International Trade Committee on May 13th, 2016

[Jacqueline Wilson, Counsel, Canadian Environmental Law Association]

My name is Jacqueline Wilson. I'm a lawyer with the Canadian Environmental Law Association. We are an Ontario legal aid clinic specializing in environmental law and policy, and we have a long history of analysis of the environmental implications of trade agreements.

I'm going to focus my presentation today on two issues to do with the environment chapter of the TPP. The first issue is the weak and unenforceable language throughout the chapter, and the second issue is the dispute mechanisms, both the state-to-state dispute mechanisms and the citizen dispute provisions.

I go into more detail about these two issues and other issues, including the limited coverage of the chapter, in a paper called, “Bait-and-Switch: The Trans-Pacific Partnership’s Promised Environmental Protections Do Not Deliver”, which is available on the Canadian Environmental Law Association's website and the Canadian Centre for Policy Alternatives' website.

Our conclusion after analyzing the environment chapter is that it does not safeguard the environment or promote effective environmental protections. It's not going to counteract the negative environmental implications of other provisions of the TPP, including the investor-state dispute settlement provisions. The vague and discretionary language in the environment chapter is exemplified by the general commitments section, which allows each party to determine its own levels of domestic environmental protection and its own environmental priorities. The overall principle reflected throughout the chapter is that state sovereignty is unviable if you're talking about setting levels of environmental protection.

That approach is to be compared with the fact that strong environmental measures taken by a TPP party, which might interfere with trade or investment, are exposed to challenge under the investment chapter.

Article 20.15 of the environment chapter is also of particular concern. It deals with the transition to a low emissions and resilient economy. In a fairly shocking act of climate change denial, the words “climate change” aren't used in this section, or at all in the TPP. Instead the TPP recognizes that each party's actions to transition to a low emissions economy should reflect domestic circumstances and capabilities. That's at odds with the government's commitment to take climate change action seriously, and its commitments in Paris.

The other specific article I want to bring to your attention in the environment chapter is article 20.10, which deals with corporate social responsibility. It raises significant equity issues because of the radical difference between the strong, enforceable rights for investors in the ISDS scheme, and the essentially meaningless requirements of this section, which asks each TPP party to encourage enterprises to voluntarily adopt principles of corporate social responsibility, and that's it.

In terms of the dispute resolution mechanisms, the primary weakness of the state-to-state dispute mechanism is that it depends on the political will of the parties to enforce the chapter. That's an approach we've seen before in trade agreements, and it hasn't worked.

The system includes three levels of confidential consultations, so the public won't know that those consultations are taking place. If the dispute settlement provisions are used—which hasn't been the case in the past, and there is no real reason to think things will change with this agreement—then public participation is not assured. The arbitration panel must consider requests to participate only for non-governmental entities or persons in one of the disputing parties, and it's only written submissions. The documentary disclosure provisions are quite limited, so the TPP parties are asked to make best efforts to release written submissions and oral submissions as soon as possible. There is no specific timeline.

Article 28.13(d)(ii) contemplates that some documents won't be released until right before the final report is issued.

[The Chair, Liberal, Mark Eyking]

Ms. Wilson, you have half a minute to wrap up, please.

[Jacqueline Wilson]

The citizen complaint provisions are also quite weak. Again, only a person of a party can challenge its own government's implementation, it is only by written submissions, and the TPP party is only required to respond “in a timely manner”. Once that response takes place, there's no opportunity for the citizen to follow up. It would take a TPP party to take up the complaint and request that the environment committee continue to review it.

Our analysis here is that the environment chapter doesn't protect the environment, it won't likely be enforced, and it's not nearly strong enough to counteract the environmentally detrimental provisions elsewhere in the TPP.

Thank you.

[The Chair, Liberal, Mark Eyking]

Thank you.

We're going to move over to the Canadian Music Publishers Association, Mr. Hutton, for five minutes.

Go ahead, sir.

[Robert Hutton, Executive Director, Canadian Music Publishers Association]

Thank you, Mr. Chair. Thank you for having me today. I appreciate it.

Music publishers are businesses that own, administer, and control the rights to musical compositions. These compositions are the foundation of the entire music industry. The music industry in Canada represents more than $4 billion of economic activity annually. A recording is an end; a live performance is an event; but without a musical composition, neither of them can take place. There are no music recordings without a composition; there are no live performances without a composition; there are no jingles on advertisements; there are no soundtracks to movies. There is nothing in the industry.

Therefore, the music publisher has perhaps one of the biggest interests in the IP provisions of the TPP, and certainly in the term extension provisions in the TPP, because they own and administer that musical intellectual property. It's the bedrock of the entire music industry.

We will primarily focus our comments today on the term extension provisions of the TPP. We know that they have been very controversial. We know that there have been some strong opinions expressed. We hope to perhaps debunk a few of the opinions that have come before you.

We have no opinion on the broader provisions of the TPP; that's not our issue. Our goal is to address those misconceptions and some misrepresentations by people we may best describe as copy fighters, which is an interesting term.

First of all, there's a myth that extending copyright terms will be costly to consumers. That is in fact not the case at all. It will not cost the consumer, at least not the consumer of musical works. It won't cost them one cent. The New Zealand and Australian studies that have been cited are based on a 20th-century consumer “packaged goods” model of music consumption that frankly no longer exists and certainly, by the time term extension really has any meaningful impact, won't exist at all. It's 2016. That's the environment we operate in, and those models are based on people continuing to purchase music as a physical product in a store or online.

Third, extending term is not about the heirs. It's not about “life plus 50” or “life plus 70” and some music writer's great-great grandchildren by their third marriage getting a whole windfall of money. That's certainly not the case. It's about creating a secure financial instrument for music publishers—Canadian companies—to invest in. Extending the term increases the value of that financial instrument, which they can leverage to invest.

Music publishers, that are mostly affected by term extension, are investing in Canadian artists—Canadian songwriters in the Canadian industry—and term extension gives them an instrument with which they can invest further. Publishers invest more in talent development than any other element of the music industry, including record labels. Term extension gives that asset greater long-term value to leverage and invest.

You've probably heard that term extension will make it more difficult for the next generation to create new works. We don't understand how extending the pool of investment capital available could possibly do that. It's just counterintuitive. It does not.

We've heard about DRM provisions that could possibly block experimentation and innovation. Well, they do block innovation that's based on intellectual property theft; they absolutely do that. That's not innovation, no matter how much the average consumer may like easy, convenient, free access to the contents that such innovators exploit. The fact is, DRM enhances investment in that same intellectual property that the innovator in every case basically wishes to exploit for free.

[The Chair, Liberal, Mark Eyking]

You have half a minute, sir, to wrap it up.

[Robert Hutton]

I will try to be fast.

The elephant in the room is the notion advanced that consumers will suffer. This is simply false. The physical scale model has been replaced by a streaming model. Buying music will be supplanted long before any hypothetical consumer impact takes place.

The Canadian business model is based on investment at the bottom level, and music publishers are doing that. Today we can buy a song from a wide variety of sources for 60¢. There's no reason to believe that extending term provision will have any meaningful impact on a consumer. It enhances the ability of Canadian companies to invest in developing Canadian culture further over the long term.

Thank you very much Mr. Chairman.

[The Chair, Liberal, Mark Eyking]

Thank you, sir.

We're going to move on now to UPS Canada.

Ms. Falcone, go ahead, for five minutes.

[Cristina Falcone, Vice-President, Public Affairs, UPS Canada]

Thank you, Mr. Chair, and committee members.

Good morning. My name is Cristina Falcone, and I am honoured to be here to testify on behalf of UPS Canada, our over 12,000 employees, and the thousands of businesses and consumers we serve across the country.

As a global logistics company, UPS has watched businesses grow from tiny home operations to companies with formidable reach outside their borders. For Canada, like other countries, the new digital economy is shaping the way we do business, and with that comes a tremendous amount of potential to tap into markets and production chains all over the world.

At the same time the global trade economy grows, there is a pressure on Canada to stay relevant. The majority of the world's growth is happening outside of the Canadian border, and that isn't going to change. Canada is facing a significant aging population whose consumption tends to drop after retirement. In addition, as witnesses stated this morning, the role of imports to Canada for Canadian manufacturers and business is just as important and impactful as exports.

Compare this with Asia, where by 2030 there will be 2.7 billion middle-class consumers. For Canada, one of the main attractions of the TPP is enhanced trade access to emerging dynamic markets. As emerging market consumers enter the middle class, they become interested in purchasing the goods and services that Canada has to offer, including energy and food products, as well as financial, business, and construction services.

TPP is a comprehensive and modern international trade agreement that will give Canada the competitive edge it needs, offering Canadian companies preferential access to a market of 792 million people, and close to 40% of the world's economy. TPP countries comprise some of the fastest growing markets in the world, as well as two of the world's three largest economies. We see this as a key opportunity.

UPS is the lead partner and mentor in the Toronto Region Board of Trade's trade accelerator program, which you heard about this morning, as well as other similar programs in conjunction with the Canadian Manufacturers and Exporters, and Startup Canada. In the past six months, UPS has delivered go global boot camps in over seven locations across Canada. Our model is to clearly communicate the provisions of trade agreements and global purchasing trends, and help companies use these changes and information to gain market advantage.

TPP will begin to open doors for smaller players across all the member countries. Without TPP, we could eventually find ourselves on the outside looking in. As emerging markets take their places at the table, global trading is taking on a shape the world has never seen before.

At UPS we operate around the world, and as supply chains become increasingly global, we see that North America, South America, Europe, and Asia will be important all at the same time. If Canada wants to compete in that world seamlessly, including maintaining our important trade relationships with the United States and Mexico, and with leverage, TPP must be approved.

I've touched on why this deal is important for access, but the content of the agreement is equally important. It will bring much needed modernization to international trade policy. It is a deal custom crafted to the opportunities and demands of a networked world.

It eliminates thousands of taxes in the form of tariffs, making Canadian businesses more competitive. It was built for the needs of digital commerce, with the standards to make sure trade rules recognize the power of growth and the special demand of an increasingly interconnected consumer-driven world. Importantly, it cleans out the clutter at customs, with fewer documents and more electronic processes and clearance, to help goods pass through customs more easily and get to customers faster.

For the first time in any trade agreement, it has a chapter devoted exclusively to small business. The Internet has turned the barriers to SMEs reaching global markets into on-ramps, but what technology offers, outmoded border processes often deny. Opaque regulations, complex paperwork, and slow delivery of small shipments all conspire to cause SMEs not to venture across borders. At UPS we have seen that even small companies, once they decide to move beyond their borders, grow at faster rates and often become our largest customers that we service in Canada. The agreement addresses many of the issues with customs clearance certainty, alignment of regulations, and national treatment, which will begin to open doors for small to medium-sized businesses in Canada, letting them drive growth and create jobs.

With the TPP, Canada has the opportunity to expand its economic partnerships. We also have the opportunity to shape the rules now that will govern trade relationships in the 21st century. One thing is certain, while we review the provisions of this trade agreement, and weigh the risks and the benefits, global commerce won't hit the pause button.

[The Chair, Liberal, Mark Eyking]

You have about half a minute. Go ahead, if you want to wrap up some comments.

[Cristina Falcone]

As we're reviewing all these provisions, global commerce continues. It is our opinion that we need to expedite the opportunity to enable small businesses to grow.

[The Chair, Liberal, Mark Eyking]

Thank you.

Thank you, panellists, for being on time.

Moving on, we're going to now have some dialogue with the MPs. We're going to start off with the first five minutes going to the Conservative party, with Mr. Hoback.

Go ahead, sir.

[Randy Hoback, Conservative, Prince Albert, SK]

Thank you, Chair.

Thank you witnesses.

Ms. Falcone, you touched on something that maybe we haven't talked enough about, the actual process of taking stuff across the border and the paperwork and the ability to get goods shipped in a speedy fashion. We had fruit producers before us yesterday saying that it was vital to their industry that they not have a shipment of lettuce get held up at a border for a week or two because of improper paperwork or just the functionality of the border.

How does TPP assist you in making sure that Canadian goods that are bought—you used the example of Internet goods, small goods, small manufacturers shipping stuff across the world into TPP countries.... How does it make it easier for them to get their goods into other areas?

[Cristina Falcone]

We call this the modern trade agreement because it is addressing many issues that previous agreements did not, including NAFTA. There's a lot of work right now with the Beyond the Border agreement and various working groups to address what wasn't included in NAFTA, because commerce has changed. There's actually a whole new customs chapter in this agreement that addresses many of these issues.

For example, electronic pre-arrival processing and clearance goes beyond the WTO trade facilitation agreement, which only commits parties to pre-arrival processing of information. That gives the certainty that by the time a shipment has arrived at the border, it has been cleared. It gets rid of that holdup...time release guarantees. We always look at customs provisions in terms of how they are going to make Canadian companies more competitive in the markets we're competing with. Having that time release gives them time-in-transit advantage.

Also, there is a de minimis provision in this as well whereby each country is going to look at what the threshold is that they set as duty- and tax-free and come up with an economically viable figure for it. This helps with the low-value, smaller shipments, which we often seek from small businesses as an entryway, selling online. We work with Mompreneurs; we work with various companies, such as eBay Canada, that are starting businesses from their homes. It's often these low-value shipments that, when they get caught up, can make a difference to their success or otherwise.

[Randy Hoback, Conservative, Prince Albert, SK]

When you looked at the history of the customers you have here in Canada, you made a comment about how you've seen them grow and how exports have driven that. Can you give us a couple of examples of these?

[Cristina Falcone]

Sure. I won't name them, but I can give you an example of recent companies that we've met with.

We had one recently speak to management at our organization. It's a tea company. They're tea manufacturers, and they started in their home. Then they started to expand beyond their borders and now they're shipping all over the world.

One example he gave was that they actually had to pull out of selling into Australia because of customs issues and market entry issues. We asked them what the key markets they were looking at were, in terms of growth. They were Chile, Peru, Australia. This is one example of how the provisions in this customs chapter in the agreement can help this already successful company grow even further.

Other organizations that we've helped started in the basement of their company: fine scents, ranging from even gluten-free products and food to a company in Alberta....

The main thing we ask them is what is hindering their success. It's the non-tariff barriers, as we've heard from other witnesses this morning. That's why we place such a strong focus on that.

TPP does certainly reduce tariffs in key markets such as Vietnam and Malaysia, but it's really those non-tariff barriers that are going to help the SMEs grow. It's the non-tariff barriers that cause them to pull back from global trade when they receive that heads up, because they don't have the resources to deal with the issues.

[Randy Hoback, Conservative, Prince Albert, SK]

On those non-tariff trade barriers, then, in TPP we have a mechanism to deal with those situations, if something should come up. Is that correct?

[Cristina Falcone]

There are provisions in there to prevent those barriers from happening in the first place—the friction.

[Randy Hoback, Conservative, Prince Albert, SK]

Mr. Hutton, concerning IP protection we heard a witness in Quebec City saying that we shouldn't worry about life plus 70, because that's the norm throughout the world now.

Is that a fair comment? Would you agree with it?

[Robert Hutton]

Absolutely.

As a matter of fact, the Organisation for Economic Co-operation and Development worldwide has cited Canada as one of the weakest jurisdictions for IP protection, purely because life plus 70 isn't in effect in Canada.

[Randy Hoback, Conservative, Prince Albert, SK]

Do you know what “freedom to operate” means?

[Robert Hutton]

Yes

[Randy Hoback, Conservative, Prince Albert, SK]

Do you believe in freedom to operate?

[The Chair, Liberal, Mark Eyking]

Mr. Hoback, you have 15 seconds left.

[Randy Hoback, Conservative, Prince Albert, SK]

As far as freedom to operate, do you believe that should be a policy Canada should have?