International Trade Committee on Oct. 18th, 2016

[The Chair, Liberal, Mark Eyking]

I call the meeting to order.

Welcome back, everyone, from the break week in your riding. I hope everything went well.

Today we'll continue with our study on TPP.

Welcome to our guests. Our committee has been fairly busy. We're dealing not only with TPP but with other issues as well, including softwood lumber and the European trade agreement. We've been travelling quite a bit over the last few months. We visited all the provinces and we have had many meetings with stakeholders. We're also getting submissions from the public. The clerk says we have had more than 20,000 emails from individuals. The agreement is a big deal, with 40% of the world's GDP involved.

As I said, we got to every province and we saved the best for last—the territories. We would have loved to go up to your area, but we're kind of constrained for time and money. At any rate, we welcome you and your perspective on TPP and any other issues you want to talk about with trade.

We usually give each presenter around five minutes. Then we open it up for dialogue between the MPs and our witnesses.

In the room with us today is Mr. Marshall, from the Mining Association of Canada. From Yellowknife we have Lois Little, and from Whitehorse we have Vikki Quocksister, Richard Karp, and Stan Thompson.

Mr. Marshall, perhaps you could start first. After your presentation, we'll move on to the territories.

Go ahead, sir.

[Brendan Marshall, Vice-President, Economic and Northern Affairs, Mining Association of Canada]

Mr. Chair, esteemed members of the committee, clerk and fellow attendees, I'm Brendan Marshall, vice-president of economic and northern affairs at the Mining Association of Canada. MAC is the national voice of Canada's mining and mineral processing industry. I am pleased to appear and discuss this important matter.

The Canadian mining industry is a major economic driver, contributing over $55 billion in GDP in 2015, employing approximately 374,000 people, and accounting for $92 billion, or one-fifth, of the overall value of Canada's total exports. Across all four stages of mining, the industry also accounted for $43.2 billion in foreign direct investment in Canada—that's 7% of the country's total.

Understanding the committee's focus today, I would like to speak on two areas. The first is the industry's perspective on the trans-Pacific partnership, and the second is how Canada's critical infrastructure deficit in the north acts as a barrier to the territories' benefiting from TPP.

MAC expresses its firm support for Canada's participation in the TPP. On principle, Canada's mining industry strongly advocates for liberalized trade and investment flows. Free trade agreements, such as NAFTA and others with various countries in Latin America, Africa, and Asia, have all helped to increase Canadian mineral exports. Importantly, they've also increased two-way mineral investment that has supported mining jobs for Canadians and the generation of taxes, royalties, and a host of indirect and induced economic benefits. A testament to this is the fact that Canada's mining industry is one of the largest in the world.

The products that our members extract are sold on international markets at international prices all over the world. Given the highly internationalized nature of the business, measures that break down price barriers and other barriers can become competitive advantages for companies. At the very least, pursuing the TPP ensures that Canada remains on a competitive playing field, all else being equal, with other peer mining countries the world over. The TPP represents a massive trade bloc, including critical emerging markets, and is a trading partnership Canada must not risk being left out of.

Mining is the largest private sector driver in Canada's north, employing approximately 8,500 people. That's one in six jobs. As of 2014, direct GDP contributions in Yukon, the Northwest Territories, and Nunavut were 18%, 29%, and 18% respectively. Mining has had a transformative effect on northern and indigenous communities through generating employment, supporting skills and training, and, in some cases, contributing royalty or direct equity shares, all while paying taxes and royalties to governments.

With respect to the north, it is instructive to ask the question: if the TPP is enacted, will it benefit the region? I would say, all else being equal, yes. Unfortunately, though, all else isn't equal in Canada's north. Let's have a look at why.

A recent industry report that MAC spearheaded, called “Levelling the Playing Field”, found that it costs two to two and a half times more to develop a comparable mine in the north than it does in the south, with 70% of the cost differential stemming directly from the lack of infrastructure. Geography itself, in these circumstances, and the costs that result from it, significantly affect the economic viability of project development and threaten the long-term viability of the largest private sector economic driver across the three territories. Decades have gone by without substantial trade-enabling infrastructure development.

While the infrastructure deficit is significant, there is tremendous potential in the north. MAC's research indicates that 15 mines could start or restart production in the next decade, with total life-of-mine investment exceeding $35 billion, nearly four-and-a-half times the size of all territorial economies combined in 2014.

Opening up the north to responsible mining development in partnership with communities will enable northerners and indigenous communities to increasingly access the socio-economic benefits that mines bring to regions. To this end, MAC recommends that the federal government establish tax and infrastructure investment incentives for remote and northern regions and include a northern-specific fund within the proposed Canada infrastructure bank based on the highly successful Alaskan model, AIDEA. The concept of incorporating a northern fund within the Canada infrastructure bank has been supported by the National Aboriginal Economic Development Board, as articulated in its January 2016 report, and the Canadian Chamber of Commerce, in a study released in June.

Depending on how the Canadian model is developed, direct and indirect job creation, tax and royalty revenue generation, and broad-based social and economic development can be weighed in assessing the public value of an applicant's business case. Further, special consideration could be given to infrastructure investments that enhance the economic viability of projects in regions with historically high unemployment and limited alternative development opportunities. Considerations such as these require recognition of the unique challenges and opportunities facing northern Canada. Creating a mechanism that facilitates economic growth will enable remote and northern regions to further develop their potential for business development, thus reducing their reliance on federal support.

Across the areas of trade and investment, indigenous reconciliation, and climate change, the pursuit of stated public policy objectives in the north must be done in tandem and built on a solid foundation. Without strategic and wealth-generating infrastructure development to enhance investment competitiveness, the north will unsustainably remain disproportionately reliant on transfer funding for core services and program delivery, frequently at lower standards than southern Canadian jurisdictions enjoy.

Equally strategic and synergistic investments in energy infrastructure are essential to reducing northern reliance on costly and high-emitting fossil fuels. With the development of a price on carbon, northern industry requires a viable fuel-switching opportunity. Otherwise, the cost of development will outweigh the benefits, pushing investment further away. At stake is the single largest territorial economic driver and the largest proportional employer of indigenous Canadians.

In conclusion, trade begins at home. Northern mining companies will be challenged to take advantage of newly created market shares via TPP or any other agreement if they are unable to competitively develop mines and unable to effectively deliver their product to export markets.

In this sense, trade, investment, and economic development in the north are intrinsically linked to addressing the infrastructure deficit. A reliable transportation system and strategic power development need to be viewed by government as key factors in the success of Canada's trade and economic development priorities for the north.

Thank you.

[The Chair, Liberal, Mark Eyking]

Thank you, sir.

We're going to move on to the Yukon now, and we're going to go to the Yukon Federation of Labour.

Go ahead, Vikki.

[Vikki Quocksister, President, Yukon Federation of Labour]

Good morning.

I'm Vikki Quocksister, president of the Yukon Federation of Labour. I'd like to thank the council and the committee for allowing us to speak today.

Among the issues that workers in the Yukon have is our concern about the labour mobility clauses within the TPP. We already have situations where there aren't enough good-paying jobs for the workers here, so we're worried that the labour mobility clauses within the TPP will bring in workers from other countries potentially, who don't perhaps have the same kind of training or whatnot, and it would create a subclass of workers here.

We agree that the economy needs to grow and that we have a poor economy at the moment, but the only way to raise the economy is to give workers a decent wage. If we're bringing in workers from other countries, the TPP does not provide ironclad prevention of abuse of that system.

In addition, we're concerned about the labour clause that discusses the unionization of all the countries that are within the TPP. Many of them have different kinds of unionization, and they don't have the same benefits and labour and human rights that we do here in Canada. Again, if those workers were to come to Canada, we're concerned that it might muddy the waters here and involve somehow changing the way we view unionization.

I know that my report is a little shorter than others, but that is my concern for the Yukon itself. Thank you very much for allowing us to submit our comments.

[The Chair, Liberal, Mark Eyking]

Thank you very much. We don't mind. It's all good.

We're going to move over to the Whitehorse Chamber of Commerce.

The two of you are here, so go ahead for five minutes.

[Richard Karp, President, Whitehorse Chamber of Commerce]

Thank you.

My name is Rick Karp. I am president of the Whitehorse Chamber of Commerce. Also here is Stan Thompson, who is the CFO for NorthwesTel, where we're being hosted today, and chair of the Whitehorse Chamber of Commerce.

First we'd like to thank the committee for including the north, and in particular the Yukon, in these consultations. Canada's north, as you heard from Brendan Marshall, is unique and has the potential to be a major contributor to any expansion of trade with the Asia-Pacific market. The Yukon's resource development projects, growth in the tourism sector, and the expanding knowledge and innovation in the cold climate research sector are economic enablers for our economy, allowing value-added sectors to develop, create jobs, and compete. Chinese investors have shown interest in the Yukon's resource and tourism sectors and have invested significantly to this date.

The north, including the Yukon, the Northwest Territories, and Nunavut, possesses vast natural resources such as gold, lead, diamonds, and copper, and many valuable resources that are in demand internationally. We have proven tourism potential; continuous innovation in cold climate research, housing, and waste management; and much more. The Yukon has so much to offer, not only to Canada but also to the Asia-Pacific market and indeed the world.

Safe, well-regulated, and responsible natural resource development is one of the defining features of our Yukon Chamber of Mines. The wealth created by natural resources enables provinces, and in particular many of the untapped resources in the Yukon, to potentially serve as net contributors to Canada's national economy in support of vital services such as health care and education. Our inclusion in the TPP process and increased trade with the Asia-Pacific region would lead to furthering the economic and social development of the north.

The lack of adequate infrastructure is the most significant obstacle to mining development here in the north. Inadequate infrastructure has been the primary barrier to developing some of the most promising mineral discoveries. Greater investment in the necessary infrastructure is needed to help relieve the current financial burden of construction costs placed on mining and resource companies and to unlock the vast potential of Canadian northern communities from mineral and oil and gas deposits in the north.

Canada is doing more business with Asia. According to the Conference Board of Canada, Asia makes up 15% of Canada's international trade, up from 10% in 2003. The Conference Board of Canada points out, however, that our imports have increased faster than our exports, and our market share in the region continues to fall. As well, Canada's foreign investment in Asia has dropped compared to G7 peers. Joining the trans-Pacific partnership discussions has started to reverse this trend.

The Asia-Pacific region has many suitors, and Canada will have to work even harder and smarter to remove trade barriers, create a level playing field, and help companies, especially in the north, to navigate and take advantage of new opportunities.

In order for the resource development, tourism, knowledge, and innovation sectors to reach their potential to increase international trade and become net contributors to Canada, we will need to do more than just sign trade agreements.

Canada needs to establish enhanced funding partnerships and innovative funding models with the private sector, all levels of government, and aboriginal peoples to invest in the transportation and energy infrastructure necessary to promote mining sector growth, to market our tourism sector internationally, and to support our knowledge and innovation sectors with the abilities to commercialize their knowledge and products. Canada requires a coordinating entity or a comprehensive funding facility, which is the key to an actionable territorial northern development strategy. That is the way to stimulate regional economic development and sustainably meet the increasing international demand for Canadian goods and services.

It is necessary to work with territorial and aboriginal governments to better coordinate infrastructure spending by aligning infrastructure planning with community and industry needs as well as with other economic development projects.

We believe that Canada should do the following.

One, take a leading role in concluding and implementing the TPP, and in your negotiations consider all that the north has to offer.

Two, assist northern businesses to develop, to help enable them to compete in the marketplace.

Three, empower CanNor to grow and develop northern SMEs by making a clear commitment to an entrenched SINED program not subject to sporadic renewal.

Four, support initiatives by Yukon College to provide education programs geared to the unique needs of the Yukon population.

Five, assist northerners to develop an infrastructure investment program targeted at the development of roads, reliable high-speed communication networks, and other technologies to open up access to resource discoveries north of the 60th parallel.

Six, in support of sustainable tourism, seed self-funding programs that are designed to return economic benefits in excess of their cost to operate.

Thank you.

[The Chair, Liberal, Mark Eyking]

Well, thank you.

We're going to move over to the Northwest Territories now. We have Lois Little, from the Council of Canadians. Go ahead.

[Lois Little, Co-Chair, Northwest Territories Chapter, Council of Canadians]

Good morning. Thanks very much for making this opportunity available.

I'm speaking this morning as a northern resident and the co-chair of the NWT chapter of the Council of Canadians. As you may know, the Council of Canadians is an advocate of social and environmental justice, a healthy democracy, and fair trade. The TPP undermines all of those values and must not be ratified. The TPP will constrain governments in areas that have little if anything to do with trade but lots to do with a fair and just society and a healthy democracy.

Here in the NWT, the TPP will undermine hard-fought battles to recognize indigenous rights and title, achieve the equality of all citizens, and honour the interdependence of northerners, the land, and the natural environment.

There can be no equality or justice when the TPP puts corporate rights above the rights of Canadians and above the rights of indigenous nations. There can be no fair trade when foreign companies have more rights to make profit than local or indigenous companies and when buying local is prohibited.

There can be no social or environmental justice when chapter 20 of the TPP offers only vague and mainly unenforceable commitments to environmental protection.

The TPP offers no new environmental standards, but offers the opportunity for corporations to sue governments if new standards are introduced to correct the current general state of environmental lawlessness in Canada and here in the NWT.

Further, there is no hope for policies and legislation that will help us cope with the devastating effects of climate change—which, incidentally, is not mentioned anywhere in the environmental chapter. The absence of recognition of climate change will create even greater injustices, especially here in our fragile northern environment.

There can be no social justice when the TPP can weaken and obstruct the vibrancy of our public health care system. Already at least 23% of Canadians can't afford prescription drugs, but the TPP will extend patents and boost brand name drugs, further burdening our health care system, causing Canadians to pay even higher drug costs and causing more Canadians to suffer because they can't afford prescription drugs.

The TPP will likely quash any hope of a national pharmacare plan that would save Canada about $11 billion annually. Because there are no carve-out provisions or basic safeguards to guard our health regulations, any legislative change to improve responses to system or demographic needs are vulnerable to investor state challenges.

Lack of public stewardship of our health care has the potential to hit the NWT very hard, as we struggle to find innovations to achieve equitable quality services in all 33 of our communities.

There can be no healthy democracy when the TPP allows corporations to bypass domestic courts and sue us for changes to public policies and public laws that threaten their corporate profits. These compensation lawsuits are adjudicated by largely unaccountable secret tribunals. By ratifying the TPP, parliamentarians and judges might as well shut the doors and go home, because they won't be needed.

The TPP will threaten local economies and local food systems, invade our privacy, increase education costs, and put restrictions on crown corporations. All these threats will diminish the quality of life here in the NWT and throughout Canada.

Negotiated in secret with corporate lobbyists, the TPP is a made-in-America corporate rights deal that will cost Canadians and our democracy and our environment dearly. It should not be ratified. Please reject it.

Thank you.

[The Chair, Liberal, Mark Eyking]

Thank you.

Thank you to all the witnesses for your presentations.

We'll move along to dialogue with the MPs. We'll start off with the Conservatives. Mr. Hoback, you have five minutes.

[Randy Hoback, Conservative, Prince Albert, SK]

Thank you, Mr. Chair.

I don't think the sky's falling, so that's a good thing.

Mr. Marshall, I'm going to start with you and probably use most of my time with you and the chamber.

When you look at the mining sector and the TPP and how strong that sector has been here in Canada, what do you see as the TPP's impact on your sector in terms of your competitiveness, your ability to not only be a leader in the world, as you are right now in this sector, but to maintain that leadership role?

[Brendan Marshall]

Thanks for the question.

From a general principles standpoint, the mining industry is highly international; it's a global industry. The Canadian mining industry, as a result, is highly internationalized, so if Canada does not move in step with other jurisdictions with respect to liberalized trade, the risk is that our competitiveness can erode across a number of areas.

That may factor in with respect to price tariffs on the import and export of goods. It may result in other regulatory and non-regulatory barriers to trade that can affect the competitiveness of the industry.

The other way to look at this, to flip the question on its head, is to think about the other member states that are party to the TPP. Canada's single largest global competitor from a mining standpoint is Australia. Given Australia's engagement and commitment to the TPP, if Canada does not follow through, not only would we potentially not be able to take advantage of competitiveness factors that the agreement would bring, but reciprocally there might be an erosion in competitiveness, since our principal jurisdiction of competitiveness excels in those respects.

From a two-fold standpoint, that's how we look at what's at stake, whether this agreement gets ratified or not.

[Randy Hoback, Conservative, Prince Albert, SK]

You highlighted competitiveness, and I think it's very important that we strive to be competitive, because it's very important. It's not only that the TPP allows you to maintain a level playing field; there are other things that could happen here in Canada that could make you uncompetitive, such as a carbon tax, a lack of infrastructure, or the inability to get your product to market. What impacts will there be on the Canadian industry if we don't get those barriers removed?

[Brendan Marshall]

As you framed quite well, competitiveness is a large concept. There are a lot of variables at play. Those factors have different implications for different companies, depending on the realities of their operations.

One of the themes for today is Canada's north, and as both the witnesses from the chamber and I mentioned, one of the principal things that reduces the competitiveness of the industry in the north is the significant infrastructure deficit.

Just to give you a little bit more detail, MAC, with partners from all of the territorial mining chambers and the Prospectors & Developers Association of Canada, undertook a relatively thorough analysis to try to quantify that cost differential. Working with our members, we ascertained that it is two to two and a half times times more expensive to build a mine in the north than it is to build a comparable mine in the south, and 70% of that cost differential is directly attributable to the infrastructure deficit.

When you try to factor in some of these competitive challenges with respect to trade, our view fundamentally is that trade begins at home, and if a company cannot reliably operate competitively within Canada and bring their product to market competitively, then some of the benefits that trade agreements have historically brought are difficult to reach. Therefore, while we view making progress from a trade and investment standpoint through the TPP as essential, we also view correspondingly that investments and policies must be made and implemented in Canada to ensure that our domestic competitiveness relative to that of other international jurisdictions is on the same playing field.

[Randy Hoback, Conservative, Prince Albert, SK]

You talked about moving in sync. One thing TPP does is to put us in sync with our competitors like Australia, as you said. Australia just got rid of its carbon tax. They just said they didn't want it anymore and they got rid of it. I know that in the farming sector in Saskatchewan, with the carbon tax coming into Saskatchewan when Australia has just gotten rid of it, my farmers are no longer on the same level playing field. Now perhaps Australia will have preferred access with the TPP if we're not there, so we have a disadvantage not only with the carbon tax but also with tariffs that may be in place for Canadian products but not for Australian products.

[The Chair, Liberal, Mark Eyking]

Mr. Hoback, I know you're on a roll, but your time is up. We're going to move over to the Liberal Party and Mr. Dhaliwal for five minutes.

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

Thank you, Mr. Chair.

Thank you to all of the witnesses.

Mr. Marshall, the Canadian mining industry represents approximately $160 billion in total, and mining representatives like you and many others tell us that this number will jump if we ratify the TPP. I have also read and heard that it will mean an increased burden on roads, rail, and the ports' capacity to support that. Do you have an estimate of how much money and infrastructure will be needed if we ratify the TPP?

[Brendan Marshall]

That's a complex question, but it does link the themes together quite nicely.

At a high level, no, MAC does not have a number with respect to the level of infrastructure that's required to meet demands. For context, our view is that the level of infrastructure relative to the demands that wealth producers in this country require is insufficient. We're already operating at a deficit relative to the ability and the need for companies to meet market demand. As that demand increases and as Canadian companies seek to take advantage of increased market share, the stress on the existing system is likely to increase unless investment follows suit.

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

My next question is to Mr. Karp and Mr. Thompson.

How do you expect investment in Yukon or the north to change if the TPP is ratified? For example, do you expect the domestic markets or the investment to be diverted away from the north to Pacific-area international investment? If so, do you expect that the international investment will be able to replace any of the domestic investment lost?

[Stan Thompson, Chair, Whitehorse Chamber of Commerce]

That's an interesting question.

The way that we see it is that we have a vibrant economy here already. Mining resources and so on, I think, are competitive in the north, and we understand this market quite well. I do think that opening up the TPP would attract other investors. We've seen some of that from China already, and we're seeing some real interest in the gold sector right now. International players are starting to show up and get involved in the mining sector. That's a relatively new phenomenon, so I think people are starting to see this as a possibility.

That's just one example of the interest in our economy, if we can open up the infrastructure to enable it.

[Richard Karp]

As well, if we're getting increased foreign investment coming into Yukon, the TPP has to cover off that they are following Canadian principles in responsible development. Any investment coming into Yukon will benefit us in terms of jobs, social issues, first nations development, and other aspects.

Another aspect here with enticing foreign investment to come in, especially in the resource sector, is YESAB and the water board and making sure that the permitting process is a smooth and even process. Right now it is very lengthy and a detriment to development.

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

To Vikki Quocksister, you mentioned that beside labour mobility, you are generally in support of ratifying the TPP. If we just leave that clause aside, would you be able to support that TPP ratification?

[Vikki Quocksister]

No. There are other clauses. I was just focusing more on the labour aspect, and of course the Yukon Federation of Labour would do that.

There are other things, such as the investor state provisions, that create a problem. We could become one of the most sued countries in the world.

[The Chair, Liberal, Mark Eyking]

Sorry; your time is up, Mr. Dhaliwal. We're going to move over to the NDP now.

We have Ms. Ramsey. Go ahead.

[Tracey Ramsey, NDP, Essex, ON]

Thank you so much. On Persons Day I have to take a moment to say to Mr. Marshall that my great-aunt, Viola MacMillan, was the president of the Prospectors & Developers Association of Canada from 1944 to 1966. She is also an inductee into the Canadian Mining Hall of Fame. I have quite a history with mining in Canada.

I think you highlighted well for us the real issues that exist and the domestic concerns that exist. You're not the first sector to sit in front of us and say that we need some policies here at home before we can access those markets in the way that we anticipate doing. I think you did a great job of highlighting the barriers we have at home that need to be addressed first, in isolation of these agreements.

My question is going to go to Ms. Little. What I'd like to touch upon is something that you mentioned, which was the cost of drugs in the Northwest Territories. Certainly something we've heard over and over at this committee with the trans-Pacific partnership is the concern about the high cost of drugs. I believe we're already number two or three in the word in the OECD for costs. It's a real concern we've heard across this country on our tour.

I wonder if you can speak specifically about the impact of higher drug costs on the people of the Canadian territories.

[Lois Little]

Thanks very much for that question.

Yes, Canada has the fourth-highest drug costs per capita among OECD countries. We're struggling here now in the Northwest Territories, and I know the situation is the same in Nunavut. We're trying to stretch health care dollars around 33 communities here and a number of remote communities in Nunavut.

Our systems are really under stress. If we start adding higher drug costs to that, our system is going to break. The TPP and the CETA agreement are putting us into that situation.

We have to be able to step back from this kind of trade arrangement. There are other ways of doing trade that are fair and don't penalize our health and education systems, and that's what we need to be looking at.