Evidence of meeting #4 for International Trade in the 42nd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was tpp.

A recording is available from Parliament.

On the agenda

MPs speaking

Also speaking

Clerk of the Committee  Mr. Rémi Bourgault
Brian Kingston  Vice-President, International and Fiscal Issues, Business Council of Canada
Warren Everson  Senior Vice-President, Policy, Canadian Chamber of Commerce
Mathew Wilson  Senior Vice-President, Canadian Manufacturers and Exporters
Perrin Beatty  President and Chief Executive Officer, Canadian Chamber of Commerce
Corinne Pohlmann  Senior Vice-President, National Affairs, Canadian Federation of Independent Business

9:15 a.m.

Liberal

Karen Ludwig Liberal New Brunswick Southwest, NB

If you've answered some of this already, I thank you.

Which Canadian markets will be the destination for the TPP signatories?

9:15 a.m.

Vice-President, International and Fiscal Issues, Business Council of Canada

9:15 a.m.

Liberal

Karen Ludwig Liberal New Brunswick Southwest, NB

With regard to the TPP countries that are being represented, which Canadian markets do you think they might be most interested in?

9:15 a.m.

Vice-President, International and Fiscal Issues, Business Council of Canada

Brian Kingston

I would look to anywhere that you see tariff peaks, to where those are coming down.

Unfortunately, I don't have the data in front of me on which areas still have high tariffs. I believe there are a few. I keep going back to dairy, and that's a particular area. I know that we have a couple in some distinct specific manufactured products. That would be the natural place where a company would see an opportunity.

9:15 a.m.

Liberal

Karen Ludwig Liberal New Brunswick Southwest, NB

Thank you. I have one more question.

If you were recommending to a young person or to a business person today on a third language, what language would that be?

9:15 a.m.

Vice-President, International and Fiscal Issues, Business Council of Canada

Brian Kingston

That's a great question. I would have to say Mandarin.

We've just released a paper on a Canada-China FTA, and the market potential there is huge.

9:15 a.m.

Liberal

The Chair Liberal Mark Eyking

Thank you.

Thank you, Mr. Kingston.

There was a minute left on the table by the Conservatives, and they informed me that they would like that minute.

9:15 a.m.

Conservative

Gerry Ritz Conservative Battlefords—Lloydminster, SK

Thanks, Mr. Chair.

Brian, I have a couple of last points. One is on the timing of the ratification.

It's a two-year cycle. How important is it to get in sooner rather than later when you see that Japan is going to have this done in June, and the Americans are in an election cycle? We need to be driving them as well. What are your comments on that?

The other point is that since you represent predominantly large businesses, how important is the ISDS chapter for you in having the security to invest in some of these other countries and do your job?

9:15 a.m.

Liberal

The Chair Liberal Mark Eyking

Make it a short answer, please, Mr. Kingston.

9:15 a.m.

Vice-President, International and Fiscal Issues, Business Council of Canada

Brian Kingston

On ratification, I think it's very important. I think we should make every effort to ratify this as quickly as possible. I know there's a tendency to want to wait for the Americans, but I think it's really good if we show a strong sign of support to, for example, our Japanese partners, that we're serious about this and we want to get this done.

On ISDS, it's critical. It's been a huge component of NAFTA. It provides companies with certainty when investing in a market. Particularly when you look at some of the markets that are in TPP where there is some regulatory uncertainty, having ISDS will be absolutely invaluable.

9:20 a.m.

Liberal

The Chair Liberal Mark Eyking

Thank you, Mr. Kingston, and thank you for coming.

That wraps up our first round.

I'm going to go in camera now, and we're going to have 15 minutes to do future business. Then we're going to go back and have a bigger round, probably in 15 or 20 minutes, and Mr. Wilson will be part of it.

[Proceedings continue in camera]

[Public proceedings resume]

9:20 a.m.

Liberal

The Chair Liberal Mark Eyking

Before we get started with our committee, I'd like to welcome, sitting in our back row, the Harvard law caucus, Canadian section, who are here to watch us and take notes. Can we give them a round of applause to welcome them?

9:20 a.m.

Some hon. members

Hear, hear!

9:20 a.m.

Liberal

The Chair Liberal Mark Eyking

We're going to have to be on our best behaviour here today.

We changed this around a little bit. We're starting a little early and are going to have four witnesses. We're going to give them each five minutes and then we'll go into our rounds of questions.

We have Mr. Wilson, from the Canadian Manufacturers and Exporters; Mr. Beatty, who is not new to this place—a former MP and minister—from the Canadian Chamber of Commerce; we have Corinne, from the Canadian Federation of Independent Business; and from this morning's meeting we have Mr. Everson, who is with Mr. Beatty.

Are you two splitting the time, or is just one of you speaking?

9:20 a.m.

Warren Everson Senior Vice-President, Policy, Canadian Chamber of Commerce

No. Mr. Beatty will speak.

9:20 a.m.

Liberal

The Chair Liberal Mark Eyking

Okay. Let's get started. Who wants to go first?

Mr. Wilson, are you all ready to go?

Go ahead for five minutes, sir. Welcome.

9:20 a.m.

Mathew Wilson Senior Vice-President, Canadian Manufacturers and Exporters

Thank you again for your flexibility this morning concerning my scheduling challenges.

First off, my name is Mathew Wilson. I'm the senior vice-president with Canadian Manufacturers and Exporters. I'm pleased to be here on behalf of Canada's 60,000 manufacturers and exporters and our association's 2,000 direct members to discuss the TPP.

CME is the largest industry and trade association in Canada. We also chair the Canadian Manufacturing Coalition, which represents 55 sectoral and manufacturing associations. More than 85% of our members are small and medium-sized enterprises, representing every industrial sector, every export sector, and all regions of the country.

Manufacturing is the single largest business sector in Canada. Canadian manufacturing sales surpassed $600 billion last year, directly accounting for 11% of Canada's GDP. The sector employs 1.7 million Canadians in highly productive, value-added, high-paying jobs. Their contribution is critical to the wealth generation that sustains the standards of living of each and every Canadian.

Simply put, Canada's domestic market, however, is just too small for manufacturers to thrive. Manufacturing is an export-intensive business. More than half of Canada's industrial production is directly exported, either as part of global supply chains or integrated manufacturing or as finished consumer products in almost every product category. Manufactured goods account for roughly 70% of all Canadian exports and are growing in importance as natural resource prices remain weak.

While Canada and the U.S. markets remain a top priority for most Canadian exporters, a growing proportion of our members are looking to take advantage of newly emerging opportunities beyond NAFTA, especially with those countries represented by the TPP. Today this collective market represents more than 650 million people and $20 trillion in opportunities.

CME strongly believes that no trade agreement is worth signing unless the deal is principled and fair. First off, we think every deal should create a fair and level playing field for manufacturers and exporters, to make sure that they have an equal opportunity to access foreign markets as our competitors have to access Canada. Second, the TPP allows value-added exports from Canada, not just the export of natural resources. Finally, it does not undermine existing manufacturing supply chains developed through existing FTAs, especially the NAFTA.

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

However, this support is not without reservation from many CME members. Concerns over certain elements of the proposed deal remain significant. Lowering content on automotive rules of origin, lack of additional measures to curb Buy American policies for government procurement in the U.S., and uneven tariff phase-out in certain sectors compared with those of our American counterparts are just some of the concerns that I hear about directly from our members.

However, despite those reservations we continue to encourage negotiators to work through these issues to ensure fair treatment of opportunities for Canadian exporters. It is critical to keep in mind that export opportunities 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 succeeding in foreign markets.

To be blunt, Canada has a poor history of success in trade agreements. Aside from NAFTA, very few if any of the agreements have led to an increase in exports. On the flip side, we've also typically not seen massive increases in imports either. FTAs are signed, and business generally continues as before.

This time it will be different. We are entering into an agreement with many aggressive export-oriented and coordinated 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 first and global exports second.

These trade agreements will 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 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 manufacturing investment and advanced technologies significantly lag those of our international competitors. We need to recognize that Canada is not an island and that these trade agreements make us less so. Our business environment must be world class at home to succeed internationally.

Second, while our trade support network is strong, it can and should be significantly strengthened. To start with, we need to do a better job of educating Canadian companies about offshore potential. Despite our success and high level of exports, very few Canadian companies are looking internationally. We need to set up programs to educate companies in new market opportunities and to increase their internal capacity and expertise for global trade—an export-intensive accelerator program similar to what is available in other markets, for example. Expanded foreign trade missions to connect companies with foreign buyers should also be supported. Exporters also need to have better market intelligence and improved connections to international business partners through an expanded trade commissioner service.

The TPP can and should be a major step towards achieving these objectives. CME recognizes and applauds the government's leadership in helping Canadian manufacturers grow their business in global markets through agreements such as TPP and CETA as well. However, we must remain focused on a principled approach to trade that grows value-added exports and does not undermine existing supply chains, while implementing a strong support network to allow companies to take advantage of these new market opportunities.

Thank you for your time this morning.

9:45 a.m.

Liberal

The Chair Liberal Mark Eyking

Thank you, Mr. Wilson, for that information.

Just so everybody in the room knows, there's translation. There's always translation in both languages.

We're going to go to Mr. Beatty for five minutes.

Welcome.

February 23rd, 2016 / 9:45 a.m.

Perrin Beatty President and Chief Executive Officer, Canadian Chamber of Commerce

Thank you very much, Mr. Chair, for inviting me to speak to the committee today about the Trans-Pacific Partnership Agreement.

The Asia-Pacific region is an increasingly important market for Canadian businesses.

Trade is only one of the levers that we have to boost economic growth, but unfortunately this is an area where Canada has not been performing particularly well of late. In many parts of Canada, we have fewer companies exporting today than we did 10 years ago. Part of the problem has been our failure to diversify trade towards high-growth markets like the Pacific Rim.

Many of you will remember the warning of Mark Carney, when he was still Governor of the Bank of Canada, that our country was over-dependent on trade with mature economies like the U.S. and Europe, where growth will be modest for the foreseeable future. The TPP takes a huge step to correcting that dependence. A TPP that eliminates trade barriers will open up new opportunities for Canadian businesses in the Pacific.

Mr. Chairman, as a member of the cabinet that approved the most hotly debated trade deal in our history, the Canada-United States Free Trade Agreement of 1988, I know very well the political pressures that emerge. Each agreement does contain tough choices. There are workers and companies who face challenges, and those concerns deserve respect, but if we stop doing trade negotiations except in cases where no one is affected, we stop negotiating at all.

We believe that the work of this committee is not about “should we ratify the agreement?” We should and we must. The work of this committee must be about understanding who the challenged sectors are and what can be done to support their response to changing circumstances.

We've talked to those who will gain, those who will face new challenges, and those who are still trying to figure out what the TPP will mean for their businesses. That's why, at our AGM back in October, just days before the federal election, hundreds of chambers of commerce from across Canada passed a resolution calling for our country to implement the TPP, in a near-unanimous vote.

I'll give you three reasons why, but before we get into that, let me make this clear. None of the reasons I'm about to list are about the costs of being outside the TPP. Having the deal go ahead with our NAFTA partners of Mexico and the United States in, while we remain outside, would be catastrophic for Canada. None of the concerns we hear raised about autos, for example, are likely to be improved by walking away from the deal. If we do that, these other 11 nations will offer each other privileged arrangements, which we'll be locked out of.

However, framing the TPP as something that we're being dragged into sells the deal short. I believe that Canada is actually much better off in a TPP world.

Let's start first with the hard gains.

Various economic studies put the benefits for Canada at somewhere between $5 billion and $10 billion per year. What we do know today is that companies doing business with Japan, Vietnam, and Malaysia, countries where we currently lack trade agreements, will be big winners. Japan is still the world's third largest economy. Vietnam and Malaysia together make up 120 million people, and those economies have been growing between 5% and 10% annually.

Today, companies in agrifood, seafood, wood, chemicals, machinery, and equipment have to pay hundreds of millions of dollars each year in tariffs. Many of them have told us that they would be able to increase exports as a result of the TPP. Beef producers and processors, for example, expect to double or triple their exports to Japan alone, and more trade means more business for railroads, ports, and air freight.

That brings me to my second reason. The TPP makes some long-overdue updates to our trade rules. The World Trade Organization and NAFTA are over 20 years old now, and they're no longer adapted to today's realities.

Think about how much has changed since then, such as the Internet, for instance. Nobody could imagine 20 years ago how all-encompassing it would become. Today, over 10% of goods trade and 60% of services trade happens online. Knowledge industries like financial services, management consulting, and information technology are among Canada's top five fastest-growing export sectors, yet there's nothing in our current trade agreements that prevents countries from blocking data flows or imposing local data storage obligations. That's where TPP comes in. Simply put, it extends free trade into the online realm.

Let's also remember that the TPP requires participating countries to maintain and enforce strong environmental laws and regulations under the threat of economic sanctions. When the deal was announced, one environmental group went so far as to say that the TPP has the strongest environmental provisions of any trade agreement in history.

There are other meaningful innovations in areas such as state-owned enterprises, regulatory transparency, and small business.

My third and last—and perhaps most compelling—reason for Canada to back the TPP is strategic.

For a mid-sized, trade-dependent economy like ours, going toe-to-toe with giants like China, India, and Japan is a terrible alternative to our traditional leading role in multilateral negotiations. We generally fair best when we're working with others and we already have a wave of countries lining up at the front door wanting in.

I was at APEC last year in Manila when the presidents of the Philippines and Indonesia announced that they intended to join TPP. Overnight that would add another 350 million people to the TPP's market, increasing the size of the group by nearly 50%.

Taiwan and South Korea also want in. I like to call this the TPP multiplier. We have a once-in-a-lifetime opportunity here to work with our partners and to shape the future of the global trade regime. This is more than in our economic interest, it's in our national interest.

9:55 a.m.

Liberal

The Chair Liberal Mark Eyking

Thank you very much, Mr. Beatty.

We're going to the Canadian Federation of Independent Business, of which I was a proud member for 20 years.

Ms. Pohlmann, you have five minutes.

9:55 a.m.

Corinne Pohlmann Senior Vice-President, National Affairs, Canadian Federation of Independent Business

Thank you, and thank you for the opportunity to be here today.

As mentioned, my name is Corinne Pohlmann. I'm the senior vice-president of national affairs for the Canadian Federation of Independent Business, and I'm pleased to be here to share CFIB's perspective on the Trans-Pacific Partnership.

Let me start by saying, though, that I'm not a trade expert nor has CFIB been as involved in discussions around TPP as some of the other groups that you have before you here today may be. However, I can tell you a little about small and medium-sized businesses in Canada and provide you with some of their reflections on international trade and how this deal may impact them.

You should have a slide deck and presentation in front of you that I'm hoping to walk you through over the next few minutes.

First, CFIB is a not-for-profit, non-partisan organization that represents more than 109,000 small and medium-sized businesses across Canada. Our members represent all sectors of the economy and they're in every region of the country.

It's important to remember that Canada's small and medium-sized enterprises employ 70% of Canadians in the private sector labour force. They're responsible for the bulk of new job creation and represent about half of Canada's GDP, so addressing issues of importance to them can have a widespread impact on job creation in the economy.

I want to remind you that CFIB takes its directions solely from our members through a variety of surveys, and we do this throughout the year. In all previous members' surveys around free trade, a strong majority of members have been supportive of free and fair trade. This is because most of them understand that trade is good for Canadian small business, for the economy, and for jobs.

We also know that many of our members appear to be in a position to benefit from TPP. A few others, including supply-managed producers and small auto parts manufacturers may have strong concerns. We continue to carefully listen to our members as more details unfold and will communicate any of their concerns to the government. One concern we have already expressed, for example, is the importance of ensuring that any economic harm to supply-managed producers as a result of the trade deal be fully compensated.

First, though, it's important to know how much small and medium-sized businesses in Canada currently trade. About one in five have sold goods or services to other countries, while about half have purchased from other countries, with another 6% planning to do more trade in the future. Where do those that trade do their business? The U.S.A. remains by far the most likely place that Canadian small businesses trade, followed by the EU, Mexico, Australia, New Zealand, and China. In fact, three of the top five are TPP countries, so those businesses would benefit from the lessening of trade barriers and tariffs that may be making it difficult for them to expand their markets in those countries.

Of those that are not currently involved in any kind of trade, a good proportion of them do not believe that their products or services are exportable. However, that still leaves about 38% of those that are not involved in exporting that could be, so making sure that trade deals like TPP address the barriers they face and that greater effort to highlight what the benefits of exporting can bring to their business in the community may result in more of them taking the plunge into new markets.

Ultimately what smaller businesses want to see in any free trade agreement is clear understanding of regulations and standards, simpler border processes, less paperwork and red tape, and lower costs. It would seem that the TPP does try to address many of these issues in some form.

Of the many features we understand the TPP will offer, those listed here are among the most important if we want to see more smaller firms engage in trade or expand their markets. They include lower taxes and tariffs; greater transparency around customs procedures; streamlining trade barriers, especially regulations and standards, by reducing paperwork and being more transparent about what is required; greater access to new markets, which is especially important for service providers, which is a growing and important segment of the small and medium-sized business community interested in trade; as well as a chapter dedicated to small and medium-sized businesses.

We're pleased to see a chapter dedicated to small and medium-sized enterprises, as it does indicate that the various TPP countries recognize that smaller businesses have unique needs and may need additional or different tools to successfully trade across borders. We also like that the chapter suggests that each country will have accessible websites that will be designed and tailored for small and medium-sized businesses. It will be very important that these websites be done in plain language and that they easily interconnect with each other where it makes sense.

Finally, that the committee on small and medium-sized businesses with representatives from each country will meet within one year to discuss small business issues is a positive sign. However, we also see some uncertainties, mostly concerning the fact that the committee will only be composed of government officials. We believe it should also have some representation from smaller businesses to ensure that it is truly addressing their needs and concerns.

Also, we hold out a lot of hope, but we do have some concerns that this law looks great on paper, but will small and medium-sized enterprises feel the impact on the ground and will it truly make a difference?

In summary, a strong majority of CFIB members has been supportive of free and fair trade. Many of our members appear to be in a position to benefit from the TPP, but a few do have strong concerns. We have communicated these concerns to government and have already stressed the importance of finding ways to mitigate any economic harm to sectors that may be adversely affected as a result of the trade deal.

We are encouraged, however, to see that the agreement has a dedicated chapter with specific measures to help small and medium-sized businesses take full advantage of the opportunities created by the TPP, but action must follow the words in order for it to have an impact on the ground for smaller companies.

As I mentioned at the outset, CFIB's position on issues is solely determined by our members, so we continue to carefully listen to them as more details unfold. We will continue to communicate any feedback shared by our members to the federal government as it moves through its consultations.

Thank you for the opportunity to present.

10 a.m.

Liberal

The Chair Liberal Mark Eyking

Thank you very much for that presentation and thank you all for the presentations.

We're going to open it up. As the committee members know, I'm pretty flexible with time, but since you have three witnesses, try not to throw in a question in your last five seconds and make it awkward for the presenters. Use your judgment on your questions, because there's going to be lots of time to go around a second time and I don't want to cut off the witnesses, if they're on the run.

We're going to start with Mr. Hoback for six minutes.

10 a.m.

Conservative

Randy Hoback Conservative Prince Albert, SK

Thank you, Chair, and thank you, witnesses, for being here this morning.

The first thing I want to get at the start is the process of the negotiations and the consulting process. Have you all felt that you've been part of the process? Have you been excluded from any of the meetings? Do you feel the consulting process was adequate? Let's have your opinion on that.

10 a.m.

President and Chief Executive Officer, Canadian Chamber of Commerce

Perrin Beatty

Perhaps I'll take a crack at that, Mr. Chairman.

There was a good deal of dialogue between us and government during the process. Could there have been more? Yes, there certainly could have been.

If you go back to the Canada-U.S. Free Trade Agreement in 1988, where we had SAGIT, the sectoral advisory committees, that's something I would like to see us bring back to have much more intensive discussions between business and government. I think from time to time the secrecy that surrounds negotiations is too great, particularly when affected interests don't have an opportunity to participate. Now, it's certainly better than—

10 a.m.

Conservative

Randy Hoback Conservative Prince Albert, SK

You felt that you were left out of the consulting process.