International Trade Committee on Sept. 26th, 2016

[The Chair, Liberal, Mark Eyking]

Good morning everyone and welcome to the House of Commons Standing Committee on International Trade. It's going to be like in the House of Commons. There's going to be translation, French and English. We have the translators, if you need translation.

My name is Mark Eyking. I am the chair of the committee. I'm from Cape Breton, Nova Scotia. Not all of our committee members are with us, but a good majority are here today. We have Tracey Ramsey and Dave Van Kesteren from southern Ontario, Gerry Ritz from Saskatchewan, Sukh Dhaliwal from British Columbia, Linda Lapointe from Quebec, and Karen Ludwig from New Brunswick. It's great to be here.

Our committee is very busy, as you know. Trade is important to Canada. Of course, the United States is our biggest trading partner. Our committee has been busy with the softwood lumber and many of the agriculture issues that we are faced with, but our biggest task that we took on this year was the TPP.

Right now, we are in the midst of an agreement with the Trans-Pacific Partnership. We're tidying up the European agreement which is a moving target over there, but it looks like it's coming together. TPP is very important for Canada. There are 12 countries with 40% of the GDP in the world. There are 800 million consumers, so it's an area that we have to look at very strongly.

There are, however, differing opinions on this agreement, and what our committee is doing is travelling the country and listening to Canadians, listening to stakeholders, those who have an interest. At the end of the day, this agreement will affect all Canadians, whether they're consumers or they're supplying a product.

We visited six provinces already and had a video conference with the territories. We're finishing our last leg of travel this week. We're saving the best for last. I'm an Atlantic Canadian. We're going to visit the four Atlantic provinces this week. We're going to P.E.I. tomorrow and then Newfoundland, and then finishing up in Halifax.

In addition to our travel, we probably have 125 briefs. So far, we've had almost 265 witnesses. The other thing we're doing differently with our committee is that we've opened it up to the public. We are accepting emails from the public. Right now, we've received over 2,000 emails. We're going to accept them until the end of October.

We are also doing something different that no other committee has done when travelling. We have an open mike segment for an hour at the end of each of our our meetings, so we can hear from the public.

We are going to be finishing up our consultation process, receiving information until the end of October. After that, we are going back to Ottawa, and our committee will draft a report. That will take probably at least five or six weeks. We're hoping that by the end of December, or at the very least the first of January, we can present our report to Parliament.

Without further ado, we are here in wonderful New Brunswick. We have quite a list of presenters today. We have segments of one hour. This morning, we have three witnesses. We have the Canadian Manufacturers and Exporters, Cooke Aquaculture, and the New Brunswick Federation of Labour.

For the presenters, we try to keep it within five minutes, if possible. After that, we open up for dialogue with the members.

We're going to start with the Canadian Manufacturers and Exporters. Mr. Joel Richardson, welcome.

[Joel Richardson, Vice President, New Brunswick and Prince Edward Island Divisions, Canadian Manufacturers and Exporters]

Thank you very much, Mr. Chair, and thank you to the members of the committee for the opportunity to speak with you today. We greatly appreciate the opportunity to be present. My comments are going to be focused primarily on some of our national perspective.

CME has taken the opportunity to present across the country, and I think you've heard from some of our other representatives. My comments won't be dissimilar to some of the things they've said. I will add maybe a bit of local flavour from here in the province of New Brunswick on some of the things we're experiencing.

As you know, New Brunswick is Canada's most trade-intensive economy. A larger percentage of our GDP in New Brunswick comes through the export and trade of our manufactured goods. We're also very reliant on the service industry. We have a significant percentage of our population in New Brunswick who work in services, as well as the manufactured goods sector.

Canadian Manufacturers and Exporters is actually Canada's largest trade and industry association. We have representation right across the country, in every province. More than 85% of the members that we represent in the manufactured goods sector are small and medium-sized companies that represent pretty much every industrial sector of the export economy. That would also be representative here in New Brunswick as well. The members I represent are large-scale companies, such as the McCains of the world. I also represent our smaller manufacturers and exporters that would have maybe less than 10 employees and are doing metal fabrication and exporting that metalwork to other regions around the world.

Manufacturing is certainly the single-largest business sector in the country. Canadian manufacturing represented sales of about $600 billion in 2015, and directly accounts for about 11% of Canada's total economic output. Manufacturing employs about 1.7 million Canadians. Here in the province, the manufacturing sector directly employs approximately 26,000 individuals. I will say that we have seen those numbers go down in recent years. Over the last 10 years, across Atlantic Canada, employment in this sector is down significantly in manufacturing. It's somewhere in the order of about 30% over the last number of years. Unfortunately, that has come at the cost of some of our traditional resource industries: forestry, fishing, and other sectors.

In New Brunswick, about 95% of the businesses here employ 200 people or less, so there's approximately 4% of New Brunswick companies that employee more than 500 people. Our large pool of companies is actually quite small. There are over 500 companies in New Brunswick that employ under 10 people. We have a very broad mix of companies, but the lion's share of all the companies in the province are fairly small-size companies.

Simply put, Canada's domestic market is too small for manufacturers to thrive. It is an export-intensive business. More than half of our industrial production is involved directly in exporting as part of the global supply chains and integrated manufacturing, such as finished consumer goods, in almost every product category. Manufactured goods account for roughly 70% of all Canadian exports. The growing importance of the natural resources prices, given the fact that they remain weak, has certainly had an impact on the provincial economy here in New Brunswick, and obviously across the country. This is all the more reason why it's important to focus on new markets. We're very supportive of TPP for that reason.

While Canadian and U.S. markets remain the priority for most of Canada's exporters, a growing share of our members are looking to take advantage of new and emerging markets that go beyond NAFTA, especially countries represented in the TPP. As you stated, Mr. Chair, today its collective market represents over 650 million consumers and over $20 trillion in GDP. That, we believe, provides a significant opportunity for us to grow our exports from New Brunswick.

CME believes strongly that no trade agreement is worth signing unless three things can happen. First, it should create a fair and level playing field for Canadian manufacturers and exporters to ensure they have an equal opportunity to export to foreign markets, as our competitors have to import into Canada. Second, it should allow value-added exports from Canada and not just the export of natural resources or unvalue-added product. Third, the trade agreement should not undermine the existing integrated manufacturing supply chains that have been developed through previous free trade agreements, especially NAFTA.

CME has, in principle, supported Canada's entry into and signing of the Trans-Pacific Partnership because of our small domestic market, the export orientation of our manufacturers, the deal's inclusion of our major trading partners, and the significant new market opportunities that it affords.

Throughout this process and in the lead-up to coming to present to you today, I did take the opportunity to speak to a number of companies, such as McCain and Irving, and a number of the smaller manufacturers. Two weeks ago, I was in Moncton and met with a number of seafood companies that were presenting at the Moncton Air Cargo Symposium. They were very supportive of growing our seafood trade into those particular markets. Our position, however, is not without reservations, certainly from several of our CME members. There are concerns over certain elements of the proposed deal, and they do remain fairly significant. While these may relate more to our Ontario colleagues, the lowering of content levels on automotive rules of origin, the lack of additional measures to curb the U.S. Buy American policies for government procurement, provisions to deal with currency manipulation, and the uneven tariff phase-out in certain sectors compared to those of our American counterparts are but a few of the concerns we've heard about directly.

So we're not without some reservations, but we believe overall that the TPP would really open up opportunities with some new markets. We do continue to encourage negotiations to work through these issues prior to final ratification to ensure fair treatment and opportunities for Canadian exporters. It's critical to keep in mind that export opportunities obviously start at home and are propped up by the strength of our domestic market, the innovativeness of our private sector, and the supports that Canadian exporters receive in accessing and supporting foreign markets.

For us, TPP means entering into an agreement with very aggressive, export-oriented countries. If we don't have similar domestic strategies for success, Canada has the potential to lose. We need a national strategy that aims to support domestic competitiveness in global exports.

First, all trade agreements open the door to increased competition. This can and should be perceived as a good thing. However, we need to be ready for that competition. While the private sector is willing and ready to compete on a level playing field, our business environment is often not entirely level. While our corporate tax regime is world-class, many other areas are not. Canadian companies face higher input costs, a much more costly regulatory burden, higher labour costs, and higher energy costs. Meanwhile, domestic supports for investment in innovation and advanced technologies significantly lack those of our international competitors.

[The Chair, Liberal, Mark Eyking]

Would you like to wrap up?

[Joel Richardson]

Absolutely, sure.

CME believes that with the right support network in place for TPP as well as other international trade, Canada could double its manufacturing output and value-added exports by 2030. We've actually launched a national manufacturing strategy—we've heard from many of our manufacturing companies—and we believe that here in New Brunswick the advantages of TPP are certainly significant, particularly with regard to the elimination of tariffs on key exports, such as industrial goods, seafood, potatoes, and maple syrup, to name a few.

The last thing I will say, Mr. Chair, is that we do have a lot of investments in the transportation logistics infrastructure in this province, which is very critical to getting goods to market, and we do see the TPP as an opportunity to strengthen our ports, including the port of Saint John in particular with its container traffic; the Moncton airport with its air cargo logistics, which directly exports product, particularly seafood, into Asia; and last, our transport truck network.

Thank you very much, Mr. Chair.

[The Chair, Liberal, Mark Eyking]

Thank you, sir.

We're going to move over to Cooke Aquaculture, and we have Mr. Andrew Young.

Go ahead, sir.

[Andrew Young, Senior Vice President, Global Sales and Marketing, Cooke Aquaculture Inc.]

Good morning.

On behalf of Cooke Aquaculture and our affiliated businesses, both the aquaculture and fisheries sectors, I thank you for the invitation to appear before the committee today.

We are headquartered on the east coast of Canada in Blacks Harbour, New Brunswick, which is just a short drive from here. The Cooke family founded this company just over 30 years ago. They had humble beginnings with a single marine site containing over 5,000 fish. Since 1985, the company has seen remarkable growth through acquisitions and has become the largest vertically integrated salmon-farming company in North America with operations in Atlantic Canada and Maine.

The family also owns a major sea bass and sea bream operation in Spain, as well as a salmon-farming company in Chile and a salmon-farming company in Scotland. In addition, the family recently expanded its interest in the fisheries sector by purchasing the Wanchese Fish Company based in Virginia, and Icicle Seafoods, which is based in Seattle, Washington, and has three business units: wild salmon; a ground fishery in Alaska; and a salmon-farming operation in the state of Washington.

The Cooke family businesses employ 5,000 people globally, including more than 1,500 people here in Atlantic Canada. We expect to generate $1.8 billion in annual sales in 2016. With global production of 275,000 tonnes of seafood, we export to more than 30 countries around the globe annually. Even though we have grown to be a global seafood company, we remain deeply rooted in Atlantic Canada. Our global expansion has strengthened and secured Canadian management and administration jobs in coastal and rural Atlantic Canada.

As it stands, the Cooke family has a worldwide network of cold storage and distribution facilities. We are consistently focused on vertical integration and diversification in terms of geography, products, and markets. Our strategy has been to achieve growth through acquisitions and organic growth in the seafood sector that are both sustainable and meet market demands.

As an Atlantic Canadian seafood company, we have global operations in Canada, the U.S., Scotland, Argentina, Spain, and Chile. We have sales offices in Canada, the U.S., Europe, and Asia, and thus fully support the Canadian government's participation in the TPP. The Cooke group of companies regards this partnership as an essential component of our future success. We compete on a global scale, and with this partnership, we see the promise of trade opportunities in various export markets.

Our current trade with TPP countries is approximately half a billion dollars in fresh and frozen seafood. One of the most significant attributes of this agreement is that it would give us a competitive advantage over our rivals in non-TPP countries. In the past, we have supported similar initiatives, such as the Canada-EU Comprehensive Economic and Trade Agreement and the Canada-Korea Free Trade Agreement.

As a leading Canadian supplier of seafood, we believe we will benefit from the implementation of the TPP. The ease of access to markets such as Japan, one of the largest seafood markets in the world, will prove to be extremely beneficial to our business and our contribution to the Canadian economy overall. We also look forward to achieving access to markets in countries like Vietnam as we look for ways to further diversify our product portfolio and geographic expansion.

Thank you for the opportunity to speak to the committee today to express our support for the TPP.

[The Chair, Liberal, Mark Eyking]

Thank you very much for your presentation. You have very impressive operations and quite a reach around the world, so it's good to hear from you.

We now have Patrick Colford from the New Brunswick Federation of Labour. Go ahead, sir.

[Patrick Colford, President, New Brunswick Federation of Labour]

Thank you, Chair.

On behalf of the 40,000 members of the New Brunswick Federation of Labour, we want to thank you for giving us the opportunity to present our views on the impact on Canada of the possible Trans-Pacific Partnership agreement.

I want to begin by expressing my sincere appreciation of your willingness, and that of Minister Freeland and your government, to sustain an open and frank dialogue regarding the Trans-Pacific Partnership negotiated under the previous administration.

It is a deeply flawed agreement, and our view is the cost of the TPP outweighs the limited benefits that might arise from this deal. Proponents of this deal only expect it to boost Canada's GDP by about 0.5%, and that's 10 years down the road. That's about as much as the previous government promised to pay the dairy industry in compensation for TPP losses. This leaves nothing to cover the losses to the auto sector and other areas.

A key study from Tufts University predicted that workers in all 12 TPP countries would lose out because the TPP would increase income inequality. This flawed agreement is about protecting the rights of multinational corporations. It does nothing to help workers or the environment.

The two sectors with the most to lose are auto and dairy. I also want to touch on our concerns with the provision of public services, rising drug costs, and investor challenges to environmental regulations.

First, the automotive sector is essentially important to Canada's research and development, high value-added production in manufacturing exports. In 2014, approximately 40,000 Canadians worked in motor vehicle manufacturing and another 70,000 in parts manufacturing. A five-year phase-out of tariffs on Canada's imports of Japanese vehicles will quickly eliminate the incentive to manufacturers here in Canada. It will encourage Japanese assemblers to import vehicles. Unifor has estimated that the TPP could lead to the loss of 20,000 jobs in the auto sector alone.

The Canadian dairy sector provides high-quality, locally produced food, while supporting small family farms in rural communities. Under the TPP agreement, foreign dairy producers would be able to access an additional 3.25% of Canada's 2016 dairy milk production. This comes at a time when the dairy industry is already under considerable stress. About 250 million litres of milk and subsequent production jobs are at risk annually.

We have many concerns with the model of investor-state dispute settlement. By now, the problems with this model of dispute settlement are well known with the unaccountable and ad hoc nature of the arbitration panels and their expansive definition of what constitutes an investment. The fact is that they do not operate in partnership with national court systems, but above them, and there is an apparent lack of deference to the prerogatives of governments, or even to ask for jurisprudence on any given issue.

With regard to public services, the TPP chapter on public services locks in the current level of privatization with so-called ratchet and stand-still clauses. This makes it more difficult for governments to introduce new public services such as pharmacare or child care without subjecting themselves to an ISDS claim. Canada already has the second-highest per capita drug costs in the world. The TPP would further constrain efforts to reform prescription drug purchasing provisions in Canada.

When it comes to the environment, the TPP also contains broad prohibitions on economic or environmental performance requirements, such as requiring technology transfers or local sourcing to foster green industries. Such restrictions would serve as a chill on governments contemplating steps required to make the transition toward a low carbon and climate resilient economy.

It's time to come back to more reasonable forms of investor protection. These protections should be in line with national judicial processes, should privilege state-to-state settlements, and should emphasize investors' responsibilities just as much as the protection of their assets.

In conclusion, given the high economic and political stakes, Canadians deserve no less than a full and substantive discussion on the potential consequences of this draft agreement.

Thank you very much.

[The Chair, Liberal, Mark Eyking]

Thank you, sir.

I think we have enough time for every MP to have a dialogue for five minutes. If we keep to five minutes, everybody will be able to have a shot at this.

We're going to start off with the Conservatives. Mr. Ritz, go ahead.

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

Thank you, gentlemen, for your presentations today. As you rightly point out, we've heard some of this in arm's-length groups attached to you across Canada.

Before the negotiations there was the Canada Gazette process, and there were close to 100 different businesses that took advantage of that, and a number of individuals as well. Then, during the negotiations, you were able to have input into what was being discussed if you signed a non-disclosure agreement. Did any of you take advantage of that?

[Andrew Young]

I'm not aware that we did take advantage of that. It's possible that somebody from our company may have, but I don't believe so.

[Joel Richardson]

Yes, we did.

[Patrick Colford]

I personally haven't, but I know some of my colleagues were part of those discussions.

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

As we move forward.... As you know, we signed a number of trade agreements, and the biggest concern that always came up was whether companies in Canada were ready to take advantage of what was out there on the world stage.

Are any of you contemplating training or taking advantage of some of the training that's out there to make sure that your associates are willing to do this? I know Cooke already has a global footprint. I've worked with some of your companies around the world, Andrew. Joel, you do as well. On the union side, is there any kind of training on what you're going to have to do to compete with the Koreans, with the Japanese, that type of thing?

[Patrick Colford]

Those dialogues have been happening for years with the former CAW, of course, and now with Unifor. They're actually taking the lead when it comes to the automotive industry, in training the workers and having those dialogues with government.

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

Good. All right.

[Joel Richardson]

Could I speak to that, Mr. Ritz, if you don't mind?

We've been talking to a number of companies, not just about this but also about CETA . One of the things we hear is that there are some real challenges with in-house company expertise for new foreign markets. It has been our recommendation that the Department of Global Affairs and the Government of Canada look at expanding the trade commissioner service, not just in key distant markets, but to specifically look at ways they can help companies build more of an in-market presence. That may be through the identification of distributors, buyer agents, representatives, beyond just the current—

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

A trade show is all of those things.

[Joel Richardson]

Yes, it just takes it one step further.

Here at home, the trade commissioner service over the past number of years has gone through some challenges in Atlantic Canada. There's one Global Affairs representative at the staff level in New Brunswick. For a multi-billion dollar export industry, it is not sufficient to serve the companies. We really believe that we need to enhance that Global Affairs department, and even here at home domestically, to get more people paired up with our companies.

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

That's an excellent point. There is actually backup on specific areas like Agriculture Canada. We have experts, and they're starting now, on websites and so on, to entice people to come forward so they can help them do whatever they're looking for, connect potato sellers with potato buyers, and so on.

I'm a firm believer that we have to get our heads around the fact that we need to sell what the market wants, not what we have. We raise beef with a 16-ounce T-bone. Well, that will feed a village in Japan. They're looking for a two-ounce cut. We have to come up with ways of doing that carve-out on our beef without destroying the actual carve-out itself and having too much waste.

There's education required at all levels, and certainly government has a big role to play in that, but industry itself has to partner with government in order to get the right training. Government sometimes misses some of that.

There's a lot of discussion that the Americans may not ratify this, and right now there's a clause which says that if six countries with 85% of the trade value don't ratify it, it won't happen, but that can be changed with the countries that are left. Should Canada proceed if the Americans don't?

Well, you can. The other 11 countries can actually have a different agreement and continue on. Most of the concerns we hear are with the Americans, the Buy American clauses, all those types of things that they have to get their heads around.

[Joel Richardson]

Yes. I think we have to recognize.... I'm looking at this purely from a New Brunswick perspective. The United States is our best customer, and we need to make sure we're not doing things necessarily that are going to upset the apple cart from a solid and stable market that currently is our best customer.

I'm not saying that it couldn't be ratified, but there needs to be a lot of consideration for where we currently sell, for sure. Any opportunity we have to open a new market, whether it's through a trade agreement or through other negotiations, is very much welcome.

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

We've also found over the years that with the country of origin label on softwood lumber, if we keep the Americans honest, then they tend to deal fairly, too.

[The Chair, Liberal, Mark Eyking]

Your time is up.

Ms. Ludwig, go ahead.

[Karen Ludwig, Liberal, New Brunswick Southwest, NB]

Good morning and thank you so much for joining us. I have to say how thrilled I am to have our trade committee here in New Brunswick.

I have a number of questions. As someone who worked for almost two decades in trade education, my first questions are for you, Mr. Richardson.

With the preparedness of New Brunswick exporters for trade, we have companies like Cooke, McCain, and Irving that have in-house expertise, as you have mentioned. How prepared, in your experience, are New Brunswick exporters for entering into the TPP market members?

[Joel Richardson]

I would suggest that for those that are at a larger scale, as you pointed out, and that have the in-house resources, sure.

One thing that I've observed happening—and I don't know if this is unique to Atlantic Canada, but I know that it is something we promote heavily—is there seems to be a bit more of a collaborative approach here between companies.

There are some smaller SMEs, even with 10 employees or under 200 employees, that are getting some mentorship from some of the larger, more successful companies in the market. We've been an advocate to say that if there is training going on....

Cooke's a great example. They provide ongoing access. They make appearances at conferences. Their executives talk about their experiences in key markets. Those are absolutely critical to helping the other companies along.

For the bulk of companies, I would suggest there is still a low level of awareness. It's not about that TPP is out there and it's being negotiated; it's about what the market opportunities are on a country-by-country basis, and on a product-by-product basis, for what they have to offer, or what they should be offering in those markets. What's the export continuum to help them get there in terms of staffing and market intelligence? How do they work with the trade commissioner service once they're there or to get there?

Another key point that has been brought up to me from companies is that at one point in time Canada did have a large emphasis on foreign trade missions to support some of the markets. Those have seemed to be less Canada led and more province led, which I think is great, but it was always powerful to see the Government of Canada going into a market. Look at the recent results from Prime Minister Trudeau's trip to China. There was a company in Fredericton that participated in that. It was a tremendous opportunity for exposure, connectivity, and new relationships.