International Trade Committee on Sept. 20th, 2018

[The Chair, Liberal, Mark Eyking]

Order.

Welcome back, everyone.

As everybody knows, we had the votes in the House on Bill C-79, the CPTPP, and it has been forwarded to us for review in order to report back to the House.

We'll proceed with the officials with us here today. Thank you for coming. The officials are going to give a short presentation, and then we're going to get a few questions from the committee members, if they have any questions. When we wrap that up, we'll go into clause-by-clause study.

Without further ado, Mr. Christie, thank you for coming and bringing your officials. You have the floor.

[Bruce Christie, Associate Assistant Deputy Minister, Trade Policy and Negotiations and Lead Negotiator of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, Department of Foreign Affairs, Trade and Development]

Thank you, Mr. Chair.

Good morning everyone.

As you may know, my name is Bruce Christie. I am the Lead Negotiator of the Government of Canada for the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, the CPTPP.

I am joined today by a number of my colleagues, including Kendal Hembroff, Director General of the Trade Negotiations Bureau at Global Affairs Canada, who is also Deputy Chief Negotiator for the CPTPP. A number of subject matter experts are also present, several of whom participated in the CPTPP or original TPP negotiations.

I'm very pleased to have this opportunity to discuss Bill C-79 and the CPTPP with you today. Following my brief remarks, we'll be happy to take your questions and provide any further details on the text of the agreement and the bill itself.

By way of brief summary, the CPTPP is a comprehensive, modern free trade agreement that covers virtually all aspects of international trade policy across 30 chapters in total. It incorporates, by reference, a majority of provisions of the original TPP agreement with updated procedures on withdrawal, accession, and review of the agreement, as well as 22 suspended provisions.

Once fully implemented, the agreement will provide preferential access for Canadian goods, eliminating 95% of tariff lines among the CPTPP parties. This covers 99% of Canada's current export to CPTPP partners.

To support the benefits of trade tariff elimination and facilitate merchandise trade, the CPTPP includes chapters dedicated to establishing clear rules for goods market access, including national treatment, rules of origin, and streamlining customs procedures.

Beyond goods, the agreement also enhances Canada's access to CPTPP markets with respect to services, investment, and government procurement. Another chapter is dedicated to facilitating labour mobility to enable certain highly skilled business people and professionals to enter and work in CPTPP markets on a temporary basis.

Finally, the CPTPP also features chapters dedicated to the protection of the environment and labour rights. These chapters are enforceable through the agreement's dispute settlement mechanism.

In addition to the main text, Canada secured a number of bilateral side instruments with CPTPP members to build upon the agreement's outcome in areas such as autos and culture.

What does all this mean to the Canadian economy? The CPTPP will create the largest trading bloc covering the Asia-Pacific region, spanning 11 markets that represent close to 500 million people and 13.5% of global GDP.

The CPTPP also provides Canada with preferential access to seven new free trade partners, notably Australia, Brunei, Japan, Malaysia, New Zealand, Singapore, and Vietnam. The CPTPP will open up the Japanese market in areas where Canadian exporters have historically faced high tariffs and other barriers to entry. This will level the playing field for Canadian companies with respect to competitors such as Australia, which already have preferential access to the Japanese market. It will also help Canadian companies gain an advantage over competitors without such preferential access, such as the United States.

Beyond Japan, the CPTPP will also allow Canada to have preferential access to some of Asia's fastest-growing markets such as Malaysia and Vietnam, and the economic benefits of the agreement are expected to be wide-reaching, spanning agriculture, fish and seafood, forestry, mining, industrial machinery, services, and investment. The government estimates that implementing and ratifying the CPTPP will generate long-term GDP gains of $4.2 billion.

The agreement's high-standard rules help ensure Canadian companies, large or small, have meaningful gains from enhanced access to the Asia-Pacific region.

The agreement and its benefits to Canada will continue to grow as new economies join the accession process. In fact, a number of economies have already indicated an interest in acceding to this agreement after it enters into force, notably Colombia, Korea, Thailand, Taiwan, and the United Kingdom. Negotiations on the accession of new members will begin after the CPTPP enters into force.

The agreement will enter into force 60 days after six of the signatories have ratified the agreement. Three members have already completed the ratification process: Mexico, Japan, and Singapore. The timing of other members' ratifications is not clear at this point, but we're certainly expecting that six countries will have ratified this agreement by the end of this year and possibly sooner.

In closing, Mr. Chair, I would like to say that Bill C-79 will amend a number of federal statutes and provide the necessary authorities for Canada to meet its obligations under the CPTPP. Following royal assent, federal departments will carry forth their required regulatory amendments, after which Canada will notify the CPTPP depository that it has ratified the agreement.

This concludes my opening remarks, Mr. Chair, and now we will be happy to take your questions on Bill C-79 and the CPTPP in general.

[The Chair, Liberal, Mark Eyking]

Thank you, sir.

We're going to go right to some questions. I think we will go to Mr. Allison, then Ms. Ramsey and Mr. Peterson.

Mr. Allison, go ahead.

[Dean Allison, Conservative, Niagara West, ON]

Thanks to the officials for being here, and thanks for waiting. We had some in camera business to take care of.

Mr. Christie, you mentioned you thought we would have six countries ratified before the end of the year. You gave us an update on who has already ratified, as we know. Who do you see as being close, and when do you see all those other countries potentially ratifying the deal?

[Bruce Christie]

As I mentioned, so far Japan, Mexico, and Singapore have completed their processes. I was informed by my Japanese counterpart a couple of days ago that through their discussions with various countries, they have been informed that New Zealand and Australia will likely complete their processes by the end of November. We're also anticipating Vietnam to have possibly completed their process further through their National Assembly discussions next month. Then, last, Chile has indicated that they are proceeding on an expedited basis, and they could be ready to ratify by the end of November.

We would fully expect at this point that we will have six countries complete the ratification process by the end of the year, if not sooner.

[Dean Allison, Conservative, Niagara West, ON]

Along with that, obviously, we have talked about first mover advantage forever. It's always the point of the first six.

Talk to us briefly about the advantages and disadvantages of being the first mover, part of the first six.

[Bruce Christie]

Essentially, once the sixth country has ratified the agreement, then the 60-day clock starts, after which time the agreement enters into force. At that point, the first wave of tariff cuts starts on the day of entry into force. Japan will do its second tariff cut soon after that, I believe on January 1.

[Kendal Hembroff, Director General, Trade Negotiations, and Deputy Chief Negotiator, Department of Foreign Affairs, Trade and Development]

It's April.

[Bruce Christie]

It's April 1. Thank you.

Some countries are delaying their ratification processes. If Canada, for example, were in that category of countries, we could see two tariff cuts undertaken by countries such as Japan. The countries that have ratified the agreement will determine the pace at which tariffs are cut, or we catch up to them, by consensus. Once we have completed our ratification process, it would be beyond Canada's control whether we're invited to make our initial tariff cuts right away or whether they are going to delay us by a year. In the case of some products, a country like Australia could be granted preferential access to Japan a year or two before we are.

[Dean Allison, Conservative, Niagara West, ON]

The last question I have is around non-tariff barriers. Obviously, the auto sector has some concerns, certainly around Japan.

I have a couple of questions in terms of a commitment to the side letter and enforcement around some of the non-tariff barriers. Can you talk about that a little bit? That has always been a concern of the auto industry, and we can't pretend that it's still not an issue.

Talk to us about enforcement and how we remove and deal with some of those issues as we go forward.

[Bruce Christie]

Throughout the government's consultations with the auto sector, we did hear that the tariffs were not really the issue—Japan doesn't have an auto tariff—but that some of the non-tariff barriers that they were facing were. Our sense is that the major non-tariff barrier for a Canadian auto producer is right-hand drive vehicles. They would obviously have to produce right-hand drive vehicles to penetrate the Japanese market.

Through the original appendix in the TPP agreement, and based on some of the concerns we heard expressed by Canadian auto producers, we did negotiate a binding and enforceable side letter with Japan that deals with some of these non-tariff barriers that were addressed through our consultations, namely noise and emissions reductions and preferential access to financing given by Japanese dealerships to Canadian cars, among others.

This letter between Minister Champagne and his Japanese counterpart that we signed establishes the rules of dispute settlement using the dispute settlement chapter of the original TPP agreement, which makes those provisions enforceable.

[Dean Allison, Conservative, Niagara West, ON]

All right. The enforcement will be through that mechanism.

[Bruce Christie]

That's correct.

[The Chair, Liberal, Mark Eyking]

Thank you, Mr. Allison.

Ms. Ramsey is next.

[Tracey Ramsey, NDP, Essex, ON]

Thank you, Chair, and thank you to our witnesses for being here today.

For my first question, I'll pick up on Mr. Allison's point on the auto sector. As you know, the auto sector is under tremendous pressure right now in terms of Canadian auto manufacturers right down to the supply chain, with the Canadian Association of Moldmakers opposed to the signing of the CPTPP. In the middle of a NAFTA round, when they're trying to achieve something better, they find it quite threatening that we're essentially showing our hand and giving away worse provisions to smaller countries. I don't think it comes as a surprise to you that they're quite unhappy with the signing of this agreement at this particular moment in time, but overall as well, they've been quite vocally opposed to it.

The question that's coming from them and that I have a question for you about is the side letter or the actual negotiated agreement. If we come out of NAFTA with something, is there any way to put language into the CPTPP now to say that we would mirror what we have in NAFTA? Why would we be offering better terms to these smaller countries than we would to our largest trading partner? There's going to be an immediate de-harmonization if we come out with something better in NAFTA than we do in the CPTPP. Is there any ability once NAFTA is negotiated to amend the auto provisions to reflect that?

[Bruce Christie]

Well, if you look at the CPTPP countries, you can see that the only country that will export automobiles to Japan under this agreement is Japan.

After the 6.1% Canadian tariff is eliminated, they will have the ability to export vehicles into Canada duty free as long as they meet the 45% regional value content. As you know, that 45% rule of origin is lower than the current 62.5% under the NAFTA. I would seriously doubt, given that for a country like Japan their key ask and interest in the Canadian market is our elimination of the vehicle tariff, so any discussion.... It was made clear throughout the CPTPP consultations that we were committed not to change any of the market access provisions in the original agreement. We kept to that. We did only suspend 22 provisions, mostly related to ISDS and intellectual property.

I don't believe that Japan would have any interest in agreeing to us harmonizing the rules of origin agreed to and negotiated under the CPTPP with that of a future NAFTA outcome.

[Tracey Ramsey, NDP, Essex, ON]

I suppose my question is, really, is that possible? Is it possible to revisit it afterward? Is it possible to bring a proposal to them based on information that you would receive from the Canadian auto sector?

[Bruce Christie]

I suppose so. We have a built-in clause in the CPTPP that allows us to meet every three years to review the implementation of the agreement, at which point all members are free to propose amendments to the agreement, or other changes based on their perception of how the agreement is being implemented. Yes, in theory, we could propose that type of amendment.

[Tracey Ramsey, NDP, Essex, ON]

The next question I have is on intellectual property. The suspended provisions include those around patent term extensions. This is great, but of course there's the concern that these provisions will come back to life at some point in time, potentially if the U.S. decides to rejoin. These are certainly provisions that they pushed for in the original TPP. If that's the case, could the patent term extensions be granted retroactively? Is that part of the language in the CPTPP?

[Bruce Christie]

Let me answer generally first.

I don't believe they would be. Any of the 22 suspensions can only be reinstated by consensus of all CPTPP parties.

Even in the event that the United States decided that it was interested in returning to the agreement, those suspensions, including the patent term extension, would not automatically be lifted. They can only be lifted if all parties agree to it.

No, there is no retroactivity applied—only at the entry into force.

[Tracey Ramsey, NDP, Essex, ON]

Of the 22, could retroactivity apply to any of those suspended provisions?

[Bruce Christie]

No, not to my knowledge.

[Tracey Ramsey, NDP, Essex, ON]

Have you received feedback from stakeholders about proposed amendments to Bill C-79?

[Bruce Christie]

I have not received any proposed amendments.

[Tracey Ramsey, NDP, Essex, ON]

In the clause-by-clause study today, we are going to be looking at the seven acts that this bill seeks to amend. I appreciate your opening remarks, but we didn't hear reference to that specifically. Can you give us a brief overview of the seven acts that we're looking at amending in the clause-by-clause examination today?