International Trade Committee on May 18th, 2017

[Randy Hoback, Conservative, Prince Albert, SK]

When we look at NAFTA, of course, security was part of the reason for the original creation of the U.S.-Mexico trade deal, which Canada came into to create NAFTA. How do you see security playing out and the role of these negotiations in regard to the fact that Mexico is the wall for North America? You handle a lot of bad people in Mexico who, because you take care of them, don't end up in Canada. Where does that fit into these negotiations?

[Agustín Barrios Gómez]

Security is certainly a linchpin. It's a very difficult issue. Of course, you have American guns being used for organized crime here in Mexico. The money that is being used to corrupt our local police officers is also coming from this narco traffic. What ends up happening is that narco traffic, with its very powerful economic strength, comes into these localities, into these municipalities. We have municipal police forces. They come in and they corrupt the entire system. Once that's done, the proposal is, “Lead or silver?” In other words, “I can either kill you and your family, or I can make you rich; it's important for me to make you rich because I need to make you an accomplice to me.”

I think we spend too much time thinking about corruption as if it were just a question of people actually taking bribes. The “lead” part of the equation—that is, the part of the equation that says that I will riddle you with bullets—is often far more dangerous for the rule of law. That's what's going on, and basically it's being financed by drug money. Once they establish those outlets, they franchise. They franchise into kidnapping. They franchise into extortion and all of that racket. That's something we need to look at very clearly.

With respect to continental security, all our visa laws—

[The Chair, Liberal, Mark Eyking]

Sorry, sir. Maybe somebody else will pick up on that point. We have to keep to our time frame.

[Agustín Barrios Gómez]

Oh, I'm sorry.

[The Chair, Liberal, Mark Eyking]

No, it's not your fault. Sometimes these questions lead into a long answer.

[Randy Hoback, Conservative, Prince Albert, SK]

It's pretty tough. He only gives you five minutes—

[The Chair, Liberal, Mark Eyking]

And you are over six, so we're going to have to move over to Mr. Fonseca.

You have the floor. Go ahead, sir, for five minutes.

[Peter Fonseca, Liberal, Mississauga East—Cooksville, ON]

Thank you, Mr. Chair.

Thank you to the witnesses.

I'm glad that in all your presentations you focused pretty much on the positives of NAFTA. Maybe for too long we have taken NAFTA for granted. Maybe, as Canadians, we are quite humble and we don't like to trumpet—excuse the pun—about all of the great things that have happened with NAFTA in terms of the jobs that have been created and the quality of life we have been able to provide to our peoples.

Within those positive aspects, etc., we've created a robust strategy. We've been stateside speaking to politicians, corporates, different associations, stakeholders, and organizations, and deployed an all-of-government, all-parties approach to be able to share our message. It's really one around education and awareness.

I'd like to know what the Mexican strategy has been. Has it been similar? Has there been a different type of strategy? How have you engaged with those influencers and decision-makers in the U.S.?

[Agustín Barrios Gómez]

Is that to me or Armando?

[Peter Fonseca, Liberal, Mississauga East—Cooksville, ON]

I can start with Mr. Gómez, and then we could go to Mr. Ortega.

[Agustín Barrios Gómez]

The quick answer is that we have engaged very poorly. There are millions of relationships that are going on, and they are very localized. Our border cities, our sister cities, unfortunately, have the tendency to look up and down. We call it the silo mentality. They look north and south, but they don't look east and west. What that's created is that the narrative of our trade and our border situation has been hijacked by those who would use it for their own political purposes. So the short answer is that we really have been remiss with respect to dealing with all of the stakeholders, and that is something we need to do.

Actually, I would beckon our Canadian counterparts. I know Canada does a little more. I've been there in Colorado when the Canadian consulate general does these events, inviting all of these local politicians, and I think that's excellent. However, I think Canada and Mexico would be much better served to identify those stakeholders and do a coordinated strategy. We need to take this to heart, and I would invite your learnings and our learnings to get together to do this better.

[Peter Fonseca, Liberal, Mississauga East—Cooksville, ON]

Mr. Ortega.

[Armando Ortega]

I think we have the reference of what Mexico did when we launched the original NAFTA negotiation. The effort that was crafted by Mexico, especially within the United States and somehow also in Canada, but particularly vigorously in the United States, was outstanding.

Then I do share the same view as Agustín Barrios Gómez. We took NAFTA for granted and we fell into our comfort zone. Of course, businessmen have been very active creating all sorts of connections and value chains. However, if I understand your question correctly, it was the narrative that we lost. In a certain sense, we didn't think it was important to convince anybody about the virtues and good benefits of NAFTA.

This is something we have to do again. This is the right time. We could have done it before. We could probably have changed—or not—the narrative in the political spectrum last year during the electoral process in the U.S. However, this is the right time to do it.

Also, just quickly, regarding the question on agriculture, once we heard in Mexico about all the attacks against NAFTA, the Mexican government moved quickly to knock on the doors of Canadian producers in agriculture, and other producers. Theoretically you can say there is the possibility of export substitution, but certainly import substitution, and in particular the agricultural sector, is a very good candidate to shift from the normal U.S. chain to either the Canadian or Brazilian or Argentinian....

The ministry of agriculture has worked very closed with the agriculture ministry in Canada and with the producers in Canada. This will happen slowly, and I would say that Americans will at least lose a bit of that market share of the Mexican market.

[The Chair, Liberal, Mark Eyking]

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

Ms. Ramsey, go ahead.

[Tracey Ramsey, NDP, Essex, ON]

Thanks so much, everyone, for being here today. You've given us a lot to think about on a very important day, receiving that news this afternoon.

Mr. Gómez, you spoke about the ignorance and xenophobia that came out of the U.S. First of all, Canadians don't support that. I think it's widely known that we look to our relationship with the Mexican people as being one of a shared understanding of culture and an appreciation of it. Of course, we don't stand by anything that's coming out of the White House about that.

You brought up an important thing around human rights, an important piece that I believe needs to be part of every trade agreement. I think in the renegotiation of NAFTA we have an opportunity to strengthen human rights, and Canada can play a key role in that. I'm wondering if you can speak to us on the importance of Canada playing that role to bring peace to Mexico and to extend our human rights into the other countries.

[Agustín Barrios Gómez]

Thank you, Ms. Ramsey, first of all, for sharing a vision. I grew up partly in Canada, and these are values that I certainly learned in Canada when I was a little boy. I appreciate hearing that as often as I can.

With respect to human rights, it is a huge issue. Certainly, there are very important lessons to be learned from Canada. Canada has played a role on a global scale. I think Canada has some excellent lessons that can be shared. In my particular case, when I was working with the Secretary of Public Security in Mexico City, I used the example of community policing by the RCMP. The RCMP had—at least had back then, and I'm sure it's even better now—a fantastic model for community policing, and that is something specific that we can use. Here in Mexico City, we wanted to use it as an example for a pilot project that eventually did not receive the necessary funding from our legislature. I think that the lessons are there, and I think that's something that Canada can certainly play a huge role in, especially in community policing as practised by the RCMP.

[Tracey Ramsey, NDP, Essex, ON]

Thank you.

There have been a lot of conversations in Canada around the fact that Mexico and Canada together have been a counterbalance against the U.S. An example of that in a dispute settlement could be the COOL legislation, the country of origin labelling. I wonder if you can speak a bit to the extent to which that engagement between Canada and Mexico has helped the two countries to settle a dispute like COOL.

[Agustín Barrios Gómez]

I would start by saying that Canada and Mexico, especially right now, are the adults in the room. I don't see it so much as a counterbalance, inasmuch as we are defending something that is very profoundly an American value. In many ways right now, it is in our hands to pick up that mantle of leadership while there is none on our neighbour's side. With respect to our co-operation, this comes back to the fact that we need to understand that this is a trilateral agreement, and that's how we need to see it. We can only be strong by working together against the protectionist and xenophobic forces being displayed in the U.S. executive.

With respect to the COOL legislation, it would also behoove us to review and to make sure that our position with respect to the rules of dispute settlement are rock-solid. It was brought up in the letter; Robert Lighthizer does mention that. The letter is about a page and a half long. It's not as if we really have a strong idea about what's going on, but it is mentioned and it is something that Canada and Mexico need to stand together on.

[Tracey Ramsey, NDP, Essex, ON]

Clearly, the U.S. is laying out their priorities in a NAFTA renegotiation. In Canada, we've taken an approach of waiting to see what they're going to come up with towards us. In Mexico, I know you've been doing a lot of work. I wonder if you can speak about what the main Mexican priorities are in connection with your relationship with Canada.

[Agustín Barrios Gómez]

Funnily enough, our main priorities are very much in line with that page and a half that USTR Lighthizer mentioned. We see an opportunity to modernize the trade agreement. We are interested in the phytosanitary measures, and there are amazing opportunities in customs procedures, digital trade, and property rights. We are interested in all the different things we were working on in TPP.

Everybody who knows anything about trade knows it was going to be a second-generation, improved NAFTA, and we'd like to pick up on that. I would venture to say that, curiously enough, these priorities—at least in this chapter of the ongoing saga in Washington—are shared among the three countries.

[The Chair, Liberal, Mark Eyking]

Thank you, sir.

We're going to move over to Ms. Ludwig.

You have the floor.

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

Thank you.

Buenas tardes. Mucho gusto.

I'm going to start with Señor Ortega.

You mentioned 300 Canadian companies that are involved with the Chamber of Commerce. Have you reached out at all to the companies within your chambers and asked them for their reactions or their concerns regarding any disruption in NAFTA? I'll put this in a bit of a larger context. We've looked significantly at how any disruption in NAFTA would mean job losses on all the different borders. There is a common perception in the United States that ripping up NAFTA would actually mean job increases. What is the feeling among the companies you're representing in the Chamber of Commerce in Mexico?

[Armando Ortega]

Many thanks.

Before crafting the open letter that we sent to President Peña Nieto on January 17 of this year, we had internal consultations with our members. I would not say they were with all 300 members, but I would say they were with representatives of all the sectors that are part of the chamber. We have manufacturing, mining, pharmaceutical services, etc.

The position is that this is a very valuable asset. Once you have a free trade agreement, you have not only access but certainty in the access. We heard months ago, or even weeks ago, from other members of the U.S. government that their concern would be to dismantle the dispute settlement system of NAFTA, which as you know comprises chapter 11 on the investment side, chapter 19, which is dumping and countervailing, and chapter 20, which is a general one. There is a concern among some of the members, particularly the Canadians who are investing in Mexico, that this could be eroded in any manner. Certainly any impact related to NAFTA would translate, as you rightly put it, into job losses and an environment that is uncertain.

The other position is that if you go to NAFTA article 2205, you have a hypothetical case in which one of the members—in this case, the U.S.—would be leaving NAFTA. It is spelled out clearly there that Canada and Mexico would continue to be there. The bottom line is to keep NAFTA going on if we reach that scenario, which I would say is improbable.

The other position of the main members of the chamber is that with or without NAFTA, two things should be done. We should exploit, on a bilateral basis, all the potential of our relationship. For example, in terms of connectivity—

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

Thank you. Gracias.

I just want to go into another line of questioning. I'll pose this question to Mr. Dade.

If we look at trade deficits to the United States, we often hear from the U.S. side that NAFTA is absolutely disastrous, but when we look at the trade deficit, the trade deficit the U.S. has with Canada is $11.2 billion; with Mexico, it's $63 billion; and with China, it's $319 billion. Any change here to NAFTA may actually create more opportunities for a trade deficit with China, so how do we separate the impact of NAFTA on, for example, helping our American friends with American jobs, versus the impact of China and globalization over the last 25 years?

[Carlo Dade]

I have two quick points on that.

The National Bureau of Economic Research in the U.S. has shown the full extent of trade integration—and my colleagues can join me in this, because we all say this all the time. Every dollar of goods or services that the U.S. imports from Canada contains 25¢ of U.S. content. Every dollar that the U.S. imports from Mexico contains 40¢ of U.S. content. Number three on the list is Malaysia at 8¢. You have to go all the way down to 4¢ to hit China, and 1¢ or 2¢ to hit Russia. When the U.S. imports something from Canada or Mexico, it's directly related to U.S. jobs. We talk about this all the time.

On the deficits, we're doing well because the price of oil is down. If the price of oil were back up, the U.S. deficit would be a lot higher. When the Americans talk about deficits, they talk about deficits only in trade in goods. They don't talk about trade in services. We're running a deficit in trade in services with the Americans, and we and the Mexicans need to remind them that with all those jobs they like to talk about—the new jobs, the white-collar jobs, the knowledge jobs—they're doing well in this relationship. Let's not forget that.

Investment is another area in which the U.S. does quite well. Look at the investment in Phoenix. There are tens of billions of dollars from Canada in Phoenix. I was there just a couple of weeks ago, and I was floored at the amount of Canadian money that's going down there. We need to round out the conversation and include those things.