International Trade Committee on Feb. 16th, 2016

[Peter Fonseca, Liberal, Mississauga East—Cooksville, ON]

Thank you, Chair.

My question is around the TPP in regard to NAFTA. Would it supersede NAFTA in every way?

[Kirsten Hillman]

No.

[Peter Fonseca, Liberal, Mississauga East—Cooksville, ON]

No. Can you give us a little more insight into that?

[Kirsten Hillman]

We have many free trade agreements. We have the WTO agreement, which is a global agreement. We have free trade agreements with Chile, Peru, a variety of other countries, and of course, the NAFTA. All of those agreements coexist. The WTO agreement, for example, is an agreement that includes all the TPP countries. The NAFTA includes three of the TPP countries. Chile, in the TPP, has an FTA with every other TPP country, bilaterally, but will also have the TPP.

All of these international regimes coexist, just like municipal, federal, and provincial legislation coexist. The key is—and we always look at this when we're negotiating—to make sure there is no conflict between the two. If the TPP were to enter into force for Canada, a trader who is trading with Mexico or the United States would choose whether or not to take advantage of TPP rules, NAFTA rules, or WTO rules, depending on which provides them with the best framework for their trade.

[Peter Fonseca, Liberal, Mississauga East—Cooksville, ON]

My other question is in line with what Mr. Ritz was asking about in regard to levelling the playing field.

When we look at some of our agreements with developing countries, be it occupational health and safety, or food safety, etc., how are those issues addressed at the table?

When the standard is much lower with the bilateral...that we're going to do the agreement with, how are those addressed? Can you give me some insight into that?

[Kirsten Hillman]

Okay, sure.

There's a variety of ways. We have a number of trade agreements with countries that are structured very differently from us, that have different regulatory regimes, and have different levels of development. Often these areas that we're talking about, labour standards or environmental standards, are related to the level of development, so a free trade agreement seeks to set a standard.

Our environment and our labour side accords are now chapters under the CETA and TPP. For example, those are chapters within the FTA. They do a few things. They establish standards for environmental protection or for labour rights, and they provide a mechanism whereby if those standards are not being met, we have recourse. We are able to enforce, against that trading country, their enforcement of their own domestic standards.

[Peter Fonseca, Liberal, Mississauga East—Cooksville, ON]

Thank you.

[The Chair, Liberal, Mark Eyking]

Mr. Hoback.

[Randy Hoback, Conservative, Prince Albert, SK]

It's interesting that in the last eight years you have certainly been busy when you look at the number of agreements we've had in place and what's on the table now.

You made a comment about the importance of first mover. I think maybe just for the committee, it's good for them to understand what that means to Canada when we look at TPP, when look at CETA, when we look at NAFTA, and what that means to our industry, when we're the first mover, when we are aggressively signing these agreements, and the impact that it will have here at home.

[Kirsten Hillman]

I am happy to explain that. I think, as a very good example of first mover, we have a very practical example in Canada. First mover advantage is.... Trade agreements are designed to do a few things. They're designed to set out open, predictable, and transparent trading environments for our companies so that they know the conditions under which they're doing business and they can have some security around that. They're also about giving us a leg-up on competitors. If it is possible for trade for Canadian firms—the kinds that Susan and her team try to support—to have advantages in the marketplace, then that's also part of what we try to achieve through a free trade agreement. First mover advantage is the idea that if we get in with a partner and get some of those trade preferences and some of those established enforceable norms before our competitors, then Canadian businesses will have an advantage in that marketplace.

A very good example of that, or a counter-example of that, is the Canada-Korea relationship. Canada was negotiating a free trade agreement with Korea at the same time the United States was negotiating a free trade agreement with Korea. The United States agreement came into force before Canada's; therefore, the tariff reductions for the United States started to take effect before they started to take effect for Canada. Our Canadian exporters suffered because American products became less expensive in the Korean market, and the U.S. had a competitive advantage in the Korean market. The most striking example of that, and there are others, is our Canadian pork exporters. Within the first 12 months after the U.S.-Korea free trade agreement entered into force, when we didn't have one, they lost $1.5 billion in a year in export sales to Korea. That's because, to put it very plainly, U.S. pork was cheaper. We try to do two things in free trade agreements: to set predictable, open, reliable, socially responsible terms of trade, and to give our exporters an advantage in the marketplace.

[The Chair, Liberal, Mark Eyking]

Thank you very much.

We're getting close to the end here. Mr. Dhaliwal, you have a quick question and then you can jump in.

[Susan Bincoletto]

I just have a—

[The Chair, Liberal, Mark Eyking]

Sorry go ahead.

[Susan Bincoletto]

I don't want to say anything that minimizes the importance of trade agreements, but they only become valuable if our exporters actually do business abroad. That's where there is a flip side. You have a piece of paper that gives the predictability, but then it's a means to an end and that end is more exports and more activity from our companies. That's generally the FTA promotion that is part of Minister Freeland's mandate and it is extremely important. How do we get our companies to understand what the negotiators have been doing and take advantage? That is a whole suite of activity that needs to be done so as not to underestimate the investment that it takes to get our companies out there.

The same applies to attracting investment. When CETA is enforced we will have a comparative advantage because we could become the hub of European investment into Canada and take advantage of NAFTA as well, instead of going to the U.S. as it does now. In the comparison between the two, the U.S. will still be the U.S. It is about taking advantage of those agreements and how we try to better attract foreign investment into Canada, given that we know that foreign investment leads to a lot of economic and social benefits for Canada.

[The Chair, Liberal, Mark Eyking]

Very good information.

Mr. Dhaliwal, the last one to you, but it has to be a quick question and a quick answer please.

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

Thank you, Mr. Chair.

I want to finish off with a question I had about India.

[The Chair, Liberal, Mark Eyking]

Go ahead.

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

In the report “Doing Business 2016“, the World Bank ranked India 130 out of 189 when it comes to the ease of doing business, and India ranked 178 when it comes to enforcing those agreements. I well remember when we signed the free trade agreement with Colombia. I was on the international trade committee and I know we had a parallel agreement on environment as you mentioned. My first question is this. Do you agree with the report that those figures are right? How would you see doing free trade with India compared to other emerging markets like China? In your opinion how would you rank that?

[Susan Bincoletto]

Do we have an opinion?

[Voices]

Oh, oh!

[Susan Bincoletto]

You're the negotiator, Kirsten...but I think that raising the standards internationally is always a good thing. As Kirsten said, not every partner in trade negotiations is equal. Some take more time and more effort than others, but from a business perspective, I think that predictability, stability, and rule of law—all these things—matter. It is certainly worth the effort, regardless of which country we're talking about.

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

You haven't cleared my question. If we have free trade with India and China, what difficulties do you see there? Is that manageable? It's not just about holding the hands of the businesses and telling them go to India, China, or Colombia at that time. It's about making sure that the businesses that want to go there and do the free trade have the confidence that these three agreements we've signed, and the parallel agreements we've signed, are enforceable and can be dealt with. Do you see that?

[Susan Bincoletto]

It's a clear element of confidence for businesses when they know that there is that ability from the host country to abide by those rules. That's all I can tell you for that.

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

Is there any agreement—

[The Chair, Liberal, Mark Eyking]

You're going to have to—