International Trade Committee on Nov. 22nd, 2016

[The Chair, Liberal, Mark Eyking]

Thank you.

We're going to move over to the Conservatives now.

Mr. Van Kesteren, you have the floor.

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

Thank you, Mr. Chair.

Thank you all for excellent presentations.

I'm going to go with Mr. Langrish again. You seem to be taking most of the floor.

My riding represents southwestern Ontario near Windsor. Of course, there's been talk. You mentioned the unintended consequences. I agree with you 100%. I think they'd be positive. We've spoken at length about what we know free trade will do. Often it's those things that nobody saw coming that translate into something negative, but for the most part I think trade deals are positive.

You talked about the corridor going into the United States. I wonder if you could elaborate on that.

I also had the opportunity to speak to this in the House yesterday. Our government, the past government, spent an enormous amount of energy on the new Gordie Howe bridge. How important will those sorts of things be, now and in the future when this agreement begins to play out?

[Jason Langrish]

Just to be clear on this, I think I'd take a logical step here. If you're a producer and you feel that Europe is a major market for you and it makes sense to relocate to Canada, especially with the lower Canadian dollar, then all things being equal, you can take advantage of that opportunity. I think some American investment will do so.

Windsor is an interesting example. I think the auto sector is a pretty big winner in this agreement. You have a situation of a tariff rate quota of 100,000 vehicles. That's not inconsequential. There's a fairly low rules of origin requirement. I think the EU has been very flexible with regard to that, so there's going to be a real opportunity.

One of the big three—and I don't want to get too specific—plans to locate production in southwestern Ontario and produce vehicles that can be exported into the NAFTA marketplace and into the EU marketplace through this tariff rate quota of 100,000 vehicles. Now, with the relatively low rule of origin requirement, this could go well beyond 100,000 vehicles.

There's a very good example of how, by having free trade with North America and with the European Union, you increase the desirability of your region as a location for investment for the manufacture and the assembly and export of these vehicles, and then with that come the industries that service that—the auto parts sector, the services sector, and various other elements—and then there's the multiplier effect in the community.

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

Thank you for that. It becomes apparent, when we study this agreement and the impact that it's going to make, just how significant this agreement is. It's quite remarkable that we were able to do this; I think everybody would agree with that.

I want to expand to another industry that's very prevalent in my riding, and that is the greenhouse industry. I wonder if you could weigh in on that as well.

I know there won't be too much going from Canada to Europe or, for that matter, the other direction, but the possibilities for expansion in the United States are just enormous. How will a free trade agreement with Europe, and having that close connection with a country such as, for instance, the Netherlands, help to expand that industry and subsequently help it to grow and become even stronger?

[Jason Langrish]

This is not a sector that I'm particularly familiar with, but, as you say, there's a great deal of expertise in this sector in the Netherlands and other parts of Europe. It won't be lost on them that they will have this access through the CETA into the Canadian marketplace, and then have national treatment, and as an investor located in Canada have access to the benefits of the NAFTA, including access to the vast American market. I just don't really know enough about the sector to talk about it more than that, but I see certainly there could be potential for growth there as well.

We tend to think a lot about Quebec when it comes to agriculture, but of course the largest agricultural producer in Canada is southwestern Ontario. That's where the most agricultural production occurs, and it's also where one of the largest manufacturing sectors in the country is, processed foods, so there are lots of opportunities.

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

Thank you.

[The Chair, Liberal, Mark Eyking]

Thank you, sir.

We're going to move over to the Liberals now. Mr. Peterson, you have the floor

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

Thank you, Chair.

Thank you to the witnesses for being here today. We do appreciate it, of course.

As a commercial litigator myself, my questions are going to relate to ISDS. I'm going to start with Mr. Valasek.

Earlier this summer, my understanding was the treaty was classified as a mixed treaty at that time, which then rendered the IS dispute system subject to member state ratification. Then obviously the original ISDS was, it appeared, going to kill the agreement in Europe, and in Germany and France particularly. I think that's what provoked the necessity of some sort of compromise on those provisions.

You indicated, Mr. Valasek, that you thought a lot of those criticisms were unfounded or misinformed. Can you elaborate on that a bit and just maybe clarify what you thought was ill-informed in those criticisms?

[Martin Valasek]

Sure.

One of the biggest criticisms is that it's a secretive process. There have been a number of witnesses who have mentioned that treaties have already injected a fair bit of transparency into that process. Of course, that's reflected in what might be called the gold standard in article 8.36 on transparency of proceedings. People keep coming back to the fact that these are secret tribunals and there's no opportunity for input. I think that's misinformed.

Another big criticism is that arbitrators are selected from, again, a very narrow pool. Some people refer to it as sort of an arbitration mafia, or a club. I think if you really look at it.... I suppose I have a foot in that group, but it's just like any group of specialists. If you took a group of international surgeons who did one particular type of surgery, you wouldn't call them a mafia or a club.

The fact is that there is a certain degree of expertise that's required. If you look at the qualifications that have been agreed to in this treaty, you see that it says in article 8.274:

The Members of the Tribunal shall possess the qualifications required in their respective countries for appointment to judicial office.... They shall have demonstrated expertise in public international law. It is desirable that they have expertise in particular, in international investment law, in international trade law and the resolution of disputes arising under international investment or international trade agreements.

The reality is that's not going to be every lawyer in the world. It's going to be a select group of people. In fact, selecting arbitrators from a small group can be seen as a positive. You're actually selecting people who are qualified.

The other criticism is that investment arbitration awards have had a chilling effect on the ability of states to regulate, or that they can make countries change their laws. That's just not true. Investment awards can award monetary compensation where there's a finding of a breach of international law. That doesn't mean that the country has to change its policy; it means that in respect of that case, they might be held to owe some money.

More importantly, many of the criticisms in respect of a chilling effect relate to claims that have been brought by investors but don't relate to actual awards. A classic example is the case that was brought against Australia by Philip Morris in respect of tobacco legislation. People raised a big stink and said, “This is impossible. You have a big global company, a tobacco company, going after legitimate policy.” Well, it's true that they're having a go at it, but the award hasn't been rendered yet. I would say, why not withhold criticism of the system until you have an award? The award may well decide that there hasn't been a breach of the treaty.

I don't know. I'm not involved in the case, but if you—

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

Thank you. I'm going to interrupt because I have a quick question for Ms. Barrington before I run out of time. I appreciate your input, Mr. Valasek.

[Martin Valasek]

Yes, sure.

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

Ms. Barrington, could you comment on the importance of having subject matter experts determine disputes in areas like international trade, and why it's important to have a private arbitration, perhaps to meet that goal of subject matter experts making these decisions?

[The Chair, Liberal, Mark Eyking]

Give a quick answer, please.

[Louise Barrington]

Thanks.

First of all, I'll comment on your first question. One of the things that I think is perceived is that arbitrators are slanted toward business and that they're going to always see it from a business point of view. I think the reality is that the results are really half and half. I mean, states lose and claimants lose, so I don't think that really is the case.

In terms of having subject matter experts, I think it can be very useful to have the view of people who are in a particular marketplace, who don't have to be educated about it and can look at it from a very practical commercial standpoint, which, of course, is what the business community is looking for.

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

I'm out of time, I believe.

Thank you.

[The Chair, Liberal, Mark Eyking]

We're going to move over to the Conservatives now. Mr. Hoback, you have the floor.

[Randy Hoback, Conservative, Prince Albert, SK]

Thank you, Chair.

Thank you, witnesses, for being here this morning and this afternoon.

I'm going to look at what we need to do, as a government, and what the Liberals need to do as a government in power, in making sure that we take full advantage of this agreement.

Jason, I'm curious. What has to be put in place so that we can actually take advantage of this trade deal? For example, on homologation, and going through the rules regarding homologation, how do we make our small and medium enterprises and manufacturers aware of what those rules are, to get products approved for not only Canada but for Europe? What other things do you think we need to look at in regard to training, to promoting the deal, and in regard to introducing it to small and medium enterprises and agriculture groups, so that they can actually look at this as an option for them? What would you propose in that area that should be done?

[Jason Langrish]

That's sort of a billion-dollar question.

I'll start with one thing. Small and medium-sized enterprises probably are not going to be the ones who are going to take advantage as direct traders and ambassadors between Canada and Europe in a continental relationship. You're going to tend to see SMEs more active in interprovincial trade and cross-border trade, normally with the northern U.S. states but sometimes a bit deeper.

Where the SMEs really get involved in this type of stuff, this longer-distance trade, is by building themselves into the supply chains of the larger multinationals. Most international trade is intracorporate. It's actually trade within large local corporations, companies like Siemens, Bombardier, or what have you.

The real opportunity for SMEs is to become preferred suppliers and build themselves into the supply chain of those large companies and so take advantage of that position. For example, if a company like Siemens gets a contract to build streetcars or something like that, and you're a local contractor or an SME and you develop a relationship with them, that relationship could carry over to working with them on contracts over in Europe or perhaps even in Asia. It's really a gateway for SMEs.

With regard to education, I think it's incumbent upon all levels of government, but it's probably going to fall quite heavily on provincial levels of government to explain what those opportunities are, and to a degree the municipal governments.

It's a bit of a tough one. To be honest, I don't really know. It's not really my forte, to be honest. I guess it's up to large corporations to talk about what the benefits are, but I suppose some governments will do this as well. As I say, it's not really my area of expertise.

[Randy Hoback, Conservative, Prince Albert, SK]

I understand that, but I find it really interesting that the business community says to government, “Get out of our way; get these deals done”, and then it comes back to say, “Okay now, government, you take on all the responsibility in promoting it and telling your businesses and our businesses to take advantage of it.”

Where is the role of the business community? Where is the role of the chambers of commerce? Where is the role of the Canada Europe Roundtable for Business? What's your role in promoting a deal like this after it's completed? Do you have a plan to promote the deal, to promote the opportunities within the deal?

I understand what you're saying about small and medium enterprises maybe working through the chains of bigger corporations, but there are also opportunities for unique products and for small and medium enterprises to be part of chains in companies in Europe. Where's the role for the private sector in making sure this deal is promoted properly?

[Jason Langrish]

We do go out there, and we do go out and bid on contracts and source locally and run seminars and participate in chambers of commerce and participate in information, but the reality is that the resources available to do this are arguably greater within government.

You were asking how it's done. I was answering your question. I'm not necessarily sure it's something that needs to be there. I think business finds a way, quite frankly, and I think it does it already, but if you think that more needs to be done, I'm just saying that there could be a role for government. I mean, we have things like trade commissioner services for a reason.

[Randy Hoback, Conservative, Prince Albert, SK]

That's a good point.

[Jason Langrish]

We have economic development agencies that are basically arms of municipal government, and they exist for a reason. Government has a role in this as well.

[Randy Hoback, Conservative, Prince Albert, SK]

Okay. I'll just leave it there, Chair.

[The Chair, Liberal, Mark Eyking]

Thank you, Mr. Hoback.

We're going to go to the NDP now.

Ms. Ramsey, you have three minutes.

[Tracey Ramsey, NDP, Essex, ON]

First, I'd like to just touch on the auto trade deficit that we have. You were talking about the auto sector with my colleague earlier.

Europe sells $5.6 billion worth of cars into Canada for the $269 million that we sell back, so we have a massive auto trade deficit of $5.3 billion. In manufacturing overall, we have a $30 billion manufacturing trade deficit with the EU. It's not very likely that CETA would rectify those kinds of massive trade imbalances.

My question, though, is back to the ISDS. I think we have to be honest in saying that the ISDS provisions have not worked well for Canada. In chapter 11 of NAFTA, we have a prime example of that.

Ms. Barrington, you said that the stakes are enormous. Essentially, you talked about this increased trend that is happening in ISDS cases. I wonder if you could elaborate on that trend and how we can curb the trend here in Canada.