, NDP, Vancouver Kingsway, BC]

Thank you.

Mr. Minister, in the United States there's a vigorous debate going on among the President, Congress, and civil society concerning the TPP. In the interest of transparency, American legislators of all parties are permitted access to the negotiated text of the TPP upon signing confidentiality commitments.

Will you permit the same privilege to Canadian legislators so we can foster a similar level of debate in our country?

[Ed Fast, Conservative, Abbotsford, BC]

Thank you for that question.

I can tell you that we have had very robust consultations with our key stakeholders. Since the TPP negotiations were launched, we've had round tables involving over 350 different stakeholders from the economy. We have had one-on-one meetings with over 500 stakeholders during that period of time. I can assure you that those consultations with stakeholders from every sector of our economy inform the positions that we take at the negotiating table.

We will not compromise Canada's ability to secure an optimal outcome for Canadians, in the national interest, by disclosing our negotiating strategy to the other parties at the negotiating table. That's something we will not do. I can assure you that at the end of the day, the standard we have set, as I've mentioned many times in the House, is that we will not sign a trade agreement unless it is in Canada's best interest.

[Don Davies, NDP, Vancouver Kingsway, BC]

I'll take that as a no, then.

Mr. Minister, last week one of the EU-member states, Greece, said it would not ratify CETA because of its inadequate geographical indicator protection. Just today there are reports out of Hungary that the Hungarian Parliament won't ratify CETA because of its investor-state chapter. Of course, we're all aware that France and Germany have previously said that they may not ratify CETA with the existing investment chapter.

Mr. Minister, you've said CETA is a done deal, but what happens if a number of member states in the EU decline to ratify CETA?

[Ed Fast, Conservative, Abbotsford, BC]

I'm not the only one to have said that CETA is a done deal. The commissioner responsible for trade in the European Union has said that it is a done deal. The Chancellor of Germany, Angela Merkel, has said that it is a done deal.

We have said that both parties came to these negotiations with very clear mandates. Both parties negotiated within those mandates, and we concluded an agreement within those mandates. We've made it very clear to our European counterparts that both parties negotiated in good faith, and now both parties are expected to bring that agreement into force.

With respect to ISDS, there is no investor-state dispute settlement chapter that is as forward looking and as aggressive as the one the European Union and Canada negotiated. We included additional rights and protections to ensure that Canadian sovereignty and EU sovereignty were protected, to ensure the right of countries to regulate in the public interest.

If you read the chapter, you'll find it is quite progressive and addresses many of the concerns people have raised about ISDS.

[The Chair, Conservative, Randy Hoback]

We're going to have to go on.

Mr. Gill, you have seven minutes.

[Parm Gill, Conservative, Brampton—Springdale, ON]

Thank you, Mr. Chair.

I also want to thank the honourable minister, along with all of the other witnesses, for taking the time to appear before the committee.

You mentioned some interesting stats, Minister: 60% of GDP, and one in every five jobs is related to trade. Obviously it's a very significant portion of our economy.

I know you are responsible for most of the 38 free trade agreements Canada has been able to sign in recent years.

Minister, the Prime Minister of India was recently on a historic visit to Canada. Can you tell us what that trip achieved in our bilateral relationship and how our government is advancing trade with India?

[Ed Fast, Conservative, Abbotsford, BC]

It highlights the incredible potential between Canada and India. India is the most populous democracy in the world, soon to be the most populous country in the world, and then you have a country like Canada, the second-largest land mass in the world, with a very small population but full of resources, talent, and the ability to provide value to India and its economy.

When Prime Minister Modi was elected, he made some very bold commitments. He has committed to very significant structural, economic, and social reforms. We welcome those reforms.

He has spoken about “Make in India”, which is his plan to attract investment to create jobs in India. We welcome that. The way you attract investment, of course, is to protect investors when they invest in your economy. We have been busy for a number of years negotiating a foreign investment promotion and protection agreement.

Under the previous Indian government, unfortunately, those discussions and our discussions on a free trade agreement languished, not because of Canada's unwillingness to engage, but because of what appeared to be paralysis within the structures of government in India.

Prime Minister Modi's election provides us with a brand new opportunity to re-energize our economic partnership. You will have noticed that Prime Minister Modi was very clear that he sees Canada as a preferred partner for engagement going forward. He also highlighted the fact that he would like to see both our investment treaty discussions and our negotiations on a free trade agreement move forward rapidly to a conclusion. We welcome that, and we are ready to engage with their negotiators. In fact, some of our negotiators have already been requested to go back to India and continue those discussions.

This is a great opportunity for Canada to share some of its expertise. We have tremendous strengths in things such as energy and energy security. In food security, Canada is a world leader in agrifood technology and storage solutions like dry storage and cold storage. We are leaders in things such as infrastructure, transportation infrastructure, and aerospace. These are all areas that India needs to have partners in, and we want to be those trusted partners.

[Parm Gill, Conservative, Brampton—Springdale, ON]

Thank you.

On the margins of Prime Minister Modi's visit, several commercial agreements between Canadian and Indian companies were announced, with a combined value of over $1.6 billion. Can you share with the committee what types of agreements were signed and how they will benefit the Canadian economy?

[Ed Fast, Conservative, Abbotsford, BC]

Yes, we were able to witness the signing of a number of commercial agreements that have a value of approximately $1.6 billion. They were in a range of sectors, including aerospace and defence, education, energy, mining, infrastructure, sustainable technologies, and information communications technology.

These are some of the areas I mentioned earlier. We expect that this could increase Canada's exports to India by up to 10%. It could be more. This is just the tip of the iceberg. India is such a huge market. They have a rapidly growing middle class that is demanding premium-quality products. When they think of Canada, the Canada brand represents premium quality.

We would love to have them take advantage of that quality, and we are going to continue to promote India as a great place to do business with, as well as to invest in.

[Parm Gill, Conservative, Brampton—Springdale, ON]

How much time do I have, Mr. Chair?

[The Chair, Conservative, Randy Hoback]

You have about two minutes.

[Parm Gill, Conservative, Brampton—Springdale, ON]

Minister, you recently led an important trade mission to South Korea. Can you share with us the significance of this mission, especially in light of the new free trade agreement?

[Ed Fast, Conservative, Abbotsford, BC]

The trade mission that I led to South Korea was the largest I had ever personally led. It included representatives of over 100 Canadian companies who clearly have been inspired by the trade agreement we've now brought into force between Canada and South Korea.

South Korea is a highly developed economy. It's a technologically savvy economy. It's one where we have tremendous opportunities to build partnerships to build a market. But what's perhaps just as important about South Korea is because it's our first trade agreement in Asia it becomes Canada's launch pad or platform into the larger dynamic Asian marketplace.

We know there are many Canadian companies that have expressed interest in beginning to explore Asia as a place to grow their exports and their markets but they've been reluctant to do so. We now have a trade agreement in place—the first in Asia, and we're looking at others. Because it's the first it does become our gateway into that larger region. We believe Canadian companies have welcomed that opportunity and that's why there were so many of them that came with me to Seoul and also to Busan, Korea.

While there they were of course able to engage with prospective customers, retailers, distributors, investors, and partners. We held what are called export cafés. This is a room many times this size with many round tables with chairs around them, and our Canadian companies are able to profile their products, their services. They put brochures on the table, then one by one we bring in prospective customers from that other marketplace. When I walk into a room like that and I hear the buzz I know that's trade going on in real time.

That's what it's all about. I wish some of you could participate on those missions. They are an incredible tool that we use to expose Canadian companies to huge markets all around the world.

[The Chair, Conservative, Randy Hoback]

Thank you, Minister.

I'll move on to Mr. Regan, please.