International Trade Committee on April 21st, 2016

[Karen Ludwig, Liberal, New Brunswick Southwest, NB]

Thank you, panel, for your very interesting presentations.

I am wondering on this side of the table about the importing opportunities. Certainly, we have a strong appreciation for exporting opportunities through the TPP. What types of products or services may be imported from the member countries that are currently not here and that may help or change the diversification of the Canadian marketplace?

[Chris Vervaet]

One of the aspects of the TPP that our processors and refiners see a real benefit in, and it is linked to imports, is rules of origin. Under this regional agreement it allows food processors to use ingredients from 12 different countries, and then have preferential access to ship the finished product to any of the 12 countries. The agreement could also help boost exports of finished oil products that contain canola, like margarine and shortening, but that margarine and shortening would be blended, and would be blended with imports such as palm oil. Through the TPP we'll be able to source palm oil from places like Malaysia, for example, and then sell even a more highly value-added product to the United States without any duties. That's an example of where, again, it's maybe not directly linked, but it's more on the rules-of-origin aspect of the TPP. You can import a product from Malaysia, blend it with canola oil here in Canada, and then sell it to the United States duty-free.

[Jean-Marc Ruest]

That's a very good example. The company that I work for, Richardson International, is involved in the processing of canola oil products: margarines, cooking oils, etc. That's exactly the situation that we were dealing with, where we're able to import a Malaysian product, we're able to source the canola oil in Canada, but blending it together causes a problem. This creates a significant opportunity to allow us to import product that's used in further processing.

[Karen Ludwig, Liberal, New Brunswick Southwest, NB]

Continuing on with that, certainly in the west, the population demographically is much more diverse than in the east.

Are there products or services that are currently not available, for example, in British Columbia, that may more likely be available to the population base there if the TPP is signed?

[Jean-Marc Ruest]

Without speaking to it as an expert, that would almost seem self-evident, but I'm not in a position to comment much more on it than that.

[Karen Ludwig, Liberal, New Brunswick Southwest, NB]

Okay, thank you.

Ms. Fernandez, the TPP's chapter on intellectual property includes a number of provisions that relate to patents for pharmaceutical products, including an adjustment to the patent term for the time lost in regulatory and governmental approval procedures for such products.

To what extent is it likely that the greater protection of intellectual property for pharmaceutical products would encourage innovation in Canada and contribute to the development of new options for treating diseases affecting Canadians?

[Lynne Fernandez]

I would be surprised if it did contribute to new innovation. There are problems with having these patents and with having a monopoly.

Some of the issues that have been brought up by other experts in terms of looking at these government protective monopolies are excessive marketing expenses. It leads to that, as firms seek to pursue the monopoly profits associated with patent protection. Data from the industry suggests that marketing costs are currently comparable to the amount of money spent on research. It's not really clear that that's such an advantage.

There's also wasted research spending on duplicating drugs. Industry data indicates that roughly two-thirds of research spending goes into developing duplicative drugs rather than drugs that actually represent a qualitative breakthrough over existing drugs.

There's also a neglect of research that is not likely to lead to drugs that can be patented. There can be research done that could be valuable and should be in the public domain so that people know what the research is leading to, but if it doesn't lead immediately to a drug patent, then the research just gets abandoned.

[Karen Ludwig, Liberal, New Brunswick Southwest, NB]

Which country do most of the generic drugs derive from?

[Lynne Fernandez]

I don't know.

[Karen Ludwig, Liberal, New Brunswick Southwest, NB]

Right now, health care is largely the responsibility of the provinces. Would you support a national health care strategy?

[Lynne Fernandez]

Yes, I would. I think that is the only way you can really enforce the Canada Health Act and the five pillars of the Canada Health Act. It just gets too fractured when it is imposed provincially.

[The Chair, Liberal, Mark Eyking]

Thank you very much.

Now we are going to move over to the NDP and Ms. Ramsey for five minutes.

[Tracey Ramsey, NDP, Essex, ON]

Thank you for your presentations today.

I find it interesting that my colleague mentions the hundreds of groups that were included, and I am pleased that you were included. What I'm not happy about are the thousands that were not included, including civil society, indigenous people, and Canadians...as we're doing here now, under a new government.

We're here to listen to what all groups have to say. We've actually received over 10,000 emails from Canadians. We have a process that I believe our chair has highlighted, that's opened up to the public so that those who aren't able to speak today will be able to engage with the committee in that way.

I'd like to talk a little about the ISDS, and my question will go to Ms. Fernandez. You spoke about the ISDS mechanism, and it's something we've heard very serious concerns about at this committee level. Joseph Stiglitz, who is an American economist, said that if we sign the TPP, the ISDS provision will make it impossible to meet the climate change goals we established in Paris.

I wonder if you can speak about the ISDS mechanism and how you see this potentially impacting the ability of the Canadian government to regulate in areas such as public interest, and to possibly meet our climate change target.

[Lynne Fernandez]

The mechanism by which corporations will then be able to sue the Canadian government is in itself becoming a growing and profitable industry for successful claimants and international trade law firms. We know that active claims in 2009 and 2010 alone reached in the hundreds of billions in U.S. dollars. One of the main concerns we have here in Manitoba—if I could speak to that because that's what I know best—is with Manitoba Hydro. It plays a very important role in developing Manitoba's economy. There's a strategy to try to open up industry and economic growth in the north, and Manitoba Hydro plays a very important role in that. I know under CETA, and I assume under the TPP as well, there could be restrictions on Manitoba Hydro for the kind of procurement it does and for the kind of local economic development it's able to induce through the agreements that it has with many first nations communities on hydro development. Manitoba Hydro currently engages with first nations in training and job opportunities around hydro development. We're very concerned that kind of mechanism is not going to be able to work under the TPP.

We also have to worry when we think about what it is governments that are involved, particularly the United States, want from Manitoba. It's going to be energy and agriculture, but it's also going to be energy and water. What are the mechanisms that are in there that are going to protect Manitoba's water and Manitoba's energy? If corporations have the ability to sue the Manitoba and Canadian government for loss of profit because the Manitoba government wants to protect our resources, or wants to make sure that it's local first nations people who have access to these jobs, then it's very self-defeating for Manitoba.

[Tracey Ramsey, NDP, Essex, ON]

Okay. The other thing I want to talk about is that it's been highlighted by the agricultural industry they'd like to see more value-added jobs in Canada and the processing in Canada. When we're looking at competing with TPP countries that have very low wages, by all accounts, are we going to be able to achieve that goal? Will we be able to increase or move up the value-added chain, as you mentioned, when we're in competition with countries with such low wages and conditions?

[Lynne Fernandez]

This is, of course, always a problem, and it has been a problem with NAFTA as well, in terms of the growth of a lot of the industries in Mexico, and a lot of movement of Canadian and American companies to Mexico. We have certainly seen that. Peru, Chile, Mexico, and of course some of the other developing countries have very low wages.

Why would Canadian companies not go there if they have the opportunity? What is that going to mean for Canadian jobs and Canadian workers?

The other thing that I would like to point out in terms of value added is the OECD report, which found that Canada has a comparative disadvantage in high- and medium-high-technology manufacturing. We have a comparative advantage in medium and low manufacturing, but it is really the developing countries that are developing the low-technology manufacturing capacity, so we stand to be undermined by the developing countries taking the place we currently hold, where our advantage is. The high-value manufacturing, in countries such as Australia and the United States, is already developed, and that is where we are weak. That is where we need to see growth and grow our sector. It is not clear that this agreement is going to help us at all with that.

We can continue to have raw items going out of the country, but no processing increases.

[The Chair, Liberal, Mark Eyking]

Thank you.

We are going to have to move over to the Liberals now.

Mr. Fonseca, you have five minutes. Go ahead.

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

Thank you to all the panellists. My questions are for Ms. Fernandez.

Ms. Fernandez, from your comments so far I see that you feel that with the TPP there would be significant conflict with Canadian policy, provincial policy, municipal policies. In particular, one of the things that we value as Canadians is our universal health care. Can you drill down on that in terms of the TPP and some of the conflicts that you would see with our health care system here in Canada?

[Lynne Fernandez]

Without being able to know all the nuances of the TPP, and to the extent that you have a very powerful private health care sector in the United States that I think would be very keen on getting into the Canadian health care industry, for lack of a better word, this would be something that I would be very concerned about. Is the agreement going to give them some sort of a doorway into Canada, some sort of access? If they don't get access to our health care system, if they're disallowed because we want to protect it as a public system, does that then give them an avenue to sue us for loss of profit? I'm absolutely concerned about that.

Then, of course, there's the issue of the drug patents and Canadians not having access to drugs. Where the province is being charged and ends up having to pay much more for drugs as a result of the patents being on longer is a big concern. Eventually, people don't have access to their drugs.

There are those two aspects of it that I would be very concerned about.

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

On that risk around it, if we were to move forward as a government with a national pharmacare strategy, do you feel that there would be a risk there with the potential ratification of the TPP?

[Lynne Fernandez]

Well, how would you enforce national pharmacare? That then becomes an expense of the government, right? If the government is going to be implementing a national pharmacare program, that means it's going to be helping Canadians with their prescriptions. If the patents are on longer and the drugs become much more expensive, that becomes a burden to the government.

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

In one of our previous meetings we heard about Lipitor, which in New Zealand costs about $15 on average for a year's supply. Here in Canada it's about $800. In some other countries, it's significantly even more expensive than here in Canada, probably in the United States.

Have you actually looked at dollars and cents in terms of what this would cost Canadians with our health care system?

[Lynne Fernandez]

I haven't personally, but I believe probably my colleagues in Ottawa who do most of the research have looked at it. I haven't personally done that, no.

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

My colleague is asking if you'd do a study on that because it sounds like something that we've heard from some of the presenters that they would like.

[Lynne Fernandez]

Sure. We have a national office, and the trade research is actually done in our national office in Ottawa. I believe that study has probably already been done and, if not, I'm sure they'd be doing it. They have done extensive research on trade agreements, so I'd be surprised if they don't have that information.