International Trade Committee on Feb. 18th, 2016

[The Chair, Liberal, Mark Eyking]

Good morning, everybody.

This is our second information meeting. As you know, the other day the department did a really good job of putting forward a snapshot of where Canada and the world are on trade. Of course, the big one on our plate coming up is the TPP. That's why we have committed one full day for the TPP.

We're not going to use our whole two hours on TPP. We'll probably go, if everybody's in agreement, as we did on Tuesday. If we do a couple of rounds, and everybody feels sufficient with that, then we'll do a little bit of future business and we'll talk about where we'll be going on Tuesday.

We will start this meeting with Kirsten Hillman.

It's good to see you again. The floor is yours. There's no set time. It worked out well the other day. If it's 10 minutes or 15 minutes, take whatever time you need, and then away we'll go. Thank you for coming.

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

Thanks very much.

I am very happy to be here with you again today. I'm Kirsten Hillman, acting assistant deputy minister, Trade Agreements and Negotiations Branch at Global Affairs Canada. I am Canada's chief negotiator for the Trans-Pacific Partnership Agreement. I am here today to provide you with a technical briefing on the TPP Agreement and to answer your questions.

With me from Global Affairs Canada are Dany Carrière, director of the Trans-Pacific Partnership Division and deputy chief negotiator for the TPP; Alison O'Leary, director, Tariff and Goods Market Access Division; Loris Mirella, lead negotiator, Intellectual Property for the TPP. I also have with me several other experts. So if you have very technical questions, I hope we will be well-equipped to answer them.

My presentation this morning will include a brief history of the TPP, information on how the TPP Agreement is structured, and finally I will talk about the next steps for Canada, including the consultation process that is already underway. I will begin with the background.

The TPP builds on the Trans-Pacific Strategic Economic Partnership Agreement, also known as the P4, between Brunei Darussalam, Chile, New Zealand and Singapore, which entered into force in 2006. Beginning in January 2008, additional countries joined in the discussion. In March 2010, a new round of negotiations was launched when Australia, Peru, Singapore, Vietnam and the United States joined the partnership and renamed it the Trans-Pacific Partnership Agreement.

Later that year, the TPP membership grew to nine countries with the participation of Malaysia. Canada, along with Mexico, joined the negotiations on October 8, 2012, in time to participate in the 15th round of negotiations. And finally, Japan joined in July 2013.

After three TPP leaders' meetings, 10 meetings with TPP ministers and more than 20 negotiating meetings since Canada joined, the TPP negotiations concluded on October 5, 2015, in Atlanta. The official signing ceremony of the TPP Agreement took place on February 4 this year, a few weeks ago, in Auckland, New Zealand.

The TPP Agreement covers virtually all aspects of trade among TPP parties. It addresses a range of issues with the goal of facilitating trade within the region. The 12 TPP countries represent 800 million people, with a combined GDP of over CAN$38.5 trillion, close to 40% of global GDP. It includes a diverse set of countries with differing levels of development.

Before I turn to the structure of the TPP agreement, let me take a moment to speak to the department's work on the economic impact analysis of the agreement.

We have a preliminary assessment of the impact of the TPP tariff reductions and market openings for trade in goods and services. However, we're dealing here with over 100,000 tariff lines and services obligations among 12 parties. So, finalizing this analysis takes some timing, and we are continuing to work on that.

We're also reviewing the economic analysis of academics and think tanks, and other organizations out there that are looking at the TPP.

Let me now briefly turn to the agreement and provide an overview of the structure of the agreement and the content. The TPP has 30 chapters, and along with its market access schedules, comprises over 6,000 pages. The agreement addresses both tariff and non-tariff barriers to trade in relation to goods. The foundation of all of our trade agreements is market access for goods, and the TPP follows Canada's traditional approach in this regard.

It has a national treatment and market access chapter that includes both standard and new provisions relative to Canada's previous FTAs. Standard provisions include tariff reductions, non-discrimination obligations, and the creation of a committee to discuss issues that arise as a means to solve problems and avoid disputes. The chapter also includes new provisions. For example, the TPP allows producers to seek preferential treatment for remanufactured goods. Remanufacturing is an industrial process that restores end-of-life goods to their original working condition.

There's a chapter on rules of origin and origin procedures that serves to determine when a good is eligible to be considered a TPP good and therefore benefit from the tariff treatment under the agreement. This chapter aims to reflect Canadian production realities, and includes procedures for making claims for preferential treatment that are clear, simple, and similar to those included in Canada's other agreements.

Also important to trade in goods are the chapters on customs administration and trade facilitation that will automate and streamline customs procedures by TPP customs authorities. The rules on sanitary and phytosanitary measures require TPP countries to regulate based on scientific principles, and the chapter on technical barriers to trade requires parties to create a fair and predictable regulatory system that does not create discriminatory barriers to trade. Both of these chapters build on the obligations that all TPP parties have at the World Trade Organization.

Now beyond goods, trade agreements, including the TPP, set out rules in relation to trade in services and investment. In the TPP, these include a cross-border trade in services chapter that opens markets in TPP countries in sectors such as professional services, environmental services, construction services, and research and development.

There's a financial services chapter that deals with banking and insurance services, and includes protections against expropriations and breaches of minimum standard of treatment. There's an investment chapter that sets out investment rules, including a requirement that Canadian investors be treated fairly, equitably, and in a non-discriminatory manner. It also preserves Canada's ability to review foreign investments pursuant to the Investment Canada Act. The chapter also includes an investor–state dispute settlement mechanism for investment disputes.

The temporary entry for business person chapter aims to facilitate the movement of specific high-skilled professional business people among TPP markets that have agreed to those same commitments towards Canada.

The electronic commerce chapter includes rules that are aimed at addressing impediments faced by consumers and businesses that trade in the electronic environment, such as the protection of personal information and consumers when they're trading online. This chapter reflects Canada's domestic regime.

There's also a telecommunications chapter, which includes obligations that are intended to ensure that service suppliers in the telecommunications sector are treated in a fair and objective manner when providing telecommunications services to another TPP country.

The TPP also includes rules on intellectual property, government procurement, competition, state-owned enterprises, labour, environment, and transparency and anti-corruption.

As with all of Canada's trade agreements, the TPP includes a dispute settlement mechanism that sets out a framework for resolving disputes.

The intellectual property chapter is the longest chapter in the TPP, and is divided into sections on co-operation, copyright, enforcement, geographical indications, industrial designs, patents, pharmaceutical patents, and agricultural chemicals. The chapter builds on existing trade agreements, namely the Paris Convention, and the World Trade Organization Doha Agreement on Trade-Related Aspects of Intellectual Property Rights.

The TPP also includes an expanded set of rules to ensure fair terms of competition when state-owned enterprises compete commercially with private companies. The labour chapter includes commitments to ensure that national laws and policies provide protection for fundamental principles and rights at work, including freedom of association, collective bargaining, and the elimination of child labour and forced labour. The environment chapter includes provisions to address global environmental challenges. The labour and environment chapters in the TPP are subject to enforcement using the dispute settlement mechanism of the agreement, a first for Canada.

In terms of next steps, according to the terms of the TPP Agreement, countries have two years to complete their domestic ratification process. For Canada, the government is committed to consulting with Canadians and to a full and open public debate in Parliament on the merits of the TPP.

Since November 4, the Government of Canada has held over 200 interactions with nearly 190 different domestic stakeholders—provinces and territories, industry, civil society, think thanks, academics. Global Affairs Canada has also received over 1,000 letters and emails through this consultation process since November 5.

Last month, Minister Freeland and Parliamentary Secretary Lametti visited seven cities across Canada—Edmonton, Vancouver, Montreal, Halifax, Regina, Winnipeg and Quebec City—and met with nearly 100 stakeholders to hear views on the outcomes of the agreement. They met with provincial representatives, women entrepreneurs, innovation firms, farmers, think thanks, representatives from Canada's forestry and wood products sector, unions and auto workers, port authorities, academics, and, of course, business leaders.

Different views have been expressed to date. Almost all stakeholders recognized the importance of signing the agreement, but signing is only a first step. It is not ratification—only ratification brings the agreement into force for Canada.

With regard to ratification, there are diverse views. Some stakeholders are pressing for ratification as soon as possible, while others say that Canada needs to walk away from the agreement. To be more specific, export-oriented Canadian business and industry associations support the agreement; they view the TPP as an opportunity to gain and increase access to priority markets; they also see the TPP as facilitating trade through, for example, the new rules on electronic commerce, state-owned enterprises, investment and intellectual property.

Canada's business sector is diverse however, and criticisms have arisen from Canada's auto sector. Diverse views have also been expressed regarding whether the TPP will have a positive or negative effect on innovation in Canada. These differences speak to the importance of ongoing consultation.

Civil society organizations and unions have raised concerns over the implications of the agreement for Canadian jobs and have raised concerns about the scope and application of the investor-state dispute settlement mechanism and the cost of pharmaceuticals.

Through these consultations, we have learned that Canadians still have a great number of questions remaining about the TPP Agreement. This is a complex agreement that requires time to consider it in its entirety. It is natural and encouraging that Canadians are pressing for more information about the applications of the agreement and how Canadians across all regions and sectors will be affected.

In conclusion, I'd just like to say that Minister Freeland has often said that signing the agreement was a first step that gave Canada its originating status. Our immediate next step is to continue to seek the views of all Canadians and to support the government's commitment to have an open and public debate, including a parliamentary debate.

Thank you for your attention. I look forward to your questions.

[The Chair, Liberal, Mark Eyking]

Thank you for that overview, Ms. Hillman.

We're going to start the rounds of questioning now. We're going to start with the Conservatives.

Mr. Van Kesteren.

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

Thank you, Chair.

Thank you again for being here. It's a delight to listen to you, and it certainly does instill confidence in Canadians to see the team that we have representing us at the table. However, as you stated, Ms. Hillman, there are definitely areas that cause concern for Canadians.

I want to speak specifically. The last time you were here, you gave us some examples of how the extraction industry would be advantaged to have this agreement. The area that I represent is in southwestern Ontario. We have a diverse economy there from industry as well as agriculture. Agriculture, at least in my riding, has become the main industry, but we still have a large imprint at the auto industry. We have a diverse area of agriculture, but we also have the largest collection of greenhouses in North America.

I'm wondering, what can I tell my constituents? What message can I take them that this is a good agreement and that this will be beneficial to them, as well as to the country?

[Kirsten Hillman]

Maybe we can take it sector by sector. Or maybe I could start by taking a step back.

There are different things that a trade agreement does for Canadians, and Canadians who are interested in trading, but even in terms of job creation that is a product of Canadian companies and that trade.

The first is the meat and potatoes, if you will, of a trade agreement, which is tariff reduction. Tariff reduction is what we call the goods market access outcomes which allow Canadian products, goods, to be exported to TPP countries at lower rates or zero tariffs. That makes our products more competitive vis-à-vis our competitors in those regions.

Some of the biggest tariff outcomes in this agreement, the most economically valuable, will be in relation to Japan. Japan is an economy that has very high tariffs and has not reduced those tariffs in many years. Even in the context of bilateral FTAs that they're negotiating with other countries, they make very modest changes, in my view, in the areas of primary export to Canada.

In the TPP, however, we have achieved significant benefits into the Japanese market through full tariff elimination on many agricultural products, some phased in over periods of up to 10 years, some more immediate, depending on the sector. We have achieved full tariff elimination for fish and seafood, again in all of the areas that are of interest to Canadian exporters. That's just Japan. There is also the market access into Malaysia, into Vietnam, into these other fast-growing Asian markets that have a middle-class that is far outpacing ours in terms of growth.

The other thing I would say is that the TPP, as I explained in my opening statement, is an agreement that's grown over time during the course of the negotiation, and it is designed to continue to grow. There are many countries that are already very eager to join the agreement, even though it hasn't yet entered into force. What that means is, when those countries enter into the agreement, they too will be committing to tariff elimination. We will have the opportunity to request that of those countries.

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

I want to go to Japan. That's very interesting. I've been to Japan. I think many of us have been there. It is an interesting country. I think there's 180 million people, so it's a huge market. Of course, we see watermelons being sold for $12, and we see these little patches of ground where people make a living on an acre.

Let's switch gears here a little bit. What would the advantage be to Japan? They're experiencing some real difficulties at this point. They're having negative interest rates. Their GDP is stagnant. Why is Japan doing this? What guarantee do we have that they will release some of these strangleholds they have on their industries? Why would they do that?

[Kirsten Hillman]

Well, I think it comes back to Prime Minister Abe's economic plan, the plan that he ran on and the plan that he was elected on. He remains a strong leader in Japan. It's sort of commonly known as Abenomics, and it included monetary easing, some fiscal reforms, tax reforms, and opening its markets to trade.

What I think Japan has realized is that its neighbours and many of its like-minded countries, as we call them in international affairs, similar G7 countries, have been much more open to international trade, which has allowed their industries to become more competitive, to be more innovative; whereas in Japan and the agriculture sector perhaps in particular, but maybe other sectors.... And this is not my personal view; this is what his vision for the country is, as it has been expressed by Prime Minister Abe, that kind of modernization and openness, which would lead to innovation, is going to be important. The agriculture community, for example, is aging. The rice farmers' average age—and I'm not going to get the actual age right—is not young.

So they need to consider some domestic reforms, and this is part of the three arrows, as they call it, in his economic plan for modernizing and strengthening the Japanese economy.

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

Is that possibly—

[The Chair, Liberal, Mark Eyking]

Sorry, Mr. Van Kesteren, those were really good opening questions, but your time is up.

We'll have other times.

Now we're going to move over to the Liberals and Mr. Dhaliwal.

[Sukh Dhaliwal, Liberal, Surrey—Newton, BC]

Thank you, Mr. Chair.

Thank you again to the panel members.

Ms. Hillman, you were very helpful. Last time I asked you, you said we can have balanced studies. We are fortunate enough to have no softwood lumber issue on the table, and I know Hillmans always make things happen because my original campaign manager was Hillman, and still my adviser and campaign manager is Hillman.

[The Chair, Liberal, Mark Eyking]

You're using up your time there, Mr. Dhaliwal, on self-promotion.

[Sukh Dhaliwal, Liberal, Surrey—Newton, BC]

Oh, sorry.

Getting back to here, Ms. Hillman, in the last two days I was talking to stakeholders about TPP, and all of a sudden this came out: why don't we study other issues side by side? CETA is one of the issues that was raised in the last two days. I would like to hear from you, because as you said, there are people who want to get the TPP ratified right now, others who want to throw it away all of a sudden, and others who probably want to wait.

How would you gauge this, if we have to do CETA and TPP side by side? What are your views on that? I would like to see how important it is.

[Kirsten Hillman]

I think the first answer to your question is that they are at different stages with respect to consideration.

The government has committed to finalizing and implementing, finalizing the legal scrub and the translation of the CETA and bringing it into force as soon as possible, and that's articulated in Minister Freeland's mandate letter, and that, as Mr. Verheul was saying the other day when we were here, is well under way and in train.

The TPP is in a different state, and that is because of the fact that it was much more recently concluded. It was concluded for Canada in an election period, and therefore, the government of today has not had a chance, first, to look at it carefully, and second, to hear directly the views of Canadians on it. It may be the case that during the negotiations, I and others have heard those views, but the government is looking to hear those views itself and assess the TPP.

So they're at different stages. I think that, by all means, all of this work can proceed at the same time. It's just different work.

[Sukh Dhaliwal, Liberal, Surrey—Newton, BC]

The way I am hearing it, we still have time to do more consultations on the TPP, even though the minister and the parliamentary secretary were on the road having consultations with the stakeholders. When it comes to CETA, it is a priority for you and for the minister and for Canadians to finish that off. Is that true?

[Kirsten Hillman]

Yes, that's absolutely right.

[Sukh Dhaliwal, Liberal, Surrey—Newton, BC]

Are you saying we can spend some time here on that particular agreement? Would you like to see us bringing that forward to the committee?

[Kirsten Hillman]

This is your committee. By all means—

[Sukh Dhaliwal, Liberal, Surrey—Newton, BC]

What's your advice? You are an expert. I would like to know. Some of us are new on this committee.

[Kirsten Hillman]

I think something that will be important as the CETA is concluded and enters into force is for Canada to make sure we understand how our businesses can take advantage of it. We officials need to make sure we do all the work necessary in supporting all of you and the people you represent in going forward and taking full advantage of what has been negotiated. An agreement is just an agreement. A trade agreement is just an agreement. It sets out basic rules. It sets out some parameters for trade, but businesses need to get out there and use those advantages that have been provided. I think that is something important to consider, and it's something that's important for everyone to work at together.

[Sukh Dhaliwal, Liberal, Surrey—Newton, BC]

When you talked about the TPP, you talked about intellectual property. When it comes to particularly the pharmaceutical industry, what would you like to see done? Will it protect our industry to compete and be more innovative?

[Kirsten Hillman]

The intellectual property provisions in the TPP or in the CETA are designed to set a common standard, and to ensure that in the area of pharmaceuticals, or any other area that's covered in that chapter. They're designed to set a common standard so that Canadian businesses that innovate can have confidence their innovations will be protected, and their rights will be enforced when they trade.

We heard the other day that Canadian companies are good at innovating, but they're not necessarily as good as they could be at commercializing those innovations, or trading in the commercialization of those innovations. Part of what trade agreements seek to do is to give innovators confidence when they're out there trading in the world that they're going to have some protections for their innovations. It's one part of a suite of tools that could be used, but it is the part that we are responsible for.

[The Chair, Liberal, Mark Eyking]

You only have two seconds left.

[Sukh Dhaliwal, Liberal, Surrey—Newton, BC]

Next time.

[The Chair, Liberal, Mark Eyking]

Okay, next time. Thank you, Mr. Dhaliwal.

We're going to the NDP. Ms. Ramsey, for six minutes.

[Tracey Ramsey, NDP, Essex, ON]

Thank you so much for presenting to us today. We appreciate it.

You mentioned the economic impact study. Canada's federal government sometimes publishes economic impact studies designed to provide information about the potential impact of trade agreements that are being negotiated. It did so, for example, in advance of its negotiations with the EU and Japan.

Will the federal government analyze the costs and benefits of a free trade agreement with the TPP countries collectively?