International Trade Committee on Feb. 23rd, 2016

[Mathew Wilson]

I think I raised that, and maybe others did as well, so why don't I start?

On currency, currency is just one example. Regulatory issues are another example. Often what we see in trade agreements is that countries that want our natural resources aren't really too fond of getting our finished goods. It's a reality, and especially in a lot of Asian markets we compete with them in a lot of manufactured, value-added goods sectors.

They can use and have used very efficiently a wide variety of regulatory measures to block the import of value-added to preference their own domestic supply chains, and then re-export goods using our natural resources on the finished products back into North America.

We've seen it. It has been studied. I don't think that's largely up for debate. The question is, what do we do with it through a free trade agreement? It's something we pushed for back before CETA was started. We needed to make sure the regulatory environment is open and fair and transparent. Oftentimes in the past it hasn't been. This agreement goes a long way through the TPP process with those countries to level the playing field.

Currency is one area that wasn't covered off in the agreement. I know there are different groups out there pushing for different solutions, including in the automotive sector. I know in a study that I did about a decade ago that looking at just Japan's currency fluctuation versus the Canadian dollar, it made a difference of $5,000 on the price of a vehicle.

It was an additional $5,000 going into Japan and a savings of $5,000 coming into Canada on just a mid-sized, average Camry that was produced. That's a pretty big impact on an average product that someone would buy.

Currency can have a big impact on trade. We're seeing it now with our own dollar dropping and new export opportunities, but I'm not sure. I know there are solutions out there for challenges. I think we wish there would have been some mechanism put into the TPP to look at currency in more detail, because I don't think enough has been done around that, to look at the root causes of it and the challenges that it causes. But it's not there and it's maybe something that this committee could look at or other sources could look at going forward, because it is a significant problem.

[The Chair, Liberal, Mark Eyking]

Thank you, Mr. Wilson.

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

[Tracey Ramsey, NDP, Essex, ON]

Thank you, Mr. Chair.

Thank you for your presentations today. I would like to touch upon the manufacturing aspect. I'm from southwestern Ontario, which is obviously quite heavy in manufacturing. There's a Tufts University study out that says that we could see 58,000 jobs lost throughout the whole TPP, but upwards of 20,000 of those jobs could be in manufacturing.

You mentioned that we need domestic policies and strategies in order to ensure the success of Canadian manufacturing. I'm wondering, Mr. Wilson, if you could speak further to where you think we lack in Canada in terms of those domestic policies. What do you feel would put us on a level playing ground with the TPP partners?

[Mathew Wilson]

I guess I'd start by saying that economic studies can be made to say all kinds of things. It depends on the economist you hired at any given time. I have a lot of respect for economists, but I don't put a lot of faith in any numbers they throw out. They use a variety of input and output models that are frankly guesses at best. There is no solid model.

We haven't seen any number that we actually believe is true. We think this will provide real opportunities if we get the framework right and that it could grow jobs and investment in Canada. I'm not really sure I buy into the job-loss numbers.

On the other side of things, in terms of support network, if you look at South Korea, which isn't in the deal right now but, as Mr. Beatty said, might be in the future, it has an entire manufacturing strategy that focuses on a couple of core sectors of the economy. We talk about not picking winners and losers, but they picked a couple of winners and they're winning. They picked technology and transportation as the areas they wanted to focus on. Their entire government support network went into supporting companies in those areas and allowing them to export value-added products out of South Korea.

They supported them through direct investment supports. People can call them subsidies or anything else, but investment supports happen in most sectors around the world. The regulatory system was set up to support them. The education system was set up to support them to make sure they're getting the talent they want. Then a trade commissioner service type of body was set up specifically to help those companies in those sectors find new market opportunities abroad and they are very active in finding and connecting South Korean companies with those opportunities.

The same thing has happened in Vietnam. I've met with Vietnamese officials on a regular basis, and now they can trade with Canada more. In Japan it's the same thing.

We have bits and pieces of those types of support in Canada, but they've never really been pulled together into a complete package. There are a lot of things—

[Tracey Ramsey, NDP, Essex, ON]

Would you like to see a stronger domestic policy?

[Mathew Wilson]

I'd like to see a lot stronger domestic policy. We can't go global if we're not competitive at home. We won't be competitive internationally, so I think we need to start at home first and then support them going global.

[Tracey Ramsey, NDP, Essex, ON]

Speaking of studies, you know the government has presented to us and said that they don't have an economic impact study. For those of us on the committee who are looking at the benefits of this for Canadians and Canadian businesses, it's really difficult to do when we're dealing with ideas that are just floating for which there are not necessarily solid concrete numbers.

I know you mentioned that a lot of economists release studies and use varied models. I'd like to ask each of you specifically whether any of your business organizations or the companies in your sectors have analyzed these costs through a study and if so whether you could share that with us.

[Perrin Beatty]

Maybe I can take a crack at that one.

Rather than looking at it in terms of a study, individual companies have looked at it in terms of their business plans.

You were citing, for example, manufacturing particularly in southwestern Ontario. My home area, where I was raised and lived, was Fergus, which is 12 miles from Guelph, where Linamar is located. Linda Hasenfratz has been very clear in terms of the critical nature of the TPP for her automotive parts manufacturing company. Each company is going to look at it in its own way.

Government needs to take a look at the impact sector by sector and in an aggregate sense across the board for Canada.

We have certainly seen figures suggesting potentially billions of dollars of economic impact for Canada. It is also clear that a failure by Canada to participate if Mexico and the United States were to be part of TPP would be disastrous for Canada.

Why? Because when your area or my old area is looking to locate new plants, one of the issues investors will look at will be, if they want to put their NAFTA plant in one of the three countries, which one or which ones will have access to the TPP market? If Mexico and the United States have access to that market and Canada doesn't, an investor will go somewhere else.

[Tracey Ramsey, NDP, Essex, ON]

I think my question is more specifically about which studies you've looked at. There are a variety of studies and certainly there are as many of them saying that we will have potential loss and a very low amount of GDP growth as there are those saying otherwise.

I'm just wondering, specifically within your organizations, which studies you focused on.

Mr. Beatty, I think you mentioned one in your presentation.

[Perrin Beatty]

I would be glad to supply you some information about the studies.

The bottom line is that these business associations wouldn't be here today if they didn't believe there was a net good for Canada. We would not be working against the interests of the Canadian business community. What we hear from our members is that it's critical for us to be participating in the TPP.

There will be a significant net plus for Canada if we're there or a significant net minus for Canada if we're not.

[Tracey Ramsey, NDP, Essex, ON]

Do any others want to respond to that?

[Mathew Wilson]

We haven't done our own economic study. We primarily looked at the government and at some of the work the government was initially doing around the modelling on this. We looked at other private sector studies that have been done through think tanks and other places and a wide variety of union-sponsored ones as well as private sector-sponsored ones.

I think Mr. Beatty is right in terms of companies having their own economic studies. My guess is that you could call companies up here from within the same sector and they would each tell you they had a very different outcome largely because of where their manufacturing footprint is and where their customer base is. Those vary quite a bit and they are hard to pin down.

[The Chair, Liberal, Mark Eyking]

Ms. Pohlmann, if you have something to add, go ahead.

[Corinne Pohlmann]

No, I was just going to say that we haven't done any work in this area, so we wouldn't have anything further to add.

[Tracey Ramsey, NDP, Essex, ON]

Thank you.

[The Chair, Liberal, Mark Eyking]

Thank you for the questions, Ms. Ramsey.

We'll move to the Liberals now.

I think you're splitting your time here? You have six minutes. Go ahead.

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

Yes. Thank you.

Thank you to the witnesses.

Mr. Wilson, you mentioned that we should not be moving forward ahead of our key trade partners, particularly the U.S. With the election year in the U.S., what do you think. Should we push it through or should we have more consultations?

Earlier the honourable Mr. Beatty and Ms. Pohlmann mentioned that they were not part of the discussion, and that we should get more companies and people involved in the decision-making once the minister makes the final decision. Do you think we should push it through?

[Mathew Wilson]

Luckily, I'm not a politician and I don't have to figure that out for you.

Honestly, yes, we're a little bit more cautious in terms of Canada's leadership versus our alignment with the U.S., largely because of the manufacturing supply chains. I think asking more questions about the impacts, and frankly not just talking about the negative side of it but about the importance of the deal and the new opportunities it can create, is not a bad thing.

The process of ratification will go on in the U.S. clearly for a little bit longer than maybe some other places, but that process of going out and talking to people about the opportunities that exist, and about how the TPP deal can create new business for them at home as well as abroad, I think that's a good thing. If that includes consultation on specific aspects of the deal and getting more input, that's okay too. We just need to be careful in terms of the timing and not getting too far out of line with where our other key trade partners are.

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

Thank you.

To the honourable Mr. Beatty, as a Liberal member, I belong to a party that believes in free trade and free entrepreneurship. How should our young people and companies be prepared to do business in the emerging markets that we are not used to, so that we are not taken over by those giants in the emerging markets?

[Perrin Beatty]

You raise an excellent question.

Trade agreements open the door; they don't guarantee that somebody will go through the door. The challenge for us, and one of the areas that I hope this committee will focus on, is that once we have the agreement in place, how do we ensure that Canadian business takes advantage of it? For example, do we have people with the skills and experience to be able to go internationally to market Canadian services?

We have been mesmerized with the U.S. market over the course of the last several decades. We still do, and we will do in the future, most of our trade with the U.S. We need to be able to look beyond that, to look at the opportunities in fast-growth markets, often on the other side of the world.

One thing that's distressing is that fewer than, I believe, 4% or 5% of Canadian students have any part of their education outside of Canada. As a consequence, they don't have the same sort of multicultural and multilingual experience that people in other parts of the world may have. We need to build and put into place an environment that makes it attractive and efficacious for people to be involved in terms of going international and succeeding.

We had the same concerns when we brought in the Canada-U.S. free trade agreement, that the Americans would eat us alive. We found that once those barriers came down, Canada's market share went up significantly. I think we'll find the same here.

If I were to give a pitch to the members of this committee, I would say there's one area where I think there's a real deficiency in terms of our trade strategy. We have a great competitive advantage in Canada. We have a pluralistic, multicultural, multilingual society, with every country's first-generation diaspora coming to Canada, speaking the language, working well with others, having family and friends back home, understanding those cultures, and by nature being entrepreneurial. They've left everything behind to come to Canada. Yet we don't have a strategy for seeing this as an economic resource to enable us to be far more successful in terms of cracking international markets.

One area where I think this committee could be helpful would be to help encourage government to include the global diaspora that we have in Canada as a key strategic advantage to us in going global.

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

Thank you.

Madame Lapointe.

[Linda Lapointe, Liberal, Rivière-des-Mille-Îles, QC]

Thank you, Mr. Chair.

I'd like to thank the witnesses for joining us today. I appreciate their time, as well as their presentations.

Mr. Wilson and Mr. Beatty, both of you referred to NAFTA. Mr. Beatty, I'd like to hear your thoughts on e-commerce.

You said that NAFTA was out of touch with today's reality. It's 20 years old and predates e-commerce. If I understood correctly, you said that the TPP could fix that by providing better opportunities and a better regulatory environment. I'd like to hear your thoughts on that. We all know that e-commerce will continue to grow.

[Perrin Beatty]

Thank you for that very important question.

At the time the FTA was done, the big issue was tariff barriers between Canada and the U.S., and when NAFTA was done, that was the same focus. We weren't looking at these new, fast-developing areas of the global economy. Increasingly, trade is being done as a result of information technologies over the Internet and through our ability to connect ourselves electronically with one another.

We are seeing inconsistent standards being brought in around the world. This makes it very difficult for Canadian businesses to be able to do business globally. What TPP does is bring in one set of standards. It helps to ensure openness in terms of borders so we don't find the global economy partitioned in terms of the ability to do business over the Internet, and it also helps to bring the intellectual property regime of the other members of TPP more in line with what Canada has today as well.

It's a more modern agreement. It reflects the contemporary realities of operating the global economy today, and as a consequence, then, with Canadian companies ready to take on the world through these new technologies, it's an advantage for us.

[Linda Lapointe, Liberal, Rivière-des-Mille-Îles, QC]

Thank you.

I have—

[The Chair, Liberal, Mark Eyking]

Your time is well up.