International Trade Committee on Nov. 29th, 2016

[The Chair, Liberal, Mark Eyking]

Welcome, everybody, and welcome witnesses, and witnesses via video conference.

Sorry for the delay. This is the time of year in the House when there are many votes, but we're going to make good use of the time we have remaining. We still have lots of time.

Without further ado, we're going to go right to the witnesses via video conference first. I'll start off with the representative from Irosoft, Alain Lavoie.

Welcome, sir.

[Alain Lavoie, President, Irosoft]

Mr. Chair and committee members, thank you for inviting me to participate in your consultations.

Let me introduce myself. My name is Alain Lavoie, and I'm the president of an SME that publishes software in the information and communication technology field, or ICT field.

First, I want to narrow the scope of my presentation by saying that I'm not an expert on the Canada-European Union Comprehensive Economic and Trade Agreement. However, I'm a very active entrepreneur in Quebec's ICT ecosystem. I'll speak only for myself. I'll provide my personal view of the situation in my sector. Obviously, I consulted other entrepreneurs and organizations before my appearance today.

The ICT ecosystem includes a number of fields and expertise, such as telecommunications and equipment. It also includes consulting services, customized IT solutions and software, and I'll focus more specifically on these things in my presentation.

In Quebec, the gross domestic product of the ICT sector was $14.5 billion in 2013. From 1997 to 2013, the sector's GDP grew at an average annual rate of 4.4%. It grew twice as quickly as Quebec's total GDP, which increased at an annualized rate of 2.1%.

Overall, Quebec's ICT sector generated $31.4 billion in revenue in 2012, which amounts to an 11% increase since 2008. Three industry sectors are responsible for this growth, specifically IT services, telecommunications and software publishing.

In Quebec, the ICT industry employees 150,000 people, which is more than a number of other economic sectors. It also mainly consists of SMEs. In fact, SMEs amount to 96% of telecommunications companies. According to a recent survey conducted by the Quebec Technology Association, 78% of SMEs in the ICT sector sell on the international market. That proportion is only 11% for the SMEs in all the other sectors combined. The export of Quebec's ICTs amounts to 34% of the sales figures for the sector's companies. This provides potential for export growth.

That said, how is the Canada-European Union Comprehensive Economic and Trade Agreement being received by Quebec's ICT industry? I'll exclude telecommunications and equipment, because I'm not familiar enough with their issues to talk about them properly. The agreement is being quite well received by the IT industry. However, some comments and nuances must be mentioned.

Since we spoke a great deal about the agreement as a way to eliminate tariffs and tariff lines, and since IT is not generally subject to those things, we feel less involved. We did business before the agreement's implementation, and we'll continue doing business afterward. Our SMEs should be well informed and most importantly helped, in order to fully benefit from this agreement.

In terms of labour mobility, if this agreement can help our businesses hire people from foreign countries more quickly, we would be delighted.

The issue of government contracts in Quebec is causing some concerns because IT contracts are currently being awarded at a slower rate. Suppliers feel insecure when it comes to the opening of government contracts. Therefore, SMEs must be told that the access to larger markets should compensate for this. The opening of government contracts will force businesses to become more competitive.

Lastly, cloud computing and privacy, which are special cases in our sector, should also be discussed because they may lead to a virtual tariff barrier.

ICT is a predominant sector that can make a strong contribution to the growth of wealth and the entry of new money into Canada. Our IT and communications SMEs are likely to fully benefit from this agreement. Our governments should help them and should try to make the agreement understandable for Canadian and Quebec businesses, especially SMEs. Our governments should explain how the agreement will affect them, particularly in terms of the opportunities it will provide. These aspects aren't always clear for an SME.

What can our governments do? They can create programs to help SMEs market and export their products. They can also give SMEs information and work with industry organizations, such as the Quebec Technology Association and the Information Technology Association of Canada, or ITAC, to raise awareness of the agreement and explain how to benefit from it.

In conclusion, I hope my presentation has given you a better understanding of the issues faced by one of the finest or even the finest industrial activity sector in Canada.

Thank you again for inviting me to appear today.

[The Chair, Liberal, Mark Eyking]

Thank you, sir.

We're going to move over to Gus Van Harten. He's a professor of law at Osgoode Hall Law School in York University.

Welcome, sir. You have the floor.

[Dr. Gus Van Harten, Professor of Law, Osgoode Hall Law School, York University, As an Individual]

Thank you very much, Mr. Chair. I want to apologize in advance because I will have to leave at 12:20, since I will have a roomful of students waiting for me at 12:30. I'd like to thank you very much for the opportunity to present to you.

I'm going to make five very quick points about Bill C-30. First of all, and this may not surprise you, I don't think the foreign investor protection provisions in CETA are a good idea in the relationship between Canada and Europe. My view is that the inclusion of chapter eight in particular and article 13.21 of CETA are imprudent and not a justified concession of Canadian sovereignty. But I won't dwell on that point, because my written submission to the committee goes on at length about it.

The next four points are much more specific. My second is that Bill C-30 says in clause 9 that the agreement is approved. I think that raises an important question, namely, what about the agreement is being approved?” We know that portions of the agreement will not be provisionally applied in Europe, particularly those related to chapter eight and article 13.21 of the foreign investment protection provisions, and we know that there's uncertainty about how those provisions are going to fare in Europe at the European Court of Justice, in member states, and so on. There's even a prospect that the agreement as a whole will never be ratified in Europe. So why wouldn't clause 9 say something like “the agreement is approved for provisional application in Canada to the extent that it has been approved for provisional application by the European Union and European member states as applicable”? Because otherwise, Canada is in the position of unilaterally approving parts of the agreement and exposing ourselves to costs and risks of foreign investor claims when the other side to the agreement hasn't done the same.

That brings me to my third point, a very quick one. In subclause 8(3) there's reference to causes of action being allowed under the agreement in Canadian law based on chapter eight, the foreign investor protection provisions. That's just an indicator of how in this legislation, Parliament would apparently be approving one-way claims against Canada without the same right being available to Canadian investors under CETA due to the provisional application approach.

Maybe the federal government has a good answer to that point, but as the legislation is drafted, it seems to me very much open to the criticism that we haven't clarified which parts of the agreement we're applying and which parts we aren't.

Very quickly, in clause 11 the Minister of Trade is given the power to appoint the members of the roster under chapter 8. I just want to stress that this is a very significant power, because we could think of the members of that roster as, very simply, almost equivalent to Supreme Court of Canada judges in the extent of their powers to review the passage of laws, passage of regulations, and so on in Canada. Especially when it comes to deciding the budgetary implications of laws, members of that chapter eight roster will, I think it's fair to say, have even greater power than would Supreme Court of Canada judges in Canada. So to give the power to choose the roster members to one minister only, the Trade Minister, is too narrow, and it would be advisable to think about a more broadly based, publicly representative process to allow for appointment of those roster members, because they're going to be extraordinarily powerful—much more powerful than the other adjudicators who are appointed by other ministers pursuant to clause 11.

The last point is that in the case of chapter eight of the agreement, because there is this uncertainty about what the Europeans are going to do—they're talking about making it a fully judicial process, and about a multilateral court option—it seems to me to be putting the cart before the horse to be approving chapter eight in this legislation when we don't actually know what the final version of chapter eight may look like, and it could look very different once the Europeans are finished with it. For that reason I think it really calls for a pause with respect to those parts of the agreement that are not approved in Europe.

Thank you very much for the opportunity.

[The Chair, Liberal, Mark Eyking]

Thank you, sir, and thank you for being on time.

We're going to go now to the Canadian Agri-Food Trade Alliance and we have Claire Citeau, the executive director.

It's good to see you here. I've seen you many times at the agriculture committee. Welcome to our trade committee. Go ahead. You have the floor.

[Claire Citeau, Executive Director, Canadian Agri-Food Trade Alliance]

Thank you, Mr. Chair.

Thank you for inviting me to speak on behalf of the Canadian Agri-Food Trade Alliance, the voice of Canadian agriculture and agri-food exporters.

CAFTA represents farmers, processors, and exporters from the beef, pork, grains, oilseeds, pulse, soy, malt, and sugar sectors. CAFTA members account for 90% of Canada's $54 billion agriculture and agrifood exports, supporting 940,000 jobs across Canada.

To illustrate the important contribution of our sectors to the Canadian economy, I'll give you some numbers. In terms of GDP, Canadian agriculture and agrifood exporters generate a direct and indirect GDP of $30 billion for agriculture and $65 billion for food manufacturing. In terms of employment, our sectors represent 352,000 direct and indirect jobs in agriculture, along with 588,000 direct and indirect jobs in food manufacturing.

The specific contribution of our sectors is similar to the direct contribution of entire sectors such as universities, financial investment services, and arts and entertainment, and is even much greater than the contribution of the aerospace manufacturing sector.

Competitive access to global markets through free trade agreements is our top priority, and at the top of the list are Europe, Japan, and the Asia-Pacific region. Access for Canadian agriculture and agrifood products is a core benefit for Canada in the CETA agreement. CAFTA has long been a champion of the CETA agreement and of increased trade with Europe. We have attended many negotiating rounds and have met regularly with the negotiators and the government to ensure that the negotiated outcomes would provide real benefits for our exporters.

CAFTA was able to immediately and unequivocally voice its support of the agreement in principle when it was announced in October 2013. We were also pleased by the conclusion of the negotiations earlier this year and were present in Brussels for the signing of the historic deal. CETA offers tremendous potential and secures substantial access to one of the world's few billion-dollar markets, and it does so ahead of our major competitors.

With a population of 500 million people, the EU is the second-largest importer of agrifood products in the world. In 2014 Canada shipped $3.2 billion in agriculture and agrifood products to the EU, led by wheat, soybeans, oilseeds, pulses, canola oil, frozen foods, and maple syrup. This is only about 5% of our total agrifood exports. Really, our exports should be much higher.

CAFTA has expressed support for CETA as the EU market has the potential to result in significant benefits for our exporters. The agreement could drive an additional $600 million in beef, $400 million in pork, $100 million in grains and oilseeds, and $100 million in sugar-containing products, as well as a further $300 million in processed fruits and vegetables. Taken together, this is $1.5 billion in new Canadian agrifood exports to the EU.

This is assuming that negotiated outcomes provide for commercially viable access. Canadian agrifood exports to the EU currently face high tariffs, with an average of 14%. On day one of implementation, tariffs on almost 40% of products will be eliminated immediately. The tariffs are not the only part of the access equation, and for some sectors, non-tariff barriers are as important as tariff reductions.

In CETA, Canada and the EU have committed to working together to advance a number of non-tariff issues, and today, unfortunately, it is clear that commercially viable access that was promised for all exporters may not be fully achieved for some time, and certainly not by the time the agreement is implemented. CAFTA has long stated that in order to achieve meaningful access, CAFTA members needed to have both tariff and non-tariff barriers fully resolved before CETA implementation.

To date, the issues that remain outstanding include the timely approval of biotechnology traits, the timely approval and re-evaluation of crop-input products, and the approval of meat-processing systems. Throughout 2014 and 2016 CAFTA has strongly encouraged the completion of respective legal and political processes related to CETA while simultaneously completing the technical discussions so that the stated benefits can be realized in the form of commercially viable access for our exporters.

We've stated that our support for the implementation of CETA will be based on the extent to which the negotiated outcomes result in commercially viable access. Last August our members met with officials from Global Affairs Canada and Agriculture and Agri-Food Canada to discuss the value of a CETA implementation plan for Canadian agriculture and agrifood exporters as part of a path forward.

Today, given the slow progress that the EU is making to resolve these issues, CAFTA gives conditional support to the implementation of CETA, with three conditions.

First, CAFTA will support the implementation of CETA if the Government of Canada commits to a well-resourced advocacy strategy and a comprehensive CETA implementation plan for Canadian agricultural and agrifood exporters to achieve real access for all exporters. Such plans will focus on ensuring that the negotiated outcomes result in commercially viable access, including but not limited to the grains and oilseed sectors and the meat sector through the establishment of high-level working groups.

Second, CAFTA asks that the committee today recommend in its report on Bill C-30 that the Government of Canada commit to the CETA implementation plan for Canadian agricultural and agrifood exporters to ensure that negotiated outcomes result in viable access for our exporters. It must be noted that this implementation plan will need to remain in effect until such time as the market access outcomes contained in the agreement become commercially viable for all of our exporters.

Third, CAFTA asks that the Government of Canada exert every effort to resolve as many of the outstanding technical barriers as possible during the interim period between now and the date the agreement is implemented.

In closing, more work needs to be done. Due to the strong potential and CAFTA's history of working collaboratively with government, CAFTA supports the passage of Bill C-30 and the implementation of CETA with the three conditions outlined above. CAFTA will be pleased to report to the committee on a regular basis on the progress achieved for Canadian agricultural and agrifood exporters as CETA gets implemented.

Thank you.

[The Chair, Liberal, Mark Eyking]

Thank you, Ms. Citeau.

We're going to move over to the Canadian Generic Pharmaceutical Association. We have president Jim Keon and also vice-president Jody Cox.

Welcome. You have the floor.

[Jim Keon, President, Canadian Generic Pharmaceutical Association]

Thank you very much.

It's nice to be back here. We were here not too long ago talking about the TPP agreement as well, which also affects pharmaceuticals.

The generic pharmaceutical companies in Canada, our industry, are primarily pharmaceutical manufacturers and exporters, and they are among the top R and D spenders across all industrial sectors. Our members operate the largest life sciences companies in Ontario and Quebec and directly employ more than 11,000 Canadians in highly skilled research, development, and manufacturing positions.

We are strong supporters of free and open trade, and we export quality made-in-Canada generic medicines to 115 countries. Our industry also plays a significant role in controlling health care costs. Generic drugs are now dispensed to fill 70% of all prescriptions in Canada but account for only 22% of the $26 billion Canadians spend annually on prescription medicines. Five or six generic prescriptions can be filled for the cost of one brand-name prescription today.

The outcome of CETA will require two main changes to Canada's pharmaceutical intellectual property laws. The first is called certificates of supplementary protection. This is the implementation of an entirely new IP, or intellectual property, measure for Canada. It will provide for two extra years of market monopoly for all new drugs in Canada. Importantly, generic pharmaceutical companies will be permitted to export from Canada during the period of additional protection. Most of the pharmaceutical IP text in Bill C-30 covers the implementation of certificates of supplementary protection.

The second large area in which changes will be required as a result of CETA is our PM(NOC) regulations, which involve the complex litigation system for pharmaceuticals in Canada, sometimes referred to as the patent linkage system. The details of these reforms will be spelled out in regulations, and draft regulations will not be published until sometime after Bill C-30 receives royal assent.

CGPA supports the general direction of the changes, which should address long-standing concerns of the generic pharmaceutical industry, such as the lack of finality to proceedings and the insufficient damages available for injured generic parties. That said, the devil will be in the details. At this point, we are both optimistic and uneasy about the impending changes.

Bill C-30 represents the most extensive legislative changes to Canada's pharmaceutical intellectual property laws in more than 20 years. In addition to provisions required to implement CETA, Bill C-30 also includes changes to the Patent Act that in some cases go beyond the requirements of CETA, and that is concerning to us.

CGPA has filed a submission with the clerk recommending six amendments to Bill C-30. On SPCs, supplementary protection certificates, CGPA believes officials generally did a very good job of drafting clear provisions that track the letter and spirit of the CETA commitments in this area. That said, we have identified three priority amendments for the consideration of the committee.

First, CGPA is proposing an amendment to make it absolutely clear that there will be no retroactivity of the SPC provisions.

Second, CGPA is proposing an amendment that would address circumstances under which a combination product can be eligible for a certificate of supplementary protection. We feel this detail is far too important to be left to regulations.

Third, CGPA is proposing a cap on the total period of drug monopoly that can be granted for a certificate of supplementary protection that's calculated from the date of market authorization. Such a safeguard exists in both the European Union and the United States.

We are proposing three other specific amendments to Bill C-30. The first pertains to what we believe are unintended consequences associated with the repeal of section 62, which has implications beyond the pharmaceutical sector. We propose that the substantive text from section 62 be reinstated.

The two amendments we are proposing pertain to concerns we have with respect to subsection 55.2(4) of the Patent Act, which is a critical provision for pharmaceutical IP litigation. CGPA is concerned that the changes to this subsection would facilitate the creation of new substantive rights or obligations that would be harmful to the generic pharmaceutical industry. At a minimum, the adoption of the changes would introduce more uncertainty into Canadian pharmaceutical IP law. These changes are not required by CETA. We have proposed that the existing language in the act be reinstated in both instances.

Now, these are overly simplistic descriptions of the issues, but we would be pleased to address them in greater detail if members have an interest. It is obviously impossible to cover such an important and complicated area in five minutes.

In addition to our proposed amendments, there are many other aspects that I would be pleased to speak to in the question-and-answer session, including the impact of the new measures on drug costs, and the role of pharmaceutical intellectual property in trade agreements.

While my remarks today were in English, we would be pleased to answer any questions you may have in either English or French.

Thank you.

[The Chair, Liberal, Mark Eyking]

Thank you, sir.

Before we start questioning, I'd like to welcome Mr. Alexander Nuttall from the Barrie, Ontario, area.

Welcome to the most exciting and cohesive committee on the Hill.

[Alex Nuttall, Conservative, Barrie—Springwater—Oro-Medonte, ON]

Thank you. It's an honour to be here.

[The Chair, Liberal, Mark Eyking]

Good.

We're going to start off with a dialogue with the MPs. We have the Conservatives starting off the first round.

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

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

Thank you, Mr. Chair.

Thank you, ladies and gentlemen, for your presentations today.

We have heard some of these issues, as you said, Jim, mirrored in the TPP discussions, but with some wrinkles here today.

I want to start with Mr. Lavoie.

You said you had to leave soon, if I understood that right.

[Alain Lavoie]

That's Gus.

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

Oh, it's Gus who has to leave.

Mr. Lavoie, you mentioned that your business does a lot of consulting on the service side. You also mentioned that there are a lot of businesses in Quebec that aren't ready for this change that's coming.

Is there a role for your company to play in mentorship and in consulting on that service side, to make sure that other businesses in Quebec are ready for the advantages?

[Alain Lavoie]

As I said, Quebec has organizations like the Quebec Technology Association that focus strongly on SMEs. Together with the government or Global Affairs Canada, these organizations can help SMEs understand how to take better advantage of the trade agreement between Canada and Europe.

I also mentioned that we're currently doing business with Europe in the IT area, and we aren't encountering any problems with tariff barriers at this time. That said, our SMEs need help.

The point I raised earlier mostly concerned SMEs and our capacity to help them. Large corporations will continue doing business with Europe. However, how can we help an SME from Gaspésie that has created software present the software to the European community? In this regard, we'll need to help SMEs market their products and gain access to different markets because constraints exist.

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

Great. Thank you.

To the Generic Pharmaceutical Association, thank you again for your presentation.

The last point you made was one that piqued my interest. You said you're asking for some amendments, or some things that are being done that aren't required for CETA to be implemented. You're asking for amendments to see those changed.

We hear a lot about ISDS and how governments don't have the right to regulate and so on. Do you see a problem with the government making those changes with what's laid out in CETA?

[Jim Keon]

No.

The changes we're proposing are all consistent with CETA. It's just the way the changes are being interpreted in the Patent Act. As I said, 30 pages of this bill are about the Patent Act. We have gone through it very carefully and have noted that in some cases changes are not required by CETA; there are housekeeping changes that introduce problems.

The biggest area with which we have concerns relates, as I said, to section 55 of the act, which provides for regulations around patent infringement actions and how they're interpreted. There are some significant changes in the wording to that section, which, again, are not required by CETA. We do not understand why those changes are being made. We believe that they could lead to expanded powers, regulatory-making powers, and they could also change the way the courts are interpreting those regulations in ways that would be harmful to our sector. That's why we're concerned about those.

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

Okay.

Those should be addressed as amendments at this stage of the bill.

[Jim Keon]

That's what we would like.

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

I'd love to see those and carry them forward. You have some support in doing that.

[Jim Keon]

We shared those with the clerk just yesterday.

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

I'm sure the Liberals want to be fair too. If they're just for housekeeping, then using Bill C-30 to do housekeeping may not be the right way to do that.

Mr. Van Harten, I will turn to you since I understand you have to leave soon.

You talked about the minister being the only person involved in the appointment of the adjudicators in the ISDS, whenever this is applied after this provisional hiatus that we're talking about. How else would you see that being done? What would be your recommendations?

[Dr. Gus Van Harten]

Thank you.

It looks as though the Europeans are going to adopt a broader process, so it won't just be DG trade at the commission. They'll be bringing in member states, or possibly other DGs, so you could look at it being a joint decision of more than one minister, or even, I think, maybe an attorney general. It could be a cabinet decision. Beyond that, there could be a public consultation process surrounding those appointments.

I usually wouldn't say that, because most adjudicative bodies, even under trade agreements, don't have the extent of the role that the ISDS mechanism will have, even once the investment court system is set up.

[The Chair, Liberal, Mark Eyking]

Thank you, Mr. Ritz. Your time is up.

We'll move over to the Liberals now.

Mr. Dhaliwal, you have the floor.

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

Thank you, Mr. Chair.

Thank you to all the presenters.

My first question goes to Jim.

Thank you for putting up all those suggestions.

If I am a professional engineer or a B.C. land surveyor and I go to my client on the ground, they're not concerned about all these technical issues. In the end, they want to see how it will benefit them in a project or how it will negatively affect them.

I just want to know from you what the impact of CETA will be when it comes to drug costs.