International Trade Committee on Dec. 1st, 2016

[Marvin Hildebrand]

As it pertains to specific goods and merchandise trade, it's a question of what British Columbia's areas of focus and areas of interest are vis-à-vis Ukraine.

The vast majority of tariffs will be eliminated under this agreement. There are very few exclusions from tariff concessions. Whether it's animal feeds or wine or certain types of surveying instruments that are produced in British Columbia, or other agricultural products, horticultural products, there's a whole range of possibility there.

Of course, it's not possible to know what exporters and companies and products will actually avail themselves of the opportunities, but suffice it to say that there will be very few tariff barriers left once the agreement is fully implemented in seven years. As a practical matter, the only thing that Ukraine excluded from tariff concessions in this agreement is refined sugar, and that was a reciprocal thing.

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

We did not include the services sector. Did you have any resentment from the labour movement or labour groups?

[Marvin Hildebrand]

Were there any concerns about that?

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

Yes.

[Marvin Hildebrand]

No, I'm not aware of any.

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

You're not aware of any. Good. Thank you.

[The Chair, Liberal, Mark Eyking]

Thank you, Mr. Dhaliwal.

We'll move to the NDP now.

Ms. Ramsey, you have the floor. Go ahead.

[Tracey Ramsey, NDP, Essex, ON]

Thank you so much for being here today and for the briefing you provided me earlier. The NDP really supports deepening relations with the Ukraine. Canada and Ukraine have a historic friendship. I think that's known.

I'd like to talk about steel. The issue of steel dumping has been brought before the Canadian International Trade Tribunal. Is there a concern that removing tariffs on steel imports from Ukraine will negatively impact Canada?

[Marvin Hildebrand]

There is not a concern that it will negatively impact Canada. Our tariffs on steel are not inconsequential. Some products have lower tariffs than others, but as a practical matter we have no concern with the fair competition that will result from a lowering of our steel tariffs. The process that you referred to is a separate thing, as you know. Those mechanisms are untouched by this agreement. There are absolutely no substantive changes to Canada's regime for trade remedies in any way.

To the extent that there may be such issues in the future, Canada will be fully equipped, as we have been in the past and are currently, to deal with those.

[Tracey Ramsey, NDP, Essex, ON]

Here is my second question. Can you elaborate on the human rights measures and enforceable mechanisms around human rights in the agreement?

[Marvin Hildebrand]

Yes, and I'll ask my colleague, Pierre Bouchard, to chip in, in a second, in terms of the labour chapter elements that would touch on human rights.

The agreement itself makes a reference to the importance of human rights in the preamble, and the other area where there would be some connection to that would be in the labour chapter. Depending on how broadly defined that term is, it could be seen to touch on other areas of the agreement, but I will ask Pierre to talk about the labour chapter in that context.

[Pierre Bouchard, Director, Bilateral and Regional Labour Affairs, Department of Employment and Social Development]

Thank you, Marvin.

We have the standard comprehensive and enforceable labour provision in the agreement, in the chapter. These include the four fundamental rights of the ILO on collective bargaining: the right to associate, no child labour, no forced labour, non-discrimination. Then we added to that rights in regard to migrant workers as well as health and safety minimum standards.

These are obligations on both the content of law and on the enforcement of law. That goes pretty far, even if their laws do not. Then that's subject to a dispute settlement mechanism within the labour chapter that can result in monetary penalties in cases of non-compliance. It's fairly strong.

[Tracey Ramsey, NDP, Essex, ON]

Thank you.

There is an unbalanced tariff phase-out that will occur for several years. Which sectors will gain and lose, potentially, and what will that tariff phase-out mean for Canadian businesses?

[Marvin Hildebrand]

Given the nature and the magnitude of the trading relationship, we considered in the negotiations that we needed almost no tariff phase-outs. Except for autos, everything on our side is going to zero on day one. The consideration was there. Whatever the increase in imports from Ukraine, which have totalled about $100 million annually for the last number of years, whether it's one sector or another, there was not the prospect for a threat of injury or any kind of surge that would be problematic for our industry.

On the other hand, Ukraine sought, for some products—about 14% of current imports from Canada—a tariff phase-out period of either three, five, or seven years. Given the different levels of development, income, and other considerations, we considered that it was not inappropriate to do that.

I think it's a win-win scenario, and frankly, as I said, other than refined sugar, everything is subject to tariff concessions in Ukraine, so in terms of the realm of the possible for Canadian industry, in virtually every place where there are tariffs now, they will be removed very soon.

[Tracey Ramsey, NDP, Essex, ON]

Thank you.

[The Chair, Liberal, Mark Eyking]

Thank you.

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

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

Thank you, Mr. Chair.

Thank you to the officials for being with us this morning.

I think this is a great agreement. I think it speaks to the history between the two countries of Ukraine and Canada. I have two grandparents born in Ukraine, so I'm one of the over 1.2 million, I think, Canadians who have some Ukrainian heritage.

I'm excited about this free trade deal, of course, and I think it will strengthen the ties with our ally Ukraine, so I'm very excited to be able to speak about this today.

I have just a couple of questions, and some of them may be a little technical.

My understanding is that virtually all Ukrainian products coming in will be tariff-free as soon as this comes into force, whereas from the Canadian side it is about 86% or 87%, I think. Then there's a seven-year phase-in period. What's the reasoning for that discrepancy?

[Marvin Hildebrand]

As I said, we really didn't see any potentially injurious threats from a surge of imports from Ukraine in any sector or in any product.

Basically, in our free trade agreements, we try to be as ambitious as possible. That's why we are doing them. Where we seek phase-outs for Canadian products, we do that for a reason. We do that where we consider that certain products, sectors, or industries require time to adjust to a tariff-free environment. That happens in a number of cases.

In this case we didn't see any real candidates for that and any particular need for it, so we agreed to.... It basically allowed us to set a higher bar. If there was going to be some level of asymmetry, we were able to take it as high as we could. It probably allowed us to inspire more ambition on the part of Ukraine as well.

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

Okay.

Is there any sort of assessment of how much time you think it will take to ratify in Ukraine?

[Marvin Hildebrand]

Ukraine President Poroshenko introduced legislation on November 17 to implement this agreement, and we have had regular indications from Ukraine that this is a priority for them in terms of ratification.

I would venture to say that it's probable that by the time Canada completes its ratification process, Ukraine will have completed theirs. We won't be waiting for them when the time comes.

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

Okay.

I want to bring up what I'll characterize as the elephant in the room. Obviously when the negotiations started in 2009, Russia hadn't yet invaded Crimea. It's a reality that armed conflict is taking place. Do you see that as in any way diminishing Canadians' ability to do business with Ukraine?

[Marvin Hildebrand]

By virtue of the sanctions regime in place, there is a geographic constraint on the parts of Ukraine with which Canada can do business at the present time. That will continue until such time as those sanctions are modified. There is a prospect, since all of Ukraine is covered in the definition of territory in this agreement, but right now there is that constraint, due to the sanctions regime.

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

Now that we've reviewed a few trade agreements in this committee, I note the absence of an investor state dispute mechanism in this agreement. That's because there's an older agreement in place, an investment and investor protection agreement. Was thought given to incorporating that into the new agreement or keeping it as a stand-alone? Was that part of the negotiation at all?

[Marvin Hildebrand]

It was very much part of the negotiations. It actually follows a very similar narrative to that of services, which I outlined earlier in response to an earlier question. There are certain linkages between services and investment in our typical model for free trade agreements, and we had anticipated including both of those areas in this agreement. For some of the very same reasons, however, it was not possible to do so, despite extensive efforts on our part. It would have been our preference.

There is a compelling counterpoint, though, in that since 1995 we have had an agreement in place for foreign investment promotion and protection. It is a high-quality agreement and it will continue to be in place. It provides solid coverage for our Canadian investors in Ukraine.

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

Okay. Thank you for that.