International Trade Committee on May 5th, 2016

[Lawrence Herman]

It's a good point.

Agreements like the TPP are all about preferences. What the TPP does is give Canadians preferential treatment in the markets of the other TPP countries. That's what this is all about. It's about preferential treatment, better treatment than countries that aren't members of the TPP get in those markets.

If we are part of the TPP, we will have better treatment in the U.S. market than what we get under the NAFTA. It will be better treatment in the U.S. market—and I'll give you some examples in a moment—than what non-TPP countries get, because it's all about preferences.

If we were not part of the TPP and it entered into force, we would still retain our NAFTA preferences. We would still have preferential treatment in the U.S. market, more than all of the other countries that aren't part of the NAFTA, but we would have lesser preference than the other TPP countries.

[Randy Hoback, Conservative, Prince Albert, SK]

So there is a penalty to be had if we're not part of it.

[Lawrence Herman]

Absolutely. I'll give you an example.

[Randy Hoback, Conservative, Prince Albert, SK]

A quick one, because I have only five minutes.

[Lawrence Herman]

Then I won't give you an example.

[Randy Hoback, Conservative, Prince Albert, SK]

Mr. Sookman, we heard from Mr. Balsillie that we don't have an innovation policy. He keeps linking the lack of an innovation policy somehow to an impact on trade policy.

How do you see that interacting? Can't we do both? Can't we have a good trade policy and a good intellectual property policy?

[Barry Sookman]

I agree with you. I don't see any reason why we can't.

It's true that the Americans and Japanese might be ahead of us in terms of their innovation strategies, and they do rely on intellectual property protection to support innovation. It's not just about preventing others; it's actually about protecting the investment and creating the incentives that are needed for companies to invest and to globalize. They go hand in hand. You can't have successful commercialization without a robust series of frameworks that promote innovation. Those frameworks include both intellectual property protection and some of the things that Mr. Balsillie was talking about.

[Randy Hoback, Conservative, Prince Albert, SK]

He's talking about freedom to operate. Is that not just freedom to steal?

[Barry Sookman]

Freedom to operate has a number of dimensions to it. I think many businesses that make very significant investments in intellectual property make very concerted efforts to protect it. If they don't, they effectively would be competing against their own technology, not being able to benefit from the investments they had.

If you look at Research in Motion, Research in Motion had engaged in several lawsuits to protect its intellectual property, including when Mr. Balsillie was the co-chairman. It's because of the need to protect your marketplace, your investments, and your jobs that litigation is pursued.

[Randy Hoback, Conservative, Prince Albert, SK]

Again, I'm trying to get my head around it.

If I want to see start-ups here in Canada, I want them to have a playing field where they can actually have a time frame to recover that investment so that they are protected through intellectual property. But Mr. Balsillie is saying that if you do that, none of them will locate in Canada; they'll all locate in the U.S.

How does that work?

[Barry Sookman]

I frankly don't see it. The regime that we have in Canada is similar to what we have in the United States. From an intellectual property perspective, there is little advantage to locating in one country versus the other. In fact, for a small Canadian start-up to compete, they have to be able to compete in the United States.

I've dealt with many Canadian start-ups, and they see their biggest market as the United States. They want to start in Canada, and they have relationships in Canada, but ultimately the big win is in the United States. They recognize that they have to file for protection in the United States. In fact, the first place they file for patent protection is the United States. They need the protection. Investors look to see if they have IP protection, and if they don't, it could be a reason for not giving companies the rounds of financing they want. It is important to Canadian innovators to have robust intellectual property protection.

[The Chair, Liberal, Mark Eyking]

Thank you.

We're going to move over to the Liberals and Mr. Dhaliwal.

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

Thank you, Mr. Chair, and my thanks to the panel members.

Mr. Herman, you said that we have to reach a balanced conclusion on TPP. There have been criticisms and concerns about the ISDS mechanism contained in the TPP text. Do you see more viable alternatives to ISDS?

[Lawrence Herman]

The ISDS provisions follow the model in NAFTA and the model that Canada has followed in over 30 investor-state dispute settlements, or, to put it another way, the Foreign Investment Promotion and Protection Agreement. It largely follows the model in NAFTA. There are some additional protections that are built in.

The TPP defines the elements that are subject to dispute settlement more clearly. This is to avoid wide-ranging or broader determinations that arbitrators can make. They're confined to specific rules of international law in their decision-making. The CETA is different. There are some changes in the CETA that are not in the TPP, but the TPP follows the NAFTA model. Some concern has been raised about the number of investor disputes brought against Canada by American investors. It is true that Canada has been a frequent respondent in these cases. If we abandoned the TPP, the provisions of NAFTA would still apply. I don't think it's an effective argument that somehow we will moderate investor claims by not being part of the TPP. Our FIPAs with other countries allow investors from those countries to claim against Canada. There haven't been any to date, but those provisions remain.

What we want to address are the advantages to Canadian investors in markets like Japan, Malaysia, Vietnam in having the ability to bring investor claims forward. Canadian investors have benefited from our bilateral FIPAs bringing action against countries like Venezuela, Argentina, Kazakhstan, Poland, and a range of other countries. Canadian investors do benefit from these ISDS provisions. That's an important factor.

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

Mr. Balsillie claimed that TPP will allow foreign companies more freedom in Canada. Do you agree with that? Could you explain why or why not?

[Barry Sookman]

In my view, the TPP makes very few changes to Canadian law. As a practical reality, it's not changing the situation that currently exists on the ground. There's the term extension and there's the possibility of some extra protection for patent restoration. Other than that, when you consider the whole gamut of the intellectual property regime, there are very few differences.

[Lawrence Herman]

The TPP on IP tweaks the provisions that we've already adhered to in the WTO TRIPS agreement, in multilateral agreements in the World Intellectual Property Organization, and in treaties such as the Berne convention and the Paris convention.

It does tweak those somewhat, but it doesn't, as Mr. Sookman says, radically alter Canadian laws in any way. I think, with all due respect, that a lot of the criticisms have been very, very much overdrawn.

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

Do you see any negative impacts of the TPP on an average middle-class Canadian?

[The Chair, Liberal, Mark Eyking]

It'll have to be a short answer.

[Barry Sookman]

I don't see any.

[Lawrence Herman]

I don't either.

[The Chair, Liberal, Mark Eyking]

That wraps up your time. It's good to be on time, Mr. Dhaliwal. Thank you.

We're going to move over to the NDP with Ms. Ramsey, for five minutes.

[Tracey Ramsey, NDP, Essex, ON]

I think it's probably appropriate that my colleague just asked that question, because I think there are grave implications, in particular in my riding of Essex, where we have a hub of manufacturing in auto manufacturing. In terms of the 58,000 jobs projected to be lost in Canada under the Tufts University study economic model, 12,000 of those would occur in southwestern Ontario. It has massive implications for average Canadians and working Canadians, to be quite honest.

We hear that you feel that this would maintain the jobs here in Canada and, of course, it's hard to see how a Canadian business would be disadvantaged in the TPP, but we've had others present here and explain to us how Canadians would be disadvantaged in the TPP. While businesses may be a beneficiary of the Trans-Pacific Partnership, average middle-class Canadians and lower-income Canadians would actually end up having to pay more for pharmaceutical drugs. There would be implications for them.

I did read one of your articles, Mr. Sookman, in which you said, “The costs of being left behind could be staggering for Canada in the long term.” I'm wondering what economic modelling you're basing that on.

[Barry Sookman]

Like Mr. Balsillie, I'm not an expert in the auto industry, so I can't comment on that. There are people who—

[Tracey Ramsey, NDP, Essex, ON]

What I was referring to is simply that you thought there would be no implications for people.