International Trade Committee on Feb. 16th, 2016

[The Chair, Liberal, Mark Eyking]

Good morning, everyone.

Welcome back, committee. Hopefully everybody had a good week in their ridings. As many of you were here at our last meeting, you know we have a pretty ambitious schedule. This is going to be a very important committee, especially with Canada being involved with all the trade. We have the officials here today. They're going to be giving a snapshot of Canada and the world and where we're at in trade. It will be anything about trade except TPP, because we're going to be doing TPP on Thursday.

We'll see how it goes and if we can get done 15 minutes early, say 10:20 or 10:30, then we can do new business in the last 15 minutes. Does everybody agree that if everything goes well and we've heard everything we need to hear, we'll ask the witnesses to leave around 10:15 and we'll go to new business?

[Some hon. members]

Agreed.

[The Chair, Liberal, Mark Eyking]

We have some agenda for Thursday, but I think we should discuss other issues. Unless there are any other questions from the committee, we are ready to go.

Welcome, witnesses. Thank you very much for coming. Hopefully you didn't have to go through too much snow to get here. It's good to see you here.

We're not set on any specific time, but if you can do it in 15 minutes...or if it takes a little longer, whatever. Just remember, some of us are new on this committee and some of us are new MPs. Just assume that we are all very new to trade and we have a very limited understanding of what's going on with Canada and the world.

The floor is yours.

[Susan Bincoletto, Assistant Deputy Minister, International Business Development and Chief Trade Commissioner, Department of Foreign Affairs, Trade and Development]

Thank you very much, Mr. Chairman, and thank you for the invitation. We're very pleased to be here in spite of the snow.

My name is Susan Bincoletto. I am the assistant deputy minister at Global Affairs Canada, responsible for business development. The responsibility I hold is chief trade commissioner, which means that I am responsible for all the trade commissioners around the world that serve Canadian companies to do business abroad and to attract investment into Canada, so it's more the trade and investment promotion side of it. I am the functional lead on the promotion side. My colleagues will introduce themselves. We each have distinct responsibilities, but always dealing with trade.

I am happy to be here today to introduce Global Affairs Canada's presentation on the subject of Canada's trade and investment priorities.

I understand that committee members have asked details of recently concluded free trade agreements and issues related to the Canada-U.S. relationship. I am accompanied by colleagues who are able to provide information on these subjects.

But first I would like to set the context by providing you with an overview of where we are at in terms of advancing Minister Freeland's mandate commitments, which include the development of a new trade and export strategy for Canada.

We are all aware of the importance of international commerce for the Canadian economy. Let me give you just a few facts. There is a limit, obviously, to the growth that Canadian companies can achieve, given the size of our own market. Generally, firms that export are more productive, more innovative, and pay higher wages. Foreign investment, both inward—which brings new capital to Canada—and outward, provides an opportunity for firms to grow, to become more productive, and to develop stronger capacity for R and D. Ultimately, consumers benefit from better selection and lower prices.

There are many opportunities in markets abroad that map directly to some of Canada’s strengths. The trade commissioner service, which I head, helps Canadian businesses of all sizes across Canada to identify and take advantage of these opportunities, which in turn helps grow our trade and increase prosperity. The trade commissioner service delivers, for example, the CanExport program that was recently launched by Minister Freeland. CanExport will provide up to $50 million over five years in direct financial support to small and medium-sized enterprises in Canada who seek to develop new export opportunities, especially in high-growth priority markets and sectors.

Risks in the global economy require, however, that Canada step up its game. The new strategy will be a comprehensive approach that works across all orders of government to increase Canada's trade and attract investment.

As outlined in Minister Freeland's mandate, the strategy will include renewing efforts on attracting foreign investments; working with Canadian businesses to help them realize fully the advantages of free trade agreements, focussing on those that have been concluded and are in force such as the Canada-Korea Free Trade Agreement; as well as targeted strategies for emerging markets, focussing on Asia. The strategy will also look at our programs and services and ensure they are leveraged with those of our partners.

Work is well underway. The department is undertaking an assessment of the previous strategy and existing programs to get a sense of what has worked and what hasn't. There will also be a consultation process associated with the strategy to ensure that the viewpoints of stakeholders and business needs are reflected.

Once the presentation is complete, my colleagues and I will be happy to answer any questions you may have on the overall trade agenda and our work on the development of a new strategy.

I will now turn to Kirsten Hillman, our chief trade negotiator for TPP, among other things, to provide detail on trade policy.

[Kirsten Hillman, Assistant Deputy Minister, Trade Agreements and Negotiations, Department of Foreign Affairs, Trade and Development]

Thank you very much.

Thank you, Susan.

I am Kirsten Hillman, acting assistant deputy minister for trade negotiations. I'm also Canada's chief negotiator for the Trans-Pacific Partnership. I'm here with my colleague, Steve Verheul, who is our chief negotiator for the Canada-Europe trade negotiations, the CETA.

I am very happy to be here today to provide an update on Canada's trade and investment negotiations, as well as on how we are working to resolve some trade policy issues.

Canada seeks to maintain a level playing field with our competitors and open new markets for Canadian businesses through a range of trade policy tools including: multilateral, bilateral and regional negotiations, foreign investment protection and promotion agreements, and other instruments.

As you know well, one of the major initiatives we are working to bring into force is the Canada-European Union Comprehensive Economic and Trade Agreement, or CETA.

The EU is the world's largest market, with a $20-trillion economy and more than 500 million consumers. Once CETA comes into force, Canada will be the only G7 country to have guaranteed preferential access to both the United States and the EU member states.

CETA will provide Canadian companies with first-mover advantage over competitors from other countries that do not have a trade agreement in place with the EU.

Right now, Canada and the EU are finalizing the legal review and translating the agreement into French and the other 21 official EU treaty languages.

We are also looking at certain refinements of the investor state dispute provisions in the text. These include clarifications of the commitments in the existing text and initial steps toward fulfilling commitments made under the agreement.

Following translation, the domestic process will begin for both parties to bring policies, regulations and legislation into conformity with the obligations under CETA.

I would like to note that your counterpart committee from the European Parliament is planning to visit Ottawa on March 21 and 22 for a fact-finding mission on CETA, and they will seek a meeting with you. This would be an excellent early opportunity to exchange views with your counterparts on opportunities the CETA presents for Canada and the EU to deepen our commercial relationship.

Global Affairs Canada is also working on a number of other initiatives outlined in Minister Freeland's mandate letter. We're working to bring recently concluded agreements with Ukraine into force, and to ratify the updates we have made to our FTAs with Chile and Israel. Work on these files is proceeding on a priority basis.

Canada has also recently signed the Trans-Pacific Partnership, and we are actively consulting with Canadians. We have a session devoted to this the day after tomorrow, so I will leave my comments at that for now.

Moving forward, the Government of Canada is looking for opportunities to enhance trade relationships with emerging and established markets, including China and India. We are looking to take a rigorous and step-by-step approach to enhance our relationship with China and engage Canadians on this issue. On India, discussions have been ongoing since late 2010. There is more work to do. We are continuing to work with India to move these negotiations and this overall relationship forward.

I'd also like to take the opportunity to update you very quickly on Canada's activities at the World Trade Organization. The World Trade Organization remains essential to Canada's trade policy tool kit, as some issues, such as domestic subsidies on agriculture, can only be addressed in a global forum. Recent achievements at the WTO include the trade facilitation agreement, which was concluded at the ninth Ministerial Conference in December 2013, and the expanded information technology agreement, which was concluded at the 10th Ministerial Conference in December 2015.

Canada has committed to moving forward to ratify these agreements as soon as possible. We are also working with groups of like-minded countries at the WTO to negotiate a trade in services agreement and an agreement to facilitate trade in environmental products.

While Canada is moving forward with many partners around the world, as we all know, our trade and economic relationship with the United States remains essential. My colleague David Morrison will now speak to the importance of the Canada-U.S. economic relationship.

[David Morrison, Assistant Deputy Minister, Americas and Chief Development Officer, Department of Foreign Affairs, Trade and Development]

Thank you very much, Kirsten.

I am David Morrison, the Global Affairs Canada assistant deputy minister for the Americas, which includes the United States and everything to the south. I am also the chief development officer of the department.

I am very pleased that the committee has chosen to open its business with a session that includes the examination of Canada's most important trade and economic relationship, the relationship with the United States, and to look more broadly at our growing ties with Mexico and the rest of the Americas. These are issues of critical importance to the prosperity of Canada.

First, let me restate the overarching economic reality of Canada's economic relationship with the United States. The U.S. is by far our largest trade and investment partner. Some details will help to elaborate this story.

Almost 25% of Canada's GDP is generated by direct exports to the United States. In 2014 Canada exported about $450 billion in goods and services to the U.S., which constitutes 77% of our total global exports. Canada sells more to the U.S. in one year than to the rest of the world over three years. In 2014, the most recent year for which we have full-year statistics, two-way trade was $870 billion in goods and services. An average of 2.4 billion dollars' worth of trade crossed the border each and every day. The U.S. is the top export destination for every province and territory in Canada, and the same holds true in reverse. Canada is the number one market for 35 of the 50 American states. The U.S. is the single biggest investor in Canada. In 2014 the stock of American investment in Canada was $361 billion, representing half of the total foreign direct investment in Canada.

I've offered these statistics on trade and investment to indicate that while we may have a few irritants with the U.S. from time to time, overall this is a vibrant economic relationship with no equal. It is also worth underscoring that the U.S. is a comprehensive partner for Canada across a range of other issues, such as the environment, energy, climate change, continental defence, international security, and people-to-people relations.

It is also important to highlight our relations with Mexico. For over 70 years, Mexico has been a trusted and long-term partner for Canada. As one of its top priorities, the Government of Canada is committed to the renewing of relations with Mexico, both bilaterally and trilaterally within North America.

Canada's trade and investment relationship with Mexico has steadily grown since the entry into force of NAFTA in 1994. Canada and Mexico are each other's third largest trading partner, with two-way trade totalling $34 billion in 2014.

Canadian direct investment in Mexico reached over $13 billion in 2014, while Mexican direct investment in Canada totalled $884 million. Our commercial linkages are based on a deepening partnership that holds potential for both countries with a joint production platform that serves as a springboard for North American and global markets.

Turning now to the wider hemispheric context, I note that Canada has established strong relationships with the Pacific Alliance countries: Chile, Colombia, Mexico, and Peru. We're seeking to extend our engagement with this dynamic economic integration initiative. An active observer, Canada supports the Pacific Alliance's efforts to promote innovation and competitiveness as drivers for sustainable and inclusive growth in the region. These relationships are important and enduring. Canada has free trade agreements with each of the Pacific Alliance countries as well as with Costa Rica, Panama, and Honduras. Costa Rica and Panama are both applying to become full members of the Pacific Alliance. As my colleague Kirsten Hillman mentioned we have also just concluded the modernization of the Canada-Chile Free Trade Agreement.

Thank you again for the opportunity to appear before this committee and help renew the relationship between Parliament and our department. My colleagues and I would welcome your questions and comments.

Thank you.

[The Chair, Liberal, Mark Eyking]

Thank you very much. I think it was quite a good snapshot of where we're at in the world.

We're going to start the first round. In the first round you get six minutes, but we're going to be flexible. If you need to finish off a thought or whatever, that's fine.

We'll go Conservative, Liberal, NDP, and then Liberal. We're going to start with Mr. Hoback.

[Randy Hoback, Conservative, Prince Albert, SK]

Thank you, Chair, and welcome everybody here on this nice snowy morning in Ottawa.

I have a few questions. I'll start off with Ms. Bincoletto. You talked about Canada's export agency. There's $50 million in new funding to develop new companies to export. EDC's been doing a lot of that. Is this going into EDC, just topping them off, or is this a new department being created?

[Susan Bincoletto]

This program was announced in budget 2015. Its intent is to support companies and share the cost of their international activities. For example if companies want to explore markets that they haven't yet explored and go to trade fairs, trade shows, explore local business opportunities, find a way to sell their products in those countries, then they would apply for up to $100,000 from the program. They would be co-sharing the cost of those activities with the Government of Canada. They would do the activities and then claim the invoices, and then we would reimburse.

It is a new program that is a complement to other programs the department has. It's designed in the department and administered by NRC IRAP because they are very good at client interfacing and the grants and contribution part. We've partnered with them to make it a more efficient way of delivering the program, and it complements some of the other programs the department has, for example, in supporting trade associations doing business abroad and municipalities to attract investment into Canada. Again, it's something that was missing.

[Randy Hoback, Conservative, Prince Albert, SK]

I know Minister Fast at the time had basically a road show going across Canada explaining all the opportunities through EDC and CCC. Is that part of that $50 million that's being used to promote smaller businesses to get involved in trade?

[Susan Bincoletto]

No, this is a new program and it is a direct financial support to Canadian companies to do business abroad.

[Randy Hoback, Conservative, Prince Albert, SK]

Is it a loan, then, or is it actual direct cash?

[Susan Bincoletto]

It's direct cash. It's a contribution, so there are some obligations in terms of monitoring and reporting, but it's not refundable.

[Randy Hoback, Conservative, Prince Albert, SK]

All right.

Ms. Hillman, you talked about CETA. I'm curious about the timelines on CETA. How are you seeing things progressing in that regard? I know that the negotiations are done, and now it's just the interpretation and that. Could you give us an update?

[Steve Verheul, Chief Trade Negotiator, Canada-European Union, Department of Foreign Affairs, Trade and Development]

Thanks.

The negotiations were completed back in August of 2014. Since then, we've been going through a legal review of the text, which has taken a bit longer than we expected. It's virtually complete now.

We're now having some discussions with the EU with respect to some investment provisions in the agreement. We're going through some of that at this moment. Once that's completed, we will finish the translation. It is required to be translated into 21 other languages besides English and French. Each of those languages has equal legal effect in the EU, so that takes some time to get through as well. We're expecting that to finish around May, and then it'll go to the Council of the EU shortly after that for ratification.

Once they get through it, we can go to signature of the agreement. Following that, the European Parliament will have to ratify it. We're looking at implementation probably early in 2017.

[Randy Hoback, Conservative, Prince Albert, SK]

As far as timelines here in Canada go, then, nothing has been established that you're aware of.

[Steve Verheul]

Well, I think we're going to try to make sure that we follow what the EU is doing and make sure that our ratification process is in line with theirs. It's not to our advantage to go in advance of them.

[Randy Hoback, Conservative, Prince Albert, SK]

Okay. As far as the agreement itself goes, it's negotiated. It's done. We're not reopening this to any other chapters or any other adjustments.

[Steve Verheul]

No, we're not reopening the negotiations at all.

[Randy Hoback, Conservative, Prince Albert, SK]

Okay. It's just the implementation of what's been negotiated that's under discussion.

[Steve Verheul]

That's right.

[Randy Hoback, Conservative, Prince Albert, SK]

Okay. That's excellent.

Mr. Morrison, you talked about the Ukraine, Chile, and Israel. I was curious. You said something about priorities. What are the priorities for those agreements and having them modernized? Are they a high priority? A low priority? Can you give us an idea on that? Or maybe Kirsten can.

[Kirsten Hillman]

It's hard to keep us straight. There are so many of us here.

Minister Freeland's mandate letter specifically references the recently concluded free trade agreement with the Ukraine and the modernizations of those with Chile and Israel as priorities, so we are working quickly to try to get those finalized. They are all in the process of being legally “scrubbed”, as they call it, or legally verified, and translated into the relevant languages. We will be moving them forward as soon as we can. Part of that's in our control; part of it's in the control of the other party. For example, the Ukraine has to translate into Ukrainian. We also obviously make sure that the French is in order.

I'm unable to give you specific timelines, but we are working quickly to have them ready as soon as our partners are ready so that we can sign them.

[Randy Hoback, Conservative, Prince Albert, SK]

Then, of course, we're going to talk about the TPP on Thursday, so I'll leave that alone.

Mr. Morrison, on the Pacific Alliance, have there been any changes in the last six months in that negotiation? What's going on there?

[David Morrison]

There are no changes at all vis-à-vis Canada.

The Pacific Alliance itself continues to be a going concern. This is an initiative that sprung up amongst the four countries of Mexico, Peru, Colombia, and Chile. It began in 2011 and quite quickly concluded a negotiation to eliminate tariffs and, as well, promote mobility of people.

It's a new development in the Americas. From a Canadian perspective, I think it's a very exciting development, given that the four countries involved are amongst our most vibrant trading partners. We have already concluded free trade agreements with all four of the countries and, as I said, the two aspirant countries of Panama and Costa Rica are also countries with which we have free trade agreements.

For Canada, particularly in the extractives industry, this is an exciting development that we're watching very closely. We were the first non-Latin-American observer country to the Pacific Alliance, and we have been amongst the most active of the 40 or so observers since we first became an observer in 2012.