International Trade Committee on June 5th, 2018

[The Chair, Liberal, Mark Eyking]

Good morning, everybody. Welcome to the International Trade committee.

I see some visitors. Welcome. As you will realize, this is not only the most active, fun, and efficient committee on the Hill...what else is there?

[Voices]

Oh, oh!

[A voice]

Mercosur.

[The Chair, Liberal, Mark Eyking]

Yes, Mercosur.

Anyway, good morning, everybody. It's a rough-slogging week. We were up late at night, but we're still forging on.

Today we're honoured to again welcome the Minister of International Trade, Mr. Champagne, who is always willing to come before us and tell us what's going on in the rest of the world, and give us some guidance.

You have the floor, sir.

[François-Philippe Champagne, Liberal, Minister of International Trade]

Thank you, Mr. Chair.

Dear friends and colleagues, thank you for being here today.

I want to start by thanking our officials who are here: our deputy minister, our chief financial officer, and our chief negotiator on Mercosur. I'd like to thank them for their hard work and for also supporting us this morning in providing answers to all the questions of the members.

If you will allow me, Chair, I'll make a very brief statement and then take questions from the members.

I am pleased to be here this morning to discuss with the committee a possible free trade agreement between Canada and Mercosur, an economic bloc consisting of Argentina, Brazil, Paraguay and Uruguay.

I would like to take this opportunity to highlight the committee's excellent initiative in undertaking this study.

As you know, the government strongly believes that the global economy should enable the free flow of products, services and investments according to clear and transparent rules. This is essential for the economic prosperity and well-being of Canadians across the country.

Mercosur, with a population of over 260 million and a combined GDP of over $3 trillion, is an emerging market that is currently difficult for our business people to access. I think the committee has heard from stakeholders on this.

Historically, the Mercosur bloc has been less ambitious than Canada in its trade agreements. It has mainly concluded agreements covering only goods.

Over the past year, Canadians interested in this proposed agreement have shared with us their priorities for negotiations, some of which were brought back before this same committee.

Given its growing middle class and continued development of its services and infrastructures, Mercosur represents a myriad of opportunities to expand and develop our modest bilateral trade relationship, which stood at $8.9 billion in 2017, with Canadian exports of $2.3 billion and imports of $6.6 billion.

That said, simply eliminating tariffs will not be enough to realize the full potential of our trading relationship.

Canadian exporters would all tell you that access to a foreign market must be stable, efficient, transparent and, of course, predictable. No SME could or would run the risk of exporting its goods to the other side of the world to be delayed at customs, or of investing significant capital to gain market share in countries where technical barriers to trade abound.

Our government understands this and is ready to act.

The free trade agreements we are negotiating are not for the sole benefit of companies, whether they be big or small. Our agenda is specifically designed to bring more people into the equation and to give them the tools necessary to compete and win. As Canadians, we know that when we have a level playing field we know how to win. That's part of the Canadian spirit.

More than anything, small and medium-sized enterprises, the main job creators in Canada and the backbone of our nation's economic growth, need to benefit from the free trade agreements. We will negotiate a dedicated chapter on SMEs with Mercosur to guide co-operation between us, to share best practices, and to make information available and, above all, easy to access for small and medium-sized businesses.

I know that this committee has been hearing from a lot of people, but you will always hear me, Chair, talking about how we can make trade real for people, and how we can make trade real for small and medium-sized companies, which definitely need access to this market. We will also work together to raise awareness of the opportunities and the support available to those small and medium-sized businesses across our nation.

Women entrepreneurs, whose businesses mainly operate in the service sector, would benefit from an FTA that increases the predictability that their nationality and/or their gender will not be discriminated against when they engage in international transactions, such as, for example, when applying for permits or licences to provide their services on a cross-border basis.

Guided by the principles and objectives embedded in our progressive trade agenda, our potential free trade agreement with Mercosur will seek to ensure that all segments of society, including those traditionally under-represented—whether they are women entrepreneurs, our youth, indigenous people, or people from the LGBTQ community—will be able to take advantage of the opportunities and benefits created by the agreement. As I said in other fora, I want to make sure that everyone has a seat at the table.

Our government's approach is to ensure that increased trade and investments create opportunities for more people. That applies across the nation. We should be making sure that people in each and every riding in this country can benefit from what we're doing.

The status quo and the old approach to trade are no longer acceptable. We've seen good examples of that very recently. As I often say, trade should be a march to the top, not a race to the bottom. People have given us a broad mandate to engage in trade, but not at the expense of labour standards, environmental laws, or governance principles. Quite the opposite, Canadians expect of us that every time we engage, we raise the bar, whether it's about labour standards, governance principles, or environmental standards. That's how we're making a difference in the world.

At the same time, this initiative presents a strategic opportunity for Canada to further our political relationships and progressive trade agenda with a group of countries that we all know is increasingly looking to play a key role in that very important part of the world. It also supports these countries' efforts to promote good governance and build a better economic future for their citizens.

When I announced the launch of the FTA negotiations with Mercosur counterparts in Paraguay on March 9, we all agreed to work towards an ambitious, inclusive, and progressive FTA. As a matter of fact, I can confirm to you that we already started discussing—thanks to Ana, our chief negotiator—labour, environment, gender, indigenous peoples, and issues with small and medium-sized enterprises at the first round of negotiations, which was held here in Ottawa on March 20 to March 23. I had the chance to meet the chief negotiators from all of the countries and to try to inspire them to make to a difference.

In fact, my very first meeting after launching the negotiations in Paraguay was with trade union representatives. I must thank the Canadian Labour Congress for facilitating those discussions. I will say I was pretty proud, Mr. Chair, to be one of the first ministers of a foreign government to take part in these negotiations. We announced at the start of the negotiations that we would meet with civil society and labour unions. I did this in Paraguay, and I did it in Argentina before, engaging with labour and making sure that in these agreements everyone would be heard, because everyone deserves to be heard.

Back then, I also encouraged negotiators on both sides to consider innovative ways to make this FTA more ambitious and more progressive than any previous agreement negotiated by Canada or Mercosur. I wanted us to create, in other words, the new gold standard of agreement for the South American region. With Mercosur, we aim to secure a comprehensive, progressive, and inclusive FTA that will serve to diversify our markets and capture emerging opportunities for Canadians for decades to come.

In conclusion, this is the long-term vision we have with respect to Mercosur.

I would like to thank the committee for inviting me to appear today. I will be pleased to answer your questions.

[The Chair, Liberal, Mark Eyking]

Thank you, Minister, and thank you for being timely. That will give us lots of room to get some good dialogue with the minister. As you've stated, you are open to other questions too, anything on the estimates and Mercosur, and we appreciate that.

Without further ado, we're going to start off with the Conservatives.

Mr. Allison, you have the floor.

[Dean Allison, Conservative, Niagara West, ON]

Thank you, Mr. Chair.

Minister, thank you very much for being here. You've always made yourself available.

I think when we invited you to talk about Mercosur that was a while ago and then last week happened. So maybe my questions will be more related to some of the other current events. Let's ask the first question on TPP. Thank you very much for the explanatory memorandum that's in the House now.

Do you see an opportunity to get the implementing legislation before the House before we rise for the summer?

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

I'd like to offer my thanks to you, Mr. Chair, and I'd also like to thank Dean. We've travelled together and I think we see things along the same lines on many issues.

Yes, it is my objective to introduce legislation before the House rises this summer. We also intend to promptly proceed with ratification. We do want to be in the first wave of countries. You remember that with the TPP we need six countries to ratify in order for the agreement to come into force. I think we have heard from many sectors of the Canadian economy that they would want Canada to be part of that first grouping so that we are sure to benefit from the first mover advantage, and I'm determined to look forward to that.

[Dean Allison, Conservative, Niagara West, ON]

Great.

Do you see us possibly being able to have this ratified in the fall when we come back?

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

My objective, as I said, is to introduce legislation before the House rises this summer. Obviously, the parliamentary process will have to follow its course. We certainly want to work expeditiously to be in that first grouping of countries, and we are talking with other countries of the CPTPP to see that we are in the first wave.

[Dean Allison, Conservative, Niagara West, ON]

Thank you.

On aluminum and steel tariffs, I had a chance to meet with 12 of the largest steel producers in the country yesterday. I know that your Prime Minister also met with them as well.

We have two tables, obviously. They're wondering why we can't immediately implement the tariffs on steel and aluminum, given the fact that right now they're at a bit...I say a bit, but they are at a huge disadvantage when it comes to tariffs. That whole month being open can have cheap stuff flooding into our country. They are very concerned. It's a very critical state, and I know you know this.

Have you any thoughts on being able to revisit those immediate tariffs and to do something about that?

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

Thanks for this question.

As you know, we're all seized with that. This is team Canada addressing the issue. I was at the G7 on aluminum yesterday in Montreal, and I will be meeting with representatives of the steel industry today.

We have had a very quick and strong response to a very bad decision from the U.S. administration when it comes to steel and aluminum. As you know, there are two tables. One will impose countervailing measures of 25% on steel and aluminum coming from the U.S. Table two is with respect to some finished goods products, some consumer products.

The reason we have launched a consultation is to make sure we select products that won't have a negative impact on our competitiveness. We need to make sure that these products are easily substitutable with Canadian products or products from other countries, to make sure we are not creating a situation of our being uncompetitive for manufacturers.

We need to make sure that the products on the list are easily sourceable from Canadian sources so that we retain our competitiveness. That's why we have launched this process. We are looking forward to the consultation to make sure that this is exactly the case.

[Dean Allison, Conservative, Niagara West, ON]

I don't think they have a problem with the consultation as much as with the steel and aluminum stuff. I know you were meeting with the aluminum guys yesterday.

The last question, because I only have five minutes, is around direct foreign investment as it relates to pipelines. I know you are a huge promoter of Canada. I've seen you in action, Minister, and I know that's the case.

My concern is around the amount of money we attract in this country. I think the process and the way we handled Trans Mountain has not been helpful in building confidence, especially in our energy sector.

My question is, what more can you do? My concern with energy and the way it revolves around investments is that we're sending the wrong signal to the world that we're possibly not open for energy investment in this country.

[The Chair, Liberal, Mark Eyking]

It will have to be a short answer, Minister.

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

I would say it is quite the contrary. I think the world has seen the resolve of the Prime Minister and this country to get our resources to market. What is making a difference in the world—a world that is more and more unstable—in talking with investors, is stability, predictability, rule of law, a very inclusive society, and one that cherishes diversity. Those are the things that investors are looking for. Most investors are looking at 10 years, 30 years of return on their investment, and I think Canada is the place of choice.

Last week or the week before, I was with the CEO of Samsung Electronics, which just opened its artificial intelligence hub in Toronto. In chatting with him, he was saying that Canada is the obvious answer.

Working together, strengthening stability and predictability in our country, making sure that we have these trade agreements, making sure that.... As you know, when I talk about Canada, I don't refer to a country of some 36 million people, but a country that now has access to 1.2 billion consumers on a preferential basis, and soon, with the CPTPP, to 1.7 billion. When you add to that the attractiveness of stability, predictability, and rule of law in a world of uncertainty, this is becoming very attractive.

[Dean Allison, Conservative, Niagara West, ON]

Thank you.

[The Chair, Liberal, Mark Eyking]

We are going to move over to the Liberals.

Mr. Dhaliwal, you have the floor.

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

Thank you, Mr. Chair.

Good morning and thank you, Minister, and to your team.

As Dean mentioned, the key element in political representatives is accessibility, and I commend you. You are always accessible.

We have studied CETA on this committee, the CPTPP, and Mercosur. It's highly unlikely that we would be able to sign NAFTA before the end of the year.

When we look at the other agreements, or reaching out to other nations for agreements, could you tell us how these agreements will leave Canadians in a favourable position?

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

Thank you for your kind words. I always try to be accessible despite all the travel, as some colleagues know.

I call it the diversification imperative. When I took the portfolio, the first thing was obviously realizing that the U.S. will always be our largest trading partner. More than 70% of our exports go to the U.S. because of the proximity of the markets and, obviously, the size of the U.S. economy.

At the same time, I think that Canadians now understand more than ever that Canada represents 0.5% of the world population and about 2.5% of global trade, so opening markets is just a smart thing to do. That's what we've done in Europe with CETA. As you know, on September 21, this agreement came into force, opening up a market of 500 million consumers and making $3.3 trillion in public procurement available to small and medium-sized businesses in Canada.

At the same time, we looked at the Asia-Pacific region, and the CPTPP for me was a way for Canada to write the rules of trade in the Asia-Pacific for the next couple of decades. That's pretty astonishing if you consider that, in the CPTPP, Canada is the second largest economy after Japan. We have been a key actor to make sure our progressive elements would be incorporated. If you look at the 22 suspensions, you will see Canada plays a leading role to make sure we rebalance the agreement in favour of, for example, the intellectual property rules we have in Canada, and with respect to culture, the environment, and labour. I think this is a great achievement for Canada.

At the same time, obviously, we're looking at the Pacific alliance, which includes the countries of Mexico, Chile, Colombia, and Peru. We already have FTAs with them, but we're trying to improve them, to modernize them for the 21st century.

With respect to Mercosur, if you took Mercosur as a bloc, that would be the fifth largest economy in the world, about 260 million people.

I think what we're doing is looking north-south and east-west to make sure Canada has preferential market access. I think this is a key differentiator. I can tell you that when investors talk to me, they do look at these agreements to see how they can access these markets. At the same time, it's our way to move the needle with respect to progressive trade. We did that with Israel, as you may have seen recently, modernizing the FTA and having the first ever gender chapter in the world that is subject to dispute resolution.

At the same time as we're expanding, we're moving the needle and making sure trade is in line with the values of Canadians and ready for the 21st century.

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

You mentioned gender equality in one of your recent ones. Are there any other agreements that are paying attention to or will benefit particularly women entrepreneurs?

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

I would say everywhere we can make a difference. I did it at the last WTO meeting in Buenos Aires. We had the mini ministerial meeting just a few days ago in Paris, but the last full meeting was in Buenos Aires in Argentina, where Canada was one of the countries that sponsored a declaration that would prevent countries from discriminating on the basis of gender when issuing a permit or government authorization. I think it's just common sense. We gathered some 120-plus countries. Sadly enough, we didn't have unanimity, despite the fact we're in 2018, so we still have a lot of work to do.

For example, I think what we've done with Israel to have a gender chapter, which would be subject to dispute resolution, is another step in the right direction.

This is a journey. I think every time we move the needle, we push the boundaries of international law, as we've done with labour, as we've done with the environment. If you look at gender, I think you would hear from colleagues around the world that they have started thinking this is now the standard we need to have in modern trade agreements. I know the European Union and others are also looking to have that in their agreements.

This is how Canada can make a difference in the world, opening up markets but at the same time making sure trade is in line with the values of Canadians.

[The Chair, Liberal, Mark Eyking]

Thank you, Minister.

We're going to move to the NDP.

Welcome, Mr. Blaikie. You have the floor for five minutes.

[Daniel Blaikie, NDP, Elmwood—Transcona, MB]

Thank you very much.

I'm going to circle back quickly to Mr. Allison's question about the TPP enabling legislation. I think we heard clearly that you're planning to table it before the end of the summer, but I didn't hear you'd pass it before the end of the summer.

Can I take that as a commitment that your government is not going to use time allocation before the end of the summer to pass the TPP enabling legislation?

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

I think you can take it from my words: I think the technical term is that we will introduce legislation before the House rises this summer.

[Daniel Blaikie, NDP, Elmwood—Transcona, MB]

But it won't be passed?