International Trade Committee on April 18th, 2016

[The Chair, Liberal, Mark Eyking]

Good morning, everybody. Welcome. This is the House of Commons Standing Committee on International Trade.

I have a few housekeeping things right off the bat. Since it's the House of Commons, we have two different languages. If anybody needs translation, we have those boxes in the back. As far as pictures go, you cannot take pictures during the sessions, but in between, when we suspend, anybody is free to take pictures then. For media availability, after the sessions are over this afternoon at a quarter to two I will be available for 10 minutes if anybody from the media wants to talk to me. After that, we have to move on.

It's great for our committee to be here in beautiful British Columbia and of course here in Vancouver. Many of us got here early yesterday and got to enjoy the city. This is our first stop in our trip across the country. We are going to try to stop in every province, and we're also going to be doing video conferences from Ottawa with the territories.

As many of you know, Canada is a trading nation. We do a lot of trade. We do over a trillion dollars' worth of trade a year, and three-quarters of that is with TPP countries. I was looking at some of the numbers. British Columbia does 10% of that trade.

Our committee consists of members from right across the country. From British Columbia, we have Sukh Dhaliwal. From Saskatchewan, we have Mr. Ritz and Mr. Hoback. From southern Ontario, we have Ms. Ramsey and Mr. Van Kesteren. From the Toronto area, we have Mr. Fonseca and Mr. Peterson. From Atlantic Canada, we have Ms. Ludwig from New Brunswick and me from Cape Breton, Nova Scotia, so we have a broad group.

We also have two members from Quebec, Mr. Lametti and Madam Lapointe, who are in Ottawa taking care of things for us there today.

We're going to visit all the provinces, and besides listening to witnesses across this country and in Ottawa, we will also be taking submissions from the public. We had such a big uptake—I think we started off with 6,000 emails last week and now we're up to 10,000—that we've extended the time for submissions from the public. They can be sent in to our trade committee until the end of June. I think they're allowed to be up to 1,500 words and, to make it easier for us, we'd like them to have an executive summary.

As we travel and as our analysts put all of this together, it's probably going to take a full year to do this report by the time we do the briefings and the report that we will present to the House. We're hoping to get it there by the end of the year, which would bode well, because we'll present it to the House of Commons and that gives the rest of the MPs a chance to look at it. We're expecting that some time next year there of course will be a vote on this.

This is where we start: here in British Columbia. The way we have it is that we're going to one city or town in each province. In Quebec and Ontario, we're going to a couple of different places.

We will have four panels. Each panel lasts about an hour. We will have three witnesses on each panel and they will have five minutes each. Then we'll have Qs and As. When I hit the gavel, we suspend, and then another group comes in.

The way we're doing it is quite new for us. It's exciting that there's such a big interest out there in what we're doing. It is a very important thing with what is happening on this trade agreement.

On that note, we're going to start with some witnesses from the British Columbia area. I have with me today Mr. Stewart Beck from the Asia Pacific Foundation of Canada.

Welcome, sir. You have five minutes. We'll have everybody give their submissions and then away we go.

[Stewart Beck, President and Chief Executive Officer, Asia Pacific Foundation of Canada]

Thank you for the opportunity to appear as a witness before the House of Commons international trade committee. As you know, my name is Stewart Beck. I am president and CEO of the Asia Pacific Foundation of Canada, a not-for-profit organization established by an act of Parliament in 1984 and a leader in research and analysis of Canada-Asia relations for over 30 years. We partner with government, business leaders, and academics in Canada and across the Asia-Pacific region to offer clear, specific, and actionable policy advice.

Prior to my role at APF Canada, I was a public servant and diplomat for 32 years, a career culminating in the post of Canadian high commissioner to India. I also served abroad in the U.S., Taiwan, and mainland China.

The rise of Asia marks one of the defining shifts of the 21st century. Within five years, Asia will represent 44% of the world's gross domestic product and 54% of the global middle class, and it will consume $4.8 trillion U.S. annually, 42% of the world's total consumption. Responding to this dramatic global shift, the Government of Canada has accelerated its engagement with Asia, making trade with China and India a pillar of its overseas agenda, and launching foreign trade missions and negotiating free trade agreements with renewed enthusiasm.

Yet, despite being a Pacific nation with approximately 60% of all new immigration originating in Asia, Canada remains marginalized in many of its relationships with Asian countries, which is costing us in building the necessary trade architecture in the region. Canada has been fortunate to have sources of growth and stability in traditional partners such as the United States and Europe, and these partnerships should not be ignored. The new Government of Canada has an opportunity to articulate a more targeted and strategic approach to engaging Asia that both advances Canadian national interests and contributes to the sustainable development and growth of the region.

To assist the Government of Canada in this endeavour, APF Canada recently released a non-partisan strategy paper that outlines a series of recommendations for the government to consider as it articulates its response to the rise of Asia. I have a copy of it here in both official languages, if you are interested. It's 25 pages, and you can read it on the plane going to Calgary. We firmly believe that a strategic approach is needed that considers the diversity of the region and accommodates a degree of uncertainty and short-term volatility. Our strategy paper is entitled “Building Blocks for a Canada-Asia Strategy”, and it is available on our website.

First among the advisory documents, the 10 actionable recommendations, is that the Government of Canada work with Parliament to ratify the Trans-Pacific Partnership. The TPP is the largest and most ambitious trade deal in the world. It effectively lowers tariffs and sets common standards for 12 countries that represent a combined market of $28.5 trillion, or 40% of the global economy. Of the 12 countries it encompasses, we already have joint free trade agreements with two, a bilateral free trade agreement with another, Chile, and a Commonwealth partnership with five others: Australia, New Zealand, Singapore, Malaysia, and Brunei.

The direct gains to Canada of the TPP are largely in the Japanese market, but much more significant are the potential indirect benefits. In a mid-sized economy such as Canada's, well-designed trade agreements like the TPP are an important means of driving innovation, productivity, and growth. The TPP can provide scale, market depth, discerning customers, flow of talent, and foreign direct investment. Not being part of the TPP, on the other hand, would be unambiguously negative for Canada. The potential costs of not being in a multilateral trade agreement anchored by the United States are significant and real for a NAFTA partner.

Canadians have been slow to embrace the TPP. Part of the reason for this is unfortunate, but understandable: It is an agreement negotiated largely in secret, with little involvement of the business community in identifying trade opportunities and risks, and signed by a former government during an election. More fundamentally, though, Canadians want to be convinced that such trade agreements are in their best interests.

APF Canada polls have consistently found that two-thirds of Canadians support free trade agreements in general, but this optimism about trade has yet to infuse the discourse around the new TPP. Our latest national opinion poll on attitudes toward the TPP finds an even split, with 41% expressing support for the TPP, and 38% opposed to this historic deal. The poll highlights a significant disconnect between positive attitudes toward free trade generally and divided views on support for the TPP specifically.

I'll just run quickly through the key findings.

Do I have time?

[The Chair, Liberal, Mark Eyking]

You're running short.

[Stewart Beck]

Okay.

It's split on TPP, as I've said. Forty-one per cent said they support, and 38% are opposed. Thirty-three per cent think the agreement will be good for Canada's economy, and 31% think it will be bad. The rest think it will be neither good nor bad or offered no response.

We're free traders. In general Canadians are predisposed to favour free trade and free trade agreements: 66% say they support free trade with other countries, and a majority think Canada's international trade with other countries has helped our economy.

There are partners that we like. Support for free trade agreements with TPP partners is significantly higher than support for the TPP itself. Support is particularly high for familiar partners like Australia, the U.S., and New Zealand, but support is also high for free trade agreements with Asian countries like Japan—70% agree—Singapore, and Vietnam. Likewise, there is strong support for FTAs with Latin American partners, with the majority of Canadians supporting free trade with Mexico, Chile, and Peru.

I just want to make one note here. Canadians think China is involved in the TPP, and the opposition for a free trade agreement with China is higher than any other of the 13 countries we asked about. Where people think China is in the TPP, it does lower support levels for the agreement.

This is a landmark deal, and this could really be made into a policy agreement.

If I can just leave you with one thought on TPP, it's that we really get the best benefit from having Japan in that agreement. We were negotiating an economic partnership agreement with Japan. It's been put on hold because of the TPP. My urge to the government would be to restart that negotiation with Japan because ultimately Canadians support that deal. We will benefit greatly from having an EPA. The Prime Minister is going to Japan in May for the G7, and this is a time when perhaps we can restart that because who knows where TPP will go, particularly in the United States.

Thank you.

[The Chair, Liberal, Mark Eyking]

Thank you very much, Mr. Beck, for that good report. We will take that for reading.

Now we're going to move on to the Vancouver Fraser Port Authority and we have Mr. Robin Silvester.

[Robin Silvester, President and Chief Executive Officer, Vancouver Fraser Port Authority]

Honourable members, good morning and welcome to Vancouver. It's a pleasure to have the opportunity to present to you today.

My name is Robin Silvester. I'm the president and chief executive officer of Vancouver Fraser Port Authority. I have with me Kirk Zhou, who is our manager of decision support and business analysis.

I also would like to acknowledge that we are standing today on the traditional territory of the Coast Salish peoples.

The Port of Vancouver, formerly Port Metro Vancouver, is Canada's largest and most diversified port, a dynamic gateway for domestic and international trade and tourism, and a major economic force strengthening our nation's economy.

Of the trillion dollars in trade that the chair mentioned at the outset, $200 billion of that trade in goods takes place through this gateway. We trade through this gateway with 170 economies, and the trade activity alone generates 100,000 direct supply-chain-related jobs in Canada, paying $6.1 billion in wages. Again, the supply chain activity alone is generating $9.7 billion of GDP.

That trade equates to about $1 in $5, as I've outlined, of our nation's trade in goods, and these 100,000 jobs pay wages 50% above the national average wage, good jobs that help people raise families even in an expensive region like this.

As a Canadian port authority, the Vancouver Fraser Port Authority was established by the federal government pursuant to the Canada Marine Act and is accountable to the elected Minister of Transport.

The mandate of Canadian port authorities is to enable Canada's trade, ensuring efficient and safe port operations, environmental protection, and regard for the community that we're part of, while working for the benefit of all Canadians.

The Port of Vancouver offers a full range of facilities and services to the international shipping community, operating in five business sectors: automobiles, break bulk, bulk, container, and crews. Canadian grains, coal, sulphur, potash, oil, and other resources and goods from western Canada are exported through the port.

Consumer products and other goods are imported primarily from the Asia-Pacific region, destined for the whole of Canada, and indeed, in some cases, into the U.S. Midwest as well. The port authority does not decide, of course, what is traded through the port, but does ensure goods are moved safely in an environmentally sound way.

Free and open trade is crucial to the delivery of our mandate, which is to enable trade and to provide value for the nation and for the communities we operate in.

Historically from the port's perspective, free trade agreements have increased imports and exports and benefited key sectors of our economy. For example, Canada's four TPP partners in the Americas region—the U.S., Mexico, Chile, and Peru—make up 38% of Canadian trade tonnage with TPP members through this port.

All these nations already have free trade agreements with Canada. Our most recent agreement with Peru may well be an explanation for the sharp growth in bilateral trade between Peru and Canada since 2013, which has been principally a result of increased wheat exports. The remaining six TPP partners in the Asia-Oceania region, by contrast, have no trade agreements with Canada.

As a group, TPP members account for a 28% to 30% share of Port of Vancouver Canadian market volume over the past two years, looking at both imports and exports. In 2015 this equated to around 27.4 million tonnes of cargo and approximately $21 billion of trade. Japan, the port's second-largest trading partner by volume, is the leading TPP member from a sea trade perspective, outlining the previous speaker's reference as well to the importance from a Canadian perspective of Japan as a member of TPP.

Several of Canada's competitors in key markets such as Japan are also TPP members but also possess a significant advantage through existing trade agreements. We need to ensure we do not lose further competitive advantage should the deal be ratified by other competitors but not by Canada.

In conclusion, for our part we would advocate that the federal government ratify the Trans-Pacific Partnership agreement in order to provide further support and increase and diversify export opportunities for key sectors of the economy by opening up those opportunities and remaining competitive. Trade agreements have had a positive impact on cargo through the port, and we would expect that to continue.

On behalf of the Vancouver Fraser Port Authority, I want to emphasize our commitment to facilitate Canada's trade in a manner that is sustainable and considers communities. I very much appreciate the time to present to you today.

Thank you.

[The Chair, Liberal, Mark Eyking]

Thank you very much, Mr. Silvester, for your nice concise report and for coming here this morning.

Our third and final panellist will be from BC LNG Alliance. I think we have Mr. David Keane here.

Welcome, sir. Go ahead. You have five minutes.

[David Keane, President and Chief Executive Officer, BC LNG Alliance]

Members of the committee, ladies and gentlemen, thank you for providing the British Columbia LNG Alliance with the opportunity to speak with you today.

First, I'd like to provide you with some background on the BC LNG Alliance. The alliance came together to serve as a common voice for British Columbia's leading LNG project proponents. Our mandate is clear: foster the growth of a safe, and environmentally and socially responsible LNG industry in British Columbia, an industry that will ultimately invest billions of dollars in Canada and provide thousands of jobs to British Columbians and Canadians for generations to come. In fact, LNG projects in British Columbia have the potential to be the largest capital investment ever made in Canadian history. For this to happen, however, we must develop an industry that is globally competitive. Having access to countries with which Canada is a free trade partner can only help the competitiveness of Canada's liquefied natural gas industry.

The BC LNG Alliance is made up of eight project proponents: Kitimat LNG, LNG Canada, Pacific NorthWest LNG, Prince Rupert LNG, Triton LNG, Woodfibre LNG, WCC LNG, and FortisBC. One of the most critical issues facing the Canadian energy sector, including B.C.'s nascent LNG industry is access to new markets to offset declining North American markets. Therefore, the BC LNG Alliance is supportive of the Trans-Pacific Partnership. We also wish to recognize the Province of British Columbia's continued leadership in advocating with the federal government for better access to the Asia-Pacific region.

My comments today address three themes related to the importance of new market access provided through the TPP and other trade agreements: B.C.'s clean energy can meet the growing global demand for natural gas; B.C.'s natural gas is an integral part of the global solution to reduce greenhouse gas emissions; and competitiveness. The ability to trade energy and energy products freely is important for the energy industry. Having the capability to trade freely with the 12 countries that make up the TPP, which, by the way, also represents about 40% of global GDP, will assist Canada in potentially becoming a significant supplier of much-needed natural gas in the form of LNG to countries that need cleaner burning fuels. This is important because the demand for energy is expected to grow. The World Energy Council projects that the world's primary energy consumption will increase approximately 30% to 60% over the next 30 years, depending on population, climate policy, energy efficiency, and technological innovation.

One of the reasons that this growth will occur is because it's expected that by 2030 there will be about 2.2 billion more people moving into the middle class, and they will want access to energy. Therefore natural gas is anticipated to grow across the power, industrial, residential, and commercial sectors. While demand for energy is growing, Canada's current markets for natural gas are significantly shrinking. While the United States has been Canada's biggest and only export market for energy, the massive increase in U.S. domestic natural gas supply has converted our most important external market to our biggest competitor. Not only is the U.S. importing significantly less Canadian natural gas, the flow has reversed in some parts of Canada. U.S. natural gas out of the eastern seaboard has replaced a significant portion of Canadian natural gas in eastern Canada. Without new markets for natural gas we will lose investments, jobs, royalties, and taxes in Canada.

On the subject of greenhouse gas emission reduction benefits, the environmental and economic case for B.C.'s natural gas is clear. The BC LNG Alliance submits to the international trade committee that the global environmental benefit resulting from a competitive Canadian LNG sector is one of the most significant greenhouse gas emission reduction policies or efforts presently being proposed in B.C. or in Canada. Furthermore, the International Energy Agency, in its latest report, says that even under the strictest of climate policies—holding temperature increases to less than 2°C—the demand for natural gas in 2040 will still account for 64% of the world's primary energy. Studies show that LNG has lower life-cycle emissions than coal, while the potential emissions reductions fluctuate moderately depending on a range of variables and assumptions used. In general, natural gas used to produce electricity results in approximately 50% less emissions than coal on a life-cycle basis.

On global competitiveness in establishing BC's LNG industry, we know that natural-gas-producing jurisdictions worldwide will compete aggressively to meet this energy demand.

As an example, Japan, the world's third-largest economy, is a critical export market for a range of Canadian goods from farm commodities to natural resources. Importantly for the natural gas industry, Japan would be potentially one of the biggest natural gas energy export markets among all of the TPP countries. Should one of our competitors have a tariff advantage over Canada through other free trade agreements, it would make the export of Canada's LNG less competitive, which could ultimately cost jobs and significant investment.

Finally, the construction of Canadian LNG projects will require goods and services that are not available in Canada, in particular, from Asia. If Canadian LNG projects are to be cost competitive, they cannot be subject to undue tariffs on such goods that are required and not available in this country. LNG construction in Canada will also benefit global suppliers, who will then purchase LNG over many decades, creating sustaining investment and employment in Canada. Therefore, the BC LNG Alliance is supportive of the Trans-Pacific Partnership.

Thank you.

[The Chair, Liberal, Mark Eyking]

Thank you, Mr. Keane.

We're going to open up with questions, and we're going to start with the Conservative Party. As we know, we have five minutes.

Mr. Hoback, you're going to start off.

[Randy Hoback, Conservative, Prince Albert, SK]

Thank you, witnesses, and everybody else, for attending here in Vancouver.

I want to thank you for participating. It's always good to get out to B.C.

Mr. Beck, I'm going to start off with you. You talked a little bit about some of the barriers to people understanding this agreement. You mentioned that China is somehow confused with this agreement.

What have you been doing to actually explain that? What are other associations doing to actually talk about the agreement in terms of who's in it, what it contains, and explaining it properly, so they understand the different parts of the agreement?

[Stewart Beck]

The easiest way to do that is by doing articles, op-eds. One of the things we do is we write frequently on the topic on our website, besides having it in the newspapers, for example, The Globe and Mail, The Vancouver Sun, and Embassy magazine.

We try to cover the broad spectrum of media about TPP and the different elements of it, including misunderstandings, such as China and Korea being thought of as part of the TPP, which they are not. Canadians have this impression that it covers a much broader swath of the Asian Pacific region than just the 12 countries.

That's the way we are out there trying to help people understand that the TPP is focused on the 12 countries. There are benefits to it, of course, and there are issues that people are talking about. Most recently, we've had a blog up on the intellectual property components and the misunderstandings about IP and the TPP.

One of the things that people don't really understand is the impact, it's not just goods, which Robin will talk about, going to the Port of Vancouver, but it's also services. It's a new chapter. It's a new type of trade agreement and it covers services in a much better way, but also things like e-commerce. Let's face it, e-commerce is an element that will help small and medium-sized enterprises in Canada compete in markets in Asia.

These are the types of things that you need to understand and that's part of our job to explain it.

[Randy Hoback, Conservative, Prince Albert, SK]

When you did your polling, who was your target when you did the polls?

[Stewart Beck]

It's a national poll.

[Randy Hoback, Conservative, Prince Albert, SK]

Is it weighted by province or by population?

[Stewart Beck]

It's a standard poll that we work with from a reputable polling agency. We don't do the poll ourselves. We contracted the poll. It polled 1,500 people. It was well conceived and we do a national opinion poll every year.

This year, instead of doing one national opinion poll on attitudes toward Asia, we did two polls, one on foreign direct investment from Asia and people's attitudes toward that, and the second one was on the TPP.

[Randy Hoback, Conservative, Prince Albert, SK]

So you haven't done two or three years in a row on TPP to see if there's been anything on that?

[Stewart Beck]

We only had the deal in September, so we did this poll in November.

[Randy Hoback, Conservative, Prince Albert, SK]

The other comment you made in your remarks was about the minister at the time, during the election, having to go to sign that document, or basically conclude negotiations. Now, of course, we had fixed election dates in place. Would you have preferred that he not go and that Canada not be at the table? What would you do if you were in that scenario and had the choice to make?

[Stewart Beck]

I think it was one of those things. Canada had to be a part of it because Mexico and the United States were part of that. We wanted to reap the benefits of an agreement with Japan, and Japan had suspended their negotiations with us on an EPA. It was in our interests to do that, ultimately.

Are you talking about Minister Fast, at the time?

[Randy Hoback, Conservative, Prince Albert, SK]

Yes. But what could he do?

[Stewart Beck]

Yes, he had no choice on that one.

[Randy Hoback, Conservative, Prince Albert, SK]

You brought up Japan. I think that's very interesting. I agree with you. If TPP for some reason doesn't go through, I'm concerned that there is no plan B, there is no negotiation with Singapore or Vietnam, or Japan for sure.

What would you encourage the government to be doing at this point in time in regard to those markets, because we have a lot of goods that would go into those markets that right now don't have a fair playing field?

[Stewart Beck]

Robin alluded to this in his comments. Australia has already concluded an agreement with Japan. It will put us at a severe disadvantage in relation to Japan, if we do not have that agreement with Japan as part of the TPP.

If we don't think that politically there will be acceptance of the TPP in the United States, for example, which will then kill the TPP as a whole, we should be starting now to reopen those conversations with Japan. We've gone through a lot of the exercise; we know what needs to be done. It wouldn't take that long. Nothing is ever easy in a trade negotiation, but to conclude an EPA is in our interest and it's in Japan's interest, quite frankly.

I was in Japan a week and a half ago. I had conversations with people there. Their view is that they're going to ratify the TPP to support the Americans and their approach, but the reality is, based on my own experience—I spent a third of my career in the United States—that the United States will do politically what it's going to do. My own view, which I told to the Japanese when I talked to them, was that this is one of those things whereby, if you move forward with Canada, that is what will get the Americans' interest—more so, perhaps, than ratifying.

[The Chair, Liberal, Mark Eyking]

I'm sorry, Mr. Hoback; your time is up.

We're going to move now over to the Liberals and Mr. Dhaliwal for five minutes.

Go ahead, sir.

[Sukh Dhaliwal, Liberal, Surrey—Newton, BC]

I would like to thank the panel members and would love to welcome my fellow colleagues from the House of Commons to beautiful British Columbia.

I would like to carry on with Mr. Hoback's conversation with Mr. Beck.

Mr. Beck, you mentioned the survey and that people were confused. Is it the complexity of the TPP that is confusing people?

Mr. Hoback asked you what you should be doing. I would like to ask you, what should the government be doing to get the information out, so it's reaching out to a significant number of Canadians to remove this confusion?