International Trade Committee on Nov. 26th, 2013

[Gus Etchegary]

If I were the fisheries minister what would I do to—

[Devinder Shory, Conservative, Calgary Northeast, AB]

To convince the WTO to allow the seal hunt in Canada.

[Gus Etchegary]

Well, the point we're bringing forward here is that there was little consideration given to the importance of opening up the minimum regulations and the removal of those. There wasn't sufficient consideration given to it. Otherwise, if they knew and recognized it, we would hope that they would find some other way of satisfying the European negotiators to carry on with and conclude the agreement, but not at the enormous sacrifice that we will have to make in our province if this materializes.

[Devinder Shory, Conservative, Calgary Northeast, AB]

Thank you.

Your Worship, I'd like to start by asking you to speak a little about how Halifax is placed to take advantage of this Canada-EU trade deal. Of course, you have a deep- water port and an international airport, both connecting Europe to North America.

How would you describe Halifax's capability for supporting increased trade with the EU? Is your administration working with stakeholders to ensure that this capacity is there for importers and exporters who will rely on it more and more in the coming days?

[Mike Savage]

We see great potential in the trade deal. First of all, we see more trade for local businesses, particularly on the seafood side. We think there's great potential there. We think our major projects will be enhanced by the free trade deal. We think the overall economic impact of our gateway is going to be very important. We also recognize that we have a responsibility, as a municipality, to do our part. To support local businesses, we have to make sure that we have a stable tax rate. We have a fairly high provincial tax rate on business. We need to make sure that we manage our finances sensibly and effectively.

But we are a trading part of the world. We have always been a trading part of the world. We've had a lot of north-south trade traditionally. We have strong relations with many European countries now, and I think that this will enhance our ability to do business around the world.

[Devinder Shory, Conservative, Calgary Northeast, AB]

What are you hearing from stakeholders about their needs over the next few years?

[Mike Savage]

I don't know that we've heard an awful lot from stakeholders. That's why it's important that this committee is here. The people I talk to on the business side are generally very supportive of this. There are concerns, because we don't have all of the details worked out yet. But I think we're very comfortable that the relationship that FCM has with all parties in the House of Commons will allow us to make sure that those concerns are dealt with.

[Devinder Shory, Conservative, Calgary Northeast, AB]

Do I have some time?

[The Chair, Conservative, Rob Merrifield]

No, you only have five seconds.

[Mike Savage]

Then I'll take the five seconds to thank the committee for coming to Halifax. I encourage you, your staff, the hardworking interpreters, and everybody else to spend a fair bit of federal money while you're down here.

[The Chair, Conservative, Rob Merrifield]

Spoken like a true mayor.

We want to thank you very much for the work that you do and for testifying before the committee.

Mr. Morley and Mr. Etchegary, your testimony is very much appreciated.

With that, we will suspend as we set up for the next panel.

[The Chair, Conservative, Rob Merrifield]

We'll call the meeting back to order.

We want to thank our witnesses for being here, and we would ask members to take their seats.

We have with us two presenters, president and chief executive officer, John Risley, from the Clearwater Fine Foods company. Thank you for being here.

We have, from the Nova Scotia Federation of Labour, Rick Clarke, who is president.

We'll start with you, Mr. Risley, and the floor is yours.

[John Risley, President and Chief Executive Officer, Clearwater Fine Foods Inc.]

Thank you very much, gentlemen, and welcome to Halifax.

I'm not sure exactly what my credentials are. I'm vitally interested in public policy. I chair a local public policy institute called the Atlantic Institute for Market Studies. My business is international, both in seafood and telecommunications, and I spend more time travelling than I and my family would like, which gives me a global perspective, if you like, that influences my views as well.

Perhaps more poignantly, in the 1988 debate on the free trade agreement and whether that was appropriate policy at the time or not, I can tell you that I participated in 52 debates. The lesson from both the FTA and NAFTA is that both sides of the argument at the extreme ends tend to be wrong. I'm looking around the committee and I don't see many of you who would have been old enough today to remember the emotion that was poured into those debates back in 1988, but both sides were forced into extreme positions. Those who were against were talking about the loss of pensions, the loss of Canadian identity, the loss of the right to manage our own social welfare system, and the collapse of the Canadian fabric as we knew it. The tragedy about that kind of argument is that it forces the other side to make ridiculous promises as to the value of the agreement and what it's going to do to try to counter, if you like, the extreme positions on the other end.

My point is that you have to ignore extreme ends. These agreements, by definition, take a long time to affect the economy. That means that dislocation doesn't happen right away and it also means that the benefits don't happen right away. This is a signal to the business community that macro-environmental change is going to impact: it's going to hurt some people and it's going to help others.

Obviously—not obviously—but I certainly take the view that more free trade is a good thing and, in fact, the experience of both the FTA and NAFTA is exactly to that point. I don't think there is any serious economist who would suggest that both those free trade agreements weren't good for Canada and the Canadian economy.

The one thing that I'm not sure is well understood is that it has actually increased our dependence on the U.S. market, and that is a danger. In fact, this present agreement with Europe is just what we need to try to get the business community to look elsewhere in the world for trade opportunities and to become more global.

Again, sort of sticking with the macro environment and the failure of the Doha Round, I know there are those who are trying to put more energy into the Doha Round. I'm not sure whether they'll get anywhere, but, in any event, given that it hasn't happened, the world has run around trying to do bilateral deals, as you know, and the danger with these bilateral deals for an economy the size of Canada is that we could easily be left behind. We do not have the global influence to run around and do bilateral deals, so any time there is a trade deal that we can do or is being done, Canada needs to be a part of it because the risk that we face, as a small country, is that we get left behind. We find out that major trading partners of the world do deals that Canada is not a part of, and that should be a huge worry for us.

Again, a lesson coming out of both the debates around trade agreements generally is that they tend to be run by lobby groups. These are the folks who have material vested interests and will, as I said, make ridiculous promises as to the benefits of these agreements and will make similarly ridiculous promises about the negative consequences. I think it's a shame that the economy is being held hostage to some extent by the supply management industry in Canada in agriculture and, in particular, the Quebec dairy industry. It's not that I have anything against Quebec dairy farmers, I don't. It's just that I don't think they have the right, nor does any sector of the Canadian economy, to hold the rest of the economy hostage. That's what happens with these very powerful lobby groups.

We need to become a much more vigorous global player. Taking our assets at the extreme end, we have on the one hand the oil sands, which is a national resource of tremendous economic importance, not just to Alberta but to the entire country. We suffer the consequences of people not being well educated about the environmental consequences of the oil sands versus other energy types.

At the other end of the spectrum, we have tiny segments like the seal industry in Newfoundland. Again, it's ignorance and a lack of education that give rise to these kinds of trade conflicts because people don't understand the importance of the seal industry. They don't understand how the seal industry is prosecuted. They think we still carry out practices that were banned by law 25 years ago.

We need the kinds of communication links with the world. We need relationships that are ingrained in trade agreements to try to educate our trading partners so that they understand the real issues at hand here so we have a chance to help these industries continue to grow and thrive.

In terms of a smaller economic agenda, you may not be aware of the extent to which trade in Nova Scotia has gone down in real terms over the course of the last several years. This is tragic.

The only hope that Nova Scotia has.... We've not yet found the oil and gas riches that Newfoundland has found off its coast. We're working on that and all Nova Scotians' fingers are crossed that BP and Shell will find big reserves. But in the meantime we need to count on our basic industries, and we're headed in the wrong direction. Our population is headed in the wrong direction and we need to do everything we can to expand trade opportunities around our natural resource-based industries here in Nova Scotia.

There will always be those who say they're in favour of free trade but that this or that particular agreement is not a good agreement because they didn't get this and they didn't get that. That's not an unintelligent argument. I remember having to deal with that argument back in 1988, and it's not an unfair argument. But on the other hand, the experience that Canada has in these negotiations is that it does a darned good job. We came out of the 1988 agreement with some advantages that the Americans will look back on and say they should never have given us.

There will be those who will say “Look at the disputes we had around softwood lumber”, and so on. But the softwood lumber dispute ended up being a resolvable difference and softwood lumber accounts for about 1.5% of the trade between Canada and the United States. Yes, this is the largest trading relationship in the world and yes, we had a dispute, but the dispute was around 1.5% of the trade—and I don't remember another dispute that has elevated itself to that extent. Its resolution was not a bad result, frankly, particularly when the softwood lumber industry in Canada continues to thrive. Although it's been through bad times, I'm not sure that has anything to do with the free trade agreement.

As to specific fishery matters, given what I've said to you, I can't sit in front of you and say that the problems of the lobster industry are going to be solved by the incorporation of this agreement and the removal of tariff barriers between Europe and Canada.

What I can tell you is that my own company, Clearwater, sold about $125 million worth of seafood products in Europe last year. We would probably be Atlantic Canada's largest lobster seller. We don't catch lobster on our own. We sell it on behalf of fishermen, and fishermen universally will tell you that the market is in trouble and has not responded to the tremendous catches we've had in the industry over the course of the last several years, which is a good news story. The bad news is the price.

At the moment, Canadian lobster exports to Europe are subject to an 8% tariff, and more importantly, processed lobster exports, i.e., that segment of the industry that creates incremental processing jobs here in Atlantic Canada, are subject to a 20% tariff. And both will be eliminated, one over the course of five years, in the first instance. This is a good thing, but it'll take time for the benefits to wend their way down to the industry in terms of more jobs and better economic performance.

I'd leave you with one thought, that there is no more powerful global economic macro-statistic than the growth of trade. So the more we can do to engage Canada as an international trading partner, the better for the Canadian economy as a whole.

Thank you for this opportunity.

[The Chair, Conservative, Rob Merrifield]

Thank you very much.

Now we'll move to Mr. Clarke, and then we'll get into questions.

Go ahead, sir.

[Rick Clarke, President, Nova Scotia Federation of Labour]

Well, thank you very much for the opportunity to appear.

I certainly agree with a lot of what John has said, and particularly with the value of trade to this province and to the economy. So I want to make it very clear that we're not opposed to trade agreements. We have some concern with the experiences that we've had with free trade agreements, but we don't tar every issue with the same brush.

The biggest concern we have with this, and I'll touch on it through my presentation, is the fact that we know so little about this deal. We've not been consulted on it. I did a couple of interviews on this when others found out that I was going to appear before the committee and asked why we were opposed to it. I said the same thing there: it's not necessarily that we're totally opposed to it, but in my life, representing workers, you don't ratify a collective agreement you haven't read. So there are a lot of unanswered questions that come out of this.

When we look at the process, and I will be very much upfront with you, we know that the provinces are being called upon to play a vital role in this. They've been sitting, I don't know if the proper term is, as “observers” at some of the tables, but not necessarily in a negotiating process. We've been lobbying our government since early 2012 and are continuing that process with the current government, talking about our concerns with ratification or endorsement of this process until we know that all of the questions are answered.

We don't believe they should endorse or sign onto this if there's going to be a lot of liability or more veils of secrecy that are not uncovered to them. Basically, that's where we're at with this. Again, we're not opposed, but we are pushing hard that we must have, before it's ratified, true, open, public consultation so that people know exactly what we have.

I will go through this quickly, because I think they passed this out and I know time is limited, but I want to touch on some issues. We are a body of the Canadian Labour Congress, and a lot of what I'll be talking about, you probably heard in some other regions of the country. Our overall concern with the CETA, from what we hear and what's been dribbled out, is that there could be a substantial hike in provincial drug costs, and that provincial and local governments' ability to use procurement to boost local economic development could be undermined, increasing provinces' vulnerability to corporate lawsuits against environmental protection and other public interest regulations. It could also erode supply management in the dairy industry.

John talked about other things that he's involved in. On my part, I've been very active as co-chair of the Premier's Council on the Economy, as a member of the Ships Start Here table from the start, and as helping to develop the workforce for tomorrow, a committee that's now very active with business, labour, and community organizations. We see some of this, and I won't speak for the other bodies, but when you look at how negative an impact these things can have on some of our industries and jobs, then we're very concerned about where our job opportunities are going. And even with the fishing industry, even though it's going to increase its exports, we don't know what that's actually going to mean for the processing.

On the pharmaceutical issues, we have a lot of concerns because we've already agreed or given into EU demands to create a new system, to the extent of allowing a patent term extension of another two years, thereby protecting the monopoly of brand name drugs. With the availability of cheaper generic medicines, when you do the comparison, this extension could cost Nova Scotia between $29 million to $56 million annually, beginning in 2023. We realize that the federal government—

[The Chair, Conservative, Rob Merrifield]

We need you to slow down a little bit because of translation.

[Rick Clarke]

I'm sorry about that. That's what happens when you try to get through in 10 minutes.

We realize that the federal government has indicated that it would offset some costs, but the reality is that it's still going to be taxpayers who will be offsetting the costs if we do see high rates or costs of pharmaceuticals.

On a national issue, we fully support the congress' opposition to the inclusion of an investor-state arbitration mechanism. It's very similar to chapter 11 of NAFTA, which allows investors to bypass the court system and seek compensation for alleged harmful public policies and regulation. The mechanism can be used by corporations to attack public interest regulations in both Canada and Europe.

Under NAFTA's chapter 11, it hasn't worked in the way that many experts thought. Canada is now the top target of NAFTA investor-state litigation. The country faces eight active NAFTA investment claims, all launched by U.S. companies, and if successful the claims could cost Canadian taxpayers more than $2.5 billion. There have been over 30 investor-state claims against Canada under NAFTA, and we're fearful that this could be something that could come out even broader with the CETA agreement.

On government procurement, CETA may constrain the ability of local governments and crown corporations to use local procurement as a stimulus for economic development. Our economy is doing fairly well in the HRM, but the concerns we have and what we've been developing and working on now for the last number of years is rural Nova Scotia. Government procurement is a big issue for small communities and we're very concerned about how the agreement can undermine this.

Exclusions are present for procurements below a certain value, and governments can specify the need for relevant experience and can include social and environmental criteria in contract requirements. There is limited regional economic development in exclusions for the three territories, the Atlantic provinces and Manitoba, Quebec and Ontario, to retain 25% of Canadian value, and that's for procurement of public transit vehicles.

Public services is another big area, because it's a large employer in this province. CETA binds any government decisions to shift to private delivery of publicly provided services. Health care, public education and social services are excluded, but in many of these areas government policy has been blurring the line between public and private, leaving provinces open to challenges by investors. We do not support privatization of any public service that leads to lower wages, less money for our economies, and more job safety concerns.

Labour mobility is an issue that's a major problem with the high unemployment we have among our young people today, and the mutual recognition of provincial qualifications included in trade deals like CETA leads to the lowest common denominator becoming the standard, rather than the mutual recognition of the lowest standard in place. The labour movement in this country through the CLC and provincial federations have called for the upward harmonization of labour regulations, qualifications, licensing and other standards.

CETA also contains commitments for the temporary entry of workers—the most ambitious ever in a trade agreement, according to the CETA agreement in principle. Our federation is very concerned about the inclusion of contract services suppliers in the commitment regarding temporary entry of workers. Localized shortages of skilled trade workers means that some employers would be extremely keen on having temporary workers coming from European countries, where unemployment is higher.

The temporary entry commitment will also make it easier for employers to engage in the practice of inter-corporate transfers. This practice was exposed this year in Canada, when the Royal Bank used it to lay off Canadian workers from professional IT jobs. We cannot afford more unemployment in Canada.

Sustainable development, the environment, and labour are the last areas that I want to touch on. The details, so far, only call for weak and mainly voluntary measures to protect the environment. There would be no binding obligations, penalties, or trade sanctions for non-compliance. The word “voluntary” is one of the major concerns we have with this.

The labour provisions appear to be similar to the labour cooperation agreement negotiated in recent free trade deals by Canada. The dispute settlement process, while it might include the civil society advisory group and a mechanism by which the public can raise concerns, remains unclear.

With regard to the fisheries, again it's kind of a yea/nay with us, because there is potential there, but because we don't know what's in the deal, there's a lot of concern. Does it mean we're going to get more exports but those exports will be raw product and be processed in Europe? Or does it mean we're going to be exporting more of the finished product? I'm not a paranoid person; I don't look under my bed every night, but I would say that tied in with that is the fact that Europe is going to have port capabilities with this agreement, which would lead me to think there could be more export of raw product rather than processed product.

I know I'm getting very close, so I guess, really, the last statement would be that we really want to see this before it's finalized, and we would urge this committee, as we will be urging our provincial government, that we need the veil of secrecy and confidentiality to be lifted from the CETA text so that we can have meaningful public consultation and debate on the agreement's costs and benefits before the provincial government or the federal government finalize the deal.

[The Chair, Conservative, Rob Merrifield]

Thank you very much.

We'll move now very quickly.

Mr. Davies, you have seven minutes.

[Don Davies, NDP, Vancouver Kingsway, BC]

Thank you to both witnesses for being with us today.

Mr. Risley, I really very much appreciate your rational and balanced view on trade. I agree with you that extreme positions are generally not helpful to debate.

In this case here, in terms of the touted benefits of CETA, we're relying on a study done over five years ago, before the agreement was ever even negotiated, that had an economic modelling that assumed things like full employment in both jurisdictions, 100% reinvestment of capital saved as a result of the reduction of tariffs—what many economists consider to be completely unrealistic assumptions. The government continues to say, based on that, that CETA will provide a GDP boost of $12 billion and create 80,000 jobs. They even, in my opinion misleadingly, say that will put $1,000 in every family's pocket. That's the kind of spin coming from the government.

I want to talk about jobs.

I was just looking at you on Wikipedia. I know you're a prominent businessman with, it says, major holdings in communications, seafood products, and other industries.

How many jobs have you, as a major employer, assessed or evaluated your operations are going to create as a result of CETA?

[John Risley]

I can't give you a specific number. What I can tell you is that to the extent that we are a re-marketer of seafood products to jurisdictions around the world, and in particular Europe, which as I said in my earlier testimony consumes about a third of our exports as a company, the more returns we get from the marketplace the more we can invest in our business back here.

What has saved the industry in Atlantic Canada is effectively that which many folks would say has been the destruction of the industry. The industry 30 years ago employed a huge number of people on a seasonal basis, folks making $10,000 or $12,000 a year who would then have their income supplemented by entry into the UI system. Our company employs about 1,700 people, I would say almost all full time. I can't tell you what our average salary would be, but I'm guessing it's more than $50,000.

This is what we need to do with the entire economy. If you look at new businesses that are starting in Atlantic Canada, they are not businesses designed to do business in Nova Scotia. They're businesses that, if they're going to be successful, are designed to do business around the world.

We can't grow our economy without that, so we need the regulatory mechanisms that allow us to trade with the world. It takes time, but that's what we need to do to reinvent the economy. We can't go backwards; we need to go forward.

[Don Davies, NDP, Vancouver Kingsway, BC]

If I take your testimony as a general proposition, you believe that a trade agreement with Europe has the potential to grow jobs, although you have not been able to assess specifics.

[John Risley]

Yes. Mr. Clarke makes a very good point. He asks, if we reduce the tariff on processed products, which in the case of lobster is 20%, what will the result be? Will we ship more unprocessed lobster to Europe, or will we process more lobster here? I can tell you categorically the answer to that. We will process more lobster here, and processing more lobster here means more jobs here. That is an absolute, categoric answer.

[Don Davies, NDP, Vancouver Kingsway, BC]

Let me turn to you, Mr. Clarke. You mentioned that your organization was not consulted. The government likes to say that this was a transparent negotiation, but I can tell you that we're hearing from a lot of witnesses in sectors such as labour, environmentalism, municipalities on their own, academics. Some industrial sectors were not consulted at all.

Do you know of any labour groups that were consulted by this government in negotiating CETA?

[Rick Clarke]

Clearly none were in Nova Scotia. There has been no consultation whatsoever on it; I think I would know, if there were any labour consultation in the province.

[Don Davies, NDP, Vancouver Kingsway, BC]

Okay.

I know that CETA apparently has provisions in it to permit greater professional labour mobility between the EU and Canada. Is something such as labour mobility—the flow of, let's say, workers or managers or any kind of labour between Europe and Canada—of interest to your organization or your members?