International Trade Committee on June 16th, 2016

[Hassan Yussuff]

Sorry, I didn't even know David until I got here today. The last thing I want to do is offend him, to tell him that he is wrong.

[Dave Van Kesteren, Conservative, Chatham-Kent—Leamington, ON]

We are not here to offend anyone. We just want the truth.

[Hassan Yussuff]

More importantly, I believe that our perspective on the TPP agreement needs to be put in context. Clearly, trade has benefited our country, and it is important for us, of course, to have a diversified market. We are not here to argue that somehow we should lock ourselves up and not trade with other countries. That is not our objective.

Looking at this agreement objectively, we have looked at some of the provisions within the agreement and have some major objections to the challenges it would place on the economy and, more importantly, how is it going to help workers? In addition to that, of course, is it going to limit our sovereignty in regard to our ability to regulate in the sectors we want to?

We think there is going to be significant damage.

David may be right about the opportunity for the chemical industry to export to other parts of the world. I don't question his judgment about the potential of that to happen. I am not here to do that.

At the same time, as we are going to open our markets to allow for this agreement to be possible, are we going to create further damage to the economy of this country and limit the sovereignty of our governments to regulate? We think this agreement is problematic. Fundamentally, we have a difference of opinion.

[David Podruzny]

Okay. No offence, please....

Thirty-eight per cent of our employees have university degrees. That is second to IT in manufacturing. They have 41%. This is a good sector to grow. Trade agreements have dispute settlement mechanisms, but trade agreements are about giving up a little bit of sovereignty so you can get unfettered access to that other market.

I will depend heavily on dispute settlement mechanisms so that this can be fair trade. That is important. It has to be fair trade.

We need to get into international markets and large capital investments. An ethylene plant is an $8.5-billion investment. That is a lot of risk. If you can't market 80% of the output of that, because the Canadian economy is so small, you won't invest here. You won't have those high-quality jobs. This is a risk, but it is a risk about going towards quality and towards a future where the world is our marketplace.

Let's not kid ourselves. They have access already. We gave up our tariff protection, for all of manufacturing except a few small areas like autos, about five or ten years ago. The tariffs were unilaterally reduced in Canada to zero in our sector. We compete already. We just want the same access there as they have here.

[The Chair, Liberal, Mark Eyking]

You have another minute.

[Dave Van Kesteren, Conservative, Chatham-Kent—Leamington, ON]

Good. We hear a recurring theme. I want to go to Mr. Sinclair. We are going to let you square off with Mr. Masswohl as well.

It is only a percentage. There is not a whole lot of gain in business. I am in business, too. I know the difference between making it one year and losing it in another year. It is usually just a difference of a few percentage points.

I am going to ask John a really simple question. How important are those few percentage points that we are talking about?

[John Masswohl]

Farmers operate on razor-thin margins. A few per cent can be the difference as to whether you keep your farm or not.

I would also say, on dispute settlement, that the Canadian beef industry has been a good user of the dispute settlement system. It helped us resolve the country of origin labelling dispute with the United States. It helped us re-establish our trade with Korea, back in 2012. It is a bit of a different dispute settlement mechanism, but again, there is another side to the story, that Canadians benefit from having these mechanisms.

[The Chair, Liberal, Mark Eyking]

Thank you.

[Scott Sinclair]

I just want to say very quickly that I don't dispute that the beef industry will gain new opportunities through tariff elimination in these key markets, but your job as parliamentarians is to look at the overall net benefit of this to Canada. That includes the many other issues that are separate from these fairly limited commercial opportunities that are going to be created by tariff elimination, which many people throughout these hearings have been raising.

This will be my last point. If you want to look at the impacts of this type of treaty, what the impacts of tariff liberalization will be under the TPP, I suggest that you look at our experience so far under the Canada-Korea FTA, where our deficit has increased, our manufacturing sector has suffered, and in the first six months of this year it's increasing again; and even in the case of beef, despite signing a free trade agreement, we were shut out for most of last year.

[The Chair, Liberal, Mark Eyking]

Thank you.

You were way over time. I think you broke the record, Mr. Van Kesteren, but there was good comment and dialogue here, but be careful with loading up the questions on the end.

We're going to move over to the NDP now. We have Ms. Ramsey for three minutes.

[Tracey Ramsey, NDP, Essex, ON]

I think that fundamentally the concept that you would be pitted against each other is so wrong to me, because I feel this isn't about saying someone is wrong and someone is right about this deal. It's about looking at it on balance for Canadian workers. I know that Mr. Yussuff represents hundreds of thousands of Canadians—

[Hassan Yussuff]

Specifically 2.3 million....

[Tracey Ramsey, NDP, Essex, ON]

—millions of Canadians. So we're sitting at this table with folks who represent millions of Canadians. On my part, I have to look at the people I represent in my riding, the people whom we have all been sent here to represent; and that's farmers, that's working people, that's libraries in our communities, that's those in educational institutions, that's every single piece.

Therefore, it's not fair to say that you're going to benefit, but you're not, and so you should battle it out. I think we know that this would be of benefit to the agricultural sectors and to certain ones like beef. Japan has been mentioned numerous times by representatives of the agricultural sector.

Building on my colleague Madame Lapointe's question, I want to ask you, Mr. Masswohl, about this stalled deal with Japan. We were in a bilateral talks with Japan. We got into the TPP, and those talks ended. The Prime Minister and the trade minister have just visited Japan. I wonder if you've heard any updates from them since they returned on pursuing the tariff reductions that you're seeking.

[John Masswohl]

I have not heard that they've scheduled another negotiating round.

[Tracey Ramsey, NDP, Essex, ON]

I think it's clear that it's something you would like to see pursued, understanding, of course, that this is a 6,000-page document and that the six chapters that apply to the trade that you're talking about I think you would find large Canadian support for—and Mr. Podruzny as well.

[John Masswohl]

The only update—

[Tracey Ramsey, NDP, Essex, ON]

What I want to talk about now are wages. We talk about Canadian workers and income inequality in our country, which is increasing dramatically. It's affecting the lives of all Canadians.

Wages are a huge factor. I want you, if you can, Mr. Yussuff, to expand on how you feel that the provisions in chapter 12, which is essentially the labour chapter, would affect the wages of Canadian workers or lead to job losses. We look at Malaysia, a really low wage economy; and we've seen jobs bleed out of our country to Mexico, another low wage economy. What is your forecast of our ability to compete with those TPP countries?

[Hassan Yussuff]

The labour provisions in the agreement don't specifically require the countries to even meet the core ILO labour standards provision. While countries may be expected to enforce their laws, we're not sure specifically what laws they will enforce if they don't already have adequate laws on their books.

It's not for us to tell other countries, of course, how to conduct themselves in labour relations, but more importantly, the ILO has been a governing body on behalf of labour rights for the world, and most of these countries participate in it. The TPP agreement does not require them to enforce the core labour standards of the ILO agreement.

Secondly, there are no sanctionable penalties for countries that are not meeting that requirement, in my view. Clearly, I think we're a country that has continued to enhance the protection of our workers. We think this agreement will have a ratcheting down effect on labour, on the wages of workers within our country. I think it will continue to put that downward pressure on wages, as we have seen with Mexico and the other countries that we have negotiated trade agreements with, because they are not required to raise their very low labour standards. There's a deep concern about that.

The studies that we have seen say that it's going to put enormous pressure on the challenge of improving labour conditions within these countries.

[The Chair, Liberal, Mark Eyking]

Ms. Ramsey, sorry, you are a minute over. I know that you're on a roll too. Everybody's on a roll today. It must be Thursday, but we have to move to the member from London North Centre.

Go ahead, Peter.

[Peter Fragiskatos, Liberal, London North Centre, ON]

It's great to be with you today as you address this very important issue.

Professor Van Harten, you discuss the state-to-state mechanism as an alternative to ISDS. Isn't that based on the premise that states will want to pursue a claim that's being advanced to them, to take that forward?

[Dr. Gus Van Harten]

Thank you for raising that question because, first, we need to be clear. When we talk about dispute settlement, the standard approach is state-to-state dispute settlement. That's what we have in the Canada-U.S. Free Trade Agreement. That's what Australia got with the United States after NAFTA. There's no ISDS in the Australia-U.S. free trade agreement, in the Canada-U.S. Free Trade Agreement, in the softwood lumber agreement. There's no ISDS at the World Trade Organization, because foreign investors, like everyone else, are expected to rely on their own state to represent their interests and to make decisions about net benefit for their country as a whole.

For example, we've had cases under NAFTA. Foreign investors have brought claims that have challenged the interpretation of NAFTA given by the governments of all three countries—the U.S., Canada, and Mexico—and the arbitrators have agreed with the foreign investors and expanded international law in a way that the States would not have allowed under their own treaty.

That gets at the sense of how profoundly ISDS changes the dynamic in ways that are highly unpredictable and highly risky. I want to make this clear because I know lots of people have views about ISDS. ISDS is not something you have to give up to get trade. We have lots of trade agreements that don't have ISDS. In the TPP itself, some countries have side letters excluding ISDS.

We could pursue the same side letters with those other countries—and just to stress this, why do I care so much about this? I have two quick points in this regard. One, Canadian investors have never won an ISDS under NAFTA. Two, hedge funds are speculating in ISDS claims against countries in London right now. It's a very new development. This is a bit scary.

[Peter Fragiskatos, Liberal, London North Centre, ON]

I look at the need in a market economy for businesses to have a predictable environment that isn't changed arbitrarily. When that happens, I think it's necessary to have a mechanism in place that allows claims to be brought forward, and your focus on the state-to-state approach assumes that a state will want to bring that claim forward. You still haven't dealt with the question.

I have a question for Mr. Yussuff and Mr. Sinclair. Are there trade agreements that you favour? Suppose that NAFTA weren't in place right now, Mr. Yussuff, and we were negotiating NAFTA. Would you counsel the Government of Canada to go forward with NAFTA, for example?

[Hassan Yussuff]

Not with the current provision in NAFTA. I would certainly exclude the ISDS clause and I would have stronger protection for workers under the labour chapter agreement.

[Peter Fragiskatos, Liberal, London North Centre, ON]

Let me be even more direct. Do you favour NAFTA or any trade agreement?

[Hassan Yussuff]

I think we had a very good trade agreement with the United States under the Auto Pact. We had a reciprocal commitment for investment and jobs in our respective countries, which benefited both of us in the development of the auto industry.