International Trade Committee on May 4th, 2017

[Karen Ludwig, Liberal, New Brunswick Southwest, NB]

Thank you. I want to simply give you an example.

In the maritime region we do a significant amount of export to the New England area. I just did the math earlier, so it could be a little off, but looking at the New England states, 335,000 jobs are directly related to trade and dependent on Canada. That's in the United States. One of the concerns that I've heard throughout my riding and in the business community is the threat of a potential border tax and what that might mean on our side of the border. Is that being considered or discussed within the business community in the United States in terms of the threat it poses to jobs on the other side of the border? As our colleague here from the auto industry mentioned, the supply chain is so integrated. It's a North American supply chain, so any disruption within that has the potential to cause significant job losses or job changes.

I'll ask Maryscott to answer that.

[Maryscott Greenwood]

That's absolutely right.

The border adjustment tax idea is being hotly considered. The comprehensive tax reform was the Congress's answer to NAFTA repeal. When the President was campaigning on tearing up NAFTA, the Congress's answer was, “You wouldn't have to do that if you did tax reform. You'd make us more competitive by incentivizing exports, by disincentivizing imports, by border adjustability, by lowering the corporate tax rate, by repatriating funds made abroad.”

The good news, if you will, for people like us who are not fans of the border adjustment tax is that there is a deep division in the United States in the business community. There is a well-formed coalition that's for it, and there are a lot of us who are strongly against it.

There's going to be a long debate. We haven't had tax reform in the United States since 1985, so it's going to take a while to get through this. Border adjustment in particular is quite controversial, and I think we need to continue making it controversial so that people will know the impact, like the statistics that you mentioned in the Maritimes and New England. That's true right across our country in terms of our dependence on Canada.

[The Chair, Liberal, Mark Eyking]

Thank you. That wraps up the time.

We're going to start our second round. We'll start with the Liberals. We have Mr. Peterson.

Go ahead. You have the floor, sir.

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

Thank you, Mr. Chairman.

Thank you everybody for being here today.

Mr. Nantais, I want to start with you, in part because of the importance of the auto sector to my part of the world. I'm from Newmarket—Aurora and, of course, Magna International is headquartered there. It's one of our biggest employers.

The auto industry in North America has been integrated for over 50 years now, starting with the Auto Pact in 1965, then the Canada–United States Free Trade Agreement, and now into NAFTA.

Do you see this NAFTA 2.0, or whatever comes out of any negotiations, as being part of that continuum of improving the agreement between Canada and the U.S.—in this case Canada, the U.S. and Mexico—to continue to help the auto industry flourish in North America?

[Mark Nantais]

We do, and on the basis that there will be opportunities. It is 23 years old, and the world has not stood still during that time, so there will be opportunities. By the same token, there are things we have to preserve. There are things in NAFTA that have really worked. In our industry, it has been responsible, along with the Auto Pact, for literally hundreds of thousands of jobs. There are some things we need to preserve, but there are definitely opportunities, whether it comes to border efficiencies or labour mobility.

We are worried about things such as changing rules of origin, for instance. In our industry that would be quite detrimental, depending on how they do it. Will it be changes to the actual content rules or will it look at the methodology for calculating content or other things that relate to that and would give the appearance of making it more stringent? Politically, that may be one of drivers for the U.S. administration. It's hard to say. Border taxes and things such as that could have very disparate impacts on different companies and sectors.

The key thing here is how we can maintain our competitiveness. How do we maintain Canada as a place to invest? Clearly, NAFTA has been very beneficial to us. Certainly, the CVMA is coordinating with our U.S. counterparts through the American Automotive Policy Council, as well as with our Mexican counterparts.

There are definite opportunities. We'll be at least trying to identify them and helping negotiators work those through.

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

Thank you for that.

Mr. Ujczo, I want to ask you a couple of questions, notwithstanding your being from the same hometown as LeBron James and that my Raptors are struggling with Mr. James's team now. We won't hold that against you. I won't bring up Ms. Greenwood's Leafs comment either. It's tough to be a Toronto sports fan.

I like the phrase that Ms. Greenwood attributed to your earlier example, buy “AmeriCanadian”, with the C and A. Do you foresee that only in the public procurement sphere? Is that the concept?

[Daniel Ujczo]

No, that should be an idea across the board in the sense of generating goodwill. The problem with Buy American policies is that most of the time it is less about the actual procurement process than the perception it sends throughout the supply chain of the community. You'll have procurement officers at all levels of government, and even some in the private sector, saying that they'd better do things...that they don't have to give the best bid an opportunity, that they can keep it local. If we start encouraging that kind of behaviour and thinking about ourselves as one market in Canada, the U.S., and North America, it will serve as a barrier or a preventative measure against more protectionist action.

If you asked your average American on the street if they want to keep Canadian goods out of the United States, or about Buy American, half the time they'll say they didn't even know it applies to Canada. That's the issue usually. We represent American companies that have Canadians in their supply chain and are prevented from bidding by their own policy.

I do think that addresses the broader issue of what we're trying to accomplish in this NAFTA negotiation. These are not tooth-and-claw lunatics running trade policy in the White House right now. They have been speaking about these issues on China and Asia for 20 years. They have a policy. They are going after Asia. Now is the perfect opportunity to stitch North America, particularly Canada and the U.S., together as a bulwark against that. That's the case we should be out there making as opposed to saying we need access to this market and speaking in the language of 20th century exports, surplus and deficits, and those types of issues.

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

Thank you.

I think I have a minute left maybe?

[The Chair, Liberal, Mark Eyking]

Half a minute.

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

Okay.

Ms. van Vugt, do you see “do no harm” as protecting the status quo? What priority would there be to change to make things better, one priority?

[Andrea van Vugt]

Just quickly, the first priority is to do no harm. We have a well-integrated supply chain and need to make sure that we don't do anything to undermine that supply chain. The next thing you can do to improve it is to modernize it. NAFTA didn't include things like e-commerce, because it didn't exist. That's one of the ways you can improve upon, but there are lots of others.

[The Chair, Liberal, Mark Eyking]

We're moving to the Conservatives.

Mr. Ritz, you have the floor, sir.

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

Thank you, Mr. Chair.

Ladies and gentlemen, thank you. It's great to see all of you again.

Dan, you made the comment that you have this title “AmeriCan”. Did you trademark that? You're a lawyer.

[Daniel Ujczo]

No, MaryScott is using it.

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

Oh, it's yours. I should have known you were the smarter one.

To follow up, Dan, you talked about the timeliness of this. When you are taking on something this massive, of course, timing is everything, especially with the United States always being in an election cycle. You said that the mid-terms in Ohio could really be a turning point, a real problem for us. It's also one of the 35 states whose number one trading partner is Canada. There are allies there, too.

You are absolutely right. It's how we market this, how we draw people out, and how we build that bulwark. We did this very successfully with country-of-origin labelling by identifying people on the ground and making it a ground war, not an administrative war. I think that's the key in this.

There are so many other things that work into this, too. The geopolitics of it has been talked about. China is sitting out there watching all of this. They are trying to negotiate with the U.S. They are trying to negotiate with us. Of course, they're trying to go faster with us because we're smaller. At the end of the day, there will be a huge miss if we don't get this right, because China is sitting there ready to pick up anything that falls off the table and then build from there.

How do we make sure that the new NAFTA—NAFTA 2.0, or AmeriCan, whatever you want to call it, is proactive? There are all kinds of provisions in there to take someone to task when there is a grievance. That's reactive. How do we build in a proactive side so that, before you get to the grievance side, you can sit down and say, “This is going to come up. How do we address it?” How do we constantly modernize, refurbish, and keep this deal vibrant? How do we work at the speed of business?

[Daniel Ujczo]

That is the quintessential question for the NAFTA renovation: How do we continue to recycle it and get out of this Canada-U.S. world, where we are running from dispute to dispute time after time?

On dispute resolution, reasonable minds can disagree. For example, I think chapter 11 has no place in a new NAFTA. It doesn't make any sense for Canadians or the United States to have that. That was put in there for the Mexicans, no question about that. Reasonable minds can also disagree, or agree, on chapter 19.

What I do believe is that this is where the regulatory cooperation council is critical. The RCC isn't something I'd bring up on a first date. There is nothing sexy or sensational about it. But it is the most—

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

It sets the basis for everything else.

[Daniel Ujczo]

It is critical, because it can be ongoing. Once Congress approves it, it can have a life of its own and evolve over time.

That's similar to the issue of trying to update the NAFTA list of professional workers. That list will be outdated at the speed of business the minute we create it.

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

As soon as you write it....

[Daniel Ujczo]

Absolutely.

We have to look at things such as positive regulation, where everything is considered—rules of origin, these types of things—unless we say otherwise. I think those are the types of things we should look at doing in Canada and the U.S., and use this time to do it.

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

It's going to take a little longer to do that. The problem is that, while all of this is being talked about, you lose the bankability and predictability that business needs to make investments, because nobody knows what the end result is going to be.

[Daniel Ujczo]

Absolutely.

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

How do you have the stability to keep the integration in North America, and keep it strong, while we have blood on the floor, at times, doing these negotiations? How do you send that message out there?

[Daniel Ujczo]

We have a great example right now with food safety. Both Canada and the United States are changing their food safety laws, the Food Safety Modernization Act, in the U.S., and the Safe Food for Canadians Act.

I'm speaking to these folks every day. There is going to be an issue at the border when these come in, because our regulations are different. These aren't containers of car parts. These are perishable goods.

What we can do right now is send a signal—

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

It's based on the outcome, not on the day-to-day....