International Trade Committee on Nov. 15th, 2016

[The Chair, Liberal, Mark Eyking]

Good morning, everyone, and welcome.

Welcome to our officials. As everyone knows, we're here to deal with Bill C-30.

[Tracey Ramsey, NDP, Essex, ON]

Mr. Chair, I want to give notice of a motion that I'm going to be bringing forward. I'll read it into the record:

That, pursuant to the motion of Tuesday, November 1, 2016, adopted by the Standing Committee on International Trade to study the Comprehensive Economic and Trade Agreement (CETA), the study consist of at least 12 meetings; That the Chair publish a news release on the Committee's website, inviting Canadians to submit their views on the CETA in writing; that the written submissions be sent to the Clerk electronically no later than December 15, 2016, 23:59 EDT; and that written submissions, once translated, be distributed to members of the Committee.

[The Chair, Liberal, Mark Eyking]

Thank you.

We'll continue with our meeting.

Welcome, everybody. As you know, we're dealing with Bill C-30. This deals with the trade agreement with Europe, and there are officials here.

Thanks for coming and for waiting for us. As you know, the Hill works in mysterious ways and when votes come up, we have to go. Thanks for waiting for us and for coming here to do briefs and give us information on this agreement. Without further ado, we'll give you guys the floor for your presentation.

Mr. Verheul, you've been a very good negotiator over the years for us—

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

Let's give him a round of applause.

[Voices]

Hear, hear!

[The Chair, Liberal, Mark Eyking]

—and we may need you for a few more years yet, with the way things look.

Go ahead, sir. You have the floor.

[Steve Verheul, Chief Trade Negotiator, Canada-European Union, Department of Foreign Affairs, Trade and Development]

Thank you very much, and good morning, everyone.

Mr. Chair and honourable members of the committee, thank you for inviting me to appear before you today. My name, as many of you know, is Steve Verheul. I am the chief negotiator for CETA. I am joined today by Caroline Charette, who is the director of the CETA secretariat at Global Affairs, and Colin Barker, who is the deputy director in the CETA secretariat.

I am pleased to have this opportunity to discuss CETA with you today. We feel that CETA is a progressive and modern free trade agreement that will have significant economic benefits for Canadians across the country. This trade represents 60% of Canada's annual GDP, and one Canadian job in five is tied to exports. That's why we need agreements like CETA, especially during a time of rising protectionist, anti-trade sentiment in many parts of the world.

The EU is already Canada's second-largest trading partner and export market. CETA is expected to increase bilateral trade in goods and services, significantly fostering growth and employment on both sides of the Atlantic. Once implemented, CETA will give Canadians unprecedented access to the world's second-largest import market for goods. The EU's annual imports alone are worth more than Canada's entire GDP. Of the EU's more than 9,000 tariff lines, approximately 98% will be duty free for Canadian goods on the day CETA comes into force, with almost all the remaining tariffs to be eliminated once the agreement is fully implemented.

CETA also recognizes the increasingly important role that services play in global trade, and it will create a wealth of new business opportunities for Canadian service providers. CETA provides for increased freedom of movement for professionals and service providers in sectors such as information and communications technology and for professionals and service providers in other areas such as telecommunications, financial services, engineering services, and architectural services.

CETA will also open up opportunities for Canadian businesses in the EU's estimated $3.3-trillion government procurement market.

This agreement sets new standards for trade in goods and services, non-tariff barriers, investment, and government procurement, as well as other areas such as labour and environment. In that regard, CETA incorporates guarantees to make sure economic gains do not come at the expense of the vital progressive elements of CETA.

CETA's preamble recognizes that provisions in CETA preserve the right of the parties to regulate within their territories for legitimate policy objectives such as public health, safety, environment, public morals, and the promotion and protection of cultural diversity.

We have maintained a high level of protection for investors while also bringing transparency, independence, and openness to investor dispute resolution procedures.

CETA will not lead to forced privatizations of public services. Canada has a long experience with the protection of public services in all trade agreements and is confident that CETA allows for full policy flexibility. Canada's trade and labour chapter recognizes Canada's and the EU's abilities to set their own labour priorities and levels of protection. It encourages high levels of labour protection and recognizes that it is inappropriate to encourage trade or investment by weakening or reducing the levels of protection afforded in labour laws and standards.

In CETA's trade and environment chapter, Canada and the EU also encourage high levels of environmental protection and have reaffirmed that environmental standards cannot be lowered in order to encourage trade or to attract investment.

With respect to the next steps, with the agreement signed at the Canada-EU summit on October 30, Canada and the EU now need to obtain their respective domestic approvals to implement CETA.

At the same time as the agreement was signed, a joint interpretive instrument was also issued by Canada and the EU. This instrument serves to clarify our shared understandings of some elements of CETA and will have legal value as an interpretive document in any future legal proceedings that might occur, in accordance with the Vienna Convention on the Law of Treaties.

The text of CETA and the joint instrument are what Canada and the EU and its member states have agreed to. You may be aware that the European Commission, the EU Council, and some member states have also made a number of unilateral declarations, but of course Canada and the EU have not agreed to any of those declarations.

In terms of next steps, first of all, starting with the EU, the European Parliament will now need to approve CETA. This requires a simple majority vote of 50% plus one in that parliament, and that vote is expected to happen as early as December 2016, although it could slip into January of next year. As a mixed agreement, CETA will then need to be ratified by all 28 EU member states, according to their own internal procedures.

However, CETA can be provisionally applied following approval by the Council of the EU and by the European Parliament. The European Commission and the EU member states have agreed that almost all of the agreement can be provisionally applied, with very few exceptions.

The only exceptions relate to provisions on investment protection, which is one part of the investment chapter, and investment dispute resolution and the corresponding provisions in the financial services chapter. This also affects portfolio investment and, under the intellectual property chapter, camcording.

Everything else will be provisionally applied, so all of the economically significant aspects of CETA will be provisionally applied. Provisional application of CETA will continue until every member state ratifies the treaty, which typically takes several years, based on previous EU agreements. Once all member states have ratified the agreement, Canada and the EU will take the necessary steps to bring CETA fully into force.

With respect to the CETA implementation act, it was introduced on October 31, and it will amend a number of federal statutes, including the Export and Import Permits Act, the Patent Act, the Trade-marks Act, the Investment Canada Act, and the Coasting Trade Act. The modifications are necessary in order to comply with Canada's obligations under the CETA.

The CETA implementation act also provides for reductions to Canadian tariffs and related mechanisms, such as tariff quotas, and it makes amendments in several areas, including trademarks and patents, coasting trade, and the review of foreign investment.

Following passage of the CETA implementation act, relevant departments will need to complete their regulatory amendments and, in parallel, provinces and territories will need to make their respective legislative and regulatory amendments within their jurisdictions. We have been working closely with the provinces and territories to bring CETA into force.

Once both parties have completed their internal processes, Canada and the EU will notify one another through an exchange of diplomatic notes, and then we will agree on a date for the entry into force of CETA, sometime early in 2017.

When it comes to provisional application, Canada's implementation of CETA will mirror the EU's. In other words, whatever they are not provisionally applying, we will not provisionally apply on our side. Provisional application will continue until all member states ratify CETA through their own domestic procedures.

Mr. Chairman, that concludes my opening statement. Thank you again for inviting us to appear before you today. We are happy to answer any of your questions.

Thank you.

[The Chair, Liberal, Mark Eyking]

Thank you.

Before I start, I see that you have your team with you. I have a question for you. It's very complicated, as you mentioned, with so many countries, so when did your team start this whole process with the European Union? Was there a time when you all went over there and said, okay, now we have to start dealing with it? How long ago was it?

[Steve Verheul]

Do you mean from the very beginning?

[The Chair, Liberal, Mark Eyking]

I guess so, yes.

[Steve Verheul]

Well, I was appointed chief negotiator early in 2009. We had our first meetings around April of 2009. Our first official full round with the Europeans was in the early fall of 2009, and we've been at it ever since. We've never really had a break throughout that period. It's been fairly constant all the way.

[The Chair, Liberal, Mark Eyking]

Thank you.

We're going to start the dialogue with the MPs now. The Conservatives are going to start.

Mr. Ritz, you have five minutes. Go ahead, sir.

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

Thank you, Mr. Chair.

Thank you, Mr. Verheul. Your team did an excellent job. It was world class, as always, Steve. Thank you so much for what you did. You look pretty good for a 29-year-old. I know that it has been a tough haul. I had the great opportunity to work with you, and I can tell you that you're one of world's best, and that's not just me saying that.

On part of your intervention, you talked about some of the member states that have made a number of unilateral declarations. Are any of those contrary to the spirit and letter of what the final negotiations will be?

[Steve Verheul]

Well, I think I would say that some of them get close to the edge of what was actually agreed. The text in itself is what represents the agreement between Canada and the EU, and that's what any dispute settlement panel will look at first and foremost.

The fact that they've done some unilateral declarations doesn't represent an agreement between the two of us, but the way that they've characterized some of those issues isn't exactly the same way we would characterize some of those issues, so within the coming weeks, we may put out some of our own thoughts on how those provisions should be interpreted.

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

That was my next question. Have we made any unilateral declarations?

[Steve Verheul]

We have not, at this stage, made any unilateral declarations, but we are working on a plan to make sure that if a dispute settlement panel ever gets beyond the text and ever gets beyond the joint interpretative instrument and starts to look at some of those unilateral declarations, not only will the EU have a public point of view, but we will as well.

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

This is going to come down to willing buyer and willing seller on both exports and imports to start the ball rolling. When the ISDS adjudication is not provisionally applied, how then will you make claims or counterclaims moving forward? Will they be simply on a case-by-case basis? The adjudication of the ISDS is sort of in limbo out there after the Walloons.

[Steve Verheul]

Right.

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

How will that be handled? Because certainly, with unilateral declarations, there will be some concerns and some claims. How will they be handled?

[Steve Verheul]

Right. Given the investment dispute resolution process will not be in place until all member states approve, we will not be able to use that mechanism, and neither will the EU. At the same time, we do have the option of using the state-to-state dispute settlement process on particular cases.

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

The WTO?

[Steve Verheul]

No. There's one in CETA as well.

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

Okay.

[Steve Verheul]

We can follow that process. At the same time, we have seven bilateral investment treaties with member states that are part of the EU, so we would still be able to use those during that period.

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

Okay. There are clauses that we can use.

Timeliness is everything in moving this through. I'm also aware of some of the situations in Canada in the legalities of moving forward. There are 90-day consultation periods, so even once we pass the legislation, that 90 days kicks in and there are regulatory packages that have to be drafted. The European Union will move forward on theirs in December and January. Do they have that type of process, too, or are they done at that point?