International Trade Committee on June 5th, 2018

[Linda Lapointe, Liberal, Rivière-des-Mille-Îles, QC]

Thank you.

My second question is on another topic.

Yesterday morning, before I happily came to Ottawa, I listened to what you had to say during your appearance on RDI Matin. On the weekend, you gave an interview following the meeting of OECD ministers. As my colleagues said earlier, we are facing tariffs imposed by the south. Like you, I come from Quebec, where there are many industrial establishments that process both steel and aluminum.

I would like you to discuss what you talked about yesterday on RDI Matin. What would you like us to know about all this?

[François-Philippe Champagne, Liberal, Saint-Maurice—Champlain, QC]

Thank you for the question.

Yesterday I returned from the OECD/World Trade Organization ministerial meeting, which was held in Paris over the last few days and where tariffs were announced. I can say that Canada has had a strong response to this very bad decision by the United States. Beyond disappointment, the reaction of global partners was to feel that the global economic order was under threat. In Paris, there was a rather serious feeling that, for the first time, national security was being used to promote protectionism. Obviously, this caused some emotion among the partners.

Canada and the European Union have worked together to send a clear message to their allies and partners to the south. Canada is not the problem; it is part of the solution.

As I have often said, a decision made on one side of the border will have repercussions on both sides. Let's take the aluminum issue as an example. Three major aluminum producers have plants on both sides of the border. Of course, what is rather unusual in the case of Canada and the United States is the integrated nature of supply chains. That's why the Canadian exception, as I call it, is unique: there are no other economies that are as integrated as ours. That's why Canada had a very strong response and argued that these tariffs would have an impact.

The retaliatory measures taken are the most significant since 1930, since the Second World War. In my opinion, the message is quite strong and it is certainly clear: Canada, while being an ally and partner of the United States, certainly cannot understand being charged rates based on national security.

In the steel sector, the Americans have a $2 billion surplus. Canada is the largest purchaser of American steel. Obviously, the whole issue of national security has no place in a discourse between Canada and the United States. The message we sent is that we will always be there to defend the industry and our workers.

We have invested nearly $30 million. A few weeks ago, the Prime Minister announced, to ensure or reaffirm the integrity of our border and our market, the addition of some 40 officers at the border to ensure that no steel or aluminum transshipments are made in Canada. Obviously, we will continue to work to protect our workers.

This is a very important industry in Quebec that, as I recall, represents 8% of exports. Yesterday, I attended the Aluminium Summit to reassure our partners that we will work together and will always be there to defend their interests.

[The Chair, Liberal, Mark Eyking]

Thank you, Minister.

[Linda Lapointe, Liberal, Rivière-des-Mille-Îles, QC]

Thank you very much.

[The Chair, Liberal, Mark Eyking]

We're going to move to the second round. We'll start with Mr. Fonseca.

You have the floor, sir.

[Peter Fonseca, Liberal, Mississauga East—Cooksville, ON]

Thank you, Mr. Chair.

Thank you, Minister, for being here.

In your opening remarks you mentioned that any business, any group, in Canada should be able to partake in the opportunities that international trade provides. I know you have had a laser focus on this, for some groups in particular, be they women, indigenous peoples, LGBTQ2. You are setting up a number of trade missions. Who will be going on those trade missions, be it with women, with the LGBTQ2, with indigenous peoples? When will they be taking place, and what are you looking to achieve?

[François-Philippe Champagne, Liberal, Saint-Maurice—Champlain, QC]

I want to recognize Pamela Goldsmith-Jones, my extraordinary parliamentary secretary. She's been a key champion of all our missions, particularly the women's trade mission. We will have one in Detroit this month. This is not the first trade mission led by a woman in Canada's history, but it's certainly a very important one. At the same time, we announced that we will have the first ever LGBTQ2 trade mission in Philadelphia later this month, and we will have the first indigenous trade mission in Canada's history coming up in New Zealand, at the indigenous congress.

The reason is very simple. Whilst we do trade missions, which are focused on sectors—I did one with the Prime Minister in Paris where it was about artificial intelligence and green technologies—at the same time we want to make sure that everyone has a seat at the table, that everyone gets the benefit of international trade and gets to learn about these agreements and the potential they offer. Our job, my job, is to convert paper into prosperity, to convert these agreements into jobs, into book orders, into opportunities for people. We realized that there were some people who were under-represented in international trade, and we're trying to address that proactively. At the same time, we're doing trade missions and favouring the sectors we know—I've been talking about our clusters, whether it's artificial intelligence, ocean technology, plant proteins, the digital economy—making sure Canada is known for both its natural resources and the superclusters that we have established and will favour significant investment.

[Peter Fonseca, Liberal, Mississauga East—Cooksville, ON]

Thank you very much.

I want to change gears and go to Canada and Mercosur. You cited that you had your first meetings on Canada and Mercosur in the third week of March. What was discussed in those meetings? What was on the table, the top issues?

[François-Philippe Champagne, Liberal, Saint-Maurice—Champlain, QC]

I would say it's making sure that we will write history in having the most progressive, inclusive, and modern agreement in the hemisphere. Uruguay, as I said, is a very progressive government. Paraguay is wanting to come on board. Argentina, since the Prime Minister met with President Macri, has set the tone. There are also our Brazilian colleagues.

What we've heard from our consultation, and I think this committee has heard this, is that there are still a number of barriers we need to address when it comes to trade. For example, I've met with Magna. We were talking about some of the challenges the auto parts manufacturers face with respect to customs clearance. We heard about issues with respect to bureaucracy that we can try to facilitate for small and medium-sized businesses, as well as about making sure we address issues around non-tariff trade barriers and IP protection. Those were the types of things we talked about in terms of facilitating trade.

The FTAs should be a tool to modernize some of these practices to allow for a freer flow of goods and services. I think you found the same thing with our partners wanting to really seize the moment—I often say that—and be ambitious. That's what I think is reflected. With Ana as our chief negotiator, we have the right person to bring that level of ambition to the table and make sure we all can be proud of an agreement that serves our economic interests as well as the interests of our interested parties and people who have commented on the journey we're taking in these negotiations.

[Peter Fonseca, Liberal, Mississauga East—Cooksville, ON]

Minister, on seizing the moment—

[The Chair, Liberal, Mark Eyking]

I don't think you're going to be able to squeeze a question in. I know it's probably a really good one, but we'll move to the Conservatives.

Mr. Carrie, you have the floor.

[Colin Carrie, Conservative, Oshawa, ON]

Thank you very much, Mr. Chair.

I want to thank the minister for being here to take our questions.

I'm going to talk a little bit more about TPP as well.

I come from Oshawa. We build cars, and General Motors is part of the Detroit three. With the original TPP, the negotiations included NAFTA. You're aware of that, how we were going to renegotiate for the entire North American bloc and include these specific countries.

We now have a world of uncertainty. We have some domestic uncertainty. I believe we have that side letter with Japan that talks about the dispute settlement process between Canada and Japan in auto parts. Now that NAFTA's still up in the air, we seem to have a difference of opinion between the Detroit manufacturers and the offshore manufacturers. I was wondering how you see these disputes working their way out when we have TPP. We have a certain set of rules for auto parts, for example, and then NAFTA seems to be going a different way. How do you give solace to our manufacturers, our parts manufacturers, that when we get these two agreements going, they are going to be reconciled?

[François-Philippe Champagne, Liberal, Saint-Maurice—Champlain, QC]

That's a very good question, and I thank you for that.

I did meet with a number of people in the sector. We consult regularly, as you would expect. It's about the auto workers, and it's a very significant industry. The good thing you will know is that Minister Freeland and I belong to the same department, so we're joined at the hip. Our deputy ministers serve both ministers, so whatever we do on one track is very well coordinated with the track on NAFTA. Those are separate tracks, but I appreciate the views you express.

What I would say is that what we've achieved in the context of the TPP negotiations is this side letter, which I think gives Canadian auto manufacturers the greatest market access ever in Japan. The good thing with that is also that it's subject to an evergreen clause, so whatever Japan would grant to any other country, Canada would benefit from. This is to address non-tariff trade barriers. It's not about tariffs; it's about making sure that the non-tariff trade barriers would be addressed with respect to safety standards in particular.

We have negotiated a pretty lengthy letter. It's more than 10 to 15 pages, if I recollect, in terms of trying to achieve the outcome. That was one of the outcomes, not the only one, but one of the outcomes that the auto sector had wanted from us. As a result, that would give the greatest market access we have ever achieved with respect to the auto sector in this important part of the world.

We also have one side letter, as you know, with Malaysia and Australia to make sure that we can get access to these two markets, despite the fact that they might not meet the rules-of-origin content required. We're going to continue. I think for us, to be honest, to be part of that first group of countries.... Why I was saying that ratification is essential is that, as you know, other countries have expressed the will to join, and having Canada in that first group of countries, making sure that the terms of trade in that part of the world take into account Canada's interests, is key. We're going to be continuing to work to perfect that and to work with the auto sector.

[Colin Carrie, Conservative, Oshawa, ON]

With NAFTA, we're seeming to get into a space where we're going to be having higher North American content, and with TPP, it appears to be lower content. As you go through to negotiate these two different agreements that you say are similar but on different tracks, this seems to be an area of contention. My question was regarding how you see those two reconciling themselves.

[François-Philippe Champagne, Liberal, Saint-Maurice—Champlain, QC]

I think there are two things. There are the auto manufacturers concerned about market access to the extent that, when I was talking to them, you can look at the auto market today or try to think of the auto market 20 years from now. As you know, this is a field that is evolving quite rapidly with autonomous vehicles and other things, and we'll see, because we know that the Detroit three, for example, export to China quite successfully. We'll have to see how this market evolves for them.

With respect to the auto parts manufacturers, which is also a big thing, their main export market is obviously the D3 market, which would be subject to the NAFTA rules. When you talk to the people in the sector, they say that what really matters to them are the rules of origin and the content requirement with respect to NAFTA. That's why we say it's on a separate track, because if you're part of the auto parts manufacturers today, you will have to comply with whatever NAFTA rules we agree to in order to be able to sell to the D3.

The access to the markets is really something where, if the D3 wanted to export in countries such as Vietnam, Malaysia, or Australia, how could they access that market?

[The Chair, Liberal, Mark Eyking]

Thank you, Minister. That's time.

Minister, you mentioned the potential in Asia. As you know, our committee travelled to the ASEAN countries. It was a very, very productive and fruitful meeting. We're just doing our report—it should be done by Thursday, after which we'll be tabling it in the House—and we welcome your taking a look at it. We made a lot of observations about what we saw when we were in those countries. It's a huge market, with great potential.

We'll move to the Liberals.

Mr. Peterson, you have the floor.

[Kyle Peterson, Liberal, Newmarket—Aurora, ON]

Thank you, Mr. Chair.

Thank you, Minister and everyone, for being with us this morning.

I'll pick up from where Mr. Carrie left off, on autos, particularly auto parts.

I know that you met with some folks from Magna a couple of weeks ago. It was maybe the end of last week or the week before. Of course, Magna's head office is in Aurora. There are lots of operations in my riding. You were out Brampton way. What were the conversations like? What are their top issues? Both NAFTA and TPP are important, of course, but how are they merging the two? What were those conversations like?

[François-Philippe Champagne, Liberal, Saint-Maurice—Champlain, QC]

Indeed, I had a very fascinating tour of their facility there, looking at innovation and at how they contribute to all the innovation. I met with Magna's senior management.

By the way, Chair, let me just thank the committee for their work. When you meet people internationally and you come back with that feedback, it's very informative. We're trying to get as many data points as we can to inform our course of action.

The main discussion was really around Mercosur. They see particularly Brazil and Argentina as very attractive markets for the auto parts manufacturers. They see a lot of export opportunities. Obviously, they were sharing with me some of the non-tariff trade barriers they're facing, and were asking us to try to address them. These are very important markets. We know that. Our bilateral trade with Brazil is around $6 billion. Those are quite significant markets.

As we look at the uncertainty in some established markets, the opportunity or the possibility to expand in new markets is becoming quite relevant. To go back to the question from our colleague, I think you see people looking more and more to other markets as they see how the global trade environment will evolve with, for example, the section 232 investigation just recently launched on the automobile sector.

I think what you find from people in this sector is “eyes wide open”. They're looking at all opportunities that may present. We did talk about a number of issues around customs procedures, taxation, trying to facilitate that, and the willingness for them to invest more if they could get the certainty and predictability in those markets. Overall, I think the sentiment was encouraging us to push further in these negotiations and to try, I think like everything in trade, to be first. We need to open markets.

To go back to our colleague's question, whatever uncertainty may exist, when you open up new markets and you provide certainty, that's what business is looking for.

[Kyle Peterson, Liberal, Newmarket—Aurora, ON]

I know that they appreciated your time and meeting with you.

I'd like to speak more generally about the capacity of Canada and Canadian SMEs to tap into free trade agreements. I mean, getting an agreement is one thing, but then it's about leveraging that agreement to the benefit of SMEs—and Canadian employees, by that token. Do we have the capacity to do so? What role do you see the new Invest in Canada playing in making sure we're getting the requisite amount of FDI in Canada to help us leverage these trade agreements?

[François-Philippe Champagne, Liberal, Saint-Maurice—Champlain, QC]

I think there are two parts to your question.

First, how can we help SMEs take advantage of the trade agreements? My famous phrase is that's about converting paper into jobs and prosperity. I think we all have a role. In particular, I think of the members of this committee. We should, if I may, always encourage you to talk about that. We signed CETA, which came into force. We now have the CPTPP. We're looking at Pacific alliance and Mercosur. We did Ukraine and Israel. There is still a lot of work to make sure that SMEs across Canada take full advantage of these agreements.

When it comes to FDI, clearly we created Invest in Canada because we wanted to be best in class, understanding that today's world is very dynamic. We know that we have organizations at the municipal level and at the provincial level that we're somehow trying to attract. As I keep saying, it's like when we go to the Olympics: we all put on the same jacket, the one with the maple leaf on the back. This was to have an organization that would coordinate the efforts being made by everyone to attract more, to have signature events, for example, and to make sure that we offer a concierge service. I keep telling investors to think of me as their concierge in Canada. But I'm not the only one. We have a concierge service to make sure that when they come, they can navigate through the different things, whether it's federal, provincial, or municipal.

This is the thing: we are in competition with a lot of people. When I go abroad, I make sure to talk about the superclusters. It's a great announcement. It's a great action we did. It's a great thing that Canada is investing in these things, but we need to make it known around the world. That's why you see artificial intelligence becoming the buzz term. I was at the C2 in Montreal and I was with Samsung Electronics at their hub in Toronto. We need to make these things known, whether it's on the Atlantic coast with ocean technologies or it's the other superclusters.

[Kyle Peterson, Liberal, Newmarket—Aurora, ON]

Thank you.

[The Chair, Liberal, Mark Eyking]

Thank you, Mr. Peterson and Minister.

We have time, probably, for two more MPs, and we're going to have two three-minute slots.

[Kyle Peterson, Liberal, Newmarket—Aurora, ON]

Two more Liberals?

[The Chair, Liberal, Mark Eyking]

That was a nice try, but we're going to the Conservatives.

Welcome, Mr. Paul-Hus. You have the floor for three minutes.

[Pierre Paul-Hus, Conservative, Charlesbourg—Haute-Saint-Charles, QC]

Thank you, Mr. Chair.

Mr. Minister, I recognize your boundless enthusiasm, especially when it comes to Canada's progressive trade agenda.

Now, we see that the free trade agreement with the EU, the CETA, is problematic. It is in effect, but it doesn't work. Contrary to what was envisaged, Canadian companies are not inclined to do business with Europe. I met the EU ambassador recently, and he was really upset. He is trying to understand why Canadian companies aren't moving.

You want to develop a free trade agreement with countries that are more or less politically stable and where there are often corruption problems. You want to apply the same progressive trade agenda there. Don't you think problems will arise?

Companies do business. If you're proposing or promoting a trade program like this, aren't there going to be barriers that, in the end, won't get us anywhere?