International Trade Committee on May 11th, 2016

[The Chair, Liberal, Mark Eyking]

I call the meeting to order.

Good morning. My name is Mark Eyking and I am the member for Sydney—Victoria. I am also the chair of the Standing Committee on International Trade.

Our committee has been quite active in the last while since Parliament started. We have a couple of things on our plate. We're dealing with finishing up the European agreement and we have softwood lumber issues, but our main issue right now is the TPP.

We are going across the country to listen to Canadians, stakeholders, and whoever wants to talk to us about this trade agreement. We are also constantly holding meetings in Ottawa with stakeholders. We've done the western provinces. We're doing Quebec right now. Starting tomorrow, we are going to do Ontario, and probably the Atlantic provinces and the territories in the fall.

With us in our committee we have Madam Ludwig, from New Brunswick; Mr. Peterson, from Ontario; Madam Lapointe, from Quebec; Ms. Ramsey and Mr. Van Kesteren, from southern Ontario; and, from the wonderful province of Saskatchewan, Mr. Hoback. This is our committee today. We have other members, but they're in Ottawa right now. We take turns travelling around the country.

We will give the witnesses, or whoever is representing witnesses, five minutes each.

On this first panel, we have the Desjardins Group, the Québec Chamber of Commerce and Industry, Québec International, and the Réseau québécois sur l'intégration continentale.

We're going to start with the Desjardins Group.

Go ahead, Mr. Brun.

[Bernard Brun, Director, Government Relations, Desjardins Group]

Thank you, Mr. Chair.

Members of the committee, I would like to give a brief introduction to the name of the Desjardins Group. First, I want to thank you for the invitation. It is much appreciated.

My name is Bernard Brun. I am the Director of Government Relations for the Desjardins Group, which is a cooperative financial group. It is the leading financial cooperative group in Canada, and the fifth largest in the world. It has 7 million clients.

We offer a full range of financial services, from basic financial services and insurance to access to capital and, of course, financing services. We are a leading actor.

Desjardins is the leading financial group in the agriculture and agri-food sector. We would particularly like to discuss this field and the potential impacts of the free trade agreement on the agriculture and agri-food market.

Alain Gagnon, who is Vice-President, Agriculture and Agri-Food Sectors Division, is with me today. He will talk to you more specifically about this subject.

[Alain Gagnon, Vice-President, Agricultural and Agri-Food Sectors Division, Desjardins Group]

Good morning. Thank you for the invitation.

Our institution's activities in this sector extend from coast to coast, but a majority are concentrated in Quebec. The Desjardins Group has a more than 41 per cent share of the farm credit market in that province, more than all of the other financial institutions combined. Overall, nearly half of all farmers in Quebec do business with Desjardins.

Overall, the implementation of the Trans-Pacific Partnership will have favourable repercussions for Canadian agriculture, and in particular for the major exporting sectors. We need think only of pork producers, cranberries, blueberries and maple syrup. Signing the agreement will lead to greater general competitiveness in the agri-food sector with its main competitors in the international markets.

Notwithstanding the generally positive aspects of the treaty, some Canadian exporters could be disadvantaged by the new access it grants. We are thinking mainly about exporters subject to supply management, such as milk and poultry, who will experience new pressures on the domestic market. The agreement in principle signed by Canada includes partial opening of agricultural markets under supply management to foreign countries.

That openness will directly affect a number of sectors, and particularly milk. For the dairy industry, that comes on top of the chink created by the agreement between Canada and the European Union. Sectors under supply management are an important part of the Desjardins Group's farm credit portfolio, and we are also a major partner of many companies in the farm supply and food processing industries. That is why it is essential, for all actors in the agricultural sector, including financial institutions like the Desjardins Group, that the compensation and financial support programs announced in the fall of 2015 be put in place.

Financial compensation and the deadlines that the government wants to put in place for compensating for certain provisions of the TPP agreement will encourage a gentle transition and enable companies to develop strategies for adapting. Without those measures, losses of markets will lead to declining revenues, which will have consequences for companies' capacity to meet their financial obligations and continue to expand.

In addition, the shock could be particularly great for regions whose economic activity depends more heavily on agricultural sectors that are under supply management. It is important to note that 31 per cent of Desjardins Group service points are located in municipalities with populations under 2,000. There were be more negative impacts for us than for the other financial institutions.

Smaller companies and those that have recently been acquired by the next generation of farmers will generally be the most affected. The Desjardins Group wants to have a clear picture of its members' and partners' business environments so that it can manage its risks appropriately. As a cooperative financial institution that has a significant presence in agricultural regions and is active in farm credit, the Desjardins Group considers it to be important for the compensatory and transitional measures aspect to be clarified quickly. As long as those measures have not been officially confirmed and put in place, all actors in the agricultural sector will have to make important business decisions against a background of uncertainty.

Similarly, we urge the government to remedy the inconsistencies in federal legislation that allow goods to be imported by circumventing customs tariffs. This was the case in the past, for example, for certain poultry products, and the most recent example is diafiltered milk. That is why we believe that in addition to adopting compensatory and transitional measures that are necessary for the sectors...

[The Chair, Liberal, Mark Eyking]

Excuse me.

If you'd just wrap up your final comments, I'd appreciate it.

[Alain Gagnon]

We support the Trans-Pacific Partnership and we are persuaded that the government has the desire and the necessary tools to ensure that all stakeholders in the Canadian agri-food have a stable business environment that encourages the dynamism and synergies of agri-food exporters.

Thank you, Mr. Chair, and members of the committee.

[The Chair, Liberal, Mark Eyking]

Thank you.

We're going to move on to the Quebec Chamber of Commerce, represented by Mr. Aubut.

[Alain Aubut, President and Chief Executive Officer, Quebec City Chamber of Commerce and Industry]

Good morning.

Thank you very much for your invitation. I would also like to thank the committee members for coming to meet with us in Quebec. It is very much appreciated.

The Québec Chamber of Commerce and Industry is the second oldest chamber of commerce in Canada, after Halifax. It is firmly rooted in the community. It has more than 5,000 members, making it very representative.

The economy of the Quebec City region is essentially based on services. Insurance and finance, together with tourism, account for nearly 40 per cent of the region's GDP. There are also other industries such as technology, optics-photonics and other niches of excellence, but I will let my colleague tell you more about them.

At present, our main issues relate to employment and access to the region. Quebec City, like the province of Quebec, is a small market. With globalization, we have no choice but to be present in as many global markets as possible, to maximize the growth of our SMEs, and obviously this calls for innovation and internationalization. Lifting tariff barriers is therefore very important and very positive for a large segment of companies in the capital region.

Canada is at the heart of a number of markets: the Atlantic, the east, the west, the north, the south with NAFTA, and Europe with CETA. Although the TPP countries are physically distant from us, this agreement nonetheless is a very important issue. Establishing tariff barriers will promote the development of our companies. Of course, it will expand access routes, with a view to the growth of our companies.

Overall, government support for innovation is an essential tool. Innovation and marketing become essential tools to encourage companies to expand. Tariff barriers help us, but that is only one factor among others that the government must take into account.

This agreement is a very important lever that will eliminate barriers to expansion for our companies. We are talking only about the TPP, but overall, we are talking about eliminating or reducing 18,000 customs duties, and that is very substantial. We have just heard from a representative of the agri-food sector. The TPP will be more favourable for other economic sectors.

At present, in some markets, our companies are taxed as much as 30 per cent on innovative or luxury products, and this means that we are not competitive on those markets. Eliminating tariff barriers is what will enable us to access those new markets.

This is a great opportunity for our SMEs, but we will have a challenge to meet, as I said earlier, in connection with information and marketing our products in those markets. We will have to know how to access those markets once the tariff barriers are reduced.

Ninety per cent of the entrepreneurial fabric of Quebec is composed of SMEs, that is, 98 per cent have fewer than 500 employees. Those companies do not always have easy access to information and to marketing methods to reach those markets. In Canada, we have Export Development Canada. We also have Canada Economic Development for Quebec Regions, which Mr. Lebel supported in Quebec. We have a number of tools, but they are not always accessible, and companies are not always well informed about them. The role of the chambers of commerce could be to inform them. In order for us to be able to inform our companies, the government of Canada will have to facilitate things for us by simplifying the information, the niches, and the access to information networks.

An innovative company is prepared to take advantage of the new markets and face the competition. We support preserving the supply management system in sectors that are less heavily represented in Quebec City itself, but are represented elsewhere in Quebec.

In short, we are persuaded that eliminating or reducing tariff barriers will enable our networks and companies to export more products. Once again, we must not forget communication, to inform companies about how to go about this, and support for marketing, which is a very important factor, as were all the research and development tax credits in the past.

Now, were are in a marketing phase. We have world-class exportable products. It is very important not only to inform companies about the benefits, but also to support them in their marketing.

Thank you very much for listening.

[The Chair, Liberal, Mark Eyking]

Thank you.

We're going to move over to Québec International and Madame Lagacé.

[Line Lagacé, Vice-President, Business Growth and Foreign Investment, Québec International]

Thank you.

Good morning. I assume that you do not have a lot of time to enjoy it, but nonetheless, I would like to welcome you to our beautiful city of Quebec.

Québec International is the economic development agency for the greater Quebec City region. We support and stimulate the strong industries in the region. In February, Québec International had the opportunity to lead an information session about the TPP for companies in the region. Last fall, we led a round table in Quebec City that included David Lametti, MP, to help people better understand the issues that companies in the region have to deal with in relation to the TPP. It is this perspective that I want to share with you this morning.

The TPP undeniably presents a good opportunity for companies to expand their markets. The TPP will result in Canada signing free trade agreements with 51 countries, and this will amount to access to 60 per cent of the global economy. For companies located here, that is an opportunity that is not to be missed.

The agreement will also provide suppliers of Canadian services with more predictability by guaranteeing the present levels of access to the markets and future improvement of the existing measures in the various parts of the TPP. That means not only that our manufacturing companies, but also services companies, will be able to profit from it. Those companies supply services for construction, computer services and research and development. They have a reasonable presence in the national capital region. The TPP represents business opportunities for those companies.

Notwithstanding the opportunities presented by the opening of these new markets, nothing is yet certain for our companies. In a competitive situation where their environment is in a state of perpetual change, companies just prepare themselves well. These are words that you must be hearing just about everywhere at present, but it is what is of most concern to our companies.

Apart from the opportunities presented by access to these new markets, our companies are facing greater competition. They must therefore be able to study the new markets and distribution networks. We have to help them clearly understand the rules governing entry into those new markets.

To that end, the government will have to establish a clear strategy and policy to support exports for companies, that goes well beyond promoting the opportunities that the TPP may present. I will come back to this a little later.

Apart from the strategy to support exports, there is support for innovation, which was mentioned earlier. That will also have to be part of the government's thinking, because, faced with this new competition, our companies will have to adapt their products, but will also have to be extremely innovative in the way they do things and try to be a little more competitive. We know that we are behind in this regard. Companies have to improve the quality of their goods and services and develop key competencies.

The TPP presents opportunities in the realm of e-commerce, where we also have catching up to do. If we want to enable our companies to access all of this, we will have to support them in incorporating a significant digital strategy in the region. There needs to be an export strategy and a strategy to support innovation.

We consider the fact that the TPP will result in much greater openness or mobility for both people and capital to be of considerable interest. In terms of innovation, this openness will also enable our companies to better understand how to adapt a product to the culture and language. In the case of video games, for example, it is extremely important to have a good grasp of the impact of these aspects. Mobility on the part of people will probably make it easier to understand these factors, for developing or adapting products.

[The Chair, Liberal, Mark Eyking]

Excuse me.

Do you want to wrap up? You have a half a minute remaining.

[Line Lagacé]

In conclusion, for all sectors, the stakes are high. We will have to reinstate real support for companies in relation to expanding markets and innovation. We are talking about an export strategy in terms both of export networks in the target areas and of understanding those markets beforehand. We also have to support them in protecting intellectual property, which is something of enormous concern to our companies. We must provide support on the ground to target distribution networks and networks of experts, and the business network in the target countries.

Thank you.

[The Chair, Liberal, Mark Eyking]

Thank you.

We're now going to move over to Réseau québécois sur l'intégration continentale. We have Mr. Serinet.

[Pierre Serinet, Coordinator, Réseau québécois sur l'intégration continentale]

Good morning.

The Réseau québécois sur l'intégration continentale is a broad network in Quebec that has been in existence and working on free trade agreements for 30 years. It brings together the trade unions movement, the women's movement, the student movement, the grassroots community movement and the human rights advocacy movement. It is also the oldest network of its kind, as a multi-sector network, in all of the Americas. More than one million people are represented in it.

I am going to begin with my conclusion and then continue from the beginning, given the time we are allowed. However, I must make two comments at the outset.

The first concerns the nature of the consultation itself. I am not certain, but I have the impression that, like us, you are concerned about the format of the consultation. Because the agreement has already been signed, civil society finds itself faced with two options: approve the agreement or reject it. So this is a consultation in which it is difficult to make recommendations. That is somewhat unusual.

My second preliminary comment is that we absolutely must look at the TPP in a broader context. We see it precisely as a structure that is being put into operation. I therefore urge the committee, as the elected representatives of our society, to take a broad view of the TPP, and include the agreement with the European Union. There have also been no consultations on that agreement, and it has not been signed. It is therefore possible to modify its problematic issues. The Trade in Services Agreement and the agreement with China must be part of a comprehensive picture. I therefore formally urge the committee, today, to study the agreement with the European Union in depth.

Before getting to my initial conclusion, I would like to urge you to step outside the rationale imposed by the free trade agreements, which is to define winners and losers. After 30 years with NAFTA, that is the perspective that we have adopted. We have done studies on the subject, and it is clear that the free trade model does not work. We have to free ourselves from that straightjacket, the idea that free trade is good in itself. We have to rethink the principles. We believe that we absolutely must base the discussion on principles of cooperation and complementarity, rather than on competition and taking markets by storm.

I was surprised to hear the chamber of commerce representatives saying, yesterday and today, that the TPP led to opening up of the Asian markets and a reduction of tariffs. The fact is that, in the countries covered by the TPP, 97 per cent of tariffs have already been eliminated. That's right: 97 per cent. When we hear that we are going to take the international markets by storm, we have to ask why our companies have supposedly not already taken those markets by storm. They tell us we are not ready, and they talk about information. Well, companies could have internationalized, but they have not done it. This brings us back fundamentally to the problem of the economic structure of Canada and of Quebec. That point has to be made.

The TPP is a bad agreement in economic, social, political and environmental terms. It is a bad agreement because it is not a trade treaty. It is a bad start, given that it is supposedly a trade treaty.

What is it, then? The TPP is essentially an agreement that will enable a system of rules to be set up that limits the ability of states to legislate. It talks about non-tariff barriers, but that is a euphemism. In reality, it is about legislation, protecting health, education, public services, measures to actively stimulate the economy, and the environment: in other words, all of the standards there may be to regulate and guide investments. That is really what it is about.

You have heard a lot about investor-state, the mechanism by which corporations can institute proceedings. We will say it at the outset: this mechanism must be removed from the trade agreements. It has no business there. I will not go on about this. You have heard enough speeches on this subject.

Public services must also be excluded from the negotiations. For the first time, culture is being put on the table, with a view to marketing.

Mandatory obligations for corporations have to be included, so we can return economic, social and cultural rights to their rightful place in the foreground, above the private rights that are already adequately protected by...

[The Chair, Liberal, Mark Eyking]

You've got to finish up, sir.

[Pierre Serinet]

I will conclude by saying that we absolutely have to change our way of thinking, look at the dynamic, and acknowledge that we have a structural problem in terms of the economy, that we have had trade deficits for the last six years, focusing the economy on raw resources under the Conservative government, and deindustrialization. We have to be proactive when it comes to the economy, and, most importantly, we must not adopt a system of international rules that reduces our ability to legislate and regulate.

I will be able to address the other issues in greater depth during the discussion.

Thank you.

[The Chair, Liberal, Mark Eyking]

Thank you.

We're going into dialogue with MPs right now. We'll start off with the Conservatives for five minutes.

Mr. Lebel, you have the floor.

[Denis Lebel, Conservative, Lac-Saint-Jean, QC]

Thank you, Mr. Chair.

Most importantly, we must not isolate ourselves. On the agreement with Europe, every province was actively involved in the discussions and negotiations. In Quebec, Pierre Marc Johnson took part in all of the discussions and discussed all the issues, and Ms. Marois signed the agreement before making it public.

On the TPP, when 11 trading partners, including the biggest one, our primary partner, the United States, want to renegotiate an agreement that has already been negotiated, we cannot exclude ourselves from the discussions. Let us remember that 72 to 75 per cent of our products are exported to the United States. It is therefore important to hear the opinions of the various stakeholders, but we have to make the decisions that are necessary so as not to be excluded from the agreement. When the other 11 partners were negotiating, we had to be there; otherwise, we had no voice in it. And so we were there.

I will now address the Desjardins Group representatives.

I enjoyed hearing you. You are interested in the future of agriculture and in farm succession, as I am. I would like to hear your thoughts on the compensatory measures proposed and how they have been received by your customers. In addition, can you tell us how these compensatory measures might mean that the future can be secured for farmers?

[Alain Gagnon]

We believe the compensatory measures are essential for some companies to survive. I am thinking particularly of the young generation, the ones who are just taking over the family farm and the ones who will do so later. Without protection against the new circumstances that result from the agreement, it will be difficult for the next generation to expand. That is why I said, in my remarks, that we had to know, fairly quickly, what the agreement provides, so we can establish strategies with that generation, a way of operating over the years to come. We have to create an environment that will enable us to continue to support them, in terms of financing.

The agri-food industry in Quebec is spectacularly robust, but we have to continue providing it with a business environment that enables it to invest, in particular by making relatively clear rules concerning changes like the ones proposed in the TPP.

[Denis Lebel, Conservative, Lac-Saint-Jean, QC]

Mr. Aubut, I would like to make a comment.

Yesterday, we heard from Stéphane Forget, who talked about the strength of the chamber of commerce network in Quebec. Of course, we agree on the need for strategies, for both marketing and innovation. There seems to be a consensus on this. I do not know whether the consensus extends throughout Canada. In Quebec, however, we observed two days ago, and you have repeated it right here in Quebec City, that there is no Quebec City vs. Montreal war of any kind whatsoever. The chambers of commerce everywhere in Quebec form a very consolidated network that can prepare for the future by implementing marketing and innovation plans.

My question is now for Ms. Lagacé.

The question of labour mobility brings me to the workforce in Quebec. Our government, the previous Conservative government, always thought that every Canadian man and woman who was able to work should work, and find dignity in work. Of course, during times when jobs were scarce, we had to be able to take action and put people to work. At present, the government wants to allow people to maybe live longer on employment insurance.

How do things stand in terms of the work force and the demand for labour in the greater Quebec City region?

[Line Lagacé]

In the Quebec City region, we are the advance guard. Our region has had an unemployment rate that wavers around 5 per cent for several years. Last year, it was 4.7 per cent, with a labour market participation rate of around 65 per cent, which means that workforce needs are the priority issue for all sectors in the region.

At present, we are mobilizing to attract workers. We are even going on recruiting missions abroad to fill various positions. For information, we are on our 25th international recruiting mission. This is an issue in various growth sectors, be they applied technology, for example, video games and information technology, or the manufacturing industry. We need welders, mechanics, and operators.

This is an issue that has concerned us since 2008. Regardless of how the figures are presented, the situation will not be improving. We have to open ourselves up more to recruiting internationally to fill the labour needs in the region.

[The Chair, Liberal, Mark Eyking]

Thank you, Mr. Lebel. Your time is up.

We're going to move to the Liberals for five minutes.

Go ahead, Madam Lapointe.

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

Good morning. Welcome to our city. I am very pleased that you are joining us today in Quebec City.

I would like to ask everyone a question. I would then ask each of you to answer briefly, so we have a chance to hear the witnesses in order.

Mr. Serinet, a little earlier, you said this was a bad agreement in environmental terms. Would you like to clarify what you consider to be bad, in environmental terms, in the agreement? That would help me.

[Pierre Serinet]

I will be brief.

This agreement ties governments' hands when it comes to environmental policy. We know the Liberal government wants to be very active on that issue. However, there are several mechanisms that limit governments' ability to propose effective environmental measures.

For example, the investor-state arbitration mechanism imposes restrictions and allows corporations to bring actions against a state if its policy does not suit them or if it reduces their profits.

There is also the perspective of the regulatory cooperation mechanism that already requires that states consult their economic opponents or adversaries to see whether certain measures would be restrictive in terms of their desire to do business.

So there are some elements that do really restrict the ability to legislate on environmental issues.

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

Thank you.

Ms. Lagacé, you said you had concerns about intellectual property.

What are your concerns in that regard?

[Line Lagacé]

At present, companies in the region operating in the video games field have concerns about the protection of intellectual property.

The TPP contains provisions that are much more permissive for the transfer of electronic documents, information, or games. As a result, the companies are wondering about that protection.

We know that, in some Asian countries, that has caused enormous problems concerning the protection of intellectual property. We therefore do not want that to be repeated in this case.

It all turns on making the company aware of this protection and how to do it and establish it in the TPP, to enable companies to properly protect their intellectual property.