International Trade Committee on Nov. 25th, 2013

[Don Davies, NDP, Vancouver Kingsway, BC]

How many jobs do you think your organization will create as a result of CETA?

[Stephen Ross]

It's hard to predict. We don't know. Again, it's coming back to.... Right now, we have no plans to really look to Europe to carry on work in Europe. The opportunity may arise, but we're more concerned about preserving what we have now and growing here in Canada than we are about moving to Europe.

Going back to Rob's comments earlier, the forces that are driving us, really, are exchange rates and labour costs. They're the two primary forces, so if we're going to countries that have.... When we started shipping to the U.S. in the nineties—Brian Mulroney brought in the free trade agreement in 1994, I think it was—the Canadian dollar was at 65¢. To the fish industry and to other industries, having the Canadian dollar at par to the U.S. dollar makes a big difference in your bottom line and your ability to get and perform work. The exchange rate is a big factor.

Likewise, what we're seeing with the euro is that the euro was at $1.76 three years ago, and now it's at $1.32 or $1.35. That's a big factor. Again, the fish industry or our industry will suffer simply because of the exchange rate, simply because we're not getting the bang for the buck or our competitors over there are getting more opportunities.

[Don Davies, NDP, Vancouver Kingsway, BC]

Yes. I've heard it said by many witnesses that one of the big problems we have with China is that they manipulate their currency, and other countries do as well. Currency manipulation can wipe out almost entire gains from any kind of trade agreement.

Do you think currency should be negotiated in a trade agreement? That's a glaring omission in CETA. There is nothing on currency. Mind you, we have dealt with intellectual property, patent law. Some people wonder why that's in a trade deal but currency is not.

Would your advice be that Canada should have currency in our trade agreements?

[Stephen Ross]

I'm not an expert on currency and foreign exchange rates, but I know that the strong Canadian dollar is certainly affecting our business.

Whether they're artificially held up or artificially created, I don't know that, but I do know it certainly affects our business and our ability to export work.

[Don Davies, NDP, Vancouver Kingsway, BC]

In terms of manufacturing in Atlantic Canada, can you give us any broad opinion about the impact that CETA will have on manufacturing in Atlantic Canada?

[Stephen Ross]

Again, going back to currency exchange rates and labour costs, all those things, if they go in the direction we don't want them to go, then it would have a negative impact.

[Don Davies, NDP, Vancouver Kingsway, BC]

In terms of jobs, I read this morning that Spain's unemployment rate to date is over 30%, and it's over 50% for people under 25.

I'm wondering whether you have any testimony about the competition in Spain. We hear a lot about opportunities, but we're also going to be facing increased European competition, and that's the thrust of your testimony.

Would that affect your industry?

[Stephen Ross]

That's what we see.

In our particular industry, there are companies that do what we do in Spain. They work here in Canada, and they do a lot of work in the U.S., like the World Trade Center. A lot of the steel fabrication companies, our business, in Spain certainly can come to Canada with lower labour costs, and we'll simply have difficulty competing.

We do see a possible decline, not so much on the day-to-day smaller projects, but the bigger infrastructure projects that we're building here in Canada. That's where we see the hurt will be.

[Don Davies, NDP, Vancouver Kingsway, BC]

The New Democrats are waiting to see the text of CETA. We read the same technical summary—we call it a brochure—that you probably read, and there's a lot of information that is simply not there yet. One area is labour mobility.

Do you have any concerns that European workers will be able to come to Canada and replace labour here? Could you tell from your review of the strategic summary about that?

[Stephen Ross]

I would like a little more mobility of labour, but I think the labour mobility here is more or less at the managerial level and not so much at the skilled labour level. I don't think it applies to skilled labour, and that's what we're looking for in Canada.

I think all of the witnesses could tell you that labour is certainly a problem here in Nova Scotia.

[Don Davies, NDP, Vancouver Kingsway, BC]

I want to confirm this. Was it your testimony that, pre-CETA, there are no European tariffs on your product lines right now?

[Stephen Ross]

No, there's not, not to my knowledge.

[Don Davies, NDP, Vancouver Kingsway, BC]

How is your ability to access European markets been so far with no tariffs?

[Stephen Ross]

We've had no interest in the European markets over the past few years because we have been quite successful in Canada and North America.

Again, as I said, with what has happened with the U.S. over the past several years, with the exchange rates and their economy suffering and the buy American provisions, that has pointed us in a different direction. There has been a lot of activity in Canada in construction and building and infrastructure, so we've been quite busy and quite successful doing that.

We are starting to see that European and Asian companies are making inroads into Alberta and also into Newfoundland, and even projects here in Nova Scotia. They are starting to have a look. With Labrador, for example, there are a lot of European companies supplying goods and services up there. These are not small projects. They're billion dollar projects, where a lot of goods and services are coming from outside of Canada. They could have been done here in Canada, but they're simply being purchased outside because there is no real trade agreement to prevent that.

[The Chair, Conservative, Rob Merrifield]

Thank you very much.

Mr. O'Toole.

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

Thank you, Mr. Chair.

I didn't get the chance to address some of Mr. Ross's concerns or statements, so I'll try to do that in my remaining few minutes.

My colleague, Mr. Davies, mentioned China and currency. To clarify, China is not part of the EU at the present time, but thank you very much for that, Mr. Davies.

[The Chair, Conservative, Rob Merrifield]

I need to interrupt you for a second.

I think Mr. Surette has another engagement.

You have to run, and I certainly want to thank you. We appreciate the time that you spent with the committee.

[Marc Surette]

I would like to thank you for the opportunity.

[The Chair, Conservative, Rob Merrifield]

Thank you.

We'll continue with the other presenters.

Go ahead, Mr. O'Toole.

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

Mr. Ross, in your presentation you suggested that there were some holes in the CETA. Could you describe what you see as holes with respect to industry, region, or whatever you think is lacking?

[Stephen Ross]

I'd have to pull it out and discuss some of the details.

The only protections, I think, relate to shipbuilding. There's a three- to seven-year protection on shipbuilding, but from what I can see, there is no protection for local content. For example, if Halifax Regional Municipality wanted to purchase goods and services, they couldn't buy them locally. Any company in Europe that can supply that good or service has an equal and fair right to come and offer proposals, without recourse.

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

It depends on how you look at it. The procurement provisions in CETA allow for preferences when it comes to grants or economic development companies or groups like ACOA, so there can be direct assistance permitted. It's assistance on the tail end, provided by limiting competition. The chair referenced that you spoke negatively about buy American, but it seemed like you were promoting buy Canadian.

The competition that will be engendered by the opening up of the procurement market in Canada and the far larger procurement market in Europe could mean a cost savings to governments.

You said that half of your business, I believe, is in the United States, in New Jersey, and states like that. Do you feel you are competitive on a North American basis?

[Stephen Ross]

We are very competitive on a North American basis. That's because our labour costs and input costs are similar. That changed with the increased valuation of the Canadian dollar. We still are competitive, but certainly not as we were when the dollar was 65 cents. It's no different from the fishing industry. Their profits and bottom line were affected by the valuation changes.

The buy American clause hurts us in doing work in the United States. The reason we're supportive of a buy Canadian agreement for infrastructure and certain industries is we see that other countries have trade and labour costs that are significantly lower. We cannot compete on lower labour costs, because a good portion of our inputs are labour. If it costs the same amount to ship something somewhere, and the only variable input is labour, and labour costs in several eurozone countries are a lot lower than Canada's, then I suspect there will be a loss of opportunities and jobs in this country.

We're not against free trade, but we're more committed to the idea of fair trade. As long as labour costs and valuations on currency rates are appropriate, then we are open to fair competition.

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

As to the products the Cherubini Group produces, I know your early heritage was in rail and products for the rail industry. Were you aware that the 2% to 5% tariffs in the EU on rail components will be eliminated with CETA? Were you aware of that?

[Stephen Ross]

No, I was not aware of that.