International Trade Committee on Feb. 18th, 2016

[The Chair, Liberal, Mark Eyking]

Mr. Hoback, your time is up. You did well.

We're going to move back over to the Liberals, and for six minutes we have Mr. Peterson.

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

Thank you, Mr. Chair.

Thank you, Ms. Hillman and everyone from the department, for being here today.

We appreciate this briefing. It goes a long way to our having a foundation when we undertake the consultative process that we're about to undergo, so thank you very much for this.

I have a question about investor-state dispute settlement, ISDS. There has been some talk about it and I think some confusion. I want you to elaborate on that provision in the TPP. How does the mechanism actually work? What do you think some of the detriments, or perhaps even benefits of that process in this agreement might be?

[Kirsten Hillman]

Okay, with investment commitments in FTAs as well as in bilateral investment treaties, that area does two things. The first thing is it includes obligations on countries with respect to how they treat foreign investments in their jurisdiction. For example, it imposes an obligation not to expropriate a foreign investment without timely and fair compensation. It imposes an obligation not to treat foreign investments less favourably than you treat domestic investors.

The second thing it does is it provides a unique dispute settlement mechanism. The entire TPP, and all of our FTAs, have a dispute settlement mechanism where one of the parties, a country, can bring a claim saying that the other country is not abiding by its obligations. You bring that to court, to an international dispute settlement system or arbitration, and the inquiry is on whether or not the treaty is being respected.

That exists also for the investment chapter. However, there is an additional mechanism that allows the investor—the private company, individual—to directly challenge the country on whether or not they are abiding by those obligations in the chapter. It's not about abiding by anything else in the treaty, not abiding by domestic law, but whether they are abiding by these four or five principles that are set out in the chapter.

That is where I think a lot of the concern lies, if you look carefully at the public discourse around that. There is a view that this is giving foreign investors a right of action against governments that can influence the government's regulatory decision-making and potentially have a chilling effect, or that those cases can be brought and a government's regulation can be found to contravene the obligations and therefore the investor can be awarded damages. That's the controversy—or the debate; let's put it that way—around the chapter.

In the TPP, we have an investment chapter and an investment dispute settlement system. We have sought to build on some of the experience in the NAFTA. It doesn't look like the NAFTA. It doesn't look like some of our bilateral FTAs. It doesn't look exactly like the CETA either.

Again, there are 12 countries at the table, so it's not going to look exactly the same. We have included additional transparency commitments, for example, clarifications to the right to regulate, procedural clarifications, a code of conduct for arbitrators, things like that, which don't exist in some of our other FTAs and bilaterals. In addition, there are other changes as well. The scope of ISDS in TPP is different from the NAFTA. It allows for investment claims to be brought under investment agreements. So where the dispute arises out of a contractual dispute it explicitly covers that, which is also different.

Every chapter is different.

I don't know if I've answered your question.

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

You have. It's a complex issue. It's hard to answer in a couple of minutes, but I think you've put some lucidity into it, at least from my perspective. Thank you for that.

I have another question.

I have a question about trade in services. In the absence of TPP or the status quo, what are the barriers that are preventing Canadian services from entering those markets right now?

[Kirsten Hillman]

There are a couple. Services trade is protected by some countries in sensitive sectors, and by Canada; for example, education and health services, we don't liberalize in the context of free trade agreements, but other services we do.

Canadians have a lot of interest in engineering services, environmental services, and anything related to energy. We have a lot to offer and a lot of customers, if you will, abroad. We have teaching services. Our education services provided abroad are also very marketable.

What we like to do in trade agreements is lock in that market access. One of the things that's very difficult for companies is when there's a demand for Canadian engineering services and they have a going concern and then for one reason or another a government says no, not any more, and it closes the border. When you lock it into a trade agreement, then you have that certainty for your service providers.

That's our objective. As I say, a lot of the areas that were highlighted to us as priorities in the TPP are engineering, environmental services, education services, IT services, a lot of the high-tech services in support of the IT sector. I am sure there are others, but those are the ones that really come to mind.

[The Chair, Liberal, Mark Eyking]

Thank you.

Folks, you are asking good questions. It seems as if everyone is asking different questions, which is really bringing out a good conversation.

We're going to go back over to the Conservatives.

Mr. Ritz, you have five minutes.

[Gerry Ritz, Conservative, Battlefords—Lloydminster, SK]

Thank you, Mr. Chair.

That was a great presentation. It's hard to get it all into two-minute answers.

I'm wondering if you can give us an example of this remanufacturing that restores end-of-life goods to their original working condition. I know Mark and I are very concerned that it covers old politicians.

[Kirsten Hillman]

I'm going to let my colleague, Alison O'Leary—

[Gerry Ritz, Conservative, Battlefords—Lloydminster, SK]

Just give a quick example, just so we can understand it.

[Alison O'Leary, Director, Tariff and Goods Market Access Division, Department of Foreign Affairs and International Trade]

Absolutely. To be honest, this isn't a major interest for Canada. In some cases you have old goods—let's think of appliances, for example—that don't work very well anymore, so you remanufacture them, make them better, but they're still used goods, and then export them—

[Gerry Ritz, Conservative, Battlefords—Lloydminster, SK]

It's part of the environmental standards that we look for, recycling.

[Alison O'Leary]

Yes, that's right.

[Gerry Ritz, Conservative, Battlefords—Lloydminster, SK]

One thing that's very important in bilaterals or multilaterals is global supply chains, and certainly much more in a plurilateral agreement such as this. That's why I have a bit of a problem with some of the claims made by the auto sector unions that somehow this is going to decimate them. We heard the same thing from the wine industry with NAFTA, and of course it didn't happen.

Canada is an assembly country. As you rightly point out, Ms. Hillman, we export predominantly to the U.S. domestic consumption in the U.S. However, we are excellent at that assembly because there's a lot of little spinoffs, and David mentioned this about his riding, about a lot of the part components. These little businesses are popping up.

This is going to be excellent for them, because now they're part of global supply chains. That's the strength in this when it comes to the auto sector, those little parts manufacturers that can now supply starters to GM in Australia. They can supply into China, if it chooses to take part, and Japan and so forth.

When you did your assessment on the impacts, did you look at things like that?

[Kirsten Hillman]

The auto rules of origin in particular, as people who were following the negotiations will know, were a difficult part of the negotiation. They were very much crunched in the latter stages of this negotiation.

At that time, we were in heavy consultation with the auto parts industry, its association and individual companies as well. When we worked to the outcome that we have, which I recognize is not seen as what everybody would have wanted, we took very much into account the priorities of those parts manufacturers, the parts that they do manufacture and where they think their priorities lie.

[Gerry Ritz, Conservative, Battlefords—Lloydminster, SK]

You also made a point in Tuesday's presentation that innovation is driven by trade, efficiencies and innovation. That leads to commercialization, because now you have a broader marketplace to develop that in. You're not supplying Canada or the United States; you're supplying everybody in the TPP.

I think that's excellent to continue to press on. Businesses themselves, when we've been talking to them, are talking about ratifying sooner rather later because they need the predictability as they tool up, as they gear up for this new availability. I'm hopeful that some of the cards and letters you're getting are from businesses asking when, so that they know who to hire, how to hire, and what they're going to need when it comes to innovation.

To that end, as a department, are you proactive with accuracy and information? There's a “myth-information”, I call it, out there. Do you have a website that has frequently asked questions and comments, so that people can go to that rather than going through all the work of writing you a letter and waiting for the response, and so on? Are you starting to have a compilation? We're seeing certain themes here, concerns about ISDS, IP, and different things like that. Do you have a complete package on your website? I haven't seen anything like that yet. Is that something you might consider?

[Kirsten Hillman]

Yes. We have a website currently, a TPP website, that includes factual information about the outcomes of the TPP across sectors, across regions. We slice and dice it different ways.

[Gerry Ritz, Conservative, Battlefords—Lloydminster, SK]

Yes.

[Kirsten Hillman]

You're talking about fact sheets on some of these issues, and that's something we're working on and thinking about. I think to date the exercise has been to gather up as many views as possible to get a feeling for where the questions are.

We're working in that direction, but I take your suggestion.

[Gerry Ritz, Conservative, Battlefords—Lloydminster, SK]

Okay.

As I asked the other day and as some of my colleagues have mentioned around here, ISDS is not a new innovation when it comes to trade. Neither are the IP provisions and so on. They've been around. I've seen a lot of concerns about TPP, but with the same issues in CETA, there doesn't seem to be a problem at all. Maybe it's the American part of the formula, that we look at them as still being a little bit imperialistic, but at the end of the day, those same agreements are there so that our businesses have reciprocity and they're protected when they make investments abroad.

We're seeing right now TransCanada suing the American government over Keystone XL. Would that be an easier process with the ISDS that's under TPP? They're doing it under NAFTA, so this is not a new process. Is it less cumbersome under TPP?

[The Chair, Liberal, Mark Eyking]

You'll have to keep it short, Ms. Hillman. The time is well over.

[Kirsten Hillman]

I was explaining how the investment chapter has the obligations and the enforcement mechanism. The basic obligations in NAFTA are the same in the TPP. With respect to the United States, these investment obligations and the ISDS exist under NAFTA still, and will continue to exist under NAFTA.

In the TPP, some of the modifications that have been made are around clarifying, but a lot of it is clarifying issues that we have already clarified in the NAFTA. We've either clarified through the jurisprudence or ministers have gotten together under NAFTA and done joint statements saying, “Look, what we really mean is this: this is what we meant when we said x, y, and z.” We have integrated those into the TPP.

[The Chair, Liberal, Mark Eyking]

Thank you, Mr. Ritz.

We have three minutes for the NDP.

Ms. Ramsey.

[Tracey Ramsey, NDP, Essex, ON]

Thank you.

I'd like to speak a little bit about the market access for goods. Specifically, a 2016 World Bank study indicates that the TPP is expected to increase the exports of each TPP country. To which countries would Canada's exports increase the most and the least, and in which countries would Canadian exporters likely increase their market share?

[Kirsten Hillman]

The first caveat around my answer is that, as I was saying earlier, our internal studies are ongoing. I would ask you to take this as a preliminary answer, but with that in mind, as a general principle, the countries where we will see the greatest benefits will be countries that have the highest tariffs. There are two factors: how high their tariff is and what kind of market we have in that country for our goods.

The highest tariffs in the TPP exist in Japan, Malaysia, and Vietnam. Other countries also have tariffs that are high in certain sectors, but across the board, looking at those three countries, they have the tariffs in a range of products. In the TPP markets, we are interested across the board in exports. Industrial products, plastics, chemicals, energy, fish, seafood, agriculture, manufactured goods, IT goods; we have market access interests across all of the sectors of our economy. Where we will get the biggest bang for our buck, however, is in those markets that have the highest tariff. Those are the three countries that I mentioned.

Was your second question on which sectors would benefit the most?

[Tracey Ramsey, NDP, Essex, ON]

Yes, but the second part of that question was to which countries our exports would increase the least. Is there a neutral or not necessarily great gain? To which countries would Canadian exporters increase their market share?