Thank you to the committee for the invitation.
The Canadian Centre for Policy Alternatives is an independent, non-partisan research institute. This year, as part of the ongoing debate over whether Canada should ratify the TPP, we have published seven studies and will release more soon.
One recent CCPA report challenges claims that the TPP will generate significant trade benefits for Canada. The reasons are fairly straightforward. Canada already has tariff-free access to most of the TPP region. Canada imports significantly more from, than it exports to, the TPP countries that we do not already have a FTA with. The quality of that trade is also imbalanced. Our exports are mainly commodities while our imports are mostly more sophisticated manufactured products.
Since what we import from these countries currently faces higher tariff protection than what we export, tariff elimination under TPP will likely worsen Canada's existing trade deficits with non-FTA TPP members. We'll also deepen our dependance on natural resource exports at the expense of our manufacturing sector.
These findings are broadly consistent with the results of other studies, including those carried out by Tufts University and the C.D. Howe Institute, and with Canada's experience so far under the recently signed FTA with South Korea.
A highly problematic aspect of the TPP agreement is the inclusion of generous foreign investment protections, enforced by investor-state dispute settlement. Giving international investors the right to seek compensation when public interest regulation interferes with their commercial objectives clearly weakens democracy.
Canada's experience under NAFTA confirms this. Because of NAFTA, Canada is now the most sued developed country in the world. Two recent losses are particularly disturbing. The 2015 Bilcon ruling, which found fault with an environmental assessment recommending against a quarry on the Bay of Fundy, will exert a detrimental chill over future environmental assessments. Another NAFTA tribunal recently awarded ExxonMobil, or its Canadian subsidiary, an initial $19 million in compensation for having to fund local research and development as part of an agreement that all companies make to drill for oil and gas offshore in Newfoundland and Labrador. As long as that policy remains in place, the federal government must pay ongoing damages.
The TPP not only expands the deeply flawed ISDS system to investors from more countries, it includes new investor rights—which I hope we will be able to explore in the question period—and significantly, the TPP would not replace NAFTA's investment protections, but will exist alongside them, giving investors the option to use the agreement most favourable to them when challenging Canadian policy.
Both CETA and TPP would require the federal government to extend the term of patents to account for supposed regulatory delays in approving drugs for sale. Canada already has an industry friendly system for protecting pharmaceutical patents, which is reflected our having the fourth highest drug costs in the OECD. Meanwhile, R and D levels in Canada have fallen to historic lows.
Research published by CCPA estimates that by further delaying the availability of cheaper generic medicines, TPP's patent term adjustment system would result in an annual cost increase of over $600 million, or 5% of the annual cost of patented drugs in Canada.
As you have heard in previous testimony, the devil will be in the details of implementation. In effect, TPP gives the United States trade representative, a long-time critic of Canadian intellectual property laws, a seat at the implementation table, since the U.S. must certify that a TPP member is fully compliant before the treaty enters into effect. In any event, the agreement would burden the Canadian health care system with higher drug costs.
Finally, Canada's TPP temporary entry commitments cover a wider range of occupations and sectors than past trade deals. The system would be extended to countries such as Australia and Japan for the first time.
The temporary entry system prohibits countries from applying any form of economic needs tests or numerical quota, including labour market impact assessments. Therefore, employers hiring migrant workers under TPP will be able to do so even in areas where unemployment is high and qualified local workers are available. Furthermore, unlike the temporary foreign worker program, which can be reformed, the temporary entry system in the TPP cannot easily be altered once the treaty is ratified.
My remarks today only scratch the surface of the issues surrounding this complex and far-reaching agreement. For further analysis, I refer you to the studies on our website. Future reports will address copyright protection, the auto industry, labour rights, and other issues. Our research to date strongly suggests the risks for Canada in ratifying the TPP, especially the negative impact on our governments' ability to regulate in the public interest, significantly outweigh the benefits. While certain sectors or groups may gain, the TPP would not be of net benefit to Canada. We therefore recommend against its ratification.
Thank you.