International Trade Committee on Feb. 16th, 2016

[Steve Verheul]

I wouldn't want to speculate, because this is still under design, but I would assume that the most likely outcome would be some kind of payment to provinces and territories to offset those additional costs. It's certainly been discussed in the past.

[The Chair, Liberal, Mark Eyking]

You have another half a minute, if you want to use it.

[Tracey Ramsey, NDP, Essex, ON]

I don't think I'll get in a question and answer in half a minute, but thank you.

[The Chair, Liberal, Mark Eyking]

Well, whatever you want, Ms. Ramsey; go for it.

[Tracey Ramsey, NDP, Essex, ON]

Okay.

In terms of the way in which our dollar is currently playing against the U.S. dollar, you mentioned how important our trading partnership is with the U.S. I'm wondering what types of provisions you're looking at, going forward and under current agreements, that will address the issue of the dollar being at the level it's at right now.

[David Morrison]

Our chief economist, who specializes in the strength of the Canadian dollar, is also here.

Let me just say that obviously in some sectors of the Canadian economy a cheaper dollar is very beneficial. It should also lead, over time, to greater inward investment into Canada. André can speak to the issues around why the dollar is at the strength it is right now, but in terms of Canada-U.S., historically a weaker Canadian dollar has led—not across the board but in certain critical sectors—to increased exports as well as to making inward investment into Canada more attractive to investors from the United States.

[The Chair, Liberal, Mark Eyking]

Thank you, Ms. Ramsey.

We'll move now to the Liberals.

Madame Lapointe, you have six minutes.

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

Good morning, everyone.

Thank you very much for being here today.

Mr. Morrison said earlier that the United States was our largest market. Unless I am mistaken, it accounts for 75% of our exports. We have a trade agreement with the U.S. and Mexico.

Many entrepreneurs or manufacturers often talk to me about the Buy American Act, which makes things much more difficult for them. Are those the kinds of difficulties you were talking about? Can you say more about that to help me better understand the Buy American Act when Quebec manufacturers bring it up?

[David Morrison]

Thank you very much.

I once asked....

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

It's okay if you answer in English.

[David Morrison]

Okay, thank you.

I'll take the first cut, and then I'll turn to my colleagues.

Yes, “Buy America” is one of the irritants I talked about. The figure I cited was that actually 77% of all of our merchandise exports in 2014 went to the United States, so it is by far and away our largest market. Amidst that thriving trading relationship, irritants do come up from time to time. Buy America is one of them.

To clarify, there is no single Buy America act. Buy America has to do with government procurement. Some of what we generically call Buy America is at the federal level. Some of what we call Buy America is at the state level. Sometimes it's a municipal stricture that the procurement into any government works project must come from the United States.

With that as a chapeau, let me turn to whoever is our Buy America expert—irritant expert.

[Kirsten Hillman]

I would like to say a bit about the way we are addressing this issue from a trade policy perspective.

We hold discussions with the United States as part of our overall relationship. We also try to talk about this in trade negotiations or policies, which come under our responsibility.

Normally, we have to deal with the U.S. federal government, and not with the states and municipalities. In Canada, the vast majority of public markets are at the municipal and provincial levels. The discussions we hold with our negotiating partner, the U.S. federal government, may focus on policies that make it possible to distribute money to other levels of government only when they are subject to certain conditions, such as an obligation to have a certain percentage of American content in order to receive funding. The Buy American program has to do with international trade policies. We have to deal with those policies.

Those policies have been a concern for us over the past 20 years because they have an effect on our value chains, which are established based on certain relations, and these kinds of policies break the value chains. We engage in a great deal of discussions with the Americans to talk to them about economic consequences and tell them that this is not good for them or us.

Furthermore, from a legal standpoint—in other words, when it comes to international trade rules—we have very little recourse, as this does not violate the current rules laid out in agreements such as NAFTA, or those enacted by the WHO or others.

We especially need to address these issues by trying to raise awareness during our conversations with the Americans. We do that on departmental, political and governmental levels, as well as through our embassies and consulates in the United States. We use all means available. We even use our private sector stakeholders to do so.

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

So, this applies when it comes to government contracts. If the contracts are private, it does not apply.

What can Canada do to balance things out for its companies? It seems that Canadian content is not always requested. We don't require the same thing from our manufacturers when it comes to government contracts.

[Kirsten Hillman]

That is correct as far as I know, but I am not an expert on the topic.

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

According to my information, the U.S. has that requirement, but Canada does not.

[Kirsten Hillman]

My understanding is that we indeed do not have that requirement, but it could be a possibility.

Moreover, we also have to know that this kind of a policy contributes to increasing costs in a country like ours, which is much smaller. Our manufacturers have fewer resources. When we discuss policies, it would be important to consider all those aspects.

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

Thank you very much.

[The Chair, Liberal, Mark Eyking]

Thank you, Madame Lapointe.

That concludes our first round. We're going to go to our second round. The first three questions will be six minutes, and we'll go Liberal, Conservative, Liberal, beginning with Mr. Peterson.

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

Thank you all for being here today. I have a few questions.

Mr. Morrison, you mentioned the size and strength of the Canadian-U.S. economic relationship and how it's becoming strong. However, there's also some evidence that since the economic crisis, it has diminished somewhat. I wonder if you have any thoughts on how we're going to build it up to the levels it used to be at before that, and if there's anything we can do with Mexico as a partner to try to get it back to the stage it used to be at.

[David Morrison]

Thank you.

I'm actually not aware of the economic relationship having diminished. It certainly dipped after the financial crisis of 2008. Economic activity overall slowed down. My recollection is that the figure I cited for 2014 merchandise exports, so not even including our trade and services, was about par for the course and higher than it's been in recent years. So, if anything, there's been a bit of an uptick.

The same holds true for Mexico, where I think we certainly believe there is a considerable amount of untapped potential. I said in my prepared remarks that Mexico and Canada have become each other's third-largest trading partner. I know for Minister Freeland and the government, that stepping up relations with both the United States and Mexico is a priority, not only in terms of the trading relationship but certainly leading with the trading relationship. NAFTA is, of course, the foundation for the trilateral relationship, so it's certainly something that our department is very seized with and will continue to pursue in the months ahead as we look towards the coming visit to Washington and increased activity on the trilateral front as well.

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

Perfect. Thank you.

In the material prepared for our meeting, there was a reference to a North American Leaders' Summit, which is going to be hosted here in Canada this year. I'm wondering if you could elaborate on what sort of agenda and what priority items we're going to be pushing at that meeting.

[David Morrison]

The summit happens not every year but most years, or it has happened most years, or every year or two, for the past decade or more. It's colloquially known as the “three amigos” summit. The last time it took place was in February 2014 when the Mexican president, President Pena Nieto, hosted in his hometown in Mexico. The agenda tends to focus on economic prosperity. That's the essence of the ties that have bound the three countries together ever since NAFTA came into force 21 years ago. There are, of course, also larger environmental issues. I think you'll see climate change featuring heavily on the agenda this year. The new government has come into office and will be pursuing a North American clean energy and environment agreement within the trilateral context.

Security issues are always at the fore. The U.S. has concerns about both its southern and its northern borders. Increasingly, I think you'll see an emphasis on North America as an actor in international affairs. I think you would have seen some of this coming out of the recent North American foreign ministers' meeting in Quebec City, which took place two weeks ago, at which the three foreign ministers in their statements mentioned Colombia and the peace process there. They mentioned Central America, and they mentioned the Carribean. Increasingly I think you'll see the three North American countries talking about their neighbours.

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

Thank you.

Do I still have time?

[The Chair, Liberal, Mark Eyking]

You still have time.

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

On that note, maybe my friend from the NDP on this committee might appreciate this question. Given the importance of the Canada-U.S. relationship, do you have any sort of brief update or any new information to add about the Ambassador Bridge and how things are progressing on that?