International Trade Committee on May 13th, 2016

[Prof. David Schneiderman]

Okay.

In terms of investor-state arbitration, it would mean that NAFTA would continue to control those kinds of disputes.

As for larger questions around trade relations, pharmaceuticals, and everything else, I think you have to weigh that question.

Insofar as we're talking about investor state, TPP just expands the business to more states, with more opportunity to cramp the policy space of Canada. That's what we're doing.

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

Okay.

We all know that there are presidential elections across the border to the south.

If the agreement were reopened, how would you change it? I heard you talk about your fear of drug prices skyrocketing. What changes would you like to see made to the agreement that is being proposed right now?

[Dr. Joel Lexchin]

There are a number of clauses in there.

First of all, there is the one about patent term extension. Currently, patents are valid for 20 years from the date of filing. The TPP doesn't give a number, it would probably add two years of patent life, which means that would delay generic drugs coming on the market for two years. I would get rid of that.

There is a provision there that allows drug companies to continue to market their products through their websites to consumers. If you look at information from the United States, you can see that there are a large number of warning letters that the U.S. Food and Drug Administration has to send to these companies because they either don't mention safety information or they exaggerate the effectiveness. I would eliminate that clause in this agreement.

I would also carve out pharmaceuticals from the ISDS provisions so that companies could not do what Eli Lilly, for instance, is doing right now.

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

Thank you.

My next question is for you, Mr. Wildeboer.

You said that your company has to be where your clients are. You also said that one job in assembly plants indirectly generates seven to 10 jobs. If we lose an assembly plant—yesterday, we were in Windsor—will we automatically lose seven to 10 indirect jobs for every job lost?

[The Chair, Liberal, Mark Eyking]

Please, half a minute.

[Rob Wildeboer]

The multiplier effect—and there's a lot of data on this from an auto assembly plant—is quite large. If you have an assembly plant with 3,000 employees, you're probably employing 6,000 supply jobs, and then you're looking at the jobs that are created when you're building the schools, and the Tim Hortons, and construction, and all that type of stuff.

As assembly plants leave, you will lose those other jobs.

[The Chair, Liberal, Mark Eyking]

That wraps it up.

We're going to go over to the Conservatives for five minutes.

Mr. Ritz, you have the floor.

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

Thank you, Mr. Chair.

Thank you, gentlemen, for your presentations today. You're certainly well-spoken advocates for your viewpoints.

I won't disagree with what you have said, because you're certainly passionate in what you bring to the table. There are always opposing points of view, and it's our job to find some balance in the middle that seeks to build the Canadian fabric and make us stronger as a country.

We are part of a global supply chain regardless of what particular enterprise you want to look at, and having the ability to have rules and regulations from some of our trading partners I think strengthens that, because we need that predictability and stability to build the Canadian fabric, but it's about how we come to those terms and how we put those into play.

Mr. Wildeboer, I want us to help you celebrate your success. We heard from Jim Balsillie from RIM that you're an anomaly. You can't happen. He said under the rules of play we have now in Canada, you shouldn't exist. I want to celebrate your success in doing that.

[Rob Wildeboer]

He mentioned our company?

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

Not you particularly, just that any Canadian company is at such a disadvantage.

I do want to talk to you about this whole idea of Canada moving away from the 6% tariff over five years, as opposed to the U.S. doing it over 25 years.

Does that not create a path of least resistance for investment in Canada from companies, say Japanese or Korean for that matter, that want to access, through the NAFTA channel, the U.S. market simply because they can't do it directly?

[Rob Wildeboer]

I always have to be a little careful because the OAMs happen to be my clients or customers.

The reality is that a lot of it is quite overblown. The reality is the OAMs are here, and they want to sell product to our customers. I have said in the past I like the idea of what we did in the Auto Pact in 1965, which is that if you want to sell here, you have to produce here.

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

Right.

[Rob Wildeboer]

That's a stick that we've lost, but I would suggest that people look at potential sticks when you have that discussion.

I do think the auto OAM that leaves Canada and shuts down the plants will probably suffer from fewer sales in Canada because it will be viewed in a particular way.

Even when you look at it from the auto parts side, it says 62.5% of the parts have to be North American produced. Now it's down to 40%, and we should all throw up our hands. Ultimately you have to be competitive.

The fact is the auto parts from other places were nowhere near 37.5%. Auto parts from China in North America are around 2%.

There's a lot of discussion and rhetoric as far as that goes. To me, in order to have an industry, you have to have an assembly base, you have to have customers that you sell to, and you have to be competitive. If you're competitive it doesn't matter what the agreement says. You're going to win jobs, and you're going to provide job security for your people.

That is the way it is.

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

Sure.

You answered my next question already on content.

The other issue I would talk about—and we heard this from some other witnesses along the trail that we've had for the last few weeks—is that Japan is lacking expertise. They're lacking people to continue to build their global platform, so they're looking at countries like Canada, which is well known for our expertise when it comes to assembly and auto parts. We've seen that now, and you mentioned the great work Ray Tanguay did in bringing those investments to Canada.

Can you see more of that type of thing happening? The Japanese recognize the skilled workforce we have here and our ability to reach global markets, and they will start to expand their platforms here as opposed to doing it in Japan where they don't have the people, literally.

[Rob Wildeboer]

Ray has done a good job bringing work to Canada. I think he's a great Canadian. He's my co-chair on the investment committee for CAPC, so I have to say nice things about him, and I do. He's a real champion for Canada.

Take a look at what General Motors is looking at. I'd like to see them on the product mandate in Oshawa. They do a lot with technology. Leading-edge lightweight technology is here, and what they're saying internally is—and they compete for mandates in their worldwide enterprises—there are more Ph.D.s in artificial intelligence in Canada than anywhere else in the world.

That's the type of thing that sells the future.

At the end of the day we don't just want to create little research centres. We want to have research centres tied with production capacity, because in innovation—and we have an innovation agenda—two-thirds of the innovation in our industry tends to be processed innovation, and you can't improve what you're making unless you're making stuff here in the first place.

That's why it is so important to make things.

The United States has figured it out with a reshoring of manufacturing. The President is focused on that. We have to focus on that as well.

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

We heard that this morning too from UPS, that business draws business. More people locate here and they calculate it on a parcel-shipment basis.

Thank you for your input.

[The Chair, Liberal, Mark Eyking]

Mr. Ritz, the time is up.

We have enough time for two more three-minute slots.

Mr. Peterson, go ahead for three minutes.

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

Thank you, Mr. Chair.

Thank you, everyone, for being here. I appreciate your comments all coming from diverse perspectives and focusing on certain issues.

Mr. Wildeboer, I want to ask you a quick question. I know we've talked about the Stiglitz and Tufts studies many times. Those say there will be a net job loss, but I think we have to bear in mind that analysis was comparing the status quo, i.e., no TPP, of all 12 countries entering the TPP.

I think our analysis needs to be on what we will do if the U.S., Mexico, and Japan enter the TPP and Canada doesn't. There hasn't been an analysis of that, but I think we have to look at that.

Mr. Wildeboer, you mentioned that would be suicidal to the manufacturing industry in Ontario. Can you expand on that a little bit?

[Rob Wildeboer]

Well, suicidal is a big word, but it kind of gets your attention.

It's silly. Let's take the automotive industry, but it's true of manufacturing as well. We make things together; it's a seamless industry. The typical vehicle has parts that cross the border 11 times. If you buy a vehicle produced in Oshawa, it has a lot of U.S.-made parts. If you're looking at a vehicle produced in St. Louis, it has a lot of Canadian-made parts. Things go across the border all the time. We effectively have free trade in our industry.

In that sense, I think we've grown as a trading nation. I would just say pension funds, at the end of the day, benefit from free trade agreements, because most of their investments, including the ones that you're mentioning, are outside of the country. They're investing in different places.

That's one of the ties of the free trade agreement. You invest here; I get to invest over there. I have a lot of funds to invest. If you look at foreign direct investment by Canadians internationally, it is higher than direct investment in Canada. Right at the top of the list of the guys doing that are our pension plans.

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

Thank you for that.

Professor Schneiderman, I appreciated your insight into the ISDS, and I agree it's a complex system that's been derived over the past 30 to 40 years, probably right back to NAFTA. I also appreciate that you acknowledged there are other perspectives as well.

I spent a few years in commercial litigation, and the courts don't always get it right either. There are always flaws in any system.

I'm curious to hear your brief opinion on the ISDS provision in CETA. It has been, as you are no doubt aware, somewhat changed from what we would find in TPP and NAFTA. Do you think that trend is a step in the right direction?

[Prof. David Schneiderman]

First, I wouldn't analogize investment arbitration to private arbitration around divorce proceedings or commercial arbitration. This concerns state policy space. It concerns the ability of the government to enact laws in the public interest. It's not about division of property upon marital breakup.

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

I appreciate that.

[Prof. David Schneiderman]

It's a very different system.

The CETA model is a modest improvement. It's only modest because the immense amounts of discretion handed over to investment lawyers remain under the CETA model. People are on retainer, but they're the same people who are giving rise to complaints about problems associated with ISDS.

[The Chair, Liberal, Mark Eyking]

Thank you, sir.

I'm going to move over to Mr. Hoback for three minutes.

Go ahead, sir.

[Randy Hoback, Conservative, Prince Albert, SK]

Thank you, Chair.

Thank you, witnesses, for being here this afternoon.

Mr. Wildeboer, yesterday we asked another parts manufacturer why these plants were locating in Mexico, and one of the answers was that it was a combination of the free trade agreements that Mexico had plus power costs plus a variety of things.

If we're going to land these other global platforms into the future, what do we as Canadians need to provide besides market access? I'm talking about CETA and the TPP. Those involve market access for sure, but what else has to be in that equation to allow that to happen here in Canada?