International Trade Committee on May 13th, 2016

[The Chair, Liberal, Mark Eyking]

Good morning everybody, and welcome to our committee meeting. We are the international trade committee from the House of Commons, and we are a very active committee. We have a lot on our plate since Parliament resumed. We have softwood lumber issues. We are finishing up on the European agreement, and right now we are up to our eyeballs on the TPP.

What we have decided on our committee is to travel the country and visit all the provinces and territories, and listen to people, companies, stakeholders, consumers, workers, and everybody who is going to be affected by the TPP agreement. Everybody will be, one way or another. Whether you're buying a product at a local hardware store, or whatever you're doing, it's going to have a big impact, and it is a big trade bloc. That is what we are doing, and we're going to be doing that throughout the year. In the new year, we'll have the report in to the House of Commons for a debate.

On that note, we have with us members of Parliament from right across the country. We have Mr. Hoback and Mr. Ritz from Saskatchewan. From Ontario, we have Mr. Van Kesteren, Ms. Ramsey, Mr. Peterson, and Mr. Fonseca. Ms. Ludwig is from New Brunswick, and Madam Lapointe is from Quebec. We have a broad group from across the country. I am Mark Eyking. I am the chair, and I am from Cape Breton, Nova Scotia.

The way we do it is we give each panellist or group roughly five minutes to do a presentation, and then we'll have dialogue with the members. On our panel this morning we have the Canadian Association of Importers and Exporters, we have Magna International Inc., we have the Toronto Regional Board of Trade, and we have the United Food and Commercial Workers Union of Canada.

We will start off with Ms. Nott for the Canadian Association of Importers and Exporters.

[Joy Nott, President and Chief Executive Officer, Canadian Association of Importers and Exporters]

Thank you very much, Mr. Chairman and members of the committee, for giving I.E. Canada, the Canadian Association of Importers and Exporters, which is far too long to say, so we call ourselves I.E. Canada, the opportunity to testify this morning.

I.E. Canada is a national trade association that's been speaking on behalf of Canadian importers and exporters for almost 85 years. Next year is our 85th anniversary. Our members include importers and exporters, Canadian manufacturers that of course both import and export, wholesalers, distributors, retail importers, and supply chain service professionals.

Our membership in total employs over one million Canadians and generates $270 billion in annual revenue to contribute to the Canadian gross domestic product. We represent some of the largest importers and exporters in Canada as well as some small and medium-sized companies. Our members import all sorts of different commodities, everything from coffee beans to car parts. In fact, sitting next to me is Magna International, which is a member, and also happens, as a company, to be the chairman of the board of directors for I.E. Canada.

In brief, I.E. Canada members overall strongly support the TPP agreement. That being said, there are a few considerations that must be taken into account whenever Canada considers signing an agreement of this magnitude. It becomes even more important when you look at an agreement like TPP that has so many different economies all at once in a single agreement, especially with the likes of Japan and the United States.

In the business world, supply chains are tightly integrated. There is very little distinction, when you're in a boardroom, between an import and an export when strategizing on where supply chains are going to be positioned. Rather, companies view their supply chains as a continuous flow of materials, components, and finished goods back and forth through the supply chain until the finished goods reach the customer. It's the continuous flow of materials and goods that companies base strategic decisions on, rather than discrete import or export processes.

Traditional government policy, however, sometimes does not match that business reality. Imports and exports are generally viewed as two distinct operations when you talk about government policy, where imports are generally viewed as being bad for the economy, and exports are being viewed as good for the economy. In today's reality, an import and an export, when you're in a boardroom, is a single transaction.

That distinctive thinking, when you start getting down into the weeds about an import being bad for the economy, and an export being good for the economy, actually hurts the Canadian economy. The reality in today's integrated supply chains is that most manufacturers and most exporters cannot achieve what they need to achieve without importing at least something, some sort of material or whatever.

When private sector companies look to trade internationally, they develop integrated strategies that disregard whether an international movement is an import or an export from a policy position. They look to the end results that they're seeking to guide their decisions, and do not develop import trade strategies without considering export and vice versa.

[The Chair, Liberal, Mark Eyking]

There's a minute left.

[Joy Nott]

One of the things we think is important for the panel to understand is that right now there seems to be.... I was saying to the chair, in a chat before we got officially started, if you had asked me to make comments on TPP about 18 months ago, I think my comments from member feedback would be slightly different than they are this morning. There seems to be a high level of skepticism right now amongst our members that TPP, or in fact any of the major free trade agreements that are on the table, such as CETA, are likely going to come to fruition.

The P word, the protectionist word, seems to be on the air globally. Whether that's justified, I'll leave to others to decide, but it seems to be the feeling that's where we're heading.

I think a lot of it is based on what's happening in the U.S. primaries right now, and some of the things they are seeing and hearing on television, and I think it's leaving people with an impression.

The final comment I'll make is that normally we don't deal with interprovincial trade. We focus on imports and exports at the national border and international transactions. We're hearing things about the state of current trade interprovincially in Canada. The New Brunswick beer story is so widely known that it's striking how many people have focused on that. The thinking is if we can't get that right, bringing TPP, and layering TPP onto New Brunswick beer....

The final comment I'll make is that I've had some members surprisingly say to me, “I long for the good old days when the tariffs were high, non-tariff trade barriers were few, and trade was transparent. I paid a lot more in duty, but I knew exactly where I stood then. Non-tariff trade barriers, which are often opaque, are much harder for me to understand what I should be doing.”

With that, I thank you for your time, and I welcome your questions.

[The Chair, Liberal, Mark Eyking]

Thank you very much. You did well on your final comments.

We're going to move on to Magna International.

Mr. Johns, go ahead, sir, for five minutes.

[Sean Johns, Director of Sustainability, Energy and Government Relations, Magna International Inc.]

Thank you. I'm probably going to be briefer than Joy was.

Good morning, Chair, and honourable members. Thank you for this opportunity to appear before the committee to comment on the Trans-Pacific Partnership agreement. I'm pleased to share Magna's perspective on the impact of this agreement and how it relates to our business in the automotive parts manufacturing sector.

Magna International is a leading global automotive supplier with 306 manufacturing operations, and 92 product development engineering and sales centres, located in 29 countries.

We have over 147,000 employees, and approximately 20,000 of those in Ontario, all focused on delivering superior value to our customers through innovative products and processes, with an emphasis on world-class manufacturing.

Our product capabilities include producing body, chassis, exterior, seating, powertrain, electronic, vision, closure, and roof systems and modules, as well as complete vehicle engineering and contract manufacturing. In 2015, our global sales amounted to $32.1 billion.

In anticipation of the pending changes the Trans-Pacific Partnership agreement could present, Magna is currently assessing how this might enable us to achieve new benefits, while also building an understanding of the compliance implications and evaluating the necessary tools that would enable us to meet these new requirements.

Overall we expect the net impact of the agreement on Magna's consolidated global operations to be neutral. Through increased competition and reduced regional value content rules, it is expected there will be additional pressure on automotive parts manufacturers within Canada where facilities are producing products that are low value, labour intensive, cost sensitive, and can be officially transported for export purposes.

The impact on small and medium-sized enterprises with limited access to capital and challenged mobility may be greater than that on Magna, as we currently have a global operating footprint with an existing presence in many markets.

With this flexibility to shift our operations to remain competitive, we will continually evaluate the optimal locations to manufacture. Although investment decisions are not based on local content requirements or tariffs alone—and for us the quality of infrastructure, access to skilled talent, ease of doing business, and proximity to our customers and suppliers is far more important—trade agreements and tariff barriers could be elements that factor in decisions on where new facilities and programs are located.

While Magna is headquartered here in Canada, and has significant operations in the province of Ontario, the location of our production facilities is highly dependent on the requirements of our customers. The broader implication for our business will be the impact of the agreement to these OEMs and any resulting reassessments of sourcing strategies to optimize supply chains.

It is critical to the automotive parts manufacturing sector that the Trans-Pacific Partnership agreement does not substantially detract from Canada's competitive position and rather strengthens its abilities of supplying products into expanding global markets.

I'll save further comments for our question session.

[The Chair, Liberal, Mark Eyking]

Thank you, sir.

We're going to move on to the Toronto Region Board of Trade, and Madam De Silva.

[Jan De Silva, President and CEO, Toronto Region Board of Trade]

Thank you, Mr. Chair.

Good morning, honourable members. Welcome to our very rainy city today. It's a good thing we're inside taking comments.

I'm pleased to have this opportunity to present to you on behalf of the more than 12,000 businesses and 120,000 professionals that make up the membership of Toronto Region Board of Trade.

For us, TPP is critical to the growth and success of our region, and to our country, because it provides our businesses access to high-growth markets.

Having personally spent 15 years running Canadian companies in Hong Kong and China, I've experienced first-hand the tremendous impact and opportunities that growth markets create for Canadian companies. More trade translates into more jobs and a higher standard of living for the people of Toronto region and, quite frankly, for many of the people in the markets that we're trading with. Firms engaged in global markets have a remarkable economic effect. They're more innovative, more productive, and generate more jobs and higher wages.

As The Conference Board of Canada reports, every $100-million increase in exports creates approximately 1,000 new jobs at home.

In Toronto region the diversity and strength of our industry mix is one of our greatest assets. We're home to a larger share of traded clusters in our economy than New York, Boston, and Chicago. In 2012, traded clusters accounted for 38% of Toronto region's total employment, compared to 33% in Canada as a whole.

From human health sciences, food and beverage manufacturing, automotive, aerospace, ICT and advanced manufacturing, the region has the right assets to succeed in a global economy.

The TPP will eliminate tariffs on almost all of our key exports and provide access to new opportunities in Asia Pacific. If ratified, Canada will be the only G7 country that is part of NAFTA, potentially CETA, and TPP, giving us access to 60% of the global economy. TPP alone will give Canadian businesses preferential access to an economic zone covering 40%, or $28.5 trillion of the global economy.

Now, the agreement is one thing. It's what do we do to get businesses active and taking advantage of this. To realize this tremendous opportunity, we really do need to find a way to get our businesses taking better advantage of all the growth that this trade access provides. Currently, only 5% of Canadian businesses that can export are exporting. In May last year, our board undertook a study to understand why this was, and what we could do to solve it. Our export strategy report, which I've left copies of here today, revealed that current exporters and businesses considering export feel they face a number of barriers.

To help these businesses overcome these challenges, we established a multi-year trade accelerator program called TAP GTA. It's a platform that brings together key government trade agencies and some of our largest corporate members to provide their high-export potential SME clients access to our trade accelerator program. The program is very practical, very hands-on. Over a 90-day period, each company develops an export business strategy and has access to resources needed to activate it. This includes our trade commissioner services, as well as access to the international consuls general in Toronto from the target markets they wish to pursue.

We're already seeing results. Since the start of our program in November we've had 50 companies successfully complete it. Over the next three years, we're targeting 1,200 companies to go through this, and we hope to generate another half of a billion dollars of export in our region.

Our graduates tell us that the program is working to increase their sales, gain access to new markets, and create new jobs within their companies. For example, one of our first graduates, Fine Cotton company, a company in Scarborough, Ontario, has already increased sales by $250,000 a quarter, through increasing exports to the U.S. They've hired an export manager. They've found a distributor in Italy who will represent them in Europe, and they've just signed an R and D agreement with the National Research Council of Canada, all activities that have come out of that export strategy process they learned through TAP GTA.

In fact, 85% of the companies that have participated in TAP are telling us that the TPP agreement is important, and these are markets that they wish to access.

Free trade agreements like TPP can create a robust network of international partners that can facilitate commerce, and organizations like our board of trade will be there to help the business community activate and take full advantage of these opportunities.

I welcome any other questions you have in the Q and A part of our discussion.

Thank you.

[The Chair, Liberal, Mark Eyking]

Thank you, Ms. De Silva.

Those are very impressive figures. It's quite the powerhouse you have here in the Toronto area. It's very vibrant. We got to enjoy some of your good food here last night. There are some nice restaurants.

Thank you for coming.

We're going to move over to Mark Hennessy now with the United Food and Commercial Workers Union of Canada.

Go head, sir.

[Mark Hennessy, Special Assistant to the National President, United Food and Commercial Workers Union Canada]

Thank you, Chair.

On behalf of the members UFCW Canada, I thank you and welcome the opportunity to appear before the Standing Committee on International Trade to comment on the Trans-Pacific Partnership.

Before I begin however, I would like to bring greetings and regrets from our national president, Paul Meinema, who was unfortunately unable to appear here today.

UFCW Canada is Canada's leading private sector union. Together we are more than a quarter million Canadian workers strong. Together we are building a stronger future for UFCW Canada members, their families, and communities while protecting and promoting employees' rights, social justice, and equity for all.

UFCW Canada is a leading force for workers in the retail, food processing, and hospitality sectors. As part of Canada's most progressive union, our members live and work in communities from coast to coast in every province. Our members are your neighbours. They are your grocery clerk or the cashier you have gotten to to know. They work in meat-packing plants and hotels. Some work in nursing homes, drugstores, food-processing plants, and many other sectors of the economy.

Quite literally, our members help feed Canada. Whether it's moving livestock, picking the vegetables, or helping you with your groceries this week, it's our members who carry out that work.

UFCW Canada believes the Trans-Pacific Partnership is not a good deal for our members and Canadian workers. I'd like to outline a few of the concerns that led UFCW Canada to take this position.

With regard to industry, we're concerned about Canadian job losses. Some of those jobs would be our members and their families. The TPP will give foreign poultry and dairy producers an even bigger share of our market, which to us means that processing and production jobs in those industries are at risk. While owners and producers have been promised compensation packages, there has been no such commitment to workers.

Another concern is the Canadian auto sector, as we have members in the auto parts sector. A study by our friends at Unifor found that the TPP could lead to the loss of as many as 20,000 jobs in the Canadian auto sector by eliminating incentives to manufacture vehicles in Canada and increasing incentives for companies to source auto parts from low-wage countries.

Also, chapter 12 of the TPP lays out the labour mobility provisions in a way that undermines the interests of Canadian workers. This provision takes the worst aspects of the temporary foreign worker program and then strengthens them. The agreement prohibits Canada from imposing any limit on the number of foreign workers entitled to enter the country as long as they fall under one of the broadly defined categories of workers that Canada has agreed to admit. Canada is further prohibited from administering a labour certification test before the worker can be given a work permit. This agreement allows companies to bring in foreign workers to Canada to take jobs that Canadians are ready, willing, and able to fill. These workers will not be immigrants. They will have no path to citizenship. They won't fall under the existing temporary foreign worker program. Under the existing temporary foreign worker program, employers have to pay those workers the same wages as Canadian workers, and train and certify up to Canadian standards. The TPP will not even give these modest protections to exploitable foreign workers.

We also take issue with the higher drug costs. Canada already has the second highest per capita drug costs in the world. The TPP gives even more monopoly patent protections to drug companies than they currently have, meaning it will require more money from Canadians should they require drugs. It also puts a real strain on unions' collective bargaining when trying to negotiate future drug plans. Yet, the big pharmaceutical corporations will continue to fill their pockets and expand their bottom lines.

Finally, the TPP is an affront to Canadian democracy. Through its investor-state dispute settlement provision, corporations are able to directly sue democratically elected governments. Further, the TPP restricts an elected government's ability to pass any new legislation that may negatively affect a corporation's bottom line. This includes expanding public services like pharmacare.

UFCW Canada is not against trade. We also understand the nature of negotiations and know that we might not get everything we want, but we are against trade agreements that benefit global multinational corporations to the exclusion of Canadian workers and their families. We would prefer agreements that are more balanced and fair. While we have other concerns with the TPP, we will speak to those in our formal submission, which is on its way.

So far, through our analysis, it is our opinion that the cons far outweigh the pros in the TPP, and for those reasons we oppose it.

I would like to mention one final concern, which is the fact there have been no government impact studies on the TPP from what I'm told, and it's been very difficult to get some of the information on what the agreement really means for Canada and Canadians. If there is still time I would urge the government to consider these types of studies, especially in regards to this agreement.

Thank you.

[The Chair, Liberal, Mark Eyking]

Thank you, sir. Thank you, to all the presenters for the presentations.

We're going to move on to the dialogue with the MPs. Before that, I would like to welcome any of the guests here in the audience.

Without further ado, we're going to start off with questioning. We're going to go to the Conservatives first for five minutes.

Mr. Ritz, you have the floor.

[Gerry Ritz, Conservative, Battlefords—Lloydminster, SK]

Thank you, Mr. Chair.

Ladies and gentlemen, thank you for your presentations here today. We're hearing repeats across Canada from different sectors—the same points are being made.

One concern or question that we've heard from many smaller businesses is “how do we get educated?” Ms. De Silva, I'm intrigued by your program and the success you're already having with it.

I was going to ask Ms. Nott whether her organization offered the same type of training, just the education component that seems to be there for businesses to take advantage of these opportunities.

[Joy Nott]

We don't actually have training per se. One thing we find challenging and that our members have told us repeatedly over the years is that the kinds of programs Ms. De Silva is talking about are to be applauded, and our members take advantage of them.

They're more about market access, though, rather than understanding the regulatory requirements. I like to say that we play really right down in the leaves—or right on the shipping dock is where our members tend to be. We are the supply chain professionals, who understand that an incorrectly completed form may sound like a small thing, but it can actually grind a shipment to a halt and can cost companies tens of thousands, if not hundreds of thousands, of dollars.

As an answer to the question, the baseline is no. There have actually been studies to say that the grassroots understanding of how to commercialize free trade agreements is actually missing from the Canadian educational system. Under the Conservative government, there was a study done by HRSDC that looked at exactly that point.

Access to market and the kinds of programs that Ms. De Silva was talking about exist. Once you actually ship and find out that there's a marketing issue or that the paperwork hasn't been completed.... That kind of education is lacking in the marketplace. The existing Japan—

[Gerry Ritz, Conservative, Battlefords—Lloydminster, SK]

The school of hard knocks can be very expensive, when you have stuff sitting on the dock.

Mr. Johns, as a global player do you find that the predictability of trade is sometimes questionable as you move product from country to country? Once you have your footprint established and have the corridors open, it becomes much easier. In a multilateral agreement such as the TPP, however, we're talking about some developing countries and we're talking about developed countries, which you already have a footprint in.

How important to you is having that predictability in order to decide where you're going to put your next client and where you're going to put your next sales office, as global supply chains continue to ripple out?

[Sean Johns]

We've experienced some difficulties moving into some new countries. As I said earlier, we're operating in 29 countries today. What we typically find is that they're not as mature, so their tax rules differ for us. That usually doesn't pose so much challenge on the investment front, but it certainly does when we want to change our footprint.

It's something that gets strong consideration, but typically we're a follower. We're not typically first there. Our customers are usually forging a path, and then we're coming later, so a lot of those things are established and there's some ability to leverage from whoever is there first.

Similarly, we operate six different business units, and in the past we've had one or another enter into a country, and then we're able, as soon as we get some feet on the ground, to leverage that around our business and share the best practice.

Developing markets are always very challenging, and it requires a lot of resources to understand the new systems and their complexities. When they're not as mature, the timelines to accomplish what you want get extended, and for us that's typically not acceptable. We're accountable to our customers to meet their timelines and deadlines. That's where we face a lot of challenge.

[Gerry Ritz, Conservative, Battlefords—Lloydminster, SK]

The point there is that there isn't a government in the world that operates at the speed of business, and that's unfortunate, but it is improving. As we have these multilateral agreements, or even bilaterals, you start to bring others up to speed.

Mature economies such as those of the U.S., Canada, and even Australia, which are trade-oriented, are looked at with envy by developing countries such as Vietnam, Malaysia, and some of the other smaller countries. As others, such as the Philippines and Indonesia, talk about joining TPP, they look to us to mentor. Part of the whole idea of education whereby we educate our businesses is that we also have to educate other governments as to how they educate their people to take advantage of import and export.

You're right, Joy; it's a two-way street. It's not just about exports; it's about imports that strengthen our own economy as well.

[The Chair, Liberal, Mark Eyking]

You have half a minute, Mr. Ritz.

[Gerry Ritz, Conservative, Battlefords—Lloydminster, SK]

Okay.

Let's talk about labour. There's always been a concern that there aren't enough people of the right type in Canada. Do you see a government-wide organization, Mr. Johns, as making it easier to move people around? You can actually take Canadians to some of your plants and bring back and forth—

[The Chair, Liberal, Mark Eyking]

Make it a quick answer, sir.

[Sean Johns]

Actually, we haven't experienced significant difficulty in taking people, but what we have found is that as our business has developed over the early period, what we want to do is use local resources in order to operate in those countries. We're really only taking our culture and our operating practices and are trying to get them implemented with people in those countries. Then we're hoping that from there...we've found it's most successful if we use local resources.

[The Chair, Liberal, Mark Eyking]

Thanks, sir.

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

Mr. Peterson, you have the floor.

[Kyle Peterson, Liberal, Newmarket—Aurora, ON]

Thank you, Mr. Chair.

Thank you, everybody, for coming here today. It's nice to hear from you and to get your points of view.

I just have a few questions.

Sean, I'm going to start with you. Hopefully you're holding down the fort in Newmarket—Aurora while I'm travelling on this committee. You talked a little bit about Magna's footprint. Many of its jobs, of course, are in my riding of Newmarket—Aurora, our riding. It's good to hear about the continued success of Magna. It seems to have survived my departure, which is nice to hear.

We're comparing the TPP to the status quo. Have you guys been able to give any assessment or analysis to, let's say, the U.S., Mexico, and Japan joining the TPP and Canada not doing so? What adverse impact might that have on your supply chains, your business lines?

[Sean Johns]

Kyle, I wish I could answer that question, but the question of whether or not we've considered Canada not joining is probably best directed at our director of trade compliance. Ultimately, I expect there has been some discussion. I'm just not in a position to answer that.

[Kyle Peterson, Liberal, Newmarket—Aurora, ON]

I appreciate that, Sean. I'll talk to Mike later.

I think you made a good point about exports and imports and that sort of dynamic. I think all of us on the committee should realize that having access to good imports is also good for a Canadian company's supply chain, because when buying input, companies want to oftentimes buy the best product at the lowest price, and sometimes that's an import. If we don't have access to that import, that lack can adversely affect the supply chain of a corporation and the price of the final product.

I'm glad, therefore, that you brought the matter up.

Joy, do you think TPP would help, on that side, and would give Canadian companies access to imports?

[Joy Nott]

I do. The bottom line to that is that if you take a look at what countries are involved in TPP, they are already countries that Canadian and American companies are sourcing from. The fact that we would have a free trade agreement with them makes it attractive.

Let me go back to the question you asked Sean: whether or not there has been any sort of analysis done as to what would happen if the United States and Mexico were part of TPP and Canada was not.

My members have been extremely clear on this one point. As I said in my remarks, there's a big doubt as to whether TPP is actually going forward, but if it does go forward, the message I have received is that we have to be at the table; we absolutely have to be at the table.

There are mixed views as to whether TPP is a fantastic deal, a mediocre deal.... You'll get different, mixed reviews, but the view is unanimous that if TPP goes forward, we have to be in the game.