International Trade Committee on Oct. 25th, 2016

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

Thank you for that.

One of the issues, of course, was the bridge, because there's so much trade, as you said yourself, with all these parts going back and forth.

How important is it for that bridge to get built?

[Mark Nantais]

Our view is that it has to get done. We account for roughly 25% of the traffic that goes across the Windsor-Detroit gateway, and our view is that it has to get done. It is absolutely necessary.

When you think about it, it's part of the NAFTA corridor, right from Mexico City through to Quebec City, and it's deficient. We have to have modern facilities and customs systems. We're in the digital age, so we need something that's consistent with that.

As you know, because we're a very highly integrated but very sophisticated industry, we need that there. We need good customs procedures. The crossing at the border is an essential extension of our just-in-time delivery systems, and it has to be equipped to do that.

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

I have a very quick question; I think this is important.

I think it's GM and Ford, and Chrysler has signed. Is Ford signing? Do we have labour stability at this point?

[Mark Nantais]

The only outstanding one right now is Ford Motor Company, and I think they have until October 31 to do that, and then they have to ratify beyond that.

Fiat Chrysler and General Motors are now fully ratified. It's passed, and they're good to go.

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

Good. Thank you.

[The Chair, Liberal, Mark Eyking]

Thank you, sir, and that wraps up our first round here this afternoon.

I thank all of the witnesses from across the pond in Europe, from Toronto, and everybody who came here today to have a good dialogue with our MPs. Your input is very important, and it'll be in our report. We look forward to it by the new year.

I'll just remind the MPs that we are only going to take a five-minute break because we have the New Zealand high commissioner coming.

We'll suspend for five minutes.

[The Chair, Liberal, Mark Eyking]

We'll continue with our session on the TPP.

We're very happy to see you here, High Commissioner.

We've met before, sir. You have a wonderful country. It's very similar to ours in many respects—in how it was developed, the type of people, the type of food. My wife and I had a special time down there for two or three weeks. We went to both islands. It's just a wonderful country.

I guess you would know all about the TPP and about how big it is for all of us. It has the potential to be one of the largest trading blocs. I'm sure for New Zealanders as well it will affect everybody one way or another, if it's engaged.

You have the floor, sir. You can take as much time as you need. Then we'll open up the dialogue with the MPs.

Go ahead.

[His Excellency Daniel John Mellsop, High Commissioner of New Zealand to Canada, New Zealand High Commission]

Thank you very much, Mr. Chair.

Members of the committee, thank you very much for making the time to hear my presentation. The chair has already commented on how close our countries are, which is probably the first page of my remarks, so thank you very much for that.

I'd like to start by saying that Canada is one of New Zealand's closest friends, and we want to make this relationship even stronger. We share a Commonwealth heritage. Our shared values and world view are underpinned by our common parliamentary, legal, social, and defence traditions.

New Zealand and Canada are co-operating on some of the toughest issues facing the international community today, including cybersecurity and the international response to ISIL. Our business communities enjoy working with each other. Our trade statistics are almost perfectly balanced. Last year New Zealand exports of goods and services to Canada surpassed $1 billion in New Zealand dollars. Our services trade is growing even more rapidly than our goods trade.

Canada is consistently one of the top foreign direct investors in New Zealand. Two years ago Canada was the number one investor in New Zealand.

Our people-to-people linkages are also very close. Kiwis love to travel to Canada, and we know that Canadians love to travel to New Zealand. In fact, over 50,000 Canadians visited in the last 12 months.

What's missing from this relationship is a trade deal. Just before I go into the detail of TPP, I want to explain why trade is so important to New Zealand.

We are 4,000 kilometres from Australia, our nearest neighbour. We have a small population and a small manufacturing base. Around 30% of our GDP comes from exports. That's a sizable chunk, but we aspire to do even better than that. With 4.5 million people, we're too small to produce everything we need. We have to import medicines and medical technology, vehicles and agricultural machinery, and we like to enjoy seasonal foods. We like to travel in Bombardier planes. We like to use the latest smart phones, and on Netflix we like to watch TV episodes that are made in Canada.

To pay for those imports, we need to export. Our biggest export sectors produce more than we can possibly consume. For example, our dairy industry exports 95% of its entire production. Our sheep farmers export about 90% of their meat. Wine, of which Canadians are drinking their fair share, will earn New Zealand a record $1.5 billion this year.

The people who work in these sectors need to secure access to much larger markets than just New Zealand. We say this a lot, but it deserves repeating: New Zealand will not prosper selling to ourselves. For this reason, New Zealand was a founding member of TPP. In fact, the trans-Pacific partnership was the culmination of an export-orientated trade strategy that New Zealand followed since the 1980s, after the U.K. joined the European Economic Community.

Once we no longer had that special trading relationship with the motherland, we were forced to make some drastic changes to our economy. We removed all our agricultural subsidies in the 1980s and tore down tariff walls protecting our sensitive industries. Some industries prospered; others were left behind or moved. We decided there was no point trying to make cars, because the Japanese or Koreans could do it much better, more cheaply, and more efficiently. Our farmers began to run their farms like businesses, investing in new machinery in the good years and cutting inefficiencies and waste during the bad years. We became highly efficient producers of food, and we need consumers.

The TPP will be worth at least $2.7 billion to New Zealand per year by 2030. Tariffs will be eliminated on 95% of our current trade with our TPP partners. Yes, there are some costs in the agreement. We would have preferred a higher level of ambition, particularly when it comes to dairy market access, but the costs and concerns are significantly outweighed by the benefits.

Members of the committee, over the last decade New Zealand has signed multiple trade agreements with countries around the Pacific Rim, from the ASEAN region to Hong Kong, Singapore, Korea, Thailand, and of course China. For the first time, our isolated geography became our advantage. We can ship goods more quickly to Asia than to Europe, and we aren't competing with the French and British farmers. We have become an essential part of the supply chain in Asia. As we see Europe putting up protectionist barriers, New Zealand businesses continue to look to Asia.

TPP is important for New Zealand, but it is also important for Canada's future prosperity.

I could recite the statistics. The key ones you know, I am sure: combined GDP of $27.5 trillion, nearly 40% of the global economy, 800 million consumers, and annual global income gains estimated at around $300 billion by 2025. These are pretty compelling numbers, but in our view, the real reason TPP is important to Canada is its geostrategic significance. Before joining TPP, Canada will have had only one trade agreement with an Asia-Pacific country. TPP will increase that number to eight.

We know that trade diversification is vital for Canada. Successive governments here have acknowledged that. You never want to be beholden to one market, because when they sneeze, you catch a cold. New Zealand learned that the hard way.

Being able to access multiple markets gives our exporters options. We know that Japan is a big drawing card for Canadian beef and pork farmers, but we also believe there will be plenty of other niche market opportunities. The Canada brand is very strong in Asia.

The trans-Pacific partnership is also an historic opportunity for Canada to set an ambitious trade agenda with the fastest-growing economies on the planet. It is a chance for Canada’s small businesses to integrate themselves into key supply chains and markets in the Asia-Pacific. TPP provides an excellent stepping stone towards even more free and open trade agreements in the Asia-Pacific. TPP was always conceived of as a living agreement that will continue to evolve over time, both in substance and in membership.

Members of the committee, New Zealand certainly welcomed Canada’s decision to join TPP. There is no doubt that the reasons for negotiating TPP and bringing it into force remain the same today as they were at the very beginning. It is clear that TPP marks a new frontier in the Canada-New Zealand economic relationship. It offers an unprecedented opportunity to grow Canada-New Zealand trade and investment and it will enable our businesses to co-operate more closely together, directly and in partnerships around the Pacific Rim.

TPP places our two countries at the centre of a unique platform for deeper integration in the Asia-Pacific region. We know that deeper economic ties and a strong, modern architecture are essential building blocks for prosperity, security, and stability.

Of course, it is not the role of diplomats to question domestic policy in their host country. The advice I would give, though, is that if Canada concludes that it is in your interests to be part of TPP, then you should move ahead with ratification, regardless of action in other countries.

Canada has an opportunity to demonstrate leadership on the global trade agenda and encourage economic links that increase prosperity and create jobs. Not being part of TPP will not make Canadian farmers better off. Canada is a major producer and exporter of quality food backed with integrity. You export much more agriculture produce to the other TPP members than New Zealand does. Non-participation in TPP would threaten Canadian farmers' viability and undermine their competitiveness.

To conclude, TPP provides an excellent stepping stone towards even more free and open trade arrangements in the Asia-Pacific. It provides New Zealand and Canada the opportunity to develop greater economic links with a fast-growing part of the world.

New Zealand encourages Canada to ratify the TPP agreement. We look forward to working with Canada to implement the TPP in the spirit in which it was negotiated.

Thank you.

[The Chair, Liberal, Mark Eyking]

Thank you, sir.

Before I open up the dialogue with MPs, while as chair I don't usually ask too many questions, I have two quick ones for you.

You're probably well aware that our committee has done quite a bit of consulting and travelling across our big country, talking to stakeholders and individuals. My first question to you is this: what process did New Zealand take in reaching out to the public or consulting?

My second question is a bit of a hypothetical one. I think only the Americans and Japanese can open up this agreement again. Is there anything that New Zealanders, if it were ever opened up, would want to see changed?

[Daniel John Mellsop]

Thank you very much.

Our public consultation process has been incredibly extensive. It's been by far the biggest consultation process that we've had with any free trade agreement. It involved touring around the region meeting with the general public as well as with specific industry groups. A big part of our consultations has been engagement with our indigenous population, the Maori population. There were specific consultations for them.

In terms of the issues that were raised during those consultations, there were a lot of questions about the detail of the agreement. There were some concerns raised about certain elements of it, but overwhelmingly there was strong support from our business community and others for the benefits that would accrue from TPP.

In terms of your second question about renegotiating the agreement, the agreement, as you know, was signed earlier this year. It was signed in good faith by the 12 parties, and I think we've all been clear that renegotiation is not a possibility. The outcome reflects very carefully balanced outcomes, and we've agreed that these are in our mutual interests.

From our perspective, it's not possible to reopen the negotiation, and we believe all parties have been clear that it's not what we want.

[The Chair, Liberal, Mark Eyking]

Thank you, sir.

I will just remind you also that we have two official languages and there might be some French and English coming at you, so I just want you to be prepared.

We're going to have one round. We're going to go to the Conservatives first.

I understand you're splitting time.

Mr. Hoback, you're up.

[Randy Hoback, Conservative, Prince Albert, SK]

Your Excellency, welcome to the committee. It's great to see you here. I'm going to split my time with former minister Ritz.

I have a question on TPP and how it sets the rules for trade in Asia. How does it impact your other agreements, and what do you see for the future in Asia as far as trade agreements with or without TPP are concerned?

[Daniel John Mellsop]

Within the Asia region, as I mentioned earlier, we have a range of existing free trade agreements, one of which was actually the Pacific four agreement, which was the predecessor to TPP or the catalyst for it, if you like. We also have bilateral deals with the likes of Thailand. We have an agreement with the ASEAN countries as a group. The TPP certainly builds on those existing FTA relationships that we have, so has better outcomes in most areas than we had already.

In terms of what else we have going on, the other major initiative that we have at the moment in the Asia region is the RCEP, or the Regional Comprehensive Economic Partnership. That involves 16 countries negotiating to a comprehensive FTA. Of course, that does not include Canada or the U.S. in that group.

[Randy Hoback, Conservative, Prince Albert, SK]

I think I'm going to turn it over to Mr. Ritz.

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

Thank you.

Daniel, thank you so much for cancelling your escape to Jamaica for a day or two. I understand the weather's going to turn tomorrow, so I'd advise you to be out to be out of there tonight.

[Daniel John Mellsop]

I'm leaving as soon as these questions are over.

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

Good for you. Travel safe.

You and I have a mutual friend in Tim Groser. Tim was the voice of trade out of New Zealand for a decade that I've been around, and a good friend, and he's now the ambassador to the United States.

We had a meeting last spring where we talked about alternatives and the reticence of the Americans to move forward and whether there is any way that we could do a plan B, whereby the other 11 like-minded countries could move forward and get around this six or seven countries with 85%. He seemed to think that there was. I know he's come out publicly in the last little while, trying to help President Obama get this done in the lame-duck session, but other than that he was saying that there's nothing that stops the rest of us like-minded countries from moving ahead.

I was wondering if you had any comments in that regard.

[Daniel John Mellsop]

New Zealand's position, as I mentioned before, is that we're not looking for a plan B for TPP. The ratification period is there. If the signatories, or some signatories, don't complete their processes within that two-year period, TPP can still enter into force when those that are ready have ratified it. Of course, we know that needs to be at least six countries and it needs to be 85% of the total trade, which has to include Japan and the U.S.

In any case, our position, as I've said before, is we're not looking for a plan B on TPP at this point. However, that said, TPP is not the only game in town. We do have other options, other FTAs that we're negotiating.

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

As do we. It's so important that we diversify our trade portfolio. We're 75% reliant on the U.S. market, and we've seen the vagaries of the political action and some of the economic problems they've had there that have put our own industries at risk, so we have to start looking afield.

Of course, when we look at the CETA agreement, it's a mature market that we can take advantage of, but the Pacific rim is the exciting new kid on the block, and there is a lot of different work that needs to be done there. Japan, of course, is the crown jewel—we all agree on that—but at the end of the day there is still some work to be done to get this ratified.

I think it can be expedited. I think we, as like-minded countries, can actually help the United States get over that hurdle, and whether it happens in the lame-duck session, or whoever the presidential designate ends up being, I think they'll be more pragmatic at the end than they are during the politicking that they've been doing for the last year or better, so if you have any insights as to how we can help them get over that finish line, I'd be more than happy to listen.

[Daniel John Mellsop]

I think on that I'd say the main message we delivered to the U.S.—and our Prime Minister was in the U.S. doing exactly this last month—was emphasizing to the U.S. audience that not ratifying the TPP would be a huge missed opportunity for the U.S., and not just for its consumers and its businesses. I think the point he was really stressing was that it would be a huge missed opportunity for the geopolitics of the region and the U.S. influence in the Asia-Pacific.

[The Chair, Liberal, Mark Eyking]

Thank you, Mr. Ritz. We're going to go to the Liberals now. Mr. Peterson, you have the floor.

[Kyle Peterson, Liberal, Newmarket—Aurora, ON]

Thank you, Mr. Chair. Thank you, Your Excellency, for being here, and welcome. We appreciate your making the time for us.

I just wanted to ask you a little about the process that your country is going through. I understand there have been some consultations. Is there a date when ratification is intended to take place? Has that been set yet?

[Daniel John Mellsop]

Our process in New Zealand is that we've introduced an implementing bill into the House. We need to make some legislative changes that will come into effect once the TPP is ratified and implemented. That bill is currently going through the House. It's had its first reading. It's in the consultation phase with the select committees, which are similar to your committees. It has two more readings before it will be passed.

The government's intention is to have that bill passed by the end of the year. That will then enable the government to ratify it.

[Kyle Peterson, Liberal, Newmarket—Aurora, ON]

Thank you for that. That's helpful.

You mentioned that you learned the lesson the hard way, after having all your eggs in one basket. I presume you were referring to your relationship with the U.K. I think part of the attraction for free trade deals for Canadians is that we also want to diversify our international trade markets and move away, to some degree, from the United States. It's prudent business to diversify your markets.

Having lived the experience that your country did, can you elaborate on some of the dangers that flow from being too reliant, perhaps, on one trading partner?

[Daniel John Mellsop]

The big damage occurred when the U.K. joined the European economic community back in 1973. I think at that stage we were exporting around 70%—don't quote me on that figure—of our exports to the U.K. Suddenly they were part of the European community, and there were subsidized farmers within Europe that we then had to compete with. As part of joining that community, the U.K. was not able to provide the same access to New Zealand that we enjoyed when the U.K. was not part of the EU.

What that meant was a shock to the New Zealand economy. It forced us, in a lot of ways, to make the changes that we needed to and reform our agricultural sector to allow it to be more competitive. It also forced us to seek new markets, which we had never really had to proactively do previously. Now our trade is much more diverse. Australia is less than 20%, and that's our largest market.